Sunderlal Mohan Lal Sarda & Others, Kolkata V. ACIT, CIR-40, KOLKATA, Kolkata

CO 12/KOL/2014

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 7322 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 8 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-09-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 14-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MD USMAN
• Assessee Lawyers: A K GUPTA
• Keywords: Depreciation; Tangible material; Difference of opinion; Accommodation entries; Reason to believe; Change of opinion; Reassessment proceedings; Capital expenditure
• Section: 143(3); 147; 148

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ITA NO. 116 / KOL / 2014 ASSESSMENT YEAR :007-08 ACIT, CIRCLE-40, 18, RABINDRA SARANI, PODDER COURT, 4 TH FLOOR, KOLKATA-001 V/S . SUNDARLAL MOHANLAL SARDA & OTHERS (AOP), H.O SUIT NO.64, 6 TH FLOOR, 8, A.J.C. BOSE ROAD, KOLKATA-11 [ PAN NO.AABAS 7905G ] /APPELLANT .. / RESPONDENT C.O. NO.12/KOL/2014 (A/O ITANO.116/KOL/2014) ASSESSMENT YEAR: 2007-08 SUNDARLAL MOHANLAL SARDA & OTHERS (AOP), H.O SUIT NO.64, 6 TH FLOOR, 8, A.J.C. BOSE ROAD, KOLKATA-11 V/S . ACIT, CIRCLE-40, 18, RABINDRA SARANI, PODDER COURT, 4 TH FLOOR, KOLKATA-001 CO-OBJECTOR .. / RESPONDENT /BY ASSESSEE SHRI A.K. GUPTA, FCA, /BY REVENUE MD. USMAN, CIT-DR /DATE OF HEARING 23-08-2017 /DATE OF PRONOUNCEMENT 31-10-2017 ITA NO.116/KOL/2014 & CO. 12/KOL/2014 A.Y. 20 07-08 ACIT, CIR-40, KOL. VS. SUNDARLAL MOHANLAL SARDA & OTHERS PAGE 2 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL AS WELL AS CROSS OBJECTION (CO) BY THE REVENUE AND ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIO NER OF INCOME TAX (APPEALS)-XII, KOLKATA DATED 31.10.2013. ASSESSMENT WAS FRAMED BY ACIT, CIRCLE-40 KOLKATA U/S 147/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 25.0 3.2013 FOR ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITS CROSS OBJECTION:- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO OF REOPENING THE ASS ESSMENT U/S 147 AS THE RELEVANT MATERIAL WAS ALREADY DISCLOSED IN THE ACCO UNTS FILED ALONG WITH THE RETURN OF INCOME. THERE WAS NO FAILURE IN DISCLOSUR E OF MATERIAL FACT AND THAT THE REOPENING OF THE ASSESSMENT WAS BAD IN LAW AND AB I NITIO VOID AND THE NOTICE ISSUED U/S 148 FOR REASSESSMENT BE CANCELLED. 3. THE ASSESSEE IN ITS CO HAS CHALLENGED THE VALIDI TY OF REASSESSMENT PROCEEDINGS INITIATED U/S 147 OF THE ACT ON THE GRO UND THAT ALL THE MATERIAL FACTS WERE DISCLOSED IN THE RETURN OF INCOME ON THE BASIS OF W HICH THE PROCEEDINGS U/S 147 OF THE ACT WERE INITIATED. 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS AN AOP AND ENGAGED IN THE BUSINESS OF EXTRACTION AND SALE OF IRON ORE, ROM AN D LUMPS. THE ASSESSEE WAS AWARDED A MINING LEASE FOR A PERIOD OF 20 YEARS FRO M THE STATE GOVERNMENT OF ORISSA VIDE ORDER DATED 14.08.2001. THE ASSESSEE CA RRIED ON THE MINING ACTIVITIES UP TO A.Y.2006-07 AND ACCORDINGLY IT HAS BEEN ASSESSED IN THE EARLIER YEARS. HOWEVER, THE ASSESSEE IN THE YEAR UNDER CONSIDERATION TRANSF ERRED THE MINING LEASE RIGHTS TO M/S. SARDA MINES PVT. LTD. (SMPL) IN TERMS OF AGREE MENT DATED 22.06.2006 WITH SMPL. THE TRANSFER OF MINING LEASE RIGHTS TO M/S. S MPL BY THE ASSESSEE WAS DULY APPROVED BY THE ORDER OF STATE GOVT. OF ORISSA DATE D 07.06.2006. 4.1 THE ASSESSEE ALONG WITH THE TRANSFER OF MINING LEASE RIGHTS, HAS ALSO TRANSFERRED MOVABLE/IMMOVABLE ASSET AND MINING LEAS E EXPENDITURE FOR RS.7,36,91,121/- AND RS.2,08,52,219/- RESPECTIVELY. THE ASSESSEE DULY DISCLOSED THE ITA NO.116/KOL/2014 & CO. 12/KOL/2014 A.Y. 20 07-08 ACIT, CIR-40, KOL. VS. SUNDARLAL MOHANLAL SARDA & OTHERS PAGE 3 CONSIDERATION RECEIVED BY IT FROM M/S SPML IN ITS B OOKS OF ACCOUNTS AND ACCORDINGLY THE SAME WAS OFFERED TO TAX. HOWEVER, THE AO OBSERVED THAT THE CONSIDERATION REC EIVED BY THE ASSESSEE TOWARDS TRANSFER OF MOVABLE/IMMOVABLE ASSETS AND MINING LEA SE EXPENDITURE HAS NOT BEEN DISCLOSED IN THE RETURN OF INCOME. THEREFORE THE AO INITIATED THE REASSESSMENT PROCEEDINGS U/S 148 OF THE ACT AFTER RECORDING THE REASONS TO BELIEVE AS DETAILED UNDER :- 'FROM THE RELIABLE SOURCES, IT HAS COME TO NOTICE T HAT M/S SUNDER LAL MOHAN LAL SHARDA & OTHERS HAD RECEIVED RS. 20852219/- AS MINI NG LEASE EXPENDITURE AND RS.73691121 AS TRANSFER OF MINING LEASE (CAPITAL EX PENDITURE) FROM M/S SHARDA MINES PVT. LTD. (TOTAL RS.94543340) DURING T HE FINANCIAL YEAR 2006-07, BUT FAILED TO OFFER THE AMOUNT I.E. RS. 94543340 FO R TAXATION' AS SUCH I AM OF THE VIEW THAT INCOME TO THE TUNE OF RS. 94543340 HAS ESCAPED ASSESSMENT FOR ASSESSMENT YEAR 2007-08. TO ASSESS T HE INCOME ESCAPED OF RS. 94543340 (RS. NINE CRORE FORTY FIVE LAC FORTY T HREE THOUSAND THREE HUNDRED AND FORTY ONLY) NOTICE U/S 148 OF THE INCOM E TAX ACT IS BEING ISSUED FOR ASSESSMENT YEAR 2007-08.' 4.2 HOWEVER, THE ASSESSEE HAS CHALLENGED THE REASON S RECORDED BY THE AO VIDE HIS LETTER DATED 19.11.2012 / 29.11.2012 ON THE GRO UND THAT ALL THE MATERIAL INFORMATION PERTAINING TO THE TRANSFER OF MOVABLE/I MMOVABLE PROPERTIES AND CAPITAL EXPENDITURE INCURRED ON MINING LEASE WERE DULY ACCO UNTED FOR IN THE BOOKS OF ACCOUNT AND OFFERED TO TAX IN THE COMPUTATION OF IN COME. AS SUCH THERE IS NO ESCAPEMENT OF INCOME AS ALLEGED BY THE AO IN THE RE ASONS RECORDED FOR REOPENING OF THE ASSESSMENT U/S 147 OF THE ACT. HOWEVER, THE AO REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT JURISDICTION FOR INITIATION OF THE PROCEEDINGS U/S 148 OF THE AC T CAN BE ASSUMED ON THE BASIS OF THE PRIMA FACIE MATERIALS AVAILABLE ON RECORD. THE AO IN SUPPORT OF HIS CLAIM HAS RELIED ON THE FOLLOWING JUDGMENTS OF THE HONBLE SU PREME COURT :- I) CIT VS RAJESH JHAVERI STOCK BROKERS PVT. LTD. RE PORTED IN 161 ITR 316 II) RAYMOND WOOLLEN MILLS LTD. VS ITO 236 ITR 34 (S C). 4.3 FINALLY THE AO HELD THAT PROCEEDINGS U/S 147 OF THE ACT HAD BEEN INITIATED IN ACCORDANCE WITH THE PROVISIONS OF LAW AND REJECTED THE PETITION OF THE ASSESSEE. BEING AGGRIEVED BY THE ORDER OF AO THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTE D THAT IT HAS NOT RECEIVED ANY ITA NO.116/KOL/2014 & CO. 12/KOL/2014 A.Y. 20 07-08 ACIT, CIR-40, KOL. VS. SUNDARLAL MOHANLAL SARDA & OTHERS PAGE 4 CONSIDERATION FOR THE TRANSFER OF MINING LEASE TO M /S SMPL. THEREFORE THERE IS NO QUESTION OF ANY ESCAPEMENT OF INCOME. IN FACT THE A SSESSEE HAS RECEIVED CONSIDERATION FROM M/S. SMPL ON OTHER COUNTS AS DET AILED UNDER :- SL.NO. PARTICULARS AMOUNT 1. TRANSFER OF MOVABLE/IMMOVABLE PROPERTIES RS.7,3 6,91,121 2. CAPITAL EXPENDITURE ON MINING LEASE RS.2,08,5 2,219 4.4 THE ASSESSEE FURTHER SUBMITTED THAT THE AMOUNT AS DISCUSSED ABOVE WAS DULY DISCLOSED IN THE INCOME TAX RETURN AS DETAILED UNDE R :- 4.3 THE APPELLANT RECEIVED RS. 7,36,91,121/- AS CO NSIDERATION FOR TRANSFER OF MOVABLE AND IMMOVABLE ASSETS. IN THE COMPUTATION OF INCOME FILED ALONG WITH THE RETURN OF INCOME THE APPELLANT SHOWED SHORT TER M CAPITAL LOSS AS UNDER: FULL VALUE OF CONSIDERATION 8,23,63,778.00 LESS: DEDUCTION U/S 48 OPENING WDV AS ON 01.04.2006 RS 12,84,92,585/- ADDITION DURING FY 2006-07 RS 67,53,134/- ( 13,5 2,45,719) TOTAL (5,28,81,941) THE AMOUNT OF RS 8,23,63,778/- INCLUDES THE ABOVE F IGURE OF RS 7,36,91,121/- . THE WDV OF THESE ASSETS WAS RS. 13,52,45,719/- AND THE APPELLANT SHOWED SHORT TERM CAPITAL LOSS IN THE COMPUTATION OF INCOM E. THE APPELLANT HAS DISCLOSED THE AMOUNT IN THE ACCOUNTS AND ALSO SHOWE D IT IN THE COMPUTATION OF INCOME AS SHORT TERM CAPITAL LOSS IN VIEW OF THE PR OVISIONS OF S.50. 4.4. THE AMOUNT OF RS. 2,08,52,219/- WAS RECEIVED A GAINST OTHER ASSETS. THE APPELLANT HAD CAPITALIZED CERTAIN EXPENSES, WHICH H AD BEEN SHOWN IN THE SCHEDULE 'C' OF THE BALANCE SHEET UNDER THE HEAD 'C APITAL EXPENDITURE NOT REPRESENTED BY ASSETS OWNED BY AOP'. IT CONSISTED O F THE FOLLOWING:- 1 . MINING LEASE EXPENDITURE (INCLUDING ROYALTY FOR TREES) RS. 1. 51,01,320/- 2. CAPITAL EXPENDITURE ON 33 KV ELECTRIC LINE RS. 38,67,866/- 3. CAPITAL EXPENDITURE ON BSNL TOWER RS. 18,04, 293/- TOTAL RS.2,07,73,479/- THE AMOUNT OF RS. 2,08,52,219/- INCLUDED RS. 78,740 /- RECEIVED ON ACCOUNT OF SUNDRY EXPENSES LIKE CONSULTATION CHARGES ETC. RECO VERED. IT IS SUBMITTED THAT THESE EXPENSES WERE CAPITALIZED IN THE ACCOUNTS BY THE APPELLANT AND HENCE WERE RECOVERED FROM THE PURCHASER OF MINE. THERE WA S NEITHER LOSS NOR GAIN ON THIS ACCOUNT. THE AO ERRED IN CONSIDERING THIS AMOU NT AS RECEIVED FOR TRANSFER OF MINING LEASE. ITA NO.116/KOL/2014 & CO. 12/KOL/2014 A.Y. 20 07-08 ACIT, CIR-40, KOL. VS. SUNDARLAL MOHANLAL SARDA & OTHERS PAGE 5 THE ASSESSEE FURTHER SUBMITTED THAT ALL THE ABOVE F ACTS WERE DULY RECORDED IN THE BOOKS OF ACCOUNTS AND BROUGHT TO THE NOTICE OF THE AO AT THE TIME OF ASSESSMENT. THE ASSESSEE ALSO SUBMITTED THAT THERE IS NO PROVIS ION IN THE MINING CONCESSION RULE 1960 FOR CHARGING ANY PREMIUM ON THE TRANSFER OF MINING LEASE. THE ASSESSEE WAS NOT THE OWNER OF THE MINING LEASE BUT WAS MEREL Y HOLDING THE LEASE RIGHTS ON THE MINES FOR A PERIOD OF 20 YEARS. THE ASSESSEE FURTHER SUBMITTED THAT SHRI N.D. CHAND AK WORKING AS ASSTT. MANAGER FINANCE IN SMPL APPEARED BEFORE THE ACIT (TDS) BHUB ANESHWAR DURING TDS PROCEEDINGS. THE ACIT (TDS) BHUBANESHWAR DURING HEA RING OBSERVED FROM THE SUBMISSION OF SHRI CHANDK, CERTAIN FACTS AS REPRODU CED UNDER : 1. PAYMENT IN RESPECT OF MINING LEASE TRANSFER . - DURING THE FINANCIAL YEAR 2006-07 THE COMPANY GOT T HE MINING LEASE FROM S.L.M.L. SARDA AND OTHERS VIDE AN AGREEMENT DATED 2 2.06.2006. THE COMPANY MADE THE FOLLOWING PAYMENTS TO S.L.M.I. SARDA AND O THERS. I) MINING LEASE EXPENDITURE - RS. 20852219/- II) CAPITAL EXPENDITURE (PURCHASE OF ASSET) - RS.7 3691121/- THE DEDUCTOR COMPANY WAS ASKED TO FURNISH THE DETAI LS OF AGREEMENT WITH S.L.M.L. SARDA & OTHERS IN RESPECT OF THE MINING LE ASE EXPENDITURE AND CAPITAL EXPENDITURE MENTIONED ABOVE. MR. N.D. CHANDAK, ASST . MANAGER FINANCE APPEARED AND EXPLAINS THAT NO PURCHASE AGREEMENT IN RESPECT OF PURCHASE OF ASSET OR MINING LEASE EXPENDITURE WAS EXECUTED BETW EEN THE TWO ENTITIES. IT WAS ALSO FOUND THE AMOUNT WAS PAID TO S.L.M.L. SARD A & OTHERS FOR THE LEASE TRANSFER OF THE MINES. THE DEDUCTOR COMPANY DID NOT PAY ANY SALE TAX IN RESPECT OF PURCHASE OF ASSETS/MACHINERY. ON ENQUIRY MR.. CH ANDAK EXPLAINED THAT NON OF THESE PAYMENT WAS OFFERED FOR TAXATION BY S.L.M. L. SARDA & OTHERS. SO IT IS CLEAR FROM ABOVE DISCUSSION THAT: A. THAT THE MINING LEASE EXPENDITURE AMOUNTING RS. 20852219/- & THE ALLEGED CAPITAL EXPENDITURE AMOUNTING RS. 73691121/- WERE P AID TO S.L.M.L. SARDA & OTHERS AS PREMIUM FOR TRANSFER OF MINING LEASE. BUT SINCE THE LAW DID NOT ALLOW SUCH TYPE OF PREMIUM SO NO AGREEMENT WAS EXECUTED. B. THE DEDUCTOR COMPANY DID NOT DEDUCT ANY TAX FROM THE PAYMENTS MENTIONED ABOVE. 5. THE ABOVE INFORMATION WAS COMMUNICATION TO THE A O HAVING JURISDICTION OVER THE ASSESSEE AND IN VIEW OF ABOVE THE AO INVOKED TH E PROVISIONS OF SECTION 147 OF THE ACT FOR THE ESCAPEMENT OF THE INCOME. BUT THE A O IN THE REASONS RECORDED HAS NOT REFERRED TO THE ABOVE PROCEEDINGS UNDER SECTION 201(1)/201(1A) OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT THE SUBMISSION MADE BY SHRI CHANDAK DURING THE TDS PROCEEDINGS CANNOT BE RELIED UPON AS HE WAS ACTING AS AN EMPLOYEE OF ITA NO.116/KOL/2014 & CO. 12/KOL/2014 A.Y. 20 07-08 ACIT, CIR-40, KOL. VS. SUNDARLAL MOHANLAL SARDA & OTHERS PAGE 6 SMPL. MOREOVER, SHRI CHANDAK WAS NOT AWARE OF ALL T HE FACTS. IN FACT A LOT OF LETTERS WERE EXCHANGED BETWEEN THE ASSESSEE AND M/S.SMPL FO R THE TRANSFER OF ASSETS ON DIFFERENT DATES SUCH AS 24.06.2006, 28.06.2006, 01. 07.2006, 03.10.2006 AND 04.10.2006. IN VIEW OF THE ABOVE, THE ASSESSEE PLEA DED BEFORE LD. CIT(A) THAT THE REOPENING U/S 147 OF THE ACT IS VOID AND DESERVES T O BE HELD AS INVALID. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HAS HELD THAT THE INITIATION OF PROCEEDINGS U/S 147 OF THE ACT IS INV ALID BY OBSERVING AS UNDER:- I HAVE CONSIDERED FACTS OF THE CASE, THE REMAND RE PORT OF THE AO AS WELL AS THE ARGUMENTS ADVANCED ON BEHALF OF THE APPELLANT. IN THIS CASE, THE RETURN FILED BY THE APPELLANT DECLARING LOSS OF RS.14,95,3 4,954/- WAS PROCESSED UNDER SEC. 143(1) OF THE ACT. REASSESSMENT PROCEEDI NGS CAN BE VALIDLY INITIATED IN CASE RETURN OF INCOME IS PROCESSED ONL Y UNDER SECTION 143(1) OF THE ACT AND NO SCRUTINY ASSESSMENT IS UNDERTAKEN, I T WOULD BE A CASE OF FORMATION OF NO OPTION AND, HENCE, IN SUCH CASES AS SESSMENT ORDER ITSELF RECORDS THAT ISSUE WAS RAISED AND IS DECIDED IN FAV OUR OF ASSESSEE; REASSESSMENT PROCEEDINGS IN SAID CASES WILL BE HIT BY PRINCIPLE OF CHANGE OF OPINION . IN RAYMOND WOOLLEN MILLS LTD. V. ITO [1999] 236 ITR 34 (SC), THE HONBLE APEX COURT HAS HELD THAT IN DETERMINING WH ETHER COMMENCEMENT OF REASSESSMENT PROCEEDINGS IS VALID, THE COURT HAS ON LY TO SEE WHETHER THERE IS PRIMA FACIE SOME MATERIAL ON THE BASIS OF WHICH THE DEPARTMENT OPENED THE CASE. THE SUFFICIENCY OR CORRECTNESS OF THE MATERIA L IS NOT A THING TO BE CONSIDERED AT THIS STAGE. THEREFORE, IN VIEW OF TH E RATIO LAID DOWN BY THE APEX CURT, THE INITIATION OF PROCEEDINGS UNDER SEC. 147 AND ISSUE OF NOTICE UNDER SEC. 148 OF THE ACT CANNOT BE HELD TO BE INVALID OR BAD IN LAW. THE SAME IS, THEREFORE CONFIRMED AND THIS GROUND OF APPEAL IS DI SMISSED. BEING AGGRIEVED BY THE ORDER OF LD. CIT(A) THE ASSE SSEE CAME IN CO BEFORE US. 6. THE LD. AR FOR THE ASSESSEE BEFORE US FILED A PA PER BOOK WHICH IS RUNNING INTO PAGES 1 TO 150. HE SUBMITTED THAT ALL THE RELEVANT INFORMATION WITH REGARD TO THE TRANSFER OF MOVABLE/IMMOVABLE PROPERTIES AS WELL AS CAPITAL EXPENDITURE WERE DULY DISCLOSED IN THE INCOME TAX RETURN. THE LD. AR IN S UPPORT OF HIS CLAIM DREW OUR ATTENTION ON PAGE 4 OF THE PAPER BOOK WHERE THE INC OME FROM TRANSFER OF MOVABLE/IMMOVABLE ASSETS WAS DULY DISCLOSED AND OFF ERED TO TAX. 6.1 SIMILARLY THE LD. AR DREW OUR ATTENTION ON PAGE -11 OF THE PAPER BOOK WHERE THE DETAILS OF CAPITAL EXPENDITURE INCURRED BY THE ASSESSEE WERE PLACED. THE LD. AR FURTHER DREW OUR ATTENTION ON THE DEPRECIATION SCHE DULE UNDER THE INCOME TAX ACT AND DEMONSTRATED THAT ALL THE MOVABLE/IMMOVABLE ASS ETS WERE TRANSFERRED TO M/S. ITA NO.116/KOL/2014 & CO. 12/KOL/2014 A.Y. 20 07-08 ACIT, CIR-40, KOL. VS. SUNDARLAL MOHANLAL SARDA & OTHERS PAGE 7 SMPL. THE DEPRECIATION SCHEDULE UNDER THE INCOME TA X IS PLACED AT PAGE 123 OF THE PAPER BOOK. THE LD. AR IN SUPPORT OF HIS CLAIM RELI ED ON THE FOLLOWING JUDGMENTS: 1. BOMBAY HIGH COURT IN THE CASE OF PRASHANT S JOSH I VS ITO REPORTED IN 324 ITR 154 2. BOMBAY HIGH COURT IN THE CASE OF NDT SYSTEM VS I TO REPORTED IN 363 ITR 603 3. DELHI HIGH COURT IN THE CASE OF CIT VS LIVING ME DIA INDIA LTD. REPORTED IN 359 ITR 106 4. DELHI HIGH COURT IN THE CASE OF CIT VS ORIENT CR AFT LTD. REPORTED IN 354 ITR 536 5. GUJARAT HIGH COURT IN THE CASE OF ASHRAM ASHRAM VS ITO(EXEMPTION) REPORTED IN 386 ITR 222 6. MADRAS HIGH COURT IN THE CASE OF MARTECH PRIPHE RALS P.LTD VS DCIT AND REPORTED IN 394 ITR 733 ON THE OTHER HAND, THE LD. DR SUBMITTED THAT INFORM ATION WAS RECEIVED FROM THE INCOME TAX OFFICE (TDS DIVISION) (BHUBANESWAR) HAVI NG JURISDICTION OVER SMPL WHEREIN THE EMPLOYEE OF SMPL HAS CATEGORICALLY SUBM ITTED THAT THE CONSIDERATION RECEIVED BY THE ASSESSEE ON ACCOUNT OF MOVABLE/IMMO VABLE PROPERTIES AND MINING CAPITAL EXPENDITURE WAS NOT OFFERED TO TAX. THE LD. DR FURTHER SUBMITTED THAT THE REOPENING U/S 147 OF THE ACT WAS INITIATED ON THE B ASIS OF THE INFORMATION RECEIVED FROM ACIT OFFICE TDS DIVISION, BHUBANESWAR. THE LD. DR VEHEMENTLY RELIED ON THE ORDER OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE AO HAS INITIATED R E-ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT ON THE GROUND THAT THE CONSIDERATION REC EIVED BY THE ASSESSEE FOR RS.7,36,91,121/- AND RS/.2,08,52,219/- ON ACCOUNT O F TRANSFER OF MOVABLE/IMMOVABLE PROPERTIES AS WELL AS CAPITAL EXPENDITURE WAS ESCAP ED FROM THE TAX. THE AO WAS OF THE VIEW THAT THE IMPUGNED AMOUNT HAS NOT BEEN OFFE RED TO TAX ON THE GROUND THAT ONE OF THE EMPLOYEE OF THE SMPL I.E. SHRI CHANDAK H AS SUBMITTED THAT THE ASSESSEE HAS NOT OFFERED THE ABOVE CONSIDERATION TO TAX. HOWEVER ON PERUSAL OF THE INFORMATION AVAILABLE ON RECORD WE FIND THAT THIS STATEMENT OBTAINED BY THE AO FROM THE OFFICE OF ACIT(TDS DIVI SION) OF SHRI CHANDAK WAS NOT ITA NO.116/KOL/2014 & CO. 12/KOL/2014 A.Y. 20 07-08 ACIT, CIR-40, KOL. VS. SUNDARLAL MOHANLAL SARDA & OTHERS PAGE 8 CONFRONTED TO THE ASSESSEE. MOREOVER, WE FIND THAT SHRI CHANDAK IS AN EMPLOYEE OF SMPL AND THEREFORE THE STATEMENT CANNOT BE RELIED U PON BY THE AO. BESIDES THE ABOVE, WE FIND THAT IT WAS ALLEGED BY T HE AO THAT THE CONSIDERATION RECEIVED BY THE ASSESSEE AS DISCUSSED ABOVE WERE NO T OFFERED TO TAX. HOWEVER, ON PERUSAL OF THE STATEMENT OF INCOME AS WELL AS FINAN CIAL STATEMENT OF THE ASSESSEE WE FIND THAT ALL NECESSARY DETAILS WERE DISCLOSED IN T HE INCOME TAX RETURN AND BALANCE SHEET. AS SUCH THE BASIS ON WHICH THE REOPENING WAS INITIATED WAS NOT BASED ON THE REASON TO BELIEVE FOR ESCAPEMENT OF INCOME, RATHER IT WAS BASED ON REASONS TO SUSPECT FOR ESCAPEMENT OF INCOME. MOREOVER, WE FIND THAT THE AO HAS NOT CLEARLY RECOR DED THE REASONS TO BELIEVE FOR THE ESCAPEMENT OF INCOME. THE AO HIMSELF IS NOT CONFIDE NT WHETHER THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AS HE HAS NOT BROUGHT ANY TANGIBLE MATERIAL IN THE REASONS RECORDED FOR THE ESCAPEMENT OF INCOME. HOWEVER THE LD. DR TR IED TO JUSTIFY THE ACTION OF AO BY SUBMITTING THAT THE INF ORMATION WAS RECEIVED FROM OFFICE OF TDS DIVISION, BHUBANESWAR AND THEREFORE THE PROCEED INGS UNDER SECTION 147 OF THE ACT WERE INITIATED. HOWEVER ON PERUSAL OF THE REASONS RECORDED WE FIND THAT THE RE IS NO REFERENCE MADE BY THE AO TO THE INFORMATION RECE IVED FROM THE OFFICE OF TDS DIVISION, BHUBANESWAR. T HUS THE ARGUMENT OF THE LD. DR CANNOT BE ACCEPTED. MOREOVER THE REASONS RECORDED BY THE AO FOR R EOPENING THE CASE CANNOT BE IMPROVED FURTHER AS HELD BY THE BOMBAY HIGH COURT I N THE CASE OF PRASHANT S JOSHI VS ITO REPORTED IN 324 ITR 154 . THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED BELOW : THE REASONS, WHICH ARE RECORDED BY THE ASSESSING OF FICER FOR REOPENING AN ASSESSMENT, ARE THE ONLY REASONS WHICH CAN BE CO NSIDERED WHEN THE FORMATION OF THE BELIEF IS IMPUGNED. THE RECORDING OF REASONS DISTINGUISHES AN OBJECTIVE FROM A SUBJECTIVE EXERCISE OF POWER. T HE REQUIREMENT OF RECORDING REASONS IS A CHECK AGAINST ARBITRARY EXERCISE OF POWER, FOR IT I S ON THE BASIS OF THE REASONS RECORDED AND ON THOSE R EASONS ALONE THAT THE VALIDITY OF THE ORDER REOPENING THE ASSESSMENT IS T O BE DECIDED. THE REASONS RECORDED WHILE REOPENING THE ASSESSMENT CAN NOT BE AL LOWED TO GROW WITH AGE AND INGENUITY, BY DEVISING NEW GROUND S IN REPLIES AND AFFIDAVITS NOT ENVISAGED WHEN THE REASONS FOR REOPE NING AN ASSESSMENT WERE RECORDED. THE PRINCIPLE OF LAW, THEREFORE, IS WELL- SETTLED THAT THE QUESTION AS TO WHETHER THERE WAS REA SON TO BELIEVE, WITHIN THE MEANING OF SECTION 147 THAT INCOME HAD ESCAPED ASSESSMENT, MUS T BE DETERMINED WITH REFERENCE TO THE REASONS RECORDED BY THE ASSES SING OFFICER. THE REASONS WHICH ARE RECORDED CANNOT BE SUPPLEMENTED B Y AFFIDAVITS. THE ITA NO.116/KOL/2014 & CO. 12/KOL/2014 A.Y. 20 07-08 ACIT, CIR-40, KOL. VS. SUNDARLAL MOHANLAL SARDA & OTHERS PAGE 9 IMPOSITION OF THAT REQUIREMENT ENSURES AGAINST AN ARBITRARY EXERC ISE OF POWER UNDER SECTION 148 . SIMILARLY ON PERUSAL OF THE REASONS RECORDED IT IS EVIDENT THAT THE ASSESSING OFFICER HAS RECORDED VERY VAGUE REASONS WHICH ARE GENERAL I N NATURE. NO SPECIFIC MATERIAL, WHICH INDICATED THE ESCAPEMENT OF INCOME WAS BROUGH T ON RECORD. SIMILARLY DEFECTS IF AN Y IN THE BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESS EE WAS ALSO NOT MENTIONED. NO SPECIFIC ITEMS OF INCOME OR THE RECEIPTS WHICH E SCAPED FROM INCOME WAS BROUGHT ON RECORD IN REASONS, LEAVE ALONE THE QUANTUM. THE ASSESSING OFFICER HAS NOT MENTIONED ANY MATER IAL WHICH WAS SUGGESTING AND INDICATING ESCAPEMENT OF INCOME. NO FINDING WAS GIVEN BY THE ASSESSING OFFIC ER WITH REGARD TO THE NON DISCLOSURE OF INCOME. FROM PLAIN READING OF THE REA SONS RECORDED BY THE ASSESSING OFFICER SHOWS, THAT THE REASONS WERE RECORD ED, WITHOUT APPLICATION OF MIND AND THE ASSESSING OFFICER WANTS TO REOPEN THE ASSESSMENT WI THOUT HAVING ANY TANGIBLE MATERIAL. IT IS SETTLED ISSUE THAT EVEN IN THE CASE S WHERE THE ASSESSMENTS WERE COMPLETED U/S. 143(1), FOR REOPENING OF THE ASSESSM ENTS, TH ERE SHOULD BE REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT AS H ELD BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS ORIENT CRAFT LTD REPORT ED IN 354 ITR 536 WHEREIN AFTER CONSIDERING THE JUDGMENT OF HONBLE SUPREME COURT I N THE CASE OF CIT VS RAJESH JHAVERI STOCK BROKERS PVT. LTD REPORTED IN 161 ITR 316, THE ISSUE WAS DECIDED IN FAVOUR OF ASSESSEE. THE RELEVANT EXTRACT OF THE JUD GMENT IS REPRODUCED BELOW. 13. HAVING REGARD TO THE JUDICIAL INTERPRETATION PLACED UPON THE EXPRESSION 'REASON TO BELIEVE', AND THE CONTINUED U SE OF THAT EXPRESSION RIGHT FROM 1948 TILL DATE, WE HAVE TO UNDERSTAND TH E MEANING OF THE EXPRESSION IN EXACTLY THE SAME MANNER IN WHICH IT H AS BEEN UNDERSTOOD BY THE COURTS. THE ASSUMPTION OF THE REVENUE THAT SOME HOW THE WORDS 'REASON TO BELIEVE' HAVE TO BE UNDERSTOOD IN A LIBE RAL MANNER WHERE THE FINALITY OF AN INTIMATION UNDER SECTION 143(1) IS S OUGHT TO BE DISTURBED IS ERRONEOUS AND MISCONCEIV ED. AS POINTED OUT EARLIER, THERE IS NO WARRANT FOR SUCH AN ASSUMPTION BECAUSE OF THE LANGUAGE EMPLOYED IN SECTION 147; IT MAKES NO DISTINCTION BETWEEN AN ORDER PASSED UNDER SECTION 143(3) AND THE INTIMATION ISSUED UNDER SECTION 143(1). THEREFO RE IT IS NOT PERMISSIBLE TO ADOPT DIFFERENT STANDARDS WHILE INTERPRETING THE WORDS 'REASON TO BELIEVE' VIS-- VIS SECTION 143(1) AND SECTION 143(3). WE ARE UNABL E TO APPRECIATE WHAT PERMITS THE REVENUE TO ASSUME THAT SOMEHOW THE SAME RIGOROUS STANDARDS WHICH ARE APPLIC ABLE IN THE INTERPRETATION OF THE EXPRESSION WHEN IT IS APPLIED TO THE REOPENING OF A N ASSESSMENT EARLIER MADE UNDER SECTION 143(3) CANNOT APPLY WHERE ONLY A N INTIMATION WAS ISSUED EARLIER UNDER SECTION 143(1). IT WOULD IN EF FECT PLACE AN ASSESSEE IN ITA NO.116/KOL/2014 & CO. 12/KOL/2014 A.Y. 20 07-08 ACIT, CIR-40, KOL. VS. SUNDARLAL MOHANLAL SARDA & OTHERS PAGE 10 WHOSE CASE THE RETURN WAS PROCESSED UNDER SECTION 143(1) IN A MORE VULNERABLE POSITION THAN AN ASSESSEE IN WHOSE CASE THERE WAS A FULL- FLEDGED SCRUTINY ASSESSMENT MADE UNDER SECTION 143( 3). WHETHER THE RETURN IS PUT TO SCRUTINY OR IS ACCEPTED WITHOUT DE MUR IS N OT A MATTER WHICH IS WITHIN THE CONTROL OF ASSESSEE; HE HAS NO CHOICE IN THE MATTER. THE OTHER CONSEQUENCE, WHICH IS SOMEWHAT GRAVER, WOULD BE THA T THE ENTIRE RIGOROUS PROCEDURE INVOLVED IN REOPENING AN ASSESSMENT AND T HE BURDEN OF PROVING VALID REASONS TO BELIEVE COULD BE CIRCUMVENTED BY FIRST ACCEPTING TH E RETURN UNDER SECTION 143(1) AND THEREAFTER ISSUE NOTICES T O REOPEN THE ASSESSMENT. AN INTERPRETATION WHICH MAKES A DISTINC TION BETWEEN THE MEANING AND CONTENT OF THE EXPRESSION ' REASON TO BELIEVE ' IN CA SES WHERE ASSESSMENTS WERE FRAMED EARLIER UNDER SECTION 143(3) AND CASES WHERE MERE INTIMATIONS WERE ISSUED EARLIER UNDER SE CTION 143(1) MAY WELL LEAD TO SUCH AN UNINTENDED MISCHIEF. IT WOULD BE DI SCRIMINATORY TOO. AN INTERPRETATION THAT LEADS TO ABSURD RESULTS OR MISC HIEF IS TO BE ESCHEWED. 14. CERTAIN OBSERVATIONS MADE IN THE DECISION OF RAJESH JHAVERI STOCK BROKERS (P.) LTD. (SUPRA ) ARE SOUGHT TO BE RELIED UPON BY THE REVENUE TO POINT OUT THE DIFFERENCE BETWEEN AN ' ASSESSMENT ' AND AN ' INTIMATION '. THE CO NTEXT IN WHICH THOSE OBSERVATIONS WERE MADE HAS TO BE KEPT IN MIND. THEY WERE MADE TO POINT OUT THAT WHERE AN ' INTIMATION ' IS ISSUED UNDER SECTION 143(1) THERE IS NO OPPORTUNITY TO THE ASSESSING AUTHORITY TO FORM AN OPINION AND THEREFORE WHEN ITS FINALITY IS SOUGHT TO BE DISTURBED BY ISSUING A NOTICE UNDER SECTION 148, THE PROCEEDINGS CANNOT BE CHALLENGED ON THE GROUND OF ' CHANGE OF OPINION '. IT WAS NOT OPINED BY THE SUPREME COURT THAT THE STRICT REQUIREMENTS OF SECTION 147 C AN BE COMPROMISED. ON THE CONTRA RY, FROM THE OBSERVATIONS (QUOTED BY US EARLIER) IT WOULD APPEAR CLEAR THAT THE COURT REITERATED THAT ' SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULFILLED ' AN INTIMATION ISSUED UNDER SECTION 143(1) CAN BE SUBJECTED TO PROCEEDINGS FOR REOPENING. THE COU RT ALSO EMPHASISED THAT THE ONLY REQUIREMENT FOR DISTURBING THE FINALITY OF AN INTIMATION IS THAT THE ASSESSING OFFICER SHOULD HAVE ' REASON TO BELIEVE ' THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN OUR OPINION, THE SAID EXPRESSION SHOULD APPLY T O AN INTIMATION IN THE SAME MANNER AND SUBJECT TO T HE SAME INTERPRETATION AS IT WOULD HAVE APPLIED TO AN ASSES SMENT MADE UNDER SECTION 143(3). THE ARGUMENT OF THE REVENUE THAT AN INTIMATION CANNOT BE EQUATED TO AN ASSESSMENT, RELYING UPON CERTAIN OBSE RVATI ONS OF THE SUPREME COURT IN RAJESH JHAVERI STOCK BROKERS (P.) LTD. (SUPRA ) WOULD ALSO APPEAR TO BE SELF-DEFEATING, BECAUSE IF AN ' INTIMATION ' IS NOT AN ' ASSESSMENT ' THEN IT CAN NEVER BE SUBJECTED TO SECTION 147 PRO CEEDINGS, FOR, THAT SECTION COVERS ONLY AN 'ASSESSMENT' AND WE WONDER IF THE REVENUE WOULD BE PREPARED TO CONCEDE THAT POSITION. IT IS NOBODY'S CASE THAT AN ' INTIMATION ' CANNOT BE SUBJECTED TO SECTION 147 PROCEEDINGS; A LL THAT IS CONTENDED BY THE ASSESSEE, AND QUITE RIGHTL Y, IS THAT IF THE REVENUE WANTS TO INVOKE SECTION 147 IT SHOULD PLAY BY THE R ULES OF THAT SECTION AND CANNOT BOG DOWN. IN OTHER WORDS, THE EXPRESSION ' REASON TO BELIEVE ' CANNOT HAVE TWO DIFFERENT STANDARDS OR SETS OF MEAN ING, ONE APPLICABLE WHERE THE ASSESSMENT WAS EARLIER MADE UN DER SECTION 143(3) AND ANOTHER APPLICABLE WHERE AN INTIMATION WAS EARLIER ISSUED U NDER SECTION 143(1). IT FOLLOWS THAT IT IS OPEN TO THE ASSESSEE TO CONTEND THAT NOTWITHSTANDING THAT ITA NO.116/KOL/2014 & CO. 12/KOL/2014 A.Y. 20 07-08 ACIT, CIR-40, KOL. VS. SUNDARLAL MOHANLAL SARDA & OTHERS PAGE 11 THE ARGUMENT OF ' CHANGE OF OPINION ' IS NOT AVAILABLE TO HIM, IT WOULD STI LL BE OPEN TO HIM TO CONTEST THE REOPENING ON THE GROU ND THAT THERE WAS EITHER NO REASON TO BELIEVE OR THAT THE ALLEGED REA SON TO BELIEVE IS NOT RELEVANT FOR THE FORMATION OF THE BELIEF THAT INCOM E CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN DOING SO, IT IS FURTHER OPEN TO THE ASSESSEE TO CHALLENGE THE REASONS RECORDED UNDER SECTION 148(2) ON THE GROUND THAT THEY DO NOT MEET THE STANDARDS SET IN THE VARIOUS J UDICIAL PRONOUNCEMENTS. 15. IN THE PRESENT CASE THE REASONS DISCLOSE THAT THE A SSESSING OFFICER REACHED THE BELIEF THAT THERE WAS ESCAPEMENT OF INC OME ' ON GOING THROUGH THE RETURN OF INCOME ' FILED BY THE ASSESSEE AFTER HE ACCEPTED THE RETURN UNDER SECTION 143(1) WITHOUT SCRUTINY, A ND NOTHING MORE. THIS IS NOTHING BUT A REVIEW OF THE EARLIER PROCEEDINGS AND AN ABUSE OF POWER BY THE ASSESSING OFFICER, BOTH STRONGLY DEPRECATED BY THE SUPREME COURT IN KELVINATOR OF INDIA LTD. (SUPRA ). THE REASONS RECORDED BY THE ASSESSING OFFICER IN THE PRESENT CASE DO CONFIRM OUR APPREHEN SION ABOUT THE HARM THAT A LESS STRICT INTERPRETATION OF THE WORDS ' REASON TO BELIEVE ' VIS-- VIS AN INTIMATION ISSUED UNDER SECTION 143(1) CAN CAUSE TO THE TAX REGIME. THERE IS NO WHISPER IN THE REASONS RECORDED, OF ANY TANGIBLE MATERIAL WHICH CAME TO THE POSSESSION OF THE ASSESSING OFFIC ER SUBSEQUENT TO THE ISSUE OF THE INTIMATION. IT REFLECTS AN ARBITRARY E XERCISE OF THE POWER CONFERRED UNDER SECTION 147. 16. FOR THE ABOVE REASONS, WE ANSWER THE SUBSTANTIAL QU ESTION OF LAW FRAMED BY US IN THE AFFIRMATIVE, IN FAVOUR OF THE A SSESSEE AND AGAIN ST THE REVENUE. THE APPEAL OF THE REVENUE IS ACCORDINGLY D ISMISSED. THERE SHALL BE NO ORDER AS TO COSTS. THERE IS A VAST DIFFERENCE BETWEEN THE ISSUE OF NOT ICE U/S. 143(2) AND NOTICE ISSUED U/S. 148. FOR REOPENING THE ASSESSMENT AND ISSUE OF NOTICE U/S. 148, THE ASSESSING OFFICER SHOULD HAVE A REASON TO BELIEVE THAT THE IN COME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. FOR HAVING A REASON TO BELIEVE THERE MUST BE TANGIBLE MATERIAL WHICH INDICATES INCOME ESCAPED ASSESSMENT. MERE SUS PICION, OR THE SURMISES THE ASSESSING OFFICER IS NOT PERMITTED TO REOPEN THE AS SESSMENT. THERE SHOULD BE STRONG BELIEF BASED ON MATERIAL IS REQUIRED FOR REOPENING THE ASSESSMENT U/S. 147. SUSPICION OR GUESS WORK IS NOT SUFFICIENT TO REOPEN THE ASSESSMENT U/S. 147 OF THE I.T. ACT. THOUGH FROM THE RECORDS IT IS TRANSPIRED THAT THE R EOPENING WAS DONE ON THE BASIS INFORMATION RECEIVED FROM OFFICE OF TDS (BHUB NESHAWAR) BUT ASSESSING OFFICER DID NOT MENTION SPECIFICALLY IN THE REASONS RECORDE D WHICH PART OF THE INFORMATION CONSTITUTES T HE BASIS FOR FORMATION OF REASONABLE BELIEF FOR ESC APEMENT OF INCOME IN THE REASONS RECORDED. THE NEXUS OF THE INFORMATION RECEIVED FROM THE TDS OFFICE OF BHUBNESHAWAR WAS NOT BROUGHT ON RECORD IN THE REASO NS FOR ESCAPEMENT OF INCOME. ITA NO.116/KOL/2014 & CO. 12/KOL/2014 A.Y. 20 07-08 ACIT, CIR-40, KOL. VS. SUNDARLAL MOHANLAL SARDA & OTHERS PAGE 12 THE ASSESSING OFFICER CANNOT IMPROVE THE REASONS ALREADY RECORDED, SUBSEQ UENTLY BY REFERRING TO THE BOOKS OF ACCOUNT OR THE EXPLANA TIONS. HON'BLE GUJARAT HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD. V. R.B. WADKAR [2004] 268 ITR 332/137 TAXMAN 479 (BOM.) HELD THAT REOPENING NOTICE IS TO BE JUSTIFIED ON TH E BASIS OF REASONS RECORDED AT THE TIME OF ISSUING THE IMPUGNED NOTICE . THE IMPUGNED NOTICE MUST STAND OR FAIL ON THE REASONS RECORDED. THU S, REASONS RECORDED CANNOT BE SUPPLEMENTED BY FURTHER REASONS OR FILING AN AFFIDA VIT OR MAKING ORAL SUBMISSIONS. THE REASONS ARE MADE ON THE POINT OF ASSESSING OFFI CER AND MUST BE SELF EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSI NG. IT CANNOT BE JUS TIFIED ON THE BASIS OF INFERENCES OR INTERPRETATIONS. SIMILARLY I N THE CASE OF SUNBARG TRADELINK (P.) LTD. V. ITO [2016] 74 TAXMANN.COM 16 (GUJ.) HELD THAT WHERE THE ASSE SSING OFFICER HAS NO MATERIAL TO SUGGEST THAT THE ASSESSEE COMPAN Y HAD RECEIVED ACCOMMODATION ENTRIES AGAINST CASH RECEIPTS, THE NO TICE FOR REOPENING THE ASSESSMENT BASED ON SUCH REASONS WAS COMPLETELY WRO NG AND HAS TO BE SET ASIDE. THE HON'BLE ITAT COORDINATE BENCH, AHMEDABAD IN THE CASE OF ITO V. AMIT SHAH [2016] 71 TAXMANN.COM 256/159 ITD 767 HAS ADJUDICATED THE ISSUE ON SIMILAR FACTS AND HELD THAT THE IMPORTANT POINT IS THAT EVEN THOUGH THE REASONS RECORDED MAY NOT NECESSARILY PROVE THE ESCAPEMENT OF INCOME AT T HE STAGE OF RECORDING THE REASONS, SUCH REASONS MUST POINT OUT TO INCOME ESCA PING THE ASSESSMENT OR NOT MERELY NEED ANY INQUIRY WHICH MAY REQUIRE ADJUDICAT ION O F INCOME ESCAPING ASSESSMENT. IN THE PRESENT CASE, AT BEST THE CASE O F THE ASSESSING OFFICER FALLS IN THE SECOND CATEGORY. FURTHER AMIT K. SHAH'S CASE ( SUPRA ), HON'BLE BOMBAY HIGH COURT IN THE CASE OF KHUBUCHANDANI HEALTHPARKS (P.) LTD. V. ITO [2016] 68 TAXMANN.COM 91/384 ITR 322 HAS HELD THAT NOTICE U/S. 148 WOULD BE WITHOUT REASONS FOR ABSENCE OF REASONS TO BELIEVE THAT INCO ME HAD ESCAPED ASSESSMENT EVEN IN CASE WHERE AS SESSMENT HAS BEEN COMPLETED EARLIER BY INTIMATION U /S. 143(1). HON'BLE MADRAS HIGH COURT IN THE CASE OF PVP VENTURES LTD. V. ASSTT. CIT [2016] 65 TAXMANN.COM 221 HAS HELD THAT JUSTIFICATION FOR REOPENING THE ASSESSMENT HAS TO BE TESTED ONLY ON THE STRENGTH OF RECORDING REASONS FOR REOPENING THE ASSESSMENT U/S 148 OF THE ACT. FROM THE ABOVE D ISCUSSION AND JUDICIAL PRONOUNCEMENTS, RECORDING OF PROPER REASONS AND THE APPLICAT ION OF MIND IS NECESSARY WHICH MUST BE BONA FIDE AND NOT IN MECHANICAL MANNER. WHERE THE NOTICE ISSUED WITHOUT APPLICATION OF MIND ON THE PART OF T HE ASSESSING OFFICER, THE SAME IS ITA NO.116/KOL/2014 & CO. 12/KOL/2014 A.Y. 20 07-08 ACIT, CIR-40, KOL. VS. SUNDARLAL MOHANLAL SARDA & OTHERS PAGE 13 LIABLE TO BE QUASHED. THE REASONS RECORDED BY THE A SSESSING OFFICER MUST DI SCLOSE THE PROCESS OF REASONING BY WHICH HE HOLD THE REASO N TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THE RE LEVANT ASSESSMENT YEAR. THE MATERIAL RELIED UPON BY THE ASSESSING OFFICER SHOUL D APPEAR ON THE RECORD. IN THE INSTANT CASE, IT IS CLEAR THAT THE ASSESSING OFFICER HAS RE CORDED VAGUE AND GENERAL REASONS WITHOUT APPLICATION OF MIND. THE ASSESSING OFFICER DID NOT ESTABLISH OR WHISPER FROM THE REASONS RECORDED REGARDING THE BAS IS FOR ESCAPEMENT OF ANY INCOME. IT APPEARS FROM THE REASONS RECORDED THAT ASSESSING OFFICER HAS REO PENED THE ASSESSMENT MERELY BECAUSE SOME INFORMATION WAS RECEIVED FROM THE TDS OFFICE OF BHUBNESHAWAR WHICH IS NOT PERMISSIBLE IN LAW IN THE INSTANT CASE. THEREFORE, WE REVERSE THE ORDER OF THE LD.CIT (A). HENCE THE GROUND RAISED IN THE CO BY THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, ASSESSEES CO IS ALLOWED. NOW COMING TO THE REVENUES APPEAL IN ITA NO.116/KO L/2014 . 9. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL :- 1. THAT ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) ERRED IN HOLDING THAT THERE WAS NO AGREEMENT IN WRITING EXEC UTED BETWEEN THE ASSESSEE AOP AND M/S. SARDA MINES PVT. LTD. FOR SALE OF ASSE TS, WHEREAS THE AUDITOR'S FORM 3CD REPORT SAID T HAT THE AOP HAS TRANSFERRED THE BUILDING STANDING THEREON TO M/S. SARDA MINES (P) LTD (TRANSFEREE) TH ROUGH A SEPARATE AGREEMENT, BETWEEN THEM. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN HOLDING THAT ASSESSEE HAS TRANSFERRE D THE ASSETS AS PER THE ORDER OF SALES TAX AUTHORITIES AND THE COMMISSIONER OF COMMERCIAL TAXE S TREATED 'TRANSFER OF RIGHT TO USE' IS COVERED BY THE DEFINITIONS OF 'SAL ES' UNDER SECTION 2(46)(C) OF THE ORISSA VALUE ADDED TAXES ACT AND THUS FOUND THA T ASSES SEE HAS ALLOWED TO USE THE ASSETS TO M/S. SARDA MINES(P) LTD. AND NOT TRANSFERRED THE SAME. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF DISALLOWANCE OF RS. 7,12 ,55,577/- (PERIPHERY DEVELOPMEN T FUND) DEBITED TO PROFIT & LOSS ACCOUNT ON 29.09.2 006, WHEREAS AS PER THE AGREEMENT, THE TRANSFEREE, I.E. M/S. SAR DA MINES (P) LTD. HAD ACCEPTED ALL THE TERMS & CONDITIONS OF SUCH TRANSFE R AND THE TRANSFEROR HAD PAID ALL MINING DUES AS ON 31.03.2006 AND H OLDING DUE CLEARANCE CERTIFICATE W.E.F. 01.04.2006 AND VALID FOR SIX MONTHS. ITA NO.116/KOL/2014 & CO. 12/KOL/2014 A.Y. 20 07-08 ACIT, CIR-40, KOL. VS. SUNDARLAL MOHANLAL SARDA & OTHERS PAGE 14 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 1,48,88,604/- MADE ON ACCOUNT 'OF LOWER RATE OF SALES SHOWN IN STOCK TRANSFER RED TO M/S. SARDA MINES (P) LTD. AS U/S. 40(A)(A) O F THE INCOME TAX ACT INCLUDING THE FACT THAT THE SALE MADE AT VA RIANT RATES IN THE SAME PERIOD IS NOT REASONABLE AND JUSTIFIED. 5. THAT THE APPELLANT CRAVES THE LEAVES TO ADD, 'AL TER, MODIFY, INCLUDE OR DELETE ANY GROUND OF APPEAL. 10. AS WE HAVE ALREADY DECIDED THAT THE REASSESSMENT PR OCEEDINGS FRAMED U/S 147 OF THE ACT IS NOT VALID IN THE EYES OF LAW. THE REFORE, THE ISSUES RAISED BY THE REVENUE DO NOT REQUIRE ANY SEPARATE ADJUDICATION. T HUS, THE APP EAL FILED BY THE REVENUE BECOMES ACADEMIC AND INFRUCTUOUS. ACCORDING LY THE SAME IS DISMISSED. 11. IN THE RESULT, REVENUES APPEAL IS DISMISSE D AS INFRUCTUOUS. 12. IN COMBINE RESULT, ASSESSEES CO IS ALLOWED AND THAT OF REVENUES APPEAL IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT 31 /10/2017 (' ) ( ) (N.V.VASUDEVAN) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) *DKP, SR.P.S KOLKATA, )- 31/10 /201 7 / COPY OF ORDER FORWARDED TO:- 1. /ASSESSEE-SUNDRALAL MOHANLAL SARDA & OTHERS (AOP) H O SUIT NO.64, 6 TH FLOOR, KOLKAATA-0 01 2. /REVENUE-ACIT, CIRCLE-40, 18, RABINDRA SARANI, PODD AR COURT, 4 TH FL, KOL-001 3. 4 5 / CONCERNED CIT KOLKATA 4. 5- / CIT (A) KOLKATA 5. 8 ''4, 4, / DR, ITAT, KOLKATA 6. = / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR. PRIVATE SECRETARY, HEAD OF OFFICE/DDO 4,