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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: HON’BLE MADHUMITA ROY, JUDICIAL
The instant appeal is directed against the order dated 15.12.2014 passed by the Learned Commissioner of Income Tax (Appeals-1), Bhopal (MP) arising out of the order dated 26.06.2012 under section 147 read with section 143(3) of the Income Tax Act, 1961(hereinafter referred as “the Act”) passed by the ITO-2, Itsari for Assessment Year 2005-06.
The brief facts leading to the case is this that the appellant firm maintaining mercantile system of accounting derived income from warehousing filed its return of income on 29.10.2005 declaring income at NIL, assessment of which was completed under section 143(3) of the Act on 05.11.2007 on Nil income accepting the claim of 100% deduction under section 80IB(11A) of the assessee at Rs.6,32,322/-. Later on it was found by the Learned Assessing Officer that such claim made by the assessee was incorrectly allowed whereupon after obtaining prior approval from the CIT, notice under section 148 of the Act dated 08.08.2011was served upon the assessee upon recording of reasons. The return already filed by the assessee on 29.10.2005 was requested to be treated as return filed in response of the said notice. Finally the Ld. A.O issued notices under section 143 (2) and 142(1) of the Act and completed the reassessment under section 147 upon determining the taxable income at Rs.6,32,322/- after disallowing the appellant’s claim of deduction under section 80IB(11A) of the Act which was in turn deleted by the Learned CIT(A). Hence the instant appeal before us. In fact by and under an order dated 22.09.2015 the appeal preferred by the revenue against the order dated 15.12.2014 passed by the Learned CIT(A) got dismissed by the Ld. Tribunal due to low tax effect as covered by CBDT instruction No. 5/2014 dated 10.07.2014. However, the said order was recalled on 29.10.2019 upon application made by the revenue applying the exception clause due to audit objection. Thus, the matter is heard afresh.
At the time of hearing of the instant appeal the Learned Departmental Representative vehemently opposed the order passed by the Learned CIT(A) in quashing the order passed by the Learned Assessing Officer in effect the reassessment order under section 147 of the Act dated 26.06.2012 for Assessment Year 2005-06. According to him the explanation rendered by the assessee in support of the claim does not satisfy the conditions specified in section 80IB(11A) since the assessee is not engaged in integrated business of handling, storage and transportation of food grains being the main condition for claiming deduction under this particular section. He, therefore, relied upon the order passed by the Learned Assessing Officer under section 147 of the Act.
On the contrary the Learned Counsel appearing for the assessee submitted before us that the initiation of the proceeding under section 147 is bad in law. It was further submitted by him that the notice under section 148 was issued on 08.08.2011 i.e. after the expiry of 4 years from the end of relevant Assessment Year. In the absence of any tangible material, reopening of the assessment completed under section 143(3) of the Act is nothing but a “change of opinion”. Furthermore the assessee answered the query made by the Ld. Assessing Officer effectively relating to the claim under section 80IB(11A) of the Act with corroborating documents which is evident from the order dated 05.11.2007 passed under section 143(3) of the Act. It was further contended by the Learned Counsel appearing for the assessee, that the reasons for issuing of notice under section 148 on 08.08.2011 with the prior approval dated 04.08.2011 granted by the Learned CIT shows that the approval so granted by the Learned CIT is a product of non application of mand. Last but not the least the proceeding initiated under section 147 of the Act has been challenged by the assessee on the very basic ground of not alleging failure on the part of the appellant truly and fully in disclosing the material facts at the time of regular assessment in the reason recorded dated 08.08.2011 by the ITO-2, Itarsi in terms of the relevant provisions of law.
We have heard the rival submission made by the respective parties and we have also perused the relevant materials available on records including the order passed by the authorities below. It appears from the order passed by the Learned AO that he was not satisfied with the case made out by the assessee in handling and transportation activities; the explanation rendered by the assessee in this regard was not found suitable and hence not accepted by the Assessing Officer. But it appears from the records that in regard to the particular claim under section 80IB((11A) of the Act dated 26.09.2007, the assessee furnished all the details of income from warehousing, the licence for running the same under the Madya Pradesh Krishi Godam Adhiniyam, 1947, the license granted by the MP Krishi Upaj Mandi Samiti, Itarsi, the license issued by MP Warehousing and Logistics Corporation, Bhopal, the body constituted by MP government. Consideration of those documents is also reflecting in the initial order of assessment under section 143(3) dated 05.11.2007 as on record before us.
Apart from that the reasons recorded for issuing notice under section 148 of the Act only speaks of incorrectly allowing the claim of the assessee of 100% deduction under section 80 IB(11A) of the Act of Rs.6,32,322/-. However, the Ld. A.O has not brought any tangible material so as to draw a conclusion that the assessee has failed to disclose fully and truly all material facts with regard to such claim of deduction under section 80IB(11A) of the Act necessary for assessment proceeding under section 143(3) of the Act which is the essential ingredient and or condition to be fulfilled as stipulated by the statutory provision of section 147 of the Act. In this aspect we have considered the judgment passed by the Hon'ble Delhi High Court in the case of Balasubramaniam Ramachandran V/s ITO in WP( C) 6159/2013 and CM 13549/2013 while dealing with the issue the Hon'ble Court has been pleased to observe as follows:-
Xxxxx "In the reasons as furnished by the Assessing Officer, we find that there is neither an}' allegation that the assessee had failed to truly disclose any material facts at the time of assessment, nor can we readily infer the same in view of the fact that a detailed enquiry had been conducted by the 6
Assessing Officer with regard to the identity and creditworthiness of the share_applicants and genuineness of the transactions in relation to the share application money received by the assessee. Further the mere statement that the DRl has seized certain goods of the assessee and levied a penalty also cannot be stated to be a reason for reopening of assessment of the assessee as the said statement made is neither followed by the recording of a belief that the income escaped on the count or that the assessee has failed to disclose all relevant material, fully and truly, at the stage of the first assessment. "
10. Similarly, in the present case, we find that in the reasons recorded there is neither any allegation that the assessee had failed to truly and fully disclose material facts at the time of the assessment nor can we readily infer the same Consequently, one of the essential ingredients for re-opening an assessment beyond the period of four years has not been satisfied in the present case. The re-assessment proceedings are, therefore, bad in law. The impugned notice under Section 148 dated 28.03.2012 as well as all proceedings pursuant there to, including the re-assessment order dated 22.03.2013 are set aside. The writ petition is allowed as above. There shall be no order as to costs” xxxxx.
Further that it is the well settled principle of law that in order to invoke the provisions of Section 147 of the Act, after a period of four years from the end of the relevant assessment year, in addition to the Ld. A.O having reasons to believe that any income has escaped assessment, it must also be established that the income has escaped assessment on 7 account of the assessee failing to make returns u/s 139 or on account of failure on the part of the assessee to disclose fully or truly, the necessary material facts. In this regard the Ld. CIT(A) relied upon the judgment passed by the Hon'ble Delhi High Court in the matter of CIT V/s Suren International P. Ltd (2013) 357 ITR 24 (Del) where on the same premise the Hon'ble Court quashed the proceeding initiated u/s 147 of the Act.
As regards the initiation of the proceeding after the expiry of 4 years from the date of completion of the relevant Assessment Year in the absence of any allegation leveled against the assessee in not disclosing truly or fully all material facts necessary for the assessment, we find that the Learned CIT(A) had further relied upon the judgment passed in the matter of Haryana Acrylic Manufacturing Co V/s CIT reported in (2009)
308 ITR 38(Del) passed by the Hon'ble Delhi High Court. We have considered that particular judgment. While allowing the petition preferred by the assessee the Hon'ble Court has been pleased to observe as follows:
"Held, allowing the petition,
(i) That the reasons recorded did not indicate the failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the Assessment Year 1998-99. While in the reasons supplied to the petitioner there was no mention of the allegation that there was a failure on the part of the assessee to disclose fully and truly all material facts, in the reasons shown in the said form to the counter affidavit there was a specific allegation that there was a failure on the part of the assessee to disclose fully and truly all material facts relating to accommodation entries raised from one of the companies to the extent of Rs. 5 lakhs. Thus, one of the conditions precedent for removing the bar against taking action after the said four years period remained unfulfilled. Consequently, the notice under section 148 based on the recorded reasons supplied to the petitioners as well as the consequent order were without jurisdiction as no action under section 147 could be taken beyond the four year period. "
Apart from that the judgment passed by the Hon'ble Delhi High Court in the case of wel Inter-trade Private Ltd and another versus ITO reported in (2009) 308 ITR 22(Del) was considered by the learned CIT(A) while quashing the proceeding.
We have further considered the judgment passed by the Hon'ble Apex Court In the case of CIT V/s Kelvinator of India Ltd 2010, 187 taxmann 312(SC) where it was held that reopening of an assessment under section 147 of the Act is not permitted merely on the ground that 9 there is change in the view of the Assessing Officer and subsequently he believes that earlier views was incorrect particularly when the assessment order itself records that the issue was raised and was decided in favour of the assessee. In that view of the matter the reassessment proceeding in such a case will be hit by the principle of change of opinion and thus liable to be quashed. Since the assessee had truly disclosed all the relevant material facts necessary for the assessment, the preconditions for invoking the proviso of Section 147 had not been satisfied. Hence the Ld. A.O had acted wholly without jurisdiction. Thus considering this particular facts and circumstances of the case and the judgment relied upon by the assessee and as well as the Learned CIT(A), we find no justification in interfering with the order passed by the Learned CIT(A) in holding the decision of reassessment proceeding under section 147 of the Act for Assessment Year 2005-06 by issuing notice under section 148 of the Act as bad in law in the absence of mentioning of any allegation against the assessee in failing to disclose fully and truly the material facts in the assessment proceeding under section 143 (3) of the Act. Merely by making a statement in the reasons recorded that the assessee’s claim of 100% deduction under section 801B(11A) of the Act was incorrectly allowed cannot be said to be justified in reopening the assessment. Such order, passed by the Learned CIT(A), in our considered view is without any ambiguity so as to warrant interference. Hence the order is passed in the affirmative, i.e. in favour of the assessee and against the revenue. The revenue’s appeal is, therefore, dismissed.
In the result appeal of the Revenue is dismissed.