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2019 (12) TMI 489 - AT - Income TaxReopening of assessment u/s 148 - assessee argued for non service of notice - HELD THAT - Assessee, at Bar, in all fairness, accepted that the assessee has not filed any return of income in response to notice issued u/s.148 of the Act. However, in para 3 of the reassessment order dated 26.11.2009, the Assessing Officer has mentioned that notice u/s 143(2) of the Act and notice u/s.142(1) of the Act was served on the assessee on 26.5.2009. In absence of any return or response to the notice u/s.148 of the Act, the assessee cannot raise any objection or ground regarding service of notice. Therefore, the additional ground of the assessee being devoid of merits is dismissed. Determining capital revenue expenditure receipts and computed the income - assessee is not registered u/s.12A and hence, it is not claiming any exemption u/s.11 - HELD THAT - In the present case, undisputedly, the assessee has incurred capital expenditure over and above its capital receipts and same cannot be allowed to be set off from the revenue surplus for the purpose of calculation of tax liability of the assessee. Admittedly, the capital receipts in the current year are less than the capital expenditure and that is why the assessee wants to set off against surplus in the revenue account. In view of above, we see no reason to interfere with the order of the CIT(A) in confirming the addition made by the AO. Validity of reopening of assessment - AY 2008- 09 - HELD THAT - This issue is squarely covered in favour of the assessee by the decision of Hon'ble Supreme Court in the case of CIT Vs. Kelvinator India Ltd. 2010 (1) TMI 11 - SUPREME COURT wherein newly substituted provision of section 147 of the Act with effect from 01.04.1989 is interpreted by observing, that section 147 of the Act, as substituted w.e.f. 01.04.1989 does not postulates conferment of power upon the Assessing Officer to initiate reassessment proceeding upon his mere change of opinion. Further, if 'reason to believe' of the Assessing Officer is founded on an information which might have been received by the Assessing Officer after the completion of assessment, it may be a sound foundation for exercising the power under section 147 r.w.s. 148 of the Act In the absence of any fresh material, the reappraisal of same material to initiate reassessment proceedings tantamounts to change of opinion and hence bad in law. We also find that in the present case, there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment. From the above facts of the case and following the decisions quoted above, we are of the considered view that the reassessment order u/s. 147 r.w.s. 144 dated 29.1.2014 of the Act is bad in law a hence, same is quashed and allow the additional ground of appeal.
Issues Involved:
1. Validity of the assessment under section 143(3) for the assessment year 2005-06. 2. Validity of reassessment proceedings under section 147 for the assessment year 2008-09. 3. Determination of capital and revenue expenditure and receipts for the assessment year 2005-06. 4. Admissibility of additional grounds of appeal. 5. Tax effect and maintainability of the revenue's appeal. Issue-wise Detailed Analysis: 1. Validity of the assessment under section 143(3) for the assessment year 2005-06: The assessee contended that the assessment made under section 143(3) was invalid because the notice under section 143(2) was served beyond the stipulated period. The Tribunal admitted the additional ground based on the Supreme Court decision in National Thermal Power Company Ltd. vs. CIT. However, it was found that the assessee did not file any return in response to the notice under section 148. Consequently, the objection regarding the service of notice under section 143(2) was dismissed as devoid of merits. 2. Validity of reassessment proceedings under section 147 for the assessment year 2008-09: The assessee argued that the reassessment proceedings under section 147 were initiated without any new material, merely based on a change of opinion. The Tribunal found that the original assessment under section 143(3) was completed after full disclosure of material facts by the assessee. Citing the Supreme Court decision in CIT vs. Kelvinator India Ltd. and the Delhi High Court decision in CIT vs. Usha International Ltd., the Tribunal held that the reassessment proceedings were invalid as they were based on a mere change of opinion without any new material. Consequently, the reassessment order was quashed. 3. Determination of capital and revenue expenditure and receipts for the assessment year 2005-06: The assessee argued that the AO was not justified in segregating capital and revenue expenditure and receipts, and that the total receipts were used for the purpose of the authority's objectives. The Tribunal upheld the CIT(A)'s decision, stating that since the assessee was not registered under section 12A, it had to be assessed as an ordinary assessee. The Tribunal agreed with the CIT(A) that capital receipts and expenditures should not be mixed with revenue receipts and expenditures for tax calculation purposes. The addition of ?55,50,620 was confirmed. 4. Admissibility of additional grounds of appeal: For the assessment year 2008-09, the assessee raised an additional ground challenging the initiation of reassessment proceedings under section 147. The Tribunal admitted the additional ground in the interest of justice, following the Supreme Court decision in National Thermal Power Company Ltd. vs. CIT. 5. Tax effect and maintainability of the revenue's appeal: The Tribunal noted that the tax effect in the revenue's appeal was below the limit of ?50 lakhs as per CBDT Circular No. 17/2019. Consequently, the revenue's appeal was dismissed as not maintainable. Conclusion: The appeal for the assessment year 2005-06 was dismissed, upholding the additions made by the AO. For the assessment year 2008-09, the reassessment order was quashed due to the lack of new material, and the revenue's appeal was dismissed both on merits and due to the low tax effect.
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