TaxTMI 
TaxTMI 
2012 (12) TMI 118
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....ull" facts in the case and ITO would have jurisdiction to reopen concluded assessment in such a case. Reliance is placed on the decision of the Hon'ble Supreme Court in Phool Chand Bajrang Lal vs. ITO (1993) 203 ITR 456 (SC); Bawa Abhai Singh vs. DCIT 253 ITR 83 (Del); 142 CTE (Del) 272 & 225 ITR 496; Ram Prasad vs. ITO (1995) 82 Taxman 199 (All); ESS ESS Kay Engg. Co. (P) Limited vs. CIT 124 Taxman 481 (SC). 2. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any grounds of appeal at any time before or during the hearing of this appeal." 3. All these appeals were argued together by both the parties hence for the sake of convenience all of them are being disposed of by this single order. 4. In all the four appeals ld. CIT(A) has struck down the validity of reassessment proceeding on the basis of "change of opinion". In ITA No. 488/Del/2011 the validity of reassessment proceeding has also been struck down on the basis of applicability of proviso to sec. 147 as it is found that there was no failure on the part of the assessee to disclose fully and truly all material facts required to assess income. 5. For ITA No.488/Del/2011, to co....
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....sment order framed u/s 143(3) and subsequent issue of notice u/s 148 is based on "change of opinion". It was claimed that the initiation of reassessment proceedings is also barred by limitation as the same is after the expiry of four years from the end of the relevant assessment year and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. The AO rejected the assessee's objection for reopening of the assessment vide order dated 27.11.2009 and reassessment order was passed on 09.12.2009. 7. Before CIT(A) it was claimed that Assessing Officer, vide questionnaire issued on 16.11.2005, had raised the following query: "In the Audit Report furnished along with the return it is stated that the service line deposits received from the consumers are accounted for as income over three years period. Please explain why the same should not be accounted in the current year itself since the assessee company has received the receipts in the current year." 8. It is found by ld. CIT(A) that assessee had filed a reply dated 19.12.2005, whereby a note on the service line deposits was filed and, therefore, she held t....
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....posits a sum of Rs. 3.41 crores, as 1/3rd of the total amount, was transferred to P&L Account as revenue receipt and a balance sum of Rs. 6.82 crores has been shown as liability. The whole of the security line deposits are in fact not a liability of the company but are revenue receipts accrued/received during the running of business operations of the company and hence are taxable in its hands. Similar type of addition was also made in the A.Y. 2005-06 the AO held that; * The service line deposits are not in the nature of deposits since t hey are non-refundable. The fact also admitted by the assessee com. * Once these receipts have been accepted as nonrefundable receipts they are no more a liability on the company. Hence the treatment given by the assessee to service line deposit by treating them as loan funds and accordingly as liabilities is altogether incorrect. * The fact that the assessee company itself treated 1/3rd of these receipts as revenue receipts, impliedly, goes on to show that the company believe that they are of revenue nature. In view of the facts narrated above, I have reason to believe that income to the tune of Rs. 6.82 crores has escaped assessment f....
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....t, the same should be the treatment for tax purpose, i.e. Depreciation should be allowed against the net fixed asset cost (i.e. net of service line deposit). 3. In the cases of non electrified areas it takes a lot of time spreading from 2 to 3 years in its electrification. After putting the assets into use, all the expenses incurred on electrification of the areas are capitalized and depreciation @ 25% per annum is being claimed in income tax. Accordingly, fixed assets (capitalized depending upon the finalization of electrification of areas) are being fully depreciated/ claimed as revenue expenditure by way of depreciation in the next 4 to 5 years. 4. In view of the above method, service line deposits received is not at all the income of the assessee company but required to be deducted from the concerned fixed assets and then claimed as depreciation on the net capitalization @ 25%. However, in the absence of one to one linking of service line deposits received from the customers and the expenses incurred there against for electrifying the concerned areas, service line deposits which are in the nature of capital receipt are being offered as revenue expenditure over 3 years per....
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....ity for higher depreciation of 80% as envisaged in the clause 8(ix) of plant and machinery depreciation schedule of IT Rules. Since the facts are similar in this assessment year also, hence I have reason to believe that the assessee has claimed higher depreciation or energy meters to which he was not entitled. This excess claim is to the tune of Rs. 91471039/-. That during the year the assessee company received a sum of Rs. 161600000/- from customers as Security Line Deposits which has been reflected in the liability side of the B/S under the head "Loan & Advances". Out of this security deposits a sum of Rs. 65200000/-, as 1/3rd of the total amount, was transferred to P&L account as revenue receipt and a balance sum of Rs. 964000000/- has been shown as liability. The whole or the security line deposits are in fact not a liability of the company but are revenue receipts accrued/received during the running of business operations of the company and hence are taxable in its hands. Similar type of addition also made in the A.Y. 2005-06. In view of the facts narrated above, I have reason to believe that income to the tune of rupees 187871039/- has escaped assessment for the assessm....
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....of the paper book. The reasons are identical as are in ITA No. 489 and for the sake of brevity the same are not being reproduced. The escapement which has been pointed out in the reasons is a sum of Rs. 37,07,38,484/- on account of difference in depreciation on energy meters and a sum of Rs. 15,73,00,000/- on account of security line deposits and total escaped income is computed in the reasons at Rs. 55,86,09,523/-. Copies of queries raised by the AO vide letter dated 09.12.2006 is placed at pages 140, 141 of the paper book. The query relating to service line deposit is at sl. No. 4 which read as under: - 4. "Please give the logic and the reason for accounting the "Service line deposits" as "income" over a period of three years." 22. Query relating to depreciation on energy meter is at Sl. No. 8 which read as under: - 8. "Please furnish the relevant documentary proof for claiming depreciation on "Energy Meters" @ 80%." 23. The copy of the reply to the above queries was furnished by the letter dated 18.11.2006 (copy is filed at pages 38 & 39 of the paper book). The reply regarding service line deposits was given vide Sl. No. 9 which read as under: - 9. "Note on the lo....
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....iled at pages 24 to 26 of the paper book which is almost the same as was given in respect of other years. 29. Thus, it is clear from the above facts that queries on the issues on which reassessment proceedings have been initiated were raised during the course of original assessment proceedings and the replies were also given by the assessee with regard to those queries. 30. Ld. DR after narrating the above facts pleaded that ld. CIT(A) while quashing the initiation of reassessment proceedings has failed to consider Explanation 1 of sec. 147, according to which mere production before the AO of the account books or other evidence from which material evidence could with due diligence have been discovered will not necessarily amount to disclosure within the meaning of proviso to sec.147. Therefore, he pleaded that ld. CIT(A) has wrongly applied the proviso to sec. 147. Mere raising of a query and reply thereof does not substantiate the fact that there was no failure on the part of the assessee to disclose fully and truly all material facts necessarily for its assessment. He submitted that there is absolutely no discussion whatsoever in the original assessment order and thus, it c....
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....e extent of Rs. 1,13,53,344/- and it was held by Hon'ble High Court that in respect of sundry creditors regarding which no details or confirmations were filed the reopening was valid. iii) M/s Oriental Insurance Co. Ltd. vs. ACIT ITA No. 3910/Del/2007 order at 22nd July, 2011: To contend that in a case when an assessment order was passed u/s 143(3) a general presumption cannot be raised that such an order was passed after an application of mind and in absence of any discussion the case will not fall within the scope of "change of opinion" as no opinion whatsoever has been formed by the AO on that issue. iv) M/s Ankita Deposits & Advances (P) Ltd. vs. CIT (2010) 193 Taxman 36 (HP) judgment dt. 18th June, 2011: In this case, it is held that power of the AO to reopen the assessment are very wide. The term "reason to believe" does not mean the mere "change of opinion". In a case where no opinion has been expressed, then whatever be the reason, as long as they prima-facie satisfy the conscience of the court, the court would not interfere with the issuance of a notice. It was found that no reasoned findings were given on the return filed by the assessee for the three previou....
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....il as if the said concept is removed, it would vest arbitrary powers in the Assessing Officer. Reference was made to the decision of Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India 320 ITR 561. It was submitted that in the said case the Hon'ble Supreme Court had also decided departmental appeal in the case of CIT vs. Eicher Ltd. 294 ITR 310 (Del) and the departmental appeal was dismissed which means that the decision of Hon'ble Delhi High Court in the case of CIT vs. Eicher Ltd. was upheld. He submitted that in the case of CIT vs. Eicher Ltd. it was held that if the entire material was placed by the assessee before the AO at the time when the original assessment was made and the AO applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did not express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment. The assessee has no control over the way an assessment order is drafted. Generally, issues which are accepted by the AO do not find mentioned in the assessment order and only such points are taken note on which the assessee's explanations are reject....
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....scope of Explanation 1 to sec. 147 and it has been held that in a case where the AO did not examine and gone into the question that whether or not provisions of sec. 2(22)(e) were attracted to the assessee's case can be a valid ground for initiation of reassessment proceedings and it was found that AO at the time of original assessment proceedings had gone into the question of loans and advances from the sister concern. Figures and details were furnished and given along with an annexure which had particulars like opening and closing balance sheet as well as the entries/transactions during the year under the question. Account of the Atma Ram Builders P. Ltd. was enclosed. It was the case of the revenue that AO had not examined and gone into the question whether or not provisions of sec. 2(22)(e) of the Act were attracted to the present case, therefore, reassessment proceedings are validly initiated. It was found by the Hon'ble High Court that sec. 2(22)(e) of the Act was not mentioned in the order sheet or in the assessment order but that fact does not help the case of the revenue for the reason that assessee cannot be faulted. If the AO had failed to apply legal provisions/sections....
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....f the receipt as revenue as 1/3rd of the receipts was declared by the assessee as revenue receipt and no reason was submitted that why 2/3rd portion of the receipt was left to be considered as revenue receipt. The subsequent decision of Hon'ble Supreme Court in the case of Honda Siel should be applied. 36. We have carefully considered the rival submissions in the light of material placed before us. It is the case of the revenue that though the queries were raised by the AO in support of the issues which are subject matter of reassessment and replies were also given by the assessee but there is a complete absence of discussion of these issues in the assessment order which means that the AO did not apply his mind on these issues, therefore, it is not the case of "change of opinion". The non application of mind by the AO on these issues give an authority to the AO to reopen the assessment and for raising such contention reliance has been placed on several decisions which have been discussed in the earlier part of this order. Thus, it is admitted fact that during the course of original assessment proceedings these issues were raised by the AO and replies were given by the assessee a....
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.... was taken by him or his successor on the same facts, it clearly amounts to a change of opinion. This cannot form the basis for permitting the AO or his successor to reopen the assessment of the assessee. In sum and substance, this was the decision rendered by the Tribunal and we do not find any fault in the view taken. Consequently, we are of the view that since the case is one of a mere change of opinion that does not justify the AO's reopening the assessment of the assessee." 37. Therefore, according to the decision of jurisdiction High Court mandate of law is that where there is a material existing on record according to which the issues were raised by the revenue and replies were given by the assessee then it cannot be presumed that AO did not apply his mind and even if there is lapse on the part of the AO that position cannot go to the disadvantage to the assessee. This decision of Hon'ble Delhi High Court has been confirmed by the Hon'ble Supreme Court in the case of ( i) CIT vs. Kelvinator of India Ltd. & (ii) CIT vs. Eicher Ltd. 320 ITR 561. 38. Now, it is the case of the revenue that later on legal position has been changed by the decision of Hon'ble Delhi High C....