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TMI Blog2012 (10) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... hallenging the reopening of the case u/s 147 of the I.T. Act. The CIT(A) has not appreciated that in the original assessment the Assessing Officer has not considered the issue as to whether the expenditure on wooden shuttering and centering material is revenue as per the law. 2. The ld. CIT(A) has erred on facts and in holding that wooden shuttering and centering is to be allowed as revenue expenses. 3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any grounds of appeal at any time before or during the hearing of this appeal." I.T.A. No.1879/D/2012 1. "The ld. CIT(A) has erred on facts and in deleting the disallowance of commission paid to M/s Brainstreet Marketing (P) Ltd. at Rs.18,85,000/-, 2. The learned CIT(A) has erred on facts and in holding that wooden shuttering and centering is to be allowed on consumption basis as revenue expenses. 3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any grounds of appeal at any time before or during the hearing of this appeal." 2. At the outset, the Bench rejected the request for adjournment on behalf of the assessee and considering the nature of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the I.T. Act." 3.1 After recording the aforesaid reasons, the AO issued a notice u/s 148 of the Act on 2nd July, 2010. In response, the assessee filed return on 9th August, 2010. During the course of reassessment proceedings on 8th October, 2010, the assessee raised objections against initiation of proceedings u/s 148 of the Act relying, inter alia, on a number of judicial pronouncements. However, the AO rejected these objections and upheld the validity of reopening of the assessment in the light of decisions in Teekoy Rubbers (India) Limited Vs. CIT (Ker) 181 ITR 387; Renusagar Power Co. Ltd. Vs. Income-tax Officer and another (All) 117 ITR 719; M.A. Chidambaram Vs. CIT (Mad) 216 ITR 175; Tube Suppliers Ltd. Vs. CIT (Mad) 216 ITR 596 and CIT Vs. First Leasing Company of India Ltd. (Mad) 241 ITR 248. 3.2 The AO, thereafter, show caused the assessee as to why the expenditure of Rs.2,42,56,947/- on wooden shuttering and centering expenses be not treated as capital in nature. In response, the assessee stated that the total amount of Rs.2,60,28,512/- comprised wooden shuttering and scaffolding- Rs.2,42,96,947.70 and steel centering & shuttering-Rs.17,31,565.30 . The assessee treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invalid. Inter alia, the assessee relied upon a number of decisions in CIT Vs. Kelvinator of India Ltd., 256 ITR 1 (Del-FB); CIT Vs. Goetze (India) Ltd., (2010) 321 ITR 431 (Delhi); Asteroids Trading and Investments (P) Ltd. Vs. DCIT (2009) 308 ITR 190; CIT Vs. Eicher Ltd. (2007) 294 ITR 310 (Delhi); Carlton Overseas (P) Ltd. Vs. Income-tax Officer (2010) (Delhi); Satnam Overseas Ltd. Vs. Addl. CIT (2010) 188 (Del); Sudhir Gensets Ltd. Vs. Income-tax Officer (2011) 201 (Delhi) (Mag.); CIT Vs. Random Constructors Pvt. Ltd. (2010) 186 (P&H); CIT Vs. Indian Farmers Fertilizers Co-operative Ltd.(2008) (Delhi); National Dairy Development Board Vs. DCIT (2011) 242 CTR (Guj) 302; CIT Vs. Simbhaoli Sugar Mills Ltd. (2011) 333 ITR 470 (Delhi); Legato Systems (India) Pvt. Ltd. Vs. DCIT (2010) (Delhi); Diwakar Engineers Ltd. Vs. Income-tax Officer (2010) (Delhi); Jal Hotels Co. Ltd. Vs. Ass. DIT (2009) (Delhi). In the light of these submissions and decisions, the ld. CIT(A) concluded as under:- "3.4 I have carefully considered the assessment order as well as the contentions of the appellant raised in the written submission. From para 4 of the original assessment order passed u/s 143(3), it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order, supported the findings of the AO while the ld. AR on behalf of the assessee relied upon the findings in the impugned order. 6. We have heard both the parties and gone through the facts of the case. Indisputably the original assessment in this case was completed vide order dated 15th December, 2007 u/s 143(3) of the Act, determining income of Rs.1,10,87,180/- in pursuance to return declaring income of Rs.1,10,50,707/- filed on 27th October, 2005. Thereafter, the AO reopened the assessment on 2nd July, 2010 u/s 147 of the Act i.e. four years after the end of the aforesaid assessment year on the ground that wooden shuttering and centering were capital in nature, even when during the course of original assessment proceedings, issue had been examined by the AO after raising queries and amount was allowed as revenue expenditure. As pointed out by the ld. CIT(A), the AO raised a specific query regarding claim of wooden shuttering and centering expenses and the assessee filed relevant details vide letter dated 15th October, 2007. No failure on the part of the assessee in relation to material facts in respect of wooden shuttering & centering expenses in the original assessment fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration, notice u/s 148 had been issued only on 2.7.2010 that is after four years from the end of relevant assessment year, apparently, the issue that arises for our consideration is as to whether there was any failure on the part of the assessee to disclose fully and truly all material facts? No such failure is either evident from the assessment order or the reasons recorded by the AO nor has been pointed out before us by the ld. DR. Indisputably, the AO chose to reopen the assessment completed u/s 143(3) of the Act after recording reasons, wherein no such failure as has been envisaged in proviso to sec. 147 of the Act, has been attributed to the assessee. In Rakesh Aggarwal v. Asst. CIT [1997] 225 ITR 496, Hon'ble Delhi High Court held that in view of the proviso to sect ion 147, notice for reassessment under section 148 would be illegal if issued more than four years after the end of the relevant assessment year unless failure is ascribed to the assessee in disclosing fully and truly al l material facts necessary for his assessment. Hon'ble Gujrat High Court while adjudicating a similar issue held in Shree Tharad Jain Yuvak Mandal v. ITO [2000] 242 ITR 612 as under: "A p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for the year under consideration and such failure should result in income chargeable to tax escaping assessment. On a plain reading of the aforesaid provisions and the reasons recorded, it becomes clear that there cannot be ascribed any failure or omission to the petitioner so as to vest the Assessing Officer with jurisdiction to reopen the assessments which were already finalised. In the circumstances, for the assessment years 1986-87, 1987-88 and 1988-89 in the light of the fact that the initiation by issuance of impugned not ices is beyond the period of four years and the prerequisite conditions stipulated by sect ion 147 of the Act are not fulfilled, there is no case made out for upholding the proposed reassessment. The not ices for all the four years are, therefore, bad in law and are quashed and set aside. " 6.2 In the case of Devidayal Rolling Mills & Another Vs. Y.R. Saini, ACIT, 285 ITR 514, Hon'ble Bombay High Court held that where an assessment order passed u/s 143(3) of the Act is sought to be reopened beyond four years from the end of relevant assessment year, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t squarely applied, and the impugned not ices were bar red by limitation mentioned in the proviso. 6.8 In Supreme Travels (P) Ltd. vs. DCIT, (Bom.), Hon'ble Bombay High Court held that the Assessing Officer can reopen the assessment only if the ingredients of section 147 are fulfilled. 6.9 In Gujarat Carbon and Industrial Ltd. vs. Jt. CIT [2008] 307 ITR 271 (Guj), Hon'ble High Court in the absence of any failure on part of the assessee to fully and truly disclose all material facts relevant for the assessment of the assessment year in question, concluded that the impugned notice under s. 148 issued beyond a period of four years from the end of the relevant assessment year, is required to be quashed. 6.10 Likewise in Gujrat Fluorochemicals Ltd. vs. DCIT [2009] 319 ITR 282 (Guj), Hon'ble High Court concluded that the assessee having made full disclosure of material facts in the return which was accompanied by several enclosures, assessment could not be reopened beyond four years from the end of the relevant assessment year for the reason that certain income has been wrongly assessed under the head 'Capital gains' instead of 'Profits and gains of business or profession'. 6.11 In N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wel Intertrade (P.) Ltd.',308 ITR 33(Del.) we had agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania, 269 ITR 192 that, in the absence of an allegation in the reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bserved as under: "....., we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April, 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of "change of opinion" is removed, as contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tering expenses merely on the basis of change of opinion and no 'tangible material ' was brought on record before initiating act ion u/s 147 of the Act . 6.19 Moreover, Hon'ble Madras High Court in their decision dated 3.8.201 in CIT vs. M/s Baer Shoes (India) Pvt. Ltd, In ITA no.706 of 2010, following the view taken by Hon'ble Gujrat High Court in Austin Engineering Co. Ltd. vs. JCIT, 312 ITR 70, concluded on the issue of reopening of assessment on the basis of subsequent decision of Hon'ble Supreme Court, in the following terms: "4. We are not able to countenance the said submission made by the learned standing counsel for the appellant. In the present case on hand, the assessee at the time of filing return for the assessment year 1999-2000 has disclosed all the materials before the Assessing Officer and claimed deduction under Section 80HHC. Even before the earlier proceedings initiated under Section 147, it is not the case of the Revenue that the assessee has not disclosed the materials. Therefore, on a consideration of the materials available on record, the Assessing Officer passed an order on the earlier two occasions. Thereafter, the Assessing Officer has sought to reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aving not been fulfilled. In view of the foregoing, especially in the light of consistent view taken in aforesaid decisions of the Hon'ble jurisdictional High Court and other Courts, considering the facts and circumstances of the case, we are of the opinion that there is nothing to suggest that al l the primary facts were not disclosed by the assessee at the time of original assessment completed u/s 143(3) of the Act nor any failure on the part of the assessee to disclose fully and truly all the material facts has been ascribed in the circumstances narrated before us. cannot be said that the assessee suppressed any material facts. It is well-settled that if a notice under sect ion 148 of the Act has been issued without the jurisdictional foundation u/s 147 of the Act being available to the AO, the notice and the subsequent proceedings will be without jurisdiction and thus, liable to be struck down . In view thereof, we have no hesitation in upholding the findings of the ld. CIT(A) in quashing the reassessment order. Consequently, ground no. 1 in the appeal is dismissed. 8.. Now adverting to ground no.1 in the appeal of Revenue for assessment year 2006-07, facts in brief, as per re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. On appeal, the assessee questioned the validity of reopening of the assessment. Relying upon the order of his predecessor for the AY 2005-06, the ld. CIT(A) quashed the reassessment in the following terms:- "5. In the similar facts and circumstances, my predecessor, in her order dated 7.12.2011 for the assessment year 2005-06 has held the reopening of assessment as 'contrary to law' after making a detailed discussion on the legal position so far as section 147 is concerned. I do not find any reason for not following the appeal order for the assessment year 2005-06. Section 147 does not postulate conferment of power on the Assessing Officer to initiate reassessment proceedings on a mere change of opinion on the same set of facts. Matters which have been considered and decided cannot be reopened - CIT Vs. Kelvinator of India Ltd. 320 ITR 561 (Supreme Court) and Legato Systems (India) (P ) Ltd. Vs. DCIT 187 Taxman 294(Del). Therefore, the reopening of assessment is held as 'contrary to law'. The grounds of appeal challenging the reopening of the assessment are allowed." 9.1 As regards on merits of the claim, the ld. CIT(A) allowed the claim in the following terms:- "6. Even on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew is sought, it would tantamount to "change of opinion", whereas, in the case of existing material, no conscious attempt has been made, it would tantamount to mistake in not considering the relevant point or proposition and it would not be a "change of opinion". In the instant case, the assessee made disclosure of wooden shuttering and centering expenses during the course of assessment proceedings, when the AO raised a specific query relating to these expenses and the issue has been considered in detail in para 4 of the assessment dated 27.5.2008.These facts have not been disputed before us. In this context, we find that Hon'ble Apex Court while affirming the decision of Hon'ble Delhi High Court in Kelvinator of India Ltd. (supra) and going through the changes made to section 147 of the Act concluded that "the AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on and is, therefore, treated as infructuous. 12. Adverting now to ground no.1 in the appeal of the Revenue for the AY2007-08 relating to disallowance of claim of Rs.18,85,000/- on account of commission paid to M/s Brainstreet Marketing (P) Ltd., the assessee filed original return reflecting income of 7,50,11,940 on 30.10.2007,which was revised on 19.07.2008 declaring income of Rs.7,44,92,693/-.The said return was processed on 28.03.2009 u/s 143(1) of the Act. Subsequently, Income-tax Officer Ward 3(1), New Delhi informed the AO in the instant case that in the case of M/s Brainstreet Marketing (P) Ltd. in the AY 2007-08, it emerged from the statement of Shri Amit Kumar Aggarwal, director of the said company and four other commission agents that the commission received from M/s Bhayana Builders (P) Ltd. was bogus. On the basis of this information, the AO reopened the assessment u/s 147 of the Act with the service of a notice u/s 148 of the Act issued on 13.11.2009. In response to this notice, the assessee filed return on 10th December, 2009. During the course of reassessment proceedings, the AO asked the assessee as to why commission paid to M/s Brainstreet Marketing (P) Ltd. to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rain Street Marketing (P) Ltd.' Below this list, there is a noting "kind atten:- Mr. Nitin Bhayana, director. We have received the above orders through Brain Street please approve the payment of their commission Rs.75 per sq. mtr." This is signed as on 2.06.2006. There are invoices (pg 35 & 36 of PB) issued by M/s Brainstreet Marketing (P) Ltd. showing commission charges of Rs.9,50,00,000/- and Rs.9,35,00,000/-. Service Tax @12% and education cess @2% has been charged on each of the aforesaid amounts. Then there is confirmation (pg 34 of PB) of accounts showing payments to M/s Brainstreet Marketing (P) Ltd. after deducting TDS of Rs.59,818 and Rs.58,874/- at the time of crediting amount of Rs.10,49,444/- and Rs.10,66,280/-. TDS has been duly deposited in govt. a/c. Certificate in form No.16A is available at page 112 of PB. From the aforesaid it may be seen that TDS was deducted from the commission payment to M/s Brainstreet Marketing (P) Ltd. and M/s Brainstreet Marketing (P) Ltd. have also charged service tax etc. on the payments received by it for the services given to the appellant." 14. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the principles of law of consistency in respect of settled issues, wooden shuttering and centering is to be allowed on consumption basis as revenue expenditure. The Hon'ble High Court of Punjab & Haryana in its judgments noted above has also held that wooden shuttering material is an allowable revenue expenses even if the same could be used in a subsequent financial year. It is accordingly held as allowable. The ground of appeal pertaining to this item is allowed." 18. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A). The ld DR while carrying us through the assessment order, supported the findings of the AO while the ld. AR on behalf of the assessee relied upon the findings in the impugned order. 19. We have heard both the parties and gone through the facts of the case. Indisputably, in the preceding years starting from AY 1998-89 until assessment year 2003-04, the claim of the assessee has been accepted treating the amount incurred on wooden shuttering and centering, revenue in nature. Following the principles of consistency , the ld. CIT(A) allowed the claim for deduction of expenditure on wooden shuttering and centering on consumption b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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