M/S PARAMOUNT PROPERTIES & ESTATE DEVELOPMENTS LTD.,KOLKATA vs. ITO, WD-3(1), KOLKATA, KOLKATA

IN THE INCOME TAX APPELLATE TRIBUNAL Kolkata Bench, Kolkata (Bench – “A”) BEFORE SHRI A. T. VARKEY, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER I.T.A. No.93/Kol/2016 Assessment Year 2005-06 M/s. Paramount Properties & I.T.O., Wd-3(1), Kolkata. P-7, Chowringhee Square, Estate Developments Ltd. -Vs- Kolkata – 700 069. 3, Pretoria Street, 4th Floor, Kolkata – 700 071. [PAN : AABCP 8731 B] (Appellant) (Respondent)

For the Appellant Shri S.K. Tulsiyan, Sr. Advocate For the Respondent Shri Sallong Yaden, Addl. JCIT-DR Date of Hearing 09.10.2017 Date of Pronouncement 06.12.2017 ORDER PER WASEEM AHMED, AM This appeal is preferred by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-XX, Kolkata [in short the ‘CIT(A)’] vide Appeal No.197/CIT(A)-XX/Wd-3(1)/2013-14/Kol dated 19.02.2014. Assessment framed by ITO, Ward-3(1), Kolkata u/s.147/143(3) of the Income Tax Act 1961 (hereinafter referred to as the ‘Act’) dated 26.12.2011 for the Assessment Year 2005-06. Shri S.K. Tulsiyan, Ld. Authorized Representative appeared on behalf of assessee and Shri Sallong Yaden, Ld. Departmental Representative represented on behalf of Revenue. 2. The assessee has raised the following grounds of appeal:

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06 “1. That on the facts and in the circumstances of the case, the Ld. C.I.T.(A) acted illegally and with material irregularity in having upheld initiation of reassessment proceeding u/s.147 by issue of a notice u/s. 148, in spite of the fact that none of conditions precedent existed and/or have been complied with and/or fulfilled by the Ld. A.O. 2. That the Ld. C.I.T.(A) erred in not having considered that the alleged difference/discrepancy in stock being the subject-matter of reassessment was already considered after thorough scrutiny in original assessment u/s. 143(3) and hence addition on account of alleged discrepancy in stock in reassessment order u/s. 147/143(3) was a change of opinion on the basis of mere change of opinion which cannot be per se reason to reopen. 3. That without any prejudice to the above, the Ld. C.I.T.(A) has grossly erred in holding that the Ld. A.O. was wholly justified in making addition of Rs.2,47,80,000/- in reassessment order u/s 147/143(3) on account of alleged difference/discrepancy in the stock in spite of the fact that the entire issue was explained to him with documentary evidences. 4. That as the order of Ld. C.I.T.(A) on the above issues suffers from illegality and is devoid of any merit, the same should be quashed and your appellant be given such relief(s) as prayed for. 5) That the appellant craves leave to amend, alter, modify, substitute, add to, abridge and/or rescind any or all of the above grounds.” 3. At the outset, it is observed that there is a delay of 240 days on the part of the assessee in fling this appeal before the Tribunal. In this regard, the assessee has filed an application seeking condonation of the said delay and keeping in view the reasons given therein, which is duly supported by an affidavit filed by assessee. The relevant contents of the said affidavit are reproduced below:- “Sir, In this case, order against the assessee’s appeal was passed by the Ld. CIT(Appeals)-XX, Kolkata on 19/02/2014 and the same was received on 28/03/2014. The due date of filing appeal before the Hon'ble Tribunal, therefore, expired on27th May, 2014. However, the appeal could not be filed by the assessee-company within such due date and the same is being filed on 22/01/2016, causing delay of 240 days. The assessee, therefore, submits and prays as under:- Ás the assessee was aggrieved by the said order o the Ld. CIT(A) denying legitimate claim and, on the other hand, upholding the addition made in the reassessment order passed u/./s 147/143(3) of the Act being not sustainable in law, the assessee decided to contest such order of Ld. CIT(A) before the Hon'ble Tribunal and, accordingly, directed the then concerned staff Sri Viswanath Sarf first to deposit necessary Appeal Fees through challan and put up the matter with all related papers for further course of action. Al fee was paid accordingly through challan dated 07 Aapril,2014, a copy of which is enclosed herewith. After obtaining necessary challan for filing appeal before the Hon'ble Tribunal, the same was kept by the staff concerned in his custody. How4eve, Sri Viswanath Saraf left the service without handing over the appeal papers etc. to the authority. The papers could only be found out when a new employee Sri Sourav Bajaj was appointed in place of said Sri Saraf who brought the matte to the notice of the company.

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06 That on receipt of the these papers, including order of Ld. CIT(A) and challan copy, the assessee-company immediately contracted the Lawyer for preparation and filing of the appeal against the said order of LD. CIT(A) and the appeal is thus being filed with a delay of 240 days before the Hon'ble Tribunal. It is, therefore, humbly submitted that the aforesaid delay in filing of the appeal beyond the statutory period is unintentional, bona fide and for reasonable cause. Your honour would appreciate that the assessee would not have gained in any manner whatsoever by not filing the appeal within the period of limitation and in that case the litigant assessee rather shall be liable for payment of additional tax on an erroneous and illegal addition to income and consequential penal action u/s 271(1)(c)of the Act, which no litigant-assessee will desire to invite. The Hon'ble Supreme Court in the case of Collector, Land Acquisition vs. Mst. Katiji & Ors [167 ITR 471 (SC) held that the courts should have a pragmatic and liberal approach while considering the petition for condonation of delay. Their Lordships have also held that when substantial justice and technical considerations are pitted against each other, the cause of substantial justice should be preferred. In view of the above, the delay caused was unintentional and for bona fide reason and hence it is humbly prayed that he delay may kindly be condoned and the appeal be admitted for adjudication on its merits to meet the ends of justice. An affidavit, duly sworn in, to the above effect is enclosed with this petition and oblige. Thanking you, Yours faithfully, Sd/- illegible For, M/s Paramount Properties & Estate Development Ltd. Considering the same and for the Revenue has not raised any objection if the delay of condonation is considered. We are of the view that there is a sufficient cause for the delay on the part of the assessee in filing his appeal. Hence we condone the said delay and proceed to dispose of this appeal of the assessee on merit. 4. In view of the above, we decided to proceed and to adjudicate the matter on the basis of materials available on record. The assessee in Ground Nos.1 & 2 has challenged the initiation of reassessment proceedings u/s 147 of the Act. 5. Briefly stated facts are that, the assessee is a limited company and engaged in the business of commission and rental income. The assessee filed its return of income declaring total income of Rs. 67,440/- vide dated 30.03.2007. The assessment was framed u/s 143(3) of the Act at the return income vide order dated 29.10.2007. Subsequently, the AO on scrutiny of assessment records observed a difference in the closing stock as on 31.03.2004 vis-à-vis opening stock as on 01.04.2004 for Rs.2,47,00,000/-. Therefore, the AO was of the view that the income of the assessee has been under assessed. Thus, the AO reopened the assessment u/s 147 of the Act after recording the reasons as detailed under:

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06 “In this case assessment was completed u/s 143(3) on 29.10.2007 at assessed income of Rs.67,440/-. On scrutiny of records it appears from P&L and balance sheet for F.Y 2004-05 that closing stock/work in progress as on 31.03.04 was shown as Rs.7,16,53,692/- whereas opening stock as on 01.04.04 was shown as Rs.4,69,53,692/-. Thus value of stock of Rs.2,47,00,000/- (Rs.7,16,53,692/- - 4,69,53,692/-) was not reflected in the accounts of the assessee for F.Y 04-05 relevant to A.Y 05-06. The AO has failed to examine or verify the mater at the time of scrutiny. Omission to do so resulted under assessment of income to the tune of Rs.2,47,00,000/-. In view of this undersigned has reason to believe that income chargeable to tax has escaped assessment of A.Y 2005-06, which requires reassessment u/s 147 of the IT Act. In this case four years have been elapsed from the end of relevant assessment year but the case falls clause (b) of section 149(1) of the IT Act, as such time limit for issue of notice u/s 148 is six years from the end of assessment year. However, as per section 151 of the IT Act ld. CIT’s approval is required before issue of notice u/s 148 of the IT Act.” 6. In view of above, the Assessing Officer issued notice u/s 148 of the Act. However, the assessee objected on the initiation of reassessment proceedings u/s 147 of the Act on following grounds : (i) At the time of original assessment, a detailed chart of the opening as well as closing stock along with purchases were furnished to the Assessing Officer and after considering the same, the Assessing Officer did not make any addition on account of difference in the closing vis-a-vis opening stock. (ii) In fact, the assessee during the year realized a sum of Rs.2,80,25,799/- out of which a sum of Rs.33,25,799/- was credited in the P & L A/c and the balance amount of Rs.2,47,00,000/- was adjusted from the opening balance of the current year. Indeed, the closing stock in the books as on 31.03.2004 was shown for Rs.7,16,53,692/- but the same was shown as opening stock at Rs.4,69,53,692/- only inadvertently. By mistake, the assessee instead of crediting his P&L A/c by Rs.2,47,00,000/- has adjusted the same with the opening stock of the assessee. However, as such there was no effect on the profitability. (iii) The difference in opening as well as closing stock was duly explained during the assessment proceedings and the Assessing Officer after full application of mind consciously not made any addition on account of impugned difference.

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06 In view of the above, the assessee prayed to the Assessing Officer, the assessment proceedings u/s 147 of the Act has been initiated merely on the basis of change of opinion which is not permissible in the eyes of law. 7. The assessee in support of its claim has submitted a chart depicting the opening value of stock, purchases and sales realization as well as the value of closing stock at the end of the year which is as under: Sl A Particulars Op bal of Purchase of Realization Cl Bal of No. Yrs Build. WIP Materials & during the year Building. WIP labour charges 1. 04- School Building(Nando M 13,83,105.80 3,17,86,052.00 1,48,22,847.80 1,83,46,310.00 05 Bldg) of Nopany Education Trust at Kolkata Pretoria Street Building at 5,67,42,094.27 69,01,463.01 1,03,36,176.00 5,33,07,381.28 Kolkata Ganges Gurukul at - - - - Chandanagore 5,81,25,200.07 3,86,87,515.01 2,51,59,023.80 7,16,53,691.28 2. 05- School Building(Nando M 1,83,46,310.00 1,21,26,781.17 70,01,204.05 2,34,71,887.12 06 Bldg) of Nopany Education Trust at Kolkata Pretoria Street Building at 5,33,07,381.28 2,10,24,595.81 3,22,82,785.47 Kolkata Ganges Gurukul at - 80,000.00 80,000.00 Chandanagore 7,16,53,691.28 1,22,06,781.17 2,80,25,799.86 5,58,34,672.69

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06 11. Similarly, the AO was in possession of all the materials available on record at the time of original assessment proceedings and, therefore, the reopening of the instant case has been made on the basis of same set of facts. Thus, it is a case of change of opinion on the basis of same set of documents. The ld. AR further submitted as under: 2.1 In connection to the above, attention is invited to the following facts concerning the assessee : • Original return of income for the relevant assessment year was filed on 30.03.2007 declaring total income of Rs. 67,440/-. • In the course of the scrutiny, notices u/s.142(1), along with the requisition of accounts and documents required and u/s.143(2) were issued and served on the assessee.[Copies enclosed at page nos.1-3 of the P/b]. • In the requisition, the AO required complete list of sundry creditors along with addresses as appearing in the Balance Sheet and the method applied for valuation of “Building WIP”. • In response to the above, the assessee filed the details of sundry creditors and as well submitted details of the valuation of the Building stock. • The AO examined the details submitted and did not call for any further detail in this regard. • It is pertinent to note that the figures of audited Profit & Loss A/c and Balance Sheet of the current and immediately preceding year were already before the AO. • Finally, after recording his satisfaction, the AO passed the order u/s.143(3) on 29/10/2007, accepting the returned income of the assessee. 2.2. Thus, in view of the above, it is clear that it is after perusing the details filed which included the issue of building stock, the AO completed the assessment and passed the assessment order u/s.143(3) at the figure of returned income of the assessee after being fully satisfied with the details submitted. The above fact will be evident from perusal of the recordings dated 15/10/2007 in the order sheet, copy of which is enclosed at page no.6-10 of the P/b. 2.3. Therefore, it cannot be said that relevant materials were not before the AO at the time of original assessment. The figures of audited P/L A/c and Balance Sheet of the immediately preceding A.Y. 2004- 05 and current A.Y. 2005-06 were very well available with the AO. The fact that the Assessing Officer in course of the original assessment did not call for further details with regard to building stock will not entitle him to initiate proceeding u/s.147 of the Act. It is evident that on same issue, i.e. building stock, the AO has initiated reassessment proceeding r-r/s.147, which is totally wrong on fact. Merely because the AO failed to apply his mind on material which was available with him cannot be a ground for reopening. 2.4. It is a settled position in regard to the reassessment proceedings that where the relevant material was available on record, but the AO failed to apply his mind to that material in making the assessment order, the AO cannot take recourse to the provision of section 147 for his own failure to apply his mind to the material, which according to him, is relevant and which was available on record. This will amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong. In support of the aforesaid stand, reliance may be placed on the following legal precedents: • Gemini Leather Stores Vs ITO [1975] 100 ITR 1 (SC) It was held in this case that after discovery of the primary facts relating to the transactions evidenced by the drafts it was for the officer to make the necessary enquiries and draw proper inference as to whether the amounts represented by the drafts could be treated as part of the total income of the appellant. This the officer did not do. It was plainly a case of oversight and it could not be said that income chargeable to tax had escaped assessment by reason of the omission or failure on the part of the appellant to disclose fully and truly all material facts. He could not, thereafter, take recourse to section 147(a) to remedy the error resulting from his own oversight. • Asian Paints Ltd. Vs Dy.CIT [2009] 308 ITR 195 (Bom) In this case, in the order rejecting the objections filed by the assessee to the notice under section 148, the AO had observed "verification of the assessment record reveals that the said details were called for but inadvertently the same were not taken into account while framing the assessment and Page | 6

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06 therefore, it cannot be said that there is change of opinion". Thus, according to the AO, the relevant material was available on record, but he failed to apply his mind to that material in making the assessment order. "It was held that since the AO had failed to apply his mind to the relevant material while framing the assessment order, he could not take advantage of his own wrong and reopen the assessment under section 147 of the Act." • Amrit Feeds Ltd. Vs ACIT [2011] 51 DTR 315 (Cal) In this case it was held that if the AOs had not questioned the entitlement of the assessee to deduction under section 80-IB in the assessment years in question, it was their mistake. All information regarding the alleged manufacturing process of the assessee was before them. After the time limit for making assessment or reassessment has long expired, the Revenue cannot turn round, take recourse to an extraordinary provision which is section 147 and attempt to reopen concluded assessments. If such exercise is permitted that would be quite contrary to the intention of the Act. In that case, there would be no finality to any assessment. Then, at any point of time after expiry of time the AO can reopen assessments. That would plainly be against the statutory policy. Therefore, the impugned notice and proceedings are quashed and set aside. • CIT Vs Kelvinator of India Ltd. [2002] 256 ITR 1 (Del)(FB): It was, inter-alia, held in this case that when a regular order of assessment is passed in terms of section 143(3), a presumption can be raised that such an order has been passed on application of mind. It is well-known that a presumption can also be raised to the effect that in terms of section 114(e) of the Indian Evidence Act, 1872, judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the AO to reopen the proceedings without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong. • Ritu Investments (P) Ltd. Vs Dy.CIT [2011] 51 DTR 162 (Del) It was held in this case that change of opinion cannot clothe the AO with the jurisdiction to initiate the proceedings under section 147 of the Act. It was also held that an error of judgement also does not confer such jurisdiction on the AO. 2.5. In light of the judicial pronouncements, as relied on above, it is established that the Assessing Officer cannot take recourse to the reassessment proceedings in order to correct the mistakes on account of lack of enquiry, deficiency in enquiry, total oversight or inadvertence on the part of the AO, while making the assessment sought to be reopened. 2.6. In the instant case, it is well established that both the figures of building stock as appearing at the beginning of the relevant A.Y. 2005-06 and as appearing at the close of the immediately preceding A.Y. 2004-05, was available with the AO. Also details of the valuation of the building stock as requisitioned was submitted by the assessee in course of the original assessment proceeding and was available with the AO. Under such circumstances, the fact that the AO did not call for further details and passed the assessment order u/s.143(3) accepting the returned income of the assessee will not entitle him to initiate proceedings u/s.147 of the Act. Thus, the action of the AO in reopening the proceedings u/s.147 of the Act on the same issue of building stock, which fact was already available on record before the AO in course of the original assessment proceeding, is totally unjustified and uncalled for and hence, liable to be quashed. 12. On the other hand, the ld. DR vehemently supported the order of the authorities below. 13. We have heard the rival contentions of both the parties and perused and carefully considered the material on record; including the judicial pronouncements Page | 7

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06 cited and placed reliance upon. The issue before us is whether on the facts and circumstances of the case the lower authorities were justified in holding that the income has escaped assessment as discussed above. The undisputed facts are that the present case pertains to the assessment year 2005-06 and the original assessment was framed by the AO under section 143(3) of the Act vide order dated 29.10.2007. The notice u/s 148 of the Act for the escapement of income was issued dated 22.03.2011 which was served upon the assessee dated 25.03.2011. From the above facts, it is clear that the notice was issued beyond 4 years from the end of relevant assessment year i.e. 2005-06. The period of 4 years for reopening the case under section 147 of the Act from the relevant assessment year comes to end as on 31.3.2010 but in the instant case the notice u/s 148 of the Act was issued dated 22.03.2011 which is beyond 4 years period. The relevant provisions of law with regard to the reopening of the case u/s 147 of the Act beyond the period of 4 years are extracted below: “[Income escaping assessment. 5147. If the 6[Assessing] Officer 7[has reason to believe8] that any income chargeable to tax has escaped assessment8 for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess8 such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure9 on the part of the assessee to make a return under section 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 facts9 necessary for his assessment, for that assessment year.

A plain look at the above statutory provision makes it clear that where assessment has been framed under section 143(3) of the Act then income escaping assessment under section 147 of the Act can be reopened by the AO beyond the period of 4 years if it is found that income has escaped assessment by the reason of the failure on the part of the assessee to make a return u/s139 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. However the Page | 8

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06 facts of the case before us reveal the fact that none of the condition prescribed under the act is applicable to the assessee to the instant case. It is because, on perusal of the records we find that the AO during the course of assessment proceedings has examined the details of the opening & closing stock of the building work in progress as evident from the order sheet entry in which the AO requires details for the valuation of ‘Building work in progress’. The relevant entry of order sheet of the AO is placed on page 2 of the PB which reads as under:- “1. Submit the list of complete names and addresses of the sundry creditors as per your balance sheet as at 31.07.05 2. Please specify your method of valuation of “building work-in-progress”. In response to the query of the AO, the assessee has filed the reply as detailed under- : “Paramount properties & estate developments Ltd. Method of valuation of Building work-in-progress as on 31.03.2005 Opening stock as on 01.04.2004 46953,692.01 Add: purchases during the year 12206.781.17 59160,473.18 Less: realisation 33,25,799.86 Closing stock work-in-progress 558,34673.32

We also note that the other details of opening & closing stock of building work in progress as well as the reasons for the difference in the opening stock was explained were duly explained before the AO during original assessment proceedings. The necessary details are placed on page 11 of the PB which reads as under : “Paramount properties & Estate Developments Limited Comparative chart of building work-in-progress for the AYs 2004-05 to 2005-06 Sl. A.Ys Particulars Opening Balance Purchase of Realisation Closing balance of No. of building work- materials & labour during the year building work-in- in-progress charges progress 1 04-05 (i) school building (Nando M Bldg) of Nopany Edu- cation Trust of Kolkata 1,383,105.80 31,786,052.00 14,822,847.80 18,346.310.00 (ii) Pretoria Street Building at Kolkata 56,742,094.27 6,901,463.01 10,336.176.00 53,307,381.28 (iii) Ganges Gurukul At Chandannagore - - - - - - - - ---------------------------------------------------------------------------------------------- 58,125,20007 38,687.515.01 25,159,023.80 71,653,691.28 ====================================================== Page | 9

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06 2. 05-06 (i) School building (Nando M. Bldg.) of Nopany Educa- tion Trust of Kolkata 18,346,319,00 12,126,781.17 7,001,204.05 23,471,887.12 (ii) Pretoria Street Building at Kolkata 53,307,381.28 - - 21,024,595.81 32,282,785.47 (iii) Ganges Gurukul at Chandannagore - - 80,000.00 - - 90,000.00 ------------------------------------------------------------------------------------------------ 71,653,691.28 12,206,781.17 28,025,799.86 55,834,672.59 ======================================================== Total realistion during the year ended 31.03.2005 28,025,799.86 Less: In the P&L A/c amount shown Under the head of realisation 3,325,799.86 Difference 24,700,000.00 ============= Note: Amount of difference of Rs.24,700,000/- was by mistake reduced from opening stock instead of crediting it in P&L account. There is however no effect as such in P&L account as the net profit remains same. The matter has been fully explained before the then Assessing Officer during the course of original assessment and it was accepted by him after the due process of scrutiny of the books and the audited accounts. The belief formed by the present A.O while recording the reasons for issuing the notice u/s 148 is wholly wrong unjustified and uncalled for. The impugned notice issued u/s.148 without merit is void Authorities Below initio. For Paramount Properties & Estate Developments Ltd. Sd/- illegible. Director.

Besides the above on perusal of the reasons recorded by the AO before issuing notice u/s. 148 of the Act, it is also clear that the AO has not, in the reasons recorded, made an allegation that income chargeable to tax has escaped assessment by reason of the assessee's failure to disclose fully and truly all material facts necessary for his assessment for the relevant assessment year. The reasons recorded by the AO under section 148 of the Act are as follows :- “In this case assessment was completed u/s. 143(3) on 29.10.2007 at assessed income of Rs.67,440/-. On scrutiny of records it appears from P&L and balance sheet for F.Y 2004-05 that closing stock/work in progress as on 31.03.04 was shown as Rs.7,16,53,692/- whereas opening stock as on 01.04.04 was shown as Rs.4,69,53,692/-. Thus value of stock of Rs.2,47,00,000/- (Rs.7,16,53,692 – Rs.4,69,53,692) was not reflected in the accounts of the assessee for F.Y 04-05 relevant to A.Y 05-06. The AO has failed to examine or verify the matter at th time of scrutiny. Omission to do so resulted under assessment of income to the tune of Rs.2,47,00,000/-. I view of this undersigned has reasons to believe that income chargeable to tax has escaped assessment for AY 2005-06, which requires reassessment u/s.147 of the IT Act. In this case four years have been elapsed from the end of relevant assessment year but the case falls clause (b) of section 149(1) of the IT Act, as such time limit for issue of notice u/s.148 is six years from end of assessment year. However as per section151 of the IT Act Ld. CIT’s approval is required before issue of notice u/s. 148 of the IT Act. Submitted for kind perusal and necessary approval. Sd/- Biswnath Maji ITO Ward-3(1), Kolkata”

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06 It is not in dispute that an assessment u/s 143(3) of the Act had already been made in the case of the assessee by an order of assessment dated 29.10.2007. Admittedly notice u/s. 148 of the Act was issued and subsequently served on the assessee on 25.3.2011 which is beyond the period of four years from the end of the relevant assessment year (2005-06). Such an allegation is admittedly absent in the reasons recorded and on facts there has in fact been no such failure on the part of the Assessee, so as to attract the proviso to Sec.147 of the Act. In our considered view the AO merely opened the reassessment proceedings under section 147 on the basis of changed of opinion which is not permissible in the eyes of law. The law is well settled on this issue. As the proceedings for the AY 2005-06 have to be judged on the basis of reasons recorded by the AO and it is not possible to substitute, delete or add anything to such reasons recorded by the AO. It is also not possible to draw any inference based on the reasons not recorded. In the light of the law as laid down in the aforesaid decisions, we are of the view that initiation of reassessment proceedings by the AO in the present case is not in accordance with the law. The order of reassessment is therefore liable to be annulled. 8. At this juncture we also find it important to reproduce the provisions of Explanation 1 to Sec.147 of the Act which reads as follows: "Explanation 1.-- Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso." We are of the view that Explanation-1 only lays down that production before the AO of account books or other evidence from which material evidence could with due diligence have been discovered by the AO will not necessarily amount to disclosure. The expressions "will not necessarily" in Explanation 1 will only mean that facts and circumstances of each case will have to be seen as to whether production of books of account and other evidence before the AO will amount to full and true disclosure of material facts. In the present case, as we have already seen, evidence was produced before the AO in the course of the original assessment proceedings u/s 143(3) of the Act and the same was perused by the AO and he had not chosen to draw any conclusion that the amount claimed as deduction by the Assessee was in fact not available to the assessee. In the given circumstances, we are of the view Page | 11

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06 that Explanation 1 cannot also be resorted to by the Revenue. Explanation-1 to Sec.147 cannot be read in a manner so as to override Proviso to Sec.147 of the Act. We also find support & guidance from the judgment of Hon’ble Calcutta High Court in the case of Simplex Concrete Piles (India) Pvt. Ltd. Vs. DCIT Ors. (Cal) 255 ITR 49 which was reversed by the Hon’ble Supreme Court vide order dated 2nd April 2003 reported 262 ITR 0605. The relevant extract of the order reads as under:- “Reassessment—Full and true disclosure—Notice after expiry of four years—Proviso to s. 147 prescribes limits of four years in respect of cases other than those covered under the four contingencies and no period of limitation has been provided for cases covered under the four contingencies contained in the proviso—In respect of those contingencies, one can fall back on s. 149 for the purpose of finding out the limits within which such notices can be issued by the authority—Limitation prescribed under s. 149 cannot be implied when the case does not come within four contingencies under the proviso to s. 147—Even where the assessee is in default, unless the case comes under cls. (ii) and (iii) of s. 149(1)(a) no notice can be issued after expiry of four years—Sec. 151 may have application only in respect of s. 149, and it cannot stretch its application to s. 147, proviso, in relation to cases other than assessee’s default—In the instant case assessee had claimed certain reliefs which were allowed— Admittedly, there is no allegation that the amounts now sought to be taxed were not disclosed—On the other hand, these were disclosed but claimed to be non-taxable— Therefore, it cannot be said that there was any omission or failure to disclose fully and truly the material facts necessary for the assessments—Contention of the Revenue that the assessee’s case attracts the mischief excepted in the proviso to s. 147 as the assessee has not responded to the notices under s. 148 has no substance as the stage after the issuance of notice would not be relevant for the purpose of s. 147—Impugned notices quashed on the ground that those were issued after expiry of four years without assessee's default” Reliance was also placed on the decision in the case of 3I Infotech Ltd.-vs.- ACIT (2010) 329 ITR 257(Bom.) wherein the Hon'ble Bombay High Court has held as under: "6.The proviso however stipulates that where an assessment has been carried out u/s 143(3), action after the expiry of four years from the end of the relevant assessment year would stand barred unless income chargeable to tax has escaped assessment inter alia by the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for that assessment year. Hence, where a reopening of assessment takes place beyond a period of four years from the end of the relevant assessment year, the test which the statute requires to be applied is based on the nature of the disclosure that is made by the assessee. If the assessee has made a full and true disclosure of all the material facts for his assessment, the action of reopening the assessment would stand barred. Contrariwise, where there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment, the reopening of the assessment would stand validated even if it takes place beyond the expiry of a period of four years. "

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06 9. We are, therefore, of the view that in the given facts and circumstances of the case, initiation of reassessment proceedings u/s 147 of the Act is held to be illegal and consequently, order passed u/s. 147 of the Act is cancelled on this ground. In view of the conclusion that the initiation of reassessment proceedings is invalid we are of the view that the others issues raised by the assessee in the grounds of appeal do not require any consideration. Accordingly the appeal of the assessee is allowed. 9.1 Besides the above we also note that the original assessment was completed u/s l43(3) of the Act on the basis of material which included the issue of opening & closing stock of building work in progress and that no new material or information being received by the AO subsequently after the completion of the assessment u/s.143(3). Thus the proceedings initiated u/s l47 of the Act merely tantamount to change of opinion which cannot form the basis for reopening a completed assessment. In support of the above contention, reliance is placed on the judgment of the Hon'ble Supreme Court in the case of Commissioner of Income-Tax v. Kelvinator of India Ltd. reported in [2010] 320 ITR 561. In the said case it was held as under- "The concept of "change of opinion" on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income-tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of ((change of opinion "must be treated as an in- built test to check the abuse of power. Hence after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is ((tangible material" to come to the conclusion that there was ent income from assessment. Reason must have a link with the formation of the belief" Based on the ratio of judgment decided in the aforesaid cases, it follows that no valid proceeding u/s.147 could be initiated even within a period of four years on mere change of opinion, if all material facts had been disclosed by the assessee and the AO had complete knowledge of all such materials and further, the assessment had also been completed after taking into consideration all such material facts. Therefore, following the above the conclusion can be drawn in case of the assessee that in absence of new information or detail being available to the AO, after

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06 completion of the original assessment u/s.l43(3) of the Act, proceedings initiated u/s.l47 of the Act for the relevant assessment year is not valid. It is clear in the present case of the assessee that the "reason to believe" is based on non existing material and therefore in absence of tangible material to reach a reasonable belief that the income liable to tax has escaped assessment, the entire proceeding initiated u/s.147 of the Act is liable to be quashed. 9.2 In view of the above, we quash the proceedings u/s 147 of the Act which were initiated beyond the period of four years from the end of the relevant assessment year and there was no failure on the part of the assessee to disclose fully and truly all material facts in course of the original assessment and the reassessment made u/s 143(3)/147 of the Act. 10. Since by earlier of this order we have quashed initiation of proceedings and issuance of notice u/s. 147/148 of the Act by allowing legal ground of assessee then other grounds of the assessee on merits become academic and infructus and we dismiss the same as having become infructuous. 11. In the result, appeal of assessee is allowed on legal grounds. Order pronounced in the Court on 06/12/2017. Sd/- Sd/- [A. T. Varkey] [Waseem Ahmed] Judicial Member Accountant Member Dated : 06/12/2017 RS(SPS)/*Dkp Copy of the order forwarded to: 1. Appellant– M/s. Paramount Properties & Estate Developments Ltd. 2. Respondent- ITO, Ward-3(1), Kolkata. 3. CIT(A)- 4. CIT – , 5. CIT(DR), Kolkata Benches, Kolkata

By Order /True Copy/ Sr. Private Secretary, Head of Office, DDO, Kolkata Benches, Kolkata. Page | 14

M/s. Paramount Properties & Estate Developments Ltd. I.T.A. No.93/Kol/2016 A. Y 2005-06