TaxTMI 
TaxTMI 
2012 (12) TMI 12
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....sessment. 2.2 The ld. CIT(A) has erred in ignoring that goodwill not being a tangible asset as per section 32 depreciation on it is not allowable and yet the assessee has claimed the same. 3. The appellant craves leave to add, to alter, or amend any grounds of the appeal raised above at the time of hearing." 2. Facts, in brief, as per relevant orders are that assessment in this case was completed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as the Act) vide order dated 27th January, 2006, determining loss of Rs.2,20,01,824/- in pursuance to return filed on 28.11.2003, declaring loss of Rs.2,93,90,196/-. Inter alia, claim for royalty payment of Rs.34,28,372/- and deferred revenue expenditure of Rs.39,60,000/- was disallowed. On appeal, the ld. CIT(A),vide order dated 21.8.2008 upheld the disallowance of royalty while allowing deferred revenue expenses. Meanwhile, the aforesaid assessment was reopened u/s 147 of the Act with the service of a notice dated 22nd July, 2008 u/s 148 of the Act, after recording the following reasons in writing:- "On examination of the case, it is revealed that the assessment was completed in scrutiny in January, 2006 on total lo....
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....four years from the end of the relevant assessment year i.e. 2003-04. Therefore, the proviso to section 147 of the Act would be applicable to the instant case. However, the question which still remains to be seen is whether the assessee made a full and true disclosure or not. It is well settled that such facts which could have been discovered by the Assessing Officer but were not discovered at the time of original assessment, will not constitute a new information. Where no new material has come on record nor any new information has been received, it would merely be a case of fresh application of mind by the Assessing Officer to the same set of facts and in such a situation, it would be a case of mere change of opinion which does not provide justification to the Assessing Officer to initiate proceedings u/s 147 of the Act. In the light of these principles, it is to be seen as to whether in the present case, any new material had come on record after completion of assessment proceedings or it is a case of mere change of opinion. The perusal of the reasons recorded before issuing notice u/s 148 on 22.7.2008 would show that undoubtedly the reasons have been recorded on the basis of peru....
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..... The power of reassessment is different from the power of review. The Assessing Officer has been given the power to reassess u/s 147 upon certain conditions being satisfied. The Assessing Officer does not have the power of review. If a change of opinion were to be permitted as a ground for reassessment then it would amount to granting a licence to the Assessing Officer to "review" his decisions, which power he does not have." 3.3 Thus, in view of the aforementioned judgments and as well as the judgments relied upon by the appellant, clear position of law and facts of the case, I am of the considered view that there was no ground to believe that there was any escapement of income. It is also observed that the Assessing Officer has not shown anywhere in the reasons that how and in what manner the assessee company failed in disclosing all material facts fully and truly. In these circumstances, it cannot be said that there was any failure on the part of the assessee to disclose fully and truly all material facts and the basic requirement in invoking the provisions of section 147 of the Act is clearly not satisfied. Hence, the Assessing Officer could not have assumed valid ju....
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.... was deleted by the learned CIT(A) in his order dated 21st August, 2008. The appeal filed by the Revenue was dismissed by the ITAT in their order dated 6th July, 2009. The said order of the ITAT has also been upheld by the Hon'ble High Court in their order dated 30.3.2012 in I.T.A. no.1152/D/2010. 7. We have heard both the parties and gone through the facts of the case as also the decisions relied upon by both the sides. As is apparent from the facts narrated in the impugned order and the reasons recorded by the AO before reopening the assessment, the assessment for the year under consideration in this case was initially completed on 27.1.2006 u/s 143(3) of the Act, determining loss of Rs.2,20,01,824/- During the course of original assessment proceedings , the AO raised a specific query with regard to goodwill vide ordersheet entry dated 29.11.2005 and the assessee replied vide letter dated 21.12.2005[pg. 26 of PB]. Thereafter, the said assessment has been reopened after the expiry of four years from the end of the relevant assessment year with the issue of a notice u/s 148 of the Act on 22.7.2008 on the ground that the assessee was not entitled to depreciation on goodwill even ....
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....existence of only the first condition suffices. In other words if the Assessing Officer, for whatever reason, has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment. However, both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. Since in the case under consideration, notice u/s 148 had been issued only on 22.7.2008 that is after four years from the end of relevant assessment year, apparently, the issue that arises for our consideration is as to whether there was any failure on the part of the assessee to disclose fully and truly all material facts? No such failure is either evident from the assessment order or the reasons recorded by the AO nor has been pointed out before us by the ld. DR. Indisputably, the AO chose to reopen the assessment completed u/s 143(3) of the Act after recording reasons, wherein no such failure as has been envisaged in proviso to sec. 147 of the Act, has been attributed to the assessee. In Rakesh Aggarwal v. Asst. CIT [1997] 225 ITR 496, Hon'ble Delhi High Court held that in view of the proviso to section 147, notice for reassessment under section 148 woul....
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.... "In the light of the fact that the assessments have been sought to be reopened after a period of four years from the end of each of the assessment years in question, the provisions of section 147 of the Act mandate that the Assessing Officer shall be vested with the jurisdiction to initiate reassessment proceedings only in case there is any omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for the year under consideration and such failure should result in income chargeable to tax escaping assessment. On a plain reading of the aforesaid provisions and the reasons recorded, it becomes clear that there cannot be ascribed any failure or omission to the petitioner so as to vest the Assessing Officer with jurisdiction to reopen the assessments which were already finalised. In the circumstances, for the assessment years 1986-87, 1987-88 and 1988-89 in the light of the fact that the initiation by issuance of impugned notices is beyond the period of four years and the prerequisite conditions stipulated by section 147 of the Act are not fulfilled, there is no case made out for upholding the proposed reassessment. The....
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....not valid. 7.7 In CIT & Another Vs. Foramer France, 264 ITR 566 (SC),Hon'ble Apex Court upheld the order of the Hon'ble Delhi High Court in concluding that when there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment, the proviso to the new section 147 of the Act squarely applied, and the impugned notices were barred by limitation mentioned in the proviso. 7.8 In Supreme Travels (P) Ltd. vs. DCIT, 182 Taxman 216(Bom.), Hon'ble Bombay High Court held that the Assessing Officer can reopen the assessment only if the ingredients of section 147 are fulfilled. 7.9 In Gujarat Carbon and Industrial Ltd. vs. Jt. CIT [2008] 307 ITR 271 (Guj), Hon'ble High Court in the absence of any failure on part of the assessee to fully and truly disclose all material facts relevant for the assessment of the assessment year in question, concluded that the impugned notice under s. 148 issued beyond a period of four years from the end of the relevant assessment year, is required to be quashed. 7.10 Likewise in Gujrat Fluorochemicals Ltd. vs. DCIT [2009] 319 ITR 282 (Guj), Hon'ble High Court....
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....vs. ITO,308 ITR 22(Del.) and in a recent decision dated 11.11.2011 in ITA no.87 /2010 in Atma Ram Properties Pvt. Ltd. vs. DCIT by the Hon'ble jurisdictional High Court. 7.15 In Haryana Acrylic Manufacturing Co., 308 ITR 38 (Del.),, Hon'ble jurisdictional High Court, inter alia, concluded as under: "20. In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen 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 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 cont....
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....sions of sec. 14A of the Act. But such are not the facts in the instant case before us, since no such failure as is envisaged under proviso to sec. 147 of the Act, has been alleged in the reasons or even ascribed to the assessee before us. The ld. DR did not demonstrate before us as to how these decisions are applicable in the facts and circumstances of the case before us. After perusing these decisions and with respect, we are of the opinion that the decisions relied upon by the ld. DR were rendered on the facts of their own and ratio laid down in these decisions is not germane to the issue before us. Therefore, we are of the opinion that the reliance by the ld. DR on these decisions is totally misplaced.. 7.161 As regards decision in Madhya Bharat Energy Corporation Ltd.(supra) relied upon by the ld. DR, in that case, the reopening of the assessment u/s 148 was challenged on the ground that the assessment could not be reopened under Section 148 of the Act as the assessee had given detailed note with the original return as to why interest income was not to be taxed, but was to be adjusted against the project cost, and so it cannot be reopened merely on account of change of opin....
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....k. These facts have not been disputed before us. In this context , we find that Hon'ble Apex Court while affirming the decision of Hon'ble Delhi High Court in Kelvinator of India Ltd.(supra) and going through the changes made to section 147 of the Act observed as under: "....., we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April, 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to reopen is much wider. 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 reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual differenc....
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....order as to costs." 7.19 The aforesaid observations of the Hon'ble Apex Court when viewed in the light of facts and circumstances in the case before us, lead us to an inescapable conclusion that the AO reopened the assessment in relation to depreciation on goodwill merely on the basis of change of opinion and no 'tangible material' was brought on record before initiating action u/s 147 of the Act. 7.20 Moreover, Hon'ble Madras High Court in their decision dated 3.8.201 in CIT vs. M/s Baer Shoes (India) Pvt. Ltd, In ITA no.706 of 2010,following the view taken by Hon'ble Gujrat High Court in Austin Engineering Co. Ltd. vs. JCIT,312 ITR 70,concluded on the issue of reopening of assessment on the basis of subsequent decision of Hon'ble Supreme Court, in the following terms: "4. We are not able to countenance the said submission made by the learned standing counsel for the appellant. In the present case on hand, the assessee at the time of filing return for the assessment year 1999-2000 has disclosed all the materials before the Assessing Officer and claimed deduction under Section 80HHC. Even before the earlier proceedings initiated under Section 147, it is not the case of the....