TMI Blog2023 (1) TMI 329X X X X Extracts X X X X X X X X Extracts X X X X ..... made addition u/s 14A of the Act while framing the assessment under section 143(3) of the Act. AO after threadbare examining the various issues including issues as to Keyman insurance premium and disallowance u/s 14A of the Act, took a view not to make any disallowance in respect of Keyman insurance premium while framing assessment under section 143(3) of the Act and made disallowance under section 14A of the Act. There is change of opinion by the AO to reopen the assessment for the AY 2013-2014, more particularly, when the issues raised in the reopening assessment were already considered during the assessment proceedings under section 143(3) - AO cannot have any jurisdiction to issue the notice u/s 148 for reopening the assessment for the year under consideration more particularly, when the assessment is sought to be reopened beyond a period of four years as held by the Supreme Court in case of Commissioner of Income tax v. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] - Decided in favour of assessee. - R/SPECIAL CIVIL APPLICATION NO. 20436 of 2018 - - - Dated:- 6-1-2023 - HONOURABLE MR. JUSTICE N.V.ANJARIA And HONOURABLE MR. JUSTICE BHARGAV D. KARIA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter dated 30.09.2015 informed the Deputy Commissioner of Income Tax, Circle-2(1)(2), Surat that it has amalgamated with the petitioner herein i.e. Shahlon Silk Industries Pvt. Ltd. 3.9) The respondent thereafter issued the impugned notice dated 13.12.2017 under section 148 of the Act in the name of assessee i.e. Shahlon Industries Pvt. Ltd. seeking to reopen the case of the assessee for the year under consideration. 3.10) The petitioner vide letter dated 22.12.2017 enclosed the copy of original return of income filed by the assessee for the year under consideration. 3.11) The respondent vide notice dated 26.07.2018 called upon the assessee to file return of the income electronically in response to the notice under section 148 of the Act. 3.12) The petitioner vide letter dated 9.08.2018 submitted reply and stated that the assessee company has already merged with the petitioner and assessee - company is no longer in existence, hence, assessee company cannot file return of income electronically. 3.13) The petitioner thereafter requested the Assessing Officer to supply copy of reasons for reopening the case of the assessee and the respondent supplied such reasons on 6.08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4A of the Act, value of investment of only Rs.16,000/- (which was value of 52 shares of Siddhinath Texurisers (P) Ltd) was considered. Investment in shares of Shahlon Ind. Infra(P) Ltd, shares of Fairdeal Textiles Pvt Ltd, shares of Fairdeal Eco Infra Pvt Ltd, share of Uday Yarn Twisters(P) Ild and share of Sanket Finance Leasing Pvt Ltd was not considered. As investment in these shares also yield exempted income, value of these investments was required to be included while computing disallowance u/ s 14A of the Act, which is worked out at Rs.4,29,678/- 3. In view of the above, I have reason to believe that the income chargeable to tax has escaped assessment to the tune of Rs.31,92,658/- (27,62,980+ 4,29,678) on account of relief granted for Key Man policy disallowance u/s 14A of the IT Act. Therefore, I am satisfied that it is a fit case for reopening the case u/s 147 of the I. T. Act read with explanation 2C. 3.14) The petitioner vide letter dated 24.09.2018 raised objections against the reopening. 3.15) The respondent vide order dated 30.11.2018 disposed of the objections raised by the petitioner. 3.16) Being aggrieved by the action of the respondent, the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er section 143(3) of the Act. 4.2) Learned Senior Advocate Mr. Hemani pointed out that after issuance of notice under section 148 of the Act, the assessee immediately intimated the Assessing Officer vide letter dated 22.12.2017 that M/s. Shahlon Industries Pvt. Ltd. is amalgamated with M/s. Shahlon Silk Industries Pvt. Ltd. vide order dated 27.08.2014 and thereafter the Assessing officer issued notice under section 142(1) of the Act requesting the assessee to file return of income in response to notice under section 148 of the Act. It was submitted that in response to such notice, assessee s Chartered Accountant vide letter dated 9.08.2018 informed the Assessing Officer that the company was no longer in existence and therefore, the return of the income could not be filed. It was submitted that it is well settled that no notice can be issued in the name of non-existent entity and therefore, the impugned notice issued in the name of a non-existent entity is non-est. 4.3) Learned Senior Advocate Mr. Hemani submitted that the assessment for the year under consideration was framed under section 143(3) of the Act and the same is sought to be reopened beyond the period of four years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 31,92,658/- for the relevant assessment year. It was submitted that the Assessing Officer found that the assessee had claimed payment of total Keyman insurance premium of Rs. 27,62,980/-, however this amount was not debited to Profit and Loss account but to the balance sheet under the head Long Term Loan and Advances. It was noticed that the insurance premium of Rs. 27,62,980/- was paid on insurance policy, however, these policies were not term policies in nature of pure life policies but were also having investment plans. Accordingly, the Assessing Officer had reason to believe that income had escaped assessment. 5.1) Learned advocate Mr. Raval relying upon the judgment in case of M/s. Peass Industries Engineers Pct. Ltd. v. DCIT reported in (2016) 72 Taxmann 302 (Gujarat) submitted that at the initial stage for reopening an assessment, what is required is reason to believe and not established fact of escapement of income and therefore, at this stage only question to be considered is whether there was relevant material to form a reasonable belief that income has escaped assessment or not. 5.2) Learned advocate Mr. Raval further submitted that just because the assessee has s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer has applied his mind and taken a conscious decision on a particular matter in issue. It was therefore, submitted that in the present case the order passed by the Assessing Officer in the original assessment proceedings is silent with respect to various aspects which have now led to reasons to believe that income of the assessee has escaped assessment. It cannot therefore, be construed that there is any change of opinion while forming the belief that there is escapement of income in case of the petitioner assessee. 5.8) In support of his submissions, reliance was placed on decision of this Delhi High Court in case of Sky Light Hospitality LLP v. Assistant Commissioner of Income Tax, Circle 28(1), New Delhi reported in (2018) 90 taxmann.com 413 (Delhi). 6. Considering the submissions made by the learned advocates on both the sides, it appears that the impugned notice under section 148 of the Act, 1961 is issued only on the ground that income chargeable to tax has escaped assessment to the tune of Rs.31,92,658/- on account of claim of deduction granted for Keyman policy and disallowance under section 14A of the Act. 7.It appears that before passing of the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer made addition under section 14A of the Act while framing the assessment under section143(3) of the Act. 10. Thus, the Assessing Officer after threadbare examining the various issues including issues as to Keyman insurance premium and disallowance under section 14A of the Act, took a view not to make any disallowance in respect of Keyman insurance premium while framing assessment under section 143(3) of the Act and made disallowance under section 14A of the Act. 11. It is therefore, apparent that there is change of opinion by the Assessing Officer to reopen the assessment for the Assessment Year 2013-2014, more particularly, when the issues raised in the reopening assessment were already considered during the assessment proceedings under section 143(3) of the Act, 1961. The Assessing Officer cannot have any jurisdiction to issue the notice under section 148 of the Act, 1961 for reopening the assessment for the year under consideration more particularly, when the assessment is sought to be reopened beyond a period of four years as held by the Supreme Court in case of Commissioner of Income tax v. Kelvinator of India Ltd. reported in 2010(2) SCC 723 as under: 2. A sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ieve , Parliament re-introduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the Assessing Officer. We quote herein below the relevant portion of Circular No.549 dated 31st October, 1989, which reads as follows: 7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression `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. 12. In view of fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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