DR. SOUMITRA DUTTA,KOLKATA vs. ITO, WD-55(1), KOLKATA, KOLKATA

ORDER

Per Shri Mahavir Singh, JM:

In view of the above reasons, ld. Counsel for the assessee stated that there is no material before the AO on the basis of which he has formed belief that there was escapement of income chargeable to tax which is a pre-condition for initiation of reassessment proceedings u/s. 147 of the Act. According to Ld. Counsel for the assessee, the AO has re appreciated same facts and issued notice u/s. 148 of the Act. According to him, on the same set of facts, on the basis of which return was processed u/s. 143(1) of the Act, the AO is not permitted to reopen the assessment u/s. 147 read with section 148 of the Act. Ld. Counsel for the assessee relied on the decision of Coordinate Bench in the case of Fives Stein India Projects India Pvt. Ltd. Vs. DCIT in dated 15.01.2016, wherein the decision of Third Member of the Hon’ble Mumbai ITAT in the case of Telco Dadagee Dhackjee Ltd. Vs. DCIT in ITA No. 4613/Mum/2005 dated 12.05.2010 was followed wherein ITAT, Mumbai Bench has laid down the following ratio: “As is clearly evident from the reasons recorded by the AO, there was no new material coming to the possession of the AO on the basis of which the assessment completed u/s 143( 1) was reopened and this position has not been disputed even by the learned DR. Relying on the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. (supra), he, however, has contended that the reopening of assessment completed originally u/s 143( 1) is permissible without there being any new material coming to the possession of the AO if the reasons recorded for reopening of the assessment are otherwise valid. The learned counsel for the assessee, on the other hand, has relied on Third Member decision of the Tribunal in the case of Telco Dadaji Dhackjee Ltd. (supra) stating that a similar issue involved in the said case has been decided by the Third Member in favour of the assessee after taking into consideration the decision of Hon'ble Supreme Court in the case of Rajesli Jhaveri Stock Broker (P) Ltd. (supra) relied upon by the learned DR. In the said case, the return, filed by the assessee was originally accepted u/s. 143(1). In the said return the assessee had claimed deduction for payment of non-compete fees of Rs. 75 lakhs which included payment of Rs.15 lakh toward Directors. The assessee had also claimed depreciation of Rs.1,41,858/- on lease premises. The AO issued notice u/s 148 on the ground that these were not allowable expenses and income chargeable to tax had escaped assessment. He accordingly disallowed both the item in the reassessment order. When the matter reached to the Tribunal, the learned Judicial Member took the view that there was no fresh material to support the formation of the belief of the AO that income chargeable to tax had escaped assessment and in the absence of any fresh tangible material, he came to the conclusion that it was not permissible for the AO to reopen the assessment. The learned Accountant Member, however, took a different view relying on the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) and the matter, therefore, was referred to a Third Member for resolving inter alia, the following point of difference: "Whether on the facts and circumstances of the proceedings initiated by the AO u/s 147 is liable to be confirmed or quashed when there was no fresh material available with the AO and the assessment had been completed originally u/s 143(1)." The Third Member agreed with the view taken by the learned Judicial Member relying mainly on the decision of Hon'ble Supreme Court in the case of Kelvinator India Ltd. (supra) and Eicher Ltd. 320 ITR 561. It was held by the Third Member that section 147 applies both to section 143(1) as well as section 143(3) and, therefore, except to the extent that a reassessment notice issued u/s 148 in a case where the original assessment was made u/s 143(1) cannot be challenged on the ground 2

3 Dr. Soumitra Dutta, AY 2009-10 of a mere change of opinion, still it is open to an assessee to challenge the notice on the ground that there is no reason to believe that income chargeable to tax has escaped assessment. As regards the decision of Hon'ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers (P) Ltd. (supra) cited by the Revenue and relied upon by the Accountant Member, the Third Member held that the same was applicable in cases where the return was processed u/s.143(1) but later on notice was issued u/s 148 and the assessee challenges the notice on the ground that it is prompted by a mere change of opinion. The Third Member then referred to the decision of Hon'ble Supreme Court in the case of CIT vs. Kelvinator of India (supra) wherein it was held that there should be "tangible material" to come to the conclusion that income had escaped assessment. Relying on the said decision, it was held by the Third Member that while resorting to section 147 even in a case where only an intimation had been issued u/s 143(1)(a), it is essential that the AO should have before him tangible material justifying his reason to believe that income had escaped assessment. Since there was no such tangible material before the AO from which he could entertain the belief that income of the assessee chargeable to tax had escaped assessment, the Third Member held that reassessment proceedings initiated by the AO were liable to be quashed on the ground that there was no tangible material before the AO even though the assessment was completed originally u/s 143(1). In our opinion, the Third Member decision of the Tribunal in the case of Telco Dadaji Dhackjee Ltd. (supra) is squarely applicable in the present case and respectfully following the same, we hold that the initiation of reassessment proceedings by the AO itself was bad in law and the reassessment completed in pursuance thereof is liable to be quashed being invalid. We order accordingly and allow ground No. 1 of the assessee's appeal."

4 Dr. Soumitra Dutta, AY 2009-10 proceedings. As we have quashed the reassessment proceedings, other grounds on merits need not to be adjudicated. Appeal of assessee is allowed. 6. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 03.02.2016.