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TMI Blog2019 (5) TMI 1206X X X X Extracts X X X X X X X X Extracts X X X X ..... f original assessment upon scrutiny made u/s 143(3) of the Act and there is nothing on record to show that there was non-application of mind on the part of the Assessing Authority on these aspects of the matter at the time of original assessment u/s 143(3). The learned Tribunal was justified in relying upon the judgment of the Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Limited [ 2010 (1) TMI 11 - SUPREME COURT] . The Hon'ble Supreme Court, in the above judgment, dealt with the amendment in law, with effect from 1st April 1989 under Section 147 of the Act, prior to and after enactment of the Direct Tax Law (Amendment) Act, 1987 has held that after 1st April, 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. These words enabling the Assessing Authority to undertake the Re-assessment Proceedings, viz.that the 'reasons must have a live link with the formation of the belief' on the basis of 'tangible material' to come to the conclusion that there is escapement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority had not, in the reasons recorded for such Re-assessment, indicated that there was a failure on the part of the Assessee to fully and truly disclose the relevant materials which resulted in such escapement of income and therefore, in the absence of any such stipulation in the reasons recorded for re-assessment, the Re-assessment Proceedings were held to be without jurisdiction and were liable to be quashed. He further submitted that the learned Tribunal has relied upon the decision of the Madras High Court in the case of Fenner (India) Limited v. Deputy Commissioner of Income Tax, reported in (2000) 241 ITR 672, whereas later on, the Gujarat High Court in the case of I.P.Patel and Co. v. Deputy Commissioner of Income Tax ([2012] 346 ITR 207 (Guj)), has held that mere non-mention of the words, viz. 'failure of the Assessee to disclose fully and truly', will not render the Re-assessment Proceedings non-est and without jurisdiction, if the reasons so apparently conveyed such failure on the part of the Assessee to fully and truly disclose the relevant material. (ii)Secondly, the learned counsel for the Revenue urged before us that for the Assessment Years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Assessing Officer has not established that the Appellant had not disclosed all primary facts fully and truly at the time of assessment U/s.143(3) and the assessments were completed on scrutinizing the books of accounts along with relevant records and documents. The attempt of the Assessing Officer to assess the broken period interest was only on account of change of opinion and on that account the Assessing Officer was not competent to commence reassessment proceedings. Assuming for a moment there was escapement of income chargeable to tax due to allowance the escapement of that income alone is not sufficient to justify the initiation of action U/s.147 after the expiry of four years from the end of the relevant assessment year. The further condition that such escapement must be by reason of failure on the part of the assessee either to file the return or to disclose truly and fully all material facts necessary for the assessment should be satisfied for initiating action U/s.147. Since, the Appellant has placed all facts along with the return of income and since assessment was completed U/s.143(3) and since the notice U/s.148 was issued beyond the period of four years from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax, reported in (2000) 241 ITR 672 . The relevant portion of the order passed by the Tribunal in this regard, is quoted below for ready reference: 2.First, we will take up the assessee's appeal in ITA Nos.838, 839, 840, 841, 843, 844, 847, 848, 849 850/Mds/2014. Since in all these appeals, the issue is common, we consider the facts narrated in ITA No.838/Mds/2014. 3.The first common ground in these appeals is with regard to validity of reopening of assessment though reopening was made after the end of the four years from the assessment orders. When the original assessment was completed u/s.143(3) of the Act, according to the ld.AR, the very initiation of proceedings under sec.148 was bad in law because, the conditions precedent to the reopening of assessment were absent in these cases. He submitted that in these cases, the original assessments were completed u/s.143(3) of the Act and no action to be taken for reopening of such assessment after the expiry of four years from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment by reason of the failure on the part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ia) ii)Excess deduction of depreciation on buildings 844/14 1996-97 13/03/1998 20/03/2002 - do - 847/14 2000-01 26/03/2003 09/03/2006 i)Excess deduction u/s.36(1)(vii) and 36(1)(viia) ii)Non disallowance of broken period interest 848/14 2001-02 20/11/2003 28/03/2008 i)Recognition of commission, exchange and brokerage on receipt basis. ii)Non inclusion of claims under ECGC DICGC. 849/14 2002-03 01/03.2005 18/07/2008 i)Recognition of commission, exchange and brokerage on receipt basis. ii)Non inclusion of claims under ECGC DICGC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there is escaped income and reopening is only mere change of opinion. It cannot be per se the reason to reopen the assessment. In these cases, the facts are that the assessment was completed under sec.143(3) of the Act. The assessment was reopened by recording the reasons for considering the following issues: 1.Interest paid on purchase of securities. 2.Expenditure for increase in capital. 3.Expenses on issue of rights issue. 4.Loss on sale of securities. 5.Fees payable for liability. 6.Excess claim of depreciation on building. 6.According to the ld.AR, there is no fresh tangible materials to come to the conclusion that there is escapement of income. The Assessing Officer seeing the same records, the income has been assessed to tax. The ld. AR submitted that this was brought to the Commissioner of Income-tax (Appeals), who instead of annulling the assessment, remitted the issue back to the file of the Assessing Officer to examine the validity of reopening u/s.147. 7.We have heard both the parties and perused the materials on records. In these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: 8.The learned single Judge of this Court, in the case of Fenner (India) Limited v. Deputy Commissioner of Income Tax, reported in (2000) 241 ITR 672 , which has been relied upon by the learned Tribunal, in our opinion, rightly held that the pre-condition for the exercise of power under Section 147 in cases where power is exercised within a period of four years from the end of the relevant assessment year is the belief reasonably entertained by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment must be by reason of the failure on the part of the assessee either to file a return referred to in the proviso or to truly and fully disclose the material facts necessary for the assessment. 9.As far as the decision of the Gujarat High Court relied upon by the learned counsel for the appellant / Revenue in I.P.Patel and Co. v. Deputy Commissioner of Income Tax (supra) is concerned, it is a possible view to take that mere repetition of these words in the reasons recorded or in the notice under Section 148 sent to the Assessee for re-assessment about the failure on the part of the Assessee to disclose fully and truly all material facts, may not be necessary, provided if on the face of the reasons so recorded and conveyed to the Assessee, it is apparent that such failure on the part of the Assessee to disclose fully and truly all material facts for assessment is clearly made out. 10.The Proviso to Section 147 of the Act provides for such a condition, which is jurisdictional in nature and in order to lift the embargo of the limitation of four years, it is not only necessary that the Assessing Authority should have a reasonable belief about the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act and there is nothing on record to show that there was non-application of mind on the part of the Assessing Authority on these aspects of the matter at the time of original assessment under Section 143(3) of the Act. 13.Therefore, on the second aspect of the matter also, we do not find anything wrong in the orders passed by the learned Income Tax Appellate Tribunal that the inference of the Assessing Authority about the escapement of income was merely on account of change of opinion and that there was no reasonable belief that the income escaped assessment. The learned Tribunal was justified in relying upon the judgment of the Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Limited ([2010] 320 ITR 561 (SC)) (wrongly printed as 328 ITR 561 in the order of the learned Income Tax Appellate Tribunal). The Hon'ble Supreme Court, in the above judgment, dealt with the amendment in law, with effect from 1st April 1989 under Section 147 of the Act, prior to and after enactment of the Direct Tax Law (Amendment) Act, 1987, and held as under: On going through the changes, quoted above, made to Section 147 of the Act, we find th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntroduce the expression `reason to believe' in Section 147. --A number of representations were received against the omission of the words `reason to believe' from Section 147 and their substitution by the `opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, `reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from Section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended Section 147 to reintroduce the expression `has reason to believe' in place of the words `for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new Section 147, however, remain the same. For the aforestated reasons, we see no merit in these civil appeals filed by the Department; hence, dismissed with no order as to costs. 14.These words enabling the Assessing Authority to undertake the Re-assessment Proceedings, viz.that the 'reasons must have a live link with the formation of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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