D.C.I.T.,CIRCLE-6(1), KOLKATA vs M/S ICA EDUSKILL PVT. LTD., KOLKATA

Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA

Before: Shri Rajpal Yadav, Vice-(KZ) & Shri Rajesh Kumar

Per Rajesh Kumar, Accountant Member:- This appeal preferred by the Revenue is directed against the order of ld. Commissioner of Income Tax (Appeals)-7, Kolkata dated 01.05.2019 for the assessment year 2008-09, wherein the Revenue has raised the following grounds:- “(1) Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in nullifying the assessment done u/s 147 of the Income Tax Act,1961.

(2) Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the addition

ITA No. 2147/KOL/2019 A.Y. 2008-2009 M/s. ICA Eduskill Pvt. Ltd. made by the AO by disallowing of preliminary expenses of Rs.31,72,758/-“.

Though the Registry has pointed out that the appeal is time barred, however, in view of the decision of the Hon’ble Supreme Court in the case of Miscellaneous Application No. 665 of 2021 in SMW(C ) No. 3 of 2020, the period of filing appeal during the COVID-19 pandemic is to be excluded for the purpose of counting the limitation period. In view of this, the appeal is treated as filed within the limitation period.

In the Ground No. 1, the revenue has challenged the order of the ld. CIT(Appeals) dated 1st May, 2019 quashing the assessment framed under section 143(3) read with section 147 of the Act dated 31.03.2015 on the jurisdictional Issue.

The facts in brief are that the assessee has filed its return of income on 19.03.2009 declaring a loss of Rs.1,94,64,229/-. The case of the assessee was selected for scrutiny and assessment under section 143(3) was made at a returned loss vide order dated 20.10.2010. Pertinent to mention that the said order under section 143(3) of the Act was subjected to rectification under section 154 of the Act on 20.09.2011 determining the loss at Rs.1,78,93,973/- after making the disallowance under section 14A read with Rule 8D of the Act. Thereafter the case of the assessee was reopened u/s 147 of the Act on the ground that authorised share capital as per Schedule 1 of the Balance-sheet has increased from Rs.1.64 crores to Rs.4.98 crores and the assessee has also claimed an amount of Rs.31,72,758/- under section 35D on account of preliminary expenses in Schedule 12D annexed to balance sheet. According to the ld. Assessing Officer, the assessee has not disallowed this expenditure suo motto in the computation of income at the time of filing the return of income and accordingly the income has escaped as failure on the part of the assessee

ITA No. 2147/KOL/2019 A.Y. 2008-2009 M/s. ICA Eduskill Pvt. Ltd. to disclose truly and fully all material facts. Accordingly notice under section 148 of the Act dated 18.03.2014 was issued by the ld. Assessing Officer apparently after a period of four years from the end of relevant assessment year in terms of proviso to section 147 of the Act on the ground that income of the assessee has escaped assessment as stated hereinabove. Finally the ld. Assessing Officer framed the assessment disallowing and adding back of Rs.30,31,447/- being 20% of share issue expenses and Rs.1,41,310/- being 20% of preliminary expenses relating to ROC fee paid for increase in authorised share capital by making an assessment under section 143(3) read with section 147 of the Act.

The ld. CIT(Appeals) allowed the appeal of the assessee on technical issue by quashing the assessment order by observing and holding as under:-

“4.2. I have considered the submission of the AR of the appellant in the backdrop of the assessment order. I have also considered the various judicial decisions as cited by the AR of the appellant in the matter of reopening of an assessment based on information already available on record of the AO. I find that the AO reopened the assessment which was completed u/s 143(3) and which was also rectified u/s 154 of the Act based on the same material evidences on record. Therefore, it can be construed that there was no new information coming into the possession of the AO which would warrant the action under u/s 147 of the Act. The action of the AO in this regard could only be interpreted as being a change of opinion on the same sets of facts and information as was available with him from the initial assessment stage u/s 143(3) of the Act. It is well settled by various judicial precedents as mentioned supra, that reopening cannot be done on change of opinion on the same sets of facts as available before the AO during earlier scrutiny assessment. In the case of Andhra Bank Ltd. vs. CIT 225ITR 447 (SC), it was held as follows - “when there is no fresh fact available to the A.O. on the basis of which he is seeking to reopen the assessments, there appears to be a case of mere change of opinion. In such cases, reopening proceedings are not valid. The principles enunciated in Kalyanji Mavji’s case 102 ITR 287 cannot save the impugned action of the A.O". In the case of Mercury Travels Ltd. vs. Dy. CIT 258 ITR 533 (Cal.), it was held as follows - “that where the primary facts were before the A.O. when he made assessments under sub-section (3) of section 143 and it was not open to him to invoke the provisions of section 147 of the said Act to reopen the assessments because he might have omitted to notice certain facia by overnight, For change of opinion, the provision of section 147 of the said Act cannot be put to service", In the case of Jindal Photo Films Ltd. vs. Dy. CIT (1998) 234 ITR 170 (Delhl), tho High Court opined as follows - “that whom nothing now has happened and there is no change in law, no new material came on record, no Information has been

ITA No. 2147/KOL/2019 A.Y. 2008-2009 M/s. ICA Eduskill Pvt. Ltd. received, In such circumstances, It can be said that It Is merely a fresh application of mind by the Assessing Officer to same set of facts and thus a case of more change of opinion". In view of the forgoing and considering the other various judicial precedents as contained In the submission of the AR of the appellant (supra) on the similar Issue at hand, l find the action of the AO In reopening the case u/s 147 to be based on untenable ground and consequentially the assessment made as a result thereof to be held as an ultra vires order, since based on "a change of opinion" as discussed supra, Consequentially, the impugned addition made In this regard also stands deleted, Since the impugned order is ultimately considered to be a nugatory order, Ground No. 5 becomes infructuous and only academic In nature for which the same Is not dealt with, which means that the impugned amount of Rs.31,72,785/- in this ground also stands deleted”.

After hearing the rival parties and perusing the material on record, we find that assessment in this case was framed u/s 143(3) of the Act vide order dated 20.10.2010. We also note that the reopening of assessment u/s 147 of the Act was made the AO by issuing notice u/s 148 on 18.03.2014 after a period of four years from the end of relevant assessment year. We observe from the reasons recorded by the AO u/s 148(2) of the Act that reopening was made on the ground that authorised share capital as per Schedule 1 of the Balance-sheet has increased from Rs.1.64 crores to Rs.4.98 crores and the assessee has claimed an amount of Rs.31,72,758/- under section 35D on account of preliminary expenses in Schedule 12D. According to the ld. Assessing Officer, the assessee has not disallowed this expenditure in the computation of income and accordingly the income has escaped due to failure on the part of the assessee to disclose truly and fully all material facts. We note from the reasons recorded that all the information were duly disclosed in the books of account, audited financial statement and return of income filed by the assessee and it cannot be construed to mean that it is something in respect of which the assessee has not truly and fully disclosed all the material facts leading to escapement of income. In fact, the assessee has disclosed all the material facts in respect of increase in the authorised capital in the balance sheet and claimed 31,72,758/- on account of 1/5th preliminary expenses u/s 35D of the Act. Under these facts and circumstances, we find force in the contentions of the Ld. A.R. that the reopening was made in violation to provisions as contained in first proviso to section

ITA No. 2147/KOL/2019 A.Y. 2008-2009 M/s. ICA Eduskill Pvt. Ltd. 147 of the Act which stipulates that reopening cannot be made where the assessment was framed u/s 143(3) of the Act after a period of four years from the end of relevant assessment year if the escapement of income has occurred due to non-disclosure of material facts by the assessee which ultimately led to the escapement of the income. But this is not the case before us. The ld CIT(A) has quashed the re-opening of assessment u/s 147 of the Act and also assessment order by passing a speaking and reasoned order. In our considered opinion there is not failure of the kind on the part of the assessee and therefore, the reopening of the assessment has been made incorrectly and in violation to 1st proviso to section 147 of the Act and cannot be sustained as has been held by ld CIT(A). The case of the assessee finds support from the decision of co-ordinate bench in the case of Haldia Petrochemicals Ltd. vs. ACIT in ITA no. 2455/Kol/2019 for AY 2008-09 dated 24.03.2021 which has been passed by following the decision of co-ordinate bench in the case of Beekay Steel Industries Ltd. vs. DCIT in ITA No. 105/Kol/2015 dated 31.05.2017. We note that the co-ordinate bench in the case of Beekay Steel Industries Ltd.(supra) has followed the decisions of various High Courts deciding the similar issue. The Hon’ble Bombay High Court in the case of Tao Publishing (P) Ltd. v. Dy.CIT reported in (2015) 370 ITR 135 (Bom.), Sound Casting Pvt. Ltd. vs. DCIT in 250 CTR 119 (Bom), Hon’ble Delhi High Court in the case of CIT vs. Orient Craft Ltd. reported in (2013) 354 ITR 356 (Del) and in the case of Haryana Acrylic Manufacturing Co. vs. CIT reported in (2009) 308 ITR 38 (Del) have held the reopening made beyond four years has to be in accordance with the first proviso to section 147 of the Act failing which the reopening as well as reassessment order are bad in law. We, therefore respectfully following the above legal position , uphold the order passed by the ld CIT(A) by dismissing the ground no. 1 raised by the revenue.

Since we have upheld the order of ld CIT(A) on the issue of quashing the re- opening of assessment u/s 147 of the Act and also on nullifying the assessment order

ITA No. 2147/KOL/2019 A.Y. 2008-2009 M/s. ICA Eduskill Pvt. Ltd. by dismissing the ground no. 1 in the revenue’s appeal ,the ground no. 2 raised on merit is not being adjudicated at this stage and is left open if need arises in future.

In the result the appeal of the revenue is dismissed. Order pronounced in the open Court on July 12th , 2022. Sd/- Sd/- (Rajpal Yadav) (Rajesh Kumar) Vice-President (KZ) Accountant Member Kolkata, the 12th day of July, 2022 Copies to : (1) Deputy Commissioner of Income Tax, Circle-6(1), Kolkata, Aayakar Bhawan, 6th Floor, P-7, Chowringhee Square, Kolkata-700069 (2) M/s. ICA Eduskill Pvt. Limited, 27, Netaji Subhas Road, Kolkata-700001 (3) Commissioner of Income Tax (Appeals)-7, Kolkata (4) Commissioner of Income Tax- , Kolkata (5) The Departmental Representative (6) Guard File

D.C.I.T.,CIRCLE-6(1), KOLKATA vs. M/S ICA EDUSKILL PVT. LTD., KOLKATA