DCIT CIR 2(2)(1), MUMBAI vs. LARSEN & TOUBRO LTD, MUMBAI

Aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before, the Ld.CIT(A), the assessee has challenged reopening of assessment u/s 147 on two grounds.

The Ld.CIT(A), after considering relevant submissions of the assessee and also by relied upon the decision of Hon’ble Supreme Court in the case of CIT vs Kelvinator of India Ltd. 320 ITR 561 held that the assessment has been reopened on mere change of opinion without there being any tangible material before the Ld.AO for reopening the assessment. The Ld.CIT(A), further observed that in the reasons for reopening, the Ld. AO has mentioned that on review of the assessment, it is observed that there is under assessment of income. This statement shows that after reviewing the case records, he found that certain income had escaped assessment. But, fact of the matter is that the assesee has submitted a letter dated 13/12/2018, during the course of assessment proceedings u/s 143(3), where the issue on which the AO has reopened was already discussed and all the details were submitted before the AO.

The Ld. DR submitted that the Ld. CIT(A) has erred in holding that the reassessment is bad in law without appreciating the fact that Explanation (1 ) to section 147 states that production before the AO of account books or other evidences from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure within the meaning of proviso to section 147 of the Act. The Ld. DR, further submitted that the Ld. CIT(A) has erred in holding that the assessment has been reopened on mere change of opinion, when in fact the issue had not been considered at all and there was no application of mind on the part of AO at any stage in the original assessment, so as to justify the inference any change of opinion. In this regard, he relied upon the decision of Hon’ble Supreme Court in the case of Dolgobinda Paricha Vs. Nimai Charan Misra & Others (1959) AIR 914 1959 SCR and also the decision of Hon’ble Supreme Court in the case of CIT vs Rai Bahadur Hardutory Motilal Chamaria (1967) 66 ITR 443 (SC)

The Ld. AR for the assesee, strongly supporting order of the Ld. CIT(A) submitted that the Ld. CIT(A) has appreciated the facts, in light of reasons recorded by the Ld. AO and assessment order passed u/s 143(3) of the I.T.Act, 1961, to come to the conclusion that the assessment has been reopened on change of opinion without there being any tangible material, which suggest escapement of income. The Ld. AR, further submitted that the Ld. CIT(A) had also recorded categorical findings, in light of proviso to section 147 of the I.T.Act, 1961 and held that unless, there is a allegation from the AO that there is a failure, on the part of assesee to disclose fully and truly all material facts necessary for assessment, the assessment cannot be reopened after four years from the end of relevant assessment year, if such assessment has been completed u/s 143(3) of the I.T.Act, 1961. In this case, there is no doubt with regard to fact that the assessment has been completed u/s 143(3) of the I.T.Act, 1961, where the assesee has filed a detailed note on product warranty provision and the AO has discussed the issue in the assessment and after being satisfied with explanation filed by the assesee completed assessment.

We have heard both the parties, perused the material available on record and gone through orders of the authorities below. We have also carefully considered case laws relied upon by both the parties. The assesee has challenged reopening of assessment on two grounds. The Ld.CIT(A) had accepted the arguments of the assessee, in light of provisions of section 147 of the I.T.Act, 1961 and the assessment order passed by the AO u/s 143(3) of the I.T.Act, 1961,dated 29/12/2018 and came to the conclusion that the assessment has been reopened on change of opinion without there being any tangible material, in the possession of the AO, which suggest escapement of income. The Ld.CIT(A) had also recorded categorical findings, in light of proviso to section 147 of the I.T.Act, 1961 and held that unless, there is an allegation from the AO in the reasons recorded for reopening of assessment that any income chargeable to tax had escaped assessment by reasons of the failure, on the part of assesee to disclose fully and truly all material facts necessary for reassessment, for that assessment year, the assessment cannot be reopened after four years from the end of relevant assessment year, if such assessment has been completed u/s 143(3) of the I.T.Act, 1961. In this case, on perusal of facts, we find that the original assessment has been completed u/s 143(3) of the I.T.Act, 1961 on 29/12/2018 and the assessment has been reopened after four years from the end of relevant assessment years without making any allegation as to failure on the part of assessee to disclose fully and truly all material facts necessary for assessment.

Insofar as, various case laws relied upon by the assessee, we find that the Hon’ble Supreme Court, in the case of ITO vs TechSpan India (P.) Ltd (supra) had held that where, question, as to how and to what extent deduction to be allowed u/s 10A was well considered in original assessment proceedings itself, initiation reassessment proceedings u/s 147 by issuing a notice u/s 148, merely because of fact that now AO was of view that deduction u/s 10A was allowed in excess, was based on nothing, but a change of opinion. The Hon’ble Bombay High Court, in the case of SBI vs ACIT (supra) had considered reopening, in light of proviso to section 147 and held that where, in original return outstanding credit interest lying in inter branch account for more than 10years as on 30/09/2010 was credited to profit and loss account by assesee bank, as per RBI instructions, but same was not offered to tax, in accordance with the Tribunal decision, reassessment after four years was unjustified. The Hon’ble Bombay High Court in Pr.CIT vs M/s L&T Ltd. had considered identical issue and held that in the absence of the statutory requirement of income chargeable to tax had been escaped assessment due to the failure, on the part of assesee to disclose fully and truly, all material facts being satisfied, the Tribunal correctly held that the notice of reassessment was invalid. As regards, case laws relied upon by the Ld. DR, we find that in case of CIT vs Rai Bahadur Hardutory Motilal Chamaria (supra), the Hon’ble Supreme Court has explained, the term what consideration by the ITO means and held that consideration does not mean incidental or collateral examination of any matter by the AO in the process of assessment and there must be something in the assessment order to show that the ITO applied his mind to the particular subject of the matter or particular source of income with a view to its taxability or to its non-taxability and not to any incidental connections. We find that the facts of the case laws relied upon by the Ld. DR is not applicable to the facts and circumstances of this case because, in this case, the Ld. AO has examined the issue in original assessment proceedings and after being satisfied with explanation furnished by the assessee accepted the claim. Insofar as, the decision of Hon’ble Supreme Court in the case of Dolgobinda Paricha Vs. Nimai Charan Misra & Othrs, we find that the word opinion has been explained by the Hon’ble Supreme Court, in the light of Indian Evidence Act, 1872 and it is a settled position of law that the Indian Evidence Act, 1872 is not strictly applicable to Income tax proceedings, the finding recorded by the Hon’ble Supreme Court, in the given facts and circumstances of that case may not be strictly applicable to facts of this case.

In this view of the matter and respectfully following the case laws discussed hereinabove, we are of the considered view that the Ld.CIT(A) has rightly quashed reassessment proceedings, therefore, initiated u/s 147 of the I.T.Act, 1961 and hence, we are inclined to uphold, the findings of the Ld.CIT(A) and dismissed appeal filed by the revenue.

In the result, appeal filed by the revenue is dismissed.