AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2018 (6) TMI 542
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....eld the validity of the notice u/s.148 was correct, when in fact the notice u/s.148 issued by the AO, tantamounted to change of opinion on the same facts, without any fresh evidence or information being brought on record. 5. Without prejudice to the grounds at 2 3, & 4, above the Appellate Commissioner ought not to have confirmed the order of the AO disallowing an amount of Rs. 20,00,000/- u/s.40(a)(ia). 6. The Appellate Commissioner ought not to have upheld the order of the AO in applying the provision u/s. 40(a)(ia) when in fact the amount of Rs. 20,00,000/- debited to the profit and loss account was not eligible for TDS". 2. At the time of hearing, the learned Counsel for the assessee submitted that he does not wish to press the ground of appeal No.2 and accordingly, the said ground is rejected as not pressed. 3. Brief facts of the case are that the assessee, an individual, deriving income from the activity of direction of cine films, has filed his return of income for the A.Y 2009-10 originally on 18.02.2010 admitting total income of Rs. 45,25,330. The assessment order u/s 143(3) of the Act was passed on 14.12.2011 determining the taxable income at Rs. 4....
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....ked to explain, the details of the sum claimed as expenses, and that the assessee has given the details of the expenses, which is placed at page 5 of the paper book wherein the advance returned to M/s Sumant Art Production amounting to Rs. 20.00 lakhs is reflected. He also drew our attention to the P&L A/c wherein the assessee has debited the expenses of Rs. 20.00 lakhs. Therefore, according to him, the AO was aware of the advance returned to M/s. Sumant Art Production and after considering the said issue also, the AO has not brought it to tax. Therefore, according to him, the reopening of the assessment u/s 147 of the Act on this ground, is nothing but on the change of the opinion which can be permitted not as held in the decision of the Hon'ble Supreme Court in the case of Kelvinator India Ltd reported in 320 ITR 561 (S.C) and also in the case S. Ranjith Reddy vs. Deputy Commissioner of Income-tax, Circle -6(1), Hyderabad reported in 144 ITD 461 (Hyd.) at paras 28 to 33. Therefore, according to him, the assessment order is not sustainable both on the legal ground as well as on merits. 6. The learned DR, on the other hand, supported the orders of the authorities below. 7....
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....e new information which has come to the knowledge of the Revenue, therefore, constitutes tangible material. If there is a fresh material that that would not preclude the Assessing Officer to reopen the assessment for an earlier year on the basis of fresh material which has come to light in the course of assessment for a subsequent assessment year. Now in the above background, considering the facts of the present case, there is no dispute that the assessee furnished a detailed note annexed to the return of income. For clarity, we reproduce the note appended to the return of income. "S. Ranjith Reddy s/o. late S. Hanumanth Reddy PAN No: AOMPS8851D Assessment Year: 2006-07 Accounting Year: 2005-06 Note appended to and forming part of Return of Income The Return of the Income for the Accounting year ending on 31-03-2006 relevant to the Assessment Year 2006-07 is submitted. 1. The sources of Income for the Assessment year under consideration consist of (a) Income from House Property (b) Income from Capital Gains (c) Income from Salary and (d) Income from Other Sources. 2. My father Sri S. Hanumanth Reddy died on 07-....
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....he vendee. 4. In the year under consideration, I jointly purchased 28.75 Guntas of land from S. Suresh Kumar on February 16th, 2006 Vide registered Sale Deed (Doc. No. 2277/2006) in Shamshabad Village, Shamshabad Mandal R.R District. I own 50% share. Towards my share I paid an amount of Rs. 2,87,500 (Vide Cheque No. 559536 drawn from Syndicate Bank Somajiguda) on February 16, 2006 towards the purchase of 28.75 Guntas of land as a co-owner for 50% share to S. Suresh Kumar. The said land is situated in Sy. No. 656/Part Shamshabad Village, Shamshabad Mandal, R.R. District. The other 50% share is purchased by Rasuri Satish Kumar Reddy. The sources for the purchase are met from the balance to the credit of savings i.e. my Syndicate Bank Current account (Bearing no. 201/14508) at Somajiguda branch. 5. During the year I sold 2,02,616 Shares of Mali Florex Limited to my brother S. Narayan Reddy for a consideration of Rs. 2,02,616/-. The said amount is yet to be received. The said Company was not having any activity. The further details for the computation as per section 45 of the Income-tax Act, 1961 are as follows: Shares were allotted in 15/12/03) the particula....
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.... that the judgement in the case of Kelvinator of India Ltd. (cited supra) covers cases where the first assessment was made u/s. 143(3) and that it does not apply to cases where the return was processed u/s. 143(1) of the Act. This proposition cannot be acceptable because the Supreme Court was expounding the provisions of section 147 and the words "reason to believe" appearing therein. It was held that schematic interpretation has to be given to these words - failing which section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of a mere change of opinion. It was further held that there is a conceptual difference between the power to review and the power to reassess and section 147 cannot be interpreted in such a manner to give a power of review. The contention of the Department before us is that where no view has been taken as to the correctness of the return in the first instance, the Assessing Officer cannot be said to exercise a power of review when he reopens the assessment which has been earlier passed under 143(1). This argument is similar to the argument that if no opinion can be said to have been formed by the Assessing Officer wh....
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....ssessment. Such an exception has not been provided for in a case where the return has been processed under section 143(1) in which case the proviso will have no application. If it is correct that an intimation under section 143(1) as well as an assessment order under section 143(3) are both amenable to section 147, it should also be conceded that even in a case where the original return was merely processed under section 143(1) the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment. He has also to record reasons under section 148(2) for reopening the earlier assessment made under section 143(1). All that has been excluded is that the assessee, in whose case the return was first processed under section 143(1) cannot challenge the notice of reopening on the ground that it is prompted by a mere change of opinion. Only to this limited extent there is a disability on the part of the assessee to challenge the notice of reopening in a case where his return was earlier processed under section 143( 1) of the Act. 31. The assessee contended before us that there was no such tangible material before the Assessing Officer from which he ca....
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....ginally filed for the year under consideration on 18.10.2001, exemption was claimed by the assessee in respect of interest income as per provisions of Article-7 of Indo-US treaty and this fact was clearly mentioned in the Note (copy placed at page No .16 of the paper book) filed along with the said return. The said return was initially processed by the Assessing Officer u/s. 143(1) on 2.1.2003. Subsequently, he however reopened the assessment for the following reasons recorded u/s. 148(2). "30.9.2005: The assessee filed its return of income on 18.10.2001, declaring NIL income. The return was processed u/: 143(1)(a) of the 1 T Act, 1961 on 2.1.2003, accepting the Nil income declared by the assessee and a refund of Rs. 1,58,701/- was determined and issued to the assessee. The assessee has received interest which is not connected with operation of aircrafts but claimed exemption on all income under Article 8 of Indo-US DTAA, and that the interest should be taxed under Article 11 of the DTAA @ 15%. Since no prima facie adjustment can be made under the statutory provisions hence the retuned income was accepted while processing the return. However, remedial action by reopening t....
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....rmissible without there being any new material coming to the possession of the Assessing Officer if the reasons recorded for reopening of assessment are otherwise valid. The learned counsel for the assessee, on the other hand, has relied on Third Member decision of the Tribunal in the case of Telco Dadaji Dhackjee Ltd. (supra) stating that a similar issue involved in the said case has been decided by the Third Member in favour of the assessee after taking into consideration the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) relied upon by the learned OR. In the said case, the return filed by the assessee was originally accepted u/s. 143(1). In the said return the assessee had claimed deduction for payment of non-compete fees of Rs. 75 lakhs which included payment of Rs. 15 lakhs to Directors. The assessee had also claimed depreciation of Rs. 1,41,848/ - on lease premises. The Assessing Officer issued notice u/s 148 on the ground that these were not allowable expenses and income chargeable to tax had escaped assessment. He accordingly disallowed both the items in the reassessment order. When the matter reached to the Tribunal, the ....
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..../s 143(1)(a), it is essential that the Assessing Officer should have before him tangible material justifying his reason to believe that income had escaped assessment. Since there was no such tangible material before the AO from which he could entertain the belief that income of the assessee chargeable to tax had escaped assessment, the Third Member held that reassessment proceedings initiated by the Assessing Officer were liable to be quashed on the ground that there was no tangible material before the Assessing Officer even though the assessment was completed originally u/s 143(1). In our opinion, the Third Member decision of the Tribunal in the case of Telco Dadajee Dhackjee Ltd. (supra) is squarely applicable in the present case and respectfully following the same, we hold that the initiation of reassessment proceedings by the Assessing Officer itself was bad in law and the reassessment completed in pursuance thereof is liable to be quashed being invalid. We order accordingly and allow ground No. 1 of the assessee's appeal. 11. As a result of our decision rendered above on the preliminary issue quashing/cancelling the assessment made by the Assessing Officer u/s. 14....