TMI Blog2017 (12) TMI 1801X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee and hence chargeable to tax. AO thereafter states that since the assessee failed to include it in its income, the same has escaped assessment. And lastly the Assessing Officer mentions that after independent verification of records with respect to the above mentioned facts , I have reason to believe that income has escaped assessment. It was on the basis of already available information and not any new information pertaining to EDC charges that came in the possession of the Assessing Officer thereafter that led to the formation of belief that the EDC charges were in the nature of revenue receipt of the assessee and had thus escaped assessment. Therefore when the reopening was resorted to on the basis of material already on the file, the same having been provided by the assessee only during assessment proceedings, and nothing else, we fail to understand how the assessee could be charged with failure to disclose material facts relating to the said receipt. No merit in the contention of the Ld.DR that mere production of account books and balance sheet and profit and loss account will not tantamount to disclosure. No justification for the authorities below to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnal Development Charges as it is neither income nor capital receipt of the assessee but is a deposit on behalf of Punjab Govt. Hence addition made is liable to be deleted. 5. Ground No.2(a) is a legal ground raised by the assessee, assailing the action of the Ld.CIT(Appeals) in upholding the validity of the order passed u/s 148 of the Act. 6. As stated above, the impugned order has been passed u/s 147 of the Act. Reasons for reopening the case were duly recorded and provided to the assessee, objections to the same were filed by the assessee which were disposed off by way of a speaking order. 7. Before the Ld.CIT(Appeals), the assessee contended that the re-assessment proceedings were bad since requisite conditions for the assumption of jurisdiction in the present case had not been fulfilled. It was pointed out that notice u/s 148 in the present case had been issued after the end of four assessment years from the relevant assessment year and initially assessment u/s 143(3) had been framed in the case of the assessee and that therefore as per the first proviso to section 147 of the Act, the re-assessment in such case could be resorted to only if the income chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asked by the assessing officer on External Development Charges nor any submissions with regard to the nature of these receipts were filed by the assessee and the assessing officer passed the order u/s 143(3) without making any view on the external charges and no discussion was made in the assessment order. Therefore, it cannot be said that assessee has disclosed fully and truly all material facts necessary for his assessment for the relevant assessment year. The assessing officer has therefore, rightly invoked the provisions of section 147 in this case as no permissible view was made at the time of assessment proceedings on this issue. It cannot be said a change of opinion. Support is drawn from the judgement of Hon'ble ITAT Kolkata bench in the case of Som Dutt Builders (P) Ltd. 98 ITD 78. The assessee in this case has only produced the books of accounts and for that matter the Balance Sheet and P L account which will not necessarily amount to disclosure within the meaning of proviso to sec. 147. Hon'ble Bombay High Court in the case of Dr. Amin's Pathology Laboratory (2001) 252 ITR 673 have held that Under Explanation I to section 147 mere production of account book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lose any material facts pertaining to the EDC charges which is an essential pre-requisite for assuming jurisdiction to reopen the case beyond four years from the end of the relevant assessment year when originally assessment u/s 143(3) has been framed. The assessee filed a brief synopsis of its arguments by as under: 1. At the outset it is submitted that the re-opening of the case U/s 148 is bad in law due to the following facts: Change of Opinion by successor AO on same facts. All facts regarding the External Development Charges were already available with the department at the time of framing the assessment u/sec 143(3) of the Act and the balance sheet and various annexures depicted such EDC . Complete details were filed during the original assessment proceedings. There is no failure on the part of the Assessee. 2. The details which were filed during the course of original assessment are as follows: a. Copy of Balance Sheet of the Assessee, wherein the External Development Charges to the tune of ₹ 225,13,21,378/- were clearly reflected. (PB at Page- 1) b. Questionnaire dated 17.08.2010, wherein the AO has specifically ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the balance sheet and, thus, everything is borne out from the records. d). Then at page 40, it has been mentioned that after independent verification of records with respect to the above mentioned facts, I have reasons to belief that an income of ₹ 1,59,61,85,128/- has escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. Thus, this remark shows that it is merely a change of opinion and from the appraisal of the same record, a different conclusion has been sought to be drawn and which is not permissible. e). It has been mentioned in the last para that there is failure on the part of the assessee to fully and truly disclose all the material facts relating to its income. It is submitted that there is no failure on the party of the assessee and each and everything is borne out from the balance sheet, questionnaire and detailed submissions and this finding is also not a correct finding. 7. From the above facts in the case of the assessee, it is very much clear that the re-opening of the case is mere the change of opinion on the part of the AO as the matter has already been considered during the course of original assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers of the authorities below and also the relevant documents to which our attention was drawn during the course of hearing. Since the issue before us is the validity of the assessment framed u/s 147 of the Act, certain facts which are undisputed need to be outlined before proceeding with the issue: a) The impugned assessment year is assessment year 2008-09. b) Assessment u/s 143(3) for the said year had been made vide order dated 28.12.2010. c) Notice u/s 148 was issued on 25.3.2015. 13. It is evident from the above that re-assessment proceedings were initiated after four years from the end of the relevant assessment year and assessment u/s 143(3) had already been framed on the assessee. In such factual circumstances, it is only in the conditions stipulated in the 1st proviso to section 147 that the re-assessment proceedings can be resorted, which as per the Revenue in the present case is the failure to disclose material facts relating to EDC charges. 14. We are not in agreement with this contention of the Revenue. Undisputedly EDC charges had been disclosed in the Balance Sheet of the assessee for the impugned year and which formed part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re-occurring phenomenon. Accordingly, the assessee was required to credit the receipts of External Development Charges to its P' L Account and debit the expenses incurred on account of the same. Since, the assessee is following Cash System of accounting, therefore, the net amount received by the assessee during the year as External Development Charges was required to be brought to the ambit of tax by crediting the receipts earned during the year and debiting the expenses incurred on account of external development work other related jobs. However, the assessee ------------------ has rather shown the External Development Charges EDC received as liability in its Balance Sheet. The said failure on the part of the assessee has led to escapement of taxable income as the net income earned on account of the External Development Charges has escaped the ambit of taxation. Thus after independent verification of records with respect to the above mentioned facts, I have reasons to believe that an income of ₹ 1,59,61,85,128/- has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961. A calculation of the same is as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ver the section empowers that Assessing Officer to assume jurisdiction to reopen the case when the escapement of income is on account of failure of the assessee to disclose material facts relating to the income, meaning thereby that only important and primary facts pertaining to the income have to be disclosed and not the reasoning or logic which lead to the conclusion of the nature of the receipt. In the present case, vis- -vis EDC charges, the necessary facts were nature of the income and the quantum of the income. The assessee having disclosed that it had outstanding EDC charges received amounting to ₹ 252 crores as at the end of the year, the nature and the quantum of the receipt was duly disclosed by the assessee. It is not the case of the Revenue that the nature of the receipt is something other than EDC charges or that the quantum is not as disclosed by the assessee. Therefore, failure to disclose any material fact cannot be attributed to the assessee. Even the reasons recorded for formation of belief are on the same set of facts, which having already been disclosed by the assessee, No failure to disclose any material fact can therefore be attributed to the assessee. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escapement of income from the assessment. 7.2 Moreover, from the reasons recorded, it appears that according to the Assessing Officer, the expenditure was incurred to establish a subsidiary in USA, and therefore, such expenditure was covered under Section 35D [1] (ii) of the I.T Act, and therefore, only 1/5th of the expenditure i.e., ₹47,23,722/- was required to be allowed. Instead, the entire amount claimed by the assessee i.e., ₹2,36,18,612/- is allowed to be debited. Therefore, according to the Assessing Officer, his predecessor has wrongly allowed the entire amount of ₹2,36,18,612/- to be debited under the head Interest and Finance charges . In the reasons recorded, it is specifically observed by the Assessing Officer that, ..On observation of the assessment records, . .. meaning thereby, while issuing notice, the subsequent Assessing Officer did consider the material which was already on the record, which was considered by the Assessing Officer, while framing the scrutiny assessment under Section 143 of the Act. 8. As observed hereinabove, even there is no allegation in the reasons recorded that there was any failure on the part of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2006-07 and the level of the CIT (A) for AY 2007-08 . Mr. Manchanda has also not been able to counter the submission that for AYs 2011-12 and 2012-13 the same claim for depreciation has been allowed. 25. For all of the aforementioned reasons, the writ petitions are allowed and the notices dated 31st March, 2015 and the consequential orders dated 11th January, 2016 passed by the AO disposing of the Petitioner s objections are hereby set aside. No order as to costs. 19. Further we do not find any merit in the contention of the Ld.DR that mere production of account books and balance sheet and profit and loss account will not tantamount to disclosure. The Ld.DR has borrowed from Explanation-1 to section 147 of the Act to so contend. The said Explanation reads as under: Explanation 1-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the forgoing proviso. 20. This Explanation only deals with account books or other evidences which are produced before the Assessing Officer. N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of taxes for which the assessee-company before us was not claiming any deductions. Thus, the primary fact that these recoveries were made was before the ITO at the time of the original assessment proceedings. As the Supreme Court has pointed out in CIT vs. Burlop Dealers Ltd. (supra), it was for the ITO to raise the possible inferences. The assessee-company was under no obligation to inform the ITO about the possible inferences which could be raised against him. If the ITO did not raise the appropriate inference on the primary facts disclosed before him the income which has escaped assessment cannot be brought to tax under s. 147(a) of the Act of 1961. The duty which has been cast upon the assessee is to disclose all the primary facts necessary to enable the ITO to arrive at the proper figure of the total income and to assess the tax accordingly. Beyond disclosure of the primary facts, no other duty is cast on the assessee. Here is not a case of books of account or other evidence produced by the assessee at the time of the original assessment proceedings. The profit and loss account of the assessee-company was submitted and it did disclose the recoveries in each of these two yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee asking for break up of other liabilities and no further questions were asked thereafter, is not acceptable. If a query is raised during assessment proceedings and answered by the assessee, undoubtedly the attention of the Assessing Officer is drawn to the same and it is reasonable to presume that he has considered the same and formed a view also. The Hon'ble Delhi High Court held so in the case of CIT vs Usha International Ltd.(2012) 348 ITR 485 (Del) which has been relied upon by the Hon'ble Punjab Haryana High Court in the case of Pr. CIT vs Anil Nagpal (2017) 291 CTR 272(P H) which has been relied upon by the Ld.Counsel for the assessee. Moreover, the reopening in this case, as discussed above, is hit by the first proviso to section 147 of the Act. 23. Considering the above discussion we do not find any justification for the authorities below to justify the reopening of the assessment. The reopening is thus clearly bad in law and liable to be quashed. We accordingly set aside the orders of the authorities below and quash the reopening of the assessment u/s 147/148 of the Act. Ground of appeal No.2(a), therefore, stands allowed. 24. Since we hav ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
