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TMI Blog2019 (9) TMI 313X X X X Extracts X X X X X X X X Extracts X X X X ..... that the procedure carved out in GKN Driveshafts (India) Ltd. [ 2002 (11) TMI 7 - SUPREME COURT] is with a view to provide the assessee an opportunity to put forth his submission. This is in the light of the fact that reopening of a concluded assessment after a period of assessment is a very serious matter. This would be evident from the observations of the Hon ble Apex Court in Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] wherein, it was held that post 1st April, 1989, power to reopen is much wider. However, one needs to give a 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 , which cannot be per se reason to reopen. As pointed out that the conceptual difference between the power to review and power to reopen is to be kept in mind; the Assessing Officer has no power to review; he has the power to re-assess, but the re-assessment has to be based on fulfilment of certain pre-condition and if the concept of change of opinion is removed in the garb of reopening the assessment, review would take place. The Hon ble Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht in dismissing the appeal of revenue as infructuous. (ii) Whether on the facts and circumstances of the case, the Tribunal was right in dismissing the Department's appeal with respect to CIT(A)'s direction to allow proportionate expenditure against corpus receipt of ₹ 9.25 lakhs as revenue expenditure, as infructuous on the ground that the amounts received by the assessee towards its corpus was not treated as income." 3.The decision to be rendered in T.C.A.Nos.582 and 583 would cover the entire proceedings, if we uphold the order of the Tribunal. This is so because, if we uphold the order of the Tribunal, the re-assessment proceedings under Section 147 of the Act would be held to be invalid for those two years. In such an event, there may not be any necessity to answer the substantial questions of law framed in T.C.A.No.584 of 2009. If, on the other hand, we take a decision in favour of the Revenue in T.C.A.Nos.582 and 583 of 2009, we may be required to answer the substantial questions of law framed in T.C.A.No.584 of 2009. With this preface, we set out the factual details which are necessary for the disposal of these appeals. 4.The assessee filed their return ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, the contribution received from time to time was with a specific direction to be invested in shares of group companies and only the income therefrom, viz., dividends, should be applied for the objects of the assessee company. 8.It was further submitted that the corpus receipts have the character of capital receipts and it is definitely not income. Reliance was placed on the decision in the case of CIT vs. Shaw, Wallace & Co. reported in (1932) 34 BOMLR 1033. These objections were dated 12.09.2005 and 19.09.2005 for the two assessment years respectively. Subsequently, another submission was made before the Assessing Officer on 16.12.2004 stating that the expenses incurred were exclusively for cricket matches, which is one of the recreational facilities provided by the company. 9.The Assessing Officer passed the re-assessment orders on 30.09.2005 holding that any corpus fund is exempted from the charge of tax only under Section 11(1)(d) of the Act, and in order to claim exemption under the said provision, the assessee has to comply with the provisions of Section 12A of the Act and should have got itself registered under Section 12A of the Act. Thus, the Assessing Officer c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich is escaped to assessment income tax, the reopening of assessments is valid. 16.In support of his contention that the receipt income is required to be viewed from the stand point of the person who receives it, reliance was placed on the decision of the Hon'ble Supreme Court in P.Krishnan Menon vs. CIT (1959) 35 ITR 48 (SC); Dr.K.George Thomas vs. CIT (1985) 156 ITR 0421; and Boeing vs. CIT reported in (2001) 250 ITR 0667 (Madras). This decision was pressed into service to explain as to what is income and how the Court has interpreted the definition of "income" as defined under Section 2(24) of the Act. 17.With regard to the validity of the reopening proceedings, reliance was placed on the decisions in Areva T & D India Ltd., vs. Assistant Commissioner of Income-tax reported in (2007) 294 ITR 233 (Madras); Consolidated Photo and Finvest Ltd., vs. Assistant Commissioner of Income-tax reported in (2006) 281 ITR 394 (Delhi); and P.S.Govindasamy Naidu & Sons vs. ACIT reported in (2010) 324 ITR 44 (Rajasthan). Therefore, it is the submission of the learned counsel that the order passed by the Tribunal requires to be set aside, as the amount received by the assessee as corpus fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer reported in (2003) 259 ITR 19 (SC). 21.The learned counsel placed reliance on the decisions of the Hon'ble Supreme Court in CIT vs. Kelvinator of India Ltd., reported in (2010) 320 ITR 0561 (SC); CIT & Anr. vs. Foramer France reported in (2003) 264 ITR 0566 (SC); CIT vs. S.R.M.T. Staff Association reported in (1996) 221 ITR 0234 (AP); and the decision of the Delhi Bench of the Tribunal in Income Tax Officer (Exemption) vs. Smt.Basanti Devi & Shri Chakhan Lal Garg Education Trust, I.T.A.No.5082 (Del)2010, dated 19.01.2011, which was affirmed by the Hon'ble High Court of Delhi in I.T.A.No.927/2009, dated 23.09.2009 and the appeal filed by the Revenue against the said order in C.A.No.007036/2011, which was dismissed by the Hon'ble Supreme Court on 17.09.2018. 22.We have heard the learned counsel for the parties and carefully perused the materials placed on record. 23.At the very outset, we wish to point out that the case as pleaded by the Revenue, before us, was never the case of the assessee before the Assessing Officer, at the first instance, while the assessments were completed under Section 143(3) of the Act. During the re-assessment proceedings, the assessee n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for achieving the objects of the assessee. The copies of the letters given by the companies, which extended the voluntary contributions were enclosed. The copy of the ledger account for the corpus fund was enclosed for the entire period along with all the details. After the receipt of the documents, notice under Section 143(2) of the Act was issued to the assessee, the assessee's authorized representative attended the hearing before the Assessing Officer and the assessment was completed under Section 143(3) on 09.03.2001. 27.The Assessing Officer in the said order clearly records the presence of the authorized representative of the assessee and that the case was discussed. Apart from that, the Assessing Officer was fully aware that the assessee company is registered under Section 25 of the Companies Act, 1956, and this is noted in the assessment order when the Assessing Officer considered the expenditure of a sum of ₹ 87,350/- and held that it is also in the nature of capital expenditure and not mere repairs and maintenance, as the assessee itself has been incorporated under Section 25 of the Companies Act, 1956, on 22.01.1997. In this factual background, we need to exam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents cannot be nullified. In this regard, the learned counsel referred to the decision in the case of Areva T & D India Ltd. (supra). The Court while approving the decisions of the Allahabad High Court in Sant Baba Mohan Singh vs. CIT reported in (1973) 90 ITR 197 and that of the Rajasthan High Court in CIT vs. Gyan Prakash Gupta reported in (1987) 165 ITR 501, held that failure to pass an order on the objections given by the assessee to the reopening proceedings is only a procedural irregularity committed by the Assessing Officer and hence, the re-assessments cannot be annulled. 31.In Jayanthi Natarajan vs. Assistant Commissioner of Income Tax reported in (2018) 401 ITR 0215, one of us (TSSJ) was considering the validity of a reopening proceedings in a writ petition filed by the assessee. One of the grounds urged was that, in spite of specific objection being raised to the reopening proceedings by the assessee, the Assessing Officer failed to pass a speaking order disposing of the assessee's objections as per the principles laid down by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. (supra) and the Assessing Officer passed an assessment order disposing of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax and another reported in (2008) 304 ITR (Mad), wherein, it was held that when a notice under Section 148 of the Act, is without jurisdiction, especially in cases beyond four years, where there is no failure on the part of the assessee, to fully and truly disclose all material facts, the proceedings deserves to be quashed simplicitor. After noting the above legal position, which was placed before the Court, the Court took into consideration the factual position and allowed the writ petition. 36.In our considered view, the decision arrived at in the case of Jayanthi Narayanan (supra) reflexes the correct position of law because, the procedure carved out by the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. (supra) not only binds the assessee, but also the Revenue. Filing of objections to the reasons for reopening is not an empty formality. If this is so, passing a speaking order on the objections cannot be treated as an empty formality and to be brushed aside as a procedural error. The purpose for passing a speaking order on the objections is to afford an opportunity to the assessee to question the same, in the event the assessee is aggrieved by such an order. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r issuing such notice. Further, it was held that the Assessing Officer is bound to furnish reasons within a reasonable time, on receipt of the reasons, the noticee is entitled to file objections and the Assessing Officer is bound to dispose of the same by passing a speaking order. 40.We do not agree with the interpretation canvassed before us that assuming objections were not disposed of by a speaking order, it would be only a procedural error. 41.We have referred to Kelvinator of India Ltd. (supra), which has pointed out as to how serious is reopening of a concluded assessment, that too, after four years. The Hon'ble Supreme Court has laid down the law and it has been made mandatory for the Assessing Officer to pass a speaking order. The use of the word "bound" cannot be rendered meaningless. Therefore, we are of the clear view that if there has been a procedural error, it goes to the root of the matter thereby affecting the jurisdiction of the Assessing Officer to proceed further to give a fresh innings to the Assessing Officer on the ground that it is a procedural error, will not only dilute the decision of the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. (su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ding receipts". This decision applies with full force in support of the assessee herein and the Revenue is not able to put forth any submission to dislodge such conclusion. 44.It would be beneficial to refer to the decision of the Hon'ble Supreme Court in Income Tax Officer vs. TechSpan India (P.) Ltd. reported in (2018) 404 ITR 0010 (SC). The Hon'ble Supreme Court was considering the validity of a reopening proceedings under Section 148 of the Act on the ground that deduction under Section 10A of the Act had been allowed in excess and the income had escaped assessment. While dismissing the appeal filed by the Revenue, it was pointed out that the very basis of issuing show cause notice for reopening was that the assessee was not maintaining any separate books of account for the two categories of expenses and held that the conclusion of the Assessing Officer that the deduction under Section 10A of the Act was allowed in excess was based on nothing, but a change of opinion on the same facts and circumstances, which were already in the knowledge of the Assessing Officer even during the original assessment proceedings. 45.In the preceding paragraphs, we have noted the factual ..... X X X X Extracts X X X X X X X X Extracts X X X X
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