9911796707
TMI Blog2012 (12) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to the Assessing Officer, the said interest was chargeable to tax in the hands of the assessee under Article 11 of Indo-US DTAA @ 15%. He therefore reopened the assessment for the year under consideration after recording the reasons and issued a notice u/s. 148 on 26.10.2005. In response to the said notice, a letter dated 14.11.2005 was filed by the assessee requesting that the return originally filed by it on 18.10.2001 be treated as return filed in response to notice u/s. 148. During the course of assessment proceedings, the assessee obtained a copy of reasons recorded by the Assessing Officer and challenged the validity of reopening of assessment inter-alia on the ground that there was no new material that had come to the possession of the Assessing Officer till date of issue of the notice u/s. 148 on the basis of which assessment was reopened. This contention of the assessee was not found acceptable by the Assessing Officer. According to him, there was reason to believe that the income of the assessee chargeable to tax had escaped assessment and it was sufficient to justify the reopening of assessment. In this regard he relied on the decision of the Full Bench of Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment was erroneous, then such facts alone would justify initiation of reassessment proceedings. Accordingly validity of reassessment made by the Assessing Officer was upheld by learned CIT(A) and even the addition made therein to the total income of the assessee on account of interest income was confirmed by him on merit. Aggrieved by the order of learned CIT(A), assessee has preferred this appeal before the Tribunal. 4. In ground No. 1 of this appeal, assessee has raised a preliminary issue challenging the validity of reassessment made by the Assessing Officer on the ground that initiation of reassessment proceedings itself is bad in law. 5. Learned counsel for the assessee at the outset invited our attention to the copy of the note filed by the assessee alongwith its return of income placed at page No. 16 of his paper book to point out that the fact of having earned interest on fixed deposit out of funds retained in India and having claimed exemption for the same as per provisions of Article 8 of the Treaty was clearly disclosed by the assessee in the return of income filed originally. He then invited our attention to the copy of the reasons recorded by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Kelvinator of India Ltd. (supra) have been taken into consideration by the Third Member in the case of Telco Dadaji Dhackjee Ltd. (supra) while deciding a similar issue in favour of the assessee. 8. We have considered the rival submissions and perused the material on record. It is observed that in the return of income originally filed for the year under consideration on 18.10.2001, exemption was claimed by the assessee in respect of interest income as per provisions of Article-7 of Indo-US treaty and this fact was clearly mentioned in the Note (copy placed at page No.16 of the paper book) filed alongwith the said return. The said return was initially processed by the Assessing Officer u/s. 143(1) on 2.1.2003. Subsequently, he however reopened the assessment for the following reasons recorded u/s. 148(2) "30.9.2005: The assessee filed its return of income on 18.10.2001, declaring NIL income. The return was processed u/. 143(1)(a) of the I.T. Act, 1961 on 2.1.2003, accepting the Nil income declared by the assessee and a refund of Rs. 1,58,701/- was determined and issued to the assessee. The assessee has received interest which is not connected with operation of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y on the slightest pretext, which is not permissible. 10. Learned Departmental Representative has also relied on the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) to contend that the reopening of assessment completed originally u/s. 143(1) is permissible without there being any new material coming to the possession of the Assessing Officer if the reasons recorded for reopening of assessment are otherwise valid. The learned counsel for the assessee, on the other hand, has relied on Third Member decision of the Tribunal in the case of Telco Dadaji Dhackjee Ltd. (supra) stating that a similar issue involved in the said case has been decided by the Third Member in favour of the assessee after taking into consideration the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) relied upon by the learned DR. In the said case, the return filed by the assessee was originally accepted u/s. 143(1). In the said return the assessee had claimed deduction for payment of non-compete fees of Rs. 75 lakhs which included payment of Rs. 15 lakhs to Directors. The assessee had also claimed depreciation of Rs. 1,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there should be "tangible material" to come to the conclusion that income had escaped assessment. Relying on the said decision, it was held by the Third Member that while resorting to section 147 even in a case where only an intimation had been issued u/s 143(1)(a), it is essential that the Assessing Officer should have before him tangible material justifying his reason to believe that income had escaped assessment. Since there was no such tangible material before the AO from which he could entertain the belief that income of the assessee chargeable to tax had escaped assessment, the Third Member held that reassessment proceedings initiated by the Assessing Officer were liable to be quashed on the ground that there was no tangible material before the Assessing Officer even though the assessment was completed originally u/s 143(1). In our opinion, the Third Member decision of the Tribunal in the case of Telco Dadaji Dhackjee Ltd. (supra) is squarely applicable in the present case and respectfully following the same, we hold that the initiation of reassessment proceedings by the Assessing Officer itself was bad in law and the reassessment completed in pursuance thereof is liable ..... X X X X Extracts X X X X X X X X Extracts X X X X
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