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TMI Blog2017 (4) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... re that the assessment in this case was completed u/s 143(3) of the Income Tax Act, 1961 (the Act) on 18.12.2006 at an income of ₹ 17,84,18,464/- as against the returned income of ₹ 17,72,42,361/-. Subsequently, the assessment was reopened u/s 148 after recording the following reasons:- Assessment in this case was completed under section 143(3) at income of ₹ 17,84,18,464/-. The scrutiny of assessment records revealed that the assessee claimed an expenditure of ₹ 50,34,277/- on account of bank guarantee as per notes to accounts column 7. This expenditure was in the nature of contingent liability winch should have been disallowed. The mistake resulted in under assessment of income of ₹ 50,34,277/- involving tax effect of ₹ 24,02,043/-. Further scrutiny of assessment records revealed that the assessee had residential building and received rental income on it. Depreciation on the same was claimed at ₹ 6,60,095/-. As it was not used for the purpose of business, depreciation was not allowable on the same. The mistake resulted in aider assessment of ₹ 6,60,095/- involving tax effect of ₹ 3,14,956/-. In view of the abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eals) [CIT (A)] is bad, both in the eye of law and on the facts. 2. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that proceedings initiated under Section 147, read with Section 148 are bad as the condition and procedure prescribed under the statute have not been complied with. 3(i) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the reassessment proceedings initiated by the learned A.O. are bad in the eye of law as the reasons recorded for the issue of notice under Section 148 are bad in the eye of law and are contrary to the facts. (ii) On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the reassessment proceedings initiated by the learned A.O. are bad in law as the same are based on reasons which are vague. 4. On the facts and circumstances of the case, the learned CIT(A) has erred, both on facts and in law, in rejecting the contention of the assessee that the not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ening of the assessment. 12. The appellant craves leave to add, amend or alter any of the grounds of appeal. 3. The ld. AR submitted that as per the reasons recorded on 3.5.2010 for reopening the assessment, the assessment was reopened on the issue that the assessee had claimed expenditure of ₹ 50,34,277/- on account of guarantee charges as per notes to accounts which should have been disallowed in the assessment framed u/s 143(3) of the Act. It was submitted that the reasons recorded also mention that the assessee had claimed depreciation on residential building amounting to ₹ 6,60,095/- against which rental income had been shown and, therefore, the same should not have allowed to the assessee company. The ld. AR submitted that, in response, the assessee had clarified that the amount of guarantee charges of ₹ 50,34,277/- had not been claimed in the year under consideration i.e. assessment year 2004-05 but had been claimed in assessment year 2003-04. Thus, no addition on this account could have been made. It was also submitted by the ld. AR that the assessee had submitted before the Assessing Officer that depreciation of ₹ 6,60,095/- had not been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as itself bad in law. 3.3 It was further submitted that the reasons recorded show that they were recorded without any application of mind as in the reasons recorded there was an allegation of accommodation entry amounting to ₹ 10 lakh from M/s Saheb Enterprises whereas the assessee had received an amount of ₹ 10 lakh from M/s Maestro Marketing Advertising Pvt. Ltd. during the year. 3.4 Ld. AR further placed reliance on the judgment of the Hon'ble Delhi High Court in CIT vs Independent Media Pvt. Ltd. (I.T.A. No. 108/2005 dated 18.11.2015) and Principal CIT vs G G Pharma Ltd. 384 ITR 147 (Del) and submitted that the proceedings had been initiated on the basis of information received from the Investigation Wing but the order of the Assessing Officer did not reflect independent application of mind to the information so received. 3.5 It was also submitted that the notice u/s 148 of the Act issued on 3.5.2010 was beyond the period of four years from the end of the relevant assessment year and, therefore, as per proviso to section 147 of the Act, the reassessment proceedings could not be reopened after the expiry of four years unless income chargeable to tax had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This a necessary condition for overcoming the bar set up by the proviso to Section 147. If this condition is not satisfied, the bar would operate and no action u/s 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wel Intertrade Private Ltd. (2009) 308 ITR 22 (Del.) we had agreed with the view taken by the Punjab and Haryana High Court in the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nditions are required to be fulfilled to assess or reassess the escaped income chargeable to tax. As per explanation (3) if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under Section 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under Section 148. 19. In the present case, as is noted above, the Assessing Officer was satisfied with the justification ..... X X X X Extracts X X X X X X X X Extracts X X X X
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