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TMI Blog2014 (12) TMI 559X X X X Extracts X X X X X X X X Extracts X X X X ..... law – relying upon M/s. Rohini Biotech (P) Ltd. And Others Versus ITO (OSD) -2, Central, Hyderabad [2014 (1) TMI 129 - ITAT HYDERABAD] - there being no nexus or live-link with the reasons recorded and the ‘formation of belief’ to come to a conclusion that there was escapement of income and also since the assessment has been reopened beyond the period of 4 years when there is no failure on the part of the assessee to fully and truly disclose all material facts in the original assessment itself, and there being ‘no tangible material’ for the reopening of the assessment, the CIT(A) erred in confirming the order of the Assessing Officer – thus, the assessment order passed u/s 143(3) read with section 147 of the Act has to be quashed – Decided in favour of assessee. Addition on fixed assets by making investment in land u/s 69 – Held that:- The similar matter has been decided in M/s. Satabisha Biotech Pvt. Ltd. And Others Versus Income-tax Officer [2014 (12) TMI 431 - ITAT HYDERABAD] wherein it has been held that assessees have made investments in fixed assets and the source of such investments was the inflow available on the Liability Side of the Balance Sheet - Since the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Respondent : Shri Rajat Mitra ORDER Per Saktijit Dey, J.M. These are bunch of 14 appeals. There are cross appeals in case of four different assessee s against separate orders of ld. CIT(A)-VII, Hyderabad pertaining to AY 2002-03 2007-08. Rest 7 appeals are by different assessees against separate orders of ld. CIT(A)-VII, Hyderabad pertaining to AY 2002-03, 2003-04 and 2007- 08. As common issues are involved in all these appeals, they were clubbed and heard together, therefore, we find it convenient to dispose of these appeals by way of a consolidated order. ITA Nos. 535, 537, 538, 539, 500 501/Hyd/2014 2. The only common issue in ITA Nos. 535, 537, 538 539/Hyd/2014 and one of the issues in ITA Nos. 500 501/Hyd/2014 is with regard to validity of proceeding initiated u/s 147 of the Act and assessment order passed consequent thereto. 3. As facts are identical in all the appeals, for the sake of brevity, we will refer to the facts as involved in ITA No. 500/Hyd/2014. 4. Briefly the facts are, assessee is a company carrying on agricultural and allied activities. Assessee is one amongst a number of companies established by Shri B. Ramalin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reopening of the assessment on the ground that the provisions of section 148 have been wrongly invoked and accordingly, reopening is not valid in law. Assessee also challenged the merit of the additions made by AO. 6. The Ld. CIT(A) having considered the submissions of the assessee and also the observation of the Assessing Officer, opined that the Assessing Officer had a reason to believe that there is an escapement of income, and hence, the reopening of assessment made by A.O. is in order. As far as additions made are concerned, though, ld. CIT(A) deleted all the additions, he nevertheless directed Assessing Officer to examine whether assessee has claimed land development expenses as part of cost of acquisition in the year of sale. 7. Ld. AR and Ld. DR agreed before us that the issue is squarely covered by the order passed by the coordinate bench of this Tribunal in case of other group companies for the same assessment year. Copies of the orders were also placed before the Bench by ld. AR. 8. We have heard the parties and perused the relevant materials on record as well as orders of revenue authorities. As can be seen the reasons for reopening assessment as recorded b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons recorded as well as assessment order passed u/s 143(3) read with section 147 of the Act, it is absolutely clear that neither there is any allegation by AO that escapement of income was due to failure on the part of assessee to disclose truly and fully all materials facts necessary for his assessment nor there is tangible material in possession of AO to show that there is escapement of income or under assessment of income. Moreover, the addition ultimately made by AO has no nexus with the reasons recorded. In the aforesaid facts and circumstances, reopening of assessment u/s 147 of the Act, beyond a period of four years from the relevant AY, that too in absence of tangible material, in our view, is invalid in law. A coordinate bench of this tribunal while considering identical issue of reopening of assessment in case of other group companies for the self-same assessment year in ITA Nos. 1233/Hyd/2011 and others dated 31/12/2013, held reopening of assessment to be invalid on the following finding: 18. To conclude, (i) The recording of reasons before the issue of notice under section 148 has absolutely no nexus with the assessment made. (ii) That the assessment made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning the assessment af ter four years from the end of assessment year can only be done only when there is failure on the part of assessee to disclose fully and truly all material facts of any particulars of income. AO did not allege anything of that sort. Therefore disallowing the expenditure claims and bringing to tax credits which were accepted in the assessment earlier comes within the domain of change of opinion . For the concept of change of opinion, the Supreme Court has held in the case of CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561 as follows : The concept of change of opinion on the part of the Assessing Off icer to reopen an assessment does not stand obliterated af ter the substitution of section 147 of the Income Tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. Af ter the amendment, the Assessing Off icer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Off icer can reopen an assessment on mere change of opinion. The concept of change of opinion must be treated as an in-built test to check the abuse of power. Hence, af ter April 1, 1989, the Assessing Off icer has power to reo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence, after 1st April, 1989, AO has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to s. 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words reason to believe but also inserted the word opinion in s. 147 of the Act. However, on receipt of representations from the companies against omission of the words reason to believe , Parliament reintroduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the AO. We quote hereinbelow the relevant portion of Circular No. 549, dt. 31st Oct., 1989 [(1990) 82 CTR (St) 1], which reads as follows : 7.2 Amendment made by the Amending Act, 1989, to re-introduce the expression reason to believe in s. 147. A number of representations were received against the omission of the words reason to believe from s. 147 and their substitution by the opinion of the AO. It was pointed out that the meaning of the expression, reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to come to the conclusion that there was escapement of income from the original assessment. The assessment made under sec. 143(3) has been wrongly reopened under sec. 147 beyond period of 4 years, as there is no failure on the part of the assessee to disclose fully and truly all the material facts in the original assessment itself . The reopening was on wrong foundation of reasoning of the f inancial implication between the assessee-company and M/s. Satyam Computer Services Limited, which was not establ ished in the reassessment to justify the reopening. 11. Thus, there being no nexus or live-l ink with the reasons recorded and the formation of belief to come to a conclusion that there was escapement of income and also since the assessment has been reopened beyond the period of 4 years when there is no failure on the part of the assessee to fully and truly disclose all material facts in the original assessment itself , and there being no tangible material for the reopening of the assessment, the CIT(A) erred in conf irming the order of the Assessing Off icer. We, therefore, hold that the reopening of the assessment under section 147 is bad in law and is to be quashed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessment year without fulfilling the conditions of proviso to section 147 of the Act. Moreover, neither there is any tangible material before the AO for reopening the assessment nor the additions ultimately made by AO have any nexus with the reasons recorded for reopening assessment. Accordingly, following the decision therein, we allow the grounds of assessee. 18. In the result, appeal in ITA No. 536/Hyd/14 is allowed. ITA No. 540/Hyd/2014 19. Grounds raised by assessee in this appeal are as under: 1. The ld. CIT(A) having found as a matter of fact that the sum of ₹ 3,20,425 could not be added u/s 69 of the IT Act, 1961 erred in giving the following finding/direction which is not necessary for the disposal of the appeal and is therefore be deleted: i. The order of CIT(A) at Paragragh 7.3. in giving a finding/direction that the allowance of expenditure as cost of acquisition development can be taken up as and when the lands are sold in a finding direction not necessary for the disposal of the appeal and therefore is to be deleted. ii. The direction of CIT(A) at paragraph 7.4 of his order directing the appellant to file complete details of the expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and perused the orders of revenue authorities as well as other materials on record. At the outset, ld. AR submitted before us that the issue is squarely covered by the decision of SMC Bench of this Tribunal in case of some other group companies, which was subsequently followed by Division Bench. Copies of orders passed by coordinate benches were placed on record pertaining to same AY. On perusal of the order passed by SMC Bench of this Tribunal in ITA Nos. 895, 896 198/Hyd/2014 dated 14/08/2014, we find that the Tribunal while dealing with the relevant direction of ld. CIT(A) held as under: 8. I have carefully considered the rival submissions and pursed the record. Admittedly, assessees have made investments in fixed assets and the source of such investments was the inflow available on the Liability Side of the Balance Sheet. Since the Assessing Officer has not properly appreciated the facts, before the learned CIT(A), the source was explained, and the same was accepted by the learned CIT(A). Having accepted the source of funds, there cannot be any addition made in this year and even in the subsequent year, i.e. in the year of sale, the source of investment cannot be disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derived from business activity, therefore, assessee will not be eligible to claim depreciation. Similarly, in respect of administrative expenses also, ld. CIT(A) found that out of total administrative expenses of ₹ 56,122, an amount of ₹ 20,362 is towards flat maintenance, which can only be set off against income under the head income from house property . As assessee has not shown any income from house property, the said amount of ₹ 20,362 cannot be allowed. Ld. CIT(A) also held that site expenses of ₹ 10,480 cannot be allowed as it is capital in nature. Out of the balance expenses, ld. CIT(A) held that audit fees, certification fee, rates and taxes are allowable since they are required for statutory compliance. Thus, the total expenses allowed by ld. CIT(A) is ₹ 19,618. Since assessee s final income assessed was nil, ld. CIT(A) directed for carry forward of loss to the extent of ₹ 19,618. 27. We have considered the submissions of the parties and perused the orders of revenue authorities as well as other materials on record. Undisputedly, assessee has not commenced its business activities during the year under consideration, hence, preoperat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aju were also part of the record before AO. Therefore, we do not find any merit in the contention of the department that ld. CIT(A) has considered fresh evidence while deleting addition. In view of the aforesaid, we do not find any infirmity in the order of ld. CIT(A) on this issue and the same is upheld by dismissing the ground raised by revenue. 34. In the result, appeal in ITA No. 685/Hyd/2014 is dismissed. ITA No. 499/Hyd/2014. 35. The ground raised by assessee in the aforesaid appeal relates to action of ld. CIT(A) in confirming assessment of agricultural income shown by assessee amounting to ₹ 6,778 as income from other sources. 36. Briefly, the facts are, during the assessment proceeding, AO noticed that assessee has shown income of ₹ 6,778 from lease rentals and has debited an amount of ₹ 18,729 as administrative and other expenses. AO alleging that assessee failed to substantiate the lease rental income, treated the same as income from other sources. AO also disallowed the expenditure claimed of ₹ 18,729. Being aggrieved of the decision of AO in treating the lease rental income as income from other sources and disallowance of expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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