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TMI Blog2016 (1) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. We have heard Mr.R.Sivaraman, learned counsel for the appellant and Mr.Pramodkumar Chopda, learned Standing Counsel appearing for the respondent. 3. The appellant/assessee filed a Return of Income on 30.9.2008 declaring a loss of ₹ 14,07,72,863/-. Later they filed a Revised Return of Income on 26.3.2009 declaring a loss of ₹ 17,47,251/-. The case was selected for scrutiny and a notice under Section 143(2) and 142(1) was issued. 4. Six specific issues were taken up in the course of scrutiny proceedings. One of them related to income from purported sale of land. The assessee had declared an income of ₹ 14,31,19,916/- as Short Term Capital Gain on sale of land. Since Fixed Assets Schedule of the company for the relevant previous year did not show any land having been disposed of and since the depreciation statement of the assessee prepared for income tax purposes also showed a particular value at the beginning and at the end of the relevant year, the Assessing Officer concluded in para 5 of the Order of Assessment dated 31.12.2010 that the assessee had income from undisclosed sources assessable under Section 69A. Consequently, the Assessing Officer treated t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the reopening of assessment itself was illegal, the appellant filed two writ petitions in W.P.Nos. 1626 and 2057 of 2015. The writ petitions were dismissed by the learned Judge by a common order dated 11.06.2015, on the ground that since the original Returns filed by the appellant got merged with the rectification order dated 6.9.2011, the period of 4 years has to be calculated not from the end of the relevant assessment year, but from the date, on which, the rectification application was filed. Therefore, the learned Judge held that the reopening of assessment was within the period of 4 years prescribed under Section 147. In the light of such a conclusion, the learned Judge held that the appellant should canvass the correctness of the order of assessment only before the First Appellate Authority in regular appeal. Aggrieved by the said common order of the learned Judge, the appellant is before us. 11. At the outset, even Mr.T.Promodkumar Chopda, learned Standing Counsel for the department, does not support the conclusion reached by the learned Judge that the reopening of assessment should be taken to be within the period of 4 years, in view of the fact that a petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he third contention of the learned counsel for the appellant is that this is not a case, which will fall either under the category of (i) failure to file return or (ii) failure to disclose fully and truly all material facts. Therefore, the period of limitation would operate in respect of the case on hand. 17. The last contention of the learned counsel for the appellant is that the Assessing Officer was in such a great hurry that he neither considered the detailed objections submitted on 19.1.2015 nor considered a letter seeking time to file further objections. Therefore, the learned counsel contends that there was a gross violation of principles natural justice. 18. On the first contention, we do not think that we need to spend more time. The Supreme Court made it clear in Commissioner of Income Tax v. Kelvinator of India Limited [(2010) 320 ITR 561 (SC)], that though the power to reopen assessment, after the Direct Tax Laws (Amendment) Act 1987, is much wider, one needs to give schematic interpretation to the words reason to believe , failing which, Section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of mere change of opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration of ₹ 31,07,20,000/- derived by the assessee from undisclosed sources is assessed u/s.69A of the I.T. Act. 22. Therefore, it is wholly untenable for the Revenue to contend that the Assessing Officer never formed an opinion at the time of scrutiny assessment and that therefore, the formation of opinion for the first time cannot tantamount to change of opinion. 23. Drawing our attention to the show cause notice dated 12.1.2015, it is next pointed out by the learned Standing Counsel for the Department that there were actually four different reasons for the reopening of assessment. Hence, it is contended that even if the issue relating to income from undisclosed sources assessable under Section 69A is taken to have been already covered by the scrutiny assessment order, the other issues raised in the show cause notice would still remain. 24. But unfortunately for the Department, we cannot now allow the Department to enlarge the scope of the enquiry under Section 147. As per the communication dated 8.12.2014, which we have extracted in para 7 above, there was only one reason stated for reopening of the assessment. The Department will have to stand or fall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings are also of significance. As a matter of fact, in the decision of the Punjab and Haryana High Court in Majinder Singh Kang, the assessment was reopened on the ground that the assessee in question, who was the Chairman of a State owned Corporation, was charge sheeted by the Department of Vigilance and Anti-Corruption, after which, he filed a revised Return. Therefore, there was never a question as to the issue whether the reopening of assessment was proper or not. After the threshold entry point was crossed, the Assessing Officer found in the course of the proceedings that some other additions were also liable to be made. Therefore, the said case is of no assistance to the Revenue. 29. Even the decision in Commissioner of Income Tax v. Mehak Finvest (P) Ltd. [(2014) 52 Taxmann.com 51] of the Punjab and Haryana High Court cannot go to the rescue of the Revenue. In that case, the Assessing Officer reopened the assessment, upon receipt of information that various finance companies managed and controlled by Chartered Accountants were involved in providing accommodation entries to the assessee company. Therefore, the validity of the reopening of assessment was not in doubt. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o visit restaurants, dutyfree shops etc., before boarding the flight. His access to the facilities inside the airport is dependent upon his right of entry into the airport. This is how Sub-Sections (1) and (2) of Section 148 and Explanation 3 to Section 147 have to be understood. 32. Therefore, any number of reasons indicated in the show cause notice, cannot justify the reopening of assessment. The justification for reopening of assessment has to be tested only on the strength of the order recording reasons for reopening under Section 148(2). Once the reasons are found to be not within the prohibited degree or found not to be a mere change of opinion, or found not to be amenable to attack on any other ground under Section 147, then, proceedings for reassessment would commence. After commencement, all other issues including those not covered in the original notice will also be amenable to scrutiny by the Assessing Officer. Hence the contention based upon Explanation 3 to 147 is rejected. 33. That takes us to the next question as to whether this case would fall under the category of failure on the part of the assessee to disclose fully and truly all material facts necessary for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arned Standing Counsel for his bravery, we do not think that we can go with him. True and full disclosure contemplated in the first proviso to Section 147 is that all material facts and not of a legal provision. If an assessee has disclosed all material facts truly and fully, but has made a claim which is wrong in law, the same cannot amount to failure to disclose, in terms of the first proviso to Section 147. 38. In Fenner (India) Limited v. Deputy Commissioner of Income Tax [(2000) 241 ITR 672], R.Jayasimha Babu, J (as he then was) explained this position as follows:- 21. The duty of an assessee is limited to fully and truly disclose all the material facts. The assessee is not required thereafter to prepare a draft assessment order. If the details placed by the assessee before the AO was in conformity with the requirements of all applicable laws and known accounting principles, and materials details had been exhibited before the AO, it is for the AO to reach such conclusions as he considered was warranted from such data and any failure on his part to do so cannot be regarded as assessee's failure to furnish the material facts truly and fully. Any lack of comprehension ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st be judged in the context of Explanation 1 to Section 147. The Court also held that the mere production of account books or other evidence from which material evidence could have been discovered, if the Assessing Officer had exercised due diligence, would not tantamount to a true and full disclosure. The said decision was also followed by the same High Court in Pranawa Leafin (P) Ltd., v. The Deputy Commissioner of Income Tax [(2013) 33 taxmann.com 454]. 43. But the above decision would not be of any assistance to the Revenue in this case. It is for the reason that in the case on hand, the Assessing Officer indicated in para 5 of the scrutiny assessment order, not only the disclosure but also his application of mind to the same. 44. The decision of the Delhi High Court in Dalmia (P) Ltd. Vs. C.I.T. [2011 (14) Taxmann.com 106], relied upon by the learned Standing Counsel for the Department, would not also advance the case of the Department. This is for the reason that in that case, the re-assessment proceedings were initiated on the basis of audit note and the Assessing Officer called for complete details and confirmations from sundry creditors. The assessee was able to prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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