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TMI Blog2012 (11) TMI 939X X X X Extracts X X X X X X X X Extracts X X X X ..... not valid. Disallowance under section 40(a) of the Act – Held that:- Since the initiation of reassessment proceedings have been held to be invalid and the orders of reassessment have been annulled - it is not necessary to deal with the appeals of the revenue on merits - appeals dismissed - ITA NO.1253 TO 1256/MUM/2006 And ITA NO.1419 TO 1422/MUM/2006 - - - Dated:- 20-1-2012 - SHRI P.M.JAGTAP SHRI N.V.VASUDEVAN, JJ. Assessee by : Shri Arvind Sonde Rrevenue by : Smt. Malathi Sridharan ORDER PER N.V.VASUDEVAN, J.M, ITA No.1253/M/06 to 1256/M/06 are appeal by the assessee while ITA No. 1419/M/06 to ITA No.1422/M/06 are appeals by the revenue. All these appeals are directed against four orders all dated 22/11/05 of CIT(A) VII, Mumbai for the assessment year 1997-98 to 2000-01. 2. First we will take up for consideration the appeals of the assessee. The ground of appeal by the assessee in all the appeals is common and reads as follows: On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the learned Assessing Officer (A.O) s stand in reopening the assessment u/s. 147 of the Income Tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year relevant to AY 1997-98. As more than 4 years have lapsed, the assessment can be reopened only with the prior approval of the jurisdictional CIT. The CIT-7 Mumbai is requested to kindly accord the requisite approval. The reasons recorded for the other assessment years are also identical except for the change of the relevant assessment year and the amount paid by the assessee to the foreign parties for alleged licence to use of software. 5. Learned Departmental Representative relied on the order of the Assessing Officer. Before us, learned counsel for the assessee pointing to the reasons recorded for reopening submitted that in the light of the pronouncement of Hon'ble Bombay High court in the case of Grindwell Norton Ltd. Vs. Jagdish Prasad Jangid, ACIT others, 267 ITR 673 (Bom), initiation of reassessment proceedings should be held to be invalid. In this regard, learned counsel for the assessee pointed out that reasons recorded do not anywhere mention that there was failure on the part of the assessee to fully and truly disclose material facts necessary for completion of assessment. It was also submitted that reassessment proceedings were being initiated after expi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee as contemplated by the proviso to section 147 of the Act. In the light of the above judicial pronouncement, we are of the view that initiation of reassessment proceedings in the present case for AYs 97-98 and 98-99 are invalid. Consequently, the order of assessment under section 147 of the Act for these assessment years is hereby annulled. 8. As far as A.Y 1999-2000 and 2000-01 are concerned, the Assessee filed return of income for these years on 17.12.1999 and 27.11.2000 respectively. An order of assessment u/s.143(3) of the Act was passed on 27.2.2001 and 13.3.2003 respectively. Notice u/s.148 of the Act for reassessment u/s.147 of the Act was issued on 10.10.2003 for both the assessment years. The reassessment proceedings for these two assessment years were therefore initiated within two years from the end of the relevant assessment years. For these assessment years the proviso to section 147 will not be applicable. The reasons recorded for reopening of assessments have already been set out in the earlier part of this order. A perusal of the same shows that when the AO completed the original assessment proceedings u/s.143(3) of the Act, the AO was fully aware of the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted before us that as far as A.Y 1999-2000 2000-01 are concerned the initiation of reassessment proceedings is based purely on a change of opinion. In this regard ld. Counsel for the assessee drew our attention to the decision of the Hon ble Delhi High Court in the case of CIT vs. Kelvinator of India Ltd., 256 ITR Pg.1(FB). In the aforesaid decision assessment under section 143(3) had been completed. Later on the AO noticed that certain expenditure ought to have been disallowed and he, therefore, initiated reassessment proceedings. The same was challenged by the assessee and the Hon ble Full Bench of the Delhi High Court held that proceedings for the reassessment cannot be initiated merely on change of opinion. The Court held that when an order under section 143(3) is passed it had to be presumed that it has been passed after due application of mind. In such a situation the AO should not be permitted to initiate reassessment proceedings purely on the basis of change of opinion. The Hon ble Court held that if AO is permitted to do so then that would amount to giving power of review to the AO which is not contemplated in law. The Hon ble Court held that there should be some ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd CIT vs. Eicher Ltd. (2007) 213 CTR (Del) 57 affirmed. 12. Our attention was also drawn to the decision of the Hon ble Bombay High Court in the case of Siemens Information System Ltd. vs. ACIT 295 ITR 333 (Bom). In the said decisions the assessee had claimed relief under section 10A in the return filed and the Assessing Officer during the course of assessment accepted it after raising a specific query as to the methodology of computing deduction under section 10A and did not set off the losses of other units not eligible after accepting the assessee s explanation by order dated March 23, 2004 for the assessment year 2001-02. However, the successor on the basis of the view taken for a later year issued notice under section 148 on March 13, 2006 within the four year time limit. He had given as his reason not only the treatment in the subsequent year, but also the decision of the Tribunal in the Revenue s favour in Navin Bharat Industries Ltd. v. Deputy CIT [2004] 270 ITR (AT) 1 (Bom) wherein the question before the Tribunal was as to whether for the relevant assessment year, a loss incurred in a unit that was eligible for an exemption under section 10A could be set off against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee and the AC. Merely because subsequently the apex Court pronounced the law to be otherwise, on the date of the filing of the return of the income when the assessee made a claim for deduction, the claim could not be termed to be either lacking in material particulars or could not be termed to be untrue. In other words, all the material facts were fully disclosed and no false facts were stated in support of the claim made. The reasons recorded themselves show that the AC has changed his opinion only on the basis of subsequent judgment rendered by the apex Court. Thus, this is a case of change of opinion by the AC and not a case of any failure on the part of the assessee. The present is a case where the period of four years has already elapsed. Hence, even if one proceeds on a footing that the apex Court judgment constitutes information yet if the period of four years has expired, unless and until the prerequisite conditions stipulated by the proviso to s. 147 are shown to be fulfilled, no action can be initiated for reassessment. Reference to provisions of Expln. 2 to s. 147 also cannot assist the case of the Revenue. The language employed by the proviso itself indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O to form a belief that income chargeable to tax in the hands of the assessee has escaped assessment. If the AO is permitted to resort to reassessment proceeding on the basis as set out in the reasons recorded then that amount to conferring power of review to the AO. In this regard, the decision of the Hon ble Bombay High Court in the case of Siemens Information System Ltd. (supra) would be relevant. 17. The facts of the case before the Hon ble Bombay High Court in the case of Siemens Information Systems (supra) were, the assessee had claimed relief under section 10A in the return filed and the Assessing Officer during the course of assessment accepted it after raising a specific query as to the methodology of computing deduction under section 10A and did not set off the losses of other units not eligible after accepting the assessee s explanation by order dated March 23, 2004 for the assessment year 2001- 02. However, the successor on the basis of the view taken for a later year issued notice under section 148 on March 13, 2006 within the four year time limit. He had given as his reason not only the treatment in the subsequent year, but also the decision of the Tribunal in the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up for consideration before us in another case of the present petitioner in Writ Petition No. 2384 of 2006 (Siemens Information System Ltd. v. Asst. CIT [2007] 293 ITR 548 (Bom)) which we have decided on July 3, 2007. This is how the court explained the ratio of the judgment (page 552) : On these facts, the learned Third Member held that a privilege cannot be to a disadvantage and an option cannot become an obligation and if the assessee does not want to avail of the benefit entitled in that respect for some reasons, that benefit cannot be forced upon him. It would be clear that the judgment is not an authority for the proposition as to whether losses suffered being undisputedly covered by section 10A as it then stood could be set off against profits of other business income of the assessee or vice versa. The decision in Navin Bharat Industries Ltd. [2004] 270 ITR (AT) 1 (Bom), therefore, by itself or in conjunction with a change of opinion as to the true construction of a provision, could not also give rise for reason to believe . It will, therefore, be clear that both the reasons cited by the Assessing Officer to issue notice, either based on the opinion of the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X
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