TMI Blog2023 (4) TMI 370X X X X Extracts X X X X X X X X Extracts X X X X ..... l facts (in cases where the proviso operates) - the exercise would then fall in the realm of mere change of opinion on the basis of the very same material, which is legally impermissible - it cannot be said that there is a tangible material which would justify recourse to the provisions contained in section 147 of the Act, 1961. Decided in favour of assessee. - I.T.A. No.1965/Mum/2021 - - - Dated:- 27-2-2023 - Shri Aby T. Varkey, JM And Shri Om Prakash Kant, AM For the Assessee : Shri Naresh Jain For the Revenue : Shri Abi Rama Karthikeyan (Sr. AR) ORDER PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-50, Mumbai dated 23.09.2021 for the assessment year 2012-13. 2. By raising the ground no. 1 to 4, the assessee has challenged the legality/validity of the reopening of assessment for AY. 2012-13. Ground no. 1 to 4 is as under: - 1. That on the facts and circumstances of the case and in law, the Ld. AO erred in reopening the assessment u/s 148 and completing the assessment u/s 147. 2. That on the facts and circumstances of the case and in law, the Ld. AO erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned action of up--holding the re--opening of assessment, let us look into the settled position of law regarding the power of AO to re--open the assessment u/s 147 of the Act. The concept of assessment is governed by the time-- barring rule; and an assessee acquires a right as to the finality of proceedings. Quietus of the completed assessments can be disturbed only when there is information or evidence regarding undisclosed income or AO has information in his possession showing escapement of income as stipulated u/s 147 of the Act. As per Section 147 of the Act, if the AO intends to re--open the assessment, then AO has to record the reason to reopen the assessment, wherein he should record the reason to believe, escapement of income . It is settled principle of law that reason to believe postulates a foundation based on information and belief based on reason. After a foundation based on information is there, still, there must be some reason which should warrant the holding of a belief that income chargeable to tax has escaped assessment. In other words, before the AO issues notice u/s 148 of the Act, he must have recorded the reason to believe escapement of income. It is no do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal condition precedent also need to be satisfied before the AO re-open the assessment i.e. the income escaped assessment due to failure on the part of the assessee to disclose fully and truly all the materials facts necessary for the assessment. And the Hon ble Supreme Court has held that when the AO reopened the assessment which has already undergone scrutiny u/s 143(3) of the Act, after expiry of four (4) years from the end of the relevant assessment year, the AO should have tangible material in his possession for doing so. Keeping this in mind let us have a look at the reasons recorded by the AO for reopening the assessment which is reproduced by the Ld. CIT(A) at page no. 4 5 of the assessment order which reads as under: - In this case the assessee had filed its return of income on 29.09.2012 declaring total income at Rs.46,66,360/-. The assessment was completed u/s 143(3) of the IT Act, 1961 on 20.03.2015 at assessed income at Rs.46, 66, 360/-. Subsequently, it is observed from the records that the assessee is engaged in business of Builder and Real Estate Developer. Assessee has offered income on sale of premises at 75% of total value of the premises sold and also d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut the assessee has incurred interest payment of Rs.92,19,206/- which was per-se excessive and therefore since assessee has claimed excess payment of interest to the tune of Rs.92,19,206/-(Rs.1,01,15,039/- - Rs.8,95,833/-) which resulted in under-assessment of income to that extent. Therefore, he reopened the assessment. However, on perusal of the reasons recorded reveals that there was no mention by AO of any new/tangible material/information from outside source on the basis of which the AO discovered the aforesaid facts. The assessee has shown construction work in progress (WIP) in its balance-sheet (Placed at page 8 of PB as on 31.03.2012) as Rs.35,08,08,390/- and its details (Schedule -8 refer page 14 of PB) shows, WIP as on 31.03.2012 the said amount which includes interest on loan to the tune of Rs.3,53,14,785/- and the interest on loan for earlier year i.e. as on 31.03.2011 was to the tune of Rs.2,11,03,854/- difference of which is Rs.1,42,10,931/-. And that unsecured loan from M/s. Urban Kshetra Infrastructure Ltd. (M/s. UKIPL) was squared up and not existing liability as on 31.03.2012 is shown from perusal of Schedule-2 Page 11 of PB. So the details noted by AO from the ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in under others M/s. UKIPL name is figuring in last i.e. as on 31.03.2011, it is showing Rs.7 cr outstanding but as on 31.03.2012, it is Rs 91 lakhs . According to Ld. AR, it was explained to AO (during original assessment) that this amount of Rs.7 cr was returned back to M/s. UKIPL with settled interest on it of Rs.1,01,15,039; and thus the total interest comes to Rs.3,53,14,785/-. Therefore, the AO in the original assessment didn t draw any adverse inference against the assessee on this issue. Thus it is noted that the AO has discharged his duty by conducting inquiry on this issue and the assessee has filed all the details regarding the interest expenditure including that paid to the M/s. UKIPL. Even though the Ld. DR justified the AO s action of re-opening by citing Explnation-1 to Section 147 of the Act which reads as under: - Explanation-1 Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. 9. According to the Ld. DR mere production of books of accounts would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14, Therefore, though it is correct that explanation 1 to section 147 of the Act says mere production of books of accounts or other documents are not enough, and the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee, this duty does not extend beyond the full and truthful disclosure of all primary facts. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else-far less the assessee to tell the assessing authority what inferences, whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences whether of facts or law he would draw from the primary facts. If from primary facts, more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as nothing t indicate non-disclosure. Reasons itself rely on the balance-sheet and computation of income filed. 10. Having found that assessee had filed the primary documents like profit loss account, balance-sheet, tax audit report which was gone through by the AO during the original assessment which culminated in framing of assessment order u/s 143(3) of the Act as on 20.03.2015 and the fact that interest expenditure of Rs.3.53 cr was included in the WIP of Rs.35.08 cr and the other details of interest expenditure was discerned from the ledger submitted by the assessee during the original assessment proceedings, Explanaltion-1 cannot be used to justify the re-open of assessment after four year from the end of the assessment year to get-over the additional condition precedent as laid down by first proviso to Section 147 of the Act, which insists that AO can re-open an assessment only if assessee had failed to disclose fully and truly all material facts necessary for assessment. Here in the instant case, we note that assessee had disclosed all the primary documents before the AO as discussed; and it cannot be said in the facts of this case that the assessee failed to disclose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under section 143(3) of the Act. Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the assessment order must record all the questions raised and the satisfaction in respect thereof of the Assessing Officer. The only requirement is that the Assessing Officer ought to have considered the objection now raised in the grounds for issuing notice under section 148 of the Act, during the original assessment proceedings. .. 15. Once it becomes evident that the Assessing Officer had raised the query and reply thereto was furnished by the assessee, the endeavour on the part of the revenue to reopen the assessment is fraught with two infirmities. One, it cannot be said that the income escaped assessment on account of failure to make a true and full disclosure of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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