TaxTMI 
TaxTMI 
2018 (5) TMI 2190
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.... that the Ld. CIT (A) has erred in law and on facts in confirming 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 asses....
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.... u/s 147 on 16.3.2016 and notice u/s 148 of the Act was issued after recording reasons. Reasons were 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....
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....ernment by way of grants, loans, advances or otherwise. b) All moneys received by the Authority from sources other than the 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 ....
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....above charges. 4. License/Permission fee is the fee for granting permission to colonizers/ promoters for their projects." 4.1. Therefore, it is seems that except for conversion charges which are to be deposited in Govt. Treasury, 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, asses....
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....f judgments, both of the Hon'ble Supreme Court and of the Hon'ble High Courts have given judgments bringing certain broad principles on this issue. The undersigned is hereby submitting, as allowed by the Hon'ble Bench, copies of case laws as received from the ACIT vide letter dated 05.03.2018 which 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 ....
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....tance and Ld. DR submissions has been that the EDC charges received by the assessee has not been reflected in the P&L account, rather, the same have been reflected in the balance sheet. That though the Assessing officer had issued a general questionnaire on 18.7.2011 and further clarification by questionnaire issued on 10.10.2011, however, no specific query / clarification was raised by the Assessing officer on EDC. Hence, the Assessing officer 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 ....
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....ne on their piece/chunk of land. The said amount received under the nomenclature "External Development Charges" is supposed be used by the assessee for carrying on of External- Development Works and other related jobs outside the land of the Land Developer/ Colonizer /Real Estate Builder/Promoter who has paid the .External Development Charges (EDC). Thus, it is seen that the receipt of External Development Charges by the assessee is attributable to its regular business. Further, the receipt and expenditure 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. ....
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....essing Officer thereafter states that since the assessee failed to include it in its income, the same has escaped assessment. And lastly the Assessing Officer mentions that "after independent verification of records with respect to the above mentioned facts", I have reason to believe that income has escaped assessment. 16. It is amply evident from the above that it was on the basis of already available information and not any new information pertaining to EDC charges that came in the possession of the Assessing Officer thereafter that led to the formation of belief 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 mat....
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....of failure on the part of assessee to disclose material facts . The findings of the Hon'ble High Court are as under: "At the outset, it is required to be noted that in the present case, the Assessing Officer has sought to reopen the assessment for A.Y 2009-2010 beyond the period of four years. Therefore, unless and until the condition precedent to reopen the assessment beyond the period of four years as mentioned in proviso to Section 147 of the I.T Act are satisfied, the Assessing Officer is not justified in initiating the re-assessment proceedings. As per the proviso to Section 147 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 ....
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....come of Rs.7,16,299 have escaped assessment." This does not satisfy the requirement of law that the reasons to believe should, where the reopening is after the expiry of four years from the end of the FY, specifically state in what manner there was a failure by the Assessee to make a full and true disclosure of material facts. That, again, will have to be preceded by spelling out the tangible fresh material that led the AO to come to that conclusion. None of this is found in the reasons to believe recorded by the AO in the case on hand. The necessity for tangible material to be present to trigger the reopening was emphasised in 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 sa....
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....esaid recoveries, it could not be brought within the purview of "production" before the Assessing Officer of account books or other evidences. The relevant findings of the Hon'ble High Court are as under: "We are unable to accept Mr. Kaji's contention that this case of the Supreme Court and the observations of the Bombay High Court apply to the present case. In the instant case the assessee has not suppressed material facts as was the case in Jai Hind Printing Press's case (supra). He has not failed to disclose in the documents submitted to the ITO the amounts of the recoveries of municipal taxes from the tenants. Actually, in the profit and loss 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....
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.... material has come in possession of the assessing officer for reopening the assessment and the AO is only attempting to review his earlier order through the reassessment proceedings which is neither valid nor justified as held by the Hon'ble Apex court in the case of CIT vs Kelvinator of India(2010) 320 ITR 561. The assessee was asked to furnish details in relation to "other liabilities" reflected in the balance sheet, which was duly filed disclosing EDC charges payable of Rs. 225.13 Cr. Admittedly no further questions were asked during assessment proceedings. It is reasonable therefore to presume that the Assessing Officer had formed a view on EDC charges while going 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 ....
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.... it was seen that EDC charges were received by the assessee". Hence the opinion regarding the escapement of income had been derived by the Assessing officer on re-appraisal of the material already available on record. The Tribunal has also discussed in para 17 of the order (supra) that what the assessee was supposed to disclosed was that important and primarily facts pertaining to the income and not reasoning or logic which would lead to the conclusion of the nature of receipt. When the assessee in this case had already disclosed the necessary facts about the EDC charges i.e the nature and quantum of receipts, hence, there was no failure on the part of the assessee to disclose fully and truly any material facts necessary for the assessment. The Tribunal while relying on various case laws has held that the balance sheet and profit and loss account are the primary documents, which are attached along with return. The Assessing officer is supposed to go through these primary documents. These documents do not fall in the category of books of account or other evidences which may escape the attention of the Assessing officer during the assessment proceedings. 12. In the case in hand be....