TaxTMI 
TaxTMI 
2015 (11) TMI 1063
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....(3) of the Income Tax Act [Act] was completed for AY. 2002-03 on 02-02-2005 and for the AYs. 2003-04 and 2004-05 on 07-03-2006. The return for AY. 2005-06 was processed u/s. 143(1) of the Act. In all the impugned assessment years, proceedings u/s. 147 were initiated not at one time, but at different periods of time, on the reason that Shri Ramalinga Raju, Ex. Chairman of Satyam Computer Services Ltd., in his letter to Board of Directors with a copy marked to SEBI has stated that books of accounts of that company have been fudged for the past several years and revenues in profits were manipulated by falsification of accounts for the last several years. Solemn statement of Shri Raju was recorded in the Central Prison, Chanchalguda, Hyderabad on 21-02-2009 wherein, he has confirmed the facts and figures are stated in his letter dt. 07-01-2009 addressed to the Board of Directors. Based on such statements, AO sought to reopen assessment of this assessee initially for AY. 2002-03. The notice was issued for AY. 2002-03 on 26-03-2009. Subsequently, proceedings were initiated on 26-03-2010 and 14- 03-2011 and 02-03-2012 for AYs. 2003-04, 2004-05 and 2005-06 respectively. In the consequentia....
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....ervices Ltd., or in the statement that assessee's books of accounts are manipulated or fudged. Further, referring to the disallowance of expenditure, it was submitted that there is no live link between the reasons recorded and the disallowance made in the assessment and that too, after accepting the incomes returned in the original assessments. Ld. Counsel placed before us the copy of the order passed by the ITAT 'A' Bench, Hyderabad in the case of certain group companies to highlight that when a notice was issued beyond a period of four years, it is the duty on the part of the AO to record proper reasons in those cases. AO could not point out any failure on the part of assessee to disclose fully and truly all material and facts necessary for assessment. The statement by Ex. Chairman of Satyam Computer Services Ltd., cannot form basis for reopening the assessments in assessee's case. He also submitted that AO even though reopened the assessment for AY. 2006-07 by issuance of notice u/s. 148, has in fact accepted the assessment vide order dt. 28-02-2014 and no disallowance of expenditure has been made. Ld. Counsel also placed on record the order of the Co-ordinate Be....
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....hat notice u/s. 148 was issued after four years. It is also fact that even though the similar proceedings were initiated for AYs. 2006-07, no addition/ disallowance was made. The main issue to be considered in all these appeals is whether the reopening of assessment on the basis of the so called statement of Shri Ramalinga Raju is warranted. Similar issue was examined in other group companies by the Co-ordinate Bench wherein, the following findings were given. (ITA No. 1233/Hyd/2011 and batch dt. 31-12-2013). "18. To conclude, I. The recording of reasons before the issue of notice under section 148 has absolutely no nexus with the assessment made. II. That the assessment made under sec.143(3) cannot be reopened under sec.148 beyond period of 4 years as there is no failure on the part of the assessee to disclose fully and truly all the material facts in the original assessment itself. III. The Assessing Officer had no tangible material to come to the conclusion that there was escapement of income from the original assessment. IV. The reopening was on wrong foundation of reasoning of the financial implication between the assessee-company a....
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.... which has become final. Therefore reopening the assessment after four years from the end of assessment year can only be done only when there is failure on the part of assessee to disclose fully and truly all material facts of any particulars of income. AO did not allege anything of that sort. Therefore disallowing the expenditure claims and bringing to tax credits which were accepted in the assessment earlier comes within the domain of 'change of opinion'. For the concept of change of opinion, the Supreme Court has held in the case of CIT vs. Kelvinator of India Ltd. (2010) 320 ITR 561 as follows : "The concept of "change of opinion" on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income Tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of "change of opinion" must be treated as an inbuilt test to check the abuse of power. Hence, after April....
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....of opinion" as an in-built test to check abuse of power by the AO. Hence, after 1st April, 1989, AO has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to s. 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in s. 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the AO. We quote hereinbelow the relevant portion of Circular No. 549, dt. 31st Oct., 1989 [(1990) 82 CTR (St) 1], which reads as follows : "7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in s. 147. A number of representations were received against the omission of the words 'reason to believe' from s. 147 and their substitution by ....
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....all material facts, the notice issued by the A.O. is to be struck down as invalid. The Assessing Officer had no tangible material to come to the conclusion that there was escapement of income from the original assessment. The assessment made under sec. 143(3) has been wrongly reopened under sec. 147 beyond period of 4 years, as there is no failure on the part of the assessee to disclose fully and truly all the material facts in the original assessment itself. The reopening was on wrong foundation of reasoning of the financial implication between the assessee-company and M/s. Satyam Computer Services Limited, which was not established in the reassessment to justify the reopening. 11. Thus, there being no nexus or live-link with the reasons recorded and the 'formation of belief' to come to a conclusion that there was escapement of income and also since the assessment has been reopened beyond the period of 4 years when there is no failure on the part of the assessee to fully and truly disclose all material facts in the original assessment itself, and there being 'no tangible material' for the reopening of the assessment, the CIT(A) erred in confirming the orde....