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TMI Blog2020 (5) TMI 482X X X X Extracts X X X X X X X X Extracts X X X X ..... s well as on the facts of the case in confirming the action of the AO in holding that compensation of Rs. 52,27,012/- is liable to be capitalized. The addition so made and confirmed by the Ld. CIT(A), is contrary to the provisions of law and facts, merely based upon suspicion hence, kindly be deleted. 4. The ld.CIT(A) erred in law as well as on the facts of the case in confirming action of the AO in making addition of Rs. 50,820/- on account of non deduction of TDS on interest treating the payment made as interest instead of compensation as claimed by the assessee. The addition so made and confirmed by the Ld.CIT(A), is contrary to the provisions of law and facts, merely based upon suspicion, and not appreciating the submissions of the assessee, hence kindly be deleted." 2. Briefly the facts of the case are that the assessee is engaged in the business of real estate and filed its return of income on 28.09.2011 declaring loss of Rs. 27,04,932/- and the assessment was completed U/s 143(3) on 14.03.2014 at NIL income. Subsequently, notice u/s 148 was issued on 28.3.2018 after recording the reasons and seeking appropriate approvals. In response, the assessee filed its return of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued on 28.3.2018. It is relevant to note that case was reopened based upon the assessment records and submission filed during the course of original assessment proceedings and the same is evident from the reasons recorded, which is reproduced in para 2 of the reassessment order passed u/s 147 of the Act. 5. It was further submitted that in respect of compensation of Rs. 50,820/- against booking cancellation, similar reasons were recorded based upon queries and reply submitted during original assessment proceedings completed u/s 143(3) of the Act. It was submitted that this issue was also discussed in detail at the time of original assessment proceedings. The AO had asked specific query in this respect vide notice u/s 142(1) dated 19.08.2013 at Point No.28. The query was duly replied by the assessee along with name of the person to whom payment has been made, amount of payment, date of payment etc. These details have also been reproduced by the AO in the reasons recorded and therefore, this being also a case of change of opinion. 6. It was further submitted that the AO while making the reassessment u/s 147 had infact, taken note in para 5.4 of his order, the submission made on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue and action of AO for initiation of reassessment proceedings was sustained summarily. It was accoridngly submitted that it is a case of mere case of change of opinion and which is not permissable as per settled legal propsition and therefore, cannot hold on the legal scrutiny of the requirement for initiation of proceedings u/s 148 and accordingly, the notice issued u/s 148 and consequent reassessment proceedings u/s 147 should be quashed and set-aside. 9. In support of his contentions, the ld AR has placed reliance on the decisions in the case of Krish Homes Pvt. Ltd. vs ITO (ITA No. 237/JP/2019 dated 23.12.2019), ACIT vs Manglam Cement Limited (2017) 78 Taxmann.com 334 (Jaipur Trib) affirmed by the Hon'ble Rajasthan High Court (in DBITA No.211/2017 dated 04.09.2017, CIT vs Vaishali Avenue (2014) 48 Taxmann.com 289 (Raj), CIT vs Hindustan Zinc Limited (2016) 70 Taxmann.com 262 (Raj) and CIT vs Kelvinator of India Ltd (2010) 187 Taxman 312. 10. Per contra, the ld DR submitted that the AO reopened the assessment proceedings after recording the due reasons and due satisfaction after following due process. The case of the assessee was reopened in the light of information/documents ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e read as they were recorded by the Assessing officer. It is for the Assessing officer to disclose and open his mind through the reasons recorded by him and he has to speak through the reasons. In the present case, the reasons recorded by the Assessing officer before issuance of notice u/s 148 read as under:- " On going through the assessment records, it was noticed that the assessee has debited an amount of Rs. 52,27,012/- in his P&L Account as compenstion paid to plot owners due to high tention line over such plots. The assessee has got back the plots for which compensation was paid by the assessee. These plots have now become the part of his closing stock. The assessee has itself admitted that the prices of land have gone up and he had to compensate the plot holders for the enhanced value. This increase in value of land would go on to increase the cost of the closing stock. In view of this matter, instead of debiting the expenditure as revenue, the expenditure ought to have been capitalized which would have gone to increase the closing stock. by the relevant amount. In one of its reply, the assessee has stated that the compensation has been given to save the goodwill of the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Krishan Kumar Gupta and held that the payment has been made in the nature of interest amounting to Rs. 68,320/- which should suffer TDS and in absence of the same, the disallowance should have been made u/s 40(a)(ia) of the Act. The position which is therefore emerging from the reasons so recorded by the Assessing officer is that there is no new material brought on record by the Assessing officer and basis the existing material available on record, he has formed the belief that the income has escaped assessment. In this case, the assessment was originally completed u/s 143(3) and as apparent from the queries raised by the Assessing officer and reply submitted by the assessee company, matter pertaining to compensation paid on account of HT Line and compensation paid against booking cancellation were duly examined by the Assessing officer during the original assessment proceedings. Therefore, the facts that there was compensation paid on account of HT Line and compensation was paid against booking cancellation and debited in the profit/loss account were available on record at the time of original assessment proceedings and the Assessing officer was duly ceased of such factual posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987 , Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549 , dated 31-10-1989, which reads as follows : "7.2 Amendment made by the Amending Act, 1989, to reintroduce 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal that the reassessment proceedings initiated by the Assessing Officer by mere change of opinion is patently illegal, cannot be faulted with." 14. In the instant case also, we find that the reopening of the completed assessment u/s 143(3) is without bringing any fresh material on record and where the material relied upon has already been examined by the Assessing officer during the original assessment proceedings, it clearly amounts to change of opinion which as per settled jurisprudence, as we have noticed supra, cannot be sustained and notice so issued u/s 148 seeking to reopen the assessment is liable to be set-aside. 15. Another contention which has been raised by the ld AR is that in the reasons so recorded, the Assessing officer has not alleged that there is failure on the part of the assessee to disclose fully and trully all material facts and where the powers under Section 147 of the Act have to be exercised by the Assessing officer after a period of four years, there has to be a failure to disclose fully and truly all material facts and information by the assessee which is not alleged by the Assessing officer in the instant case. In this regard, we note that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such primary facts. However, as far as onus on the assessee to disclose the primary facts are concerned, the same has been satisfied and there is no such failure and infact, in the reasons so recorded, there is no allegation made by the Assessing officer that there is any such failure on the part of the assessee company and as we have stated above, it is for the Assessing officer to disclose and open his mind through the reasons recorded by him and he has to speak through the reasons. Therefore, we agree with the contention so advanced by the ld AR that this being a jurisdiction requirement and in absence of any such failure on part of the assessee company, the Assessing officer cannot assume jurisdiction u/s 147 of the Act. 16. In light of aforesaid discussions and respectfully following the decisions referred supra, we are of the considered view that in the instant case, the Assessing officer doesn't have the legal basis to acquire jurisdiction for reassessment and thus, the notice issued under section 148 and consequent reassessment proceedings are quashed and set-aside. 17. The other grounds raised on merits of the additions have therefore become academic and we do not pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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