TaxTMI 
TaxTMI 
2017 (12) TMI 1801
X X X X Extracts X X X X
X X X X Extracts X X X X
....ar business of the assessee, being regular and recurring receipts and, therefore revenue in nature, as opposed to being reflected as a liability by the assessee in its balance sheet. 3. Before the Ld.CIT(Appeals) the assessee challenged the order of the Assessing Officer, raising both legal contentions against the assumption of jurisdiction by the Assessing Officer to frame assessment u/s 147 of the Act and also on the merits of the case, both of which were dismissed by the Ld.CIT(Appeals). 4. Aggrieved by the same, the assessee has come up in appeal before us, raising the following effective grounds: "2. (a). That the Ld. CIT (Appeals) has erred in law and on facts in not quashing order u/s 143(3) r.w.s. 147 of Income Tax as all the facts relating to External Development Charges of Rs. 159,61,85,128.00 were fully & truly disclosed & discussed at the time of Scrutiny Assessment u/s 143(3) of Income Tax. (b). Not with standing of ground No.1 That the Ld. CIT (Appeals) has erred in law and on facts in confirming the addition of Rs. 159,61,85,128.00 on account of External Development Charges as it is neither income nor capital receipt of the assessee but is a d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... all material facts relating to the EDC charges by the assessee. The CIT(Appeals), therefore, held that the Assessing Officer had rightly invoked the provisions of section 147 of the Act since no view was made at the time of assessment proceedings on this issue and the assessee had failed to disclose material facts pertaining to the issue. The relevant findings of the Ld.CIT(Appeals) at paras 5.3 and 5.3.1 of the order are as under: "5.3 Submission of the appellant, arguments of assessing officer and the material on record have been carefully considered. In this case it is seen that at time of scrutiny assessment u/s 143(3), assessing officer issued a general questionnaire dated 23.08.2010 asking for the details of 'other liabilities' amounting to Rs. 449.29 crores. This was a general questioner consisting of 20 questions to the appellant. Assessing Officer submitted the breakup of these liabilities in which external development charges of Rs. 225.13 crores is one of the items and the others being change of land use and license fees. No further question was asked by the assessing officer on External Development Charges nor any submissions with regard to the nature ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ial necessary for assessment for the relevant year and therefore reassessment proceedings initiated by the assessing officer by issue of notice u/s 148 is as per the provisions of section 147 of the income tax Act 1961 and the reopening is upheld. Grounds of appeal no. 1 is dismissed." 10. Before us, Ld. counsel for the assessee reiterated the contentions made before the Ld.CIT(Appeals) contending that the assumption of jurisdiction by the Assessing Officer to frame assessment u/s 147 was bad since the basic conditions for assuming jurisdiction had not been fulfilled in the present case on account of the following: a) All facts regarding EDC were already available with the Assessing Officer in the form of Balance Sheet and various annexures depicting EDC charges, as also detail filed during assessment proceedings of "other liabilities" disclosing so. No new information had come in the possession of the Assessing Officer therefore, the re-opening tantamounted to change of opinion on the same set of facts. b) There was no failure on the part of the assessee to disclose any material facts pertaining to the EDC charges which is an essential pre-requisite for assumi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to treatment of EDC in the books of accounts of the Assessee. 5. The assessee during the course of re-assessment proceedings had also filed his objections (PB at Page-41-63) for the reopening of the case and the Ld. AO rejected such objections. 6. From a bare perusal of the reasons, it is very clear that there is no fresh material with the Assessing Officer to justify the reopening of the assessment and which is evident from the copy of the reasons and following few salient points need your kind consideration:- a). In the reasons at page 39, it has been mentioned in Ist paragraph (During perusal of records in this case), meaning thereby that no new material or information has been received but it is reappraisal from the information already in the file. b). In para-2, there is detail with regard to EDC and how, they are collected, which was in the knowledge of the earlier Assessing Officer also, have been mentioned and, as such, everything is borne out from the records. c). Then again certain observations have been made that how that liability of EDC has been reflected in the balance sheet and, thus, everything is borne out ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Deputy Commissioner of Income Tax 284 ITR 542 BOM-HC (Pages 63-67, Relevant page 64 of judgment set) e) G N Shaw (Wine) (P) Ltd V/s Income Tax Officer 260 ITR 513 CAL-HC (Pages 68-71, Relevant pages 68-69 of judgment set) f) Haryana Acrylic Manufacturing Co. V/s Commissioner of Income Tax 308 ITR 38 DEL-HC (Pages 72-78, Relevant pages 72,75 & 76 of judgment set) g) Sun Pharmaceutical Industries Ltd. V/s Dy Commissioner of Income Tax 381 ITR 387 DEL-HC (Pages 79-82, Relevant pages 79, 80 & 81 of judgment set) h) Mahavir Spinning Mills Ltd. V/s Commissioner of Income Tax 270 ITR 290 P&H-HC (Pages 83-87, Relevant page 83 & 84 of judgment set)" 11. The Ld. DR, on the other hand, relied upon the findings of the Ld.CIT(Appeals) and contended that the assessee had failed to disclose material facts pertaining to the EDC charges since only preliminary questions were asked during assessment proceedings on which no view could have been formed by the Assessing Officer and, therefore, assumption of jurisdiction had been rightly upheld by the Ld.CIT(Appeals). 12. We have heard the contentions of both the parties, perused the orders of the authorities bel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....al or Institutional Zone on their piece/chunk of land. The said amount received under the nomenclature "External Development Charges" is supposed be used by the assessee for carrying on of External- Development Works and other related jobs outside the land of the Land Developer/ Colonizer /Real Estate Builder/Promoter who has paid the .External Development Charges (EDC). Thus, it is seen that the receipt of External Development Charges by the assessee is attributable to its regular business. Further, the receipt and expenditure of the said amount is a regular, routine and re-occurring phenomenon as External Development Charges are being regularly received by the assessee from Land Developers/ Colonizers/Real Estate Builders; Promoters in every year and similarly these are being regularly expended /utilized/ spent for the purpose of carrying out External Development Works and other related jobs. In light of the above, it is observed that both the receipts as well as the expenditure related to External Development Charges (EDC) are clearly revenue in nature as they are attributable to the regular business of the assessee and are also a routine, regular and re-occurr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssing Officer thereafter states that since the assessee failed to include it in its income, the same has escaped assessment. And lastly the Assessing Officer mentions that "after independent verification of records with respect to the above mentioned facts", I have reason to believe that income has escaped assessment. 16. It is amply evident from the above that it was on the basis of already available information and not any new information pertaining to EDC charges that came in the possession of the Assessing Officer thereafter that led to the formation of belief that the EDC charges were in the nature of revenue receipt of the assessee and had thus escaped assessment. Therefore when the reopening was resorted to on the basis of material already on the file, the same having been provided by the assessee only during assessment proceedings, and nothing else, we fail to understand how the assessee could be charged with failure to disclose material facts relating to the said receipt. 17. Moreover the section empowers that Assessing Officer to assume jurisdiction to reopen the case when the escapement of income is on account of failure of the assessee to disclose material facts r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f assessee to disclose material facts . The findings of the Hon'ble High Court are as under: " At the outset, it is required to be noted that in the present case, the Assessing Officer has sought to reopen the assessment for A.Y 2009-2010 beyond the period of four years. Therefore, unless and until the condition precedent to reopen the assessment beyond the period of four years as mentioned in proviso to Section 147 of the I.T Act are satisfied, the Assessming Officer is not justified in initiating the reassessment proceedings. As per the proviso to Section 147 of the Act, if it is found that there was any failure on the part of the assessing in not disclosing the true and correct facts, which has resulted into escapement of the income, the Assessing Officer is not justified in reopening the assessment. 7.1 Considering the reasons recorded, there is no allegation that there was any failure on the part of the assessee in not disclosing the true and correct facts due to which, there is escapement of income from the assessment. 7.2 Moreover, from the reasons recorded, it appears that according to the Assessing Officer, the expenditure was incurred to establi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed assessment." This does not satisfy the requirement of law that the reasons to believe should, where the reopening is after the expiry of four years from the end of the FY, specifically state in what manner there was a failure by the Assessee to make a full and true disclosure of material facts. That, again, will have to be preceded by spelling out the tangible fresh material that led the AO to come to that conclusion. None of this is found in the reasons to believe recorded by the AO in the case on hand. The necessity for tangible material to be present to trigger the reopening was emphasised in Commissioner of Income tax v. Orient Craft Ltd. (supra). 24. The repeated assertion by Mr. Manchanda that the claim for depreciation for AYs 2006-07 and 2007-08 was disallowed by the AO is not entirely correct. It overlooks the history of the litigation around the claims for those AYs with both ending in the Assessee ultimately succeeding on the point after the remand to the AO by the ITAT for AY 2006-07 and the level of the CIT (A) for AY 2007-08 . Mr. Manchanda has also not been able to counter the submission that for AYs 2011-12 and 2012-13 the same claim for depreciation has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in the purview of "production" before the Assessing Officer of account books or other evidences. The relevant findings of the Hon'ble High Court are as under: "We are unable to accept Mr. Kaji's contention that this case of the Supreme Court and the observations of the Bombay High Court apply to the present case. In the instant case the assessee has not suppressed material facts as was the case in Jai Hind Printing Press's case (supra). He has not failed to disclose in the documents submitted to the ITO the amounts of the recoveries of municipal taxes from the tenants. Actually, in the profit and loss account one finds that in each of those two assessment years, the total amount of rates and taxes were first shown and the recoveries were shown as deductions from those amounts of rates and taxes. Therefore, to any person reading the profit and loss account it would be obvious that these recoveries, namely, Rs. 27,098 in one case and Rs. 26,477 in the other case, were recoveries of taxes for which the assessee-company before us was not claiming any deductions. Thus, the primary fact that these recoveries were made was before the ITO at the time of the original as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment and the AO is only attempting to review his earlier order through the reassessment proceedings which is neither valid nor justified as held by the Hon'ble Apex court in the case of CIT vs Kelvinator of India(2010) 320 ITR 561. The assessee was asked to furnish details in relation to "other liabilities" reflected in the balance sheet, which was duly filed disclosing EDC charges payable of Rs. 225.13 Cr. Admittedly no further questions were asked during assessment proceedings. It is reasonable therefore to presume that the Assessing Officer had formed a view on EDC charges while going through the detail furnished to him on his behest. The reopening now on the same set of information is nothing but based on change of opinion. The contention of the Ld.DR that there was no change of opinion since no view had been formed by the Assessing Officer during assessment as information regarding receipt of EDC had been furnished in response to a general questionnaire issued to the assessee asking for break up of other liabilities and no further questions were asked thereafter, is not acceptable. If a query is raised during assessment proceedings and answered by the assessee, undoub....