TaxTMI 
TaxTMI 
2018 (5) TMI 2190
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....ing the addition of Rs. 102,83,72,519/- on account of External Development Charges as it is neither income nor capital receipt of the assessee but is a deposit on behalf of Punjab Government. Hence, addition made is liable to be deleted. 3. The assessee in this appeal has agitated the reopening of assessment u/s 147 of the Income-tax Act, 1961 (in short 'the Act') by the Assessing officer on the ground that the External Development Charges (hereby referred to 'EDC') received by the assessee was the regular business income of the assessee which, however, was reflected by the assessee as 'liability' in its balance sheet. The Assessing officer, therefore, held that the income relevant to these receipts on account of EDC charges had escaped assessment leading to the reopening of the assessment and framing of the impugned assessment order u/s 147 of the Income Tax Act. 4. At the outset, Ld. Counsel for the assessee has submitted that the notice for reopening of the assessment u/s 148 of the Act had been issued after the end of fourth assessment year from the relevant assessment year and that initially assessment was carried out u/s 143(3) of the Act, therefore, the reope....
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....ere duly provided to the assessee and objections filed by the assessee were duly disposed by way of speaking order. The AO has duly complied with the mandate of the act and as per findings of the Supreme Court Judgment GKN Driveshafts (India) Limited Vs. ITO 259 ITR 19. The CIT (A) at Para 2.3 to 2.5 Pages 3 to 6 has confirmed the action of the AO by way of reasoning that at the time of Original Scrutiny AO issued just a general questionnaire on 18.07.2011 and further clarifications by questionnaire issued on 10.10.2011. No specific query/clarification was raised by the AO on External Development Charges (EDC). Hence, the issue of EDC was not examined at all by the AO. When no opinion has been formed by the AO, there is no question arises regarding Change of Opinion. 2. That brief facts of the case for proper adjudication of this case are that the assessee has submitted that the order of the AO dated 16.12.2016 is arbitrary and illegal. In this regard, it is stated that the belief is based on facts and documents which have been mentioned in the reasons recorded for re-opening i.e. the EDC issues were not gone into in scrutiny provisions, but the assessee had wrongly shown them as....
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....e State Government or the Central Government by way of loans or debentures. c) all fees received by the Authority under this Act. d) all moneys received by the Authority from the disposal of lands buildings and other properties, movable and immovable; e) all moneys received by the authority by way of the rent and profits or in any other manner or from any other source; and f) all moneys received by the Authority in connection with the execution of any town development scheme. (2) The funds of the Authority shall be applied towards meeting- a) The expenditure incurred in the administration, implementation and carrying out the provisions of this Act; b) The cost of acquisition of land for the purposes of this Act. c) The expenditure for development of land and construction of houses; and d) The expenditure for such other purposes as the state Government may direct or permit. (3) The Authority shall keep its fund in any Scheduled Bank or in any Apex Co-operative Bank or a Central Co-operative Bank. (4)The Authority may invest any portion of its fund in such securities or in such other manner as it may determine from time to time. (5) The income resulting f....
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....y, the EDC Charges and Permission is to be retained by the assessee and therefore, as per Section 49 of PRTPD Act, 1995, the assessee not only retained the money but it was also the fund of the assessee and liable to be taxed as revenue receipt and the assessee was to take this amount in his profit and loss account and show it has a revenue receipt and not as a liability. Therefore, it is seen that the assessee did not truly and fully disclose Material facts pertaining to the case, infact it "dressed up" its returns and audited returns as per its terms and not as per law. 5. On these factual premise certain legal issues emanate which are delineated below. The section 147 R.W. Explanation 1 is reproduced for ready reference:- 147. If, the (Assessing) Officer (has reason to believe) that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings, under this section, or recomputed the loss or the depreciation allowance or any ot....
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....were submitted by the Department before the Hon'ble Punjab & Haryana High Court alongwith rejoinder to the writ petitions filed by the Assessee on the similar issue for AY 2010-11 & 2011-12. Copies of writ petitions and rejoinder filed by the Department in response to these writ petitions have already been submitted before the Hon'ble Bench on 07.03.2018. It is very humbly requested that the Rejoinder and copies of Case laws filed by the Department before the Hon'ble High Court may be considered while deciding validity of proceedings initiated u/s 148 of the Act. 7. The Ld. DR, has further relied upon the catena of judgements, listed below, mainly to contend that mere production of books of account or documents etc. without pointing out the relevant entries therein does not amount of disclosure within the meaning of section 147 (a) of the Act. Sr. No. Particulars Dated 1 CWP No. 13806 OF 2010 (P&H, HC) M/s R.N. Gupta & Co Ltd Vs. ACIT 30.11.2010 2 1991 SCC (2) 558 (SC) A.L.A Firm Vs. CIT 21.02.1991 3 1976 AIR 203 (SC) Kalyani Mavji & Co. Vs. CIT 10.12.1975 4 159 ITR 624 ((SC)) Indo-Aden Salt Manufacturing Vs. CIT Bombay 12.3.1986 5 1 to Jodhpur Vs. Purpshott....
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....did not form any opinion about the nature of EDC receipts and, therefore, there was no question of change of opinion. That the assessee had failed to disclose fully and truly the material facts necessary for the assessment for that year. 10. We have considered the rival submissions. Undisputedly, the facts of the case and issue under consideration are exactly identical to that of the assessee's own case for assessment year 2008-09 (ITA No. 410/Chd/2013) decided vide order dated 28.1.2017. In that case, this Tribunal while holding the reopening of the assessment as bad in law observed as under:- "12. We have heard the contentions of both the parties, perused the orders of the authorities below and also the relevant documents to which our attention was drawn during the course of hearing. Since the issue before us is the validity of the assessment framed u/s 147 of the Act, certain facts which are undisputed need to be outlined before proceeding with the issue: a) The impugned assessment year is assessment year 2008-09. b) Assessment u/s 143(3) for the said year had been made vide order dated 28.12.2010. c) Notice u/s 148 was issued on 25.3.2015. 13. It is evident fr....
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....e of the said amount is a regular, routine and reoccurring phenomenon as External Development Charges are being regularly received by the assessee from Land Developers/ Colonizers/Real Estate Builders; Promoters in every year and similarly these are being regularly expended /utilized/ spent for the purpose of carrying out External Development Works and other related jobs. In light of the above, it is observed that both the receipts as well as the expenditure related to External Development Charges (EDC) are clearly revenue in nature as they are attributable to the regular business of the assessee and are also a routine, regular and re-occurring phenomenon. Accordingly, the assessee was required to credit the receipts of External Development Charges to its P&L Account and debit the expenses incurred on account of the same. Since, the assessee is following Cash System of accounting, therefore, the net amount received by the assessee during the year as External Development Charges was required to be brought to the ambit of tax by crediting the receipts earned during the year and debiting the expenses incurred on account of external development work & other related jobs. However,....
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....ief that the EDC charges were in the nature of revenue receipt of the assessee and had thus escaped assessment. Therefore when the reopening was resorted to on the basis of material already on the file, the same having been provided by the assessee only during assessment proceedings, and nothing else, we fail to understand how the assessee could be charged with failure to disclose material facts relating to the said receipt. 17. Moreover the section empowers that Assessing Officer to assume jurisdiction to reopen the case when the escapement of income is on account of failure of the assessee to disclose material facts relating to the income, meaning thereby that only important and primary facts pertaining to the income have to be disclosed and not the reasoning or logic which lead to the conclusion of the nature of the receipt. In the present case, vis-à-vis EDC charges, the necessary facts were nature of the income and the quantum of the income. The assessee having disclosed that it had outstanding EDC charges received amounting to Rs. 252 crores as at the end of the year, the nature and the quantum of the receipt was duly disclosed by the assessee. It is not the cas....
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....7 of the Act, if it is found that there was any failure on the part of the assessing in not disclosing the true and correct facts, which has resulted into escapement of the income, the Assessing Officer is not justified in reopening the assessment. 7.1 Considering the reasons recorded, there is no allegation that there was any failure on the part of the assessee in not disclosing the true and correct facts due to which, there is escapement of income from the assessment. 7.2 Moreover, from the reasons recorded, it appears that according to the Assessing Officer, the expenditure was incurred to establish a subsidiary in USA, and therefore, such expenditure was covered under Section 35D [1] (ii) of the I.T Act, and therefore, only 1/5th of the expenditure i.e., Rs.47,23,722/- was required to be allowed. Instead, the entire amount claimed by the assessee i.e., Rs.2,36,18,612/- is allowed to be debited. Therefore, according to the Assessing Officer, his predecessor has wrongly allowed the entire amount of Rs.2,36,18,612/- to be debited under the head "Interest and Finance charges". In the reasons recorded, it is specifically observed by the Assessing Officer that, "..On observatio....
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.... Commissioner of Income tax v. Orient Craft Ltd. (supra). 24. The repeated assertion by Mr. Manchanda that the claim for depreciation for AYs 2006-07 and 2007-08 was disallowed by the AO is not entirely correct. It overlooks the history of the litigation around the claims for those AYs with both ending in the Assessee ultimately succeeding on the point after the remand to the AO by the ITAT for AY 2006-07 and the level of the CIT (A) for AY 2007-08 . Mr. Manchanda has also not been able to counter the submission that for AYs 201112 and 2012-13 the same claim for depreciation has been allowed. 25. For all of the aforementioned reasons, the writ petitions are allowed and the notices dated 31st March, 2015 and the consequential orders dated 11th January, 2016 passed by the AO disposing of the Petitioner's objections are hereby set aside. No order as to costs." 19. Further we do not find any merit in the contention of the Ld.DR that mere production of account books and balance sheet and profit and loss account will not tantamount to disclosure. The Ld.DR has borrowed from Explanation-1 to section 147 of the Act to so contend. The said Explanation reads as under: "Explanation....
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....ss account one finds that in each of those two assessment years, the total amount of rates and taxes were first shown and the recoveries were shown as deductions from those amounts of rates and taxes. Therefore, to any person reading the profit and loss account it would be obvious that these recoveries, namely Rs. 27,098 in one case and Rs. 26,477 in the other case, were recoveries of taxes for which the assessee-company before us was not claiming any deductions. Thus, the primary fact that these recoveries were made was before the ITO at the time of the original assessment proceedings. As the Supreme Court has pointed out in CIT vs. Burlop Dealers Ltd. (supra), it was for the ITO to raise the possible inferences. The assessee-company was under no obligation to inform the ITO about the possible inferences which could be raised against him. If the ITO did not raise the appropriate inference on the primary facts disclosed before him the income which has escaped assessment cannot be brought to tax under s. 147(a) of the Act of 1961. The duty which has been cast upon the assessee is to disclose all the primary facts necessary to enable the ITO to arrive at the proper figure o....
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....through the detail furnished to him on his behest. The reopening now on the same set of information is nothing but based on change of opinion. The contention of the Ld.DR that there was no change of opinion since no view had been formed by the Assessing Officer during assessment as information regarding receipt of EDC had been furnished in response to a general questionnaire issued to the assessee asking for break up of other liabilities and no further questions were asked thereafter, is not acceptable. If a query is raised during assessment proceedings and answered by the assessee, undoubtedly the attention of the Assessing Officer is drawn to the same and it is reasonable to presume that he has considered the same and formed a view also. The Hon'ble Delhi High Court held so in the case of CIT vs Usha International Ltd.(2012) 348 ITR 485 (Del) which has been relied upon by the Hon'ble Punjab & Haryana High Court in the case of Pr. CIT vs Anil Nagpal (2017) 291 CTR 272(P&H) which has been relied upon by the Ld.Counsel for the assessee. Moreover, the reopening in this case, as discussed above, is hit by the first proviso to section 147 of the Act. 23. Considering the above....