TaxTMI 
TaxTMI 
2019 (8) TMI 1454
X X X X Extracts X X X X
X X X X Extracts X X X X
.... total income of the assessee was determined by the Assessing Officer at Rs. 1,38,92,878/-. The said assessment was subsequently reopened by the Assessing Officer and assessment under section 143(3)/ 147 was completed by him vide order dated 27.03.2015. The said assessment, however, was cancelled by the ld. CIT(Appeals) vide an order dated 26.12.2016 by treating the same as bad-in-law. Thereafter the assessment was again reopened by the Assessing Officer and a notice under section 148 was issued by him to the assessee on 31.03.2017 after recording the reasons. According to the Assessing Officer, the assessee, however, did not file any return in response to the said notice issued under section 148 electronically under digital signature as prescribed in Rule 12 of the Income Tax Rules, 1962. Keeping in view this non-compliance, the request of the assessee to provide the reasons recorded for reopening the assessment was not acceded to by the Assessing Officer. There was also no compliance on the part of the assessee to the notices issued by the Assessing Officer under section 142(1) of the Act. The Assessing Officer, therefore, proceeded to complete the assessment to the best of his j....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cond return was filed in the prescribed format through email as per rule 12 of the IT rules. It was also informed to the AO that the assessee's letter to treat the original return filed u/s 139 as return u/s 148 is sufficient compliance of the notice u/s 148. Section 148 itself prescribes that all the provisions of section 139 shall apply and accordingly the return filed originally u/s 139 was specifically requested to be treated as return filed in response to notice u/s 148. The issue under consideration is that whether the letter as filed by the appellate is sufficient compliance of notice u/s 148 relating to filing the return of income. The AO has relied on Rule 12 of the IT rules and what was required was that the return was to be filed electronically. It was stated to the AO in all the letters filed that the original return was filed electronically and the said return should be treated as return in response to notice u/s 148. The provisions of section 148 also says that all the provisions of section 139 shall apply, Therefore, the requirement of Rule 12 was fulfilled. It is reiterated that the original return was also filed electronically which is not in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....irected to disclose the reasons for taking action under section 148 for the said assessment years to the petitioner within two weeks. The Delhi High Court in the case of Jai Shiv Shankar Traders Pvt. Ltd. 2015 Tax Pub (DT_ 4975 (Del-HC): (2016) 067 (I) ITCL 0050: (20216) 383 ITR 0448: (2016) 282 CTR 0435: (2016) 129 DTR 0063 has held that....The narration of facts as noted above by the Court makes it clear that no notice under section 143(2) of the Act was issued to the assessee after 16.12.2010, the date on which the assessee informed the AO that the return originally filed should be treated as a return filed pursuant to the notice under section 148. The legal position regarding section 292BB has already been made explicit in the decisions of the Allahabad High Court. That provision would apply insofar as failure of service of notice was concerned and not with regard to failure to issue notice. In other words, the failure of the AO in reassessment proceedings, to issue notice under section 143(2), prior to finalising the reassessment order, could not be condoned by referring to section 292BB. The resultant position was that as far as the present case was concerned, the fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... return on 07.11.2013. No notice u/s 143(2) was issued within the prescribed time and therefore the return filed in response to notice u/s 148 was legally accepted u/s 143(1). However, the AO issued notice u/s 143(2) after much delay on 9.1.2015. The AO also completed the assessment u/s 143(3) wherein the addition on account of the purchase from Darshan Sales Corporation and valuation of closing stock was in dispute. The assessee disputed both the addition made before the CIT(A) on merits as well as on the issue that the return filed u/s 148 was duly accepted u/s 143( 1) since no notice u/s 143(2) was issued within the time allowed. The assessee disputed both the additions is evident from the order of CIT(A). The CIT(A) quashed the assessment since no notice u/s 143(2) was issued within statutory time. The CIT (A) also observed that he is not deciding on the merits since the appeal was allowed on legal ground. However, the written submissions filed before the AO contained full explanation that the addition was not maintainable on merits, which is apparent from the written submissions quoted in the appellate order. The department did not file any appeal before the ITAT but the AO is....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... earlier order dated 31.07.1976. The first appellate authority once again annulled the reassessment order. The Tribunal confirmed the said order. Held: Rightly so. The AO was having no jurisdiction to reassess the income on same set of facts and figures in his second reassessment order once again after annulment of first reassessment order by the appellate authority. The Madras High Court in the case of V.R. Durgamba 1998 Tax Pub(DT) 0648 (Mad-HC_: (1998) 233 ITR 0096: (1998) 098 Taxman 0336 has held that once a proceeding in respect of an item other than the one mentioned in the notice under section 148 of the Income Tax Act and had been taken into consideration and the same is subsequently not upheld in appeal, the proceeding in respect of the same item afresh under section 147(a) cannot be resorted to. Therefore, the Tribunal was right in holding that the Income Tax Officer had not validly assumed jurisdiction under section 147(a) of the Act. The P&H High court in the case of Smt. Anchi Devi 2008 Tax Pub(DT) 1828 (P&H-HC) : (1008) 218 CTR 0011 : (2008) 005 DTR 0311 has held that Reassessment-Validity-Earlier reassessment was held to be time-barred-First assessm....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "I have considered the submissions of the authorized representative of the appellant as well as the assessment order framed in the light of the materials available on record before the assessing officer during the assessment proceedings. The AR of the appellate has submitted that on the facts and circumstances of the case, the proceedings u/s. 147 were not in accordance with law and accordingly the assessment is void-ab-initio an is illegal to be declared as null and void. The assessment has been reopened u/s 147 after expiry of 4 years. The earlier two assessments were completed u/s 143(3). However, it appears from the assessment order now passed that nowhere in the reasons recorded the AO was satisfied that income has escaped assessment for failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment In fact, there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. The purchase of goods from Darshan Sale Corporation was part of the first assessment order since the sale price of the said. bearings was duly added as income is recorded. Furthermore, in the letters and rep....
X X X X Extracts X X X X
X X X X Extracts X X X X
....it cannot be a ground to reopen the assessment u/s 147. The basis for alleged under valuation have not been spelt out anywhere in the reasons or in the order itself. Moreover, the information from Investigation cannot along be the reason for reopening of the assessment and the AO has to apply his own mind. No such applicat4ion of mind is visible in the reasons recorded. The AR placed his reliance on various judgments as mentioned above in his submissions. The reopening of the assessment after four years from the end of the assessment year is bad in law. I find that it is evident form the reasons recorded that there is no whisper that the income had escaped assessment for failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. When there is no case that there was failure on the part of the assessee to disclose all material facts necessary for assessment which is not whispered in the reasons recorded and for arguments sake even in the reassessment order the proceedings initiated u/s 147 is bad in law in view of various decisions cited above. Further, it is also clear from the reasons recorded that the AO ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion of mind by the AO, deduction under section 36(1)(viii) was allowed. notice for reopening issued after four years questioning the deduction as wrongly allowed. on the same facts was not valid as complete frets were already submitted. There was no failure of the assessee to disclose full and true facts for allowability of deduction under section 36(1)(viii). Admittedly, notice under section 148 was issued after the expiry of four years. The notice under the proviso of section 147 can be issued after the expiry of four years only in case where income chargeable to tax has escaped assessment 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. From the perusal of the reason recorded it is apparent that no case has been made out that the assessee had failed to disclose fully 'and truly all material facts necessary for his assessment and no observation has been made in this regard. The Madras High Court in the case of Fenner (India) Ltd 20....
X X X X Extracts X X X X
X X X X Extracts X X X X
..../s 148 issued after expiry of four years from the end of the relevant assessment year quashed because there was no material on record that income chargeable to tax escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year. The Delhi High Court in the case of Global Signal Cables (India) (P.) Ltd 2014 Tax Pub(DT) 4178 (Del-HC) : (2015) 061 (I) ITCL 0120 : (2014) 368 ITR 0609 has held that Reassessment-Full and true disclosure Absence of new material on information=At) reopened assessment under section 148 on the ground that assessee had granted interest free loan, therefore, proportionate disallowance on account of interest and financial charges out of total interest and financial charges debited in Profit and Loss Account should have been made resulting in under assessment of income: Assessee challenged reopening of assessment on the ground that reopening was initiated on the basis of review or reappreciation of the same material and no fresh material of any sort had come in the possession of the department as also there had been no fa....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... on reasons not recorded. It is for the assessing officer to reach to the conclusion as to whether there was failure on the part of the assesese to disclose fully and truly all material facts necessary for the assessment for the concerned assessment year. It is for the assessing officer to from his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the assessing officer. The reasons recorded should be self explanatory and should not keep the assessee guessing for the reasons. Reasons provide llink between conclusion and evidence. The reasons recorded must be based on evidence. The assessing officer. in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that 'assessment year, so as la establish vital link between the reasons and evidence. That vital link is the safeguard against arbitr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ry of 4 years from the end of the relevant assessment years. If one looks into the assessment order as well as the chart produced by both the counsels, there is hardly any case of escapement of income. Secondly, the department has failed to prove that the assessee has failed to disclose fully and truly all material facts required for assessment of its income. Assuming but not accepting that there is some mistake in calculation either on the part of the assessee or on the part of the Income Tax Officer that does not mean that the assessee has not disclosed fully and truly the material facts regarding his income. If some calculation mistake has been committed for the purpose of deduction under a particular section that can be rectified, under section 154 of the Act, but on that ground no notice under section 148 can be issued. When the notice it4self is bad in law, there is no reason to carry on with the futile exercise of completion of reassessment proceedings. Therefore, on both the counts there is no case or justification to issue the notice u/s 148, particularly when the Income Tax Officer cannot assume jurisdiction to issue notice under section 148 as per the provisions of the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reasons for reopening of the assessment. The assesese produced the books and stock register to show that the assessee purchased materials from Darshan Sales Corporation, the payment was made by account payee cheque and also sales tax/VAT on the same was paid by the assessee as demanded by the sales tax department. The assessee also produced the stock register to show that the purchase was made on 19.3.2010 which purchase was of 8 pcs of bearing no. NA 3070NRB for Rs. 25,792/- from the said Darshan Sales Corporation. This particular material was immediately sold on 22.3.2010 to M/s. Reliance Indus. Ltd. The purchase and sale were both duly incorporation in the books of accounts. The sale price was Rs. 32,387/-. It was also submitted that the total amount of net sale to M/s. Reliance Industries was of Rs. 1,36,197 inclusive of the sale of Rs. 32,387/- and the sold gross sale amount was also added by the AO in the original assessment as undisclosed income. Therefore, firstly the purchase was evidences by corresponding sales and secondly the gross sale itself out of the purchase was added as income in the original assessment, therefore the addition of Rs. 25,792/- was not justified. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nfluences the determination of an issue by the mere circumstance of its relevance. It requires no further authority to make it significant its quintessential value lies in its definitive vitality. The controversy centres around the point whether the instruction or knowledge as to law is circumscribed by any limitation. When one speaks of law, one originally speaks of norms or guiding principles having legal effect and legal consequences. To possess legal significance for that purpose, it must be enacted or declared by competent authority. The legal sanction vivifying its imparts to its force and validity and binding nature. Law may be statutory law or judge made law. In every case, therefore, to be law it must be a creation by a formal source either legislative or judicial authority. A statement by a person or body not competent to create or define the law cannot be regarded as law, The suggested interpretation of enacted legislation and the elaboration of legal principles in text books and journals do not enjoy the status of law. They are merely opinions and, at best, evidence in regard to the state of the law and in themselves possess no binding effect as law. What is contemplate....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lisation that income has escaped assessment is covered by the words reason to believe, and it follows from the 'information' received by the ITO. The information is not the realisation, the information gives birth to the realisation. 4. Therefore, whether considered on the basis that the nature and scope of the functions of the internal audit organisation of the Income Tax Department are co-extensive with that of receipt audit or on the basis of the provisions specifying detailing its functions in the Internal Audit Manual, the opinion of an internal audit party of the Income Tax Department on a point of law cannot be regarded as 'information' within the meaning of section 147(b). In view of the above, it is clear that there was no new material before the AO for making third assessment order in the matter. The both the reasons are already available before the AO while framing the second assessment order which has already annulled as mentioned above. Keeping in view of the above, the reopening is therefore, bad in law and cancelled. This ground of appeal is allowed". 4. For the reasons given above, the ld. CIT(Appeals) held the reopening of assessment by the Ass....