DCIT, NEW DELHI vs. M/S. ESTWHILE GLOBAL TRUST BANK LTD., NEW DELHI

PER ANADEE NATH MISSHRA, ACCOUNTANT MEMBER (A). The present appeal has been filed by the Revenue against the order dated 24.04.2014 of CIT(A)-XVI, Delhi pertaining to A.Y. 2002-03.

Grounds of appeal are as under:-

1. “On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in quashing the order passed u/s 147/143(3) holding that it was without jurisdiction, though the case was purely as per the provisions of section 147 of the I T Act.

2. On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in quashing the order passed u/s 147/143(3) holding that it was out of jurisdiction, without appreciating the facts that the issues were never discussed during the first assessment proceedings. 3. On the facts and circumstances of the case and in law, the Ld.CIT (A) has erred in not considering the fact that the assessee's case is clearly covered in Clause (C) of Explanation 2 below first proviso appended to I.T.A .No.-4090/Del/2014 DCIT vs Erstwhile Global Trust Bank Ltd.

Section 147 of the I T Act, 1961, wherein no new material is required for reopening of the case. 4. The appellant craves to be allowed to add any fresh grounds of appeal and/or delete or amend any of the grounds of appeal.” (B). For the sake of convenience, all the grounds of appeal are taken up together. The original return was filed on 25.10.2002 showing a loss of Rs.1,53,01,94,382/-. The assessment u/s 143(3) of the I.T.Act, 1961 (in short “Act”) was made on 30.03.2005 at income of Rs.1,47,84,09,712/-.

After giving effect to order dated 14.06.2006 of Ld.CIT(A), the assessee’s loss was determined at Rs.1,33,67,78,397/-. Re-assessment proceedings u/s 147 of the Act were initiated by the AO by notice u/s 148 of the I.T.Act issued on 30.03.2009. The following reasons were recorded by the Assessing Officer (in short “AO”) on 25.03.2009 for issue of notice u/s 148 of the Act:-

"In this case, return declaring loss of Rs. 153,01,94,382/- was filed on 25-10-2002 and assessment order u/s 143(3) of the IT Act was made on 30- 03-2005 assessing the total income at Rs.147,84,09,712/-. However, after giving effect to the order of Ld. CIT(A) vide order passed u/s 250 dated 14- 06-2006, the loss was revised at Rs.1,33,67,78,397/-. Further, on verification of the assessment records for the AY 2002-03, following mistakes were pointed out- (1) The assessee in the Profit & Loss account had credited an amount of Rs.724,22,09,000/- under the head “interest earned" instead of the correct amount of Rs.727,91,12,000/- as appearing in schedule XIII. Hence, the interest income was shown less by Rs.3,69,03,000/-. (2) Assesses has claimed and allowed depreciation @ 60% on LAN and WAN equipments under the head Compute/ hardware whereas LAN/WAN is to be treated as Plant and Machinery and depreciation @ 25% should have been allowed. (3) As per RBI Circular dated 10-01-2002 unrealized gains on valuations had not been taken to the income account resulting into lowering of profit by Rs 1,00,19,000/- whereas as per mercantile system of accounting unrealized gain should have been treated as income of the assessee and added back to the taxable income.

I.T.A .No.-4090/Del/2014 DCIT vs Erstwhile Global Trust Bank Ltd.

(4) The assessee in the Profit & Loss account had debited an amount of Rs.635,84,93,000/- under the head "interest expended" instead of the figure of Rs.635,30,13,000/- as appearing in schedule XV. Therefore, the expenditure were claimed excess by Rs.54,80,000/-. In view of the facts narrated above, there is failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment and I have reason to believe that the income of the assessee to the extent of Rs.5,24,02,000/- approx. has escaped assessment for which action u/s 147 of the IT Act is to be initiated in the year under consideration i.e. AY. 2002-03. Since the assessment in this case was completed u/s 143(3) of IT Act, and four years have also been elapsed from the end of the relevant assessment year, therefore, kindly approval of the Commissioner, Delhi-V. New Delhi is solicited as per provisions of Section 151(2) of the IT Act.”

(B.1). Vide letter dated 21.04.2009, the assessee stated that the original return filed on 25.10.2002 may be considered as the return filed pursuant to notice u/s 148 of the Act. The assessee also sought copy of reasons recorded for issue of notice u/s 148 of the Act which were provided to the assessee by the AO. The assessee raised objections vide letter dated 27.05.2009 which were disposed of by the AO by an order in writing, dated 30.10.2009, and the objections against issue of notice u/s 148 of the Act, were rejected by the AO. A fresh assessment order dated 17.12.2009 u/s 143(3)/147 of the Act was passed by the Assessing Officer in which the following additions were made:-

1. Short declared interest income Rs.3,69,03,000/- 2. Disallowance of excess interest expense Rs.54,80,000/- 3. Disallowance of excess depreciation Rs.3,05,87,016/- 4. Addition of unrealized income Rs.1,00,19,000/- (B.2). The assessee filed appeal against order dated 17.12.2009 before Ld.CIT(A). In the appeal filed by the assessee before Ld.CIT(A), 11 grounds I.T.A .No.-4090/Del/2014 DCIT vs Erstwhile Global Trust Bank Ltd. were taken by the assessee out of which Ground Nos. 1 to 4 related to assumption of jurisdiction u/s 147 of the Act by the AO; Ground Nos.5 to 8 related to merits of various disallowances/additions made by the AO and the remaining grounds were either general or consequential in nature.

While disposing off the appeal of the assessee, Ld.CIT(A) allowed Ground Nos. 1 to 4 of the appeal filed before Ld.CIT(A) holding that the re- assessment proceedings initiated by the AO u/s 147 of the Act were based on a mere change of opinion. He also held that there was no failure on the part of the assessee to disclose all the material facts necessary for its assessment fully and truly. He held that the notice issued by the AO u/s 148 in the proceedings initiated u/s 147 of the Act were without the jurisdictional foundation available u/s 147. He quashed the assessment order passed u/s 147/143(3) holding it to be without jurisdiction. Since he allowed assessee’s appeal on Grounds 1 to 4 of the appeal, he did not adjudicate on the remaining grounds of appeal filed by the assessee. The Revenue has filed this appeal against the aforesaid order dated 24.04.2014 of Ld.CIT(A).

(C). At the time of hearing before us, the Ld. DR supported the order passed by the AO and contended that the assessment order dated 17.12.2009 u/s 143(3)/147 of the Act and the additions made therein did not amount to change of opinion because no opinion was formed or expressed by the AO in the original assessment order dated 30.03.2005 in I.T.A .No.-4090/Del/2014 DCIT vs Erstwhile Global Trust Bank Ltd. respect of the points on which additions have been made in subsequent order dated 17.12.2009 u/143(3)/147 of the Act. He relied on order in the case of Ucal Machines Tools P.Ltd. vs ITO, Company Ward-III(1), Chennai [2016] 71 taxmann.com 230 (Chennai-Trib.). The Ld. DR supported the order of the AO. The Ld. Authorized Representative (in short “AR”) appearing for the assessee strongly supported the order of the Ld.CIT(A) based on two contentions –firstly, that the initiation of proceedings u/s 147 of the Act and the additions made in order dated 17.12.2009 u/s 143(3)/147 of the Act amounted to “change of opinion”; and secondly, that there was no failure on the part of the assessee to disclose fully and truly all material facts. Ld.AR relied on the following case laws in support of his contentions:-

I.T.A .No.-4090/Del/2014 DCIT vs Erstwhile Global Trust Bank Ltd.

(D). We have heard both sides attentively. We have also perused all the materials on our record carefully. Under proviso to section 147 of the Act, it is clearly prescribed that no action shall be taken u/s 147 of the Act after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to make a return u/s 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. In the case before us, the undisputed facts are, that the assessee did file return u/s 139 of the Act; the AO did pass assessment order u/s 143(3) of the Act on 30.03,2005; and re-assessment proceedings u/s 147 of the Act have been initiated after the expiry of more than four years from the end of the relevant assessment year (AY 2002-03). Under these facts, no action u/s 147 of the Act can be taken unless income has escaped assessment by reason of failure on the part of the assessee to disclose all material facts fully and truly. In the instant case, the Revenue has failed to show which material facts were not disclosed by the assessee. We have perused the assessment order dated 17.12.2009 u/s 143(3)/147 of the Act and have also perused the aforesaid written order dated 13.11.2009 of the AO rejecting the objections raised by the assessee. We have further perused the reasons recorded by the AO for initiation of proceedings u/s 147 of the I.T.A .No.-4090/Del/2014 DCIT vs Erstwhile Global Trust Bank Ltd. Act and for issue of notice u/s 148 of the Act. Moreover, we have perused our records carefully. There is nothing on the basis of which can be said that there was failure on the part of the assessee to disclose all material facts fully and truly. Infact we are unable to even find any allegation by the AO to the effect that there was failure on the part of the assessee to disclose all material facts fully and truly. In these facts and circumstances, we hold that Revenue has failed to show that there was failure on the part of the assessee to disclose all material facts fully and truly. When the assessee has filed a return u/s 139 of the Act or in response to sections 142(1) or 148 of the I.T.Act and when an assessment order u/s 143(3) or u/s 147 of the Act has already been passed then the assessee enjoys statutory protection under proviso to section 147 of the Act from any action u/s 147 of the Act after the expiry of four years from the end of the relevant assessment years; unless income chargeable to tax has escaped assessment by reason of failure on the part of the assessee to fully and truly disclose all material facts necessary for his assessment for that assessment year. Onus is on Revenue to show that there was failure on the part of the assessee to fully and truly disclose all material facts necessary for his assessment for that assessment year and in the instant case, Revenue has failed to discharge this onus. When it is not the case of the Revenue that there was failure on the part of the assessee to disclose all material facts fully and truly, Revenue cannot violate the I.T.A .No.-4090/Del/2014 DCIT vs Erstwhile Global Trust Bank Ltd. statutory protection enjoyed by the assessee under proviso to section 147 of the Act. In the facts and circumstances of this case, therefore, we hold that the statutory protection enjoyed by the assessee under proviso to section 147 of the Act was wrongly violated by Revenue. Therefore, we dismiss all the grounds of appeal in this appeal filed by the Revenue, and hold that the assumption of jurisdiction u/s 147 of the Act and initiation of proceedings u/s 147 r.w.s. 148 of the Act was erroneous in law in the facts and circumstances of this case. In view of this conclusion, there is no need for us to adjudicate whether the initiation of proceedings u/s 147 of the Act and the additions made in order dated 17.12.2009 u/s 143(3)/147 of the Act amounted to “change of opinion” as this issue becomes purely academic. Accordingly, we decline to interfere with the order of Ld.CIT(A) whereby he quashed the assessment order u/s 143(3)/147 of the Act dated 17.12.2009.

(E). In the result, the appeal of the Revenue is dismissed for statistical purposes.

The order is pronounced in the open court on 19th of April 2017.