TaxTMI 
TaxTMI 
2022 (11) TMI 382
X X X X Extracts X X X X
X X X X Extracts X X X X
....Act dated 27.02.2017 on the ground that there is an escapement of income. On the request of the assessee, reasons for reopening were furnished by the Assessing Officer. Further, notice under section 143(2) of the Act dated 24.08.2015 was also duly served on the assessee. In response to the same, the assessee filed its objection to the reopening of the assessment. After considering the objections of the assessee, the Assessing Officer has disposed off by a speaking order dated 17.08.2017. After following due procedure and considering the submissions of the assessee, the Assessing Officer has completed the assessment under section 143(3) r.w.s. 147 of the Act dated 07.11.2017 determining total income of the assessee at Rs..20,84,11,151/- after making additions/disallowances. 3. The assessee carried the matter in appeal before the ld. CIT(A) and challenged the reopening of assessment under section 147 of the Act as well as on merits. After considering the submissions and case law relied upon by the assessee, the ld. CIT(A) has held that the action of the Assessing Officer in reopening the assessment does not satisfy the proviso to section 147 of the Act and accordingly he quashed t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ell as the prevailing legal opinion regarding re-assessment and the order of the CIT(A)-1 dated 28.09.2016, I am inclined to accept the contentions of the appellant. This ground of appeal is allowed. In view of this decision regarding re-assessment, the other grounds of appeal have become academic and do not require adjudication." 4. The Revenue is in appeal before the Tribunal. The ld. DR strongly supported the order passed by the Assessing Officer and submitted that the reopening is valid. 5. On the other hand, the ld. Counsel for the assessee has submitted that in the reasons recorded, it is very clear that on verification of the return and assessment records and after examining all the details filed by the assessee, the Assessing Officer has completed the assessment order under section 143(3) of the Act dated 25.03.2013. However, the Assessing Officer, again on the basis of some information, passed the reassessment order under section 143(3) r.w.s. 147 of the Act dated 07.11.2017, which is beyond four years, without mentioning any failure on the part of the assessee to disclose any material in the reasons recorded by the Assessing Officer is bad in law and strongly suppor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s are invested in bank, interest thereon is to be assessed under the head "Income from Other Sources". This view was held in a host of binding decisions such as South India Shipping Corporation Vs CIT (Mad) 240 ITR 24, CIT Vs Monarch Tools (P.) Ltd. (Mad) 260 ITR 258, The Totgars Co-operative Sales Society Ltd. Vs ITO (SC) 322 ITR 283 etc. Hence such interest receipts amounting to Rs. 20,17,90,108 has to be assessed under the head" Income from Other Sources". 3.1.4 After having decided to assess such receipts under the head "Income from Other Sources", only expenditure incurred to earn such income can be allowed as deduction to arrive at the net income from such receipts as held in CIT Vs V.P Gopinathan (Se) 248 ITR 449. In this case, as admitted by the assessee, only surplus funds were deposited in bank and with sister concerns and hence there is no interest outgo to earn such income. Since the interest is directly credited to the bank account of assessee by these deposit holders, there is no administrative expenditure also incurred by the assessee to earn such income. Hence, the whole receipts of interest amounting to Rs. 20,17,90,108/- needs to be treated as " Income fr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aking investment in shares, mutual funds and other securities, income from sale of the same being considered separately under the head "Capital Gains". C) Not an Expenditure to earn income: Donation paid by the assessee falls under this category. 3.1.6 The above analysis will clearly prove the fact that income by way of interest assessable under the head" Income from Other Sources" during the year is sum of Rs. 20,17,90,108/-. Consequently no amount will be assessed under the head "Profits & gains of business or profession". Thus, the taxable income of the A.Y. 2010-11 is worked out as under: (in Rs.) Income from Other Sources (as discussed above): 20,17,90,108 Income under the head Capital Gains (as returned): 2,24,07,388 Less: Short term capital loss b/f from A.Y. 09-10 : 1,62,91,313 61,16,075 Gross Total Income 20,79,06,183 Less: Deduction u/g 80G (as per return) 78,37,315 TAXABLE INCOME 20,00,68,868 As against this, total income assessed is Rs.15,50,25,060/-. Short assessment of income Rs.4,50,43,808/-. Tax effect: Rs. 1,52,69,850/- I....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on 148 of the Act, he wanted to treat the entire income as business income and not as capital gain as computed by the Assessing Officer in the original assessment order under section 143(3) of the Act dated 31.12.2010. We find that the assessee has fully and truly furnished all the details before the Assessing Officer and by considering the details filed by the assessee, the assessment was completed under section 143(3) of the Act dated 31.12.2010 and the Assessing Officer has accepted the claim of the assessee in respect of capital gains. Subsequently, the Assessing Officer wanted to treat the very same capital gain as business income on the basis of the same material available on record. Obviously, the reopening is only a change of opinion and no new tangible material came to the notice of the Assessing Officer to come to a different conclusion and thus, the change of opinion is not permissible in law as the judgement of the Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. (supra) applies. In the appellate order, the ld. CIT(A) has reproduced the relevant observations of the Hon'ble Supreme Court as has been reproduced hereinabove. 7.1 By following th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessing Officer reopened the assessment to treat the very same capital gain as business income on the basis of the same material available on record. 7.3 Apart from the above, in this case, the assessment was reopened beyond four years from the end of the relevant assessment year under consideration, the provisions of section 147 of the Act applies. Once the proviso to section 147 of the Act applies, it is the duty of the Assessing Officer to prove that the assessee has failed to furnish fully and truly all material facts to complete the assessment. In this case the Assessing Officer was not able to establish that there is failure on the part of the assessee to disclose fully and truly all materials. Therefore, in our opinion, the reopening is invalid beyond four years from the end of the relevant assessment year. 7.4 In this connection, in the case of Fenner (India) Ltd. v. DCIT 241 ITR 672, the Hon'ble Jurisdictional High Court has held that the reasons recorded by the Assessing Officer did not establish even prima facie, a failure on the part of the assessee to fully and truly disclose the material fact for the assessment and accordingly quashed the notice. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....er section 32AB; and (c) that adjustment from the Modvat account had wrongly been allowed as deduction as payment of excise duty. On a unit petition: Held, that the reasons recorded by the Assessing Officer did not establish, even prima facie, a failure on the part of the assessee to fully and truly disclose the material facts for the assessment, because: (a) the assessee had placed before the Assessing Officer all statements, a perusal of which clearly showed that all the materials required for calculating the extent of benefits under sections 80HHC and 32AB and the actual calculation had been placed before the officer, The mistake, if any, was solely due to the mistake made by the officer and was not a mistake attributable to any failure on the part of the assessee. (b) a perusal of the statements filed by the assessee in the assessment proceedings showed that the assessee had placed before the Assessing Officer every relevant detail regarding the excise duty paid, the manner in which the payment was effected, the amounts paid through the deposit account, the amount adjusted from the Modvat account, the opening balance in the Modvat accrual account, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessments for the relevant assessment years. Whether or not there was any failure on the part of the assessee in disclosing fully and truly all material facts necessary for his assessment, was a matter of fact and there could be no deemed failure as was sought to be contended on behalf of the income-tax authorities. Therefore, in the absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment years 2003-04 and 2004-05, the notices under section 148 having been issued after the expiry of period of four years from the end of the relevant assessment years, the very initiation of proceedings under section 147 stood vitiated and could not be sustained." 7.7 In the case of CIT v. Sil Investments Ltd. 339 ITR 166, the Hon'ble Delhi High Court has observed and held as under: "The assessments of the assessee for the assessment years 2001-02 and 2002-03 were reopened after four years on the ground that an amendment to section 80HHC of the Income-tax Act, 1961, had been made with retrospective effect from April 1, 1998. The conditions were not there in section 80HHC at the time when the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is not any and every material, howsoever vague and indefinite or distant, remote and far-fetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words "definite information" which were there in section 34 of the Act of 1922 at one time before its amendment in 1948 are not there in section 147 of the Act of 1961 would not lead to the conclusion that action can now be taken for reopening the assessment even if the information is wholly vague, indefinite, far-fetched and remote, The reason for the formation of the belief must be held in good faith and should not be a mere pretence. The original assessment for the assessment year 1958-59 was made on the respondent after allowing deduction of a sum of Rs. 10,494 'towards interest to certain creditors. Thereafter, by a notice under section 148 of the Income-tax Act, 1961, dated March 8, 1967, served on the respondent on March 14, 1967, the Income-tax Officer sought to reopen the assessment. In his report made in February, 1967, to the Commissioner for reopening the assessment of the respondent for the assessment year 1958-59 after four ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Income-tax Officer, or (b) to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must coexist to confer jurisdiction on the Income-tax Officer. It is also imperative for the Income-tax Officer to record his reasons before initiating proceedings as required by section 148(2). Another requirement is that before notice is issued after the expiry of Jour years from the end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice. The duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income-tax Officer of the account books or other evidence from which material evidence could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference....