TaxTMI 
TaxTMI 
2013 (8) TMI 365
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....his appeal of Revenue is against the order of CIT(A) quashing the re-assessment proceedings initiated by Assessing Officer u/s. 147 r.w.s. 148 of the Act on the ground that AO was unable find any new material which were not disclosed by the assessee earlier. 3. Briefly stated facts are that assessee is a Public Limited Company engaged in the business of running luxurious hotels of international standards in major cities of India. Originally, assessment was completed u/s. 143(3) of the Act on 26-03-2002. In this assessment order deduction u/s. 80HHD and 80IA of the Act were allowed to the assessee to the extent of Rs.48,98,74,299/- and Rs.3,18,83,094/- respectively. Subsequently, assessment was re-opened by issuing notice u/s. 148 of the Act dated 09-03-2006. The reasons recorded by AO dated 01-03-2006 read as under: "M/s. EIH LTD. ASSESSMENT YEAR 1999-2000 PAN No. AAACE 6898B 01.03.2006 The assessment for the year was originally completed u/s. 143(3) on 26.03.2002 at a total income of Rs.44,43,74,840/-. The assessment was revised u/s. 251/154/143(3) on 21.05.2004 at a total income of Rs.32,98,80,396/-. In the original assessment the deductions u/s. 80HHD of Rs.48,....
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.... on the profits of the same unit." And deduction u/s 80HHD of the Act was allowed at Rs.33,05,30,050/- as against originally allowed u/s. 143(3) of the Act vide dated 26-03-2002 at Rs.48,98,74,299/-. Effectively, the deduction u/s. 80HHD of the Act was withdrawn at Rs.3,12,33,429/-. Aggrieved against re-opening, assessee preferred appeal before CIT(A). 4. CIT(A) quashed the re-opening vide para-2.3 of his order, which is as under:- "2.3 I have considered the submission of Ld. Authorized Representative of the appellant and also considered the orders under sec. 143(3) and 147/143(3) dated 26.03.2002 and 29.12.2006 respectively, the facts of the case and the decisions cited. I have also gone through the relevant provisions of the Act. The facts that have emerged in the instant case are as under:- 1. Claims for deductions under sections, 80HHD and 80-IA were made in the original return of income supported by statutory / relevant documents and computations 2. The claims were examined and granted by the Assessing Officer in the assessment order passed under sec. 143(3) of the Act after scrutiny of the documents filed with the return. 3. The notice under sec. 148 was ....
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....and would constitute grounds for reopening the assessment. It is a case of change of opinion between the two Assessing Officer so far as granting deduction under sec. 80HHD and 80-IA of the Act is concerned. But the question is whether such underassessment was due to the failure on the part of the assessee to disclose fully ad truly all the material facts or not. From the assessment order it will be evident that all the particulars had been disclosed in course of the original assessment. The Authorized Representative had rightly pointed out that in the recorded reasons nothing had been mentioned as to what other material facts the assessee should have disclosed before the Assessing Officer so that there would not have been any escapement of income chargeable to tax. In view of above, I am of the opinion that the appellant had disclosed all primary facts before the Assessing Officer at the time of original assessment and there was no omission or failure to disclose fully and truly all material facts necessary for assessment. Therefore, in view of the above the proceedings initiated under sec. 147 cannot be justified and accordingly treated as invalid and void ab-initio. According....
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....se o sports equipment for mountaineering, trekking, golf, river- rafting and other sports in or on water; (d) Construction of conference or convention centres ; (e) Provision of such new facilities for the growth of Indian tourism as the Central Government may, by notification in the Official Gazette, specify in this behalf; (f) Subscription to equity shares forming part of any eligible issue of capital made by a public company;] Provided that where any of the activities referred to in clauses (a) to [(f)] would result in creation of any asset owned by the assessee outside India, such asset should be created only after obtaining prior approval of the prescribed authority. (5) Where any amount credited to the reserve account under clause (b) of sub- section (1):- (a) Has been utilised for any purpose other than those referred to in sub- section (4), the amount so utilized; or (b) Has not been utilize d in the manner specified in sub-section (4), the amount not so utilized, Shall be deemed to be the profits, - (i) In a case referred to in clause (a) in the year in which the amount was so utilised; or (ii) In a case referred to in clause (b), in the year ....
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.... Ld. CIT-DR stated that there are no details of utilization of foreign exchange earnings and this is sufficient reason for reopening of assessment. The Assessing Officer while recording reason has reasonable belief that there is escapement of income in view of the above stated reasons, which are supported by the argument. 7. On the other hand, Ld. SR-AR, Shri R. N. Bajoria argued on behalf of assessee. He first took us to reason recorded that amount of foreign exchange earnings was transferred to profit and loss account for the year after arriving at net profit out of reserves but the same was utilized for the purpose mentioned in Section 80HHD(4) and then referred to the account of the assessee, wherein utilization has been enclosed at assessee's paper book page-12 i.e., Schedule of depreciation as per Income Tax Rule 1962 for year ended as on 31-03-1999 for the AY 1999-00. He stated that the total addition in building, furniture and fixture, plant and machinery and computers above six months is Rs.20,24,09,711/- and below six months is Rs.18,74,51,612/-. The relevant details are enclosed in this depreciation chart and this sufficient compliance u/s. 80HHD of the Act. Accordi....
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....f the assessee stated that as laid down in Section 80HHD(4)(a) of the Act, the amount utilized for expansion of facilities in existing hotels having exceeded to Rs.37 crores i.e., Rs.34,17,37,961/-, the entire amount allowing in foreign exchange earning reserve amount as on 31-03-1998 was transferred to profit and loss account. According to him, the details of addition to hotel building, plant and machinery, furniture and fixtures in hotel rooms were filed in tax audit report and depreciation chart forming part of account. Ld. AR of the assessee took us to proviso to Section 147 of the Act and the relevant proviso, which reads as under:- "If the AO 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 t....
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....on as per Income Tax Rule 1962 for year ended as on 31-03-1999 for the AY 1999-00, as referred by Ld. Counsel for the assessee. We find from the depreciation chart that total addition in building, furniture and fixture, plant and machinery and computers above six months is Rs.20,24,09,711/- and below six months is Rs.18,74,51,612/-. The relevant details are enclosed in this depreciation chart and this sufficient compliance u/s. 80HHD of the Act. We have gone through the original assessment order and find that these details were available before the Assessing Officer at the time of original assessment proceedings and assessee has filed these details along with return of income and AO has allowed the claim of the assessee after examining all these documents and passed a speaking order. We find from the reasons recorded by AO for initiating re-assessment proceedings, firstly, the deduction u/s. 80HHD and 80-IA of the Act cannot be claimed on the business profit of the same unit i.e., the Oberio Hotel, Bangalore and secondly, as a result of transfer of Rs.37 crores from the reserve to profit and loss account there cannot be under assessment of income to the extent of Rs.34,70,37,961/-.....
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....l facts necessary for that AY. Even there is no dispute that there is assessment in this case was made u/s. 143(3) of the Act and the only question is, therefore whether the assessee at the time of original assessment disclosed fully and truly all material facts necessary for its assessment for the AY in question. The reasons recorded have already been extracted. There is no failure on the part of the assessee as is evident from the recorded reasons that it is not the case of the AO that any income escaped assessment on account of the omission or the failure on the part of the assessee to disclose fully and truly all material facts necessary for the AY 1999-00. The tenor of the reasons recorded indicates that the AO, who made the original assessment, erred in allowing certain deductions, which according to his successor in office, resulted in under-assessment and would constitute grounds for reopening the assessment. But the question is whether such under-assessment was due to failure on the part of the assessee to disclose fully and truly all material facts or not. From assessment order, it will be evident that all particulars had been shown and / or disclosed by assessee in the c....