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TMI Blog2017 (12) TMI 991X X X X Extracts X X X X X X X X Extracts X X X X ..... MBER For The Revenue : Shri Shravan Gotru, Sr. DR For The Assessee : Shri Santosh Kr. Aggarwal, Adv ORDER PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the Revenue against the order of the ld CIT(A)-Faridabad dated 08.10.2015 for the Assessment Year 2007-08. 2. The Revenue has raised the following grounds of appeal:- 1. Whether on the facts and in the circumstances of the case, the ld CIT(A) was right in law in quashing the reassessment proceedings u/s 147 of the Income Tax Act, 1961 disregarding the fact that reassessment proceedings were validity initiated as provisions of section 147 of the Act which were not correct and true. 3. Brief facts of the case are that assessee is a company engaged in the manufacturing of machine clothing paper industries. The assessee filed its return of income on 31/10/2007 for ₹ 16044214/-. The assessment under section 143 (3) was completed at ₹ 160835700/- on 9/12/2009. 4. Subsequently the Ld. assessing officer has noted that assessee has debited a sum of ₹ 1.82 crore under the head repairs to plant and machinery and ₹ 34.67 lacs as repairs others which is also mach ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al before the Ld. CIT (A) who per order dated 8/10/2015 has held that the case of the appellant is squarely covered by judgment of Hon‟ble Gujarat High Court in case of Citibank transport versus ACIT 362 ITR 72 and before the engineers versus 80 354 ITR 211 is the assessment is being reopen on the basis of the opinion which is not permissible in law. He further held that while issuing the notice under section 148 the reasons recorded does not show that the income has escaped due to failure on part of the appellant to disclose all material facts in original assessment proceedings. He further noted that in fact the show cause notice was issued to the assessee during the original assessment proceedings which was replied by the assessee and no addition was made on the issue which is subject matter of reopening in the case. Therefore he quashed the reopening proceedings. Revenue, aggrieved with the order of the Ld. CIT (A) has preferred an appeal before us as per grounds of appeal stated hereinabove. 7. The Ld. departmental representative vehemently contested the order of the Ld. CIT (A) and submitted that it is not the change of the opinion but the Ld. assessing officer has gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... et entry and various submissions made before assessing officer. 3. The reassessment proceedings were bad in law because as per the provisions of law under section 147, the income chargeable to tax should have escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, which was not satisfied in appellant's case. 4. The Assessing Officer has nowhere referred to any 'Tangible information' coming to his possession after the conclusion of the original assessment u/s 143(3) which can lead to his reason to believe that income has escaped assessment. The AO has taken support only from the documents furnished during the course of original assessment proceedings which were considered and accepted, and upon which the claim of the appellant was allowed at that time. 5. The Assessing Officer has only done a review on the same set of documents and facts thus leading to the review of assessment order already passed. 6. The issues on which the additions have been made now, were raised by the AO and answered by the assessee in the original assessment proceedings and the assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10. Having brought out the crux of the arguments of the AO as well as the appellant the sequence of events and crucial facts leading up to the framing of the assessment order under appeal are enumerated for the sake of clarity as below: a) The appellant filed its return of income of ₹ 16,04,43,214/- on 30.10.2007. b. In response to the questionnaire issued to Assessee together with other notice u/s 143(2) and 142(1), the assessee filed its replies on various dates. c. The appellant vide its reply dated 29/06/2009 submitted the details of the expenses on Repair Plant Machinery and Others Repair together with other requisite details. d. As per order entry sheet dated 27.11.2009 the Assessing Officer after going through the earlier submitted details required the assessee to furnish the details as under:- iii) Nature of expenses on building repairs others. Show cause why it should not be capitalized. iv) Nature of expenses on Plant Machinery repair of 1.82 cr. Show Cause why it should not be capitalized. e. The appellant vide letter dated 01.12.2009, filed its reply tothe show cause on why the repair exp. should not be capitaliz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Assessing Officer regarding escapement of income. (v) In cases where the first proviso applies, there is an additional requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts. Explanation to the Section stipulates that mere production of books of accounts or other documents from which the Assessing Officer could have, with due diligence, inferred material facts, does not amount to full and true disclosure of material facts . 12. A plain reading of proviso to section 147 makes it more than clear that where the provision of sectionl47 are being invoked after period of 4 years from the end of relevant assessment year, in addition to AO having reasons to believe that any income chargeable to tax has escaped assessment, it must also be established as a fact that such escapement has been occasioned by either assessee failure to make return u/s 139 etc.,or by reason of failure on part of assessee to disclose fully and truly all material facts necessary for his assessment. The same has been explained in detail by the territorial High court in the case of Duilichand Singhania Vs ACIT 269 ITR 192 (P H) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough it is the duty of the Assessee to disclose all the material facts before the authority, the conclusion drawn from these facts was up to the AO. The AO cannot act on a mere suspicion or instinct that there has been error in assessment. 17. In this background having considered all the facts relevant to the case, order of the AO and submissions of the appellant and after verifying the facts I find that C from page 28: a) In response to the questionnaire issued to Assessee together with the notice u/s 143(2) and 142(1), the assessee filed its replies on various dates. The appellant vide its reply dated 29.06.2009 submitted the details of the expenses on repair on plant and machinery and other repair together with other requisite details. b). The AO had indeed asked the assessee on 27.11.2009 to furnish the details of Plant Machinery Repair amounting to ₹ 1.8 Cr. and asked the assessee to show cause why the same should not be capitalized. (This is evident from the copy of the order sheet furnished by the appellant, obtained by the appellant after taking an inspection of the assessment folder of the AO) c) The appellant replied to his show cause of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the end of relevant assessment year, in addition to AO having reasons to believe that any income chargeable to tax has escaped assessment, it must also be established as a fact that such escapement has been occasioned by either assessee's failure to make return u/s 139 etc.,or by reason of failure on part of assessee to disclose fully and truly all material facts necessary for his assessment. Perusal of the facts of the case clearly show that the AO has not been able to establish at all that there was any failure on the part of the assessee to discloseyuly and fully all material facts necessary for his assessment. In fact it is quite evident that the facts relevant to the reopening were called for by the AO and duly furnished by the appellant during the course of original assessment proceedings. 18. Having examined the facts of the case it shall not be out of place to examine the various judicial decisions relevant to these facts. 19. I find that Hon'ble Gujarat high court in case of Vishwanath Engineers vs ACIT 354 ITR211 has examined similar issue and held nature of expenditure examined in original assessment proceeding and expenses treated as business expense ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACIT 354 ITR211 as the assessment is being reopened on the basis of change of opinion which is not permissible in law. I further find that the case of appellant is squarely covered by judgment of P H High Court In Case Of Dullichand Singhania Vs ACIT 269 ITR 192 (P H). 22. Reliance is also placed on the Hon'ble Bombay High Court in the case of ICICI Prudential Life Insurance Co. Ltd Vs ACIT reported in 325 ITR 471 wherein the AO intended to reopen the concluded assessment on the basis of the documents furnished at the assessment stage. The documents were furnished along with elaborate explanation upon specific inquiry raised upon by the AO. The assessment order although Hiri the original order, the AO intended to reopen the assessment. The Hon'ble Court in this case has held that since the AO did not have any tangible material and the reason recorded refer to the same basis which was present during original assessment, what the AO intended was arising out of a mere change of opinion in the absence of any new material/information and hence the notice of reassessment should be quashed. Similarly in the case of Sanand Properties (P.) Ltd Vs JCIT reported in 343 ITR 388, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reassessment proceedings can be validly initiated in case return of income is processed only under section 143(1) and no scrutiny assessment is undertaken as it would be case of formation of no opinion and, hence, in such cases there is no change of opinion - Held, yes - Whether reassessment proceedings will be invalid in case assessment order itself records that issue was raised and is decided in favour of assessee; reassessment proceedings in said cases will be hit by principle of 'change of opinion' - Held, yes - Whether there cannot be deemed formation of opinion invoking presumption under section 114(e) of Evidence Act where particular subject matter, entry or claim/deduction is not examined - Held, yes - Whether reassessment proceedings will be invalid in case an issue or query is raised and answered by assessee in original assessment proceedings but thereafter Assessing Officer does not make any addition in assessment order - Held, yes [In favour of assessee] 24. Thus after considering the facts of the appellant's case I Hold that Notice u/s 148 is bad in law and same is quashed, taking strength from the above judicial decisions which are congruent with th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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