TEAM GLOBAL LOGISTICS PVT. LTD.,MUMBAI vs. DCIT-11(3)(1), MUMBAI

1. The Ld. CIT(A) erred in law and in facts in not appreciating that the reopening of the assessment u/s. 147 of the Act and issue of notice u/s. 148 of the Act was invalid and bad in law.

Sections 147 to 151 of the Act deal with the procedure of reassessment. This scheme has been substantially overhauled by the finance Act 2021 with effect from 01.04.2021. However, there is no dispute that the instant appeal shall be governed by the old regime. “Reason to believe” requires schematic interpretation. The assessing officer has power to reopen provided therein a tangible material to come to the conclusion that there is escapement of income from assessment, reason must have a link with the formation of the belief.

We have considered the reasons recorded and communicated to petitioner on 19th April, 2021. The reasons indicate that the Jurisdictional Assessing Officer (JAO) has proceeded on incorrect facts and also he has proceeded on pure change of opinion. We say incorrect facts because the assessment order under Section 143(3) of the Act was passed on 21" December, 2019 determining total income of Rs.1,20,89,790/-.

We have to also note that after the information on 20th January, 2019 was received, as noted in the assessment order dated 21" December, 2019 five notices were issued by the Assessing Officer under Section 142(1) of the Act. In the notice dated 1" October, 2019 a specific query has been raised by which petitioner was called upon to provide party wise details alongwith address of the parties to whom loan and advances were given and details of interest received on such loans and also furnish the nature of the loans/advances. Petitioner responded by its letter dated 8th November, 2019 and 14th November, 2019. In the reply dated 14th November, 2019 at Item No.4, petitioner has provided party wise details alongwith address of the parties to whom loans and advances were given, interest received on such loans and the nature of the loans/advances. The list includes all the names given in paragraph no.3 of the reasons for re-opening. These have been considered in the assessment order because in the assessment order there is reference to five notices issued under Section 142(1) of the Act and it is also noted that the assessee has filed details through ITBA Module in response to the notices issued from time to time which are placed on record.

Mr. Suresh Kumar submits that these cannot be said to have been subject of consideration of the Assessing Officer because the assessment order does not contain reference and/or discussion. We will have to reject the submissions of Mr. Suresh Kumar since this court has time and again held that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer_while completing the assessment. It is not even necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. [Aroni Commercials Ltd. vs. Deputy Commissioner of Income-tax 2(1)], [2014] 44Taxmann.com304(Bom) It is also settled law that change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment.

The second transaction on the basis of which notice under section 148 is issued relates to a transaction entered into in May, 1982, under which the assessee-company advanced to M/s. C. R. Developers (P) Ltd. a sum of Rs.15 lakhs purporting to be an advance for the purpose of construction of a hotel. The advance is in the nature of a loan and no interest is being charged on this account. The respondents contend that the assessee-company should have received an interest income worth approximately income worth approximately Rs. 3 lakhs if interest had been charged on this advance. Hence, this interest income of approximately Rs. 3 lakhs has escaped assessment. Once again the reason which is recorded is beyond the scope of section 147. It is an accepted position that the assessee-company has in fact nor received any interest in respect of this advance from M/s. C. R. Developers (P) Ltd. in the assessment year 1988-89. When no income is received there is no question of paying any tax on income which the respondents think, should have been received but was in fact not received. In the case of CIT v. A. Raman and Co. [1968] 67 ITR 11, the Supreme Court said that the law does not oblige a trader to make the maximum profit that he can out of his trading transactions. Income which accrues to a trader is taxable in his hands. Income which he could have but has not earned, is not made taxable as income accrued to him. The Court also said that the High Court exercising Jurisdiction under article 226 of the Constitution has power to set aside a notice issued under section 147(b) if the condition precedent for the exercise of jurisdiction does not exist. It is open to the court to ascertain whether the ITO had in his possession any information Team Global Logistics Pvt. Ltd. and whether from the information the ITO have reason to believe that the income chargeable to tax has escaped assessment. In the present case, the reasons which are recorded clearly show that there is no material at all on the basis of which the Assessing Officer could have reason to believe that any interest income had escaped assessment. No such income had accrued during the assessment year in question.

In similar vein, when we asked Mr Sahni, who is appearing for the respondent to point out some provision of the Income Tax Act, whereunder such 'notional' interest could be made the subject matter of tax, the only reference he made was to Section 144 of the said Act. However, we are clear that Section 144 does not at all apply to the present proceedings because the present proceedings originate from an assessment under Section 143(3) of the said Act.

As held by the Apex Court in the case of Indian & Eastern Newspaper Society, New Delhi vs. Commissioner of Income Tax, New Delhi, 119 ITR 996(SC), even if it is an error that the Assessing Officer discovered, still an error discovered on a re- consideration of the same material does not given him power to re-open. When the primary facts necessary for assessment are fully and truly disclosed, the Assessing Officer is not entitled on change of opinion to commence proceedings for reassessment. Even if the Assessing Officer, who passed the assessment order, may have raised too many legal inferences from the facts disclosed, on that account the Assessing Officer, who has decided to reopen assessment, is not competent to reopen assessment proceedings. Where on consideration of material on record, one view is Team Global Logistics Pvt. Ltd. conclusively taken by the Assessing Officer, it would not be open to reopen the assessment based on the very same material with a view to take another view.”

The learned AR has drawn the attention of the bench towards the reasons of opening recorded by learned assessing officer and which is at page 18 of the assessee’s paper book. The relevant para 3.0 of Reasons of reopening, reads as under: “ 3.0 Hence, it is evident from the above that the assessee failed to disclose fully and completely the material facts in the return of income. It is also evident from the above discussion that in this case, the issue under consideration was never examined by the AO as there was no regular assessment done for the year under concerned. Also on the basis of information received, it was seen that the above issue has not been considered and verified which resulted into escapement of income. For the above reasons, it is not a case of change opinion by the AO.”

Learned assessing officer has, in the “reason for reopening” commenced his reasons with the following lines “In this case assessee has filed its ROI on 30.09.2012, declaring total income of Rs. 6,68,55,810/-, the same has been processed u/s. 143(1) of the IT Act.” The aforesaid contents of the reason for reopening shows that assessing officer was not aware of the fact that the scrutiny assessment of the assessee was already carried out and order u/s. 143(3) of the Act dated 18.02.2015 was passed, which is part of the assessee’s assessee’s paper book at page 44, wherein it is mentioned that after verification of various details filed by the assessee the return of income filed by the assessee is accepted and income is assessed at Rs. 6,68,55,810/-. It is further noticed that before passing the original order, learned assessing officer issued notice u/s. 142(1) of the Act dated 01.09.2014 which is placed at page 38-39 of the assessee’s paper book. It further transpires that the learned assessing officer called for the Team Global Logistics Pvt. Ltd. details of unsecured loans along with the loan confirmation and interest paid. In response thereof assessee submitted his letters date 09.10.2014 and 21.11.2014, which are part of assessee’s paper book at page 40-43. Statement of unsecured loan from M/s. Tribhuvan Dealtrade Pvt. Ltd. is also shown of an amount of Rs. 35,00,000/-. This shows that in the reasons recorded for the reopening of the assessment, learned assessing officer has formed his reason to believe on the basis of the fact that original return filed by the assessee was not picked up for scrutiny. However, the record show that return of income of the assessee was scrutinised and assessment order u/s. 143(3) dated 18.02.2015 was passed. Once the issue of reopening was examined in the scrutiny assessment proceedings, the reason framed under wrong facts are not valid reason, therefore such reasons to believe cannot be sustained. In view of this, assessee’s ground against reopening of assessment is allowed reassessment based on such invalid reason is quashed. In view of the fact that reopening of the assessment is quashed, we do not intend to adjudicate the remaining issues on merit.

In the result the appeal is allowed. Order pronounced on 15.10.2024.