TaxTMI 
TaxTMI 
2023 (3) TMI 565
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....t petition are stated as under : a) That the reopening of assessment, where it has been made under Section 143(3) of the Act, beyond a period of four years from the end of the relevant assessment year would be illegal, if the assessee had disclosed all material facts truly and fully during the previous assessment; that in the facts of the present case, the Assessing Officer had no jurisdiction to reopen the case of assessment for the Assessment Year 1997-98, there being no suppression of any material, all of which was before the Assessing Officer, when previous orders of assessment had been passed. b) In the light of the fact that all sale and lease back transactions made during the Assessment Year 1996-97, by the Petitioner, and since similar transactions were entered into leasing machinery to third parties during the Assessment Year 1997-98, which were different from the ones transacted in Assessment Year 1996-97, the Assessing Officer had no jurisdiction to reopen the assessment after depreciation allowance claimed by the Petitioner for the relevant assessment year had been examined by the Assessing Officer and had been accepted after scrutiny. c) That....
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....r the Assessment Year 1996-97 to substantiate its contention that all disclosures for that relevant year had been made before the Assessing Officer, consequently, prompting the Tribunal to allow the Petitioner's appeal and quash the reopening of assessment for that year. No counter affidavit denying this factual position has been filed by the revenue before us. We have proceeded with the hearing of the matter on the basis of these uncontroverted facts. 5. We have heard Mr Ajaykumar R. Singh, learned Counsel for the Petitioner and Mr Akhileshwar Sharma, learned Counsel for the Respondents. We have perused the record of the petition and the additional affidavit of the Petitioner. 6. It is the Petitioner's contention that it filed its return of income for the previous year ended 31.03.1997 relevant to the Assessment Year 1997-98 on 01.12.1997, in which it disclosed two transactions with M/s. Gremach CNC Limited and M/s. Technology Plastics Limited, being sale and lease back transactions of machinery, on which it had claimed depreciation @ 100%, alongwith lease rental income on such assets from these two entities. It is further the case of the Petitioner that after the return ....
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....eyond the period of four years from the end of the relevant Assessment Year. It was further the Petitioner's contention that the assessee had not failed to disclose all material facts in previous assessment years, where all material and transactions were before the Assessing Officer disclosed truly and fully, and as such, the reopening of assessment after four years, was without any jurisdiction vested in the Assessing Officer. All these contentions were raised in the reply dated 22.09.2004 filed by the Petitioner to the notice for reopening of assessment. 8. It is further the contention of the Petitioner as raised in its additional affidavit dated 06.12.2022, that the revenue had issued a notice under Section 142(1) of the Act, on 21.09.1999 during original assessment proceedings for Assessment Year 1997-98, pursuant to which the Petitioner had filed submissions vide its letter dated 23.01.2000 and its letter dated 01.03.2000 submitting complete information about the sale and lease back transactions with M/s. Gremach CNC Limited and M/s. Technology Plastics Limited; Further that the reopening is now based on reassessment proceedings for the Assessment Year 1996-97, in which an ....
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...., Assistant Commissioner of Income-Tax and others, dealt with the reasons recorded by the Assessing Officer. The relevant paras of the judgment are quoted as under : "20. In the case in hand it is not in dispute that the assessment year involved is 1996-97. The last date of the said assessment year was March 31, 1997, and from that date if four years are counted, the period of four years expired on March 1, 2001. The notice issued is dated November 5, 2002, and received by the assessee on November 7, 2002. Under these circumstances, the notice is clearly beyond the period of four years. 21. The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He h....
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....oceeding with reopening of assessment. Para 16 of the judgment reads thus : "16 The Assessing Officer was aware of the fact that the script of Shreenath was allegedly a penny stock company as it is clear from the annual information report given by the Assessing Officer himself to petitioner alongwith the first notice. Therefore, there is no question of any further information on the same issue being treated as information so as to justify the reopening of the assessment. The expression "reason to believe" in Section 147 of the Act has been held to mean a cause or justification. It is also the position that at the stage when the Assessing Officer reopens an assessment, it is not necessary that the material before the Court should conclusively prove or establish that income has escaped assessment. But that does not mean that the Assessing Officer will not even mention enough details of tangible material that he has received for him to reopen the assessment. A general and bald statement, as stated in the reasons for reopening that Kolkata Investigation Wing have analyzed the trade data of identified 84 penny stocks and there are 13 penny stocks in which petitioner is found to....
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....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. In the affidavit in reply, it is stated that the reassessment proceedings was based on audit objections. In another unreported judgment of this Court in Jainam Investments v. Asst. CIT [2021] 439 ITR 154 (Bom); Writ Petition No.2760 of 2019 dated August 24, 2021 relied upon by Mr. Pardiwalla, it is held that the reasons for reopening an assessment should be that of the Assessing Officer alone who is issuing the notice and he cannot act merely on the dictates of any another person in issuing the notice. In Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC), also relied upon by Mr. Pardiwalla, the court held that in every case, the Income-tax Officer must determine for himself what is the effect and consequence of the law mentioned in the audit note and whether in consequence of the law which has come to his notice he can reasonably believe that income had escaped assessment. The basis of his belief must be the law of which he has now become aware. The opinion rendered by the audit party in regard to the law cannot, for the....
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....ment has been made under section 143(3), action can be initiated after the expiry of four years from the end of the relevant assessment year if the income chargeable to tax has escaped assessment because of the failure of the assessee to make fully and truly a disclosure of the material facts. The provisions of section 147 have been interpreted in a recent judgment of the Supreme Court in CIT v. Kelvinator of India Limited [2010] 320 ITR 561. The Supreme Court noted that after April 1, 1989 the power to reopen is much wider than earlier since the substantive part of section 147 only imposes one condition, namely, that the Assessing Officer must have reason to believe that income has escaped assessment. The Supreme Court held that none the less, a mere change of opinion would not justify the exercise of the power to reopen an assessment and there must be tangible material before the Assessing Officer to come to the conclusion that income has escaped assessment. The Supreme Court held thus (page 564) : ". . . one needs to give a schematic interpretation to the words 'reason to believe' failing which, we are afraid, section 147 would give arbitrary powers to ....
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....earlier assessment order. The Tribunal concluded that the reassessment proceedings are liable to quashed for the Assessment Year 1996-97. In their replies, the Petitioner has specifically raised the contention that for the Assessment Year 1997-98, the assessee had entered into similar transactions with two other entities and that there was no allegation of non disclosure of primary facts in the notice nor was there any allegation that there was some new source of income, which had come to light to make the Assessing Officer believe that there was escapement of taxable income. In fact it is clear that the parties with whom the sale and lease back transactions were entered into by the Petitioner for the year 1996-97, were clearly different from the ones with whom similar transactions were entered into for the Assessment Year 1997-98, in which depreciation allowance was granted after detailed scrutiny. The Petitioner has produced before us the letter dated 21.09.1999 in reply to earlier notice under Section 142(1) of the Act, issued for reopening the Assessment Year 1997-98, wherein they were called upon to furnish the copies of bills for addition to fixed assets during that year and ....