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TMI Blog2022 (11) TMI 64X X X X Extracts X X X X X X X X Extracts X X X X ..... notice u/s 148 of the Act on 31.3.2019, i.e., the reopening has been done after expiry of four years from the end of the assessment year. At this juncture, we may refer to the provisions of sec.147 of the Act, particularly the proviso thereto, which gives a protection to the assessee in the cases of reopening of assessment after expiry of four years from the end of the assessment year As reasons recorded by the assessee would show that the assessing officer has noticed alleged escapement of income only on verification of records . Hence there is merit in the contentions of Ld A.R that the AO did not bring any new material on record for forming belief that there is escapement of income. We noticed earlier that the reopening has been done after expiry of four years from the end of the assessment year and hence it is imperative for the AO to show that there was failure on the part of the assessee to disclose fully and truly all material facts, as stated in the proviso to sec.147 of the Act. The case of the assessee is that there was no failure on its part as alleged by the AO. We are of the view that the reopening of assessment is bad in law and hence the order passed by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment before the Tribunal. We heard the parties first on this legal issue. 4. As noticed earlier, the original assessment in the hands of the assessee was completed u/s 143(3) of the Act on 06-12-2015. The assessing officer has reopened the assessment by issuing notice u/s 148 of the Act on 31.3.2019, i.e., the reopening has been done after expiry of four years from the end of the assessment year. At this juncture, we may refer to the provisions of sec.147 of the Act, particularly the proviso thereto, which gives a protection to the assessee in the cases of reopening of assessment after expiry of four years from the end of the assessment year. The said proviso reads as under:- 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 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 (1) of section 142 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was subsequently paid during the year. It was noticed from records that the assessee company holds 45.76 per cent shares in SAMPL which is not a company in which public is substantially interested. It was noticed from the Balance sheet of M/s SMMPL that there was accumulated profits of Rs. 10.23 crores in the lender company. As all the conditions laid down in sub-clause (e) of subsection (22) of Section 2 of the Act is satisfied, loans received from M/s Sal Maritime Management Pvt. Ltd to the extent of accumulated profits of the company required to be treated as deemed income under section 2(22)(e). Omission to do so resulted in under assessment of income of Rs. 4,35,70,000/- involving tax effect of Rs. 1,41,36,287/-. 2.1 On further verification of the records it was noticed that (a) from Auditor's Report SI No. 3(xv) that the assessee had given corporate guarantee for term loans of US $4.85 million (Rs. 24.25 crore assuming 1$ = Rs. 50) to one of its foreign subsidiary namely Sunrise Martime Pte. Ltd. Singapore for purchase of old ships. Moreover, as per assessee's submission dated 09.01.2015, the assessee company had given loan of Rs.7,62,89,795 (0B - Rs.3,69 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in response to various notices issued during the assessment reassessment proceedings and have noted that the assessee has not fully and truly disclosed the following material facts necessary for his assessment for the year under consideration. It is important to highlight here that material facts relevant for the assessment on the issue(s) under consideration were not filed during the course of assessment proceeding and the same may be embedded in annual report, audited P L A/C, balance sheet and books of account in such a manner t it would require due diligence by the AO to extract these information. For afore stated reasons, it is not a case of change of opinion by the AO. 5. In this case more than four years have lapsed from the end of assessment year under consideration. Hence necessary sanction to issue notice u/s 146 has been obtained separately Principal Commissioner of income Tax as per the provisions of section 151 of the Act. 7. A careful perusal of the above said reasons recorded by the assessee would show that the assessing officer has noticed alleged escapement of income only on verification of records . Hence there is merit in the contentions of Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the part of the assessee as alleged by the AO. (A) The first issue related to the loan taken by the assessee from M/s Sai Maritime Management P Ltd. The Ld A.R submitted that the AO has examined the loan transactions during the course of assessment proceedings by raising specific query. In this regard, he invited our attention to the following documents:- (a) Notice dated 26.12.2014 issued by the AO during the course of original assessment proceedings, wherein the AO has raised a specific query no. (i) requesting the assessee to furnish details of persons from interest bearing unsecured loans amounting to Rs.3,97,00,000/- was taken during the year. Further, the AO has asked in query no. (ii) to furnish confirmation letters and other details of the creditors. The AO has also asked in query no. (vi) to furnish complete details of the loans given/taken from related enterprises and also state as to how the enterprises are related. (b) The assessee has furnished the details, vide its reply dated 09-01-2015, vide replies given in point no.1,2 and 6. (c) The Ld A.R submitted that the Statutory auditor s report also mentions about the loan transactions with related parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion before Ld DRP also, but the Ld DRP has rejected the same. In this regard, the Ld D.R invited our attention to the orders passed by Ld DRP, wherein the Ld DRP had rejected the contentions of the assessee by following Explanation 1 to sec. 147 of the Act. He further submitted that the AO has re-opened the assessment in order to examine the issue of applicability of transfer pricing provisions to the transactions entered by the assessee with its AE, since he has not examined the same in the original assessment proceedings. Hence there was no change of opinion on the part of the AO and there is enough reason for the AO to re-open the assessment. The Ld D.R further submitted that the assessee has reported the international transactions in Form 3CEB by way of notes, which could be noticed by the AO only by due diligence. He further contended that the information about escapement of income may come from the record of the assessee also and it is not always necessary that there should be any fresh tangible material for forming belief of escapement of income. The Ld D.R further relied upon the decision rendered by Ld DRP on this issue. 11. We have noticed earlier that the assessing o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollowing the decisions rendered by Hon ble Bombay High Court, which were relied upon by Ld A.R before us. The first one is the decision rendered by Hon ble Bombay High Court in the case of Kalpataru Limited vs. DCIT (2021)(439 ITR 284)(Bom). Following discussions made by Hon ble Bombay High Court in the above said case are relevant to the facts of the present case:- 11. It is settled law that where the assessment is sought to be reopened after the expiry of a period of four years from the end of the relevant year, the proviso to Section 147 stipulates a requirement that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary. Since in the case at hand, the assessment is sought to be reopened after a period of four years, the proviso to Section 147 is applicable. It is also settled law that the Assessing Officer has no power to review an assessment which has been concluded. If a period of four years has lapsed from the end of the relevant year, the Assessing Officer has to mention what was the tangible material to come to the conclusion that there is an escapement of income from assessment and that there has been a failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether of facts or law, should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be meaningless to demand that the assessee must disclose what inferences - whether of facts or law - he would draw from the primary facts. If, from primary facts, more inferences than one could be drawn, it would not be possible to say that the assessee should have drawn any particular inference and communicated it to the assessing authority. How could an assessee be charged with failure to communicate an inference, which he might or might not have drawn? 15. As held in Ananta Landmark Pvt. Ltd. (supra), Explanation 1 to Section 147 of the Act has nothing to do with inferences and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income-tax Officer could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section, by casting a duty on the assessee to disclose inferences , to draw the proper inferences being the duty imposed on the Income T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in draft payable account which were 10 years or more old as on 30th September, 2010. The same has not been offered to tax, in accordance with the Delhi ITAT decision in the case of Punjab National Bank Vs. Addl. CIT (ITA Nos. 2014 2873 / Del /2007). In clear terms, therefore, the assessee had furnished the necessarily details before the Assessing Officer of the said amount having been shown in Profit Loss A/c but not offering it to tax. If during the original assessment proceedings, the Assessing Officer desired to inquire further into such claim of the assessee, nothing prevented him from doing so. At any rate, he cannot do so in the assessment proceedings which are sought to be commenced beyond the period of four years from the end of relevant assessment year. 16. It can be noticed that the ratio laid down by Hon ble jurisdictional High Court in the above said two cases support the case of the assessee in this case. Accordingly, we are of the view that the reopening of assessment is bad in law and hence the order passed by the assessing officer is liable to be quashed. Accordingly, we quash the order passed by the AO. 17. Since we have quashed the assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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