TaxTMI 
TaxTMI 
TaxTMI 
2023 (6) TMI 261
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 mentioned the interest income which pertained to the previous year and accordingly erred in upholding the act....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 assessee is not entitled to depreciation. (iv) Assessee claimed employee's remuneration and benefits amounting to Rs. 4,73,76,085/- as per schedule 12 of P&L a/c. Average salary per mon....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Assessment. The Assessee has submitted all the facts and information to the A.O at the time of making original Assessment. Synopsis of the arguments of the appellant is as follows : 1. There is no fault on the part of the Assessee,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at 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 CIT (A). Therefore, the Additional Grounds of Appeals filed on 11.01.2017 are not admissible. Reliance is placed on the following decisions in this regard: > Brooke Bond India Ltd (1991) 59 Taxmann 82 (Cal) > Begum Noor Banu (1993)69 Taxmann 565 (AP) 3. Without prejudice to the above....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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." 9. We have heard the rival contentions of the parties and perused the material available on record. In fact, whether the Assessing Officer can reopen the assessment without the satisfaction of the Commissioner of Income Tax, in case if reopening is made beyond a period of 4 years, is a jurisdictional ground. Similarly, whether there was any satisfacti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....arious 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 and the assessment was completed u/s 143(3) of the Act on 23.04.2008 with taxable income of Rs. 8,43,96,302/-. Thereafter, the Assessing Officer had issued notice u/s 147/148 of the Act to the assessee. 11.2 Before us, ld. AR has submitted that the re-opening of the assessment was taken place beyond a period of 4 years and the Assessing Officer has not record....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 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 time of assessment. It was submitted that it is incumbent and necessary for the Assessing Officer to mention that the assessee had failed to disclose fully and truly all the material facts. He had drawn our attention to the decisions of Hon'ble Mumbai High Court in the case of Bhor Industries Vs. ACIT reported in 267 ITR 161 and also jurisdictional High Court in the case of PCIT Vs. Lanco Hills Technol Par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- 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 that assessing officer's reopening reasons have to be read on a standalone basis, without any scope for further improvement at a later stage by addition or deletion or substitution. Therefore, Tribunal held that CIT(A) was justified in taking the view that reopening of assessment was on account of mere change of opinion. 9. We are in agreement with the views expressed by the Tribunal. 10. The fact that the reopening of assessment....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 the Department bearing ITA No. 968/Hyd/2016 and ITA No. 930/Hyd/2016 respectively relates to the AY 2006-07 were heard on 07th April, 2021. 2. One of the grounds raised was relating to reopening of assessment U/s. 147 by virtue of notice U/s. 148 of the Act issued on 28/03/2012. 3. The Appellant submits that since the reopening of the assessment was beyond the period of four years, there was no omission or failure on the part of the Appellant to disclose fully an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 it arises out of the records of the Department governing sanction for issue of notice u/s 148 of the I.T. Act, 1961." 15. Ld. AR had also relied upon the decision of Tribunal in the case of GMR Air Cargo and Aerospace Engineering Limited ITA 183/Hyd/2020 decided on 14.09.2022 wherein our specific attention was drawn to Para 11.1 to 25 to the following effect : 11.1 Referring to provisions of section 114(a) of the Indian Evidence Act, he submitted that all statutory officers are deemed to have performed their duty as expected of them. He submitted that....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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 (Karn.HC) viii. Viren Sureshchandra Shah v. ACIT (63 taxmann.com 104) (Guj.HC) ix. Titanor Components Ltd. vs. ACIT(343 ITR 183) (Bom.) x. Voltas Ltd. v ACIT (2012) 349 ITR 656( Bom.) 13. Referring to the following decisions, he submitted that reopening u/s. 147 of the I.T.Act in absence of fresh tangible material/failure on the part of the assessee to disclose fully and truly all material which are necessary for the assessment is bad in law and void. i. CIT v. Chaitanya Properties (P.) Ltd (240 Taxman 659 (Kar.HC) ii. Jal Hotels Co. Limited v. ACIT (184 Taxman 1) (Del.HC) iii. Legato Systems (India) Pvt. Ltd v. DCIT (187 Taxman 294)....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 the AO in the original assessment order has neither discussed nor there was an opinion with respect to issue related to prior period expenditure as project expenses written off during the relevant assessment year and therefore the reassessment proceedings initiated in respect of this issue is not mere change of opinion and therefore, such reopening of assessment being in accordance with law has to be upheld. He also relied on the following decisions to the proposition that the reassessment proceedings initiated by the AO are valid. i. Innovative Foods Ltd. vs. Union of India [2018] 96 taxmann.com 250(Ker. HC) ii. Instnat Holdings Ltd. vs. DCIT [2014] 44 taxmann.com 386 (ITAT, Mumbai) iii. CIT vs. Nova Promoters & Finlease(P.) Ltd.[201] 18 taxmann.com 217(Del. HC) 18. So far as the disallowances of the project expenses written off as revenue expenses is concerned, the ld. DR submitted that the pre-operative exp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 expenditure. Similarly, perusal of Schedule-D forming the part of balance sheet, copy of which is placed at page 47 of the paper book, shows that the assessee, after deducting the project expenses written off at Rs. 84,97,952/- has allocated the amount of Rs. 1,9616,399/- to various capital assets. Thus, a perusal of the above details in the audited accounts filed along with the return of income clearly shows that assessee has disclosed all the material fact necessary for completion of the assessment and there was no failure on the part of the assessee to disclose any material facts necessary for completion of the assessment. Under these circumstances, we have to see as to whether the reopening of the assessment beyond a period of four years from the end of the relevant assessment year in absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment can be made when the initial assessment was completed u/....
X X X X Extracts X X X X
X X X X Extracts X X X X
....l. 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 to a conclusion that the reasoning assigned by the Assessing Officer arc not sufficient and, hence, the reopening of the assessment was bereft of materials to come to a conclusion that there were reasons to believe that the income has escaped assessment. Therefore, the order of the Commissioner of Income-tax (Appeals) overturning the order of Assessing Officer is, in our opinion, correct. We have also given our anxious consideration to the order of the Tribunal which has considered the issue at length and essentially the judgments in this regard. We are of the considered opinion that the Tribunal has correctly appreciated the finding of the Commissioner of Income- tax (Appeals) and applied the law in this regard in coming to such a conclusion. Arguments were advanced to the effect that it was a concurrent finding of facts by the commissioner of Income-tax (Appeals) and the Tribunal and. therefore, no substantial question of law arises for consideration and we are, in the facts and circumstanc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uash 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 mistake on the part of the Assessing Officer whereby he had wrongly mentioned the date of signing the revised proposal on 19.03.2011 and it was the submission of ld. DR that it should have been 19.03.2012 and to buttress the above said contention, he has drawn our attention to the covering letter dt.26.03.2012, which is as under : 17. It was submitted that the proposal for re-opening was approved and communicated by the ITO, Head Quarters to the ITO on 17.03.2012. It was submitted that on account of typographical mistake, the re-assessment cannot be set aside. It was submitted that the Assessing Officer has rightly re-opened the assessment. 18. We have heard the rival submissions and perused the material on record. In the present case, the ACIT vide letter dt.26.03.2012 had forwarded the proposal dt.19.03.2012 to the CIT-II vide letter dt.26.03.2012. The letter of the ACIT is reproduced hereinbelow. Along with the letter, ACIT also enclosed the Form for recording the reasons for initiating proceedings u/s 147 of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 view the satisfaction/approval reproduced hereinabove have been accorded by the authorities in a mechanical manner on 19.03.2011, without looking into the proposal dt. 26.03.2011 by the ACIT and without considering the proposal of the Assessing Officer dt.19.03.2012. Firstly, there was no reason for the ACIT to recommend the case of the Assessing Officer for reopening u/s 147 of the Act. The CIT was duty bound to independently apply his mind and come to the satisfaction that the said case was a fit case for reopening of the assessment beyond a period of 4 years. There was total non-application of mind by the ACIT and also by the CIT, as both the said senior officials had failed to take cognizance of the proposal dt. 19.03.2012, wrongly typed as 19.03.2011 on Page 2 reproduced hereinabove. In fact, 19.03.2011 would fall within a period of 4 years whereas 19.03.2012 would fall beyond the period of 4 years. In case of any re-assessment was made beyond a period of 4 years, then recording of satisfaction by the CIT is a must u....