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TMI Blog2019 (12) TMI 154X X X X Extracts X X X X X X X X Extracts X X X X ..... t and is also a partner in M/s. Sai Royal Properties, which is engaged in the same business. The petitioner filed its return of income for assessment year 201213 declaring total income at Rs. 3,17,74,860/ on 27.09.2012. The case was selected for scrutiny, whereafter, by an order dated 19.01.2015, assessment came to be framed under section 143(3) of Act assessing the income of the petitioner at Rs. 3,19,11,584/ after making an addition of Rs. 1,36,725/ under section 14A of the Act. 5. Thereafter, by the impugned notice dated 23.03.2018, the respondent seeks to reopen the assessment of the petitioner for assessment year 201213. By a letter dated 12.04.2018, the petitioner requested the respondent to accept the original return of income filed on 27.09.2012, as the return filed in response to the notice under section 148 of the Act. The petitioner electronically filed its return of income on 20.04.2018. The petitioner also requested the respondent to furnish the reasons recorded for reopening the assessment. It appears that in the meanwhile the petitioner had also made an application under the Right to Information Act, pursuant to which the Office of the Princ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the profit and loss account, but have not been added back in the computation of income and that the provision is not an expense incurred for the purpose of business and is unascertainable in nature. The petitioner was, accordingly, called upon to explain as to why such amount should not be added back to the return of income. It was pointed out that the petitioner was also called upon to explain as to why the gain on retirement from M/s. Sai Royal Properties should not be treated as business income given the fact that M/s. Sai Royal Properties was also engaged in the business as that of the petitioner and was essentially, an extension of the petitioner. 6.3 It was pointed out that in response to the notice under section 142(1) of the Act, the petitioner had given a detailed reply explaining the two issues raised by the Assessing Officer. It was submitted that the Assessing Officer, after being convinced with the explanation given by the petitioner, framed assessment under section 143(3) of the Act, without making any addition in respect of these two issues. It was submitted that therefore, during the course of scrutiny assessment, the Assessing Officer had duly applied his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the original assessment proceedings." 6.5 Lastly, it was pointed out that pursuant to the application made by the petitioner under the Right to Information Act, 2005 the audit paras have been furnished to the petitioner. The attention of the court was invited to the audit paras to point out that both the issues, on which the Assessing Officer seeks to reopen the assessment, are based upon the objections raised by the audit department. Referring to the audit paras, it was pointed out that in response to both the issues, the Assessing Officer did not accept the objections and gave his reply thereto. However, the audit department did not accept the reply of the Assessing Officer. It was submitted that therefore, the formation of belief that income chargeable to tax has escaped assessment is not that of the Assessing Officer, but of the audit department and hence also, the reopening of assessment is bad. 6.6 To bolster his submission, learned advocate placed reliance upon the decision of this court in the case of Adani Exports v. Deputy Commissioner of Income Tax (Assessments), (1999) 240 ITR 224, wherein it has been held thus: "It is true that satisfaction of the Asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the office note on February 8, 1997, that he has reason to believe is mere pretence to give validity to the exercise of power. In other words, it was a colourable exercise of jurisdiction by the Assessing Officer by recording reasons for holding a belief which in fact demonstrably he did not hold that income of the assessee has escaped assessment due to erroneous computation of deduction under section 80HHC, for the reasons stated by the audit. The reason is not far to seek." 6.7 Reliance was also placed upon the decision of this court in the case of Adani Infrastructure & Development (P.) Ltd. v. Assistant Commissioner of Income Tax, (2019) 101 taxmann.com 256 (Gujarat), wherein the court has recorded that in the facts of the said case, the record clearly revealed that the Assessing Officer had not accepted the objections raised by the audit party and on the contrary, had objected to such objections by communicating internally. Evidently, therefore, the Assessing Officer had not formed any independent belief that income chargeable to tax had escaped assessment. 6.8 Reliance was also placed upon the decision of this court in the case of Cliantha Research Ltd. v. Deputy Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interference by this court. 8. This court has considered the submissions advanced by the learned advocates for the respective parties. As can be seen from the reasons recorded, the Assessing Officer seeks to reopen the assessment on the following two grounds, which are extracted for ready reference: "(i) The assessee company was a partner in M/s. Sai Royal Properties having 50% share as partner. This share of capital was accounted by the assessee company under the head "Investments". On retirement from the partnership firm, M/s Sai Royal Properties, the assessee had received Rs. 2,47,62,500/ from M/s. Sai Royal Properties in addition to its capital balance of Rs. 3,98,65,000/. It had shown the amount of Rs. 2,47,62 500 in its Return of Income as Capital Gain, as the character of the investment is "Capital" in nature. However, on perusal of para 21 regarding "Settlement of account and Goodwill", of the Partnership deed of M/s. Sai Royal Properties Dt. 02/07/2007, it is noticed that there it was specifically mentioned that the retiring partner would not be entitled to receive any amount as Goodwill or otherwise beyond the balance standing to the credit of such party ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in as to why the gain on retirement from firm M/s. Sai Royal should not be treated as business income, given the fact that M/s. Sai Royal is engaged in the same business and is essentially an extension of the petitioner. 10. Thus, though not stated in exactly the sameterms, the Assessing Officer did call for an explanation from the petitioner in respect of both the items on which the respondent seeks to reopen the assessment. Furthermore, in response to the notice issued by the Assessing Officer under section 142(1) of the Act, the petitioner had given its explanation by a communication which was received by the Assessing Officer on 04.12.2014, wherein both the issues have been explained at length. The Assessing Officer, after considering the explanation tendered by the petitioner, has not made any addition in respect of these two issues in the assessment framed under section 143(3) of the Act. 11. On behalf of the respondent, it has been contended that the issue of allowability of unascertainable expenses while calculating book profit under section 115JB of the Act was never discussed during the original proceedings and therefore, it cannot be said that the Assessing Officer ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act, lacks validity. 16. Another aspect of the matter is that the assessment of the petitioner is sought to be reopened after a period of more than four years from the end of the relevant assessment year. On a plain reading of the reasons recorded, it is evident that all facts were already before the Assessing Officer at the time of scrutiny assessment and no fresh material has been relied upon by the respondent for the purpose of reopening the assessment. Under the circumstances, it cannot be said that there is any failure on the part of the petitioner to disclose fully and truly all materials facts necessary for its assessment. Under the circumstances, in the light of the first proviso to section 147 of the Act, the assumption of jurisdiction on the part of the respondent Assessing Officer beyond a period of four years from the end of the relevant assessment year without there being any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment, is without authority of law. 17. Last but not the least, as pointed out by the learned advocate for the petitioner, the petitioner had obtained a copy of the audit para under th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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