IN THE INCOME TAX APPELLATE TRIBUNAL
BEFORE SHRI R.P. TOLANI, JM & SHRI A.N. PAHUJA, AM
ITA No.1536/Del/2011
Assessment year: 2002-03
Deputy C. I .T.
Circle 3(1),
(Appellant)
V/s.
M/s City Financial
Consumer Finance
Ltd., 3 Local Shopping
Centre, Pushp Vihar,
(Respondent)
[PAN:AABCA 3223B]
Assessee by: S/Shri C.S. Aggarwal & Ravi Mal l, ARs
Revenue by: S/Shri V.K. Saksena & Pradeep Kumar , DRs
Date of hearing:
Date of pronouncement:
O R D E R
A.N.Pahuja:-
This appeal filed on
1) “The ld. CIT(A) has erred on facts and in law in annulling the order u/s 143(3)/147 of the Income-tax Act while holding invalid the reopening u/s 147, ignoring that where transaction itself, on the basis of subsequent information is found to be bogus transaction, mere disclosure of that transaction at time of original assessment proceedings cannot be said to be a disclosure of the “true” and “full” facts in the case and I.T.O. would have jurisdiction to reopen concluded assessment in such a case. Reliance is placed on the decision of the Hon’ble Supreme Court in Phool Chand Bajrang Lal Vs. I.T.O. (1993) 203 ITR 456 (S.C.); Bawa Abhai Singh Vs. DCIT 253 I.T.R. 83 (Del); 142 CTE(Delhi) 272 & 225 ITR 496; Ram Prasad Vs. I.T.O. (1995) 82 Taxman 199(All).
2) The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.”
2. Adverting first to ground no.1 in the appeal, facts, in brief, as per relevant orders are that return filed on 31.03.2002 by the assessee, a financial services company, was selected for scrutiny with the service of a notice u/s 143(2) of the Income-tax Act, 1961 (hereinafter referred to as the ‘Act’) issued on 13.10.2003. The aforesaid return was revised on 31.03.2004, declaring income of Rs.12,10,34,127/-.Subsequently, assessment was completed on 25.02.2005 on an income of Rs.28,54,17,720/-. Later, the Assessing Officer (A.O. in short) recorded the following reasons, in writing, for reopening the assessment completed on
“The original return of income was filed on 31.10.2002. Later on, the revised return was filed by the assessee on 31.03.2004 at an income of Rs.12,10,34,127/- and order u/s 143(3) was passed on 25.02.2005 at assessed income of Rs.28,54,17,720/-.
“Section 32 of the Act, provides that in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets, owned wholly or partly by the assessee and used for the purpose of the business or profession, the following deductions shall be allowed. In case of any block of assets, such percentage on the written down value thereof as may be prescribed. Further, as per depreciation table, computers including computers software, depreciation @60% is allowed under the Act and not for the accessories/peripherals.”
The perusal of asstt. records for the assessment year 2002-3 reveals that the assessee company has availed depreciation @60% on additions of fixed assets during the year on all items including UPS, Cables, CD Writers etc. besides computer and software, that was not admissible as other items as computer peripherals/accessories. The items in the list of addition to fixed assets except computers and software fall in the category of part of plant and machinery and depreciation on these items are to be allowed @25%/12.50%(assets used less than 180 days). This has resulted in escapement of income of Rs.Rs.11,65,426/-. In view of above facts of the case, I have reasons to believe that the income to the tune of Rs.11,65,426/- has escaped assessment because of failure on part of assessee to disclose fully and truly material facts necessary for asstt. and hence notice u/s 148 is hereby issued for reopening u/s 147 of the I.T. Act.”
2.1 Accordingly, a notice dated 30.03.2009 was issued u/s148 of the Act. In response, the assessee submitted vide letter dated 16.11.2009 that the revised return filed on 31st March, 2004 may be treated as return filed in response to notice u/s 148 of the Act. During the course of reassessment proceedings, after rejecting the assessee’s objections vide order dated 27.11.2009, the AO restricted the claim for depreciation on computer accessories and peripherals @25% instead of 60% claimed by the assessee, resulting in disallowance of Rs.11,65,426/-. Accordingly, income was reassessed at Rs. 32,12,35,890/- vide order dated
3. On appeal, the assessee questioned the validity of reopening the assessment completed on 25.02.2005 on the ground that the assessee had made full and true disclosure of all material facts in relation to their claim of depreciation, on the basis of which assessment was reopened and there was no failure on the part of the assessee to submit any material facts. Since there was no lapse on the part of the assessee, the AO was not justified in reopening the assessment, the assessee pleaded. In the light of these submissions, the ld. CIT(A) quashed the reassessment order while referring to the decision of Hon’ble Supreme Court in CIT Vs. Kelvinator of India Ltd., 187 Taxman 312 and Satnam Overseas Ltd. Vs. Addl. CIT 188 Taxman 172, in the following terms:-
“4. I have carefully considered the submissions of learned AR and have gone through the assessment order. The Assessing Officer has invoked the provisions of section 147 of the Act on the ground that the assessee has claimed depreciation at a higher rate of 60% on computer accessories and peripherals. In this case, the original assessment was made u/s 143(3) of the Act. Subsequently, the reassessment proceedings have been initiated by the Assessing Officer on the basis of same material, which was available at the time of original proceedings. It is not the case of the Assessing Officer that any fresh material or information has come to his notice on the basis of which he had ‘reason to believe’ that income chargeable to tax has escaped assessment. The original assessment was completed u/s 143(3) on 25.02.2005 and the same records were before the Assessing Officer at that time. Taking a different view at a later stage on the basis of same material is merely a case of ‘change of opinion’. It has been held in various decisions that the provisions of section 147 cannot be invoked on the basis of ‘change of opinion’.
In the case of CIT Vs. Kelvinator of India Ltd. 123 Taxman 433, Hon’ble Delhi High Court has opined as under:
“We also cannot accept submission of Mr. Jolly to the effect that only because in the assessment order, detailed reasons have not been recorded on analysis of the materials on the record by itself may justify the Assessing Officer to initiate a proceeding u/s 147. The said submission is fallacious. An order of assessment cannot be passed either in terms of sub-section (1) of section 143 or subsection (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143, a presumption cannot be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act the judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong.”
In the case of CIT Vs. Kelvinator of India Ltd. 187 Taxman 312, Hon’ble Supreme Court has observed as under:
One needs to give a schematic interpretation to the words ‘reason to believe’ failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of ‘mere change of opinion’, which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review, he has the power to reassess. But assessment has to be based on fulfillment of certain precondition and if the concept of ‘change of opinion’ is removed, as contended on behalf of the department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of ‘change of opinion’ as an inbuilt test to check abuse of power of the Assessing Officer.
In the case of Satnam Overseas Ltd. Vs. Addl. CIT, 188 Taxman 172, it has been held by Hon’ble Delhi High Court that since reasons given for reopening assessment simply relied upon record which was already available before Assessing Officer while completing assessment proceedings u/s 143(3), there was no scope for reassessment proceedings and, therefore, impugned notices were liable to be quashed.
I further find that the present case falls within the scope of proviso to section 147 of the Act. The assessment was made u/s 143(3) and the case has been reopened after the expiry of four years from the end of the relevant assessment year. The Assessing Officer has nowhere established that the income has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. Rather, the assessment proceedings are based on the material available on record.
Looking into the factual and legal position, I find that the reopening of assessment beyond the period of 4 years, without establishing the assessee’s failure to disclose the material facts and by merely using the same material which was available on record and was subject matter of scrutiny assessment, is beyond the scope of section 147. Hence, the reopening in this case is held to be invalid. Consequently, the order u/s 143(3) read with section 147 stands annulled.”
4. The Revenue is now in appeal before us against the findings of the ld. CIT (A). The ld. DR supported the order of the AO. On the other hand, the ld. AR on behalf of the assessee while carrying us through the impugned order and page 45 of the paper book, supported the findings of the ld. CIT(A).
5. We have heard both the parties and gone through the facts of the case. As is apparent from the facts narrated in the impugned order and the reasons recorded by the AO before reopening the assessment, the assessment for the year under consideration in this case was initially completed on 25.2.2005 u/s 143(3) of the Act on an income of Rs. 28,54,17,720/-and claim of depreciation on computer accessories& peripherals @60% was allowed as such. Thereafter, the said assessment has been reopened after the expiry of four years from the end of the relevant assessment year with the issue of a notice u/s 148 of the Act on 30.3.2009 on the ground that depreciation on computer accessories and peripherals was admissible at normal rates and not @60% claimed by the assessee. No failure on the part of the assessee in relation to material facts in respect of claim of depreciation on computer accessories and peripherals in the assessment for the year under consideration, has been attributed in the aforesaid reasons recorded by the AO nor the ld. DR ascribed any such failure to the assessee, before us. Though in the reasons recorded it is mentioned that the assessee failed to fully and truly disclose the material facts necessary for the assessment, the reasons do not indicate why and how the assessee failed to make full and true disclosure of material facts in relat0ion to claim of depreciation. The assessee made disclosure of facts relating to claim of depreciation as per details placed on page 1 to 8 of the paper book. We find that the facts mentioned in the aforesaid reasons were available with the AO even at the time of finalizing the initial assessment completed u/s 143(3) of the Act on 25.2.2005. On the basis of same material, if the AO takes a different view subsequently, after expiry of 4 years from the end of the assessment year, that would not confer any jurisdiction on the AO to issue notice u/s 148 of the Act . The scope and effect of sect ion 147 as substituted with effect from
“A perusal of the aforesaid provision goes to show that under the proviso to sect ion 147, the foundation of conferring jurisdiction on the Assessing Officer to assess or reassess the income for any assessment year beyond the end of four years from the end of relevant assessment year must be omission or failure on the part of an assessee to make a return under sect ion 139 for any assessment year or to disclose fully and truly all material facts necessary for his assessment for that year and that the Income-tax Officer has reason to believe that the income chargeable to tax has escaped assessment for that year. In the absence of any such omission or failure on the part of the assessee, taking act ion for assessment or reassessment is not permissible for any year af ter the expiry of four years from the relevant assessment year.
The scope of the assessee's duty to disclose fully and truly all material facts necessary for assessment in the context of the provisions of sect ion 34 of the Indian Income-tax Act , 1922, has been succinctly stated by the Supreme Court by their Lordships in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191. The court observed:
"There can be no doubt that the duty of disclosing al l the primary facts relevant to the decision of the quest ion before the assessing authority lies on the assessee."
The court further said:
"Does the duty, however, extend beyond the full and t ruthful disclosure of all primary facts? In our opinion, the answer to this quest ion must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else far less the assessee- to tell the assessing authority what inferences, whether of facts or law, should be drawn."
5.1 Again in the case of Patidar Oil Cake Industries Vs. DCIT, 270 ITR 347(Guj), Hon’ble Guj rat High Court held
“In the light of the fact that the assessments have been sought to be reopened after a period of four years from the end of each of the assessment years in quest ion, the provisions of sect ion 147 of the Act mandate that the Assessing Officer shall be vested with the jurisdiction to initiate reassessment proceedings only in case there is any omission or failure on the par t of the assessee to disclose fully and truly al l material facts necessary for the assessment for the year under consideration and such failure should result in income chargeable to tax escaping assessment . On a plain reading of the aforesaid provisions and the reasons recorded, it becomes clear that there cannot be ascr ibed any failure or omission to the petitioner so as to vest the Assessing Officer with jur isdiction to reopen the assessments which were already finalised. In the circumstances, for the assessment years 1986-87, 1987-88 and 1988-89 in the light of the fact that the ini tiation by issuance of impugned not ices is beyond the period of four years and the prerequisite conditions stipulated by sect ion 147 of the Act are not fulfilled, there is no case made out for upholding the proposed reassessment. The not ices for all the four years are, therefore, bad in law and are quashed and set aside. ”
5.2 In the case of Devidayal Rol ling Mills & Another Vs. Y.R.Saini,ACIT,285 ITR 514,Hon’ble Bombay High Court held that where an assessment order passed u/s 143(3) of the Act is sought to be reopened beyond four years from the end of relevant assessment year, the Revenue must establish that there was failure on the part of the assessee to disclose fully and truly all material facts relevant for the purposes of the assessment .
5.3 In the case of Mercury Travels Ltd. Vs. DCIT & Another,258 ITR 533(Cal.) , Hon’ble High Court in the light of facts of the case concluded that no income chargeable to tax had escaped assessment for those assessment years due to failure of the assessee to disclose fully and truly all material facts necessary for its assessment .
5.4 In Priyanka Carbon & Chemical Industries (P) Ltd. vs. DCIT (2008) 15 DTR (Guj.) 31, Hon’ble High Court held that when factual data was available with the AO at the time of assessment , on the same very material, if the AO takes a different view subsequently and that too after expiry of four years from the end of the relevant assessment year, that would not confer any jurisdiction on the AO to issue notice u/s 148 of the Act . Similar view was taken in ACIT vs. Jagdishbhai Nanubhai Tekrawala (2008) 12 DTR (Guj) 270,
5.5 In Vareli Weavers Pvt . Ltd. vs. DCIT (1999) 240 ITR 77 (Guj ) also not ices under sect ion 148 read with sect ion 147 of the Act were quashed by the Hon’ble High Court , there being no whisper in the reasons recorded by the AO about failure on the part of the assessee to disclose truly and fully al l mater ial facts .
5.6 In CIT Vs. DCM Ltd. , (2009) 24 DTR(Del. ) 72,Hon’ble jurisdictional High Court found that there was no allegation in the reasons recorded by the AO that the assessee had failed to f ile its return or that it had failed to disclose fully and truly all material facts in its return nor was there any allegation by the Assessing Officer that the assessee had failed to disclose fully and truly all material facts in its return of income nor even there was any allegation regarding escapement of income. In these circumstances, Hon’ble High Court upheld that findings of the Tribunal that notice u/s 148 of the Act, having been issued after four years, the reopening of the assessment was not valid.
5.7 In CIT & Another Vs. Foramer France, 264 ITR 566 (SC),Hon’ble Apex Court upheld the order of the Hon’ble Delhi High Court in concluding that when there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment , the proviso to the new sect ion 147 of the Act squarely applied, and the impugned not ices were bar red by limitation mentioned in the proviso.
5.8 In Supreme Travels (P) Ltd. vs. DCIT, 182 Taxman 216 (Bom.), Hon’ble Bombay High Court held that the Assessing Officer can reopen the assessment only if the ingredients of sect ion 147 are fulfilled.
5.9 In Gujarat Carbon and Industrial Ltd. vs. Jt. CIT [2008] 307 ITR 271 (Guj), Hon’ble High Court in the absence of any failure on part of the assessee to fully and truly disclose all material facts relevant for the assessment of the assessment year in question, concluded that the impugned
notice under s. 148 issued beyond a period of four years from the end of the relevant assessment year, is required to be quashed.
5.10 Likewise in Gujrat Fluorochemicals Ltd. vs. DCIT [2009] 319 ITR 282 (Guj), Hon’ble High Court concluded that the assessee having made full disclosure of material facts in the return which was accompanied by several enclosures, assessment could not be reopened beyond four years from the end of the relevant assessment year for the reason that certain income has been wrongly assessed under the head ‘Capital gains’ instead of ‘Profits and gains of business or profession’.
5.11 In Nikhil K Kotak vs. Mahesh Kumar, AO [2009] 319 ITR 445 (Guj) also it was held that in the absence of any averment of the Revenue that there was any omission or failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment of the assessment year in question, impugned notice under s. 148 issued beyond a period of four years from the end of the relevant assessment year is bad in law and without jurisdiction.
5.12 In Cadila Healthcare Ltd. vs. Dy. CIT [2010] 41 DTR 145 (Guj), Hon’ble High Court concluded that in the absence of any averment in the reasons recorded by the AO for reopening the assessment that the petitioner has failed to disclose fully and truly any material fact necessary for its assessment for the year under consideration or any new material or facts coming to the notice of the AO leading to the conclusion that income had escaped assessment, the ingredients of the proviso to s. 147 are not satisfied and, therefore, entire proceedings under s. 147 initiated pursuant to the impugned notice after expiry of four years from the end of the relevant assessment year were without jurisdiction and cannot be sustained.
5.13 In Mihir Textiles Ltd. vs. Jt. CIT [2010] 43 DTR 11 (Guj),Hon’ble High Court held that the petitioner having submitted audited books of accounts, P&L a/c, and balance sheet along with notes and also made a specific disclosure in the form of a note regarding transfer of its undertaking, it cannot be said that the petitioner is guilty of not making full and true disclosure and, therefore, notice under s. 148 issued after the expiry of four years from the end of the relevant assessment year is quashed and set aside.
5.14 Similar view was taken in decision dated 28.11.2011 in CIT vs. Purolator India Limited in ITA no. 489/Del./2011 and decision dated 1.12.2011 in BLB Limited vs. ACIT in WPC 6884/2010,JSRS Udyog Limited & Another vs. ITO,313 ITR 321(Del.); Wel Intertrade Private Limited vs. ITO,308 ITR 22(Del.) and in a recent decision dated 11.11.2011 in ITA no.87 /2010 in Atma Ram Properties Pvt. Ltd. vs. DCIT by the Hon’ble jurisdictional High Court.
5.15 In Haryana Acrylic Manufacturing Co. , 308 ITR 38 (
“20. In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee 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 WelIntertrade (P.) Ltd.',308 ITR 33(Del.) we had agreed with the view taken by the Punjab and Haryana High Court in the case of Duli Chand Singhania,269 ITR 192 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 viewpoint, we hold that the notice dated 29-3- 2004 under section 148 based on the recorded reasons as supplied to the petitioner as well as the consequent order dated 2-3-2005 are without jurisdiction as no action under section 147 could be taken beyond the four year period in the circumstances narrated above.”
5.16 Now advert ing to decisions rel ied upon in the grounds of appeal. First such case is Phool Chand Bajrang Lal Vs. I.T.O. (1993) 203 ITR 456 (S.C.),wherein Hon’ble Apex Court held that the AO rightly initiated the reassessment proceedings on the basis of subsequent information which was specific, relevant and reliable and, after recording the reasons for the formation of his own belief that in the original assessment proceedings, the assessee had not disclosed the material facts truly and fully and, therefore, income charge able to tax had escaped assessment. In Rakesh Aggarwal (Legal Heir Of Late Shri R. S. Aggarwal), 142 CTR(Delhi) 272 reopening of assessment for the AYs 1989- 90 & 1990-91 was within the four years .Likewise decision in Ram Prasad Vs. I.T.O. (1995) 82 Taxman 199(All) was rendered on the facts of its own. The ld. DR did not demonstrate as to how these decisions are applicable in the facts and circumstances of the case before us. After perusing these decisions and with respect, we are of the opinion that the decisions relied upon in the grounds of appeal were rendered on the facts of their own and ratio laid down in these decisions is not germane to the issue before us. Therefore, we are of the opinion that the reliance on the decisions in the grounds of appeal is totally misplaced..
6. To sum up, in the instant case, as is apparent from the facts narrated in the impugned order, the AO reopened the assessment completed on 25.2.2005 u/s 143(3) of the Act merely on the basis of facts already available before him at the time of original assessment proceedings. Not even a whisper is evident from the reasons recorded or the facts narrated in the impugned orders as to whether or not there was any failure on the part of the assessee in disclosing fully and truly al l material facts necessary for his assessment.The reasons do not indicate why and how the assessee failed to make full and true disclosure of material facts in relation to claim of depreciat ion. We are of the opinion that any such failure as is envisaged in the proviso to sec. 147 of the Act, is a matter of fact alone and there can be no deemed failure . In these circumstances, in absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration, the notice under sect ion 148 of the Act having been issued after the expiry of a period of four years from the end of the relevant assessment year, the very initiation of proceedings under sect ion 147 of the Act stands vitiated and as such cannot be sustained, the ingredients of sect ion 147 having not been fulfilled. In view of the foregoing, especially in the light of consistent view taken in aforesaid decisions of the Hon’ble jurisdictional High Court and other Courts, considering the facts and circumstances of the case, we are of the opinion that there is nothing to suggest that all the primary facts were not disclosed by the assessee at the time of original assessment completed u/s 143(3) of the Act nor any failure on the part of the assessee to disclose fully and truly al l the material facts has been ascribed in the circumstances narrated before us. It cannot be said that the assessee suppressed any material facts. It is well-settled that if a notice under sect ion 148 of the Act has been issued without the jurisdictional foundation u/s 147 of the Act being available to the AO, the notice and the subsequent proceedings will be without jurisdiction and thus, liable to be struck down . In view thereof, we have no hesitation in upholding the findings of the ld. CIT(A) in quashing the reassessment order Consequently, ground no. 1 in the appeal is dismissed.
7. No additional ground having been raised before us in terms of residuary ground no. 2 in the appeal, accordingly, this ground is dismissed.
8. No other plea or argument was made before us.
9. In the result, appeal is dismissed.
Order pronounced in open Court
Sd/- Sd/-
(R.P. TOLANI) (A.N. PAHUJA)
(Judicial Member) (Accountant Member)
NS
Copy of the Order forwarded to:-
1. Dy. C. I .T. , Circle 3(1),
2. M/s City Financial Consumer Finance India Ltd.,3 Local Shopping Centre, Pushp Vihar , New Delhi
3. CIT concerned.
4. CIT (A)-VI,
5. DR, ITAT,’B’ Bench,
6. Guard File.
BY ORDER,
Deputy/Asstt.Registrar
ITAT,
