CONCORDE MOTORS (INDIA) LTD,MUMBAI vs. ACIT (OSD) 2(1), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order dt. 04.10.2012 of CIT(A)-4,Mumbai, the assessee has filed the present appeal.Assessee-company,engaged in the business of servicing and maintenance of vehicles, filed its return of income 05.01.2006, declaring total income at Nil .The assessment order u/s.143(3) r.w.s. 147 of the Act, was passed on 3.12.2008,determining the total income of the assessee at Rs.58,53, 770/-.

234/M/13-Concorde Motors(India)Ltd.

4.During the course of hearing before us,the Authorised Representative (AR) referred to the reasons recorded by the AO and stated that both the issues mentioned in the reasons were dealt with extensively by the AO while passing the original order,that the assessee had supplied all the necessary details and AO had arrived at a particular conclusion, that in para 2 of the reasons the AO had mentioned that total income was determined at Rs.58.53 lakhs, that finding given by AO was factually incorrect,that there was no escapement of income for the year under consideration, that reopening was based on very same records available on the file of AO, that there was no new or fresh material for forming the belief of escapement of income. He referred to the cases of Kelvinator India Ltd.(320ITR561);Foramer France(264 ITR566);Corporation Bank Ltd.(254 ITR 791);Asterioidds Trading and Investments P. Ltd. (308ITR190); Sanghvi Swiss Refills P.Ltd.(300ITR276);Bhavesh Developers (329ITR 249); Multi screen media Private Limited(324ITR54);Siemens Information systems Ltd. (295 ITR 333)and Godrej Agrovet Ltd(290ITR252).The Departmental Representative (DR)supported the order of the AO and the FAA.

5.We have heard the rival submissions and perused the material before us. We find that in the reasons recorded, the AO had mentioned that ‘perusal of the record revealed ……….’.The note clearly shows that the AO had re-appraised the facts available on record and no new material had been considered before issuing the notice u/s. 148 of the Act.We find that vide his letter dated 24.11.2005,the assessee had mentioned that the premises of the company were to be utilised for undertaking business of servicing/maintaining of vehicles, that pending finalisation feasibility report the premises were let out to M/s. Tata Motors Ltd.for the purpose of servicing/maintenance of vehicles (Pg-42 of the PB).Vide its letter dated 28.11. 2005,(Pg-46 of PB),the assessee had enclosed a copy of leave and license agreement, 2

234/M/13-Concorde Motors(India)Ltd. dt.11.10.2002 entered into between Mini Car India Ltd. and Tata Motors Ltd. It is also found that while completing the order u/s. 143(3) of the Act, the amount of Rs.58.53 lakhs is not appearing anywhere.In short,the AO had reopened the assessment with regard to issues which are already dealt with during the regular assessment proceedings.After the completion of 143(3) proceedings,he formed different opinion about the treatment to be given to the two items.Thus, it was a pure case of change of opinion.We find that the FAA had mentioned that there were mistakes in the original assessment order.In our opinion,if there were mistakes, other remedies were available to the AO.To rectify the mistake, the assessment should not have been reopened as per the established principles of taxation jurisprudence-other remedies are available.Re-opening of a completed assessment is a serious thing and the provisions of section 147 can be invoked if the preconditions are fulfilled.The AO cannot issue notice of section 148 of the Act to review re-appraise the earlier order.As stated earlier,in the case under consideration,the AO had deliberated upon both the issues during the original assessment proceedings.So,there was no justification in re-opening the matter.Here,we would like to refer to the case of Central Warehousing Corporation Ltd.(382 ITR 172).In that matter the Hon’ble Delhi High Court has dealt the similar issue.Fact of the case were that for the AY. 2004-05,the reopening of assessment was sought to be made on the basis that the assessee had claimed exemption in respect of its dividend and the proportionate management and administrative expenses attributable to the dividend income were not deducted in computing admissible exemption and the said mistake had resulted in underassessment of income and as a result there was a short levy of tax including interest and the re-opening was proposed in accordance with section 14A of the Act. The FAA and the Tribunal held that the reassessment was not valid.Dismissing the appeal filed by the Department,the Hon’ble High Court held as under: The assessment of the assessee for the assessment year 2005-06 was completed under section 143(3)of the Income-tax Act, 1961. The Assessing Officer subsequently reopened the assessment on the ground that he had inadvertently failed to notice that income of the assessee from the disposal of stocks in the bonded warehouse had escaped assessment. The Tribunal held that the reopening of the assessment was invalid…. the original assessment was framed under section 143(3) of the Act and while framing original assessment, a specific query was raised by the Assessing Officer and was clarified by the assessee in writing. It was not a case where relevant material was not disclosed by the assessee in the first round of assessment. Thus the reopening of the assessment by the Assessing Officer for the assessment year 2005-06 was based on a change of opinion, which was impermissible in law….. that in the original assessment order, the Assessing Officer elaborately discussed section 14A of the Act and a questionnaire was also issued by the Assessing Officer specifically raising a query why the proportionate administrative and management expenses incurred for earning the exempted income should not be disallowed under section 14A . The assessee had replied to the questionnaire and the reply had been taken into account. Thus the Assessing Officer by 234/M/13-Concorde Motors(India)Ltd. seeking to reopen the assessment, was reviewing his earlier order. Therefore, the reopening of the assessment was not valid.” We would also like to refer to the matter of Turner Broadcasting Systems Asia Pacific Inc. of the Hon’ble Delhi high court (380 ITR 412 ).In that case the assessee was a company incorporated in the U. S. A. and was a tax resident of the U. S. A. During the relevant financial years, it derived income from the grant of exclusive rights to TIIPL in India to sell advertising on the products and to distribute certain products. It filed its returns for the assessment years 2007-08 and 2008-09. The assessments were made and the AO in the assessment orders had referred to the mutual agreement to avoid double taxation under article 27 of Double Taxation Avoidance Agreement between India and the U. S. A, for the AY.s. 2001-02 to 2004-05 and the fact that subsequently for the AY. 2005-06, assessment was concluded following the mutual agreement procedure. The AO in the assessment order had specifically recorded that since the facts of the year under consideration remained the same, following the agreement reached by the respective competent authorities in the earlier years, the tax was computed at 10 % according to resolutions passed in the mutual agreement procedure.Notices of reassessment were issued in respect of both the AY.s.The assessee challenged the re-opening by filing a writ petition.Allowing the writ,the Hon’ble Court held as follow:

“In CIT v. USHA INTERNATIONAL LTD. [2012] 348 ITR 485, the Full Bench of the Delhi High Court laid down the following propositions of law : (i) the expression “change of opinion” postulates formation of opinion and then a change thereof. In the context of section 147 of the Income-tax Act, 1961, it implies that the Assessing Officer should have formed an opinion at the first instance, i.e., in the proceedings under section 143(3) and by initiation of the reassessment proceedings, the Assessing Officer proposes or wants to take a different view ; (ii) reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and was decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by the principle of “change of opinion” ; and (iii) reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations, it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, whether or not he had recorded his reasons in the assessment order. …… that no fresh information or material had been referred to in the reasons recorded for seeking to reopen the assessment. The material that was referred to was the very same material that was already before the Assessing Officer at the time of framing of the assessments under section 143(3) of the Act and even the reasons recorded that “from the perusal of the assessment record, it is observed that”. This clearly showed that the Assessing Officer had sought to reappreciate the material that was already there at the time when the assessment was framed under section 143(3). It was clearly a case of change of opinion, which is clearly not permissible. The notices were not valid.”