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TMI Blog2023 (8) TMI 1612X X X X Extracts X X X X X X X X Extracts X X X X ..... due to the failure on the part of the assessee, the same is not found to be sustainable and hence liable to set aside. Neither any allegation has been labelled against the assessee by the Ld. AO while reopening assessment under Section 148 of the Act in failing to disclose fully or truly all material facts necessary for assessment which admittedly goes against such reopening of assessment by the department. No recording of reasons of the fact of failure on the part of the appellant in submitting material facts for the purpose of making assessment truly and fully at the time of original assessment is reflecting for initiation of such re-assessment proceeding. Once, upon considering the documents, the claim of the assessee decided and accepted by not making any addition during the course of regular assessment issuing notice u/s 148 on the same issue by successor AO amongst to assumption of revisionary power which is not valid as per law. When the AO attempts to reopen an assessment on the count the opinion formed earlier by him was an incorrect opinion, the reopening is not warranted. Reopening of assessment beyond the period of 4 years not sustainable - Decided in favour of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A)-1, Baroda on 02.08.2013. Subsequently, the assessment proceeding under Section 147 of the Act was initiated upon taking approval from the Ld. CIT-1, Baroda and notice dated 27.02.2015 under Section 148 of the Act was served upon the assessee on 03.03.2015. By and under the reply dated 04.06.2015, the assessee requested to treat the return filed under Section 139(1) of the Act as return filed against the notice issued under Section 148 of the Act. The assessee claimed expenses to the extent of Rs. 1,27,92,992/- on account of duties and taxes out of which a sum of Rs. 62,92,692/- pertained to claim of expenses on account of VAT payment. In fact, the assessee paid VAT of Rs. 5,31,615/- by 31.03.2008. The balance amount remained unpaid and shown as outstanding liability as on 31.03.2008 and neither the said amount of Rs. 57,61,077 was paid before the due date of filing of return. Show cause notice under Section 142(1) of the Act, therefore, was issued to the assessee to show as to why disallowance of Rs. 57,61,077/- may not be made in view of provisions of Section 43B of the Act. The assessee submitted the following reply as under: "In the above referred notice, your hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 57,61,077/- under Section 143(3) r.w.s. 144C(3) of the Act. As per provision of Section 43B of the Act, the claim of unpaid expenses of VAT/Sales Tax of the impugned amount was found to be not allowable and addition was made. Such plea was also taken by the Ld. DR while making argument in favour of the Revenue and against the deletion of addition made by the Ld. CIT(A). 8. On the contrary, during the course of assessment proceedings, the additional ground was taken by the Ld. AR questioning very validity of reopening of assessment under Section 147 of the Act initiated beyond the period of 4 years from the end of relevant assessment year. 9. It is relevant to mention that for the year under consideration, the return was filed under Section on 30.09.2008. The assessment was completed under Section 143(3) of the Act on 29.11.2011. The prescribed period for reopening under Section 148 of the Act within the period of 4 years from the end of assessment year expires on 31.03.2013. However, a notice under Section 148 of the Act was issued on 27.02.2015 culminating into the order of addition. On the other hand, the law prescribes that in the event reopening under Section 147 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the notice pertains to the A.Y. 2008-09). It may also be mentioned that the assessment was already completed in the appellant's case by an order u/s. 143(3) passed on 29-11-2011. This therefore is a case where action U/s. 147 is sought to be taken beyond the period of 4 years from the end of the assessment year and for which the assessment has already been completed in pursuance of section 143(3) of the Act. It is therefore submitted that in the appellant's case there is necessity for complying with the conditions prescribed under the first proviso to section 147 of the Act. Proviso to section 147 prescribe that no action U/s. 147 can be taken in such a case unless the escapement of income has happened due to failure on the part of the appellant to either make a return or to disclose fully and truly all material facts necessary for the purpose of making assessment. Since the appellant had already furnished the return U/s. 139 (1), it may be required to be seen whether the escapement of income has arisen due to failure on the part of the appellant. 7. Before embarking upon the addition for the purpose of showing that the assessing officer has merely relied upon the doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts 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 section 147. If this condition is not satisfied, the bar would operate and no action under section 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. In our recent decision in Wei Intertrade Private Ltd. [2009] 308 ITR 22 (Delhi) we had agreed with the view taken by the Punjab and Haryana High Court in the case of Dull Chand Singhania [2004] 269 ITR 192 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 Assessing Officer under section 147 beyond the four year period would be wholly with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... extent of Rs. 5,31,615, only this amount was required to be allowed as expenditure. Further, as there is no mention of payment of remaining liability of Rs. 57,61,077/- before filing of return, it was required to be disallowed. In view of the above facts, I have reason to believe that in this case the income chargeable to tax of Rs. 57,61,077/- has escaped assessment for the AY 2008-09 within the meaning of clause (c) of Explanation 2 of section 147 of the Act and therefore this case is a fit case for reassessment.". (iii) On the basis of the above observations it can be clearly seen that the AO has not even examined the applicability of Proviso to section 147 of the Act and has not recorded his satisfaction that the income has escaped assessment due to the failure on the part of the appellant. Further on the perusal of the above observation of the AO, it is crystal clear that the AO has acted on the same material available at the time of original assessment and filed along with the return of income. We invite your kind attention to page no. 65 of the paper book. At the time of regular assessment proceedings the AO had required the appellant to submit the details of dutie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Duties and Taxes A/c. In response to same, the Appellant vide submission dated 25-10-2011 (refer page no. 68) vide point no 9 submitted the ledger copy of the Duties and Taxes A/c. It is only after examining the ledger copies during the course of Assessment the learned AO allowed the same as an expense to the Appellant. We herewith submit a copy of the Assessment Order framed u/s. 143(3) rws 144C(3) of the Act for your kind perusal (Page No. 69 to 72) • On the basis of the above observations your kind office would appreciate that the only thing that the AO relies upon is the assessment record and the return of income furnished by the appellant in the regular assessment proceedings. There is not even a hint that there is any failure on the part of the appellant. It may be mentioned that the AO relies upon the same set of documents which were filed in the original proceedings and no new facts have been either brought on record or sought to be relied upon. • It can be seen from the above submission that merely relying upon the appellant's case records and the documents filed by the appellant for coming to the prima facie belief (at the time of issuance of notice) t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not available on record. It is also not a case where the details were not filed or the AO had lost sight of the issue. In view of the above we submit that the reopening is done based on change of opinion which is not valid as per law. The same also amounts to assuming of revisionary powers which is not as per law. The AO by reopening the case has attempted to review the earlier order passed his predecessor which is not valid as per law. 13. The AO has relied on the same material which were available at the time of original assessment. The assessment is based on re-appreciation of same material as was available at the time of original assessment. Further, the AO has applied fresh mind on the material already available on record and considered by the AO at the time of regular assessment proceedings. We therefore submit that this amounts of change of opinion and therefore not valid as per law. 14. Further, once having considered the claim of the appellant and the AO deciding not to make any addition while framing regular assessment, issuing notice u/s. 148 on the same issue by successor assessing officer amounts to assumption of revisionary powers which is not valid as per law. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made as held by several judicial authorities. Hence, requested to treat the reassessment as invalid. The appellant relied on several decisions in the submissions (supra). The appellant contends that the AO has not mentioned in the notice issued for reopening that the income has escaped assessment due to failure on the part of the appellant. Relying on several decisions, it was contended that the AO has not satisfied the conditions prescribed as per the proviso to sec. 147 of the act and hence the initiation of reassessment itself is invalid. The appellant also contended that the reasons recorded by the AO do not have allegation that the appellant had failed to disclose fully and truly all the material facts necessary for assessment and hence it was contended as to treat the assessment proceedings as invalid. The appellant relied on certain decisions as can be seen in the submissions (supra) for the above proposition. It was contended by the appellant that at the time of original assessment, the AO called for the details of duties and taxes and appellant filed reply to the same. From the reasons recorded, the appellant contended, the AO considered the same material which wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court is reproduced hereunder for better appreciation of the issue. "2. The appeal as arises out of the judgment of the Income Tax Appellate Tribunal In which it was held that the notice of reopening which was issued beyond the period of 4 years from the end of the relevant assessment year, was invalid. We may reproduce the reasons recorded by the Assessing Officer for issuing such a notice:- "(i) It was seen from the records that while computing the deduction u/s 80IA, certain pass through components like Fuel adjustment Charges (FAC), electricity duty, wheeling charges, grid support charges etc. have not been considered for arriving at the market value of the electricity. (ii) For the purpose of claiming deduction u/s 80-IA, excess profit from the generation of electricity has been shown as against '16% return on investment' fixed by the Ministry of Power. (iii) Various expenses like interest, commission, brokerage and corporate overheads were not debited to the separate Profit & Loss A/c. Further, sales and administrative expenditure is not proportionate to the expenditure debited in consolidated P&L A/c to the profit of 80-IA units, which has resulted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment proceedings were initiated. The AO in the original assessment sought the details of duties and taxes and initiated reassessment proceedings on the very same issue without bringing any new material facts on records. Respectfully following the decisions of Hon'ble Supreme Court and the Hon'ble High Court of Gujarat, on which the appellant placed the reliance, it is held that the AO has not satisfied the conditions prescribed as per first proviso to sec. 147 of the Act to initiate reassessment proceedings by issuing notice u/s.148 of the Act, as the original assessment was completed u/s.143(3) and the notice u/s.148 was issued beyond four years from the end of the relevant assessment year. Hence, the reassessment proceedings initiated by the AO held to be invalid. It is also to be noted that as there are no new material facts considered by the AO, the reassessment proceedings held to be on the basis of change of opinion and hence on this count also the reassessment is treated as bad in law. The reliance is also placed on the decisions of Usha International Ltd. (25 taxman.com)(Del.)(FB), to state that reassessment proceedings cannot be initiated on mere change of opinio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing original assessment the Ld. AO asked for the details of duties and taxes and again initiated re-assessment proceeding on the very same issue without bringing any new material facts on records. On this aspect, we further considered the order passed by the Jurisdictional High Court in the case of Micro Inks (P.) Ltd. vs. ACIT, reported in [2017] 79 taxmann.com 153 (Guj) as relied upon by the Ld. AR wherein expenditure incurred towards interest and finance charges on loan was treated as business expenditure after scrutiny, and, since there was no failure on part of the assessee in disclosing true and correct facts, reopening assessment beyond period of four years was held to be unjustified. 16. We have carefully considered all the relevant materials available on record before us including the notice dated 27.02.2015 issued by the Ld. CIT(A), Baroda, wherein no recording of reasons of the fact of failure on the part of the appellant in submitting material facts for the purpose of making assessment truly and fully at the time of original assessment is reflecting for initiation of such re-assessment proceeding. Once, upon considering the documents, the claim of the assessee decided ..... X X X X Extracts X X X X X X X X Extracts X X X X
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