TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 1306
X X X X Extracts X X X X
X X X X Extracts X X X X
....the appeal by 16 days. The learned Counsel has drawn our attention on the petition for condonation of delay in filing of appeal and affidavit filed along with that. 3. We have heard both the parties on this issue. No serious objection has been raised by the learned Departmental Representative for granting condonation of delay in filing of appeal by the assessee. It is further noted by us that the assessee has been able to demonstrate sufficient cause in explaining the delay of 16 days. Therefore, in the interest of justice, relying upon the judgment of the Hon'ble Supreme Court in the case of Collector, Land Acquisition v. Mst.Katiji & Ors. [(1987) 167 ITR 471 (SC)], we find it appropriate to admit this appeal, and therefore, the appeal is admitted for adjudication on its merits. 4. In Ground No.1, the assessee-company has challenged the reopening of the assessment. It has been argued that in this case original assessment was done u/s 143(3) of the Income-tax Act, 1961 (in short "the Act"). Subsequently, notice has been issued u/s 148, after the expiry of four years from the end of the assessment year. It is submitted that there is no allegation in the reasons about any failure o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d depreciation of Rs. 63,64,593. Subsequently, the Assessing Officer issued notice u/s 148 dated 31.3.2011. In response to the same, the assessee-company filed its return of income and asked for the `Reasons' for reopening of the assessment, which was furnished by the AO to the assessee. For the sake of ready reference these reasons are reproduced here under:- "In this case, the assessee filed Return of Income for the A.Y. 2005-06 on 28/10/2005, declaring total income at Rs. 1811/-. Assessment u/s. 143(3) was completed on 28/12/2007, determining total income at NIL after set off of brought forward unabsorbed business losses and depreciation. I. Irregular allowance of Depreciation : It is seen from depreciation statement as per Income Tax Act, the assessee has claimed depreciation of Rs. 76,83,991/- on 'Time Sharing Unit Property'. The property is on lease for a period of 99 years and also the right to property is acquired prior to 01/04/1998, as such, the assessee is not eligible for depreciation either under the category of intangible assets or other. Omission to disallow the same has resulted into under assessment of Rs. 76,83,991/-. II. Incorrect computation of taxable in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....8,467). Alternatively, it is seent that exceptional items (net) of Rs. 6,09,98,126/- in the Profit & Loss Account is arrived as follows: The exceptional items of Rs. 6,09,98,126/- is arrived after reducing old sundry debtors and loans & advances (net) of Rs. 165760865/- from the liabilities which are written back on account of settlement /amnesty etc. As the expenses debited on account of loans & advances and sundry debtors are either capital or inadmissible expenditure, the same is required to be disallowed. Omission to disallow the same has resulted into under assessment of R.16,57,60,865/- In view of the above, I have reasons to believe that, on the above two issues, the income amounting to Rs. 17,34,44,856/- (Rs.76,83,991 + 16,57,60,865), chargeable to tax, has escapement within the meaning of section 147 of the I.T. Act. Therefore, the case is re-opened by issue of notice u/s. 148 of the I.T. Act, after obtaining the prior approval from the Hon'ble CIT - 8, Mumbai vide her office letter dated 31.03.2011. Issue notice u/s. 148 of the I.T.Act, 1961." 6.1 The assessee has challenged the aforesaid `Reasons' on two counts, i.e., One - there is no fresh material coming into th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... judgments coming from various courts that availability of fresh tangible material in the possession of AO at the time of recording of impugned reasons is a sine qua none, before the AO can record reasons for reopening of the case. We begin with the judgment of Hon'ble Supreme Court in the case of CIT vs. Kelvinator India Ltd. 320 ITR 561 (SC), laying down that for reopening of the assessment, the AO should have in its possession 'tangible material'. The term 'tangible material' has been understood and explained by various courts subsequently. There has been unanimity of the courts on this issue that in absence of fresh material indicating escaped income, the AO cannot assume jurisdiction to reopen already concluded assessment. 6.8. Recently, Hon'ble Delhi High Court in the case of Pr. CIT vs Tupperware India Pvt. Ltd., in its order dt 10-8-15 (ITA no 415/2015 ) got an occasion to analyse latest position of law on this issue. After discussing many judgments on this issue, it was held that even in the case of original assessment order having been passed u/s 143(1), it is mandatory for the AO to have in its possession, fresh tangible material before reopening of the case. 6.9 In th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Tribunal, in the circumstances of this case was justified in concluding that re-assessment proceedings themselves were not in accordance with law and consequently dismissing the Revenue's appeal. No question of law arises for consideration." 6.13. In the case of CIT vs. Shri Atul Kumar Swami in ITA No. 112/2014 dated 18-03-2014 reported at 52 Taxmann.com 47, Hon'ble Delhi High Court observed as under: ".....Reopening of assessment is valid if it is based on tangible material to justify conclusion that there was escapement of income-In instant case note forming part of return clearly mentioned and described nature of the receipt under a non-compete agreement- Reasons for issuance of notice u/s 147 nowhere mentioned that revenue came up with any other fresh material warranting reopening of assessment-Mere conclusion of proceedings u/s 143(1) ipso facto does not bring invocation of powers for reopening assessment-Reopening of assessment was unjustified-Revenue's appeal dismissed." 6.14. Further reliance can be placed on the detailed judgment in the case of Madhukar Khosla vs. ACIT 367 ITR 165 (Delhi), wherein it has been held that the reopening is not permitted under the law ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Telco Dadajee Dhackjee Ltd vs DCIT ( ITA No 4613/Mumbai/2013 dt 12-5-2010), in support of this view. 6.18. Similar view has been expressed by Hon'ble Delhi Bench of ITAT in the case of M/s Nexgen School of Business Vs. Deputy Commissioner of Income Tax, [ITA No. 5609/DEL/2010] holding that the Assessing Officer was not justified to initiate the reopening proceedings in absence of any new information or material on record since the date of filling and processing of the return of income. 6.19. In the present case, it has already been discussed that admitted facts are that there was no fresh material coming into the possession of the AO, at the time of recording of the 'Reasons'. These facts have not been rebutted by Ld DR also. The case law relied upon by Ld DR in the case of Dr. Amin's Pathology, supra is not applicable on the issue being decided here. The issue that in absence of any fresh material, whether AO can proceed to record Reasons, was not before Hon'ble High Court, therefore Hon'ble High court had decided the issue of Change of opinion in that case. In the case before us, as discussed above, we are not going into that issue. In our considered opinion, at this stage, we ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ut the omission or mistake committed by the AO himself. In our considered view, the law does not give powers to the AO to reopen an assessment carried out u/s 143(3) after the expiry of four years unless the AO is able to demonstrate that there was failure on the part of the assessee in disclosure of material facts. In this regard, we feel it appropriate to reproduce hereunder the first proviso to section 147 of the Act:- "Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year:" It may be noted that the reading of the `Reasons', as reproduced in earlier part of this order, that neither there is any allegation of `failure and d....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ourt, upholding the view that no reopening can be done after the expiry of four years unless there was failure on the part of the assessee in disclosure of material facts. It is noted that the present case stands on a better footing. 7.3 Before we part with, it is found appropriate to refer to a recent judgment of Hon'ble Delhi High Court in the case of Pr.CIT v. Samcor Glass Ltd. (ITA No.768/2015 dated 12.10.2015), wherein Hon'ble High Court came down heavily upon the Income Tax Department for reopening of the assessments of the tax payers, in a casual manner and without complying with mandatory conditions of law. Relevant portion of the judgment is reproduced below:- "4. Although the Assessees in both the appeals are different, the issue involved in both cases is similar, i.e., whether the reopening of the assessment under Section 147/148 of the Act is valid? 5. Apart from the fact that the impugned order of the ITAT suffers from no legal infirmity, the court is of the view that on the face of it, the reasons for reopening of the assessment in both the cases did not satisfy the basic requirement of the law, in at least in two aspects. One was that the reopening was of assessm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....us, in our considered view, this issue is squarely covered in favour of the assessee by the judgments of the Hon'ble jurisdictional High Court and Hon'ble Supreme Court of India, and therefore, reopening is held to be invalid on this ground as well. 7.5 Thus, ground with regard to reopening is allowed and reassessment order is quashed, and therefore, other grounds with respect to merits and other legal issues are not being adjudicated. ITA No.5859/Mum/2012 : Asst.Year 2006-2007 8. In this appeal, there is delay of 16 days in filing of appeal by the assessee, similar to that in A.Y. 2005-06. We follow our order for A.Y.2005-06, as per our observations given in para 2 and 3 of this order, and condone the delay, and admit this appeal for adjudication, after taking consent of the parties. 8.1 In this appeal also, the learned Counsel has challenged validity of reopening of the assessment. In this case also the facts are similar. The original assessment proceedings was done u/s 143(3) vide order dated 30.12.2008, subsequently, a notice was issued u/s 148 dated 31.03.2011, i.e., within four years from the expiry of the relevant assessment year. Thus, the only difference is that this ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reciation on time sharing unit property, which has been raised in the aforesaid `Reasons', came up for consideration before the AO in assessment year 2003-2004, wherein it was allowed by the Assessing Officer, after taking proper details and documentary evidences from the assessee. Our attention has been drawn on various pages of the paper book, wherein the AO had raised query on this very issue in the assessment proceedings of assessment year 2003-2004, replies were submitted by the assessee, giving full details and justification, these were considered by the AO, and thereafter only after consideration of these replies and details / documents of the assessee, the AO passed order u/s 143(3), wherein claim of the assessee was allowed and no disallowance was made of the depreciation on time sharing unit property. It was, thus, argued that it is a case of change of opinion on the part of the AO. Reliance was placed on the judgment of the Hon'ble Bombay High Court in the case of DIT v. HSBC Asset Management India Pvt. Ltd. (IT Appeal No.254 of 2012, dated 18th June, 2014) for the proposition that if depreciation is allowed in first year, then in subsequent years it becomes part of bloc....