TaxTMI 
TaxTMI 
2016 (10) TMI 351
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.... taken before him related to assumption of jurisdiction under sec 148 , whereas the appellant has challenged the completion of reassessment by the Id A.O without furnishing the reasons recorded for reopening the assessment. 4. That in the facts and circumstances of the case, the Id CIT[A] erred in holding that the ground no 4 taken before him related to assumption of jurisdiction under sec 148 , whereas the appellant has challenged the completion of reassessment by the Id A 0, as barred by limitation." 3. The Assessee was incorporated by the Government of West Bengal with an objective of supplying essential commodities in the State with a view to stabilize the market price as well as to ensure the availability of such commodities to the people of State. 4. For AY 2005-06, the Assessee did not file any return of income on or before the due date u/s.139(1) of the income Tax Act, 1961 (Act). A notice u/s.148 of the Act was issued on 29.1.2008. In response to the same the Assessee filed return of income on 1.2.2008 declaring total income of Rs. 41,78,301/-. An order of Assessment u/s.143(3) read with Sec.147 of the Act was passed on 23.12.2008 determining the total incom....
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....t of his judgment are set out in paragraph 2 of his order which reads thus: "2. It is pertinent to mention and note before discussing observations and making additions in the hands of the assessee that, the assessee was un-cooperative throughout the course of assessment proceedings and failed to show compliance with notices and questionnaires issued. The AR of the assessee appeared on 01.09.2011, 02.11.2011 and' 16.12.2011 but only submitted incomplete details. Hearing was adjourned to 28.12.2011 where the assessee was asked to furnish certain specific details regarding its iron ore and cement clinker export business and the corresponding disproportionate freight charges claimed by it, but there was no compliance by the assessee on the said date. Till the date of passing this order, the assessee did not comply and submit remaining requisite details. Hence, it is seen that the assessee is a habitual non complier, is non cooperative and has no regard and respect for Law of the Land. There is, therefore, no alternative but to pass the order ex-parte ." 7. The AO thereafter made a reference to the fact that the Assessee was established with the object of trading of esse....
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.... "5.2 Ground Nos. 2,3,& 4 : In these grounds of appeal, the appellant has challenged the validity of the re-opening of the assessment and completing the assessment u/s 147/143(3)1144 of the Act. After carefully considering the submission of the appellant along with the case laws relied upon, perusing the facts of the case including the observation of the AO and other materials brought on record, these grounds of the appeal regarding the validity of the reopening of the assessment is decided as under :- i) The A/R has submitted that the assessment of the appellant has been completed under section 143(3) of the Act and during the course of original assessment proceeding the information about the issues on which the re-assessment proceeding has been initiated was available with the AO passing the earlier assessment orders. Hence the re- opening of the assessment is nothing but change in opinion and in view of settled legal position the A/R submitted that for change of opinion re-assessment proceeding cannot be initiated. I have gone through the submission of the appellant and the report of AO and other material available in record. I have found that durin....
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....he case of CIT v India Sea Foods (2011) 332 ITR 424 the Hon 'ble Kerala High Court has held that the provision regarding re-assessment proceeding and rectification of proceeding are self contained provision and there is no bar that if rectification proceeding is initiated then re-assessment proceeding cannot be initiated. In view of above, I am of the considered view that the AO was fully justified in initiating the re-assessment proceeding though the rectification proceeding was also initiated. iii) The third submission of AIR that the re-assessment proceeding is initiated on the basis of audit note. From the perusal of reason recorded and communicated to the CIT for obtaining the approval it is evident that the reason for re-opening are recorded by the A0..at his own and they are not the re-production of audit note without application of mind. From the record it is evident that the audit objections drew the attention of Assessing officer to the discrepancies noticed by the audit party and it did not amount to an expression of opinion but the audit note was to convey information to the AO. It is the Assessing officer who after going through the recor....
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....nts - that too for the entire amounts ( emphasis supplied). " v) As per the A/R excess freight paid by the company has gone out of coffer of the appellant company and even if the amount is embezzled or fraud has been committed then also full freight expense is allowable. This submission of the AR is not in accordance with explanation to section 37(1) of the Act which provides that any expenditure incurred for the purpose which is an offence or is prohibited by law shall not be allowed as business expense. Since in the case of the appellant, as admitted by Ld AR, the excess freight amount paid amounts to embezzlement or fraud, which is an offence and is prohibited by law. Hence, I am of the view that excess freight of Rs. 20,49,30, 189/- paid by the appellant is not an allowable expense. Accordingly this disallowance of Rs. 20,49,30, 189/- made by the AO is confirmed and these grounds of appeal of the appellant are dismissed. " 12. Aggrieved by the order of the CIT(A), the Assessee has preferred the present appeal before the Tribunal. We shall first deal with Gr.No.1 to 4 raised before the Tribunal in which the validity of assumption of jurisdiction u/s.147 of the Act by....
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.... of the assessee for A.Y. 2005-06. It was thus submitted by the ld. counsel for the assessee that reopening of the assessment should be held to be bad in law, as the AO in the present case has not recorded specifically that escapement of income was due to the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the A.Y. 2005-06. 15. On the reopening of assessment being merely on a change of opinion, the learned counsel for the Assessee submitted that in the reasons recorded the AO has not made any reference to the fact that there was audit objection and therefore the assessment was reopened. He pointed out that the reasons recorded merely mentions that on scrutiny of assessment records for the relevant AY, it revealed that the Assessee had debited carriage inward of Rs. 110,94,58,668/- during the previous year on purchases of Rs. 569,29,90,826, whereas the carriage inward in respect of the earlier financial year was only Rs. 2,06,43,162/- on purchases of Rs. 469,35,73,464/-. According to him these facts were very much available in the audited accounts of the Assessee which was available before the AO when the origina....
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....on the basis of reasons recorded and nothing can be looked into to substitute or add to the reasons recorded by the AO. 18. We have given a very careful consideration to the rival submissions. We are also of the view that initiation of reassessment proceedings will have to be held as invalid for the reason that reasons recorded by the AO do not spell out that escapement of income was due to the assessee not fully and truly disclosing all material facts necessary for completion of assessment for the relevant assessment year. Admittedly the proviso to Sec.147 of the Act was applicable in the present case. The AO in the reasons recorded has not spelt out as to how there was a failure on the part of the assessee to fully and truly disclose all material facts. In fact there is no such allegation at all in the reasons recorded by the AO. When the original proceedings were concluded all facts with regard to increase in freight charges vis-à-vis purchases were much available before the AO. 19. Our conclusion as above is supported by the decision of the Hon'ble Karnataka High Court in the case of CIT and ACIT v. Hewelett Packard Digital Global Solutions Ltd., ITA No.406 of 2007....
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....for exemption under Section 10A, even that nexus is manifest. The Assessing Authority has not properly applied his mind towards the statutory provisions and has not taken into consideration that the original assessment passed under Section 143(3) which was also reopened once and adjustment was made. It is for the second time, he was raising all these objections. When admittedly the second reopening of the assessment is beyond four years, under law, it is barred by time and the findings recorded by the Tribunal is legal and valid and does not suffer from any legal infirmity. In that view of the matter, no substantial question of law arises for consideration in these appeals. Accordingly, the appeals are dismissed." 20. The Hon'ble Gujarat High Court in the case of General Motors India Pvt. Ltd. Vs. DCIT, 360 ITR 527 (Guj) has also taken the same view and has held as follows: "It is required to be noted that in the present case notice u/s 148 of the Act had been issued on 27/4/2011 in relation to the Assessment Year 2005-06. Hence, admittedly the same had been issued after expiry of a period of four years from the end of the relevant assessment year. Under the circumstanc....
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...., reopening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the AO to make a back assessment, but in s. 147 of the Act (w.e.f. 1st April, 1989), they are given a go by and only one condition has remained, viz., that where the AO has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post 1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, s. 147 would give arbitrary powers to the AO to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test ....
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....uly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise the reasons which were lacking in material particulars would get supplemented, by the time the matter reaches the Court, on the strength of affidavit or oral submission advanced...". 23. The learned DR's reference to the audit objection on the quantum jump in expenses on freight vis-à-vis the purchase of the Assessee compared to the earlier previous year has not been spelt out in the reasons recorded. On the reasons recorded by the AO, there is no other conclusion possible except the conclusion that the reopening of assessment is not based on tangible material which came into possession of the AO after conclusion of the original assessment proceedings. On the facts and circumstances of the present case, we are of the view that initiation of reassessment proceedings has been merely on the basis of change of opinion and in view of the law laid do....