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TMI Blog2016 (2) TMI 1372X X X X Extracts X X X X X X X X Extracts X X X X ..... occasioned by either the assessee failing to make a return under section 139 either, etc. , or by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. Undisputed facts of the present cases are that the assessee original assessment was completed u/s. 143(3) of the Act, that the AO had not mentioned, in the reasons recorded for reopening of the assessments, that because of the failure of the assessee to disclose the material facts truly and fully income had escaped assessment. As the basic and first pre-requisite for issuing the notice is not fulfilled, so, the assessment orders passed in pursuance of such notices have to held to be invalid. Considering the facts and circumstances of both the cases, we are of the opinion that the orders of the FAA does not suffer from any legal or factual infirmity. So, upholding his orders for both the years i. e. 1997-98 and 1998-99, we decide the effective ground of appeal against the AO. Reopening of assessment - whether assessee was entitled for deduction of the whole lease rent ? - HELD THAT:- No new material had come in possession of the AO t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g all the appeals by a common order. ITA Nos. 1486 2631/Mum/2006 (A. Ys. 1997-98 , 98-99) (Departments Appeal): ITA Nos. 1371 2324/Mum/2006 (A. Ys. 1997-98 to 98-99) (Assessees Appeal) : 2. Assessee-company is engaged in the business of civil construction and undertakes construction of roads, bridges, pile foundations and marine works. The details of dates of filing of returns of income, date of assessment orders, dates of issue of 148 notices, assessed incomes as per section 143(3)r. w. s. 147 can be tabulated as under: Assessment Year Dt. of filing of original return Dt. of issue of notice u/s. 148 Assessed income u/s. 143 (3) r. w. s. 147(Rs. ) 1997-98 28. 11. 1997 25. 03. 2004 16, 99, 27, 000/- 1998-99 30. 11. 1998 25. 03. 2004 15, 14, 47 , 000/- 1999-2000 30. 12. 1999 10. 03. 2004 19, 99, 00, 000/- 2000-01 30. 11. 2000 10. 03. 2004 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: On perusal of the records it is noticed that the lease rentals amounting to ₹ 1 1. 31 crores was allowed to the assessee for A. Y. I 997-98. From the lease agreement it is observed that the enjoyment of the property taken on lease, the lessee apart from paying the rent had to ensure its maintenance on proper condition. In the event of loss or destruction also, it was to continue to pay the lease rent if asset survived for lease period the lessee had the option to acquire the asset at a nominal price. On the other hand the lessor comes in the picture even at the time of purchase. , only to make the payment that too only when authorised by the lessee to do so. Hence for all the intents and purposes, the lessee is the owner of the asset and the lessor the financier making payment at the time of purchase. The arrangements only ensured that the lesser in all circumstances gets buck the money advanced and nothing more. Such an arrangement cannot be treated as a genuine lease agreement but a financing transaction. In such situation only the interest paid on loan taken is an allowable deduction and not the repayment of the principal amount . A cursory glance at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts was liable to be set aside. While granting approval to the notice it was obligatory on the part of the Commissioner to verify whether there was any failure on the part of the assessee to disclose full and true relevant facts in the return of income filed for the assessment of income of that assessment year. It was also obligatory on the part of the Commissioner to consider whether or not power to reopen was being invoked within a period of four years from the end of the assessment year to which the proceedings related. None of these aspects had been considered by him. The notices and consequently the order justifying reasons recorded were unsustainable. It is said that the proviso to the section 147 was incorporated to prevent misuse of re-opening the assessments by the AO. s after period of four years. Tax laws envisage that completed assessment should not be disturbed without solid reasons. We hold that the Proviso casts onus on the AO to prove failure of the assessee and that if the AO fails to do so, then assessment passed by him in pursuance of re-opening notice, looses legal validity and sanctity. At this juncture, we would like to consider the matter of Tecumseh Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r that assessment year. Undisputed facts of the present cases are that the assessee original assessment was completed u/s. 143(3) of the Act, that the AO had not mentioned, in the reasons recorded for reopening of the assessments, that because of the failure of the assessee to disclose the material facts truly and fully income had escaped assessment. As the basic and first pre-requisite for issuing the notice is not fulfilled, so, the assessment orders passed in pursuance of such notices have to held to be invalid. Considering the facts and circumstances of both the cases, we are of the opinion that the orders of the FAA does not suffer from any legal or factual infirmity. So, upholding his orders for both the years i. e. 1997-98 and 1998-99, we decide the effective ground of appeal against the AO. 6. We have held that the reassessments for the above mentioned AY. s. are invalid. So, the appeals filed by the assessee for the AY. s. 1997-98 and 1998-99 are not being adjudicated treating the same of academic nature. ITA/3251 3252/Mum/2006-AY. s. 1999-00, 2000-01 Assessee s Appeal: ITA/3643 3644/Mum/2006-AY. s 1999-00, 2000-01 Department s Appeal: 7. While deciding t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny escapement of income for any of the years. In both the years the depreciation and interest would be more than the rental income, if the transaction with regard to leased assets was to be treated financial transaction. With regard to the argument that the AO had not formed any opinion, as he had not discussed anything in the assessment order, we would like to mention that in the matter of Prima Paper and Engineering Industry(supra)the Hon ble Jurisdictional High Court has held as under: It is well settled that the power to reopen an assessment is not a power of review and mere change of opinion would not justify reopening of an assessment. This would apply even when assessment sought to be reopened is within four years from the end of the assessment year. Revenue does not dispute the fact that the issue with regard to which the reopening is sought to be done was the subject matter of discussion and deliberation before the Assessing officer during the original proceedings leading to the order dated 29th April, 2003. In these circumstances, it is an undisputed position that the Assessing Officer did have occasion to apply his mind to the deduction claimed by the respondent-Asse ..... 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