TMI Blog2023 (3) TMI 565X X X X Extracts X X X X X X X X Extracts X X X X ..... ect. The reasons cited for rejection of the objections in the impugned order dated 04.03.2005, namely the reference to the specific transactions of sale and lease back for the Assessment Years 1996-97 and 1997-98 clearly do not constitute material to justify reopening of the assessment. As held the notice must stipulate that there was a failure on the part of the assessee to disclose fully and truly material facts necessary for its assessment and discovery of such new material, details of which are required to set out in the notice could be the only material to form the basis for assuming jurisdiction under Section 147 of the Act. In the present case, there is clearly a failure on the part of the Assessing Officer to set out such material that provided the basis for assumption of jurisdiction under Sections 147 and 148 of the Act. Decided in favour of assessee. - WRIT PETITION NO . 735 OF 2005 - - - Dated:- 13-3-2023 - DHIRAJ SINGH THAKUR AND VALMIKI SA MENEZES, JJ. For the Petitioner : Mr Ajaykumar R. Singh, Advocate. For the Respondents : Mr Akhileshwar Sharma with Ms Shilpa Goel, Advocate. JUDGMENT: ( PER VALMIKI SA MENEZES , J.) By this writ petit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disclose true and full material facts; the Petitioner contends that dismissal of his objections to the reopening of assessment amounts to a change of opinion renders the reopening of assessment invalid. 4. During the course of the hearing, we were of the view that production of communication dated 21.09.1999 issued by the Deputy Commissioner of Income Tax, Central Circle-11, Mumbai, issued to the Petitioner under Section 142(1) of the Act, in connection with assessment proceedings for Assessment Year 1997-98 should be made part of the record, to support the contention that in-fact the issue with regard to the claim of depreciation on the assets purchased from two entities, namely M/s. Gremach CNC Limited and M/s. Technology Plastics Limited, had been enquired into by the then Assessing Officer in a scrutiny proceedings for the assessment year, we directed the revenue to file an affidavit with regard to the authenticity and genuineness of the communications relied upon by the Petitioner, who had then produced the same across the bar to answer our query. Time was granted to the Respondent to file its affidavit-in-reply till 07.12.2022. On 06.12.2022, the Petitioner filed an aff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation claimed by the Petitioner on the assets purchased by it under the sale and lease back transactions. That thereafter on 22.03.2004, the revenue issued a notice under Section 148 of the Act, claiming that some income of the Petitioner had escaped assessment and called upon the Petitioner to file a return, which the Petitioner did on 08.09.1998 without prejudice to its contention that reopening of assessment was impermissible. It is the Petitioner s submission that when the Respondent No.1 furnished reasons for issuing notice under Section 148 of the Act, under cover of letter dated 25.08.2004, the reasons disclosed that the claim of 100% depreciation made in the Assessment Year 1997-98 related to purchase of assets from the said M/s. Gremach CNC Limited and M/s. Technology Plastics Limited, and it was alleged that for the Assessment Year 1996-97, the Petitioner had entered into similar transactions, which were found to be a paper transactions, on which it claimed 100% depreciation. The revenue claimed that such depreciation was disallowed under Section 143(3) read with Section 147 of the Act, and on that count, proposed to reopen assessment for the year 1997-98. 7. The P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein on the basis of above submissions. It is the Petitioner s submission that the impugned order is contrary to law and continuation of reassessment proceedings against the Petitioner for Assessment Year 1997-98 are completely without jurisdiction, void, non-est and illegal, and therefore, such action is arbitrary in violation of Article 14 of the Constitution of India. 10. In support of its contentions, the Petitioner has cited the judgments of this Court in Hindustan Lever Ltd. ..V/s.. R. B. Wadkar, Assistant Commissioner of Income-Tax and others , reported in Vol. 268 ITR 332, Jainam Investments ..V/s.. Assistant Commissioner of Income Tax, (Writ Petition No.2760 of 2019 dated 24.08.2021), Ananta Landmark Pvt. Ltd. ..V/s.. Deputy Commissioner of Income-Tax and others, reported in (2021) 439 ITR 168 (Bom) and Purity Techtextile Private Limited ..V/s.. Assistant Commissioner of Income-Tax and another, reported in (2010) 325 ITR 459 (Bom), to buttress the argument that the expressions reason to believe in Section 147 of the Act, to mean that the Assessing Officer would be required to mention enough details of tangible material which is new and not already disclosed in ear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches the court, on the strength of the affidavit or oral submissions advanced. 22. Having recorded our finding that the impugned notice itself is beyond the period of four years from the end of the assessment year 1996-97 and does not comply with the requirements of the proviso to Section 147 of the Act, the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant year, the proviso to Section 147 stipulates a requirement that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. Since in the case at hand, the assessment is sought to be reopened after a period of four years, the proviso to Section 147 is applicable. It is also settled law that the Assessing Officer has no power to review an assessment which has been concluded. If a period of four years has lapsed from the end of the relevant year, the Assessing Officer has to mention what was the tangible material to come to the conclusion that there is an escapement of income from assessment and that there has been a failure to fully and truly disclose material fact. After a period of four years even if the Assessing Officer has some tangible material to come to the conclusion that there is an escapement of income from assessment, he cannot exercise the power to reopen unless he discloses what was the material fact which was not truly and fully disclosed by the assessee. If we consider the reasons for reopening, except stating in paragraph 3 that a sum of Rs.7,66,66,663/- which was chargea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is failure to disclose truly and fully material facts . 15. In Purity Techtextile Private Limited ..V/s.. Assistant Commissioner of Income-Tax and another (supra), this Court considered the jurisdictional conditions to be fulfilled under Section 147 of the Act in the formation of the belief by the Assessing Officer that income chargeable to tax had escaped assessment. Whilst dealing with the question of the bar of limitation of four years, this Court has held as under : 12. Section 147 provides that 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 163 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 the section. Under the first proviso, where an assessment has been made under sub-section (3) of section 143 or section 147 for the relevant assessment year, no action can be initiated under section 147 after the expiry of four years from the end of the relevant assessment year unless the income chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abuse of power by the Assessing Officer. Hence, after April 1, 1989, Assessing Officer has power to reopen, provided there is 'tangible material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Purity Techtextile Private Limited ..V/s.. Assistant Commissioner of Income-Tax and another (supra), whilst referring to the judgment of the Hon ble Supreme Court rendered in CIT ..V/s.. Kelvinator of India Limited , reported in [2010] 320 ITR 561 , has held that it is only when the Assessing Officer records reasons which are based upon specific information, which constitutes the assessee s failure to make full and true disclosures of those material facts, that the revenue can assume jurisdiction under Section 147 to reopen assessment. 16. Keeping these principles laid down by this Court in the afore quoted judgments in mind, we proceed to examine the legality of the impugned order. It is clear from the order in appeal passed by the Tribunal for the Assessment year 1996-97, that the reopening proceedings for that year had been set aside for reasons that the two transactions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of the Petitioner for Assessment Year 1997-98, more so to get over the bar of limitation of four years. The objections raised by the Petitioner in its reply dated 22.09.2004, that the reasons cited in the notice dated 22.03.2004 issued by the Respondent No.1 that the reopening was based upon a change of opinion without there being any sufficient cause for arriving at that conclusion is justified and correct. The reasons cited for rejection of the objections in the impugned order dated 04.03.2005, namely the reference to the specific transactions of sale and lease back for the Assessment Years 1996-97 and 1997-98 clearly do not constitute material to justify reopening of the assessment. As held in the judgments of this Court quoted above, the notice must stipulate that there was a failure on the part of the assessee to disclose fully and truly material facts necessary for its assessment and discovery of such new material, details of which are required to set out in the notice could be the only material to form the basis for assuming jurisdiction under Section 147 of the Act. In the present case, there is clearly a failure on the part of the Assessing Officer to set out such mat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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