TaxTMI 
TaxTMI 
2014 (4) TMI 862
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.... the fact that the Petitioner had failed to disclose fully and truly all material facts necessary for its assessment. In the present case, there was not even an allegation in the reasons recorded for reopening the assessment, that the Petitioner had failed to disclose any facts as required under the first proviso to section 147 of the Act and hence the initiation of re-assessment proceedings was bad in law. Secondly, the original assessment order was passed under section 143(3) after the Assessing Officer had considered all the relevant aspects of the matter. Hence, the purported reopening of the assessment was based merely on a "change of opinion" which was impermissible in law. 4. The brief facts are as follows: - (a) The Petitioner is incorporated under the "The National Bank of Agriculture and Rural Development Bank Act, 1981" (NABARD Act) for providing and regulating credit and other facilities for the promotion and development of agriculture and small scale industries with a view to promoting integrated rural development, and for matters connected therewith and/or incidental thereto. (b) The Petitioner filed its return of income for the A.Y. 2005 -2006 on 31st Oct....
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....e and which fulfills the conditions as may be prescribed; (ii) an undertaking referred to in clause (ii) or clause (iii) or clause (iv) of sub-section (4) of section 80IA; and (iii) an undertaking referred to in sub-section (10) of section 80IB; (e) "longterm finance" means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with interest thereof during a period of not less than five years; It is not in dispute that the Petitioner is entitled to claim a deduction under this section as it is a "financial corporation" as defined therein. (d) The return of income of the Petitioner for the A.Y. 2005 -2006 was selected for scrutiny assessment under section 143 (3) of the Act. During the course of this scrutiny assessment, Respondent No. 1 vide its detailed questionnaire dated 10th February, 2006 specifically enquired about the Petitioner's claim for deduction under section 36 (1) (viii) of the Act. In reply to the queries of the 1st Respondent, the Petitioner by it's letter dated 6th March 2006 gave a detailed explanation to the various questions raised by Respondent No. 1. At paragraph 10 of the said letter, the P....
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....6(1) (viii) of the IT Act, in my view the amount of Rs.25,31,29,910/- has escaped assessment. Based on above I have reason to believe that income of Rs.25,31,29,910/- has escaped assessment in the hands of assessee for AY 2005-06 within the meaning of section 147 of the IT Act. Issue notice u/s 148 of the IT Act." It is pertinent to note that there is not even an allegation in the said reasons that the Petitioner had failed to disclose fully and truly any material fact, as required under the first proviso to section 147 of the Act. (g) On receipt of the said notice and the reasons, the Petitioner filed its return of income under protest on 17th April 2012. Thereafter, by their letter dated 6th November 2012, the Petitioner raised detailed objections to the validity of the reopening of the assessment for the A.Y. 2005 -2006. The three basic objections raised were:- (i) that the reasons recorded for reopening the assessment did not in any manner bring out or demonstrate or even suggest or allege that there had been any failure on the part of the Petitioner to disclose any material fact; (ii) that in fact, there had been no failure on the part of the Petitioner to di....
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.... 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. 7. In the present case, admittedly a scrutiny assessment was done under section 143 (3) of the Act for the A.Y. 2005-2006 and the proposed reassessment is sought to be taken after the expiry of four years from the end of the relevant assessment year. In such a scenario, the first proviso to section 147 of the Act was attracted. Thus, no action for initiation of reassessment proceedings for A.Y. 2005 -2006 could be initiated unless the income chargeable to tax had escaped assessment by reason of the failure on the part of the Petitioner to disclose fully and truly all material facts. As rightly submitted by Mr Dastur, there was not even an allegation in the reasons recorded for initiating the reassessment proceedings, that there was any failure on the part of the Petitioner to disclose any material fact, let alone the details thereof. 8. It is now well settled that the reasons which are recorded by the assessing officer for reopening an assessment, are the only reasons which can be considered. No substitution or deletion is permissible. No additions can be made to tho....
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....r passed on 30th November 2007. 11. In its return of income filed on 31st October 2005 the Petitioner claimed a deduction of Rs.544,63,94,200/- under section 36 (1) (viii) of the Act. The said deduction was claimed on the basis of a detailed computation in a tabular format giving details of the longterm and shortterm finance. It is important to note that the computation was clearly stated to be on the "interest received". The phrase therefore referred to the gross interest. It is not in dispute that the claim for deduction was only restricted to the longterm finance. In the queries raised and material sought on 10th February 2006, Respondent No. 1 call upon the Petitioner to furnish the details of the computation for the deductions claimed under section 36 (1) (viii) of the Act. In response thereto, the Petitioner furnished all the details and once again gave the computation that was submitted along with the return of income filed on 31st October 2005. The attention of Respondent No. 1 was specifically drawn to the said computation. Thereafter, Respondent No. 1 passed the assessment order on 30th November 2007 under section 143 (3) wherein he did not disallow the deduction claim....
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....ablishment expenses had been apportioned to the gross interest received. After taking into consideration the explanations given by the Petitioner along with supporting documents, Respondent No. 1 did not think it fit to disallow the said deduction, claimed under section 36 (1) (viii). We have to presume, that having raised a specific query with reference to the said deduction, Respondent No.1 applied his mind to the issue and thereafter passed the assessment order dated 30th November 2007. In such a scenario, it would be unfair to the Assessing Officer, who made the assessment order, to speculate that he was either incapable of applying, or did not apply his mind to the very aspects in respect of which he sought details. 15. We therefore find, that there was no failure on the part of the Petitioner to disclose fully and truly all material facts as contemplated under the 1st proviso to section 147 of the Act. On this ground also, the Petitioner is entitled to succeed in this writ petition. 16. We also find force in the argument of Mr Dastur that the initiation of reassessment proceedings under section 147 of the Act was only based on a "change of opinion" which is impermissibl....