M/s DCM Ltd., New Delhi V. ACIT, New Delhi

CO 39/DEL/2010

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 5303 (ITAT-DELHI)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-11-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-10-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 18-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K CHAND
• Assessee Lawyers: PRADEEP GUPTA
• Keywords: Depreciation; Tangible material; Wrong claim; Difference of opinion; Tax effect; Reason to believe; Unabsorbed depreciation; Change of opinion
• Section: 143(3); 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B DELHI BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO. 4799(DEL)/2009 ASSESSMENT YEAR: 2000-01 ASSISTANT COMMISSIONER OF INCOME D C M LTD., TAX, CIRCLE 10(1), NEW DELHI. VS. 6 TH FLOOR, VIKRANT TOWER, RAJENDRA PLACE, NEW DELHI. PAN-AAACD1012E C.O. NO. 39(DEL)/2010 (ARISING OUT OF ITA NO. 4799(DEL)/2009) ASSESSMENT YEAR: 2000-01 DCM LTD., 6 TH FLOOR, ASSISTA NT COMMISSIONER OF VIKRANT TOWER, RAJENDRA VS. INCOME-TAX, CIRCLE 10(1), PLACE, NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI N.K. CHAND, SR. DR ASSESSEE BY : SHRI PRADEEP GUPTA, C.A. & SHRI V.P. GUPTA, ADVOCA TE ORDER PER K.G. BANSAL : AM THIS APPEAL OF THE REVENUE AND THE CROSS OBJECTI ON OF THE ASSESSEE EMANATE FROM THE ORDER OF CIT(APPEALS)-XIII, NEW DELHI, PASSED ON 14.10.2009 IN APPEAL NO. 195/07-08 PERTAINING TO ASSESSMENT YEAR 2000- 01. THE REVENUE HAS TAKEN UP ONE SUBSTANTIVE GROUND IN ITS APPEAL THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DIRECTING THE AO TO ALLOW SET-OFF OF ` 21,35,46,455/- AS BROUGHT ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 2 FORWARD LOSSES INCLUDING UNABSORBED DEPRECIATION WHILE UNDER THE RELEVANT PROVISION OF SECTION 115JA, THE ASSESS EE CAN AVAIL THE BENEFIT OF EITHER THE BROUGHT FORWARD LOSSES OR UNABSORBE D DEPRECIATION, WHICHEVER IS LESS, COMPUTED YEAR-WISE. ON THE OTHER HAND, IN THE CROSS OBJECTION, THE ASSESSEE HAS TAKEN ONE SUBSTANTIVE GROUND IN R ESPECT OF VALIDITY OF REOPENING THE ASSESSMENT U/S 147 UPHELD BY THE L D. CIT(A). 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE FILED THE RETURN ON 30.11.2000, WHICH WAS PROCESSED U/S 143(1) ON 22. 3.2001. THEREAFTER, THE ASSESSMENT WAS COMPLETED U/S 143 READ WITH SECTI ON 147 ON 26.3.2004 DETERMINING THE TOTAL INCOME AT NIL AFTER SETTING OFF OF BROUGHT FORWARD LOSSES OF EARLIER YEARS AMOUNTING TO ` 10,42,04,927/-. THE ASSESSMENT WAS REOPENED BY ISSUING NOTICE U/S 148 ON 23.3.2007 BY RECORDING THE FOLLOWING REASONS:- IT WAS OBSERVED THAT THE INCOME OF THE ASSESSE E COMPANY AS PER PROVISIONS OF SECTION 115JA WAS ASSESSED AT RS. NIL WHEREAS THE CORRECT INCOME OF THE ASSESSEE COMPA NY AS PER PROVISIONS OF SECTION 115JA WORKED OUT TO RS. 1 22.99 LAKHS. THE MISTAKE RESULTED INTO UNDER ASSESSMENT OF INC OME TO THE EXTENT OF RS. 122.99 LAKHS INVOLVING TAX EFFEC T OF RS. 68.78 LAKHS. ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 3 I, THEREFORE, HAVE REASON TO BELIEVE THAT THE ABOV E INCOME HAS ESCAPED ASSESSMENT AND, THEREFORE, NOTICE U/S 1 48 OF THE I.T. ACT IS BEING ISSUED FOR RE-ASSESSMENT. 2.1 THESE PROCEEDINGS WERE COMPLETED ON 24.12.2 007 DETERMINING THE ADJUSTED BOOK PROFIT AT ` 4,09,96,594/-. THIS AMOUNT WAS ARRIVED AT AFTE R DEDUCTING A SUM OF ` 12,54,20,082/-, BEING UNABSORBED DEPRECIATION OR LOSS, WHICHEVER IS LESS, FROM THE BOOK PROFITS OF ` 16,64,16,676/-. THE DEDUCTION WAS COMPUTED AS UNDER:- ASSESSMENT YEAR PROFIT/LOSS AFTER DEPN. DEPRECIATION BOOK PROFIT/LOSS BEFORE DEPN. AMOUNT OF LOSS/DEPRECIATION TO BE CONSIDERED 1997-98 -355357821 90757273 -265100548 90757273 1998-99 -134439780 99776971 -34662809 34662809 1999-00 -17297283 103514185 86216902 -- TOTAL: -507594884 294048429 -213546455 125420082 2.2 ASSESSEE MOVED AN APPEAL BEFORE THE LD. CIT(A PPEALS). THE MAIN GROUNDS TAKEN IN THE APPEAL RELATED TO THE VALIDI TY OF THE REOPENING OF THE ASSESSMENT AND COMPUTATION OF ADJUSTED BOOK PR OFITS U/S 115 JA. IN RESPECT OF THE LATTER, THE GROUND BEFORE THE LD. CIT(A) WAS THAT THE AO ERRED IN DETERMINING THE AMOUNT OF THE DEDUCTION AT ` 12.54 CRORES AGAINST THE CLAIM OF ` 21.35 CRORES. THE LD. CIT(APPEALS) UPHELD THE ACTION OF ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 4 REOPENING THE ASSESSMENT BUT ALLOWED THE GROUND RELATING TO THE COMPUTATION OF ADJUSTED BOOK PROFITS. THE REVEN UE HAS CHALLENGED THE ORDER ON MERITS WHILE THE ASSESSEE HAS CHALLENG ED THE ORDER IN RESPECT OF REOPENING THE ASSESSMENT. SINCE THE CROSS OBJEC TION RAISES THE PRELIMINARY GROUND, WE THINK IT FIT TO PROCEED WITH THE SAME AT THE OUTSET. 3. LD. COUNSEL DREW OUR ATTENTION TO PAGE NO. 5 0 OF THE PAPER BOOK, WHICH CONTAINS THE REASONS FOR REOPENING THE ASSESSMENT. THE SUBSTANTIVE PORTION OF THE REASONS HAVE ALREADY BEEN REPRODUCED BY US. THEREAFTER, HE DREW OUR ATTENTION TO PAGE NOS. 5 1 TO 53 OF THE PAPER BOOK, BEING THE OBJECTIONS OF THE ASSESSEE TO THE ISSUA NCE OF NOTICE U/S 148. IT IS MENTIONED THEREIN THAT THE NOTICE HAS BEEN ISSUE D AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT PREVIOUS YEA R. THEREFORE, IN TERMS OF THE PROVISO TO SECTION 147,IT HAS TO BE SHOWN TH AT THE INCOME ESCAPED ASSESSMENT BY REASON OF FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELATING TO THE ASSESSMENT. THERE IS NO ALLEGATION IN THE RECORDED REASONS ABOUT SUCH FAILURE. THE COMPU TATION OF ADJUSTED BOOK PROFITS WAS EXAMINED DURING THE COURSE OF EARL IER ASSESSMENT AND THE ASSESSEE COMPANY HAD ALSO FILED THE REPORT OF T HE CHARTERED ACCOUNTANT IN ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 5 FORM 29B REGARDING COMPUTATION OF ADJUSTED BOOK PROFIT U/S 115JA. THEREFORE, IT WAS ARGUED THAT THE REASONS RECOR DED FOR REOPENING THE ASSESSMENT DO NOT CONFORM TO THE REQUIREMENT OF SECTION 147. IN THIS CONNECTION, OUR ATTENTION WAS ALSO DRAWN TOWA RDS PAGE NOS. 7 TO 9 OF THE PAPER BOOK, WHICH CONTAIN THE COMPUTATION OF ADJ USTED BOOK PROFIT. THE COMPUTATION SHOWS THAT A SUM OF ` 16,64,16,676/- WAS SET OFF AGAINST THE PROFITS OF THIS YEAR RESULTING IN NIL ADJUST ED BOOK PROFITS. THE ACTUAL DEDUCTION WAS WORKED OUT AT ` 21,35,46,455/-, BUT ONLY THAT MUCH AMOUNT WAS SET OFF WHICH WAS EQUAL TO THE BOOK P ROFITS. OUR ATTENTION WAS ALSO DRAWN TOWARDS PAGE NO. 34 OF THE PAPER BOOK, WHICH IS IN RESPECT OF THE QUERIES RAISED BY THE AO ON MERITS REGAR DING THE COMPUTATION OF ADJUSTED BOOK PROFITS. THE CASE OF THE LD. COUNS EL IS THAT SINCE NO FAILURE TO DISCLOSED FULLY AND TRULY ALL MATERIAL FACT S HAS BEEN ALLEGED IN THE REASONS, THE REOPENING OF THE ASSESSMENT IS INVA LID. 3.1 THE LD. COUNSEL HAD ONE MORE OBJECTION TO THE REOPENING OF THE ASSESSMENT, NAMELY, THAT NO APPROVAL WAS TAKEN F ROM THE COMMISSIONER OF INCOME-TAX FOR ISSUING NOTICE U/S 148, WHICH IS MANDATORY IN TERMS OF THE PROVISO TO SECTION 151(1). IN THIS CONNECTION, OUR ATTENTION WAS DRAWN TOWARDS PAGE NOS. 54 AND 55 OF THE PAPER BOOK, BEING THE NOTE-SHEET, ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 6 WHEREIN IT IS RECORDED THAT THE LETTER HAD BEEN RECEIVED FROM THE COMMISSIONER ADVISING THE AO TO INITIATE ACTION U/S 147. IN EFFECT, THIS LETTER IS AN APPROVAL U/S 151(1) AS NO SPECIFI C PROFORMA HAS BEEN DESCRIBED FOR THIS PURPOSE. THE CASE OF THE LD. COUNSEL IS THAT THE APPROVAL HAS TO BE TAKEN AFTER RECORDING THE REASONS AN D ANY PRIOR CORRESPONDENCE CANNOT BE SAID TO BE THE APPROVAL. 4. IN REPLY, THE LD. DR REFERRED TO THE DISCUS SION AT PAGE 2 OF THE ASSESSMENT ORDER, WHICH READS AS UNDER:- C) THE ASSESSEE HAD NOT FURNISHED COMPUTATION OF BOOK PROFIT U/S 115JA OF THE IT ACT, 1961 EITHER IN THE ORIGINAL RETURN FURNISHED ON 30.11.2000 OR IN THE REVIS ED RETURN FURNISHED ON 27.3.2002 OR IN THE RETURN FI LED IN RESPONSE TO NOTICE U/S 148 FURNISHED ON 21.3.2003. FURNI SHING OF A LETTER DURING ASSESSMENT PROCEEDINGS ON 3.3.20 04 FURNISHED IN THIS OFFICE ON 20.2.2003 MENTIONING THEREIN BESIDES OTHER REASONS IN DETAIL ALSO ABOUT THE COMPUTATI ON OF BOOK PROFIT AND FORM NO. 29B FROM A CA IS NOT DISCL OSURE WHICH CAN BE SAID TO BE EITHER SUFFICIENT OR MATE RIAL FOR THE FULL AND TRUE COMPUTATION OF INCOME. THEREFORE, T HE FACT REMAINS THAT THE ASSESSEE DID NOT FURNISH COM PUTATION OF BOOK PROFIT IN ITS RETURN OF INCOME AND HAD, TH US, FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS N ECESSARY FOR HIS ASSESSMENT FOR THE A.Y. 2000-01 WHICH INCLUDED ASSESSMENT OF BOOK PROFIT U/S 115JA OF THE IT ACT, 1961. ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 7 4.1 IT IS ARGUED THAT THE PROVISO TO SECTION 14 7 IS A PART OF THE SECTION. THEREFORE, WHEN AN ASSESSMENT IS REOPE NED U/S 147, IT HAS TO BE READ IN THE REASONS THAT THE SAME HAS BEEN DON E BECAUSE THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. IN REGARD TO THE REQUIREMENT OF THE APPROVAL U/S 151, RELIANCE HAS BEEN PLACED ON THE NOTE-SHEET UND ER WHICH THE ASSESSEE WAS INFORMED THAT THE PREVIOUS CORRESPONDENCE WITH THE LD. CIT AMOUNTED TO APPROVAL U/S 151. 5. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. IT IS A MATTER OF RECORD THAT NOT ICE U/S 148 WAS ISSUED ON 23.3.2007. THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR EXPIRED ON 31.3.2005. ASSESSMENT HAD EARLIER BEEN MADE U/S 143(3) READ WITH SECTION 147. THEREFORE, THE ASSESSMENT COULD BE REOPENED U/S 147 ONLY IF THERE HAD BEEN A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS IN RELATIO N THERETO. THE LD. COUNSEL FOR THE ASSESSEE HAD RELIED ON THE DECISION IN THE CASE OF SFIL STOCK BROKING LTD. (2010) 325 ITR 285 (DEL). IN THAT CASE, THE DEPUTY DIRECTOR OF INCOME-TAX (INV.) INFORMED THE AO THAT DURING THE COURSE OF INVESTIGATION IN THE CASE OF SHRI SATISH GOYAL, IT WAS STATED BY HIM ON ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 8 OATH THAT TRANSACTIONS CARRIED OUT BY HIM THR OUGH BANK ACCOUNT NO. 003097, CORPORATION BANK WERE MERELY PAPER TRA NSACTIONS IN WHICH THE PARTIES INTENDING TO TAKE THE BILLS, PAID CASH IN LIEU OF WHICH CHEQUES OR DEMAND DRAFTS WERE HANDED OVER TO THEM AS SALE PROCEEDS OF SHARES. THERE WAS AN ENTRY OF ` 20,70,000/- IN THIS ACCOUNT, WHICH WAS NOTHING BUT PAPER ENTRY. THE AO REOPENED THE ASSESSME NT BY RECORDING THE FOLLOWING REASONS:- INFORMATION RECEIVED FROM DEPUTY DIRECTOR OF INC OME-TAX (INV.) 107, SUSHANT LOK, GURGAON VIDE HIS LETTER NO. DDIT(INV)/GGN/02-03/271 DATED MARCH 17, 2003 REC EIVED IN MY OFFICE ON MARCH 25, 2003, THAT ONE OF MY AS SESSEES M/S SFIL STOCK BROKING LIMITED HAD MADE BOGUS CLAIM OF LONG- TERM CAPITAL GAINS SHOWN AS EARNED ON ACCOUNT OF SALE/PURCHASE OF SHARES TAKEN THROUGH BANK ACC OUNT NO. CA- 3097, CORPORATION BANK, KAROL BAGH, NEW DELHI IN THE NAME OF R.K. AGGARWAL & COMPANY BY OBTAINING ENTRIES FOR RS. 6,00,000/-, RS. 7,00,000/- AND RS. 7,70,000/- ON FE BRUARY 28, 1998, FEBRUARY 28, 1998 AND MARCH 1, 1998 RESPECT IVELY. HE HAS DIRECTED THE ASSESSING OFFICER TO GET NOTI CES ISSUED UNDER SECTION 148. SUBSEQUENTLY, I HAVE BEE N DIRECTED BY THE ADDL. CIT, RANGE 8, NEW DELHI VIDE HIS LETTE R NO. ADDL. CIT R-8/2002-03/572 DATED AUGUST 26, 2003 TO INIT IATE PROCEEDINGS UNDER SECTION148 IN RESPECT OF CASE S PERTAINING TO THIS WARD. THUS, I HAVE SUFFICIENT INFORMATION IN MY POSSES SION TO ISSUE NOTICE UNDER SECTION 148 IN THE CASE OF M/S S FIL STOCK BROKING LTD. ON THE BASIS OF REASONS RECORDED AS ABOVE. ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 9 THE HONBLE COURT MENTIONED THAT THE FOUNDATION FO R ISSUING NOTICE U/S 148 IS THE BELIEF OF THE AO THAT INCOME ESCAPED ASSESSMENT. IN THIS CASE, THE AO DID NOT APPLY MIND INDEPENDENTLY B UT FOLLOWED THE DIRECTION OF THE ADDITIONAL COMMISSIONER OF INCOME-TAX. I T WAS HELD THAT THE RECORDED REASONS DO NOT SHOW APPLICATION OF INDEPENDENT MIND BY THE AO AS REQUIRED U/S 147. THEREFORE, THE REOP ENING OF THE ASSESSMENT WAS HELD TO BE INVALID. WE HAVE PERUSED THE REASONS RECORDED BY THE AO, PLACED IN THE PAPER BOOK ON PAGE NO. 50. THE REASONS DO NOT CONTAIN ANY AVERMENT THAT ANY DIRECTION WAS RECEIVED BY THE AO FROM ANY OTHER AUTHORITY. THE REOPENING IS BASED UPON HIS B ELIEF THAT DEDUCTION IN RESPECT OF BROUGHT FORWARD LOSS OR DEPRECIATI ON, WHICHEVER IS LESS, WAS NOT CORRECTLY COMPUTED BY THE ASSESSEE IN THE COU RSE OF EARLIER ASSESSMENT. THEREFORE, IT IS NOT A CASE WHERE THERE IS NO INDEPENDENT APPLICATION OF MIND BY THE AO. BUT IT IS ALSO A FACT THAT THE RE CORDED REASONS DO NOT CONTAIN ALLEGATION THAT THERE WAS FAILURE ON THE PART OF THE ASSESSE IN DISCLOSING RELEVANT FACTS FULLY AND TRULY. 5.1 RELIANCE HAS ALSO BEEN PLACED ON THE DECISI ON OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT & ANOTHER VS. ASL AM ULLA KHAN (2010) 321 ITR 150. IN THIS CASE ALSO IT HAS BEEN HEL D THAT IF ON PERUSAL OF ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 10 REASONS AS RECORDED, IT IS FOUND THAT THERE WA S NO APPLICATION OF MIND ON THE PART OF THE AO, THE REOPENING WILL BE INVALID IN LAW. THE HONBLE COURT MENTIONED THAT THE ASSESSING AUTH ORITY CANNOT ACT ON THE DICTATES OF THE CIT, WHO DIRECTED HIM TO REOP EN THE CONCLUDED ASSESSMENT FOR THE YEAR 1991-92. 5.2 RELIANCE HAS ALSO BEEN PLACED ON THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (2010) 320 ITR 561, IN WHICH IT WAS HELD THAT ASSESSME NT CANNOT BE REOPENED U/S 147 ON MERE CHANGE OF OPINION. THERE MUST BE SOME TANGIBLE MATERIAL ON RECORD ON THE BASIS OF WHICH THE AO CAN FORM HIS BELIEF THAT INCOME ESCAPED ASSESSMENT. WITHOUT SUCH MATERIAL , THE REOPENING WILL BE BAD IN LAW. 6. IN REPLY, IT HAS BEEN SUBMITTED THAT THE PROV ISION REGARDING FAILURE ON THE PART OF THE ASSESSEE TO SUBMIT TRULY AND FULLY ALL MATERIAL FACTS REGARDING THE ASSESSMENT SHOULD BE READ INTO THE REASON AS THE RELEVANT PROVISO, IS A PART OF SECTION 147. THEREFORE, WHEN THE ASSESSMENT WAS REOPENED U/S 147 ON THE FACTS OF THIS CASE, I T HAS TO BE TAKEN THAT THIS PROVISION HAS BEEN TAKEN INTO ACCOUNT. ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 11 6.1 IN REGARD TO THE APPROVAL FROM THE CIT, RE LIANCE HAS BEEN PLACED ON THE OBSERVATIONS MADE BY THE AO TO THE EFFECT THAT INFORMATION WAS RECEIVED FROM THE CIT AND, THUS, THIS INTIMATION CONSTITUTED THE APPROVAL. 6.2 COMING TO THE DECISION IN THE CASE OF KELVI NATOR OF INDIA LTD., IT HAS BEEN SUBMITTED THAT THE QUESTION OF CHANGE OF OPINION ARISES ONLY WHEN AN OPINION HAS BEEN FORMED EARLIER. IN THIS CASE, NO OPINION WAS FORMED WHEN FIRST ASSESSMENT WAS MADE, AS SEEN FROM THE ASSESSMENT ORDER. THEREFORE, THE CONCEPT OF CHANGE OF OPINION IS NOT APPLICABLE TO THE FACTS OF THE CASE. 6.3 IT WAS ALSO THE CASE OF THE LD. DR THAT A N ASSESSMENT CAN BE REOPENED WHEN ON THE BASIS OF INFORMATION, THE AO HAS REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT. RELIAN CE HAS BEEN PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF KALYANJI MAVJI & COMPANY VS. CIT (1976) 102 ITR 287. FURTHER, RELIANCE HAS BEEN PLACED ON THE DECISION OF HONBLE SUPREME COURT I N THE CASE OF INDIAN & EASTERN NEWSPAPER SOCIETY LTD. VS. CIT (1979) 119 ITR 996. IN THIS CASE, IT WAS HELD THAT WHILE INFORMATION OF FAC T CAN COME TO THE AO FROM ANY SOURCE, THE INFORMATION OF LAW MUST COME FROM A FORMAL SOURCE, WHO ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 12 IS COMPETENT TO PRONOUNCE LAW. THUS, IT WAS HEL D THAT INFORMATION OF LAW RECEIVED FROM THE AUDIT DEPARTMENT, WHICH IS NOT ENTRUSTED WITH THE WORK OF PRONOUNCING LAW, WAS NOT VALID SOURCE OF INFORMATION FOR REOPENING THE ASSESSMENT. IN THE CASE OF ALA FIR M VS. CIT (1991) 189 ITR 284, RELIED UPON BY THE LD. DR, IT WAS HELD THAT THE ASSESSMENT HAD BEEN VALIDLY REOPENED BECAUSE THE DECISION OF THE HIGH COURT WAS NOT CONSIDERED IN THE ORIGINAL ASSESSMENT. IN THE C ASE OF YUVRAJ VS. UNION OF INDIA & ANOTHER (2009) 315 ITR 84 (BOM.), THE FACTS ARE THAT THE ASSESSEE HAD SOLD HIS RIGHT TO PURCHASE OPEN PLO T IN PUNE AND COPY OF AGREEMENT OF ACQUISITION OF RIGHT TO PURCHASE AND THE DEED IN RESPECT OF RIGHT TO PURCHASE EXECUTED BY THE BUILDERS WERE FILED. THE HONBLE COURT MENTIONED THAT FROM THE PERUSAL OF THE ORDER, IT CANNOT BE FOUND THAT THERE WAS ANY APPLICATION OF MIND ON THE PART OF THE AO , THE ISSUE TO BE DEALT WITH AND REASONS FOR PASSING THE ORDER. THE V ALUE OF THE LAND WAS NOT DETERMINED BY THE REVENUE. THE ISSUE RELATING T O CAPITAL GAINS OR CASUAL INCOME WAS ALSO NOT ADDRESSED TO BY THE REVENUE . IN SUCH CIRCUMSTANCES, THE AO WAS JUSTIFIED IN REOPENING THE ASSESSM ENT. ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 13 6.4 THE LD. DR ALSO DISTINGUISHED THE FACTS OF T HE CASE OF SFIL STOCK BROKING LTD. (SUPRA) AND SUBMITTED THAT NO DIRECTIO N HAS BEEN ISSUED IN THIS CASE BY ANY AUTHORITY TO THE AO. 7. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. IT IS AN ADMITTED FACT THAT THE ASSES SMENT HAD BEEN REOPENED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THEREFORE, FIRST PROVISO TO SECTION 147 IS APPLICABLE, WHICH READS AS UNDER:- PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECT ION (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 TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UN DER SUB- SECTION (1) OF SECTION 142 OR SECTION 148 OR TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR. 7. IT IS ALSO AN ACCEPTED POSITION OF LAW TH AT WHILE DECIDING THE VALIDITY OF REOPENING, WHAT IS TO BE SEEN IS TH E REASONS RECORDED BY THE AO. IN THIS CASE, IT IS RECORDED THAT SUBSEQU ENTLY IT WAS OBSERVED THAT THE INCOME OF THE ASSESSEE-COMPANY AS PER PROVISIONS OF SECTION 115JA WAS ASSESSED AT NIL, WHEREAS THE CORRECT INCOME WO RKS OUT TO ` 120.99 LAKHS. THE MISTAKE RESULTED INTO UNDER-ASSESSMENT OF I NCOME TO THE EXTENT OF ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 14 ` 122.99 LAKHS INVOLVING TAX EFFECT OF ` 68.78 LAKHS. THEREAFTER, IT IS FURTHER RECORDED THAT I HAVE REASON TO BELIEVE THAT ABOVE INCOME HAD ESCAPED ASSESSMENT AND, THEREFORE, NOTICE U/S 148 OF THE ACT IS BEING ISSUED FOR RE-ASSESSMENT. ON PERUSAL OF THE REASONS, WE FIND THAT IT HAS NOWHERE BEEN ALLEGED THAT INCOME HAS ESCAPED A SSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THIS YEAR . ON THIS BASIS ONLY, THE REOPENING OF THE ASSESSMENT IS INVALID. IN SUCH A CASE, IT IS NOT ENOUGH TO SHOW THAT THE INCOME HAD ESCAPED ASSESSMENT AT THE STAGE OF RECORDING THE REASONS BUT IT HAS ALSO TO BE SHOWN THAT THE INCOME ESCAPED BECAUSE OF THE REASON THAT THE ASSESSEE DID NOT TRULY AND FULLY DISCLOSE THE FACTS RELEVANT FOR THE ASSESSMENT. THIS ALLEGATION MUST COME OUT CLEARLY FROM THE REASONS THEMSELVES WITHOUT ANY AID FROM OTHER MATERIAL ON RECORD. THIS ALLEGATION IS MISSING IN THIS CASE . EVEN OTHERWISE, WHEN WE EXAMINE THE RECORD RELATING TO FIRST ASSESSMENT, IT IS SEEN THAT THE ASSESSEE HAD FURNISHED THE REPORT OF THE AUDITOR COMPUTING ADJUSTED BOOK PROFITS. THE AO MAY OR MAY NOT AGREE WITH THE METHOD EMPL OYED BY THE ASSESSEE IN WORKING OUT THE BUSINESS LOSS OR DEPRECIATI ON, WHICHEVER IS LOWER. HOWEVER, ONCE THE ASSESSEE HAS FURNISHED THE PARTICULARS, IT CANNOT BE SAID THAT THE INCOME ESCAPED ASSESSMENT ON ACCOUN T OF ANY FAILURE ON HIS ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 15 PART. ON THE FACTS, IT WAS FOR THE AO TO EXAMIN E THE ISSUE IN LIGHT OF THE LEGAL PROVISIONS AND THE JURISPRUDENCE, WHICH WA S NOT DONE. THUS, THE ERROR, IF ANY, CANNOT BE ATTRIBUTED TO THE ASS ESSEE. THEREFORE, WE ARE OF THE VIEW THAT THE REOPENING OF THE ASSESSMENT I S BAD IN LAW. 7.2 WITHOUT PREJUDICE TO THE ABOVE, IT MAY ALSO B E MENTIONED THAT THE ASSESSMENT COULD HAVE BEEN REOPENED ONLY AFTER OB TAINING APPROVAL OF THE COMMISSIONER U/S 151. THE CASE OF THE LD. DR IS THAT SINCE INFORMATION HAS COME FROM THE COMMISSIONER, ON THE BASIS OF W HICH THE ASSESSMENT WAS REOPENED, SUCH AN APPROVAL WAS MERELY A FO RMALITY AND THE INTIMATION ITSELF SHOULD BE TAKEN AS APPROVAL. WE ARE NOT INCLINED TO AGREE WITH THIS ARGUMENT. THE QUESTION OF APPROVAL ARISES ONLY AFTER THE REASONS HAVE BEEN RECORDED BY THE AO. IN ABSENCE O F RECORDING OF THE REASONS, THERE IS NO QUESTION OF ANY PRE-EXISTIN G APPROVAL. THUS, WE TEND TO AGREE WITH THE LD. COUNSEL THAT APPROVAL SHOU LD HAVE BEEN SPECIFICALLY OBTAINED FROM COMMISSIONER AFTER RECORDING THE REASONS, WHICH HAS NOT BEEN DONE IN THIS CASE. THEREFORE, THE REOPENING OF THE ASSESSMENT IS INVALID ON THIS GROUND ALSO. ITA NO. 4799(DEL)/09 & C.O. NO. 39(DEL)/2010 16 7.3 ACCORDINGLY, IT IS HELD THAT THE AO HAS NOT PR OPERLY ASSUMED JURISDICTION OVER THE CASE FOR MAKING RE-ASSESSM ENT. THUS, THE ASSESSMENT IS CANCELLED. 8. IN VIEW OF THE AFORESAID, WE DO NOT THINK IT N ECESSARY TO GO INTO OTHER ISSUES SUCH AS CHANGE OF OPINION OR THE MERI TS REGARDING CORRECT COMPUTATION OF BUSINESS LOSS OR DEPRECIATION, WHI CHEVER IS LOWER, ON THE FACTS OF THIS CASE. 9. IN THE RESULT, THE CROSS OBJECTION OF THE ASSES SEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED AS INFRUCTUOUS. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 19 NOVEMBER, 2010. SD/- SD/- (RAJPAL YADAV) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 19TH NOVEMBER, 2010. SP SATIA COPY OF THE ORDER FORWARDED TO: ACIT, CIRCLE 10(1), NEW DELHI. DCM LTD., NEW DELHI. CIT(A) CIT THE DR, ITAT, NEW DELHI. ASSISTANT REGISTRAR.