TMI Blog2021 (12) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... the subject matter of reopening of the assessment and since the original assessment was completed under section 143(3) and since there is no allegation by the A.O. of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment and since there is no tangible material for belief that income chargeable to tax has escaped assessment, therefore,we hold that the reassessment proceedings initiated by the A.O. in the instant case after a period of four years from the relevant assessment year are not in accordance with Law. - Decided in favour of assessee. - ITA. No. 6022/Del./2016 - - - Dated:- 10-9-2021 - SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER For the Assessee : Shri KVSR. Krishna, C.A. For the Revenue : Shri Sanjay Tripathi, Sr. DR ORDER PER R.K. PANDA, A.M. This appeal filed by the Assessee is directed against the Order dated 29.07.2016 of the Ld. CIT(A)-2, New Delhi, relating to the A.Y. 2007-2008. 2. Facts of the case, in brief, are that the assessee is a Company incorporated on 08.12.1996 and is a Rural Livelihood Promotion Company engaged in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rnish details regarding receipt of subsidy. It was explained by the assessee that it has received an amount of ₹ 23.46 lakhs and remaining amount of ₹ 1.07 crores is outside the books of the assessee. The A.O. observed that Notes to Accounts clearly state that a sum of ₹ 1.07 crores is subsidized by Shore Cap Exchange. Therefore, according to the A.O. such subsidy received by the assessee company is on account of revenue being given for business purposes and, therefore, the same is taxable in view of the principles laid down by the Hon ble Apex Court in the case of M/s. Sahney Steel and Press Works Ltd., vs., CIT 228 ITR 253 (SC). He further noted that assessee company has revised its return of income under section 148 for the impugned assessment year and has not submitted any documentary evidence in support of its revised return of income. Relying on the decision of Hon ble Supreme Court in the case of CIT vs., M/s. Sun Engineering Works Pvt. Ltd., reported in [1992] 1 SCR 732 wherein it has been held that assessee cannot take advantage of reopening for review of concluded items, the A.O. rejected the revised return of income filed by the assessee. Thus, the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was spent on acquisition of capital assets. Retaining ₹ 1 per identified assets, balance has been adjusted against grants. Grant amount, aggregating to ₹ 1.6 million spent on Staff Training and Repairs and Maintenance are not reflected in the Income and Expenditure Statement. 23.4.2. The company has received computer systems, software and operating systems and procedures especially developed suiting its operational needs from its holding company, which has been financed out of the IFC Technical Assistance Facility. IFC is one of major shareholder of the company. The hardware;, software, other expenses for development of the same aggregating to ₹ 10.8 million was managed by the holding company, BASICS Ltd. another major shareholder. After the development, the company is paying a nominal rent of ₹ 1.0 million per annum, for the hardware only to BASICS Ltd. 23.4.3. Similarly, a sum of ₹ 10.7 million was also subsidized by Shorecap Exchange, Chicago, USA towards Risk Management, Strengthening Middle Management and Business Process Reengineering of the company operations. 4.1. Ld. Counsel for the assessee submitted that the amount in q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case there was sufficient disclosure in the audited accounts giving the primary facts and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment and since there is no tangible material for belief that income had escaped assessment, therefore, the reassessment proceedings initiated by the A.O. and upheld by the Ld. CIT(A) is not in accordance with Law. Therefore, the grounds raised by the assessee challenging the validity of re-assessment proceedings has to be accepted and the reassessment proceedings should be held as null and void. 4.3 So far as the merits of the case is concerned, the Learned Counsel for the Assessee submitted that it is not subsidy as interpreted by the A.O. and reiterated the arguments as made before the A.O. and the Ld. CIT(A). 5. The Ld. D.R. on the other hand relied on the orders of the A.O. and the Ld. CIT(A). 6. We have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the A.O. in the instan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at action under section 147 of the Income Tax Act, 1961 cannot be taken after the expiry of 04 years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. The relevant observations of the Hon ble Delhi High Court in the case of Haryana Acrylic Manufacturing Co. vs., CIT (supra) are as under : Viewed in this light, the proviso to section 147 of the said Act, carves out an exception from the main provisions of section 147. If a case were to fall within the proviso, whether or not it was covered under the main provisions of section 147 of the said Act would not be material. Once the exception carved out by the proviso came into play, the case would fall outside the ambit of section 147. Examining the proviso [set out above], we find that no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year if the following conditions are satisfied: (a) an assessment under sub-section (3) of section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wel Intertrade (P.) Ltd. s we had agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing Officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our viewpoint, we hold that the notice dated 29-3-2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 2-3-2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above. The matter, however, does not end here. We have mentioned above that the sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t that the actual reasons were those as noted in the said form. Then why did the Assessing Officer communicate a different set of reasons to the petitioner? Did he think that the supplying of reasons and the inviting of objections were mere charades? Did he think that it was a mere pretence or a formality which had to be gotten over with ? At this point, it would be well to remember that the Supreme Court in GKN Driveshafts (India) Ltd. s case had specifically directed that when a notice under section 148 of the said Act is issued and the noticee files a return and seeks reasons for the issuance of the notice, the Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of the reasons, the noticee is entitled to file objections to the issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order. These are specific directions given by the Supreme Court in all cases where notices under section 148 of the said Act are issued. Surely, the Assessing Officer could not have construed these specific directions to be a mere empty formalities or dead letters? There is a strong logic and purpose behind the directions issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e find the Hon ble Supreme Court in the case of CIT vs., Kelvinator of India Ltd., [2010] 320 ITR 561 (SC) has held that after 1st April, 1989 the A.O. has power to reopen the assessment provided there is tangible material to come to the conclusion that there was escapement of income from assessment. The reason must have a link for the formation of the belief. The relevant observation of the Hon ble Supreme Court reads as under : After the Amending Act, 1989, Section 147 reads as under: Income escaping assessment. 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year). On going through the changes, quoted ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion `reason to believe' in Section 147. --A number of representations were received against the omission of the words `reason to believe' from Section 147 and their substitution by the `opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, `reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression `has reason to believe' in place of the words `for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same. For the afore-stated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs. 6.4. We find the Hon ble Delhi High Court in the case of Bharti Infratel Ltd., vs., DCIT Another [2019] 411 ITR 403 (Del.) has held that proviso to Section 147 of the I.T. Act, 1961 clearly states that no action under ..... X X X X Extracts X X X X X X X X Extracts X X X X
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