TaxTMI 
TaxTMI 
2025 (4) TMI 2060
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....: Ms. R. Anita, Addl.CIT ORDER PER ABY T. VARKEY, JM: The appeal in ITA No. 1341/CHNY/2024 is preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), Chennai (hereinafter in short `the Ld.CIT(A)'), dated 19.03.2024 for the Assessment Year (hereinafter in short `AY') 2012-13; and all other twenty-two (22) appeals are preferred by fourteen (14) different assessee's against the common order of the Learned Commissioner of Income Tax (Appeals), NFAC, Delhi dated 30.09.2024 for the AYs 2012- 13 & 2013-14. 2. Since the issues involved in all these appeals are common, they were heard together. Both parties agree that the appeals in the matters of Shri S Aravind for AYs 2012-13 & 2013-14 may be taken as lead case and result of which will be followed mutatis mutandis in all the other appeals. 3. In all these appeals, the addition/s impugned are emanating from the survey action which was conducted u/s 133A of the Income-tax Act, 1961 [in short `the Act'] upon the 'Karur Kongu Charitable Trust' on 23.01.2013. It would therefore be first relevant to discuss the background facts relating to the issue/s impugned in these ....
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....had produced their books of accounts along with supporting evidences and that in light of the same, the documents and material found in the course of survey were examined and thereafter, the assessments were completed u/s 143(3) of the Act in which no further addition was made by the AO. 5. Later on, it is noted that, the cases of these assesses were re- opened after the expiry of four years from the end of the relevant assessment years 2012-13 & 2013-14 by issue of notices u/s 148 of the Act both dated 26.03.2019. The assesses are noted to have requested the AO to treat the original return filed u/s 139 of the Act as the return of income in response to notice u/s 148 of the Act. Upon request of the assesses, the AO is noted to have supplied the reasons recorded for reopening the assessments. Drawing our attention to the recorded `reasons' for both these AYs, the Ld. AR for the assesses showed us that, the AO after re-appraisal of the impounded survey material, which according to him, was already examined in the course of original assessment for AY 2013-14, changed his opinion and formed a belief that the assesses had failed to disclose fully and truly the investments made o....
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....iew that the seized material did not contain anything which incriminated the assessee qua AY 2012- 13, the AO chose not to take up the case for scrutiny assessment. According to him therefore, when the AO chose not to issue notice u/s 143(2) of the Act when the time was available, and he was already in possession of the impounded material, then the subsequent issue of notice u/s.148 of the Act based on the same seized material was not a valid action and hence, reopening notice is bad in law. For this, the Ld. AR relied on the decision of Hon'ble Madras High Court in the case of Tanmac India v DCIT [2016] 97 CCH 0189 and the Hon'ble Delhi High Court decision in the case of CIT v. Orient Craft Ltd. 354 ITR 0536 (Del) and the decision of the coordinate Bench of this Tribunal in the case of Cheyur Ramakrishnan Rajkumar v. ITO (ITA No. 334/Chny /2024). 8. Per contra the Ld. CIT, DR appearing for the Revenue has contended that the assessee had not filed his return of income for AY 2012-13 u/s 139 of the Act and therefore there was no occasion for the AO to take up his case for scrutiny by issue of notice u/s 143(2) of the Act and thus in her view, the decision of Hon'ble M....
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....s, the AO had extended time to issue notice u/s 143(2) of the Act for AY 2012-13. Thus, Ld AR submitted that the reasoning given by the Revenue to distinguish the assessee's reliance on the decision of Hon'ble Madras High Court (supra) was misconceived & misplaced. He further argued that, the decisions cited by the Revenue were not relevant to the plea raised by the assessee, as in those cases, it was only held that, no opinion can be said to have been formed in the proceedings u/s.143(1) of the Act. 10. We have heard the rival submissions of both the parties. The facts as noted are that, survey action u/s 133A of the Act was conducted on 23.01.2013 in the course of which several material including loose documents, trial balance, completion certificate, estimated cost of construction etc. were seized by the AO. Also, statements of several persons were recorded by the AO at the time of survey. Thereafter, pursuant to post survey enquiries, the AO is noted to have recorded the last of the statement of the trustees in the month of August 2013. It is accordingly noted that the AO was indeed aware about the contents of the seized material, as he had examined the same in the p....
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....is, the trust bought 5.02 acres of land at a cost of Rs. 4.49 lakhs for constructing a Polytechnic College. During the Financial Year 2011-12 relevant to the assessment year 2012-13, the trust started constructing a Polytechnic College on the land. The construction work was continued till the financial year 2012-13. Meanwhile a survey u/s 133A was conducted at the premises of the above trust on 23.02.2013. During the survey proceedings, sworn statements were recorded from R. Palanisamy, the Managing trustee, Shri B. Sathyamoorthy, partner of Erode based builder firm (M/s S.Selvaraj& Co) and Shri S. Sethurajan site Engineer of the firm. Shri R. Palanisamy, the managing trustee of the trust had admitted in his statement that a construction contract was executed between the trust and with a builder firm called M/s S. Selvaraj & Co of Erode on 05.09.2011. The total value of the contract was Rs. 12 crores. Also, according to him, the trust had paid Rs. 8 lakhs as on 23.01.2013 Further, he had admitted, each trustee had contributed Rs. 40 lakhs towards the construction cost. In his statement, the partner of the builder firm Shei R.R.Sathyamoorthy also acknowled....
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.... earlier, the Revenue cannot be permitted to avail of the extended time- limit beyond four years, particularly in the absence of any new or tangible material (apart from the existing survey material) being brought on record. In our considered view therefore, the reopening of assessment for AY 2012-13 was invalid and bad in law. 13. Our above view is found to be squarely supported by decision of the Hon'ble jurisdictional Madras High Court in the case of Tanmac India v DCIT (supra). While answering to the question as to whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the Assessing Officer is justified in reopening the assessment by issuance of notice under section 148 of the Act when no new material was unearthed justifying the re-opening of the assessment, the Hon'ble High Court is noted to have held as follows: "12. If the assessing officer, after issuing intimation u/s. section 143(1) does not issue a notice u/s. 143(2) of the Act to initiate proceedings for scrutiny of the return of income, the obvious conclusion is that he does not consider it necessary or expedient to do so, the inference be....
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....have reason to believe within the meaning of the section." [emphasis given by us] 14. The Hon'ble Madras High Court in particular on the issue of non- action on the part of the Assessing Officer in issuing 143(2) of the Act on the basis of material which was already on this record, is noted to have observed as under: - "16. The facts as well as the law remain identical in all three cases. Thus, merely by virtue of the non-action on the part of the assessing officer in the case of the present assessee, i.e. by his failure to issue a notice under section 143(2) of the Act, the Department gets the advantage of another four years from 31.3.2002 to initiate proceedings for re-assessment. This obviously can neither be the proper interpretation of section 147 nor the intention of Legislature. ................................... ........................................... It is incorrect to state that the Assessing Officer had no opportunity as the statute grants him full opportunity to scrutinize the assessment if he felt it was necessary and expedient for him to do so. Having chosen not to, he cannot resort to the provisions of S.147 in the abse....
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....ead to such an unintended mischief. It would be discriminatory too. An interpretation that leads to absurd results or mischief is to be eschewed." . . . . . . . . . . . The reasons recorded by the Assessing Officer reached the belief that there was escapement of income "on going through the return of income" filed by the assessee after he accepted the return under section 143(1) without scrutiny, and nothing more. This is nothing but a review of the earlier proceedings and an abuse of power by the Assessing Officer, both strongly deprecated by the Supreme Court in CIT v. Kelvinator (supra).'" [Emphasis supplied] 15. Following the ratio laid down by the Hon'ble jurisdictional High Court (supra), we hold that the reopening of assessment for AY 2012-13 to be bad in law and therefore the impugned order passed u/s 147/143(3) of the Act is held to be ab initio void and is thus quashed. The assessee thus succeeds in his appeal in ITA No. 2584/Chny/2024 for AY 2012-13. 16. We now turn our attention to the appeal for AY 2013-14 in ITA No. 2585/Chny/2024. It is noted that, the income-tax assessment for AY 2013-14 was originally completed u/s. 143(3) o....
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....ment. The Ld. DR further submitted that, the AO had also overlooked the impounded material, more particularly the trial-balance and the draft completion certificate, which in his view revealed the unaccounted investments made by the trustees in the land and building and therefore in his view, the AO had rightly reopened the assessment u/s 147 of the Act. 18. The Ld. AR in his rejoinder argued that the contentions put forth by the Revenue were fraught with factual inaccuracies. He first pointed out that, the trustees in their statement recorded at the time of survey had furnished the details of contributions made to the Trust which were recorded in the books of the Trust as well and the unaccounted contributions had been admitted and disclosed in the return of income. He thus submitted that, when the assessee had already declared the unaccounted contributions to tax in his return of income, there was no reason for the assessee to separately furnish the details thereof. He further invited our attention to the contemporaneous facts to show that the land was acquired in 2011 and thereafter portion of the land was contributed to the Trust. According to him, if AO was of the view that....
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....ome 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 re- compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: [Emphasis ....
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.... fully all facts necessary for assessment. The AO after obtaining information and documents from the assessee cannot supplement his conclusion about assessee's failure to disclose truly and fully material facts, if the recorded reasons do not refer to such failure. In the circumstances, where the AO initiates the reassessment proceedings beyond four years from the end of the relevant assessment year, then the AO is duty bound to demonstrate in his reasons recorded prior to issue of notice, the failure on the assessee's part to truly and fully disclose all material facts in the course of original assessment. 23. Further, it is also by now well settled in law that, where the assessee is able to show that, the issue with reference to which the AO formed the reason to believe was examined or enquired into or was deliberated upon in the original assessment then, the AO is not permitted to take recourse to proceedings under Section 147 of the Act. The AO is thus not permitted to form his reasons to believe, on reappraisal of the same facts and materials already available on record as it would constitute `change of opinion'. Gainful reference in this regard may be made to t....
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....lso inserted the word "opinion" in section 147 of the Act. However, on receipt of representations from the Companies against omission of the words "reason to believe", Parliament re- introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549, dated 31-10- 1989, which reads as follows : "7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in section 147. - A number of representations were received against the omission of the words 'reason to believe' from section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression 'has reason to believe' in....
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....rded that the Department did not bring any material fact before it, which was not disclosed in the original return of income. 32. Even in this appeal, no such fact has been brought to our notice nor pleaded in the memorandum of grounds of appeal and presumably that is the reason why the Revenue had raised the substantial questions involving the interpretation of Rule 27 of the Rules and conveniently was not focussing on the issue as to whether the reopening of assessment was on account of change of opinion. A reading of the reassessment order dated 31-3-2004 will clearly reveal that all facts and figures were gathered by the Assessing Officer only from the original return of income filed by the assessee. There was no fresh or tangible material available with the Assessing Officer to reopen the proceedings. Therefore, we have no hesitation to conclude that the reopening of the assessment beyond four years was clearly a case of change of opinion. For all the above reasons, substantial questions of law Nos. 1 to 3 are liable to be answered against the Revenue and consequently, it is held that the reopening of the reassessment is bad in law and is liable to be set aside. ....
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....irm had received Rs. 3,80,00,000/- and the total value of the contract was Rs. 7 crores (except cement and steel). Further, the statement given by the site engineer Shri S.Sethurajan on the loose sheets impounded also strengthened the building construction commenced during the Financial Year 2011-12. Consequent to the survey, the assessments of the 32 trustees for the Asst. Year 2013-14 were completed on 28.03.2016. During the scrutiny proceedings, the trustee Shri S.Aravind admitted Rs. 8 lakhs towards the purchase of land (17.99 acres) from his unaccounted income. However, he failed to disclose the investments made on the construction of the College building. In this juncture, it is pertinent to note that the trust came into existence only in the year 2011 and the trust had not generated any income during the year of construction. The only source for the construction was from the trustees as there was no external borrowings by the trust. Therefore, the above trustee had failed to disclose truly and fully on the investments made during the Financial Year 2012-13 on the construction of the Polytechnic College. Hence, I have reason to believe that the income charge....
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.... to the regular income and paid the taxes. Also, the books of accounts and documents impounded at the time of survey were thoroughly examined. Since, the assessee has offered the entire amount admitted at the time of Survey in the Return of Income fled the assessment of the assessee is completed accepting the income returned. In addition to the above, all the details furnished were thoroughly verified for its genuineness. Assessed u/s 143(3) of the Income tax Act, 1961. Demand Notice u/s 156 is attached to this order as Annexure. Penalty proceedings u/s 271(1)(c) is initiated separately."[Emphasis given by us] 27. From the above observations made in the original assessment order, it is amply evident that, the impounded material, referred to in the recorded reasons, was already considered while completing the original assessment and clearly there was no fresh tangible material available with the AO to reopen the assessment beyond four years. Rather, the recorded reasons (supra) shows that the AO had re-examined the facts and material already available in assessment records and formed his opinion that income chargeable to tax has escaped assessment. In our consid....
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....n question was admittedly acquired in 2011 and not in the relevant FY 2012-13 and therefore adverse inference, if any, could have been legally drawn only in that year and not the relevant AY 2013-14. On this aspect alone, we find that, the reasons recorded by the AO for AY 2013-14 to be based on wrong assumption of relevant facts available on record. 31. Drawing our attention to the second portion of the reasons viz., the cost of construction of building was not fully accounted, the Ld. AR showed us that, the costs incurred were recorded in the books of accounts of the Trust and not the trustees. It was brought to our attention that, only the unaccounted portion as admitted by the builder as well as the trustees had been declared and admitted by the latter proportionately in their respective returns of income, which was examined and accepted by the AO in the original assessment. Taking us through the documents placed on record, it was shown that, the balance cost of construction was incurred by the Trust out of regular voluntary contributions from the trustees and the same was recorded in the books of accounts. He also brought to our notice that, the cost recorded in the books o....
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....n the Trust pursuant to which he impounded several materials and recorded the statement/s of the managing trustee and the builder. In the post survey enquiries, statements of other trustees were also recorded. It is in the course of post survey enquiries, the trustees quantified and admitted to unaccounted income by way of cost incurred towards the construction of college building and also paid taxes on the same in their returns of income for AY 2013-14. These facts show that, the AO was well aware about the contents of the relevant impounded material, and had applied his mind in the post survey enquiries, pursuant to which he also recorded statements of other trustees in the month of August 2013. Thereafter, the AO took up the scrutiny of the return of income filed for AY 2013-14 by issue of notice u/s 143(2) of the Act, and his observations in the original assessment order shows that the assessment was framed after examining the impounded material. These contemporaneous facts thus suggests that the AO had applied his mind to the impounded survey material and only because specific line of enquiry, was not to the liking of his successor, it can't be reason enough to allege that....