ECI ENGINEERING & CONSTRUCTION COMPANY LTD., HYD,HYDERABAD vs. ACIT, CIRCLE-2(2), HYD, HYDERABAD

O R D E R PER LALIET KUMAR, J.M. These two appeals filed by the assessee and the Revenue, respectively, are directed against the order of Commissioner of Income Tax (Appeals) – 5, Hyderabad dated 30.03.2016 for the assessment year 2006-07.

2. The abridged grounds raised

by the assessee in read as under : “1. The order of ld.CIT(A) - 5 is erroneous in law in facts and in law.

2. The ld.CIT(A) erred in upholding the decision of the Ld.AO in treating sale of partly paid up shares as fully paid and confirming the addition of Rs.50,14,625/- as long term capital gain.

3. The ld.CIT(A) erred in confirming the addition of Rs.27,69,422/- towards difference in interest.

4. Further, the ld.CIT(A) failed to observe that the notes to financial statements clearly mentioned the interest income which pertained to the previous year and accordingly erred in upholding the action of the Ld.AO in assessing the difference in interest of Rs.27,69,422/-.

5. The ld.CIT(A) erred in confirming the addition of difference of prior period income of Rs.1,26,71,371/-.”

2.1. The assessee had further filed the additional grounds of appeal, which read as under :

“1. The ld.CIT(A) erred in upholding the reassessment proceedings when there was no failure or omission on part of the appellant to disclose fully and truly, all material facts while completing the original assessment u/s 143(3) of the Income Tax Act.

2. The ld.CIT(A) erred in upholding the decision of the Ld.AO in treating sale of partly paid up shares as fully paid and confirming the addition of Rs.50,14,625/- as long term capital gain.

3. The ld.CIT(A) erred in confirming the addition of Rs.27,69,422/- towards difference in interest. 4. Further, the ld.CIT(A) failed to observe that the notes to financial statements clearly mentioned the interest income which pertained to the previous year and accordingly erred in upholding the action of the Ld.AO in assessing the difference in interest of Rs.27,69,422/-. 5. The ld.CIT(A) erred in confirming the addition of difference of prior period income of Rs.1,26,71,371/-.”

3. The grounds raised by the Revenue in read as under :

“1. The order of ld.CIT(A) is erroneous in law and on facts of the case.

2. The ld.CIT(A) erred in deleting the disallowance of depreciation on discarded assets of Rs.21,25,929/-.

3. The ld.CIT(A) erred in deleting the addition of Rs.1,42,37,594/- made by the Assessing Officer on account of assets discarded or written off.

4. The ld.CIT(A) erred in simply accepting the contention of the assessee and in not passing a speaking order on the issue of deletion of addition of Rs.1,42,37,594/- an expenditure claimed towards assets discarded / written off under prior period expenditure.”

4. The brief facts of the case are that assessee is a company engaged in the business of civil contracts, filed its return of income for A.Y. 2006-07 on 23.11.2006 declaring total income of Rs.7,79,88,094/-. The return of income was processed u/s 143(1) of the Act on 10.03.2008 and thereafter, the assessment was completed u/s 143(3) of the Act by making disallowance of Rs.52,00,000/- and Rs.12,08,208/- on account of disallowance u/s 40(a)(ia) of the Act. Thus, the income of the assessee was computed at Rs.8.43,96,302/-. In the assessment order, the Assessing Officer in para 4 has mentioned as under :

“4. It is noticed from the Annexure-13 to the Tax Audit Report submitted during the course of assessment proceedings, there is a shortfall in Tax Deduction at source to the extent of Rs.27,112/- under the head Hire Charges for Machinery.”

4.1. Subsequently, case was taken up for scrutiny u/s 148 of the Act. The ld.AR had submitted that the Assessing Officer had issued notice u/s 148 of the Act on 28.03.2012. The said notice, provides as under :

4.2. The Assessing Officer had mentioned the following reasons for belief on 19.03.2011 that the income has escaped the assessment while issuing notice u/s 148 of the Act.

Reasons for the belief that Income has escaped assessment. (i) As per the computation on Long Term Capital Gains the assessee had sold 29000 shares Rs.7/- per share and 28,65,500/- shares @ 5.25 per share on 31.07.2005 and claimed the profit on sale of investment of Rs.64,47,895/- as exempt u/s 10(38) on the reason that the shares are listed shares and that Securities Transaction Tax (SIT) has already been deducted. Though in, its letter Dt: 16.04.2008, the assessee stated that the details of STT paid would be provided separately, the same have not been found on record. Further, under the current circuit breaker norms of Stock Exchanges, it is not possible that the prices Rs.5.25 and Rs.7.00 could be quotations on the same day i.e.. 31.07.2005. In view of the same the transaction appears to be an off-market negotiated transaction. Since SIT will not be deducted in off-market transaction, the sale would attract capital gains tax. (ii) As the details of STT are not on record, the exemption u/s 10(38) of .64,47,895/- requires to be disallowed. (iii) Assessee claimed depreciation on discarded assets amounting to 21,25,929/ Depreciation is allowable only when the asset is owned and put to use by the assessee. In the instant case, since assets are discarded and not put to use the assessee is not entitled to depreciation. (iv) Assessee claimed employee's remuneration and benefits amounting to .4,73,76,085I- as per schedule 12 of P&L a/c. Average salary per month works out to approx. Rs.40 lakhs. As per balance sheet under the head current liabilities, salaries,& wages (sch-8) an amount of Rs.91,01,161/- and an amount of Rs.1,35,755/- under the head PF is due, which clearly indicates that the liability is for more than two months as against normal trend of one month. (v) The shares of Rockwell India ltd were sold at two different rates of Rs.7 & Rs.5.25 per share. The breakup is not available on record. By applying the rate at Rs.7 per share the understatement of sale proceeds of Rs.50.14, attracts long term capital gain tax.

4.3. It was submitted by the ld.AR that from the notice, it is clear that the said notice was issued without obtaining the satisfaction of the CIT-II, Hyderabad / CBDT. The contention of ld.AR was that the notice was issued as if the re-opening was done within 4 years under clause (1) of section 147 of the Act. It was the contention that if the reopening is done by the Revenue beyond a period of 4 years, then satisfaction of the Commissioner of Income Tax is necessary.

4.4. The assessee after receipt of notice u/s 148 had also received notice u/s 143(2) and 142(1) of the Act. In response thereto, assessee furnished information as called for and after examining the same, Assessing Officer had completed the assessment u/s 143(3) of the Act on 23.04.2008 with a taxable income of Rs.8,43,96,302/- interalia making certain additions / disallowances.

5. Feeling aggrieved with the order of Assessing Officer, assessee carried the matter before ld.CIT(A), who granted partial relief to the assessee. While deciding the appeal, ground no.2 raised by the assessee with respect to “2. The action of the Assessing Officer is illegal and barred by limitation as per law”. The ld.CIT(A) had decided ground nos.1 to 3 collectively, against the assessee, at page 17 of the order passed by the ld.CIT(A). The submissions of the assessee were reproduced hereunder : (Page 7 and 8 of the CIT order).

“A. The Appellant filed its1101 for the AY 2006-07 for an income of Rs7,79,8,09.4/- on 23-11-2006. The same is completed u/s 143(3) of the LT Act vide order dated 23-04-2008 by the DCIT, Circle 2(2). The notice u/s 148 is issued on 28-03-2012. Thus, there is a time gap of more than 4 years from the end of the relevant Assessment year and issue of notice under Sec.148. In terms of the provisions of section-147 of the I.T. Act, the Assessment is bad and illegal as it is time barred as there is no fault on the part of the Assessee to disclose filly and truly all material facts necessary for his assessment. B. Without prejudice to the above, it is submitted that the A.O has issued the notice u/s 148 only due to the change of opinion and nor based on any new information that has come to his notice subsequently. There is no information or reason with the AO to believe that income has escaped assessment. In this regard, reliance is placed on CIT v. Munjal Showa Ltd. (2012). 205 Taxman 351 (Delhi)(HC) where in it has been held that Reassessment due to the change of opinion when there is no failure on part of Assessee in disclosing the full facts is not valid. C. The A0 has no information on record to show that income chargeable to tax has escaped assessment due to the failure of the Assessee to disclose fully and truly all the material facts necessary for the Assessment. The Assessee has submitted all the facts and information to the A.O at the time of making original Assessment. Synopsis of the arguments of the appellant is as follows :

5.1. The ld.CIT(A) though had noted down the objections raised by the assessee and submissions of the assessee, however, without any elaborate reasonings had dismissed the grounds of the assessee by reasoning given vide 6.10 and 7 of his order (at page 16 and 17). The ld.CIT(A) had partly granted the relief to the assessee and partly confirmed the addition made by the Assessing Officer.

6. Feeling aggrieved with the order of ld.CIT(A), both the assessee and Revenue are now in appeal before us.

6.1 First we will deal with the appeal of assessee in .

8. Per contra, ld. LD. DR objected for admission of additional grounds of appeal

filed by the assessee and to substantiate his case, he relied upon the decisions in the case of Brooke Bond India Ltd. Vs. CIT – (1991)

59. Taxman

82. (CAL) as well as CIT Vs. Begum Noor Banu – (1993)

69. Taxman 565 (Andhra Pradesh.) and further submitted that the additional grounds raised by the assessee cannot be entertained. In support of his case, he also filed the following written submissions, which are to the following effect :

“1. Most respectfully submitted that the Appellant has raised Additional Grounds regarding reassessment proceedings U/s 147 of the I T Act. In this regard, the comments of the Assessing Officers were called for. The report of the Assessing Officer, vide his letter bearing F No. CC-2(3)/ ECI Engg/2022-23 dated 18.10.2022 has been received which has been duly forwarded by the Range Head vide his letter bearing F No. JCIT/CR-2/HYD/2/ITSC/2022-23 dated 26/10/2022 (Copies of both are enclosed herewith as Annexure I.

2. At the outset, it is pointed out that these grounds regarding reassessment have been raised by the Assessee for the first time before the Hon ITAT and it was neither raised before the AO nor before the TA CIT (A). Therefore, the Additional Grounds of Appeal

s filed on 11.01.2017 are not admissible. Reliance is placed on the following decisions in this regard: > Brooke Bond India Ltd (1991) 59 Taxmann 82 (Cal) > Begum Noor Banu (1993)69 Taxmann 565 (AP)

3. Without prejudice to the above, it is to submit that it becomes clear from above report of the AO that the approval of the CIT for the issue of Notice U/s 148 of the IT Act was obtained on 27.03.2012. From the records, it is seen that the Proforma proposal for re-opening of assessment was submitted by the Additional CIT, vide his letter dated 26.03.2012 (In the Form for recording reasons thereof, it appears that the date has been inadvertently typed as 19.03.2011 instead of 19.03.20 12). Copies of the Proforma, the said forwarding letter of the Addl. CIT, communication of the approval by the ITO (HQ) dated 27.03.20 12 and a copy of the Notice U/s 148 of the IT Act dated 28.03.2012 are enclosed herewith as Annexure II

6. In view of the above, it is not only a case of fraudulent claims, but also of falsity, of shifting stands and misrepresentation of facts before the Revenue Authorities to evade the taxation. Reliance is placed on the following decisions in this regard: > Phoolchand Bajrang Lal and others Vs. Income Tax Officer (1993) 203 ITR 456 SC 7. It is clear from above mentioned AO's report and the Additional CIT's comments thereon, that there is no change of opinion, but it is a fraudulent claim of exemption U/s 10 (38), for which the assessee itself had later admitted the mistake and offered the LTCGs for taxation. So, the raising of such frivolous and inadmissible additional grounds of appeal is a deliberate act to avoid payment of due taxes. The said report also makes it clear that the issue of Notice U/s 148 is within the purview of provisions contained in section 151 of the IT Act and after due approval of the CIT-il, Hyderabad. In this context, it may be pointed out that the Assessee has not approached with clean hands neither before the assessing officer nor before appellant authorities, including the Hon'ble ITAT.”

11 ground going to root of the matter so as to determine correct tax liability of a taxpayer provided all the relevant facts are already on record. Respectfully, following the decisions cited supra, we accept that the assessee’s petition seeking to raise additional grounds. Further, as the additional grounds raised by the assessee are legal in nature and directly emanate from the order contested, the same are required to be admitted.

10. Both the decisions relied upon by the ld. DR deals with the issue of admission of additional grounds covering a new item for the first time before the Tribunal which has not been disputed at the earlier stage, namely, either before the Assessing Officer or before the ld.CIT(A). In the case of Begum Noor Banu (supra), the assessee’s land was acquired by the Government and compensation was awarded and on reference, the compensation was annulled by the first appellate authority and the ld.CIT(A). The assessee in that case had filed the return of income declaring enhanced compensation and also declared the capital gain and interest amount to a tune of Rs.72,026/- and thereafter, the Assessing Officer had computed total income of the assessee. The ITO in the said case had mentioned that the capital gain is strictly speaking was chargeable in the fiscal year in which the land was acquired but since the assessee had declared gain in the assessment year under consideration, therefore, the Assessing Officer has computed the income accordingly. On appeal, the assessee has not raised any ground of capital gain before the 1st appellate authority and thereafter, for the first time, the assessee had raised the ground before the Tribunal. The Tribunal has allowed the raising of the additional ground. The hon’ble jurisdictional High Court after considering the various judgments and the facts of the said case, had held that the Tribunal has no power to admit a new additional ground which deals with the new claim of the assessee. In view of the above, the judgment relied

12 upon the by the Revenue in the case of Begum Noor Banu (supra) is not applicable. Similar are the facts in the case of Brooke Bond India Ltd (supra). Hence, the decisions relied upon by the Revenue are not applicable to the facts of the case. In view of the above, the additional grounds raised by the assessee are admitted.

ADDITIONAL GROUND NO.1 11.1 In the present case, the assessee has filed the original return of income on 23.11.2006 admitting total income of Rs.7,79,88,094/- and the return of income was processed by the CPC on 10.03.2008 and the assessment was completed u/s 143(3) of the Act on 23.04.2008 with taxable income of Rs.8,43,96,302/-. Thereafter, the Assessing Officer had issued notice u/s 147 / 148 of the Act to the assessee.

11.2 Before us, ld. AR has submitted that the re-opening of the assessment was taken place beyond a period of 4 years and the Assessing Officer has not recorded that there was any omission or failure on the part of the assessee to disclose fully and truly all the material facts for the completion of assessment. It was further submitted that notice for re-opening was issued on 20.03.2012 and however, for the reasons to re-open the assessment were mentioned as under :

Reasons for the belief that Income has escaped assessment. (i) As per the computation on Long Term Capital Gains the assessee had sold 29000 shares Rs.7/- per share and 28,65,500/- shares @ 5.25 per share on 31.07.2005 and claimed the profit on sale of investment of Rs.64,47,895/- as exempt u/s 10(38) on the reason that the shares are listed shares and that Securities Transaction Tax (SIT) has already been deducted. Though in, its letter Dt: 16.04.2008, the assessee stated that the details of STT paid would be provided separately, the same have not been found on record. Further, under the current circuit breaker norms of Stock Exchanges, it is not possible that the prices Rs.5.25 and Rs.7.00 could be quotations on the same day i.e.. 31.07.2005. In view of the same the transaction appears to be an off-market negotiated transaction. Since SIT will not be deducted in off-market transaction, the sale would attract capital gains tax. (ii) As the details of STT are not on record, the exemption u/s 10(38) of .64,47,895/- requires to be disallowed. (iii) Assessee claimed depreciation on discarded assets amounting to 21,25,929/ Depreciation is allowable only when the asset is owned and put to use by the assessee. In the instant case, since assets are discarded and not put to use the assessee is not entitled to depreciation. (iv) Assessee claimed employee's remuneration and benefits amounting to .4,73,76,085I- as per schedule 12 of P&L a/c. Average salary per month works out to approx. Rs.40 lakhs. As per balance sheet under the head current liabilities, salaries,& wages (sch-8) an amount of Rs.91,01,161/- and an amount of Rs.1,35,755/- under the head PF is due, which clearly indicates that the liability is for more than two months as against normal trend of one month. (v) The shares of Rockwell India ltd were sold at two different rates of Rs.7 & Rs.5.25 per share. The breakup is not available on record. By applying the rate at Rs.7 per share the understatement of sale proceeds of Rs.50.14, attracts long term capital gain tax.

12. From the basis of the above said reasons, it was the contention of the ld. AR that the proposal given by the Assessing Officer was a revised proposal which is clear from the form / format by the Assessing Officer for seeking approval from the ld.CIT. Further, it was submitted that the ld.CIT had accorded the approval without satisfying himself and the approval as per record was accorded on 31.03.2011. It was submitted that if the re-opening is to be made within 4 years, then the satisfaction of the Commissioner of Income Tax is not required before reopening of the assessment. However, if the reopening is made after a period of 4 years, then the satisfaction of the CIT is required thereby concluding that the assessee had failed to disclose truly and correctly material facts at the time of assessment. It was submitted that it is incumbent and necessary for the Assessing Officer to mention that the assessee had failed to disclose fully and truly all the material facts. He had drawn our attention to the decisions of Hon’ble Mumbai High Court in the case of Bhor Industries Vs. ACIT reported in 267 ITR 161 and also jurisdictional High Court in the case of PCIT Vs. Lanco Hills Technol Park (I.T.T.A No.326 of 2022) decided on 13.12.2022 whereby both the High Courts have held as under :

“7. Revenue preferred appeal before the Tribunal against the aforesaid order of CIT(A) dated 30.03.2019. By the order dated 07.09.2021, Tribunal dismissed the appeal of the revenue by upholding the order of CIT(A). Tribunal held as follows: "4. We have heard rival pleadings and perused the case file. We note first of all that the Assessing Officer recorded the following reasons for forming his opinion that the assessee's taxable income had escaped assessment: "it is gathered from the information available with this office that the assessee was debited an amount of Rs.113,19,93,808/ - towards 'Reversal on account of cancellation and price revision; and finally reported a book loss of Rs.38,28,51,371/-. The reduction of Rs.113,19,93,828/ - towards Reversal on account of cancellation and price revision 'from the Profit and Loss Account for the year ended 31.03.2010 is irregular, the same need to be brought to tax. In view of the above, I have reason to believe that income has escaped assessment as per the provisions of section 147 of the IT Act."

5. There is hardly any dispute that we are in Assessment Year 2010-11 wherein the Assessing Officer had frErled his section 143(3) regular assessment on 27.12.0 12 followed by recording of the foregoing reasons culminating in issuance of section 148 notice dt.31.3.2015. This impugned reopening therefore has been it i :fated beyond the specified period of four years from t1 E e-id of the relevant assessment year in light of section 147(1) 1st proviso. The said proviso stipulates that such a reopening would only be initiated if it is found that the assessee had not disclosed all the relevant particulars "fully" and "truly" before the Assessing Officer in the first round. Learned CIT-DR to dispute that the Assessing Officer's sole reopening reason has placed reliance on the assessee's books only regarding "reversal on account of cancellation and price revision. (supra)". We therefore quote Hon'ble Bombay High Cou:-:'s landmark decision in Hindustan Lever Limited Vs. R.B. Wadekar (2014) 268 ITR 332 (Born) that an Assessing Officer's reopening reasons have to be read on standalone basis; as it is, without any scope of further m:rovement at a later stage by way of addition, deletio:a or- substitution therein. We thus quote that to conclude that the impugned reopening has been rightly quashed by the CIT(A) as a mere change of opinion only. All this, renders the latter issue on merits as academic. No other argument has been pressed before us."

8. Thus, according to the Tribunal, the reopening was initiated beyond the specified period of four years from the end of the re levant assessment year. In the light of Section 147(1) first proviso of the Act, Tribunal further noted that reopening of assessment is only permissible if the assessee had not disclosed all the relevant particulars fully and truly before the assessing officer. Relying on a decision of the Bombay High Court in Hindustan Lever Limited v. R.B.Wadekarl, Tribunal held that assessing officer's reopening reasons have to be read on a standalone basis, without any scope for further improvement at a later stage by addition or deletion or substitution. Therefore, Tribunal held that CIT(A) was justified in taking the view that reopening of assessment was on account of mere change of opinion.

9. We are in agreement with the views expressed by the Tribunal.

In view of the decisions cited hereinabove, it is clear that unless there is a failure on the part of the assessee to disclose fully and truly all the material facts, the re-opening made by the Assessing Officer cannot be said to be in accordance with law.

13. It was further submitted that the ld.CIT(A) and the Addl. Commissioner both have not applied their mind and have recorded the satisfaction without any application of mind in as much as the date for seeking the approval the ACIT / CIT was mentioned as 19.03.2011 i.e., within the period of 4 years, whereas, the proposal for seeking the approval was only mooted by the ACIT on 26.03.2012. In the light of the above, it was submitted that since the re-opening was made beyond a period of 4 years, it is necessary and mandatory for the Commissioner of Income Tax and Assessing Officer to satisfy themselves that there was a failure on the part of the assessee to fully and truly disclose all the material facts. It was also the contention of the assessee that during the assessment proceedings before the Assessing Officer in first round, the assessee has disclosed the material information about the long term capital gain. The Assessing Officer after noticing the contention of the assessee had asked the assessee to provide the details of STT paid on the share. Thereafter, no addition was made in the hands of the assessee on account of long term capital gain by the Assessing Officer. It was the submission of the assessee by the ld.AR that once the assessee had disclosed all the information to the Assessing Officer, then it is for the Assessing Officer to use his power under the Act for making the additions in the hands of the assessee. Further, it was submitted that the additions were made on account of the Audit Objections. It was the submission of the ld.AR that no reopening can be made based on the audit objections. The same audit report was available with the official of the Revenue at the first instance which was duly referred by him in Para 4 of his order and therefore, no addition can be made based on the same audit report.

“1. The above appeal preferred by the Appellant and the Department bearing respectively relates to the AY 2006-07 were heard on 07th April, 2021. 2. One of the grounds raised was relating to reopening of assessment U/s.147 by virtue of notice U/s. 148 of the Act issued on 28/03/2012.

3. The Appellant submits that since the reopening of the assessment was beyond the period of four years, there was no omission or failure on the part of the Appellant to disclose fully and truly all the material facts necessary for the completion of assessment.

4. The original assessment U/s. 143(3) was completed on 23/4/2008.

5. One of the grounds raised by the Appellant was that the notice U/s. 148 was issued without obtaining necessary sanction of the Commissioner of Income Tax, as this sentence was struck down by the Assessing Officer in the notice issued U/s. 148 on 28/03/2012. The Appellant pleaded for the sanction accorded by the Commissioner in relation to the facts called for and the Learned Departmental Representative was asked to furnish a copy, which was done. On a perusal of the Form for recording the reasons in initiating the proceedings U/s. 147 of the Act, for obtaining the approval, of the CIT given on 19th March, 2011 reveals the following:-. (i) The proposal itself is a "revised proposal" as could be seen from the "Head Note" of the "Form of approval". (ii) The Pr. CIT noted that he was satisfied that the recording of reasons of the proposals that were put to him arose out of remedial action to be taken within four years from the end of the AY 2006-07 which fell on 31st March, 2011, notwithstanding the fact that the original assessment was completed U/s. 143(3) of the IT Act, 1961.

(iii) The Pr. Commissioner while sanctioning the approval for reopening of the assessment was being issued within the period of four years from the end of the Assessment Year i.e., AY 2006-07. (iv) The assessment year in question is 2006-07 and the period of four years ends on 31/3/2011 as the original assessment was completed on 23/04/2008. However, the notice was issued on 28/03/2012 which is beyond four years from the end of Assessment Year 2006-07.

7. Therefore, the Appellant submits that the sanction accorded by the Commissioner of Income Tax on 19/03/201.1 was on an application of mind that the reopening of the assessment was within four years. Further, the Form also states that it is a revised proposal (Please see Head Note).

9. The Appellant further states that no sanction was obtained for issue of notice on 28/03/2012 which fell beyond the period of four years from the end of the Assessment Year 2006-07.

10. The Appellant prays that the aforesaid facts may kindly be taken on record for adjudication as the Hon'ble Tribunal deems fit as it arises out of the records of the Department governing sanction for issue of notice u/s 148 of the I.T. Act, 1961.”

11.1 Referring to provisions of section 114(a) of the Indian Evidence Act, he submitted that all statutory officers are deemed to have performed their duty as expected of them. He submitted that since the AO had passed the original order u/s. 143(3) on 7.12.2010 on the basis of the return of income filed along with the audited accounts and there is absolutely no failure on the part of the assessee to disclose fully and truly all material facts, therefore in view of the proviso to section 147 of the I.T.Act, the assessment could not have been reopened beyond the period of four years form the end of the relevant assessment year. He submitted that by merely mentioning that there is failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment is not sufficient. The AO has to bring on record some tangible material to show as to which part of the income was not disclosed fully and truly by the assessee so as ITA 183/Hyd/2020 to invoke the provision of section 148 beyond the period of four years. 11.2 Referring to the decision of Hon'ble Supreme Court in the case of ITO vs Kayathwal Estate Pvt.Ltd reported in 442 ITR 507, he drew the attention of the Bench to the following observation of the Hon'ble Supreme Court:- "1. Having heard Shri Balbir Singh, learned ASG and in the facts and circumstances of the case more particularly at the time of Scrutiny Assessment under section 143(3), the Assessing Officer had asked for the details regarding the unsecured loan taken byI the Assessee during the year under consideration and the Assessee furnished the details as asked for and thereafter, after perusing the details so furnished by the Assessee, the Assessing Officer passed an order under section 143(3) of the Act. Therefore, it cannot be said that there was any suppression on the part of the Assessee in not disclosing true and correct facts. It is required to be noted that even the re-assessment proceeding were initiated beyond the period of four years. Under the circumstances, the High Court is absolutely justified in quashing the re-assessment proceedings and the notice under section 148 of the Income tax Act. No interference of this Court is called for in exercise of powers under article 136 of the Constitution of India.

2. With this, the Special Leave petition stands dismissed. of.

i.ACIT vs.L.S.Cable(P) Ltd. 88 taxmann.com 616 (Del.HC) ii.Reliance Gems & Jewels Ltd. vs. DCIT3(3), Mumbai (ITA No.3855/Mum/2013) dated 28.10.2015(ITAT,Mumbai) iii.CIT vs. E-Funds International India(2007) 162 Taxman 01(del.) iv. CIT vs. ESPN Software India Pvt.Ltd. (301 ITR 368) (Del.HC) v. CITvs. Aspentech India(P.) [2010] 187 taxman 25(Delhi) vi. Bombay Steam Navigaiton co.Pvt Ltd. (56 ITR 52) (SC) vii. Empire Jute Co.Ltd. vs. CIT (124 ITR 1) (SC) 17. The ld. DR on the other hand heavily relied on the orders of the AO and CIT(A). So far as the validity of reassessment is concerned, he submitted that the AO in the original assessment order has neither discussed nor there was an opinion with respect to issue related to prior period expenditure as project expenses written off during the relevant assessment year and therefore the reassessment proceedings initiated in respect of this issue is not mere change of opinion and therefore, such reopening of assessment being in accordance with law has to be upheld. He also relied on the following decisions to the proposition that the reassessment proceedings initiated by the AO are valid. i.Innovative Foods Ltd. vs. Union of India [2018] 96 taxmann.com 250(Ker.HC) ii.Instnat Holdings Ltd. vs. DCIT [2014] 44 taxmann.com 386(ITAT,Mumbai) iii.CIT vs. Nova Promoters & Finlease(P.) Ltd.[201] 18 taxmann.com 217(Del.HC) 18. So far as the disallowances of the project expenses written off as revenue expenses is concerned, the ld. DR submitted that the pre-operative expenses is capital expenditure in nature and ITA 183/Hyd/2020 therefore, the same cannot be allowed as deduction. For the above proposition, he relied on the following decisions: i. CIT v. Omer Khayyam Wineries (P.) Ltd. [1979] 120 ITR 859 (AP.HC) ii.Eimco K.C.P.Ltd. vs CIT [2000] 109 taxman 151(SC) (SC) iii. CIT vs. Mohan Steel Ltd. [2005] 273 ITR 479 (Alahabad HC) iv.MAC Industrial Products Ltd. ACIT,CC [2006] 101 ITD 191 (ITAT, Chennai) v.CIT vs. Reinz Talbros (P.) Ltd. [2001] 119 taxman 739 (Del.HC) 19. He accordingly submitted that the order of the ld.CIT(A) being in accordance with law has to be upheld and the grounds raised by the assessee should be dismissed.

20. We have considered the rival arguments made by both the sides, perused the orders of the AO and Ld.CIT(A) and paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case completed the assessment u/s. 143(3) on 27.03.2010 determining the total loss at Rs.3,19,03,542/- as against the returned loss of Rs.3,56,28,560/- by disallowing depreciation of Rs.37,25,018/-. Subsequently, the AO issued notice u/s. 148 on 27.03.2014 after recording the reasons for reopening and such reasons have already been reproduced in the preceding paragraph. It is the submission of the ld. Counsel for the assessee that the assessment has been reopened beyond a period of four years from the end of the relevant assessment year and there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment and therefore, in view of the proviso to section 147 of the I.T.Act, the AO cannot reopen the assessment beyond a period of four years from the end of the relevant assessment year. It is his submission that mere mentioning of failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment is not sufficient in absence of any tangible ITA 183/Hyd/2020 material before the AO to substantiate or to show as to which part of the income or which facts necessary for completion of the assessment were not disclosed by the assessee. Therefore, according to the ld. AR, the reassessment proceedings initiated by the AO are not in accordance with law and has to be quashed.

21. We find sufficient force in the above arguments advanced by the ld. Counsel for the assessee. A perusal of the profit and loss account, copy of which is placed at page 44 of the paper book clearly shows that the assessee has claimed project expenses written off at Rs.84,97,952/- as expenditure. Similarly, perusal of Schedule-D forming the part of balance sheet, copy of which is placed at page 47 of the paper book, shows that the assessee, after deducting the project expenses written off at Rs.84,97,952/- has allocated the amount of Rs.1,9616,399/- to various capital assets. Thus, a perusal of the above details in the audited accounts filed along with the return of income clearly shows that assessee has disclosed all the material fact necessary for completion of the assessment and there was no failure on the part of the assessee to disclose any material facts necessary for completion of the assessment. Under these circumstances, we have to see as to whether the reopening of the assessment beyond a period of four years from the end of the relevant assessment year in absence of any failure on the part of the assessee to disclose fully and truly all material facts necessary for completion of the assessment can be made when the initial assessment was completed u/s. 143(3) of the I.T.Act, 1961.

22. We find the Hon'ble Supreme Court in the case of ACIT vs ICICI Securities Primary Dealership Ltd reported in 320 ITR 561 has held that where accounts had been furnished by assessee when called upon and thereafter assessment was completed u/s. 143(3), subsequently on a mere re-look of said account earlier ITA 183/Hyd/2020 furnished by assessee it is not permissible u/s. 147 to reopen assessment of assessee on ground that income has escaped assessment 23. We find the Hon'ble Madras High court in the case of CIT vs. RPG Transmission Ltd. reported in 359 ITR 653 has held that reopening was not justified where AO had actually before him all relevant material at the time of original assessment itself. The relevant observation of the Hon'ble High Court at para 30 of the order reads as under:-

"

24. The various other decisions relied on by the ld. Counsel for the assessee in the paper book also supports his case to the proposition that the reopening of the assessment in the instant case beyond a period of four years from the end of the relevant assessment year is not valid in absence of failure on the part of the assessee to disclose all material facts necessary for completion of the assessment.

19. The CIT-II had accorded the satisfaction and the same was communicated by the ITO, Head Quarters to the assessee on 27.03.2012. The Assessing Officer had issued the notice u/s 147 of the Act on 28.03.2012 wherein the Assessing Officer had deleted the following lines :

“This notice is being issued after obtaining necessary satisfaction of Commissioner of Income Tax – II, Hyderabad / the Central Board of Direct Taxes”.

20. The reasons for reopening of the assessment were also reproduced hereinabove and also forming part of the approval submitted by the Assessing Officer to the ACIT and in turn to the ld.CIT(A). The closer scrutiny of the proposal submitted by the Assessing Officer to the ACIT, the satisfaction accorded by the CIT and the notice dt.28.03.2012, make it clear that the Assessing Officer had mentioned the date on the said proforma as 19.03.2011 though the ACIT in communication sent to the CIT-II

25. Now we will take the appeal of Revenue.

Order pronounced in the Open Court on 15th May, 2023.