TaxTMI 
TaxTMI 
2017 (9) TMI 815
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....on the basis of factual information given by the audit party is valid in law. 4. Any other ground that may be taken up at the time of hearing". 2. Brief facts of the case are that the assessee company, which is engaged in the business of market research and data processing, filed its return of income on 23.3.2006 admitting taxable income at Rs. 6,25,76,413. The return was initially processed u/s 143(1) of the I.T. Act and subsequently selected for scrutiny and the assessment order u/s 143(3) of the Act was passed on 15.12.2008 assessing the income at Rs. 8,81,69,093 after making addition of the proposed adjustment by the TPO u/s 92CA of the Act. Subsequently, the internal Audit Department of the Revenue raised audit objections and on the basis of the said objections, the case was reopened u/s 147 of the I.T. Act by issuance of notice u/s 148 dated, 26.03.2013. The assessee, vide its letter dated 25.4.2012, submitted its reply stating that according to its information and knowledge, no income has escaped assessment in relation to the relevant A.Y and therefore, the initiation of proceedings u/s 147 is not warranted. Without prejudice to the said contention, the assessee ....
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..... He also drew our attention to the reply of the assessee to the AO's questionnaire "yes, but there was a short delay in payment". He submitted that this submission of the assessee is incorrect in so far as the payment to the government was in the subsequent financial year and not in the relevant financial year. He submitted that the relevant documents with regard to TDS made and remitted were not filed by the assessee during the assessment proceedings but were filed only during the re-assessment proceedings. He has also drawn our attention to the relevant copies of Form-16 which are placed at pages 62 to 64 of the paper book filed by the Revenue to demonstrate that the due dates of payment during the relevant financial year are 23.09.2004, 30.11.2004 and 22.11.2004 but the payment into the govt. a/c was made on 19.07.2005 in all the three cases. Thus, according to him, there is no true and full disclosure of all the material facts by the assessee while filing the return of income or during the assessment proceedings u/s 143(3) of the Act. As regards the assessee's contention that the re-assessment is on the basis of an audit objection and therefore is not sustainable, the learned ....
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....jections against the re-assessment, that the AO has mentioned that the assessee has failed to disposing fully and truly all material facts necessary for assessment of its income. He submitted that the requirement of the law is that the AO has to be satisfied at the time of recording the reasons itself that the assessee has failed to disclose fully and truly all material facts. He also submitted that the Revenue has not raised any ground before this Tribunal that the assessee has failed to disclose fully and truly all material facts and therefore, the learned DR cannot now raise a ground that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment of its income. 5. The assessee has also filed a paper book consisting of the copies of the judicial precedents in support of its contention. As regards the DR's reliance upon the decision of the Hon'ble Supreme Court in the case of CIT vs. PVS Beedies Pvt. Ltd and also Indian & Eastern Newspaper Society v. CIT (cited Supra), the learned Counsel for the assessee submitted that those decisions were on the provisions of section 147(b) of the Act which existed at that point ....
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....ny source including the audit party, but for initiating the re-assessment proceedings u/s 147 of the Act, the AO has to independently apply his mind to form an opinion/belief that there is escapement of income. Further, where the proviso to section 147 applies, the AO has to further record that the escapement of income is due to the failure of the assessee to disclose fully and truly all material facts necessary for assessment of its income. The reasons for reopening the assessment have been filed before us in the Paper Book filed by the assessee at page 3 of the Paper Book containing judicial precedents (Vol.-I) and it is noticed therefrom that the audit objections are reproduced therein as reasons for reopening of the assessment and there is no whisper of the failure of the assessee to disclose fully and truly all material facts. For the sake of clarity and ready reference, they are reproduced hereunder: "Sub: Reasons for the re-opening of assessment II/s.147 of I.T. Act 1961 - in your case - Ass Year 2005-06 - communicating - Reg. The reasons for re-opening. of assessment u/s.147 of the Income Tax Act, 1961, for the Asst. Year 2005-06, are furnished as under:- ....
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....13,44,415/-. Out of this Rs. 1,91,36,242/- was allowed in the scrutiny order. The details of entire turnover could not be correctly ascertained". 7. We have also perused the audit objections placed at pages 1 & 2 of the paper book filed by the assessee and find that the audit objections only are recorded as reasons for reopening and the AO has not recorded that there is escapement of income which is due to failure on the part of the assessee to disclose fully and truly all material facts. It is also not clear whether he has verified the assessment record before forming a belief that there is escapement of the income on the grounds on which the audit party has raised the objections. In the light of above facts and circumstances, let us now examine the applicability or otherwise of the ratios of the decisions relied upon by both the parties to the facts of the case before us. The learned DR has read out extensively from the following decisions in support of his contentions. (i) CIT vs. PVS Beedis Pvt. Ltd (237 ITR 13 (S.C) The Hon'ble Supreme Court in this case, while considering the meaning of section 147(b) of the Act held that the information given by the ....
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....earing on the assessment must be made directly and solely by the ITO. We find that the Hon'ble Supreme Court in this case also was dealing with the provisions of section 147(b) of the Act. Further, as held by the Apex Court, it is the AO who has to be satisfied that the income has escaped assessment and cannot solely rely upon the audit objection to reopen an assessment. We find that this decision is in fact in favour of the assessee. (iii) CIT vs. National Tyres and Rubber Co. of India Ltd (202 Taxmann 625) (Kerala) In this case, the Hon'ble Kerala High Court was considering the case of an assessee whose assessment for the A.Y 1995-96 was reopened on the basis of an audit objection that the capital gain on conversion of capital asset into stock-in-trade was not offered to tax. The Hon'ble High Court considered the fact that in the said case, the assessee had not filed the return of income for the relevant A.Y and neither did the AO assess the liability under the said section i.e. section 45(2) and it was the audit party which brought to the notice of the AO that the income chargeable to tax u/s 45(2) has not been assessed for the A.Y 1995-96 because i....
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....e assessment has been reopened. This is the case where fresh information has been brought on record by the Investigation Wing and that is the basis for reopening of the case after a period of 4 years. Therefore, the facts of this case are also distinguishable from the facts of the case before us. (viii) ABC Classes PRS vs. PR.CIT reported in (2016) (387 ITR 119) (Allahabad) In this case also, the basis for reopening of the assessment is the information gathered by the Excise Department from the statement of Partners during a search. For the reasons stated above in reference to the case of HVK International Pvt. Ltd, this case is also not applicable to the facts of the case before us. (ix) Raymond Wollen Mills Ltd vs. ITO & Others (207 ITR 929) (Bombay) The assessment year in this case are 1967-68, 1968-69, 1970-71 to 1973-74 and the reopening of the assessment was u/s 147(a) i.e. the pre-amended provisions and therefore, the same is not applicable to the facts of the case before us. (x) Girilal & Co. vs. ITO & Others (387 ITR 122) (S.C) In this case, the Hon'ble Supreme Court was considering the case of an assessee where the re-opening of the....
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....ppellant/Revenue". iii) Hon'ble Andhra Pradesh High Court in the case of Mahalasxmi Motors Ltd vs. Dy.CIT reported in (2004) (265 ITR 53). In this case, the Hon'ble jurisdictional High Court has held that where all the facts were available before the assessing authority while making the original assessment and the assessing authority allowed the claim, the Department cannot reopen the assessment even if there is loss of revenue or even if legal inferences drawn by the assessee is erroneous in the first place when full and true disclosure of the facts was made by the assessee. iv) Hon'ble Supreme Court in the case of ITO vs. Lakhmani Mewal Das reported in (1976) 103 ITR 437. In the case of Income Tax Officer vs. Lakhmani Mewal Das reported in (1976) (103 ITR 437), the Hon'ble Supreme Court held that the expression "reason to believe" does not mean a purely subjective satisfaction on the part of the ITO but the reasons must be held in good faith v) Hon'ble Supreme Court in the case of CIT vs. Bhanji Lavji reported in (1971) 79 ITR 582. The Hon'ble Supreme Court in the case of CIT vs. Bhanji Lavji (cited Sup....