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TMI Blog2021 (6) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... used by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. In the impugned case, the Assessing Officer has not satisfied with the second limb of section 147. The reopening of assessment can be quashed on two counts, i) no new material was brought on record by the AO in the reopening of assessment to establish that the income of the assessee has escaped assessment as the assessee has already disclosed all the information necessary for completion of original assessment and ii) the reopening of assessment made beyond four years from the AY under consideration. AO reopened the assessment based on change of opinion, which is not acceptable as per the decisions quoted supra. Therefore, we quash the reopening of assessment made by the AO and the grounds raised by the assessee on this issue are allowed. - ITA No. 2068/H/2018 - - - Dated:- 11-6-2021 - Shri Satbeer Singh Godara, Judicial Member And Shri Laxmi Prasad Sahu, Accountant Member For the Assessee : Shri H. Srinivasulu For the Revenue : Shri M. Dayasagar ORDER PER L.P. SAHU, AM: This appeal of the Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he end of the relevant assessment year for which the assessment was completed under section 143(3)/147, the Assessing officer should bring out clearly in the satisfaction note that the escapement of income was due to omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment. It was brought to the notice of AD that essential aspect of the stipulation of the proviso is that the satisfaction note should clearly bring out the omission or failure on the part of the assessee. The same having not been brought out in the satisfaction note, there is no satisfaction in the eye of law to sustain reopening. It was specifically brought to the notice of the AO that at the time of reopening on 27/03/2017 the case records were not available with the AD to come to a finding that there was a failure on the part of the assessee to disclosure material particulars at the time of completion of the original assessment. The case records at the relevant point of time were with the Assessing officer of Delhi. It was vehemently contended that the AD could not have come to a conclusion that there is escapement of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the report of the DDIT (Inv). AO treated the payments to various subcontractors as bogus mainly for the reason that they are not traceable. (Vii) The alternative plea of the appellant (Without prejudice to the basic legal objections) to adopt a percentage of the profit on the payment to subcontractors as decided by the jurisdictional ITAT simply ignored without distinguishing the same. Despite the fact that the appellant made elaborate submission that as a lower forum, he is bound by the decision of the ITA T as per decisions of Apex Court and other High Court was not addressed to in the assessment order. (Viii) In an the assessment order was non-speaking, did not address various vital issues raised by the appellant. The basic requirement of a scrutiny order is lacking. 5. The CIT(A) after considering the objections raised by the assessee, quashed the assessment order passed by the AO u/s 147/148 of the Act, by observing as under: 8. I have considered the assessment order, material placed before me, the written submissions of the assessee, factual report of the Assessing Officer, rebuttal of the assessee on the factual report of Assessing Officer and the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowance, as the case may be, for the assessment year concerned(hereinafter in this section and in sections 148 to 153 referred to as the relevant assessmen t 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 sub section(l) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his asssessment for that assessment year; 8.1.1 As the scrutiny assessment was completed in the case and sought to be reopened after four years, the first proviso is clearly applicable. The scope and function of proviso as held by the Hon'ble Supreme Court in the case of CIT Vs Indo Mercantile Bank Ltd (1959) 36 ITR, is as under: The proper function of a proviso is that it qualifies the generality of the main enactment by pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proviso would be within the purview of the enactment. As was stated in Mullins Vs Treasurer of Survey (1880) 5 QBD 170: 42 LT 128 (referred to in Shah Bhojraj Kuverji Oil Mills and Ginning Factory Vs. Subhash Chandra Yograj Sinha AIR 1961 SC 1596 and Calcutta Tramways Co. Ltd Vs. Corporation of Calcutta AIR 1965 SC 1728), when one finds a proviso to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject matter of the proviso. The proper function of a proviso is to except and to deal with a case which would otherwise fall within the general language of the main enactment and its effect is confined to that case. It is a qualification of the preceding enactment which is expressed in terms too general to be quite accurate. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule .... 8.1.3 Viewed in this light, the proviso to sec.147 of the said act, carves out an exception from the main provisions of sec. 147. If a case were to fall within the proviso, whether or not it was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me had escaped assessment, is not sufficient to re-open assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to sec. 147. If this condition is not satisfied, the bar would operate and no action under sec.147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. 8.1.5 In the case of WeI Intertrade P Ltd, Hon'ble Delhi High Court agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the AO under sec.147 beyond the four year period would be wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lude with any level of certainty that income has escaped assessment on account of failure of the assessee to disclose fully and truly the material relevant for the determination of total income. In view of the above also, it is held that proceedings are not validly initiated. 8.3 The third issue raised by the assessee is reasons recorded are on account change of opinion as contended by the assessee as the assessee's return was scrutinized for the purpose of examining the sub contractor expenditure earlier. In this regard it is seen that the case was selected for scrutiny after obtaining approval of CCIT, Delhi with the following note of AO/ Addl. CIT: Nature of business: Infrastructure/Power Projects: In the case of the assessee, loans of ₹ 56 Cr(approx) from entities other than banks and sum of ₹ 371 Cr as loans and advances are reflected in the balance sheet, the source, utilization and veracity of the same needs to be verified. Further, in the P L ale, a sum of ₹ 557 Cr has been debited. The allowability of this expenditure needs to be verified. Further, assessee has earned exempted income and disallowance u/s.14A needs to be checked. Donati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed on 29.12.2017. The issue as to whether the AO has complied with the law laid down by Hon'ble Supreme Court in the case of M/s. GKN Drive Shafts (India) Ltd 259 ITR 19 on account of the above is questionable but the same is not discussed/adjudicated as the assessee did not press the ground no.6 raised with reference to the above issue. The ground is dismissed. 6. Aggrieved by the order of CIT(A), the revenue is in appeal before the ITAT by raising the following grounds of appeal: 1. The ld. CIT(A) erred in deciding the proceedings initiated ul s.148 of the Act, as invalid though there is a failure on the part of the assessee to disclose the facts fully and truly as required in first proviso of Section 147 of the Act. 2. The ld. CIT(A) erred in not appreciating the fact that the AO has recorded the reasons for reopening the assessment u/s.147 beyond 4 years as required under the provisions of the Act. 3. The ld. CIT (A) erred in deciding the proceedings initiated u/s .148 of the Act, as invalid on the ground that the case records pertaining to original assessment completed u/s. 143(3) were not available with the AO at the time of recording reasons, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO be restored. 8. On the other hand, the ld. AR of the assessee relied on the order of the CIT(A). 9. We have considered the rival submissions and perused the material on record as well as gone through the orders of revenue authorities. Also, we have perused the paper books filed by both the parties. It is a settled position of law that the assessment can be reopened under section 147/148 on the basis of reason to believe and not reason to suspect . Unless the reasons to believe about the escapement of income exist, no recourse can be taken to the provisions of section 147. In the reasons recorded, there must be allegations upon the assessee for not disclosing fully and truly all material facts for computation of assessment in case of assessment u/s 143(3). For the sake of convenience we reproduce the copy of reasons recorded which is as under: The assessee company is engaged in the business of civil constructions and structural works for Thermal and Hydro-power projects. A search and seizure operation was conducted in this case on 28/07/2016 and assessments in this case are pending completion u/s 143(3) rws 153A of the IT Act, 1961 for AYs 2011-12 to 2016-17. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as above, it is clear that the Assessing Officer has reason to believe that there is an escapement of income, but, the case falls under first proviso of section 147 i.e. earlier the assessment was completed u/s 143(3) of the Act and now it was reopened beyond the four yeas from the Assessment Year. In such a case, we are unable to find in the reasons recorded that there is no allegation on the part of the assessee in disclosing fully and truly all the material facts for completion of assessment. It is well settled by a number of judgments of the Hon ble Supreme Court that the twin conditions which are required to be fulfilled before an Assessing Officer can exercise his jurisdiction under clause (a) of section 147 of the Act are (a) that the Assessing Officer must have reason to believe that income, profits or gains chargeable to tax had either been underassessed or had escaped assessment and (b) that the Assessing Officer must have reason to believe that such escapement or underassessment was caused by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. In the impugned case, the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9.2 The contention of the assessee is that no new material has been found by the AO in the reassessment proceedings and therefore reopening of assessment is only due to change of opinion and that too beyond the time limit as prescribed in the proviso to section 147 of the Act which is bad in law. 9.3 In this connection, we refer to the following decisions: (1) In Deputy Commissioner of Income Tax Vs. Manak Shoes Co. P. Limited, (2011) 11 ITR (Trib) 673 (Del), the Tribunal held that where regular assessment had been made under Section 143(3) allowing depreciation of factory building, plant and machinery, and reassessment proceedings were initiated on the ground that depreciation was not admissible since the assessee had no manufacturing activity during the year, the Tribunal found that the matter had been examined during the assessment stage and that there was no fresh information to justify a different inference and notice under Section 148. Though action was initiated within the four year time limit, it was found that it was based on mere change of opinion and reassessment proceedings was, therefore, not justified. (2) In Consolidated and Fin vest Limited Vs. Asst ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer before passing the orders under Section 143(3). Further, the new logic, rationale and opinion which has been formed by the Assessing Officer for seeking reopening of the assessment is nothing but a change of opinion and a new approach to the existing facts and material which the Assessing Officer could well have done during the regular assessment proceedings of the relevant assessment years. (5) In Commissioner of Income Tax Vs. Eicher Limited, (2007) 294 ITR 310 (Del), the High Court has taken a view that since the facts and materials were before the Assessing Officer at the time of framing of the original assessment, and later a different view was taken by him or his successor on the same facts, it clearly amounted to a change of opinion, which would not form the basis for permitting the Assessing Officer or his successor to reopen the assessment of the assessee. The Honourable High Court further observed that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation necessary for completion of original assessment and ii) the reopening of assessment made beyond four years from the AY under consideration. We are of the view that the AO reopened the assessment based on change of opinion, which is not acceptable as per the decisions quoted supra. Therefore, we quash the reopening of assessment made by the AO and the grounds raised by the assessee on this issue are allowed. 9.2 In support of our decision. we are also relying on the following judgements: 1. Sound Casting(P) Ltd. v. Dy. CIT (2012) 250 CTR 119 (Bom.) 2.Tao Publishing (P) Ltd..v. Dy. CIT (2015) 370 ITR 135 (Bom.) 3.Tata Business Support Services Ltd. v. DCIT (2015) 121 DTR 222/ 232 Taxman 702 (Bom) 4. Micro Inks P. Ltd. v. ACIT (2017) 393 ITR 366/ 246 Taxman 143 (Guj.)(HC) 5. Navkar Share and Stock Brokers P. Ltd. v. ACIT (2017) 393 ITR 362 (Guj.)(HC). 9.3. Respectfully following the aforesaid decisions, we uphold the order of the CIT(A) and dismiss the grounds raised by the revenue on this issue. 10. In the result, the appeal of the revenue is dismissed in above terms. Pronounced in the open court on 11th June, 2021. - - TaxTMI - TM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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