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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI SANJAY GARG
Per Sanjay Garg, Judicial Member:
The present appeal has been preferred by the assessee against the order dated 13.08.2010 of the Deputy Director of Income Tax [hereinafter referred to as the DDIT] relevant to assessment year 2004-05.
The assessee has taken the following grounds of appeal: “I Ground no.1: 1.1 On the facts and circumstances of the case and in law, the Deputy Director of Income-tax (International Taxation) - 3(1), Mumbai ('the DDIT') erred in reopening the assessment under section 148 of the Income-tax Act, 1961 ('the Act').
1.2 The Appellant prays that the reassessment be considered as bad-in-law and the reassessment order be quashed. II Ground No. 2 2.1 On the facts and circumstances of the case and in law, the AO erred in disallowing specific expenses incurred by the Head Office for the Project
2.2 The Appellant prays that the AO be directed to hold that section 440 has no application to the specific expenses incurred by the Head Office for the Project in India and no disallowance is called for. Ill Ground No. 3 3.1 On the facts and circumstances of the case and in law, the AO erred in disallowing depreciation of Rs. 19,75,142.
3.2 The Appellant prays that the AO be directed to allow depreciation of Rs.19,75,142. IV Ground No. 4 4.1 On the facts and circumstances of the case and in law, the AO erred in levying interest under section 234A of the Act.
4.2 The Appellant prays that the AO be directed to hold no interest under section 234A of the Act is leviable in the case of the Appellant. V Ground No. 5 5.1 On the facts and circumstances of the case and in law, the AO erred in levying interest under section 234B of the Act.
5.2 The Appellant prays that the AO be directed to hold no interest under section 234B of the Act is leviable in the case of the appellant, being a non-resident.
VI The Appellant craves leave to add to, amend or alter any of the above grounds of appeal.”
A perusal of the above reproduced grounds of appeal reveals that vide ground No.1 the assessee has raised a legal issue as to the validity of the reopening of the assessment. The Ld. A.R. of the assessee has challenged the reopening of the assessment mainly on two grounds. Firstly, that no notice under section 148 was served upon the assessee and secondly, that there was no tangible material before the Assessing Officer (hereinafter referred to as the AO) on the basis of which the AO could have any reason to believe that the income of the assessee has escaped assessment. While contending so, the Ld. A.R. of the assessee has submitted that there was no independent application of p
4. Taking the first legal ground as to service of notice, it is admitted fact on the file that the assessee had changed its address and no intimation was given to the AO/Revenue Authorities regarding the change of address. The contention of the Department has been that the notice was duly sent by post at the registered address of the assessee with the Department. On the other hand, the contention of the Ld. A.R. has been that the Department has not proved by evidence that the notice was actually sent. He has further invited our attention to letter dated 12.11.2009 wherein it was requested to provide a copy of the notice during the reopened assessment proceedings itself. The Ld. A.R. has contended that the copy of notice by the Department has been provided only during the proceedings before this Tribunal.
5. We have considered the rival contentions on this ground. Admittedly, the assessee had changed its address and the assessee was not operating at the place the address, which was given/registered with the Department. The stand of the Department is that the notice was sent through post in due course. Once it is admitted by the assessee that it was not available at the address at which the Department might have sent the notice, the assessee, in our view, is precluded from taking a stand that no notice was served upon it. The presumption will be that the notice was sent in due course by the Department and the same had not been returned/received back unserved and thus there was reasonable presumption that the notice was received by the assessee. Under such circumstances, the assessee is now estopped from taking the plea that the notice under section 148 was not served upon it.
6. Now coming to the second ground. The Ld. A.R. of the assessee has brought our attention to the copy of reasons recorded, which has been placed at 4 M/s. Johnson Controls(S) Pte. Ltd. page 110 of the paper book before us. Since as per the provisions of the section 147 of the Act, the AO must have reasons to believe that the income of the assessee has escaped assessment. The various judicial authorities time and again have held that the reasons to believe must be based on some information or material coming to the knowledge of the AO and the AO after applying his mind to the said information or material should have reason to believe that the income of the assessee has escaped assessment. Reopening of the assessment under section 147 cannot be done under the garb of review of the assessment. The pre-condition for reopening of the assessment under section 147 is that there should be some information coming to the AO regarding the escapement of income and the AO should have applied his mind to the said information and thereafter examining the same, he should have reason to believe that the income of the assessee escaped assessment. It does not mean a purely subjective satisfaction of the assessing authority, such reason should be held in good faith and cannot merely be a pretence.
Now coming to the reasons recorded by the assessee in this case. The said reasons recorded for the sake of convenience are reproduced as under:
A perusal of the above reasons recorded reveals that certain audit objections were raised by the audit party. The AO without applying his mind as to the points raised in the audit objections has simply reproduced the objections and has not recorded any reason for forming his belief that the income of the assessee has escaped assessment. He has neither consulted the said audit objections with the record available with him nor has checked the merits or demerits or otherwise validity of the objections raised by the audit party. Under such circumstances, it cannot be said that the AO had any reason to believe that the income of the assessee has escaped assessment. The reopening in this case has been done in a mechanical manner without application of mind on the basis of report of audit party which is not sustainable in the eyes of law.
In view of our above discussion, the very reopening in this case is quashed. Since we have quashed the very reopening in this case, hence the
In the result, the appeal of the assessee is hereby allowed.
Order pronounced in the open court on 30.10.2015.