TaxTMI 
TaxTMI 
2016 (7) TMI 190
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....IT(A) deleted this disallowance. The AO, thereafter, recorded reasons and issued notice under section 148 on 22.3.2010. He was of the opinion that assessee has made payment of interest to a non-resident without deducting TDS, and therefore, it is not eligible for interest expenditure. 4. It emerges out from the record that the assessee-company imported certain machineries from Barmag AG-Germany. The said machineries were financed by Landesbank Baden Wurttemberg, (LBBW), Stuttgart, Germany. It is a German company and resident of Germany. The assessee was of the opinion that the loan was export credit guarantee by the German Federal Government and interest on such loan is not taxable in India, and therefore, no TDS is required to be deducted by the assessee. Somehow, the AO was of the opinion that the TDS ought to be deducted, therefore, the AO recorded reasons to reopen the assessment. The reasons recorded by the AO read as under: "REASONS FOR RE-OPENING ASSESSMENT U/s.147 OF THE I.T. ACT, 1961 Reg.: NOVA PETROCHEMICALS LTD. A.Y.: 2003-04 The assesses company had filed return on 29.11.2003 showing loss at Rs. 10,39,752. The assessment u/s. 143(3) was finalized o....
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....148 to 153 assess or re-assess 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 recomputed 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 to 153 referred to as the relevant assessment year): 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 sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year; [Provided further that the AO may assess or reassess such income other than the income involving matters which are the ....
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....r section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. From the perusal of the reason recorded it is apparent that no case has been made out that the assesses had failed to disclose fully and truly all material facts necessary for his assessment and no observation has been made in this regard, On the basis of the same material which was available on record, the assessing authority was of the view that the deduction had been wrongly allowed under section 36(1)(viii) of the Act. The Tribunal observed that the assessee had furnished the requisite details in respect of leasing income and upfront fee as received in the assessment year under consideration and the same was duly disclosed in the audited profit and loss account, as is evident from pages 4 and 5 of the paper book read with page 23 of the paper book and also computation of income filed along with return, a copy of which is placed at pages 33 to 35 of the paper book. This finding of the Tribunal has not been disputed by raising any question and during the course of the argument by the learned counsel for the appellant. Therefore, we are of the view that on the fac....
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....ils filed by the assessee and from the profits and loss account. Therefore, it was impossible for the Assessing Officer to even draw the inference that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for assessment year 2002-03. Significantly, the reasons that had been disclosed to the assessee did not contain a finding to the effect that there was a failure to fully and truly disclose all necessary facts, necessary for the purpose of assessment. In these circumstances, the condition precedent to a valid exercise of the power to reopen the assessment, after a lapse of four years from the relevant assessment year, was absent in the present case. The notice was not valid and was liable to be quashed." Hon. Supreme Court in the case of ITO vs. Lakhmani Mewal Das (1976) 103 ITR 437 (SC) held that where assessment is sought to be reopened after expiry of four years reasons for belief must show live link between the material and belief. There should be a rational connection or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link be....
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....r four years. Hon. Gujarat High Court in Inducto Ispat Alloys Ltd. vs. ACIT (2010) 320 ITR 458 (Guj) and Nikhil K. Kotak vs. Mahesh Kumar (2009) 319 ITR 445 (Guj) also held that where the period of four years has expired from the end of relevant Asst. Year the proviso to section 147 would come into play. It stipulates three conditions and one of those conditions is showing omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. When we go through the reasons recorded and as mentioned above we do not find any reference to such failure on the part of the assessee to disclose any material fact necessary for assessment and in fact narration given in the reasons do not show any such failure which could be inferred even if not so mentioned specifically in the reasons. In our considered view when neither there is any allegation of failure nor the AO has brought any material on record to suggest escapement of income then it is only a change of opinion and therefore assessment cannot be reopened after expiry of four years." 8. In the light of the above, if I examine the facts of the present case, then, it would reveal t....