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TMI Blog2012 (9) TMI 963X X X X Extracts X X X X X X X X Extracts X X X X ..... epartment: 1. Whether on the facts of the case and in law the Ld. CIT(A) erred in quashing the assessment order u/s 143 r.w.s. 147 dated 22.12.2010 and stating the fact that notice u/s 148 was barred by limitation of time and wrong due to absence of reason to believe. 2. Whether on the facts of the case and in law the Ld. CIT(A) erred in upholding the contentions of the assessee that the AO was not correct in reopening the assessment of the assessee as the case is not barred by the limitation as set out in the proviso, which is 6 years with prior approval of the Ld. DIT(E). 3. Whether on the facts of the case and in law the Ld. CIT(A) erred in allowing the assessee's claim of exemption u/s 10(23C)(iiiab) of the Act without appreciating the fact that the assessee is not wholly or substantially financed by the Govt. in view of Explanation to sub section (1) of section 14 of the Comptroller and auditor General's (Duties, Powers and Conditions of Service) Act, 1971 as the total Govt. grant during the year is less than 75% of the total expenditure of the assessee. 4. The Appellant prays that the order of the ld CIT(Appeals)-I, Mumbai be set aside and that of the Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 and the assessee's various contentions are hereby rejected…." 4. In the instant case, the notice was issued on 14.03.2010, i.e. beyond four years but within six years, because regular assessment had been completed u/s 143(3), therefore, the AO had the extended period upto six years, subject to the conditions laid down in the first proviso to section 147 had been complied with. The other factor involved in that period of six years were available only if there has been a failure on the part of the assessee to fully and truly disclose all material facts. Since the reason talks of the issue which was earlier dealt with by the AO in regular assessment, the time limit gets restricted to four years and in the instant case, the notice u/s 148 could only have been issued upto 31.03.2008, i.e. as per 149(1)(a) and as per first proviso to section 147. 5. The CIT(A), on consideration of detailed submissions made before him and reproduced in the impugned order, observes: 4.4 On comprehensive reading of the provisions, I find that the Parliament has in its wisdom used the word 'action' in the first proviso to section 147 but has used the word 'notice' in section 149(1). Under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he given case is to examine whether or not the appellant had made a true and full disclosure of all material facts. If it is found that the assessee has made full disclosure, then no action under sec 147 can be taken after the period of four years as indicated above. 4.8 On perusal of the reasons recorded for re-opening indicates that, there is not a whisper speaking of any allegation, that the appellant failed to disclose fully and truly all material facts necessary for assessment. Merely having a reason to believe that income had escaped assessment is not sufficient to reopen the assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by failure on the part of the assessee. This is a necessary condition for overcoming the bar set up by the proviso to sec 147 of the Act. If this condition is not satisfied, the bar would operate and no action under sec 147 could be taken. The reasons supplied to the appellant do not consist of any such allegation. In the said reasons, nowhere it is mentioned that income has escaped assessment on account of any failure of the assessee. On the contrary, the reasons recorded indicate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was not correct in reopening the assessment of the appellant. Subsequently the order passed by the AO u/s. 143(3) r.w.s. 147 of the Act, is annulled. Accordingly, the appellant's appeal is allowed". 6. Against these observations, the Department has raised the ground. 7. The DR relied on the order of the AO. 8. The AR, on the other hand, reiterated the submissions made before the CIT(A) and strongly submitted that the initiation, from the very beginning, i.e. recording of the reason had been bad in law. The AR pointed out that the issue raised in the reassessment proceedings, pertained to the exemption claimed by the assessee under section 10(23c)(iiiab). This issue was dealt with by the AO in the regular assessment. Therefore, according to the AR, it was merely a change of opinion, which does not allow the AO to initiate the reassessment proceedings. The AR, relied on the following decisions : • CIT vs. Kelvinator of India Ltd :(320 ITR 561) SC • Aventis Pharma Ltd. vs. ACIT & Ors. :(323 ITR 570) Bom • Siesta Steel Construction (P) Ltd. vs. KK Shikare & Or :(154 ITR 547) Bom • Niba India & Anr. Vs. Smt. Arti Handa, ACIT & Ors. :(300 ITR 283) Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il, 1989, the Assessing Officer 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". 11. Hon'ble Bombay High Court in the case of Aventis Pharma Ltd. vs ACIT, reported in 323 ITR 570, held, on facts, "The submission which has been urged on behalf of the assessee is that a full disclosure was made in the return of income. Pursuant thereto, the Assessing Officer passed an order of assessment under section 143(3). It was urged that the Assessing Officer applied his mind specifically to both the aspects of the case noted earlier and to the explanation furnished by the assessee during the course of assessment proceedings. It has been urged that there was no tangible material before the Assessing Officer on the basis of which he could have formed a reason to believe that income chargeable to tax had escaped assessment. Consequently, it has been urged that the assessment is sought to be reopened on a mere change of opinion, which is not permissible. During the course of submission, counsel appearing on behalf of the assessee assisted the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of a regular assessment, the period of six years becomes available to the AO only in a case where there is a failure on the part of the assessee to fully and truly disclose all material facts. If in case, the reasons being recorded and relied upon by the AO has been dealt with in the regular assessment, the period available is only four years as per Explanation to section 149(1) read with clause (c) to Explanation 2 to section 147. The relevant provisions are : 149 (1) No notice under section 148 shall be issued for the relevant assessment year,- [(a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b) Explanation.-In determining income chargeable to tax which has escaped assessment for the purposes of this sub-section, the provisions of Explanation 2 of section 147 shall apply as they apply for the purposes of that section. Explanation 2 to section 147 Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircumstance, as noted, that the assessment was completed u/s 143(3), taking into account the claim of deduction u/s 80IB(10). In this case, the sole issue on which the reassessment proceedings were initiated were that commencement certificate had been issued on 24.07.1993, whereas a deduction under the provision is permissible only when the undertaking has commenced construction, hence the deduction was wrongly taken. The Hon'ble High Court concluded, "Significantly, the reasons which have been recorded by the Assessing Officer for reopening the assessment show that reliance is placed on a commencement certificate which it is now common ground before the court was already on record before the Assessing Officer when the original order under section 143(3) was passed. The reasons disclosed to the assessee state that copies of the commencement certificates were made available by the Joint Commissioner of Income-tax subsequent to the order of assessment under section 143(3). Since the documents on the basis of which assessment was sought to be reopened had already been furnished to the Assessing Officer in the course of the proceedings under section 143(3), it cannot possibly be cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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