GAS & POWER INVESTMENT COMPANY LTD, MUMBAI V. ITO WD 1(1)(4), MUMBAI

ITA 1118/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4171 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 07-12-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 19-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHARTI SINGH
• Keywords: Reopening of assessment; Question of law; Tangible material; Difference of opinion; Corroborative evidences; Assessment record; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings; Capital expenditure
• Section: 143(3); 147; 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G BE NCH, MUMBAI BEFORE SHRI C.N. PRASAD, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER / I .TA NO.1118/MUM/2014 ( / ASSESSMENT YEAR: 2006-07 M/S. GAS & POWER INVESTMENT CO. LTD., ASIAN BUILDING, GROUND FLOOR, 17, R. KAMANI MARG, BALLARD ESTATE, MUMBAI -400 001 / VS. THE ITO, WARD 1(1)(4), AAYAKAR BHAVAN, MUMBAI-40 020 ./ ./ PAN/GIR NO. AACCG 3843J ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY: SHRI ISHWER RATHI SHRI MAHENDRA MEHTA / RESPONDENT BY: MISS BHARTI SINGH / DATE OF HEARING :28.01.2016 !' / DATE OF PRONOUNCEMENT :05.02.2016 / O R D E R PER C.N. PRASAD, JM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST T HE ORDER OF THE LD. CIT(A)-1, MUMBAI DATED 10.12.2013 PERTAINI NG TO ASSESSMENT YEAR 2006-07 ARISING OUT OF THE ASSESSMENT ORDER PA SSED U/S. 143(3) OF THE ACT R.W. SEC. 147 OF THE ACT. ITA NO.1118/M/2014 2 2. THE ASSESSEE CHALLENGING THE ORDER OF THE LD. CI T(A) IN CONFIRMING THE REOPENING OF THE ASSESSMENT U/S. 147 OF THE ACT AND ALSO SUSTAINING THE ADDITIONS MADE IN THE REASSESSM ENT ORDER. 3. BRIEF FACTS ARE THAT THE ASSESSEE M/S. GAS AND P OWER INVESTMENT PVT. LTD (HEREINAFTER REFERRED TO AS GPI CL) IS A COMPANY SET UP AS A SPECIAL PURPOSE VEHICLE (SPV) FOR THE S PECIFIC PURPOSE OF SETTLEMENT OF DEBT CLAIMS OF OFFSHORE LENDERS OF DA BHOL POWER CO. LTD. , (DPC), AS ENVISAGED UNDER A COMPREHENSIVE RE STRUCTURING PLAN FOR REVIVAL OF THE DPCS POWER PROJECT FINALIZED BY THE INDIAN LENDERS OF DPC UNDER THE AEGIS OF THE EMPOWERED GROUP OF MI NISTERS CONSTITUTED BY THE GOVERNMENT OF INDIA. GPICL IS REGISTERED WITH RESERVE BANK OF INDIA AS NON BANKING FINANCE COMPAN Y. IT IS TREATED AS A GOVERNMENT COMPANY IN TERMS OF SEC. 619B OF TH E COMPANIES ACT, 1956. GPICL FILED RETURN OF INCOME ON 7.11.20 06 DECLARING LOSS OF RS. 30,93,56/-. THE ASSESSMENT WAS COMPLETED ON 29.12.2008 U/S. 143(3) OF THE ACT ACCEPTING THE LOSS RETURNED BY TH E ASSESSEE. SUBSEQUENTLY, NOTICE U/S. 148 WAS ISSUED ON 24.10.2 011 AND THE REASSESSMENT WAS COMPLETED ON 8.12.2011 U/S. 143(3) R.W. SEC. 147 OF THE ACT. WHILE COMPLETING THE REASSESSMENT, THE ASSESSING OFFICER DISALLOWED EXPENSES OF RS. 13,07,890/- TREATING IT AS CAPITAL EXPENDITURE, DISALLOWANCE U/S. 43B(E) IN RESPECT OF INTEREST TO FINANCIAL INSTITUTIONS AND DISALLOWANCE U/S. 40A(IA ) FOR NON DEDUCTION OF TDS. 3.1. THE ASSESSEE CONTENDED BEFORE THE AO THAT THE REOPENING IS BAD IN LAW AND THE ADDITIONS AND DISALLOWANCES MADE IN THE REASSESSMENT ORDER ARE NOT JUSTIFIED. HOWEVER, REJE CTING THE ITA NO.1118/M/2014 3 CONTENTION OF THE ASSESSEE, THE AO FRAMED THE ASSES SMENT U/S. 147 OF THE ACT MAKING THE ABOVE SAID DISALLOWANCES. 4. THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A) CHALLENGING THE REOPENING OF ASSESSMENT AND ALSO THE ADDITIONS/DISA LLOWANCES MADE BY THE AO. THE LD. CIT(A) INSOFAR AS THE REOPENIN G OF ASSESSMENT IS CONCERNED HELD THAT IN THE ORIGINAL ASSESSMENT ORDE R PASSED U/S. 143(3) DATED 29.12.2008 NONE OF THE ISSUES FOR WHIC H PROCEEDINGS U/S. 147 HAS BEEN INITIATED HAS BEEN DISCUSSED OR EXAMINED OR DECIDED AND THEREFORE THERE IS NO CHANGE OF OPINION AND THE REOPENING OF ASSESSMENT IS VALID. HE ALSO SUSTAINE D THE DISALLOWANCES MADE IN THE REASSESSMENT ORDER BY DIS MISSING THE APPEAL OF THE ASSESSEE. 5. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITS THAT REOPENING OF ASSESSMENT IS BAD IN LAW AS THERE IS N O TANGIBLE MATERIAL WHICH HAS COME ON RECORD AFTER COMPLETION OF ASSESSMENT TO REOPEN THE ASSESSMENT AND MAKING DISALLOWANCES. INVITING OUR ATTENTION TO PAGE-2 OF THE PAPER BOOK FILED WHICH A RE THE REASONS FOR REOPENING THE ASSESSMENT. HE SUBMITS THAT THE ASSE SSMENT WAS REOPENED FOR DISALLOWING FRANKING CHARGES AND EXPEN SES INCURRED IF ANY PERTAINING TO NON CONVERTIBLE BONDS TREATING TH EM AS CAPITAL EXPENDITURE AND NOT ALLOWABLE AS REVENUE EXPENDITUR E. REFERRING TO THE REASONS, THE LD. COUNSEL SUBMITS THAT THE REASO N FOR REOPENING THE ASSESSMENT ITSELF MAKES CLEAR THAT THE AO WANTS TO DISALLOW THESE EXPENSES ON PERUSAL OF ASSESSMENT RECORDS AND THE P ROFIT AND LOSS ACCOUNT AND WITHOUT HAVING ANY TANGIBLE MATERIAL CO MING ON RECORD AFTER COMPLETION OF ASSESSMENT TO SUGGEST THAT THES E EXPENSES ARE NOT ALLOWABLE EXPENSES. ITA NO.1118/M/2014 4 5.1. THE LD. COUNSEL FOR THE ASSESSEE FURTHER INVI TING OUR ATTENTION TO PAGE-3 OF THE PAPER BOOK SUBMITS THAT IN THE COU RSE OF ORIGINAL ASSESSMENT PROCEEDINGS VIDE LETTER DATED 6.11.2008, THE AO REQUIRED THE ASSESSEE TO FURNISH BILL-WISE DETAILS OF FRANKI NG CHARGES AND STAMP DUTY WITH SUPPORTING EVIDENCES AND EXPLAIN TH E NATURE AND PURPOSE OF SUCH EXPENSES. THE LD. COUNSEL FOR THE ASSESSEE VIDE LETTER DATED 21.11.2008 FURNISHED DETAILS OF FRANKI NG CHARGES AND STAMP DUTY WITH SUPPORTING EVIDENCES. THE LD. COUN SEL SUBMITS THAT ALL THESE DETAILS WERE FURNISHED IN THE COURSE OF O RIGINAL ASSESSMENT PROCEEDINGS. THE AO HAVING ACCEPTED THE DETAILS FU RNISHED AND CONVINCED THAT THE EXPENSES ARE REVENUE EXPENSES AC CEPTED THE CLAIM OF THE ASSESSEE. THUS, THE LD. COUNSEL SUBMITS THA T IN THE ABSENCE OF ANY TANGIBLE MATERIALS COMING ON RECORD, THE REOPEN ING IS BAD IN LAW. HE FURTHER PLACING RELIANCE ON THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF INDIA CEMENTS LTD VS CIT (60 ITR 52) SUBMITS THAT AMOUNT SPENT TOWARDS STAMP DUTY, REGISTRATION FEES ETC., IN OBTAINING LOAN IS NOT CAPITAL EXPENDITURE BUT IT WAS ONLY BUS INESS EXPENSES LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUS INESS. THEREFORE, HE SUBMITS THAT THERE IS NO QUESTION OF REOPENING T HE ASSESSMENT. 5.2. PLACING RELIANCE ON THE DECISION OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS SUKHJIT STARCH & CHEMIC ALS LTD. (326 ITR 29) THE LD. COUNSEL SUBMITS THAT EXPENDITURE ON ISS UE OF DEBENTURES IS DEDUCTIBLE. PLACING RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS PRIMA PAPER AND EN GINEERING INDUSTRY (364 ITR 222) HE SUBMITS THAT THIS IS A CA SE OF REOPENING OF ASSESSMENT WITHIN A PERIOD OF FOUR YEARS WHERE IN T HE COURSE OF ASSESSMENT PROCEEDINGS, THE ISSUE OF DEDUCTION U/S. 80-IA WAS RAISED ITA NO.1118/M/2014 5 BY THE AO TO WHICH THE ASSESSEE HAS RESPONDED BY FI LING ITS SUBMISSIONS AND WHICH WAS ACCEPTED ORIGINALLY. IT WAS HELD BY THE HONBLE BOMBAY HIGH COURT THAT REOPENING OF ASSESSM ENT ON PREMISE THAT DEDUCTION WAS WRONGLY ALLOWED AND THAT ISSUE N OT DISCUSSED IN ASSESSMENT ORDER IS NOT MATERIAL. IT WAS HELD THAT THE REOPENING IS BAD IN LAW AND NOT PERMISSIBLE. PLACING RELIANCE ON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ASIAN PAIN TS VS DCIT AND ANOTHER (308 ITR 195), COUNSEL SUBMITS THAT IT HAS BEEN HELD THAT MERE CHANGE OF OPINION OF THE AO IS NOT A GROUND FO R REASSESSMENT. LASTLY, HE PLACES RELIANCE ON THE DECISION OF THE MUMBAI BENCH IN THE CASE OF MOTILAL R. TODI VS ACIT IN ITA NO. 2910/M/2 013 DATED 22.9.2015 AND SUBMITS THAT WHEN THERE IS NO TANGIB LE MATERIAL, REOPENING OF ASSESSMENT IS BAD IN LAW. 6. THE LD. DEPARTMENTAL REPRESENTATIVE PLACED RELIA NCE ON THE ORDERS OF THE LOWER AUTHORITIES IN REOPENING OF THE ASSESSMENT AND MAKING THE DISALLOWANCES. 7. HEARD BOTH SIDES, PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED BY THE AO ON 8.12.2011 ACCEPTING THE LOSS OF RS. 30,93,56/- RETU RNED BY THE ASSESSEE. LATER ON NOTICE U/S. 148 WAS ISSUED. TH E REASONS FOR REOPENING WAS FURNISHED AS UNDER: ON PERUSAL OF THE ASSESSMENT RECORDS, IT REVEALS T HAT AS PER THE PROFIT AND LOSS A/C, THE ASSESSEE HAS CLAIM ED FRANKING CHARGES OF RS.11,01,870/- UNDER ADMINISTRA TIVE & OPERATING EXPENSES. ON FURTHER PERUSAL OF THE FRA NKING CHARGES ACCOUNT, IT IS OBSERVED THAT THE SAID EXPEN SES ARE INCURRED TOWARDS EXECUTION OF AGREEMENT WITH FOREIG N LENDERS. FURTHER, IT IS OBSERVE THAT THE ASSESSEE H AS PAID ITA NO.1118/M/2014 6 STAMP DUTY OF RS.2,06,020/- TOWARDS EXECUTION OF AGREEMENT AND CLAIMED AS REVENUE EXPENSES. THE ASSE SSEE BESIDES ITS SHARE CAPITAL HAS RAISED ON AMOUNT OF RS.1309.30 CRS. BY ISSUING NON CONVERTIBLE BONDS AN D ALSO THOSE PRIOR TO THE COMMENCEMENT OF THE PERIOD OF REPAYMENT OF BONDS ARE TO BE CAPITALIZED AND NOT ALLOWABLE AS REVENUE EXPENSES. THUS, THE INCOME OF RS.13,07,890/- (RS.11,01,87+ RS.2,06,020) HAS ESCAP ED INCOME. 7.1. AS IT COULD BE SEEN FROM THE ABOVE REASONS, TH E ASSESSMENT WAS REOPENED TO DISALLOW FRANKING CHARGES UNDER ADMINIS TRATIVE AND OPERATING CHARGES AND EXPENSES INCURRED IF ANY PERT AINING TO NON CONVERTIBLE BONDS TREATING THEM AS CAPITAL EXPENDIT URE NOT ALLOWABLE AS REVENUE EXPENDITURE. WE ALSO FIND FROM THE REAS ONS THAT THE AO CAME TO THE CONCLUSION THAT THESE EXPENSES ARE TO B E TREATED AS CAPITAL EXPENDITURE. ON PERUSAL OF THE ASSESSMENT RECORD, THERE IS NOTHING IN THE REASONS RECORDED TO SUGGEST THAT ANY TANGIBLE MATERIALS HAVE COME ON RECORD FOR COMING TO THE CON CLUSION THAT THERE IS AN ESCAPEMENT OF INCOME. IT IS ALSO PERTI NENT TO NOTE THAT IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO FURNISH DETAILS IN RESPECT OF FRANKING CHARGES AND STAMP DUTY BY LETTER DATED 6.11.2008 AND THE ASSESSEE FUR NISHED DETAILS BY LETTER DATED 21.11.2008. THE EXPLANATION WAS ACCEP TED BY THE AO IN THE ORIGINAL ASSESSMENT PROCEEDINGS. NOW THE REOPE NING WAS MADE SOLELY ON THE BASIS OF MATERIALS ALREADY AVAILABLE ON RECORD AT THE TIME OF ORIGINAL ASSESSMENT. EVEN FOR THE OTHER AD DITIONS WHICH WERE MADE IN THE REASSESSMENT ORDER, THERE IS NO TANGIBL E MATERIAL WHICH HAS COME ON RECORD SUBSEQUENT TO COMPLETION OF ASSE SSMENT OR AT THE TIME OF RECORDING REASONS FOR REOPENING. ITA NO.1118/M/2014 7 7.2. ON A READING OF THE REASSESSMENT ORDER, IT IS CLEAR THAT THE DISALLOWANCES WERE MADE BASED ON THE MATERIALS ALRE ADY AVAILABLE ON RECORD AT THE TIME OF COMPLETION OF ASSESSMENT. MOR E OR LESS AN IDENTICAL ISSUE COME UP IN MUMBAI TRIBUNAL IN THE C ASE OF MOTILAL R. TODI (SUPRA), THE CO-ORDINATE BENCH AFTER CONSIDERI NG VARIOUS CASE LAWS HELD THAT IF THERE ARE NO TANGIBLE MATERIALS A VAILABLE ON RECORD THEN THERE WOULD BE NO REASON TO BELIEVE AND CONSEQ UENTLY REOPENING WOULD BE AN IMPERMISSIBLE REVIEW. IN CO MING TO SUCH CONCLUSION, THE CO-ORDINATE BENCH ANALYSED VARIOU S CASE LAWS AND HELD AS UNDER: THUS, COMING BACK TO THE FACTS AND CIRCUMSTANCES OF THE CASE BEFORE US, WE ARE REQUIRED TO EXAMINE THE FIRST THING FIRST I.E. WHETHER, IN THIS CASE, THERE WAS ANY FRE SH TANGIBLE MATERIAL IN THE POSSESSION OF THE AO AT THE TIME OF RECORDING OF THE REASONS. IN CASE, THE FIRST CONDITION IS F ULFILLED, THEN WE ARE REQUIRED TO EXAMINE THE COMPLIANCE OF PRESCR IBED CONDITIONS AT THE NEXT STEP, AND SO ON. IN CASE, TH E FIRST CONDITION ITSELF IS NOT FULFILLED, THE PROCEEDINGS BECOME INVALID IN THE EYES OF LAW, THERE AND THEN, AND THE RE WOULD NOT BE ANY REQUIREMENT TO EXAMINE ANY FURTHER. IF T HE CASE OF THE AO FAILS ON THE FIRST STEP ITSELF, WE WOULD NOT BE REQUIRED TO LOOK INTO THE OTHER SUBSEQUENT ASPECTS, AS PROCE EDINGS WILL BECOME INVALID IN THE EYES OF LAW AT THE VERY INCEPTION. IN THE PRESENT CASE, IT WAS NOTICED BY US THAT THE CASE OF THE ASSESSEE IS THAT THERE WAS NO FRESH TANGIBLE MATERIAL IN THE POSSESSION OF AO AT THE TIME OF RECORDING OF IM PUGNED REASONS. A PERUSAL OF THE REASONS RECORDED BY THE AO IN THIS CASE REVEALS THAT AT THE TIME OF RECORDING OF THESE REASONS THE AO HAD EXAMINED ORIGINAL ASSESSMENT R ECORDS ONLY AND NO FRESH MATERIAL HAD COME IN THE POSSESSI ON OF THE AO. IN RESPONSE TO OUR SPECIFIC QUERY ALSO, LD DR C OULD NOT POINT OUT ANY FRESH MATERIAL AVAILABLE WITH THE AO AT THE TIME OF REOPENING OF THE CASE OF THE ASSESSEE. THUS , ASSERTION OF THE ASSESSEE THAT THERE WAS NO FRESH MATERIAL WI TH AO FOR REOPENING OF THIS CASE, REMAINED UNCONTROVERTED. ITA NO.1118/M/2014 8 UNDER THESE FACTS AND CIRCUMSTANCES, LET US NOW EXAMINE SETTLED POSITION OF LAW ON THIS ISSUE. IT H AS BEEN HELD IN VARIOUS JUDGMENTS COMING FROM VARIOUS COURTS THA T AVAILABILITY OF FRESH TANGIBLE MATERIAL IN THE POSS ESSION OF AO AT THE TIME OF RECORDING OF IMPUGNED REASONS IS A SINE QUA NONE, BEFORE THE AO CAN RECORD REASONS FOR REOP ENING OF THE CASE. WE BEGIN WITH THE JUDGMENT OF HONBLE SUP REME COURT IN THE CASE OF CIT VS. KELVINATOR INDIA LTD. 320 ITR 561 (SC), LAYING DOWN THAT FOR REOPENING OF THE ASS ESSMENT, THE AO SHOULD HAVE IN ITS POSSESSION TANGIBLE MATE RIAL. THE TERM TANGIBLE MATERIAL HAS BEEN UNDERSTOOD AND EX PLAINED BY VARIOUS COURTS SUBSEQUENTLY. THERE HAS BEEN UNAN IMITY OF THE COURTS ON THIS ISSUE THAT IN ABSENCE OF FRESH M ATERIAL INDICATING ESCAPED INCOME, THE AO CANNOT ASSUME JURISDICTION TO REOPEN ALREADY CONCLUDED ASSESSMENT . RECENTLY, HONBLE DELHI HIGH COURT IN THE CASE OF P R. CIT VS TUPPERWARE INDIA PVT. LTD., IN ITS ORDER DT 10-8-15 (ITA NO 415/2015 ) GOT AN OCCASION TO ANALYSE LATES T POSITION OF LAW ON THIS ISSUE. AFTER DISCUSSING MANY JUDGMEN TS ON THIS ISSUE, IT WAS HELD THAT EVEN IN THE CASE OF ORIGINA L ASSESSMENT ORDER HAVING BEEN PASSED U/S 143(1), IT IS MANDATOR Y FOR THE AO TO HAVE IN ITS POSSESSION, FRESH TANGIBLE MATERI AL BEFORE REOPENING OF THE CASE. IN THE CASE OF BOMBAY STOCK EXCHANGE LTD. (WRIT PETITION NO.2468 DT. 12.06.2014) (89 CCH 118), HON BLE BOMBAY HIGH COURT OBSERVED AS UNDER: IT IS PERTINENT TO NOTE THAT RESPONDENT NO.1 HAS NOT SET OUT IN THE REASONS WHICH FACT OR OTHER MATERIAL WAS NOT DISCLOSED BY THE PETITIONER THAT L ED TO INCOME ESCAPING ASSESSMENT. IN FACT, ON GOING THROU GH THE REASONS, WE FIND THAT RESPONDENT NO.1 HAS COME TO THE CONCLUSION/BELIEF THAT INCOME HAD ESCAPED ASSESSMENT ON THE BASIS OF THE MATERIAL ALREADY BEF ORE HIM AND NO NEW TANGIBLE MATERIAL HAS BEEN RELIED UPON BY RESPONDENT NO.1 TO COME THE SAID CONCLUSION/BELIEF. THIS IS CLEAR FROM THE USE OF TH E WORDS ON PERUSAL OF THE RECORDS IT IS NOTICED..... ..., FURTHER PERUSAL OF STATEMENT 2 ENCLOSED WITH THE COMPUTATION OF INCOME SHOWS....... AND IT IS FURT HER NOTICED...... IN THE IMPUGNED NOTICE. ITA NO.1118/M/2014 9 IN THE CASE OF CIT VS. ORIENT CRAFT LTD. 354 ITR 5 36, IT WAS OBSERVED BY HONBLE DELHI HIGH COURT THAT IN THE SAID 14 MOTILAL R. TODI CASE, REASONS FOR REASSESSMENT D ISCLOSED THAT AO REACHED BELIEF THAT THERE WAS ESCAPEMENT OF INCOME 'ON GOING THROUGH THE RETURN OF INCOME' FILED BY AS SESSEE AFTER HE ACCEPTED RETURN U/S. 143(1) WITHOUT SCRUTI NY, AND NOTHING MORE. IN THESE FACTS, IT WAS HELD BY THE HO NBLE HIGH COURT THAT IT WAS NOTHING BUT REVIEW OF EARLIER PRO CEEDINGS AND ABUSE OF POWER BY AO. IT WAS FURTHER HELD THAT SINCE THERE WAS NO WHISPER IN REASONS RECORDED, OF ANY TA NGIBLE MATERIAL WHICH CAME TO POSSESSION OF AO SUBSEQUENT TO ISSUE OF INTIMATION, THEREFORE, IT WAS AN ARBITRARY EXERCISE OF POWER CONFERRED U/S 147. THUS, REOPENING WAS HELD T O BE INVALID ON THIS GROUND ITSELF. IN THE CASE OF MOHAN GUPTA (HUF) VS. CIT 366 ITR 115, SAME VIEW HAS BEEN FOLLOWED BY HONBLE DELHI H IGH COURT. FURTHER, IN THE CASE OF CIT VS. K. L. ARORA IN ITA 118/2014 DATED 21-04-2014, HONBLE DELHI HIGH COURT OBSERVED AS UNDER: THIS COURT IS OF THE OPINION THAT NO FAULT CAN BE FOUND WITH THE TRIBUNALS ORDER. IT IS WELL SETTLED THAT IN ORDER TO ISSUE A VALID REASSESSMENT NOTICE, THE AO HAS TO BE SATISFIED ON THE BASIS OF TANGIBLE MATERIAL OR INFORMATION SUBSEQUENTLY AVAILABLE TO HIM THAT THE ASSESSEE HAD NOT MADE FULL AND TRUE DISCLOSURE WHICH LED TO INCOME ESCAPING ASSESSMENT AT THE STAGE WHEN THE ORIGINAL ASSESSMENT WAS COMPLETED. SHORT OF THAT A RE-APPRECIATION OF THE EXISTING MATERIALS WHICH REALLY AMOUNTS TO REVIEW IS IMPERMISSIBLE. THE TRIBUNAL, IN THE CIRCUMSTANCES OF THIS CASE WAS JUSTIFIED IN CONCLUDING THAT RE-ASSESSMENT PROCEEDINGS THEMSELVES WERE NOT IN ACCORDANCE WITH LAW AND CONSEQUENTLY DISMISSING THE REVENUES APPEAL. NO QUESTION OF LAW ARISES FOR CONSIDERATION. ITA NO.1118/M/2014 10 IN THE CASE OF CIT VS. SHRI ATUL KUMAR SWAMI IN IT A NO. 112/2014 DATED 18-03-2014 REPORTED AT 52 TAXMANN.COM 47, HONBLE DELHI HIGH COURT OBSERVED A S UNDER: ..REOPENING OF ASSESSMENT IS VALID IF IT IS BASED ON TANGIBLE MATERIAL TO JUSTIFY CONCLUSION TH AT THERE WAS ESCAPEMENT OF INCOMEIN INSTANT CASE NOTE FORMING PART OF RETURN CLEARLY MENTIONED AND DESCRIBED NATURE OF THE RECEIPT UNDER A NON-COMPETE AGREEMENTREASONS FOR ISSUANCE OF NOTICE U/S 147 NOWHERE MENTIONED THAT REVENUE CAME UP WITH ANY OTHER FRESH MATERIAL WARRANTING REOPENING OF ASSESSMENTMERE CONCLUSION OF PROCEEDINGS U/S 143(1) IPSO FACTO DOES NOT BRING INVOCATION OF POWE RS FOR REOPENING ASSESSMENTREOPENING OF ASSESSMENT WAS UNJUSTIFIEDREVENUES APPEAL DISMISSED. FURTHER RELIANCE CAN BE PLACED ON THE DETAILED JUDGMENT IN THE CASE OF MADHUKAR KHOSLA VS. ACIT 367 ITR 165 (DELHI), WHEREIN IT HAS BEEN HELD THAT THE REOPENING IS NOT PERMITTED UNDER THE LAW UNLESS IT IS BASED ON FRESH TANGIBLE MATERIAL AND THAT IF THE REASONS TO BELIEVE ARE NOT BASED ON NEW, TANGIBL E MATERIALS, THE REOPENING AMOUNTS TO AN IMPERMISSIBLE REVIEW. IT HAS BEEN FURTHER OBSERVED THAT : THE FOUNDATION OF THE AOS JURISDICTION AND THE RAISON DETRE OF A REASSESSMENT NOTICE ARE THE REA SONS TO BELIEVE. NOW THIS SHOULD HAVE A RELATION OR A LINK WITH AN OBJECTIVE FACT, IN THE FORM OF INFORMATION OR FACTS EXTERNAL TO THE MATERIALS ON THE RECORD. SUCH EXTERNAL FACTS OR MATERIAL CONSTITUTE THE DRIVER, OR THE KEY WHICH ENABLES THE AUTHORITY TO LEGITIMATELY RE-OPEN THE COMPLETED ASSESSMENT. I N ABSENCE OF THIS OBJECTIVE TRIGGER, THE AO DOES NOT POSSES S JURISDICTION TO REOPEN THE ASSESSMENT. IT IS AT THE NEXT STAGE THAT THE QUESTION, WHETHER THE REOPENING OF ASSESSM ENT AMOUNTS TO REVIEW OR CHANGE OF OPINION ARISES. IN OTHER WORDS, IF THERE ARE NO REASONS TO BELIEVE BASED O N NEW, TANGIBLE MATERIALS, THEN THE 16 MOTILAL R. TODI R EOPENING AMOUNTS TO AN IMPERMISSIBLE REVIEW. HERE, THERE IS NOTHING TO SHOW WHAT TRIGGERED THE ISSUANCE OF NOTICE OF REASSESSMENT NO INFORMATION OR NEW FACTS WHICH LE D THE ITA NO.1118/M/2014 11 AO TO BELIEVE THAT FULL DISCLOSURE HAD NOT BEEN MAD E (KELVINATOR OF INDIA LTD [(2010)320 ITR 561 (SC)] A ND ORIENT CRAFT LTD [(2003)354 ITR 536 (DELHI)] FOLLOW ED, USHA INTERNATIONAL [(2012)348 ITR 485 (DEL) (FB)] REFERRED) IN THE CASE OF CIT VS JYOTI DEVI 218 CTR 264, HONBLE RAJASTHAN HIGH COURT HELD THAT SINCE REVENU E COULD NOT POINT OUT ANY INFORMATION OR MATERIAL WHI CH HAD SUBSEQUENTLY COME TO THE NOTICE OF THE AO TO ENABLE HIM TO FORM THE REQUISITE BELIEF THAT ANY INCOME LIABLE TO BE ASSESSED HAD ESCAPED ASSESSMENT, THEREFORE, THE INI TIATION OF REASSESSMENT PROCEEDINGS WAS NOT VALID. HONBLE MADRAS HIGH COURT IN THE CASE OF BAPALAL & CO. EXPORTS 289 ITR 37, HELD THAT IN THE ABSENCE OF ANY NEW MATERIAL, THE AO IS NOT EMPOWERED TO REOPEN AN ASSE SSMENT IRRESPECTIVE OF THE FACT WHETHER IT WAS MADE UNDER S. 143(1) OR S. 143(3). RECENTLY, MUMBAI BENCH OF ITAT IN THE CASE HV TRANSMISSIONS LTD. IN I.T.A NO. 2230/MUM/2010 HELD THAT EVEN THOUGH ORIGINAL ASSESSMENT WAS MADE UNDER S. 1 43(1) AND NOT UNDER S. 143(3), ASSESSEE HAVING MADE FULL DISCLOSURE OF ITS INCOME, AO WAS NOT JUSTIFIED IN R EOPENING THE ASSESSMENT IN THE ABSENCE OF ANY NEW MATERIAL. HONBLE BENCH HAS RELIED UPON THIRD MEMBER JUDGMENT FROM MU MBAI BENCH 17 MOTILAL R. TODI OF ITAT IN THE CASE TELCO DADAJEE DHACKJEE LTD VS DCIT ( ITA NO 4613/MUMBAI/2013 DT 1 2-5- 2010), IN SUPPORT OF THIS VIEW. SIMILAR VIEW HAS BEEN EXPRESSED BY HONBLE DELHI BENCH OF ITAT IN THE CASE OF M/S NEXGEN SCHOOL OF B USINESS VS. DEPUTY COMMISSIONER OF INCOME TAX, [ITA NO. 5609/DEL/2010] HOLDING THAT THE ASSESSING OFFICER W AS NOT JUSTIFIED TO INITIATE THE REOPENING PROCEEDINGS IN ABSENCE OF ANY NEW INFORMATION OR MATERIAL ON RECORD SINCE THE DATE OF FILLING AND PROCESSING OF THE RETURN OF INCOME. IN THE PRESENT CASE, IT HAS ALREADY BEEN DISCUSSED THAT ADMITTED FACTS ARE THAT THERE WAS NO FRESH MATERIAL COMING INTO THE POSSESSION OF THE AO, AT THE TIME OF RECOR DING OF THE REASONS. THESE FACTS HAVE NOT BEEN REBUTTED BY LD DR ITA NO.1118/M/2014 12 ALSO. THE CASE LAW RELIED UPON BY LD DR IN THE CASE OF DR. AMINS PATHOLOGY, SUPRA IS NOT APPLICABLE ON THE IS SUE BEING DECIDED HERE. THE ISSUE THAT IN ABSENCE OF ANY FRES H MATERIAL, WHETHER AO CAN PROCEED TO RECORD REASONS, WAS NOT BEFORE HONBLE HIGH COURT, THEREFORE HONBLE HI GH COURT HAD DECIDED THE ISSUE OF CHANGE OF OPINION IN THAT CASE. IN THE CASE BEFORE US, AS DISCUSSED ABOVE, WE ARE NOT GOING INTO THAT ISSUE. IN OUR CONSIDERED OPINION, A T THIS STAGE, WE NEED NOT GO INTO THE OTHER ASPECT I.E. WH ETHER THERE WAS CHANGE OF OPINION OR NOT. THIS ISSUE HAS BEEN A PTLY CLARIFIED BY HONBLE HIGH COURT IN THE CASE OF MADH UKAR KHOSLA, (SUPRA), WHEREIN IT HAS BEEN HELD BY THEIR LORDSHIPS THAT EXTERNAL FACTS OR MATERIAL CONSTITUTE THE DRIV ER, OR THE KEY WHICH ENABLES THE AO TO 18 MOTILAL R. TODI LEGI TIMATELY REOPEN THE COMPLETED ASSESSMENT AND IN ABSENCE OF T HIS OBJECTIVE TRIGGER, THE AO DOES NOT POSSESS JURISD ICTION TO REOPEN THE ASSESSMENT. FURTHER, MOST IMPORTANTLY, I T WAS HELD BY THE HONBLE HIGH COURT THAT IT IS AT THE NE XT STAGE WHEN THE QUESTION, WHETHER THE REOPENING OF ASSESSM ENT AMOUNTS TO REVIEW OR CHANGE OF OPINION ARISES. IN OTHER WORDS, IF THERE ARE NO NEW TANGIBLE MATERIALS, TH EN THERE WOULD BE NO REASONS TO BELIEVE, AND CONSEQUENTLY REOPENING WOULD BE AN IMPERMISSIBLE REVIEW. UNDER T HESE CIRCUMSTANCES THERE WOULD NOT ARISE ANY NEED TO GO THE NEXT STAGE TO EXAMINE THE NEXT QUESTION, I.E., WHETHER T HERE WAS REVIEW OR CHANGE OF OPINION. THE CONDITION WITH RESPECT TO AVAILABILITY OF NEW TANGIBLE MATERIAL IS STEP ANTERIOR TO THE CONDITION OF NO CHANGE OF OPINION OR REVIEW. THUS, IN VIEW OF JUDGMENTS DIRECTLY ON THE ISSUE U NDER CONSIDERATION, AS DISCUSSED IN PARAS 6.7 TO 6.18, A BOVE, REOPENING DONE BY LD. AO IN THE ABSENCE OF FRESH TA NGIBLE MATERIAL, IS INVALID AND BAD IN LAW. THEREFORE, THE INITIATION OF REASSESSMENT PROCEEDINGS WAS NOT VALID. THUS, RE - ASSESSMENT ORDER FRAMED IN PURSUANCE TO INVALID REO PENING IS ILLEGAL; THE SAME IS HEREBY QUASHED. SINCE ASSES SMENT ORDER HAS BEEN QUASHED ON JURISDICTIONAL GROUND ITS ELF, OTHER GROUNDS ARE NOT BEING ADJUDICATED. RESPECTFULLY FOLLOWING VARIOUS CASE LAWS REFERRED T O ABOVE, WE HOLD THAT THE REOPENING IS BAD IN LAW FOR THE REASO N THAT THERE ARE NO ITA NO.1118/M/2014 13 TANGIBLE MATERIALS TO FORM REASON TO BELIEVE THAT I NCOME HAS ESCAPED ASSESSMENT AND THE REOPENING IS BAD IN LAW FOR THE REASON THAT THE ASSESSMENT CANNOT BE REOPENED BASED ON THE SAME SET OF FACTS WHICH WERE ALREADY ON RECORD. THUS, WE HOLD THAT THE REO PENING IS BAD IN LAW. 8. SINCE WE ARE HOLDING THAT THE REOPENING IS BAD I N LAW, WE ARE NOT ADJUDICATING THE GROUNDS WHICH WERE RAISED ON M ERIT AS THE SAME BECOME ACADEMIC. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2016. SD/- SD/- (RAJESH KUMAR) (C.N. PRASAD ) # / ACCOUNTANT MEMBER %&# /JUDICIAL MEMBER MUMBAI; )# DATED : 5 TH FEBRUARY, 2016 . & . ./ RJ , SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. +,-&&./ , ./' , / DR, ITAT, MUMBAI 6. -012 / GUARD FILE. / BY ORDER, +& //TRUE COPY// ITA NO.1118/M/2014 14 / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI