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TMI Blog2024 (11) TMI 435X X X X Extracts X X X X X X X X Extracts X X X X ..... In order to assume jurisdiction under Section 147, the stand of the AO was that DAP expenditure was allowed owing to a mistake , whereas, production and translation expenses were allowed without any verification. Even if, such an argument is to be accepted, the appropriate remedy in such a situation may lie under Section 263 of the Act. Consequently, one of the essential ingredients for reopening the assessment beyond the period of four years has not been satisfied in the present case. Reassessment proceedings are therefore bad in law. Reasons to believe - Quite apart from above, it is also important to note that the details regarding DAP and production and translation expenses were placed before the AO in AY 2012-13 and on consideration of material so placed on record, the claim of DAP expenses as well as production and translation expenses were allowed by the AO. Order of assessment for AY 2012-13 has attained finality as on date. We also take note of the undisputed position as brought to our notice during arguments that the claim of deductibility of the said expenses was not only allowed in AY 2012-13 but also in AY 2013-14. Thus, identical expenditure has been claimed by the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 30.10.2015 was passed by the AO, giving effect to the directions issued by DRP. 7. In the meanwhile, a notice under Section 142 (1) of the Act was issued to the petitioner for AY 2012-13, on 14.10.2015. In response to queries raised vide questionnaire dated 14.10.2015, the details of production and translation expenses were submitted on record by the petitioner for AY 2012-13. The details regarding claim of Discovery Appreciation Plan [ DAP ] expenses were also placed on assessment record before the AO in AY 2012-13. 8. Final Assessment Order was passed by the AO under Section 144C/143 (3) of the Act for the AY 2012-13. 9. The Assessment Order dated 30.03.2015 was later rectified under Section 154 of the Act on account of certain mistakes apparent from record. 10. Notice under Section 148 of the Act was issued by the respondent on 31.03.2018, reopening the assessment concluded vide Final Assessment Order dated 30.10.2015 for the AY 2011-12. 11. On 05.10.2018, petitioner filed objections to assumption of jurisdiction under Section 148 of the Act, but the same were dismissed by the respondent vide order dated 12.10.2018. 12. The impugned notice proposing the reassessment action ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to prove during the reassessment proceedings that there was no escapement of income. ANALYSIS CONCLUSION: 16. It is evident that notice under Section 148 was issued beyond the period of four years from the end of the relevant AY. Consequently, the first proviso to Section 147 of the Act would be applicable in this case Section 147 reads as under:- 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment 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 en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holding company. Since the amount debited is related to the distribution of profits and a kind of dividend therefore, it should not have been allowed as expenses. Thus assessee has been allowed over expenses of 2.01 Crores. The mistake resulted in under assessment of Income of Rs. 2.01 Crores for AY 2011-12. Similarly, the assessee has claimed Rs. 8,17,06,5621- as production expenses which has been allowed to assessee without verification. Thus amount of Rs. 10,18, 06,562/- has escaped assessment. 19. In his objections, petitioner took the plea of limitation and noncompliance with the conditions precedent, as provided in proviso to Section 147. He also took the objection that the reasons for reopening of assessment constitute a change of opinion. 20. However, AO rejected the objections stating that AO while recording the reasons for reopening the case considered the issues raised in Audit Objections, applied his mind independently and was satisfied that there were reasons to believe that income chargeable to tax escaped assessment. 21. It is well settled through a catena of decisions that escapement of income by itself is not a sufficient ground for reopening the assessment in a c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r of India Ltd. (2010) 228 CTR (SC) 488. The Supreme Court after taking note of the amendments in Section 147 held as under:- However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. 23. Similarly, a Coordinate Bench of this Court in CIT v. Suren International Private Limited: (2013) 357 ITR 24 (Delhi), after referring to earlier decisions of this Court observed as under:- In the reasons as furnished by the Assessing Officer, we fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessment and, therefore, the assessment needed to be reopened. On the other hand, if the AO did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequences of that lapse. 25. Similarly, in the case of CIT v. Batra Bhatta Company (2008) 174 Taxman 444 (Delhi), another Division Bench of our own High Court held as under:- 7. We feel that the observations of the Supreme Court in the aforesaid decision clearly apply to the case at hand. Merely because the Assessing Officer felt that the issue required 'much deeper scrutiny, is not ground enough for invoking section 147. It is not belief per se that is a pre-condition for invoking section 147 of the said Act but a belief founded on reasons. The expression used in section 147 is - 'If the Assessing Officer has reason to believe' and not- 'If the Assessing Officer believes'. There must be some basis upon which the belief can be built. It does not matter whether the belief is ultimately proved right or wrong, but, there must be some material upon which such a belief can be founded. In the present case, the Commissioner of Income-tax (Appeals) as well as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013-14. Thus, identical expenditure has been claimed by the petitioner year after year and there has been no disallowance. Since there has been no disallowance of the deductions in the subsequent AYs, we agree with the submission of learned counsel for the petitioner that the basis for the reasons to believe do not survive any more, as held by this Court in A.T. Kearney India Ltd. v. ITO [2015] 371 ITR 179/63 taxmann.com 200 (Delhi), Ultra Marine Air Aids (P) Ltd. v. IAC [2011] 12 taxmann.com 436/201 Taxman 69 (Mag.) (Delhi) and Silver Oak Laboratories (P.) Ltd. v. Dy. CIT [W.P. (C) No. 17719-20/2006. The observation of this Court in Ultra Marine (supra) is apt and reads as under:- As the notification has been quashed and, the same has not been assailed by the Revenue Department, the reasons for reopening the assessment under section 147/ 148 of the Income-tax Act, 1961, do not survive. The very basis and foundation for issue of reassessment notice have ceased to exist. Consequently, the writ petition is allowed ... 30. In view of aforesaid discussion, we are unable to sustain the impugned notice under Section 148 dated 31.03.2018. As a result, the impugned notice dated 31.03.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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