TaxTMI 
TaxTMI 
2023 (6) TMI 261
X X X X Extracts X X X X
X X X X Extracts X X X X
....ards difference in interest. 4. Further, the ld.CIT(A) failed to observe that the notes to financial statements clearly mentioned the interest income which pertained to the previous year and accordingly erred in upholding the action of the Ld.AO in assessing the difference in interest of Rs. 27,69,422/-. 5. The ld.CIT(A) erred in confirming the addition of difference of prior period income of Rs. 1,26,71,371/-." 2.1. The assessee had further filed the additional grounds of appeal, which read as under : "1. The ld.CIT(A) erred in upholding the reassessment proceedings when there was no failure or omission on part of the appellant to disclose fully and truly, all material facts while completing the original assessment u/s 143(3) of the Income Tax Act. 2. The ld.CIT(A) erred in upholding the decision of the Ld.AO in treating sale of partly paid up shares as fully paid and confirming the addition of Rs. 50,14,625/- as long term capital gain. 3. The ld.CIT(A) erred in confirming the addition of Rs. 27,69,422/- towards difference in interest. 4. Further, the ld.CIT(A) failed to observe that the notes to financial statements clearly....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee had sold 29000 shares Rs. 7/- per share and 28,65,500/- shares @ 5.25 per share on 31.07.2005 and claimed the profit on sale of investment of Rs. 64,47,895/- as exempt u/s 10(38) on the reason that the shares are listed shares and that Securities Transaction Tax (SIT) has already been deducted. Though in, its letter Dt: 16.04.2008, the assessee stated that the details of STT paid would be provided separately, the same have not been found on record. Further, under the current circuit breaker norms of Stock Exchanges, it is not possible that the prices Rs. 5.25 and Rs. 7.00 could be quotations on the same day i.e.. 31.07.2005. In view of the same the transaction appears to be an off-market negotiated transaction. Since SIT will not be deducted in off-market transaction, the sale would attract capital gains tax. (ii) As the details of STT are not on record, the exemption u/s 10(38) of .64,47,895/- requires to be disallowed. (iii) Assessee claimed depreciation on discarded assets amounting to 21,25,929/ Depreciation is allowable only when the asset is owned and put to use by the assessee. In the instant case, since assets are discarded and not put to use the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The notice u/s 148 is issued on 28-03-2012. Thus, there is a time gap of more than 4 years from the end of the relevant Assessment year and issue of notice under Sec.148. In terms of the provisions of section-147 of the I.T. Act, the Assessment is bad and illegal as it is time barred as there is no fault on the part of the Assessee to disclose filly and truly all material facts necessary for his assessment. B. Without prejudice to the above, it is submitted that the A.O has issued the notice u/s 148 only due to the change of opinion and nor based on any new information that has come to his notice subsequently. There is no information or reason with the AO to believe that income has escaped assessment. In this regard, reliance is placed on CIT v. Munjal Showa Ltd. (2012). 205 Taxman 351 (Delhi)(HC) where in it has been held that Reassessment due to the change of opinion when there is no failure on part of Assessee in disclosing the full facts is not valid. C. The AO has no information on record to show that income chargeable to tax has escaped assessment due to the failure of the Assessee to disclose fully and truly all the material facts necessary for the Assess....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... grounds of appeal filed by the assessee and to substantiate his case, he relied upon the decisions in the case of Brooke Bond India Ltd. Vs. CIT - (1991) 59 Taxman 82 (CAL) as well as CIT Vs. Begum Noor Banu - (1993) 69 Taxman 565 (Andhra Pradesh.) and further submitted that the additional grounds raised by the assessee cannot be entertained. In support of his case, he also filed the following written submissions, which are to the following effect : "1. Most respectfully submitted that the Appellant has raised Additional Grounds regarding reassessment proceedings U/s 147 of the I T Act. In this regard, the comments of the Assessing Officers were called for. The report of the Assessing Officer, vide his letter bearing F No. CC-2(3)/ ECI Engg/2022-23 dated 18.10.2022 has been received which has been duly forwarded by the Range Head vide his letter bearing F No. JCIT/CR-2/HYD/2/ITSC/2022-23 dated 26/10/2022 (Copies of both are enclosed herewith as Annexure I. 2. At the outset, it is pointed out that these grounds regarding reassessment have been raised by the Assessee for the first time before the Hon ITAT and it was neither raised before the AO nor before the TA CI....
X X X X Extracts X X X X
X X X X Extracts X X X X
....letter dated 27.11.2012. 6. In view of the above, it is not only a case of fraudulent claims, but also of falsity, of shifting stands and misrepresentation of facts before the Revenue Authorities to evade the taxation. Reliance is placed on the following decisions in this regard: > Phoolchand Bajrang Lal and others Vs. Income Tax Officer (1993) 203 ITR 456 SC 7. It is clear from above mentioned AO's report and the Additional CIT's comments thereon, that there is no change of opinion, but it is a fraudulent claim of exemption U/s 10 (38), for which the assessee itself had later admitted the mistake and offered the LTCGs for taxation. So, the raising of such frivolous and inadmissible additional grounds of appeal is a deliberate act to avoid payment of due taxes. The said report also makes it clear that the issue of Notice U/s 148 is within the purview of provisions contained in section 151 of the IT Act and after due approval of the CIT-il, Hyderabad. In this context, it may be pointed out that the Assessee has not approached with clean hands neither before the assessing officer nor before appellant authorities, including the Hon'ble ITAT." ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... has computed the income accordingly. On appeal, the assessee has not raised any ground of capital gain before the 1st appellate authority and thereafter, for the first time, the assessee had raised the ground before the Tribunal. The Tribunal has allowed the raising of the additional ground. The hon'ble jurisdictional High Court after considering the various judgments and the facts of the said case, had held that the Tribunal has no power to admit a new additional ground which deals with the new claim of the assessee. In view of the above, the judgment relied upon the by the Revenue in the case of Begum Noor Banu (supra) is not applicable. Similar are the facts in the case of Brooke Bond India Ltd (supra). Hence, the decisions relied upon by the Revenue are not applicable to the facts of the case. In view of the above, the additional grounds raised by the assessee are admitted. 11. Now we will deal with the additional grounds raised by the assessee. ADDITIONAL GROUND NO. 1 11.1 In the present case, the assessee has filed the original return of income on 23.11.2006 admitting total income of Rs. 7,79,88,094/- and the return of income was processed by the CPC on 10.03.2008 a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....head PF is due, which clearly indicates that the liability is for more than two months as against normal trend of one month. (v) The shares of Rockwell India ltd were sold at two different rates of Rs. 7 & Rs. 5.25 per share. The breakup is not available on record. By applying the rate at Rs. 7 per share the understatement of sale proceeds of Rs. 50.14, attracts long term capital gain tax. 12. From the basis of the above said reasons, it was the contention of the ld. AR that the proposal given by the Assessing Officer was a revised proposal which is clear from the form/format by the Assessing Officer for seeking approval from the ld.CIT. Further, it was submitted that the ld.CIT had accorded the approval without satisfying himself and the approval as per record was accorded on 31.03.2011. It was submitted that if the re-opening is to be made within 4 years, then the satisfaction of the Commissioner of Income Tax is not required before reopening of the assessment. However, if the reopening is made after a period of 4 years, then the satisfaction of the CIT is required thereby concluding that the assessee had failed to disclose truly and correctly material facts at the ti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee's books only regarding "reversal on account of cancellation and price revision. (supra)". We therefore quote Hon'ble Bombay High Court's landmark decision in Hindustan Lever Limited Vs. R.B. Wadekar (2014) 268 ITR 332 (Born) that an Assessing Officer's reopening reasons have to be read on standalone basis; as it is, without any scope of further m:rovement at a later stage by way of addition, deletional or- substitution therein. We thus quote that to conclude that the impugned reopening has been rightly quashed by the CIT(A) as a mere change of opinion only. All this, renders the latter issue on merits as academic. No other argument has been pressed before us." 8. Thus, according to the Tribunal, the reopening was initiated beyond the specified period of four years from the end of the re levant assessment year. In the light of Section 147(1) first proviso of the Act, Tribunal further noted that reopening of assessment is only permissible if the assessee had not disclosed all the relevant particulars fully and truly before the assessing officer. Relying on a decision of the Bombay High Court in Hindustan Lever Limited v. R.B.Wadekarl, Tribunal held....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efore the Assessing Officer in first round, the assessee has disclosed the material information about the long term capital gain. The Assessing Officer after noticing the contention of the assessee had asked the assessee to provide the details of STT paid on the share. Thereafter, no addition was made in the hands of the assessee on account of long term capital gain by the Assessing Officer. It was the submission of the assessee by the ld.AR that once the assessee had disclosed all the information to the Assessing Officer, then it is for the Assessing Officer to use his power under the Act for making the additions in the hands of the assessee. Further, it was submitted that the additions were made on account of the Audit Objections. It was the submission of the ld.AR that no reopening can be made based on the audit objections. The same audit report was available with the official of the Revenue at the first instance which was duly referred by him in Para 4 of his order and therefore, no addition can be made based on the same audit report. 14. The ld.AR had also filed the following submissions in support of his case. "1. The above appeal preferred by the Appellant and th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncome Tax was fully aware of the fact that the complete facts in relation to the issues arising out of assessment were completely disclosed during the course of assessment proceedings as seen from the wordings recorded at para 10 of Form of Approval. 7. Therefore, the Appellant submits that the sanction accorded by the Commissioner of Income Tax on 19/03/201.1 was on an application of mind that the reopening of the assessment was within four years. Further, the Form also states that it is a revised proposal (Please see Head Note). 8. Further, the notice U/s. 148 was issued on 28/03/2012 which falls beyond the period of four years from the end of the assessment year 2006-07 triggering the proviso to section 148 whether there was any failure on the part of the Appellant to furnish all material facts for completion of the assessment. 9. The Appellant further states that no sanction was obtained for issue of notice on 28/03/2012 which fell beyond the period of four years from the end of the Assessment Year 2006-07. 10. The Appellant prays that the aforesaid facts may kindly be taken on record for adjudication as the Hon'ble Tribunal deems fit as ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... period of four years. Under the circumstances, the High Court is absolutely justified in quashing the re-assessment proceedings and the notice under section 148 of the Income tax Act. No interference of this Court is called for in exercise of powers under article 136 of the Constitution of India. 2. With this, the Special Leave petition stands dismissed. of. 3. Pending application(s), if any, shall stand disposed of." 12. Referring to the following decisions, he submitted that no notice u/s. 147 can be issued after the expire of four years from the end of the assessment year unless there is a failure on the part of the assessee to disclose fully and truly all material necessary for the assessment. i. ACITv.Rajesh Jhaveri Stock Brokers(P.) Ltd.[2007] 291 ITR 500 (SC) ii. CITv.Foramer Finance (264 ITR 566) (SC) iii. Prashant Joshi vs. ITO (189 taxman 1) iv. RPG Transmission (359 ITR 673) (Mad HC) v. Kotarki Constructions(P.) Ltd. vs ACIT(89 taxmann.com 265)(Kar.HC) vi. Bombay Presidency Golf Club Ltd. vs. ITO (332 ITR 226) (Bom.) vii. CIT vs. Hewlett-Packard Globalsoft(P.) Ltd. (380 ITR 386 (Ka....
X X X X Extracts X X X X
X X X X Extracts X X X X
....v. Lakhmani Mewal Das (103 ITR 437) (SC) ii.Dass Friends Builders(P.) Ltd. vs.DCIT (153 taxmann 282) (Alh.HC) iii.TTK Prestige Ltd. v. DCIT (97 taxmann.com 112) (Kar.HC) iv. Known Agro Foods(P.) Ltd. vs. ACIT 375 ITR 460 (Del.HC) 16. So far as, the merit of case is concerned, the ld. Counsel for the assessee submitted that even on merit also the amount has to be allowed as expenditure u/s. 37 of the I.T.Act. For the above proposition, he relied on the following decisions:- i.ACIT vs.L.S.Cable(P) Ltd. 88 taxmann.com 616 (Del.HC) ii.Reliance Gems & Jewels Ltd. vs. DCIT3(3), Mumbai (ITA No. 3855/Mum/2013) dated 28.10.2015(ITAT,Mumbai) iii.CIT vs. E-Funds International India(2007) 162 Taxman 01(del.) iv. CIT vs. ESPN Software India Pvt.Ltd. (301 ITR 368) (Del. HC) v. CITvs. Aspentech India(P.) [2010] 187 taxman 25 (Delhi) vi. Bombay Steam Navigaiton co.Pvt Ltd. (56 ITR 52) (SC) vii. Empire Jute Co.Ltd. vs. CIT (124 ITR 1) (SC) 17. The ld. DR on the other hand heavily relied on the orders of the AO and CIT(A). So far as the validity of reassessment is concerned, he submitted that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the end of the relevant assessment year and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment and therefore, in view of the proviso to section 147 of the I.T.Act, the AO cannot reopen the assessment beyond a period of four years from the end of the relevant assessment year. It is his submission that mere mentioning of failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment is not sufficient in absence of any tangible material before the AO to substantiate or to show as to which part of the income or which facts necessary for completion of the assessment were not disclosed by the assessee. Therefore, according to the ld. AR, the reassessment proceedings initiated by the AO are not in accordance with law and has to be quashed. 21. We find sufficient force in the above arguments advanced by the ld. Counsel for the assessee. A perusal of the profit and loss account, copy of which is placed at page 44 of the paper book clearly shows that the assessee has claimed project expenses written off at Rs. 84,97,952/- as expenditur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....terprises Ltd. was not a new fact which has emerged. on the contrary in the original returns that were filed. the factum of payment of licence fee to RPG Enterprises Ltd. was clearly disclosed and, therefore. it appears that the Assessing Officer had a mere relook at the same facts, which, in our considered opinion, is against the dictum of the apex court and the principles that emerge therefrom. An analysis of the orders of the commissioner of Income-tax ("'Appeals) as well as the Tribunal would show that the Assessing officer had actually before him all the relevant materials at the time of the original assessment itself and, therefore, the finding of fact recorded by the Commissioner of Income-tax ("'Appeals) as well as the Tribunal docs not call for any interference and we find that the reassessment was merely a relook of the earlier assessment with a change of opinion and, therefore, the reasons by which the ""Assessing Officer reopens the assessment are actually vague and fanciful. We also find that the Commissioner of Income-tax (Appeals) while dealing with the appeals arising out of the assessment had considered at length the Assessing officer's finding and came....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... that the reopening of assessment beyond a period of four years from the end of the relevant assessment year is not in accordance with law. Mere mentioning of the words failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment by the AO, in our opinion is not sufficient in absence of showing which part of the material was not disclosed by the assessee. This view of ours finds support from the decision of Hon'ble Bombay High court in the case of Hindustan Lever Ltd. vs R.B.Wadker reported in 268 ITR 332 where the Hon'ble High Court has held that the AO 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 to establish the ital link between the reasons and evidence. We, therefore, hold that the initiation of reassessment proceedings by the AO in the instant case is not in accordance with law and therefore, the same has to be quashed. Accordingly, we quash the reassessment proceedings and the grounds raised by the assessee on this issue are allowed." 16. Per contra, ld. DR had submitted that there was a typographical mistak....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessment, the re-opening cannot be made in the eyes of law and we are in agreement with the decision cited by the ld. AR in the case of Bhor Industries (supra) and PCIT Vs. Lanco Hills (supra). In the light of the above, reopening made by the Assessing Officer is not in accordance with the law and the consequential assessment made by the Assessing Officer is also bad in law. Further, the Assessing Officer in the notice of reopening dt.28.03.2012 copy of which has already been reproduced at para 4.1 of the order had deleted that the notice was issued after obtaining the necessary satisfaction from the CIT. This fact clearly shows that at the time of issuing the notice, there was no satisfaction on record by the Revenue authorities permitting the Assessing Officer to reopen the assessment beyond a period of 4 years. Had that satisfaction was available then there was no reason for the Assessing Officer to delete the above noted facts. In view of the above, a conclusion may be drawn that the reopening was made beyond a period of 4 years without recording satisfaction by the CIT. 21. There is another reason for us to allow the additional grounds raised by the assessee. In our vie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of 4 years after recording due satisfaction in the eyes of law. 23. Since we have allowed the additional grounds of assessee, therefore, the grounds raised by the assessee on merit have become infructuous. Accordingly, the appeal of the assessee is allowed. 24. In the result, the appeal of the assessee is allowed. 25. Now we will take the appeal of Revenue. 26. As we have already allowed the additional grounds filed by the assessee, the same renders Revenue's grounds of appeal to have become infructuous. Thus, the appeal filed by the Revenue is dismissed. 27. In the result, the appeal filed by the Revenue is dismissed. 28. To sum up, the appeal of the assessee is allowed and the appeal of Revenue is dismissed. Order pronounced in the Open Court on 15th May, 2023. ============= Document 1 OFFICE OF THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE -2(2), HYDERABAD NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 F.No.DCIT-2(2)/AAACE4411G/2011-12 To The Principal Officer, M/S ECI Engineering and Construction Company Ltd., Plot.No.A-12 & 13, Manikonda Village, R.R.Dist, Hyderabad - 500089. Dated: 28-03-2012 Where as I have r....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ors, 3rd floor, Road No.1 , Jubilee Hills, Hyd-33. AAACE4411G/E-249 Company Circle-2(2)/ Range-2, Hyderabad 2006-07 5A) 6 7 7.a) The quantum of Income which has escaped assessment Whether the provisions of sec.147(a) or 147(b) or 147(c) are applicable or both the sections are applicable Whether the assessment is proposed to be made for first time. If the reply, is In affirmative please state Whether any voluntary return had already been filed 147(C) NO YES 40 9 7.b) If so, the date of filing the said return 8 8b) If the answer to item 7 is in the negative please state; a) the Income originally assessed assessment Whether it is a case of under assessment. Assessment at too low rate, assessment which has been made the excessive loss or depreciation. Whether the provisions of section 150(1) are applicable. If reply is in the affirmative, the relevant facts may be stated against item no.11 and it may also be brought out that the provisions of section 150(2) would not stand in the way of initiating proceedings u/s 147 23-11-2008 8,43,96....