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TMI Blog2017 (9) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, we are of the opinion that there was no failure on part of the assessee to disclose fully and truly the material facts, so, the reassessment proceedings, initiated by the AO in its case under appeal, are not valid. Reversing the order of the FAA, we decide the first effective ground of appeal in favour of the assessee. Reassessment proceedings were invalid, so, we are not deciding the other issues raised by the assessee. - Decided in favour of the assessee. - I. T. A. 784-85/Mum/2015 - - - Dated:- 6-9-2017 - Shri Rajendra, Accountant Member and Ram Lal Negi, Judicial Member Revenue by : Shri Sanjay Singh-CIT-DR Assessee by : S/Shri Porus Kaka Manish K. Kanth ORDER Per Rajendra, AM Challenging the orders, dated 18/12/2014, of the CIT(A)-1 Mumbai the Assessee has filed the present appeals for the above mentioned two assessment years (AYs. ). Assessee-is a Charitable Trust. Details of filing of returns of income returned incomes, assessed incomes, etc. , can be summarized as under :- A. Y. ROI filed on Returned Income Assessment dt. Assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apital assets held by the trust and sold out during the year were not fully disclosed, that the AO had also not verified and examined the mode and nature of acquisition of capital assets held by it, that it had not provided the full details, that it had not placed on record the necessary details and documents which could lead to the conclusion that there were material discrepancies in receipt of sale consideration and the alleged fixed deposits purchased by the assessee, that the record of cash and bank balances, reflecting common pool of funds was not sufficient to segregate the amounts and dates of Fixed Deposits as required for making claim of exemption u/s. 11(1A)of the Act, that the claim of fixed deposits, classified and recorded in the balance sheet under the head cash and bank balances was incomplete disclosure, that it was misleading accounting, that there was no full and true disclosure by the assessee on the issue of sale and acquisition and subsequent compliance or condition in the context of capital assets. He referred to the cases of Girilal Co. (300ITR); Chandrika Education Trust (224ITR);Vardhman Spng general Mills Ltd. ; South India Corporation Agencies Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als, that withdrawal was out of earlier fixed deposits unconnected with the sales, that after considering all these facts the AO had computed the income of the assessee at rupees nil and had allowed the benefits of section 11 (1A) of the Act. He further argued that the reasons for reopening showed total non-application of mind by the AO, that same reasons were given for a consolidated block of two years, the reasons were based on erroneous inferences drawn from the facts already disclose during the original assessment, that the objections to reopening were rejected by way of a non-speaking order, that the reassessment order did not deal with any of the submissions/ objections raised by the assessee, that notice of reopening and the reasons recorded were not based on any fresh tangible material which were not on record that it was a case of change of opinion, that while reopening the assessment the AO had not relied upon any fresh tangible material. He relied upon the cases of Jashan Textile Mills (284 ITR 542), German Remedies Ltd (287 ITR 494), Talati Pantheky (362 ITR 362), Aroni Commercials (362 ITR 403), Dena Bank (76 taxmann. com 279), ICICI Home Finance Co. Ltd. (210 Taxman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Rs. NIL . On perusal of the records it is noticed that the immovable property of the assessee trust at Yerwada (Pune) being Plot No. l Plot No. 4 forming part of final plot No. 88 were sold to M/s. Delta Enterprises for ₹ 1162. 00 Lakh vide development agreement dated 31. 01. 2004 read with Memorandum of Completion of Transaction dated 11. 05. 2004. The assessee trust stated that an entire amount of ₹ 1193. 78 lakhs was invested with Fixed Deposit in Development Credit Bank Limited (DCBL). Examination of the Fixed Deposit account reveals that the entire amount is not invested in the said Bank as detailed below: A. Y. 2001-02 2002-03 2003-04 2004-05 2005-06 Fixed Deposit with DCBL 62, 00, 000/- 1, 18, 24, 504/- 8, 34, 25, 000/- 23, 08, 30, 474/- 22, 10, 67, 627/- Increase - 56, 24, 504/- 7, 16, 00, 496/- 14, 74, 05, 475/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (c)(iv) of Explanation 2 to proviso to Sec 147 of the Act which reads as under:- 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:- (c) where an assessment has been made, but- (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. ] In view of the forgoing I have reason to believe that the income of the assessee has escaped the assessment for A. Y. 2004-05. The assessee has failed to provide the information in the return such as period of investment in FD and other details. Therefore the cause of escapement of income within the meaning of section 147 of Income Tax Act, 1961, is failure on the part of the assessee to make full and true disclosure of material facts as far as the above issue is concerned. The sanction u/s. 151(1) of the Income Tax Act, 1961, is solicited for issuance of notice u/s. 148 of the Act, from the DIT (Exemption) as the assessment for the year under consideration has been finalized u/s. 143(3) of the Income Tax Act, and a period of four years have lapsed from the end, of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unt to disclosure within the meaning of the provision. Explanation 2 to section 147 enumerates the cases where it would be presumed that income chargeable to tax has escaped assessment. As per the Hon ble Courts assessees are duty bound to disclose primary facts necessary for assessment. If they disclose primary facts, it is for the AO to make the necessary enquiries and draw proper inferences as to whether the income returned is correct or not. The term failure on the part of the assessee is not restricted to the Income-tax return and the columns of the return or the tax audit report. The expression failure to fully and truly disclose material facts also relates to the stage of the assessment proceedings and there can be omission and failure on the part of the assessee during the course of the assessment proceedings. (376 ITR 131). 5. 3. It is the duty of the AO to make an enquiry and if he did not make an enquiry, it is a case of oversight and it could not be said that the income chargeable to tax had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts. Hon ble Allahabad High Court, in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cepted the claim in law, but having made partial disallowance considering the facts, it was thereafter not open to the Assessing Officer to issue notice for reopening, that too, without any additional material which would suggest that the assessee had made a false declaration or provided inaccurate particulars. We would also like to refer to the case of United Shippers (371 ITR 441). In that matter the AO had passed an assessment order u/s. 143(3). In the course of the assessment proceedings, he called upon the assessee to submit a brief note on the nature of its business. The assessee had categorically disclosed the nature of its business activity as being engaged in shipping operations. The assessee in various documents, as sought by the AO in the course of assessment proceedings, had disclosed the nature of its activity to be operation of ships. On the basis of this material it had made a claim for deduction u/s. 33AC justifying its claim being engaged in shipping operations. Claim was supported by the material made available to the AO. He recorded an opinion that the assessee was engaged in shipping operations so as to make it eligible for deduction u/s. 33AC of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6. When a notice for reassessment is challenged, the burden is on the Revenue to establish that the jurisdictional requirement stands satisfied. We have, in earlier paragraphs, noted down the principles governing re-opening of the assessments. Even if one of the numerous jurisdictional requirements necessary for the issue of reopening notice is not satisfied, the reopening of an assessment fails. The sustainability of the reopening notice would be tested only on the basis of the reasons recorded at the time of issuing the notice. 6. After considering the principles governing the reopening, now, we would like to consider the facts of the case under appeal. We find that the AO has not referred to any material, other than what was examined in the initial round of assessment proceedings, for forming his belief that the assessee s income had escaped assessment. The AO s belief was based solely on the basis of material already examined by him during the first round of assessment proceedings. The notice issued u/s. 148 starts with following sentence: On perusal of the records it is noticed that It clearly shows that the notice was not issued on the basis of new tangible m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the year under consideration. Vide its letter, dated 02/08/2006, the assessee had filed detailed note on sale of the property (Pg. 15-16 of the PB), order of the charity commissioner sanctioning the sale of property, dated 17/ 03/ 2003(Pg. 17-38)and a copy of sale agreement with VDL(Pg. 39-83 of the PB). Later on, vide its letter, dated 20/09/2006, the assessee had filed details about names and addresses of the partners of VDL, copies of fixed deposits with Development Credit Bank (Pg. 87-121of the PB), a copy of bank book giving detailed narration of all the receipts and payments (Pg. 128- 161 of the PB). It was also emphasised that all the deposits were for the term exceeding 6 months including renewals. It is also found that it had disclosed receipt of compensation of ₹ 31. 78 lakhs for assigning the development rights in respect of an adjacent plot on which there was a reservation. The assessee had renewed certain earlier fixed deposit and same had no connection with the compensation received on sale of plot of land. After considering the above submissions of the assessee and after deliberating upon the documents furnished by it, the AO had passed scrutiny assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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