TaxTMI 
TaxTMI 
2016 (10) TMI 214
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....ithout at all recording subjective satisfaction based on the appreciation of evidence in his possession and simply proceeded with the borrowed satisfaction based on the information provided by some other official without in any manner recording his own independent satisfaction, thus the consequent order passed deserves to be held bad in law. 1.2 That the Ld. CIT(A) has further erred in ignoring the fact that the information of audit party on the issue of law cannot be made a ground for re-opening the assessment, thus the order so passed deserves to be quashed. 2. On the facts and circumstances Ld. CIT(A) has grossly erred in upholding the disallowance of the interest of Rs. 8,66,831/- made by ld. AO which was paid to partners while the capital contribution was made by the partners in the firm and the partners have already been taxed on such interest in their return of income, thus disallowance so upheld tantamount to double taxation and therefore, deserves to be deleted." 2. The brief facts of the case are that the assessee is a partnership firm, engaged in the business of trading of marbles. For the year under consideration, the assessee filed return of income....
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....is found to be acceptable to the extent of offering the income for taxation as the assessee in the account of Smt. Durga Devi Somani have deposited Rs. 46,35,000/- on various dates out of which 5 lacs were of rotated out of previous withdrawals therefore on this account the assessee his liable to get benefit of the same. The assessee has also claimed credit of Rs. 12,54,544/- for the cash payments shown as sundry creditors in the preceding years of Smt. Durga Devi Somani in her individual capacity which have been offered-for taxation and accordingly taxed therefore written back in their books. In support thereof the assessee has filed copy of the assessment order of ITO, Kishangarh dated 21.12.2009 which confirms the facts. Therefore the assessee is allowed credit of Rs. 12,54,544/- thus on this account there will be a net addition of Rs. 28,80,456/-, (46,35,000/- - 5,00,000/- - 12,54,544/-) In the case of Sangeeta Somani the assessee has made cash deposits of Rs. 39,35,000/- out of which- 5,50,000/- were rotated out of the withdrawals made from the same account. Therefore the assessee is liable to get benefit of Rs. 5,50,000/-, thus the net amount to be added for taxation as unexp....
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.... 2.2 The assessee filed the reply to the said notice issued U/s 148 of the Act. In the reply, it was submitted that the capital of the partners were surrendered by the partners themselves and not by the firm and therefore, it was contended that the capital was brought by the partners in the firm and in the surrender letter, merely confirmed to deposit the tax on the surrendered amount. It was further submitted that the tax was paid by the firm but was borne by the partners. It was further submitted that both the partners shown the interest received by them in the return of income in the said assessment year. Thereafter, the assessee relied upon the various judgments and submitted that the proceedings U/s 148 of the Act be dropped. However, the ld Assessing Officer had not agreed with the contentions of the assessee and has therefore passed the assessment order thereby revising the assessment order and recomputed the total income of the assessee firm. The order of the ld Assessing Officer passed in the assessment proceedings are as under:- "It is worthwhile to mention here that during original assessment proceedings, the assessee itself requested vide letter dated 24.11.201....
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....e that income chargeable to tax has escaped assessment as the interest income of Rs. 8,66,831/- was not brought to tax in the case of the assessee. The cases cited by the assessee are on their own facts and are not applicable in the case of the assessee as they relate to the taxing of the income which was not at all mentioned in the reasons for reopening the assessment. In view of above discussion, this ground of appeal is dismissed." 4. Now the assessee is in appeal before us. The ld AR of the assessee has submitted as under:- Under these grounds of appeal the assessee has challenged the validity of initiation of reassessment proceedings u/s 148 of the Act as well as the completion of assessment u/s 147/143(3) of the Act. In this regard it is submitted that during the course of original assessment proceedings, the fresh capital contributions made by the partners in their capital accounts was voluntarily surrendered and it was requested that the same may be taxed in the hands of the firm. After considering the surrender so made and further after duly examined the books of accounts and details filed of the interest paid by assessee to the partners on their capit....
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....CIT Vs. Kelvinator of India Ltd. (SC) (ii) 51 DTR 117 CIT vs. Mansh Ajmera (Raj.) (iii) 314 ITR 275 Cartini India Ltd. Vs. Addl. CIT (Bom.) (iv) 115 TTJ 766 Sudhir Engg. Co. Vs. ACIT (Del.) (v) 114 ITD 69 Asstt. CIT Vs. O.P. Chawala (Delhi) (vi) 119 TTJ 379 ITO Vs. Smt. Indra Devi Gupta (JP) (vii) 59 DTR 221 Virendra Kumar Agrawal vs. ITO (Mumbai 'F') (viii) 122 DTR 131 Avtec Ltd. Vs. Dy. CIT (Dei.) (ix) 157 ITD Issue 1 Weekly Browser Page 11 Adani Developers P. Ltd. Vs. ITO, Ward 1(1) [2016] 66 Taxmann.com 125 (Gujarat) (x) CIT Vs. Indian Sugar & General Industry Export Import Corpn. Ltd. [2008] 170 Taxman 229 the Delhi High Court The sum and substance of the above said judgment that once the ld Assessing Officer has confirmed and has passed a reasoned order, the it is not permissible in law to disturb the final assessment made by the ld Assessing Officer on the basis of the same material available with the ld Assessing Officer. It was submitted that the presumption in law is that if the material is available on record, then the ld Assessing Officer should have applied his mind and gone thr....
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....tion (2) outlined in this case and extracted earlier may have been somewhat widely stated; it has not cast any doubt on the other three propositions set out in Kalyanji Mavji's case. The facts of the present case squarely fall within the scope of propositions 2 and 4 enunciated in Kalyanji Mavji's case. Proposition (2) may be briefly summarised as permitting action even on a "mere change of opinion". This is what has been doubted in the Indian Eastern Newspaper Society's case (supra) and we shall discuss its application to this case a little later. But, even leaving this out of consideration, there can be no doubt that the present case is squarely covered by proposition (4) set out in Kalyanji Mavji & Co. (supra). This proposition clearly envisages a formation of opinion by the Income-tax Officer on the basis of material already on record provided the formation of such opinion is consequent on "information" in the shape of some light thrown on aspects of facts or law which the I.T.O. had not earlier been conscious of. To give a couple of illustrations, suppose an I.T.O., in the original assessment, which is a voluminous one involving several contentions, accepts a plea ....
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....s to reopen the assessment because the opinion formed earlier by himself (or, more often, by a predecessor I.T.O.) was, in his opinion, incorrect. Judicial decisions had consistently held that this could not be done and the Indian Eastern Newspaper Society's case (supra) has warned that this line of cases cannot be taken to have been overruled by Kalyanji Mavji (supra). The second paragraph from the judgment in the Indian Eastern Newspaper Society's case earlier extracted has also reference only to this situation and insists upon the necessity of some information which make the ITO realise that he has committed an error in the earlier assessment. This paragraph does not in any way affect the principle enumerated in the two Madras cases cited with approval in Anandji Haridas [1986] 21 S.T.C. 326. Even making allowances for this limitation placed on the observations in Kalyanji Mavji, the position as summarised by the High Court in the following words represents, in our view, the correct position in law: The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis ....
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.... be relevant. Several aspects including papers filed and submitted with the return and during the original proceedings are relevant and material. Sometimes application of mind and formation of opinion can be ascertained and gathered even when no specific question or query in writing had been raised by the Assessing Officer. The aspects and questions examined during the course of assessment proceedings itself may indicate that the Assessing Officer must have applied his mind on the entry, claim or deduction etc. It may be apparent and obvious to hold that the Assessing Officer would not have gone into the said question or applied his mind. However, this would depend upon the facts and circumstances of each case. The Hon'ble Delhi Court in the case of CONSOLIDATED PHOTO AND FINVEST LTD. Vs. ASSISTANT COMMISSIONER OF INCOME-TAX [2006] 281 ITR 394 (Del) has held as under: "10. It is common ground that in the present case the Assessing Officer had not received any additional information from any outside source or quarter but the fact that there was no such information did not make any material difference. Action under section 147 was permissible even if the Assessing Officer....
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....er incompetent or otherwise improper to call for interference by a writ court. The Assessing Officer has in the reasoned order passed by him indicated the basis on which income exigible to tax had in his opinion escaped assessment. The argument that the proposed reopening of assessment was based only upon a change of opinion has not impressed us. The assessment order did not admittedly address itself to the question which the Assessing Officer proposes to examine in the course of reassessment proceedings. The submission of Mr. Vohra that even when the order of assessment did not record any explicit opinion on the aspects now sought to be examined, it must be presumed that those aspects were present to the mind of the Assessing Officer and had been held in favour of the assessee is too far-fetched a proposition to merit acceptance. There may indeed be a presumption that the assessment proceedings have been regularly conducted, but there can be no presumption that even when the order of assessment is silent, all possible angles and aspects of a controversy had been examined and determined by the Assessing Officer. It is trite that a matter in issue can be validly determined only upon....
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....6,831/-. There is no whisper or discussion in respect of the deduction arising out of the interest paid to the partners. In the light of the above, once neither the question was asked from the assessee nor any enquiry was conducted by the Assessing Officer nor he applied his mind on the deductibility of the interest to the partners, therefore in our view, no opinion was formed by the Assessing Officer in the original assessment proceedings in this regard. Since we have held that no opinion was formed by the Assessing Officer in the original assessment proceedings, therefore, the reopening made by the Assessing Officer on the same facts cannot be said to be bad in law and is in accordance with law mentioned hereinabove. By respectfully following the judgment of Full Bench of Hon'ble Delhi High Court in the case of Usha International (supra) we uphold the reopening proceedings for the reassessment. Moreover, in the light of the above judgment referred hereinabove, it does not matter even if the reopening/reassessment are sought to be initiated on the basis of the material already available on the record in the original assessment proceedings. 6.2 Having decided issue No. ....