TaxTMI 
TaxTMI 
2025 (3) TMI 2148
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....mutandis in ITA no. 7428/Del/2019 for assessment year 2011-12. 3. The Ld. Council for the assessee has contested the order of Ld. First Appellate authority both on legal grounds as well as qua merits of the addition. As the legal grounds strike at the very foundation of the assessment proceedings, we take up the legal grounds of the appeal of the assessee first. It is the case of the assessee that the action of Ld. AO in computing income for A.Y. 2010-11 vide u/s 147 r.w.s 143(3) order dated 06.12.2017 of the act is legally invalid as the same is resting upon notice u/s 148 dated 30.03.2017. The Ld. Council has argued that the impugned notice is hit by the mischief of first provision to section 147 and hence is an invalid notice. Consequently, the assessment order would also become bad in the eyes of law. 4. It is the case of the assessee that the reopening constitutes an action based upon change of opinion and which is not permissible by law. It has been contended that there was no failure on the part of the appellant to disclose fully and truly any material record or information and that therefore the notice u/s 148 issued to it becomes bad in law. For the purposes of this ....
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.... consequent reassessment orders were void ab initio. The Ld. Counsel for the assessee has submitted that for AY-2010-11 orders u/s 143(3) were passed on 30.03.2015. It has been contended that the assessee had disclosed through, submissions, all its transactions, before the Ld. AO in response to his show cause notices and that the Ld. AO has concluded that assessment proceedings with due diligence and after application of mind. The Ld. AO thus had clearly considered the same and applied his mind before arriving at his orders dated 30.03.2015. In the light of the same the initiation of reassessment proceedings on the same set of material evidences falls under the mischief of first proviso to section 147. 8. In support of its contentions, the Ld. Counsel for the assessee placed his reliance upon catena of judicial pronouncements, inter alia, including the one pronounced by the Hon'ble Delhi High Court in the case of Haryana Acrylic Manufacturing as at 308 ITR 0038. We have noted that Hon'ble High Court in the impugned order, on subject of initiation of proceedings qua 1st proviso to section 148 held as under : "...... 10. The learned counsel for the petitioner also submitt....
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....pproval of the Commissioner of Income Tax. Serial No. 11 of the form pertains to "reasons for the belief that income has escaped assessment". Under this heading the following is recorded:- "11. Reasons for Original assessment in this case the belief that was completed on 07.03.2001 u/s. It is apparent by comparing these purported reasons with the reasons extracted earlier and which had been supplied to the petitioner that the two are different. While in the reasons supplied to the petitioner there is no mention of the allegation that there was a failure on the part of the assessee to disclose fully and truly all material facts, in the reasons shown in the said form in Annexure-A to the counter-affidavit, there is a specific allegation that there was failure on the part of the assessee to disclose fully and truly all material facts relating to accommodation entries raised from one of the companies of Sh. Sanjay Rastogi to the extent of Rs 5,00,000/-. In this context, the learned counsel for the petitioner submitted that the entire proceedings are vitiated inasmuch as the reasons which were supplied to the petitioner were different from what, according to the respon....
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....t year. In Phool Chand (supra) it was further observed in the context of the Burlop decision (supra) that an assessment order for the subsequent year could not by itself lead to any inference, much less to the formation of a reasonable belief that income chargeable to tax had escaped assessment in the previous year, on account of the failure on the part of the assessee to make a true and full disclosure of the primary facts during the proceedings of the concluded assessment. In this background, the Supreme Court observed:- "The judgment in Burlop Dealers' case cannot be understood as laying down any such proposition that even where the Income-tax Officer gets some fresh information which was not available at the time of the original assessment, subsequent to the conclusion of the original assessment proceedings, which enables him to form a reasonable belief that the income of the assessee had escaped assessment because of the omission or failure of the assessee to disclose true and full facts during the assessment proceedings, he cannot reopen the assessment. The observations in Burlop's case, noticed above, were made in the peculiar fact-situation of that case and....
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....ment proceedings, any part of his income, profits or gains chargeable to income-tax has escaped assessment. He may start re-assessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief is not for the court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a li....
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....notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that 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 or recompute the loss or the depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). Explanation 1.--For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:-- (a) where income chargeable to tax has been under-assessed; or (b) where such income has been assessed at too low a rate; or (c) where such income has been made the subject of excessive relief under this Act or under the Indian Income-tax Act, 1922 (11 of 1922), or (d) where excessive loss or depreciation allowance has been computed." Provided that where an assessment under sub-section (3) of section 143 or this section has bee....
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.... opinion did not arise. 17. Let us now examine the provisions of section 147 as applicable to the present case. It has been pointed out above that the present case, being a case of re-opening of an assessment after four years (but before six years) from the end of the assessment year in question, would be governed by the proviso to section from which material evidence could with due diligence have been discovered by the Income- tax Officer will not necessarily amount to disclosure within the meaning of this section. 147. Before we examine the proviso, it would be instructive to examine the scope and function of a proviso. In CIT v. Indo- Mercantile Bank Ltd: 1959 Supp (2) SCR 256, the Supreme Court held:- "The proper function of a proviso is that it qualifies the generality of the main enactment by providing an exception and taking out as it were, from the main enactment, a portion which, but for the proviso would fall within the main enactment. Ordinarily it is foreign to the proper function of a proviso to read it as providing something by way of an addendum or dealing with a subject which is foreign to the main enactment. "It is a fundamental rule of c....
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....tta [AIR 1965 SC 1728]), when one finds a proviso to a section the natural presumption is that, but for the proviso, the enacting part of the section would have included the subject- matter of the proviso. The proper function of a proviso is to except and to deal with a case which would otherwise fall within the general language of the main enactment and its effect is confined to that case. It is a qualification of the preceding enactment which is expressed in terms too general to be quite accurate. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule..." 18. Viewed in this light, the proviso to section 147 of the said Act, carves out an exception from the main provisions of section 147. If a case were to fall within the proviso, whether or not it was covered under the main provisions of section 147 of the said Act would not be material. Once the exception carved out by the proviso came into play, the case would fall outside the ambit of section 147. 19. Examining the proviso [set out above], we find that no action can be t....
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....ee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. We have already mentioned above that the reasons supplied to the petitioner does not contain any such allegation. Consequently, one of the conditions precedent for removing the bar against taking action after the said four year period remains unfulfilled. In our recent decision in Wel Intertrade Private Ltd (supra) we had agreed with the view taken by the Punjab & Haryana High Court in the case of Duli Chand Singhania (supra) that, in the absence of an allegation in the reasons recorded that the escapement of income had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, any action taken by the Assessing officer under section 147 beyond the four year period would be wholly without jurisdiction. Reiterating our view-point, we hold that the notice dated 29.03.2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the conseq....
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........". 11. The central theme thus emanating from above mentioned statutory provisions as well as the judicial pronouncements, is that no action u/s 148 can be taken on the basis of change of opinion. Income Tax Authorities cannot revisit their decisions merely by having a change of mind. The latter is permissible only in existence of certain facts and circumstances and cannot be an arbitrary or ad-hoc decision. Hon'ble Apex Court in its decision of Kelvinator of India postulated that there is a conceptual difference between "power to review" and "power to reassess". Whereas Direct tax statute empowers an assessing authority the power to reassess, it nowhere provides any power to review. In the case referred above it has been laid down that 148 proceedings after four years would be only justified if some new material comes to the fore or else there was a definite failure on part of the assessee to have disclosed true material facts during the course of original assessment. Thus, once an assessing officer has applied his mind to certain material, during an assessment proceedings, and drawn his conclusions, it is not permissible to reappreciate the same material and take a differen....
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.... assessee, ground of appeals concerning merits of addition have become academic in nature. 15. As facts of the case for A.Y. 2011-12 in ITA No.7428/Del/2019 are identical decision taken here in above shall apply mutatis mutendis. Consequently, all the grounds of appeal raised by the assessee are allowed. 16. In the result, appeals of the assessee vide ITA No.7427/Del/2019 and ITA No.7428/Del/2019 are allowed. ITA No. 7429/Del/2019 17. The first issue raised through grounds of appeal No.1 and 2 in the impugned appeal is regarding the action of the Ld. AO is making an addition of Rs. 24,36,065/- under Section 14A of the Act. The Ld. Counsel submitted that the AO has considered the impugned additions para -3 of his order dated 29.09.2016. It is the case of the assessee that by invoking the referred provisions of Rule 8D the satisfaction of the Ld. AO, mandatorily required, is absent in the order. It has accordingly being argued that in the absence of Ld. AO's satisfaction, no addition was required to be made. In support of his arguments the Ld. Counsel has invited reference to decision of Hon'ble Delhi High Court in the case of TaiKisha Engineering 370 ITR 338 Delhi and of....
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....mpanies is not meant to generate dividend income but are strategic in nature to obtain long term advantage in terms of control of the business. Our view is fortified by the judgment of Hon'ble Delhi High Court in the case of CIT vs Oriental Structural Engineers Pvt Ltd 4245/DEL/2011 and of ITAT, Delhi in the case of ACIT Circle 2(1), New Delhi vs. Bharat Hotel Ltd (IT AT No. 4959/DEL/2012 & No. 5401/DEL/2013, on which the Ld. CIT(A) has also relied. In view of the above detailed analysis of the case, there is no case for disallowance u/s 14A, hence, the same was rightly directed to be deleted by the Ld. CIT(A), which does not need any interference on our part, therefore, we uphold the well reasoned order passed by the Ld. CIT(A) on the issue in dispute and accordingly reject the ground no. 2 raised by the Revenue." 19. Accordingly, in respectful compliance to the above we are of the considered view that no disallowance under section 14A was permissible in this case. Accordingly, the findings of lower authorities on the issue are set aside and the Ld. AO is directed to delete the addition Rs. 24,36,065/-. The grounds of appeal No. 1 and 2 are, therefore, allowed. 20. The n....