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TMI Blog2013 (5) TMI 642X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice of the department, the accounts had been furnished by the assessee when original assessment was completed u/s.143(3) on a mere re-look, the Officer has come to the conclusion that the income has escaped assessment, is not permissible under the proviso to section 147 which speaks about a failure on the part of the assessee to make a proper return. Thus considering the present case there was failure on the part of the AO to consider material placed before him at the time of making assessment and on a re-look to the said material, AO cannot reopen the assessment and that too after the expiry of more than four years from the end of the relevant assessment year to rectify his own mistake. Thus the initiation of reassessment proceedings by the AO is not legal in the present case & notice issued u/s.148 to initiate reassessment proceedings is not valid and same is quashed. - I.T.A.No.5426/M/2011 - - - Dated:- 22-5-2013 - Shri B. R. Mittal (JM) And N. K. Billaiya (AM),JJ. For the Appellant : Shri Vijay Mehta For the Respondent : Shri P. K. Shukla ORDER Per B. R. Mittal, JM:- The assesee has filed this appeal for assessment year 2003-04 against orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts necessary for the assessment." 6. Thereafter, AO issued notice u/s.148 of the Act dated 31.3.2010 and initiated reassessment proceedings. Assessee disputed the action of AO to initiate reassessment proceedings. However, AO stated that it is noticed that the total anticipated loss of Rs.9,73,01,399/- is claimed by the assessee company in respect of four projects viz; DMRK-2, DMRC-1, Goa Bridge and Rani Lanco for the assessment year under consideration. Assessee is following percentage completion method and according to percentage of completion of the relevant projects as on 31.3.2003, the loss allowable amounts to Rs.8,14,23,891/- only. That assessee claimed further loss to the extent of Rs.1,58,77,508/- in respect of above mentioned projects. To verify the correct claim of loss by the assessee, the case was reopened by issue of notice u/s.148 of the Act on 31.3.2010. AO passed the assessment order u/s.143(3) r.w.s 147 of the Act disallowing assessee's excess claim of future loss of Rs.1,58,77,508. Being aggrieved, assessee filed appeal before ld CIT(A). 7. On behalf of assessee, it was contended that reopening of the case u/s.147 of the Act on 31.10.2010 was beyond four yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also has accepted this fact. He submitted that nothing new materials was found by the department from the date of original assessment order made and the date on which reassessment proceedings was initiated. He submitted that assessee had disclosed all relevant facts at the time of original assessment proceedings and the assessment order was passed after application of mind. Ld A.R. submitted that AO has mentioned in the reasons recorded that the income chargeable to tax has escaped assessment by reasons of failure on the part of the assessee to disclose fully and truly material facts necessary for assessment in terms of proviso to section 147 of the Act but in the reasons recorded, it is no where stated as to what was not disclosed by the assessee. Ld A.R. relying on the decision of Hon'ble Bombay High Court in the case of Hindustan Lever Ltd vs R. B. Wadkar, Assistant Commissioner of Income Tax and Others (No.1), 268 ITR 232 (Bom) stated that AO himself has to disclose in the reasons as to which fact or material not disclosed by the assessee fully and truly was necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of reassessment proceedings by the AO is not valid and same should be quashed. 10. On the other hand, ld Departmental Representative justified the action of ld CIT(A). He submitted that merely disclosing the loss in the notes to the accounts does not amount to disclosure of fully and truly facts particularly when the AO did not address the issue in the original assessment proceedings. He submitted that Explanation (1) to section 147 of the Act states that production before the AO of account books or other evidence from which material evidence with due diligence could have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of proviso to section 147 of the Act. Ld D.R. also referred the decision of Hon'ble Bombay High Court in the case of Multiscreen Media (P) Ltd vs. Union of Indian Anr, 324 ITR 54 (Bom). He submitted that in the said case, AO allowed deduction to the petitioner at the time of original assessment on account of expenditure incurred towards advertisement, publicity and market research. However, during the course of assessment proceedings, in the next assessment year, AO specifically made a disallowance in respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ld D.R. submitted that initiation of reassessment proceedings is valid and same should be confirmed. 11. We have considered submissions of ld representatives of parties and orders of authorities below. We have also carefully considered the cases cited by ld representatives of both the parties in support of their submissions (supra). 12. There is no dispute to the fact that at the time of original assessment proceedings, assessee made disclosure in the notes to the accounts that it was following percentage completion method and the revenue from contracts is recognized on that basis. Ld CIT(A) has also stated in the impugned order that assessee has disclosed the loss of Rs.9.73 crores in the notes to the accounts. There is also not in dispute that original assessment was made u/s.143(3) of the Act and reassessment proceedings is initiated after the expiry of four years from the end of the relevant assessment year viz; 2003-04 as the notice under section 148 of the Act is dated 31.3.2010. Ld A.R. has stated that notice issued u/s.148 is barred by limitation in view of proviso to section 147 of the Act. In the circumstances, it would be useful to reproduce the relevant provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under section 147, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned. However, when an assessment had been made u/s.143(3) for the relevant assessment year, no action can be taken under section 147 after the expiry of four years from the end of the relevant assessment year, unless the AO has reason to believe that income chargeable to tax has escaped assessment, inter alia, by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. It is also provided u/s.148(2) of the Act that before issuing notice to initiate reassessment proceedings, AO must record his reasons u/s.148 of the Act. 14. The Hon'ble Bombay High has held in the case of Hindustan Lever Ltd (supra) that reasons recorded must be based on evidence. That AO must disclose in the reasons as to which facts or material facts not disclosed by the assessee fully and truly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him, is relevant. The said issue has been considered by the Full Bench of Hon'ble Delhi High Court in the case of CIT vs. Kelvinator of India Ltd, 256 ITR 1(Del) and at page 9, Their Lordships have observed as under: "The said submission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong." 15. The said observations of Full Bench was considered by Hon'ble Jurisdictional High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not permissible under the proviso to section 147 of the Income tax Act, which speaks about a failure on the part of the assessee to make a proper return. We are of the considered view that in the case before us, there was failure on the part of the AO to consider material placed before him at the time of making assessment and on a re-look to the said material, AO cannot reopen the assessment and that too after the expiry of more than four years from the end of the relevant assessment year to rectify his own mistake. 18. We have also considered the cases cited by ld D.R. (supra). On perusal we observe that in all the cases, reassessment proceedings were initiated within a period of four years from the end of the relevant assessment year and, therefore, said cases are not relevant to the facts of the case before us. Hence, we do not consider it necessary to discuss those cases specifically as they are not applicable to the issue involved herein. 19. In view of above discussions and the facts of the case before us, we hold that the initiation of reassessment proceedings by the AO is not legal. Hence, we hold that notice issued u/s.148 of the Act dated 31.3.2010 to initiate rea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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