TMI Blog2022 (9) TMI 765X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. We, therefore, hold that the initiation of reassessment proceedings by the AO in the instant case is not in accordance with law and therefore, the same has to be quashed. Accordingly, we quash the reassessment proceedings and the grounds raised by the assessee on this issue are allowed. - ITA No.183/Hyd/2020 - - - Dated:- 14-9-2022 - Shri Rama Kanta Panda, Accountant Member AND Shri Laliet Kumar, Judicial Member For the Assessee : Shri K.C.Devdas For the Revenue : Shri Kumar Aditya, Sr.AR ORDER PER SHRI RAMA KANTA PANDA, A.M. This appeal filed by the assessee is directed against the order dated 13.12.2019 of Learned Commissioner of Income Tax (Appeals)-8, Hyderabad relating to AY 2008-09. 2. The grounds raised by the assessee are as under:- Ground I: Validity of re-opening of assessment under section 147 of the Act: 1. On the facts and in the circumstances of the case and in law, the learned CIT(A) has erred in upholding the action of Assessing Officer that the assessment completed vide assessment order dated March 30, 2015 has been validly re-opened and hence assuming jurisdiction under section 147 of the Income tax Act, 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... national Airport at Hyderabad. The assessee filed its original return of income on 29.09.2008 declaring loss of Rs.3,56,28,560/-. The AO completed the assessment u/s. 143(3) on 27.12.2010 determining the total loss at Rs.3,19,03,542/- wherein he made disallowance of depreciation of Rs.37,25,018/-. 4. Subsequently, the AO issued notice u/s. 148 of I.T.Act on 27.03.2014 after recording the following reasons:- The assessee company filed its return of income on 29.09.2008 for the AY 2008-09 admitting a loss of Rs.3,56,28,560/-. The return was processed u/s. 143(1) of I.T.Act Assessment u/s. 143(3) was completed on 27.12.2010 determining taxable income of Rs.3,19,03,542/-. During the year an amount of Rs.84,97,952/- was debited towards project expenses written off and the same was not added back in the computation. As the same is capital n nature and liable to be disallowed u/s. 37 of the I.t.Act. This resulted in short accounting of total income of Rs.84,97,952/-. Due to failure on part of the assessee to disclosure fully and truly all material facts necessary for completion of the assessment the income has been escaped from assessment. Therefore, I have reason to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t expenditure was shown as revenue expenditure and since the assessee did not file any information, he held that all the head of expenditure in the project expenses breakup which were labeled as pre-operation expenses are pre-operative. Hence, the same was to be capitalized with fixed assets. He therefore treated the project expenses written off of Rs.84,97,952/- as in the nature of capital expenditure and not allowable u/s. 37 of the I.T.Act. He accordingly disallowed the same and determined the total loss at Rs.2,34,05,590/-. 8. Before the ld.CIT(A), the assessee apart from challenging the addition on merit challenged the validity of reassessment. However, the ld.CIT(A) upheld the validity of reassessment proceedings by observing as under:- 6.3 I have carefully perused the submissions made by the appellant, as well as the order of the Assessing Officer. It is the contention of the assessee's AR that there was no income liable to tax which escaped assessment. However, the reasons for reopening the case are clearly enumerated in the Assessment Order itself, and it is seen that the reopening is perfectly valid. The AO has clearly stated in the Assessment Order itself, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to this issue are therefore PARTLY ALLOWED. 10. Aggrieved with such order of the ld.CIT(A), the assessee is in appeal before the Tribunal. 11. The ld. Counsel for the assessee strongly challenged the order of the ld.CIT(A) in upholding the validity of the reassessment proceedings. Referring to page 81 to 87 of the paper book, he drew the attention of the Bench to the original assessment order passed u/s. 143(3) on 27.12.2010 wherein the AO, after verifying the details as called for, has completed the assessment determining the total loss at Rs.3,19,03,542/- as against the returned loss of Rs.3,56,28,560/-. Referring to the notice issued u/s. 148, copy of which is placed at page 88 of the paper book, and the reasons recorded at page 97 of the paper book, he submitted that the AO basically reopened the assessment on the ground that the project expenses written off amounting to Rs.84,97,952/- is capital in nature and liable to be disallowed u/s. 37 of the I.T.Act. Referring to page 47 of the paper book, he drew the attention of the Bench to Schedule -D which shows the expenditure during construction period and submitted that out of the total expenditure during construction pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon ble Supreme Court:- 1. Having heard Shri Balbir Singh, learned ASG and in the facts and circumstances of the case more particularly at the time of Scrutiny Assessment under section 143(3), the Assessing Officer had asked for the details regarding the unsecured loan taken byI the Assessee during the year under consideration and the Assessee furnished the details as asked for and thereafter, after perusing the details so furnished by the Assessee, the Assessing Officer passed an order under section 143(3) of the Act. Therefore, it cannot be said that there was any suppression on the part of the Assessee in not disclosing true and correct facts. It is required to be noted that even the re-assessment proceeding were initiated beyond the period of four years. Under the circumstances, the High Court is absolutely justified in quashing the re-assessment proceedings and the notice under section 148 of the Income tax Act. No interference of this Court is called for in exercise of powers under article 136 of the Constitution of India. 2. With this, the Special Leave petition stands dismissed. of. 3. Pending application(s), if any, shall stand disposed of. 12. Referr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wal Realty (P.) Ltd.v.DCIT 1 (107 taxmann.com 284) (bom.HC) viii. Arvind Remedies (378 ITR 547) (Mad.HC) ix. Indian Bank(63 taxmann.com 145)(Mad HC) x. Godrej Agrovet Ltd. v. DCIT[2015] 56 taxmann.com 141(Bom.HC) xi. Paladiya Brothers CO.v.ACIT[2015] 61 tamxann.com 26(Guj.) xii. NTPC Ltd. DCIT[2013] 32 taxmann.com 343 (Del.) xiii. Sita Wrold Travel (India) Ltd. v.CIT(274 ITR 186)(Del.HC) 15. Referring to the following decisions, he submitted that in absence of formation of belief that income has escaped assessment, reopening is bad in law. i. ITO v. Lakhmani Mewal Das (103 ITR 437) (SC) ii.Dass Friends Builders(P.) Ltd. vs.DCIT (153 taxmann 282) (Alh.HC) iii.TTK Prestige Ltd. v. DCIT (97 taxmann.com 112) (Kar.HC) iv. Known Agro Foods(P.) Ltd. vs. ACIT 375 ITR 460 (Del.HC) 16. So far as, the merit of case is concerned, the ld. Counsel for the assessee submitted that even on merit also the amount has to be allowed as expenditure u/s. 37 of the I.T.Act. For the above proposition, he relied on the following decisions:- i.ACIT vs.L.S.Cable(P) Ltd. 88 taxmann.com 616 (Del.HC) ii.Reliance Gems Jewels Ltd. vs. DCIT3(3), Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e instant case completed the assessment u/s. 143(3) on 27.03.2010 determining the total loss at Rs.3,19,03,542/- as against the returned loss of Rs.3,56,28,560/- by disallowing depreciation of Rs.37,25,018/-. Subsequently, the AO issued notice u/s. 148 on 27.03.2014 after recording the reasons for reopening and such reasons have already been reproduced in the preceding paragraph. It is the submission of the ld. Counsel for the assessee that the assessment has been reopened beyond a period of four years from the end of the relevant assessment year 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 therefore, in view of the proviso to section 147 of the I.T.Act, the AO cannot reopen the assessment beyond a period of four years from the end of the relevant assessment year. It is his submission that mere mentioning of failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment is not sufficient in absence of any tangible material before the AO to substantiate or to show as to which part of the income or which facts necessary fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded by the Assessing officer goes into various details while coming to the conclusion that the income has escaped assessment and, in our opinion, the said material and details were already available with the Assessing officer at the time of initial assessment and it does not appear to be something which has been gathered afresh or that which came to the notice of the Assessing Officer after the completion of original assessment. The payment of license fee to RPG Enterprises Ltd. was not a new fact which has emerged. on the contrary in the original returns that were filed. the factum of payment of licence fee to RPG Enterprises Ltd. was clearly disclosed and, therefore. it appears that the Assessing Officer had a mere relook at the same facts, which, in our considered opinion, is against the dictum of the apex court and the principles that emerge therefrom. An analysis of the orders of the commissioner of Income-tax ( 'Appeals) as well as the Tribunal would show that the Assessing officer had actually before him all the relevant materials at the time of the original assessment itself and, therefore, the finding of fact recorded by the Commissioner of Income-tax ( 'Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue. 24. The various other decisions relied on by the ld. Counsel for the assessee in the paper book also supports his case to the proposition that the reopening of the assessment in the instant case beyond a period of four years from the end of the relevant assessment year is not valid in absence of failure on the part of the assessee to disclose all material facts necessary for completion of the assessment. 25. In view of the above, we hold that the reopening of assessment beyond a period of four years from the end of the relevant assessment year is not in accordance with law. Mere mentioning of the words failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment by the AO, in our opinion is not sufficient in absence of showing which part of the material was not disclosed by the assessee. This view of ours finds support from the decision of Hon ble Bombay High court in the case of Hindustan Lever Ltd. vs R.B.Wadker reported in 268 ITR 332 where the Hon ble High Court has held that the AO must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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