TaxTMI 
TaxTMI 
2022 (11) TMI 64
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.... the above said notice, the assessee filed a letter dated 25.06.2019 requesting the AO to treat the return already filed u/s 139(1) of the Act as the return filed in response to the above said notice. The AO also supplied the reasons for reopening of the assessment to the assessee, to which the assessee filed its objection. The AO rejected the objections filed by the assessee by passing an order on 24.10.2019. In the original assessment, the loss of Rs.1,31,222/- declared by the assessee under normal provisions of the Act had been accepted and the total income was determined u/s 115JB of the Act at Rs.3.16 crores. In the reassessment proceedings, the AO referred the matter relating to international transactions to the Transfer Pricing Officer. After passing of draft assessment order, the assessee filed its objections to Ld Dispute Resolution Panel. After receiving directions from Ld DRP, the AO determined the total income under the normal provisions of the Act at Rs.4.72 crores and book profit at Rs.3.16 crores. Since the total income computed under normal provisions of the Act was more than the book profit, the AO raised tax demand on the total income computed under normal provisi....
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....s not disclosed by the assessee to him during the course of assessment proceedings in order to show that there was escapement of income due to the failure of the assessee to disclose truly and fully. He contended that the AO has made allegations of escapement of income only upon verification of the records already available on record. Accordingly, the ld A.R contended that the AO has revisited the already available record and has reopened the assessment merely on change of opinion. 6. In order to appreciate the contentions of the assessee, it is necessary to extract the reasons recorded by the AO for reopening of assessment. It is extracted below:- "The return of income for A.Y. 2012-13 was filed on 22.09.2016 declaring income at a loss of Rs 1,31,222/-. The book profit as per the provisions of section 115JB(2) was computed at Rs. 3,16,57,364/-. In this case, the assessment was completed under section 143(3)(ii) of the IT Act, 1961, on 08.02.2015 determining the taxable income at Rs. 3,16,57,360/- u/s 115JB(2). The assessee is in the business of shipping agency services and also derivatives trading. 2. On verification of the records, it was noticed that the ass....
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.... effect of under- assessment of Rs. 1,71,92,673 with consequent tax effect of Rs. 55,78,162/-. It is evident from the above facts that the assessee had not truly and fully disclosed material facts necessary for his assessment for the year under consideration thereby necessitating reopening u/s. 147 of the Act. Thus I have reasons to believe that income to the extent of Rs. 6,07,62,673/- chargeable to tax has escaped assessment within the meaning of section 147 of the I.T. Act. 3. Applicability of the provisions of section 147/151 to the facts of the case: In this case a return of income was filed for the year under consideration and regular assessment us 143(3) was made on 08.02.2015. Since, 4 years from the end of the relevant year has expired in this case, the requirements to initiate proceeding us 147 of the Act are reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the assessment year under consideration, it is pertinent to mention here that reasons to believe that income has escaped....
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....ssable as deemed income u/s 2(22)(e) of the Act involving tax effect of Rs.1,41,36,287/-. (b) The assessee has given corporate guarantee for term loans obtained by one of its foreign subsidiary companies named M/s Sunrise Maritime Pte Ltd, Singapore for purchase of old ships. The assessee has determined arms length price of the above transaction in its transfer pricing study. However, the assessee has provided the corporate guarantee at free of cost, whereas, if such guarantee was given to an unrelated entity, the assessee would have charged some cost. The AO estimated the guarantee commission @ 3%. (c) The assessee has given interest free loan of Rs.7,62,89,795/- to its foreign subsidiary company, but did not collect any interest. Under Arms length principle, the assessee should have charged interest of Rs.99,17,673/. The case of the AO is that the details relating to the above said transactions may have been may be embedded in annual report, audited P&L A/C, balance sheet and books of account in such a manner that it would require due diligence by the AO to extract these information. Apparently, the AO has taken protection under Explanation 1 to sec.147 of th....
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....report. (C) The next issue relates to the Corporate guarantee given to the AE. (a) The Ld A.R submitted that the details of corporate guarantee have been reported under the head "Contingent and Claims against the Company not acknowledged as Debts", given under Notes to Accounts to forming part of the Accounts. (b) The auditor has furnished the details of international transactions entered by the assessee in the report given in Form No.3CEB, which relate to the international transactions entered by the assessee. Clause 13(b) of the Annexure to Form 3CEB specifically furnished the details of Corporate Guarantee given by the assessee. (c) Annexure D to Form 3CEB furnishes the details of all the international transactions entered with M/s Sai Trans Pte Ltd. The auditor has specifically mentioned the details of loan and Corporate Guarantee given to the above said AE. (d) The Ld A.R submitted that all these documents have been filed in compliance with specific requirements of the Law and the transactions of giving corporate guarantee has been disclosed quite explicitly, which could have come to the knowledge of the AO on a cursory glance of th....
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....we find that there is merit in the contentions of the Ld A.R that there was no failure on the part of the assessee in disclosing all material facts relevant to the computation of income fully and truly to the assessing officer during the course of original assessment proceedings. When the assessee has duly furnished all the material facts relevant for computation of income before the AO, it is for the AO to decide the manner of examining those details. If there is failure on the part of the AO, in our view, the same cannot be a ground for reopening of assessment after the expiry of four years from the end of the assessment year, when the original assessment was completed u/s 143(3) of the Act. 13. The view of the AO and Ld DRP is that the Explanation 1 to sec.147 would permit the AO to reopen the assessment. They have so taken the view on the reasoning that the information furnished by the assessee could be discovered by the AO only with dur diligence. In our view, the view so expressed by the tax authorities is against the facts available on record. We have earlier noticed that the AO has raised specific query with regard to the first two items discussed above. With regard to t....
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....hat it is noticed that petitioner has wrongly claimed deduction under Section 80 IB of the Act on total income instead of claiming on the business income and has wrongly claimed deduction under Section 80 IB of the Act on capital gain and income from other sources and thus petitioner has failed to disclose true and full material facts before Purti Parab 10/24 909-WP-2815-2019.doc Respondent No.1. There is nothing else in the reasons. A general statement that the escapement of income is by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment is not enough. The Assessing Officer should indicate what was the material fact that was not truly and fully disclosed to him. ............. Therefore, though it is correct that explanation 1 to Section 147 of the Act says mere production of books of accounts or other documents are not enough, and the duty of disclosing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee, this duty does not extend beyond the full and truthful disclosure of all primary facts. Once all the primary facts are befor....
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....d to and relied upon the material on record. There is not a single item, no document and no material which did not form part of the original assessment proceedings on the basis of which the Assessing Officer has formed a belief that the income chargeable to tax has escaped assessment. In clear terms, the mandatory requirement flown from first proviso to Section 147 of the Act is not established. The beginning portion of the reasons itself which is in the nature of preamble referred that, "In this case, on verification of the case record, it is noticed that". Thus, entire reasons proceed on verification of the case records. Even, with respect to each individual ground raised by the Assessing Officer, he has referred to the documents, material and information already on record during the assessment proceedings. 8. We have also perused the documents which form part of the original assessment proceedings and find that the assessee had made all necessary disclosures. We notice that in the computation of income along with return filed, the assessee had shown amount of outstanding debit/credit interest in inter-branch account transferred to Profit & Loss A/c as per R.B.I. instruc....