TMI Blog2023 (3) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... me was not permissible under section 147 as it was clearly a change of opinion. Therefore, order re-opining assessment was not permissible. In the case of Godrej Boyce Mfg. Co. Ltd. [ 2022 (4) TMI 639 - BOMBAY HIGH COURT] the High Court held that where Assessing Officer completed original assessment under section 143(3) and subsequently he issued notice seeking to reopen such assessment for reason that interest bearing funds had been used for making addition of capital work-in-progress and hence interest paid in respect of capital borrowed for addition to capital work-in-progress should have been added back and capitalized as per provisions of section 36(1)(iii), as reasons did not indicate that there was failure to disclose truly and fully all material facts, impugned notice deserved to be quashed . Accordingly, in view of our observations in the preceding paragraphs and in light of the above judicial precedents highlighted above, we are hereby directing that the present reassessment proceedings are liable to be set aside. Since, we are quashing the notice issued u/s 147 of the Act on grounds of jurisdiction itself, we are not separately adjudicating on other Grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is not sustainable since there is no material on record with the Department to the effect that the disclosure made by the assessee during the during the course of assessment proceedings was either incomplete or untrue or that there was failure on the part of the assessee in disclosing material facts at the time of original assessment. In response, the ld. Departmental Representative relied on the observations made by ld. CIT(A) in the appellate order. 4.1 The facts pertaining to the issue of challenge to jurisdiction of initiating proceedings u/s. 147 of the Act are that the assessee company filed its return of income on 30-09-2008 declaring loss of Rs. 12,85,67,801/-. The original assessment u/s. 143(3) of the Act was completed on 30-12-2010 after determining total loss of Rs. 5,06,04,324/-. Subsequently, the Assessing Officer noticed that certain expenses pertaining to prior period i.e. prior period expenses had been incorrectly claimed by the assessee in the return of income and the Ld. Assessing Officer issued notice u/s. 148 of the Act on 18-03-2015 after recording reasons. The Assessing Officer recorded the following reasons while initiating re-assessment proceedings:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted before us that vide letter dated 03-12-2012 the necessary details relating to prior period expenses were submitted by the assessee before the Assessing Officer during the course of original assessment proceedings. Thirdly, all materials necessary for completing assessment were submitted at the time of assessment u/s. 143(3) of the Act and were already on record and no new facts had come to the notice of the Assessing Officer. Accordingly, in the instant facts, the proceedings u/s. 147 of the Act are liable to be dropped since the re-assessment proceedings have been initiated on a mere change of opinion . However, ld. CIT(A) dismissed the challenge of the assessee to initiation of re-assessment proceedings u/s. 147 of the Act with the following observations:- From the perusal of above reply, it is clear that appellant had not furnished complete details of prior period expenses. Further, no documentary evidences were also furnished to establish that the prior period expenses were actually crystallized during the year under consideration. Therefore, it is clear that full and true disclosure of all material facts was not made by the appellant during the course of origina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material facts required for the assessment. In the instant case, the assessee had truly and fully disclosed all material facts relating to the assessment. Further, the ld. Assessing Officer had made due inquiries on this aspect during the course of assessment proceedings and further no fresh material had come in the possession of the Assessing Officer which could form the basis of initiation of proceedings u/s. 147 of the Act beyond the period of four years from the end of the relevant assessment year. Further, on merits, the counsel for the assessee submitted that it has been a consistent practice of the assessee company in accounting both prior period expenses and prior period income and the same is a revenue neutral exercise. Further, the counsel for the assessee submitted that the Department on one hand has taxed the prior period income in the current year i.e. income pertaining to prior year, but on the other hand, prior period expenses have been disallowed and added back to the income of the assessee. Therefore, the Department is taking inconsistent position on taxability of prior period income and expenses for the same assessment year. 6. In response, the ld. Departm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d net prior period expenses of Rs. 3327.35 lakhs during the year under consideration. Notably, in the immediately preceding year, the assessee had claimed similar prior period expenses to the tune of Rs. 156.37 lakhs as well. Therefore, we observe in the instant facts that the only reason for reopening the assessment of the assessee was view a view to disallow prior period expenses claimed during the year under consideration. The Department, in our considered view has not brought forth any material on record to show that there was any failure on the part of the assessee to disclose fully and truly all materials facts necessary for his assessment, which is a pre-requisite for initiating proceedings beyond the period of four years from the end of the relevant assessment year. This is evident from the SCN issued by the Ld. Assessing Officer for making additions u/s 147 of the Act. Further, as pointed out by the counsel for the assessee relevant queries were made on this aspect during the course of assessment proceedings and the assessee had also replied thereto by way of a letter dated 03-02-2010. Therefore, in our considered view, the instant proceedings have been reopened by way of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and unjustified. In the case of Foramer France [2003] 129 Taxman 72 (SC), the petitioner-foreign company was engaged in business of oil exploration and providing expertise and assistance in said field. Proceeds from manning and management contracts received by petitioner were originally assessed in February, 1991 under section 143(3) treating same as business income in terms of section 44BB. However, following Tribunal's decision rendered in case of petitioner's expatriate employee, Assessing Officer issued a notice under section 148 in November, 1998 seeking to reassess same income as fees for technical services. The Hon'ble Supreme Court held that since admittedly there was no failure on part of petitioner to make return or to disclose fully and truly all material facts necessary for assessment, proviso to new section, which bars issue of notice under section 148 after expiry of four years from end of relevant assessment year, squarely applied to facts of instant case and, therefore, impugned notice was barred by limitation. Therefore, since notice under section 148 was without jurisdiction, there was no merit in plea that petitioner was to be relegated to alterna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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