TaxTMI 
TaxTMI 
2025 (7) TMI 2072
X X X X Extracts X X X X
X X X X Extracts X X X X
....uant to the notices issued, the AO acknowledged that the assessee was duly represented and produced the details called for and thereafter, the AO determined the income of the assessee at Rs. 328,87,81,902/-, after inter alia disallowing additional depreciation to the extent of Rs. 9,53,49,197/- which was claimed u/s 32(1)(iia) of the Act. Thereafter, the AO issued notice u/s. 148 of the Act dated 31.03.2017 after expiry of four (4) years, reopening the assessment, for the reasons that additional depreciation could not be allowed to the assessee on account of electrical installations, data processing equipment & exchange fluctuation loss. Thereafter, the reassessment was completed u/s 147/143(3) of the Act after making further disallowance on account of additional depreciation of Rs. 8,64,30,006/- [Rs.2,78,78,547/- plus Rs. 5,85,51,519/-]. Inviting our attention to the appellate order impugned in this appeal, the Ld. AR pointed out that the Ld. CIT(A) had rejected the assessee's challenge to the legal validity of reopening of assessment as well as the merits of the impugned addition(s). Aggrieved by the same, the assessee is now in appeal before this Tribunal. 3. The Ld. AR first....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the electrical installations at the factory premises, were made available at the time of original assessment and therefore it was not a case that the assessee had failed to disclose truly and fully all material facts necessary for assessment for that year and in that view of the matter, the AO could not have validly reopened the assessment for AY 2010-11 after the expiry of four years. The Ld. AR further submitted that even the reasons as recorded by the AO did not contain any averment to the effect that income had escaped assessment as a consequence of assessee's failure to disclose truly and fully all facts necessary for his assessment. According to the Ld. AR therefore, the AO's action of re-opening the assessment completed u/s. 143(3) after four years, deserves to be struck down for not satisfying the condition precedent set out in the first proviso to Section 147 of the Act. 5. Per contra, the Ld. CIT, DR submitted that the AO was in possession of external material in the form of audit objection based on which he formed his opinion that income chargeable to tax had escaped assessment. According to him, there is no requirement in law for the AO to explicitly demonstr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecorded by him in writing, is of the opinion'' which gave unbridled subjective satisfaction to the AO was later substituted back to "reason to believe escapement of income'', by the Direct Tax Laws (Amendment) Act, 1989. The Hon'ble Apex Court as well as the Hon'ble jurisdictional High Court as well as other Hon'ble High Courts have already held in plethora of cases the test of a prudent person instructed in law in understanding jurisdictional fact & law (mixed question of fact and law) the reason to believe escapement of income (supra). 7. As noted, the AO, who is a quasi-judicial authority is empowered to reopen the assessment only in a given case wherein there is reason to believe escapement of chargeable income to tax, which he has to record before issuing notice u/s 148 of the Act. In this regard, it must be borne in mind that reasons to believe postulates foundation based on information, and belief based on reason. After a foundation based on information, is made, there still must be some reason, which should warrant the holding of a belief that income chargeable to tax has escaped assessment. It has to be kept in mind that the Hon'ble Supreme Court in Ganga Saran & Sons P....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se he doesn't enjoy the power to review his own order. 10. Thus, as noted before the AO assumes jurisdiction to re-open it is necessary that the conditions laid down in the said section 147 has to be satisfied viz., AO should record "reason to believe" that the income chargeable to tax for that assessment year has escaped assessment. And, if the AO intends to re-open an assessment [scrutinized u/s 143(3)] after four years from the relevant assessment year, then an additional condition needs to be satisfied viz escapement of income was due to fault of the assessee, in not fully and truly disclosing all the material facts necessary at the time of original assessment. If the conditions stipulated by statute are not satisfied at the first place, then it cannot be said that AO has validly assumed jurisdiction u/s. 147 of the Act. Therefore, the question for consideration is whether on the basis of the reasons recorded by the AO, he could have validly reopened the assessment. For that, it has to be seen as to whether the AO on the basis of whatever material before him, [which he had indicated in his "reasons recorded"] had reasons warrant holding a belief that income chargeable to tax....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was held that, the Revenue can take the benefit of extended period of limitation beyond four years and upto six years only if the Revenue can show that the assessee had failed to disclose fully and truly all material facts necessary for its assessment. In this case (NDTV), we note that the assessee had issued step-up convertible bonds to its subsidiary based in the United Kingdom (UK) named NDTV Network Plc. (hereinafter referred to as the 'NNPLC'). At the time of original assessment, the assessee had disclosed the issue of stepup coupon bonds for US$ 100 million to NNPLC. The assessee had also disclosed the details of entities who subscribed to this issue and also the fact that the bonds were discounted at a lower rate, before the assessment was finalized. Subsequent to completion of the original assessment, the AO was in receipt of information that the assessee had undertaken round tripping of funds and that these funds raised by way of issue of bonds to group entities actually represented the unaccounted funds belonging to the assessee. The AO accordingly reopened the concluded assessment after expiry of four years and within six years. On these facts the question posed....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... facts necessary for its assessment. The assessee, in our view had disclosed all the facts it was bound to disclose. If the revenue wanted to investigate the matter further at that stage it could have easily directed the assessee to furnish more facts. 27. The High Court held that there was no "true and fair disclosure" in view of the law laid down by this Court in Phool Chand BajrangLal's case (supra), and the judgment of the Delhi High Court in Honda Siel Power Products Ltd. v. Dy. CIT [2011] 110 taxmann.com 2/197 Taxman 415/[2012] 340 ITR 53 (Delhi). We have already referred to the judgment in Phool Chand's case (supra), wherein it was held that where the transaction of a particular assessment year is found to be a bogus transaction, the disclosures made could not be said to be all "true" and "full". Relying upon the said judgment the High Court held that merely because the transaction of convertible bonds was disclosed at the time of original assessment does not mean that there is true and full disclosure of facts. 28. We are unable to agree with this reasoning given by the High Court. The assessee as mentioned above made a disclosure about having agre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation from the revenue. 30. According to the revenue the assessee to avoid detection of the actual source of funds of its subsidiaries did not disclose the details of the subsidiaries in its final accounts, balance sheets, and profit and loss account for the relevant period as was mandatory under the provisions of the Indian Companies Act,1956. It is not disputed that the assessee had obtained an exemption from the competent authority under the Companies Act, 1956 from providing such details in its final accounts, balance sheets, etc. As such it cannot be said that the assessee was bound to disclose this to the Assessing Officer. The Assessing Officer before finalising the assessment of 3-8-2012 had never asked the assessee to furnish the details. 31. The revenue now has come up with the plea that certain documents were not supplied but according to us all these documents cannot be said to be documents which the assessee was bound to disclose at the time of assessment. The main ground raised by the revenue is that the assessee did not disclose as to who had subscribed what amount and what was its relationship with the assessee. As far as the first part is concerne....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sing all the primary facts relevant to the decision of the question before the assessing authority lies on the assessee. To meet a possible contention that when some account books or other evidence has been produced, there is no duty on the assessee to disclose further facts, which on due diligence, the Income- tax Officer might have discovered, the Legislature has put in the Explanation, which has been set out above. In view of the Explanation, it will not be open to the assessee to say, for example - "I have produced the account books and the documents: You, the assessing officer examine them, and find out the facts necessary for your purpose: My duty is done with disclosing these account-books and the documents." His omission to bring to the assessing authority's attention these particular items in the account books, or the particular portions of the documents, which are relevant, will amount to "omission to disclose fully and truly all material facts necessary for his assessment." Nor will he be able to contend successfully that by disclosing certain evidence, he should be deemed to have disclosed other evidence, which might have been discovered by the assessing authority i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....any further assistance to the assessing officer by disclosure of other facts. It was for the assessing officer at this stage to decide what inference should be drawn from the facts of the case. In the present case the assessing officer on the basis of the facts disclosed to him did not doubt the genuiness of the transaction set up by the assessee. This the assessing officer could have done even at that stage on the basis of the facts which he already knew. The other facts relied upon by the revenue are the proceedings before the DRP and facts subsequent to the assessment order, and we have already dealt with the same while deciding Issue No. 1. However, that cannot lead to the conclusion that there is non-disclosure of true and material facts by the assessee." 14. From the above binding ratio of decision of the Hon'ble Apex Court, the principle which thus emerges is that, the Revenue can take the benefit of the extended period of limitation of 6 years for initiating proceedings under the first proviso to Section 147 of the Act only if the Revenue can show that the assessee had failed to disclose fully and truly all material facts necessary for its assessment. The requirement....
X X X X Extracts X X X X
X X X X Extracts X X X X
....,957/- (1st half) and Rs. 5,46,29,562/- (1st half) were added to the asset value and additional depreciation was claimed on the Plant and Machinery. Additional depreciation is allowable only to addition made during the year and not on the value of exchange fluctuations. Hence an amount of Rs. 62,47,347/- (Rs.7,84,391/- & Rs. 54,62,956/- requires to be disallowed. Thus, a total amount of Rs. 3,41,25,894/- allowed as additional depreciation is required to be withdrawn and if this is considered, there would be an additional tax effect of Rs. 1,15,99,391/-. 16. On perusal of the recorded reasons, it is noted that, the AO had examined the depreciation statement which was furnished by the assessee and noted that, the assessee had claimed additional depreciation on electrical installation and data processing equipment, which in AO's view, was not allowable on such assets. The AO is noted to have further observed from the depreciation statement that, exchange fluctuation loss was added to the WDV block of Plant & Machinery on which additional depreciation was claimed by the assessee. The AO was of the opinion that, additional depreciation is allowable only on new additions and not the e....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Annexure - E. The Ld. AR further invited our attention to the specific query raised by the AO questioning allowability of additional depreciation on assets which were installed during the second half of earlier year, and after considering the response of the assessee, the AO is noted to have made disallowance of Rs. 9,53,49,197/- out of the additional depreciation claimed by the assessee u/s 32(1)(iia) of the Act. 18. Having gone through the notices/requisitions issued by the AO's predecessor, details submitted by the assessee in original assessment, and the assessment order passed u/s 143(3) of the Act dated 21.05.2014, we of the considered view that, the assessee had disclosed all the primary facts before the AO in the original assessment concerning the additional depreciation claimed on electrical installations & data processing equipments installed at the factory premises as well as the exchange fluctuation loss component which was capitalized to the new additions to plant & machinery. Even the AO is found to have enquired into the claim of additional depreciation by his notice u/s 142(1) of the Act and to the extent to which he disagreed with the claim, he is found to have ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t assessment year] that the AO had not made any such averment that the assessment has been reopened for the failure on the part of the assessee to disclose fully and truly all the material facts necessary for that assessment year. It was not the AO's remark that, the material facts relating to, the new additions made to fixed assets, foreign exchange loss capitalized & additional depreciation claimed u/s 32(1)(iia) of the Act, were not disclosed truly and fully in the assessment completed u/s 143(3) of the Act, which is the precise requirement of law as can be discerned on reading of first proviso to section 147 of the Act. Thus, in our view, on this score also, the usurpation of jurisdiction u/s. 147 by the AO to reopen the assessment completed u/s. 147 of the Act after four years is bad in law and, therefore, has to be struck down for not satisfying the jurisdictional fact in law, which is a condition precedent to legally assume jurisdiction to reopen assessment after 4 years from the end of the relevant assessment year. 21. In this regard, it would be gainful to refer to the decision of the Hon'ble Supreme Court in the case of CIT v. Avadh Transformers (P.) Ltd. 51 Taxman....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he very initiation of proceedings under section 147 of the Act stand vitiated and as such cannot be sustained." 22. We may also refer to the decision of in the case of Tao Publishing (P.) Ltd. v. Dy. CIT [2015] 370 ITR 135 wherein the Hon'ble Bombay High Court has held that where the reasons supplied by the AO do not disclose that there was any failure on the part of the assessee to provide all the material facts, then it will have to be presumed that the assessee did not fail to make full and true disclosure of all material facts and hence the jurisdictional requirement set out in the first proviso to Section 147 for initiating reassessment, after the expiry of period of four years, shall be held to be not fulfilled. The relevant observations of the Hon'ble High Court is extracted below: "9. The learned counsel for the Petitioner rightly pointed out that the ground that the Petitioner had failed to disclose all the relevant material was not incorporated in the Reasons supplied to the Petitioner. The object of furnishing Reasons for reopening, is to put the assessee to notice as to why the Assessing Officer has reason to believe that income has escaped assessmen....