INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD, MUMBAI V. DCIT RG 10(1), MUMBAI

ITA 167/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3261 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-07-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 18-06-2013
• Assessment Year: 2002-2003
• Appeal Filed On: 07-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GIRAJA DAYAL
• Assessee Lawyers: P V LAKHANI
• Keywords: Depreciation; Search and seizure; Audit objection; Earning of tax free income; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 40A(3); 143(3); 14A; 115JB; 147; 148; 15

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - I BENCH. . .. . . .. . , ,, , / !'# !'# !'# !'# , ' ' ' ' BEFORE S/SH. B.R. MITTAL, JUDICIAL MEMBER & RAJENDRA, ACCOUNTANT MEMBER ./ ITA NO.167AND 223/MUM/2010, $ $ $ $ % % % % / ASSESSMENT YEAR-2002-03 INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD., FINANCIAL CENTRE, PLOT NO. C-22, G. BLOCK, BANDRA- KURLA COMPLEX, BANDRA(E) MUMBAI- 400051 VS. DCIT RANGE 10(1) MUMBAI. PAN: AAACI0989F ( &' / APPELLANT ) ( ()&' / RESPONDENT ) DCIT RANGE 10(1) MUMBAI. VS. INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD., FINANCIAL CENTRE, PLOT NO. C-22, G. BLOCK, BANDRA- KURLA COMPLEX, BANDRA(E) MUMBAI- 400051 PAN: AAACI0989F ( &' / APPELLANT ) ( ()&' / RESPONDENT ) &' &' &' &' * * * * ' '' ' / APPELLANT BY : MR. P.V. LAKHANI ()&' + * ' / RESPONDENT BY : MR. GIRAJA DAYAL CIT (DR) $ $ $ $ + ++ + ,- ,- ,- ,- / DATE OF HEARING : 18-06-2013 ./% + ,- / DATE OF PRONOUNCEMENT : 03-07-2013 $ $ $ $ , 1961 + ++ + 254(1) ' '' ' ,0, ,0, ,0, ,0, '1 '1 '1 '1 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, A.M. CROSS APPEALS HAVE BEEN BY THE ASSESSEE AND THE ASS ESSING OFFICER (AO) CHALLENGING THE ORDER DT.30-10-2009 OF CIT(A)-10,MUMBAI,RAISING FOLLOWING GROUNDS OF APPEAL: GROUNDS OF APPEAL FILED BY THE ASSESSEE READ AS UND ER : THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN CONCLUDING THAT THE REASSESSMENT PROCEEDINGS ARE VALIDLY INITIATED. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLANT SUBMITS THAT THE CONDITIONS OF SEC 147 ARE NOT SATISFIED AN D ISSUE OF NOTICE U/S 148 IS BAD IN LAW. THE REASSESSMENT PROCEEDINGS ARE NOT VALIDLY INITIATED. ON THE FACTS AND CIRCUMSTANCES OF THE CASE APPELLANT SUBMITS THAT THE REASSESSMENT ORDER PASSE D IS NOT VALID AND ADDITIONS MADE MAY BE DELETED. 2.THE APPELLANT SUBMITS THAT ISSUES DEALT WITH BY L EARNED ASSESSING OFFICER IN REASSESSMENT PROCEEDINGS HAVE BEEN DEALT WITH AND HAVE BEEN ADJU DICATED UPON BY THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT PROCEEDINGS. THERE IS CHANG E OF OPINION WITHOUT BRINGING ON RECORD ANY NEW FACTS OR EVIDENCES. THE REASSESSMENT PROCEEDING S INITIATED BASED ON CHANGE OF OPINION ARE BAD IN LAW. 2 ITA NO.167/MUM/2010,(AY-2002-03) INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD . 3. THE LEARNED ASSESSING OFFICER HAS ISSUED NOTICE BAS ED ON AUDIT OBJECTIONS RAISED BY THE AUDIT PARTY. THE APPELLANT SUBMITS THAT REASSESSMENT PROC EEDING BASED ON AUDIT OBJECTIONS ARE BAD IN LAW. 4.THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) H AS ERRED IN CONFIRMING THE DISALLOWANCE OF THE CLAIM OF DEPRECIATION OF RS.69,22,568/-IN RESPE CT OF RESIDENTIAL PROPERTIES. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE APPELLANT SUBMITS THA T THE DISALLOWANCE OF DEPRECIATION OF RS.69,22,568/- IS NOT JUSTIFIED AND THE SAID DISALL OWANCE MAY BE DELETED. 5.THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) H AS ERRED IN INVOKING PROVISIONS OF SECTION 14A READ WITH RULE 8D AND CONFIRMING THE DISALLOWAN CE AS PER THE RULE. THE APPELLANT PRAYS THAT THE DISALLOWANCES CONFIRMED AS PER RULE 8D IS NOT J USTIFIED AND IS BAD IN LAW AND BE DELETED. 6.WITHOUT PREJUDICE TO GROUND NO. 5. THE APPELLANT PRAYS THAT ON THE FACTS AND CIRCUMSTA NCES OF THE CASE THE LEARNED ASSESSING OFFICER HAS ERRED IN CLUBBING THE DISALLOWANCES MADE IN RESPECT OF EXEMPT INCOME EARNED UNDER 3 DIFFERENT SECTIONS NAMELY SECTION 10(23G), 10(34) & SECTION 10(35). THE APPELLANT PRAYS THAT THE LEARNED ASSESS ING OFFICER WAS OBLIGED TO COMPUTE THE DISALLOWANCE UNDER EACH OF THE RESPECTIVE SECTIONS. THE COMBINE DISALLOWANCES MADE BY THE LEARNED ASSESSING OFFICER IS NOT CORRECT AND IS NOT JUSTIFIED. THE APPELLANT PRAYS THAT CONFIRMATION OF THE DISALLOWANCE UNDER RULE 8D TO BE DELETED. 7.THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) H AS ERRED IN CONFIRMING THE LEVYING OF INTEREST U/S 234-B. ON THE FACTS & CIRCUMSTANCES OF THE CASE THE APPELLANT DENIES THE LIABILITY FOR PAYMENT OF INTEREST U/S. 2348. 8.THE APPELLANT CRAVES THE PERMISSION TO ADD, ALTER OR AMEND THE GROUNDS OF APPEAL AT THE TIME OF HEARING. AO HAS FILED FOLLOWING GROUNDS OF APPEAL : 1.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED IN HOLDING THAT THE PROVISIONS OF SECTION 234D ARE APPLICABLE W.E.L AY 2004-05 ONWARDS WITHOUT APPRECIATING THAT A.THE SECTION WAS INTRODUCED W.E.F. 01.06.2003 AND HENCE WAS APPLICABLE IN ALL THE CASES WHERE ON THE SAID DATE, INTIMATION U/S 143(1) WAS ALREADY IS SUED BUT REGULAR ASSESSMENT WAS PENDING; B.THE SAID SECTION PROVIDED TO LEVY INTEREST IN EVE RY CASE WHERE REFUND WAS ISSUED U/S 143(1) OF THE ACT AND ON REGULAR ASSESSMENT, EITHER THERE WAS A D EMAND OR THE AMOUNT OF REFUND HAD REDUCED FROM THE AMOUNT OF REFUND AS PER INTIMATION U/S.143 (1) OF THE ACT; 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 113.73 CRORES, MADE TO THE BOOK PROFIT U/S 1 15 JB IN RESPECT OF THE LEASE EQUALIZATION RESERVE, IGNORING THE FACT THAT AS PER CLAUSE (B) OF EXPLANA TION TO SECTION 1 15JB, THE NET PROFIT AS PER P&L A/C HAS TO BE INCREASED BY THE AMOUNTS CARRIED TO A NY RESERVES BY WHATEVER NAME CALLED, OTHER THAN A RESERVE SPECIFIED U/S 33AC AND LEASE EQUALIZ ATION RESERVE IS NOT A RESERVE SPECIFIED U/S 33AC. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUND BE SET SIDE AND THAT OF THE A.O. BE RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GR OUNDS OR ADD A NEW GOUND WHICH MAY BE NECESSARY. ITA NO.167/MUM/2010 : 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF LEASING AND INVESTMENT BANKING, FILED ITS ORIGINAL RETURN THAT WAS ASSESSED U/S 143(3) OF THE ACT ON 2 5.02.2005.AO DETERMINED THE TOTAL INCOME OF THE ASSESSEE AT RS.90,48,86,939/-UNDER THE NORMAL P ROVISIONS AND AT RS. 85,99,59,539/- U/S.115JB OF THE ACT.WHILE PASSING ORDER U/S 143(3) OF THE AC T, AO MADE THE FOLLOWING ADDITIONS TO THE TOTAL INCOME OF THE ASSESSEE: PARTICULARS ADDITION UNDER NORMAL PROVISIONS OF ACT. ADDITION FOR THE PURPOSE OF BOOK PROFIT U/S. 115JB PAYMENTS TO CLUBS 7,94,443/- -NIL- DEPRECIATION ON LEASING TRANSACTIONS 21,22,23,544/ - -NIL- 3 ITA NO.167/MUM/2010,(AY-2002-03) INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD . LEASE EQUALIS ATION RESERVE 113,73,83,896/ - - NIL - DEDUCTION U/S.35D 19,22,953/- -NIL- PROVISION FOR NON-PERFORMING ASSETS -NIL- 5 ,18,49,391 PROVISION FOR INVESTMENT VALUATION -NIL- 4, 58,35,875 FROM THE ABOVE IT IS CLEAR THAT THE AMOUNT OF LEASI NG EQUALISATION RESERVE WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE, WHILE COMPUTING THE I NCOME UNDER THE NORMAL PROVISIONS OF THE ACT, BUT WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF TH E ACT,HE DID NOT ADD THE SAID AMOUNT. SIMILARLY, PROVISION FOR INVESTMENT VALUATION WAS C ONSIDERED BY THE AO FOR COMPUTING INCOME AS PER THE PROVISIONS OF SECTION 115JB OF THE ACT, BUT SAME WAS NOT CONSIDERED FOR COMPUTING INCOME UNDER NORMAL PROVISIONS OF THE ACT. SUBSEQUE NTLY,AO RE-OPENED THE CASE U/S 147 OF THE ACT AS HE WAS OF THE OPINION THAT THERE WERE REASON S TO BELIEVE THAT CERTAIN INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. ACCORDINGLY, A NOTICE U /S 148 OF THE ACT WAS ISSUED. THE ASSESSEE VIDE HIS LETTER DATED 05.01.2006 STATED THAT THE OR IGINAL RETURN FILED BY IT SHOULD BE TAKEN AS THE RETURN FILED IN RESPONSE TO NOTICE ISSUED U/S 148. 2.1. DURING RE-ASSESSMENT PROCEEDINGS, THE AO ASKED FOR VARIOUS DETAILS FROM THE ASSESSEE AND AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE F OR ALLOWING ADDITIONS/DISALLOWANCES WERE MADE IN THE ASSESSMENT ORDER PASSED U/S 143(3) R.W. SECT ION 147 OF THE ACT. A. INCOME FROM HOUSE PROPERTY RS. 85,9 0,888/- B. DEPRECIATION ON HOUSE PROPERTY RS. 6 9,22,568/- C. AMORTIZATION OF LEASE HOLD LAND RS. 26,99,594/- D. AMOUNT SET ASIDE FOR INVESTMENT VALUATION RS. 4,24,35,875/- E. DISALLOWANCE U/S. 14A RS. 67,28,54,440/ - F. DISALLOWANCE U/S. 40A(3) RS. 1,3 7,400/- G. LEASE EQUALIZATION (ADDITION ONLY FOR THE PURPOSE OF U/S.115JB RS. 113,73,83,896/- 3 .ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPE LLATE AUTHORITY (FAA).AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE RE-ASSESSMENT O RDER,HE HELD THAT AO HAD IN HIS POSSESSION DOCUMENTS/INFORMATION ABOUT ESCAPEMENT OF INCOME BY THE ASSESSEE, THAT DOCUMENTS/PIECE OF INFORMATION COULD BE RECEIVED BY HIM FROM ANY SOURC E I.E. FROM PERSON INSIDE/OUTSIDE THE DEPARTMENT OR FROM ANY OTHER AGENCY,THAT THE REQUIR EMENT OF THE ACT WAS THAT AO SHOULD APPLY HIS MIND ON THE INFORMATION AVAILABLE, THAT IN THE CASE UNDER CONSIDERATION, THE AO HAD RECEIVED INFORMATION FROM THE AUDIT PARTY IN RESPECT OF THRE E ISSUES IN THE MONTH OF MARCH/APRIL 2005, THAT THE AO HAD APPLIED HIS MIND AND REACHED TO A PRIMA FACIE BELIEF THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, THAT THE NOTICE U/S.148 WAS ISS UED IN DECEMBER, 2005,THAT THE TIME LEG BETWEEN RECEIPT OF INFORMATION AND ISSUE OF NOTICE PROVED THAT THE AO HAD APPLIED HIS MIND AND FORMED A BELIEF, THAT BASIC CONDITIONS STIPULATED U/S.147 WERE SATISFIED AND THE PROCEEDINGS WERE VALIDLY INITIATED BY HIM.HE FURTHER HELD THAT AO HA D RECEIVED INFORMATION IN RESPECT OF THREE ITEM, THAT ON ACCOUNT OF LEASE EQUALISATION RESERVE THE A O HAD MADE ADDITION IN THE ORIGINAL ASSESSMENT ORDER OF THE SAME AMOUNT IN THE NORMAL PROVISIONS O F ACT, THAT HE DID NOT CONSIDER THE SAME FOR COMPUTING BOOK PROFIT AS PER THE PROVISIONS OF SECT ION 115JB, THAT SIMILARLY THE MATTER OF INVESTMENT REVALUATION AO HAD CONSIDERED THE SAME F OR DISALLOWANCE FOR COMPUTING INCOME U/S 115JB,BUT HE DID NOT CONSIDER IT FOR COMPUTING INCO ME UNDER NORMAL PROVISIONS OF THE ACT, THAT 4 ITA NO.167/MUM/2010,(AY-2002-03) INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD . THE AO IN THE ORIGINAL ASSESSMENT ORDER HAD FORMED AN OPINION THAT THESE TWO ITEMS WERE OF DISALLOWABLE NATURE, THAT INADVERTENTLY BOTH THE IT EMS WERE LEFT TO BE CONSIDERED EITHER UNDER THE PROVISIONS OF SECTION 115JB OR AS PER THE NORMAL PR OVISIONS OF LEVYING TAX,THAT THE AO HAD NOT FORMED HIS BELIEF ONLY RECEIPT OF AUDIT OBJECTION, THAT IN THE CASE UNDER CONSIDERATION SUCH BELIEF WAS ALREADY FORMED WHILE PASSING THE ORIGINAL ASSE SSMENT ORDERS, THAT THE AUDIT NOTE ACTED AS A REMINDER TO THE AO,THAT IN THE REASSESSMENT PROCEED INGS THERE WAS NO CHANGE OF OPINION,THAT THE OPINION ALREADY FORMED DURING THE ORIGINAL ASSESSM ENT PROCEEDINGS WAS GIVEN EFFECT IN RE- ASSESSMENT PROCEEDINGS.RELYING UPON THE ORDER OF RA JESH JHAVERI STOCK BROKERS P. LTD.(291 ITR 500-SC), JAI BHARAT MARUTI LTD.(180 TAXMAN 192-DELH I HIGH COURT),HE HELD THAT IN THE CASE UNDER CONSIDERATION,THE AO WAS IN POSSESSION OF SOM E MATERIAL ON THE BASIS OF WHICH HE FORMED A PRIMA-FACIE OPINION THAT INCOME CHARGEABLE TO TAX H AD ESCAPED ASSESSMENT,THAT THE AO ISSUED NOTICE U/S.148 OF THE ACT AND HAD DULY COMPLIED WIT H THE REQUIREMENT OF SECTION 147 OF THE ACT. 4 .BEFORE US,AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT INTERNAL AUDIT PARTY HAD RAISED AUDIT OBJECTIONS ABOUT THE LEASE EQUALIZATION FUND,INVEST MENT VALUATION AND PAYMENT MADE IN CONTRAV- ENTION OF SEC.40(A)(3) OF THE ACT,THAT WHILE RECORD ING THE REASONS FOR RE-OPENING AO HAD MENTIO - NED THESE THREE ISSUES, THAT AT THE TIME OF ORIGINA L ASSESSMENT,AO HAD MADE QUERIES ABOUT LEASE EQUALISATION,THAT AFTER APPLYING HIS MIND AND CONSI DERING THE SUBMISSIONS MADE BY THE AO ASSESSEE WAS THAT UNDER NORMAL PROVISIONS AND NOT U NDER THE PROVISIONS OF SECTION 115JB,THAT ON THE BASIS OF OBJECTION RAISED BY THE AUDIT PARTY HE CHANGED HIS OPINION, HE REFERRED TO PAGE NO. 35 AND 16 OF THE PAPER BOOK.WITH REGARD TO PROVISION F OR INVESTMENT VALUATION AMOUNTING TO RS.4. 58 CRORES,HE REFERRED TO PAGE NO.17 OF THE PAPER BOOK AND SUBMITTED THAT AMOUNT IN QUESTION WAS ADDED TO THE INCOME OF THE ASSESSEE UNDER MAT PROVI SIONS,THAT NO FRESH MATERIAL WAS AVAILABLE WITH THE AO FOR INVOKING SECTION 147.HE FURTHER SUB MITTED THAT RS. 6.87 LACS PAID IN CASH BY THE ASSESSEE WERE RELATED COURT FEES PAID IN CASH, THAT MATTER WAS PENDING BEFORE THE HONBLE HIGH COURT OF MADRAS,THAT IN THE TAX AUDIT REPORT IN PAR A-17(H) THE AMOUNT WAS SHOWN AS PAID IN CASH,THAT IN THE REASONS RECORDED THE AO HAD REFER RED TO THE TAX AUDIT REPORT, THAT THERE WAS CHANGE OF OPINION,THAT 147-POROCEEDINGS WERE NOT VA LID,THAT THE RE-ASSESSMENT WAS BASED ON AUDIT OBJECTIONS.AR RELIED UPON THE CASES OF ASIAN PAINTS LTD.(308ITR195), ICICI HOME FINANCE LTD.(210 TAXMAN 67), AND KELVINATOR OF INDIA LTD. ( 320 ITR 561).DEPARTMENTAL REPRESENTATIVE (DR) SUBMITTED THAT AO HAD NOWHERE DISCUSSED THE IS SUE OF LEASE EQUALISATION, PROVISION FOR INVESTMENT VALUATION, THAT AO HAD FORGOTTEN TO ADD THE AMOUNTS WHILE CALCULATING THE INCOME UNDER NORMAL PROVISIONS/ UNDER MAT PROVISIONS, THAT IT WAS NOT A CASE OF CHANGE OF OPINION, THAT AO HAD NOT APPLIED HIS MIND AND HAD COMMITTED MISTA KE. 4.1 .GROUND OF APPEAL NO. 4 TO 7 ARE ABOUT DEPRECIATION OF RESIDENTIAL PREMISES,DISALLOWANCES TO BE MADE U/S 14A R.W. RULE 8D AND INTEREST TO BE CHARGE D U/S 234B. 4.2. IN OUR OPINION,BEFORE DECIDING THE ISSUE AT GROUND NO.4 TO 7 ISSUE OF VALIDITY OF RE-ASSESSMENT PROCEEDINGS HAS TO BE DECIDED, AS IT GOES TO THE VE RY ROOTS OF THE ASSESSMENT ITSELF. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL.IN THIS CASE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3)OF THE ACT AND AO HAD REOPE NED THE ASSESSMENT AS HE WAS OF THE OPINION THAT INCOME HAD ESCAPED ASSESSMENT. REOPENING OF A COMPLETED ASSESSMENT, IS GOVERNED BY CERTAIN PRINCIPLES.ONE OF THE SETTLED PRINCIPLES, I N THIS REGARD, IS THAT THE ASSESSING AUTHORITY CANN OT KEEP IMPROVING HIS CASE FROM TIME TO TIME AND THAT THE REASSESSMENT PROCEEDINGS HAVE TO STAND OR FALL ON THE BASIS OF WHAT IS STATED IN THE REASONS RECORDED U/S.148(2) AND NOTHING MORE. SECONDLY,IT CAN HARDLY BE DISPUTED THAT ONCE THE AO NOTICES A C ERTAIN CLAIM MADE BY THE ASSESSEE IN THE RETURN FILED,HAS SOME DOUBT ABOUT ELIGIBILITY OF SUCH A CL AIM AND, THEREFORE, RAISES QUERIES, EXTRACTS RESPONSE FROM THE ASSESSEE, THEREAFTER IN WHAT MANN ER SUCH CLAIM SHOULD BE TREATED IN THE FINAL 5 ITA NO.167/MUM/2010,(AY-2002-03) INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD . ORDER OF ASSESSMENT, IS AN ISSUE ON WHICH THE ASSES SEE WOULD HAVE NO CONTROL WHATSO - EVER.WHETHER THE AO ALLOWS SUCH A CLAIM, REJECTS SU CH A CLAIM OR PARTIALLY ALLOWS AND PARTIALLY REJECTS THE CLAIM, ARE ALL OPTIONS AVAILABLE WITH T HE AO, OVER WHICH THE ASSESSEE BEYOND TRYING TO PERSUADE THE AO, WOULD HAVE NO CONTROL WHATSOEVER.T HEREFORE,WHILE FRAMING THE ASSESSMENT, ALLOWING THE CLAIM FULLY OR PARTIALLY, IN WHAT MANN ER THE ASSESSMENT ORDER SHOULD BE FRAMED, IS TOTALLY BEYOND THE CONTROL OF THE ASSESSEE. IF THE AO THEREFORE, AFTER SCRUTINIZING THE CLAIM MINUTELY DURING THE ASSESSMENT PROCEEDINGS, DOES NO T REJECT SUCH A CLAIM, BUT CHOOSES NOT TO GIVE ANY REASONS FOR SUCH A COURSE OF ACTION THAT HE ADO PTS, IT CAN HARDLY BE STATED THAT HE DID NOT FORM AN OPINION ON SUCH A CLAIM.IT IS NOT UNKNOWN THAT A SSESSMENTS OF LARGER CORPORATIONS IN THE MODERN DAY, INVOLVE A LARGE NUMBER OF COMPLEX CLAIM S,VOLUMINOUS MATERIAL,NUMEROUS EXEM - PTIONS AND DEDUCTIONS.IF THE AO IS BURDENED WITH TH E RESPONSIBILITY OF GIVING REASONS FOR SEVERAL CLAIMS SO MADE AND ACCEPTED BY HIM, IT WOULD EVEN O THERWISE CAST AN UNREASONABLE EXPECTATION WHICH WITHIN THE SHORT FRAME OF TIME AVAILABLE UNDE R LAW WOULD BE TOO MUCH TO EXPECT HIM TO CARRY.IRRESPECTIVE OF THIS, IN A GIVEN CASE, IF T HE AO ON HIS OWN FOR REASONS BEST KNOWN TO HIM,CHOOSES NOT TO ASSIGN REASONS FOR NOT REJECTING THE CLAIM OF AN ASSESSEE AFTER THOROUGH SCRUTINY, IT CAN HARDLY BE STATED BY THE REVENUE TH AT THE AO CANNOT BE SEEN TO HAVE FORMED ANY OPINION ON SUCH A CLAIM.SUCH A CONTENTION, IN OUR OPINION, WOULD BE DEVOID OF MERITS. IF A CLAIM MADE BY THE ASSESSEE IN THE RETURN IS NOT REJECTED, IT STANDS ALLOWED. IF SUCH A CLAIM IS SCRUTINISED BY THE AO DURING ASSESSMENT,IT MEANS HE WAS CONVI - NCED ABOUT THE VALIDITY OF THE CLAIM.HIS FORMATION OF OPINION IS THUS COMPLETE.MERELY BECAUS E HE CHOOSES NOT TO ASSIGN HIS REASONS IN THE ASSESSMENT ORDER WOULD NOT ALTER THIS POSITION.IT M AY BE A NON-REASONED ORDER BUT NOT OF ACCEPTANCE OF A CLAIM WITHOUT FORMATION OF OPINION. IN OTHER WORDS, IN A SITUATION WHERE THE AO DURING SCRUTINY ASSESSMENT,NOTICES A CLAIM OF EXEMP TION,DEDUCTION OR SUCH LIKE MADE BY THE ASSESSEE, HAVING SOME PRIMA FACIE DOUBT RAISES QUE RIES,ASKING THE ASSESSEE TO SATISFY HIM WITH RESPECT TO SUCH A CLAIM AND THEREAFTER,DOES NOT MAK E ANY ADDITION IN THE FINAL ORDER OF ASSESSMENT,HE CAN BE STATED TO HAVE FORMED AN OPINI ON WHETHER OR NOT IN THE FINAL ORDER HE GIVES HIS REASONS FOR NOT MAKING THE ADDITION. 5.1. HONBLE JURISDICTIONAL HIGH COURT,IN THE CASE OF EX PORT CREDIT GUARANTEE CORPORATION OF INDIA LTD.(350 ITR 650),HAS HELD THAT WHEN AN ASSESSMENT IS SOUGHT TO BE REOPENED WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR,THE TEST TO BE APPLIED IS WHETHER THERE IS TANGIBLE MATERIAL TO DO SO.WHAT IS TANGIBLE IS SOME THING WHICH IS NOT ILLUSORY, HYPOTHETI -CAL OR A MATTER OF CONJECTURE.SOMETHING WHICH IS TANGIBLE NE ED NOT BE SOMETHING WHICH IS NEW. THUS,THE MOST IMPORTANT FACTOR TO ISSUE NOTICE U/S.148 OF TH E ACT IS EXISTENCE OF TANGIBLE MATERIAL. REFERRING TO THE JUDGMENT OF HONBLE APEX COURT DELIVERED IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA),IT WAS HELD THAT WHERE THE ASSESSMENT WAS SOUGHT TO BE REOPENED WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE GOVERN ING TEST HAS BEEN FORMULATED IN THE SAID JUDGMENT OF THE SUPREME COURT.HONBLE BOMBAY HIGH C OURT RELIED UPON THE FOLLOWING PORTION OF THE ORDER OF THE KELVINATOR OF INDIA LTD. (SUPRA ) : 'THEREFORE, POST 1ST APRIL, 1989, POWER TO REOPEN I S MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BE LIEVE' FALLING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE AO TO REOPEN ASS ESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REA SSESS. THE AO HAS NO POWER TO REVIEW ; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILMENT OF CERTAIN PRECONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVE D, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVI EW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE AO. HENCE, AFTER 1ST APRIL, 1989, THE AO HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE 6 ITA NO.167/MUM/2010,(AY-2002-03) INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD . FORMATION OF THE BELIEF. OUR VIEW GETS SUPPORT FROM THE CHANGES MADE TO SECTION 147 OF THE ACT, AS QUOTED HEREINABOVE. UNDER THE DIRECT TAX LAWS (AMEN DMENT) ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS 'REASON TO BELIEVE' BUT ALSO INSE RTED THE WORD 'OPINION' IN SECTION 147 OF THE ACT. HOWEVER, ON RECEIPT OF REPRESENTATIONS FROM THE COM PANIES AGAINST OMISSION OF THE WORDS 'REASON TO BELIEVE', PARLIAMENT REINTRODUCED THE SAID EXPRE SSION AND DELETED THE WORD 'OPINION' ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN THE A O.' FROM THE ABOVE DISCUSSION IT IS CLEAR THAT THE AO E VEN WITHIN A PERIOD OF FOUR YEARS CANNOT REOPEN AN ASSESSMENT MERELY ON THE BASIS OF A CHANGE OF OP INION.THE AO HAS NO POWER TO REVIEW AN ASSESSMENT WHICH HAS BEEN CONCLUDED. BUT,WHERE HE H AS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS AN ESCAPEMENT OF INCOME FR OM ASSESSMENT, THE POWER TO REOPEN CAN BE EXERCISED. IN THE CASE UNDER CONSIDERATION ONLY TAN GIBLE MATERIAL REFERRED TO BY THE AO IS HIS ERRORS IN INCLUDING/EXCLUDING CERTAIN ITEMS OF INCO ME WHILE CALCULATING THE INCOME OF THE ASSESSEE UNDER THE NORMAL PROVISIONS OR UNDER MAT PROVISIONS . WE FIND THAT REASSESSMENT PROCEEDINGS WERE INITIATE D BY THE AO AFTER OBJECTIONS WERE RECEIVED FROM THE INTERNAL AUDIT PARTY, THE DATES OF AUDIT O BJECTIONS AND THE DATES OF ISSUE OF NOTICE U/S. 148 ESTABLISH THE FACT THAT THERE WAS NEXUS BETWEEN THE TWO.FROM THE SEQUENCE OF THE EVENTS IT IS CLEAR THAT THE AO HAD ISSUED THE NOTICE FOR REOPENING AFT ER CONSIDERING THE ISSUES RAISED BY THE AUDIT PARTY.THE ITEMS INVOLVED IN THE AUDIT OBJECTIONS FI ND PLACE IN THE REASONS RECORDED BY THE AO.WE FIND THAT WHILE PASSING THE ORIGINAL ASSESSMENT ORD ER ,AO HAD CALLED FOR THE DETAILS ABOUT LEASE EQUALISATION RESERVE AS WELL AS ABOUT THE WRITING O FF OF NON- PERFORMING ASSETS. QUESTION NO. 16 & 18 OF THE QUESTIONNAIRE ISSUED BY THE AO ON 16.11.2 004 IS ABOUT THESE TWO ISSUES.WE FURTHER FIND THAT AFTER CONSIDERING THE SUBMISSIONS OF THE ASSES SEE,AO DECIDED THAT LEASE EQUALISATION RESERVE AND PROVISION OF DIMINUTION IN INVESTMENT HAS TO BE GIVEN PARTICULAR TREATMENT. AS STATED EARLIER,ONE OF THE ITEMS WAS TAXED UNDER NORMAL PR OVISIONS AND NOT UNDER MAT PROVISIONS, WHEREAS THE OTHER ITEM WAS CONSIDERED FOR MAT PROVI SIONS AND NOT FOR COMPUTATION UNDER NORMAL PROVISIONS OF THE ACT.THUS,AN INFORMED DECISION WAS TAKEN BY THE AO ABOUT BOTH THE ITEMS. IN THESE CIRCUMSTANCES, IF AO DECIDED TO ISSUE A FRESH NOTICE FOR REOPENING THE COMPLETED ASSESSMENT,IT HAS TO BE TREATED AS CHANGE OF OPINIO N.IT CAN ALSO BE SAID THAT THE ORDER OF ASSESSMENT THAT WAS PASSED BY THE AO UNDER SECTION 143(3) IS N OT SILENT IN RESPECT OF POINTS ON THE BASIS OF WHICH THE ASSESSMENT WAS SOUGHT TO BE REOPENED. THE RE IS MERIT IN THE CONTENTION WHICH HAS BEEN URGED ON BEHALF OF THE ASSESSEE THAT QUERIES HAD B EEN RAISED DURING THE COURSE OF THE ASSESSMENT AND THE ASSESSMENT ORDER WOULD EX FACIE DISCLOSE TH AT THE AO HAD APPLIED HIS MIND TO THE POINTS ON THE BASIS OF WHICH THE ASSESSMENT WAS NOW SOUGHT TO BE REOPENED. THUS, NO TANGIBLE MATERIAL EXISTED TO REOPEN THE ASSESSMENT IN THE PRESENT CAS E. 5.2. HERE, WE WOULD ALSO LIKE TO MENTION THAT ROLE OF TH E AUDIT PARTIES TO POINT OUT OF THE FACTUAL MISTAKES AND NOT TO ADVISE THE AO ON LEGAL MATTERS. THEREFORE,IF AN AO, REOPENS THE ASSESSMENT ON THE LEGAL ADVICE OF THE AUDIT PARTY,IT CANNOT BE HE LD FORMING OF AN INDEPENDENT OPINION. WHETHER A PARTICULAR ITEM HAS TO BE ADDED OR NOT WHILE COMPUT ING THE INCOME UNDER NORMAL PROVISIONS OR MAT PROVISIONS IS AN ISSUE TO BE DECIDED BY THE AO. HE IS THE ONLY PERSON TO INTERPRET THE LAW PERTAINING TO COMPUTATION OF INCOME AS PER THE PROV ISIONS OF SECTION 115 JB OF THE ACT.IT IS NOT THE CASE THAT AO HAD NOT CALLED FOR ANY DETAILS FROM TH E ASSESSEE IN THIS REGARD.HE ANALYSED THE PIECES OF INFORMATION SUPPLIED BY THE ASSESSEE ABOUT BOT H THE ISSUES AND LATER ON DECIDED TO ASSESS THE INCOME IN A PARTICULAR MANNER. IT IS NOTEWORTHY THA T ORDER WAS PASSED BY A SENIOR OFFICER OF THE DEPARTMENT I.E. BY ADDITIONAL CIT IN THE CASE UNDER CONSIDERATION AN EXPERIENCED OFFICER HAS TAKEN A VIEW AFTER CONSIDERING THE RELEVANT FACTS A ND LAW.HE HAS NOT INITIATED REASSESSMENT PROCEEDINGS ON HIS OWN. AS STATED EARLIER, 148 NOTI CE WAS ISSUED AFTER RECEIVING OBJECTION FROM AUDIT PARTY. IT IS TRUE THAT, WHILE INITIATING 147 PROCEEDINGS, HE HAS NOT MENTIONED THAT REASON FOR REOPENING WAS NOT THE AUDIT OBJECTIONS. BUT, IF WE CONSIDER THE SURROUNDING CIRCUMSTANCES IT IS 7 ITA NO.167/MUM/2010,(AY-2002-03) INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD . CLEAR THAT TRIGGER POINT WAS THE OBJECTIONS RAISED BY THE AUDIT PARTY.WE ALSO FIND IN THE APPELLATE PROCEEDINGS, FAA HAD ALLOWED THE APPEAL OF THE ASSE SSEE WITH REGARD TO PROVISION FOR INVESTMENT VALUATION (4.58 CRORES) AND COURT FEE PAID IN CASH (RS. 6.87 LACS) AND DEPARTMENT HAD ACCEPTED HIS DECISION. 5.3 CONSIDERING THE PARTICULAR FACTS AND CIRCUMSTANCES OF THE CASE UNDER CONSIDERATION, WE ARE OF THE OPINION THAT REOPENING WAS RESULT OF CHANGE OF OPINION. FACT THAT THE AO DID NOT RECORD REASONS FOR COMPUTING INCOME UNDER NORMAL/MAT PROVI SIONS, WOULD BE OF NO CONSEQUENCE. THEREFORE,WE ARE OF THE OPINION THAT THE NOTICE U/S . 148 IN THE PRESENT CASE WAS ISSUED WITHOUT JURISDICTION. THEREFORE,WE DECIDE GROUND 1-3 IN FAVOUR OF THE ASS ESSEE .REMAINING GROUNDS,FILED BY THE ASSESSEE ,DO NOT REQUIRE ANY ADJUDICATION. ITA NO.223/MUM/2010 : 6.IN THE APPEAL FILED BY THE AO THERE ARE TWO EFFEC TIVE GROUNDS OF APPEAL,ARISING OUT OF THE ORDER OF THE FAA.WE HAVE ALREADY HELD THAT REOPENING OF T HE ASSESSMENT BY THE AO WAS NOT BASED ON ANY TANGIBLE MATERIAL.THEREFORE,GROUNDS OF APPEAL F ILED BY THE AO HAVE TO BE DISMISSED. IN THE RESULT, APPEAL FILED BY THE ASSESSEE STANDS ALLOWED AND THE APPEAL OF THE AO IS DISMISSED. 2 ,3 $2, + !4 + !, 56 7 $2 , - + 2! + !, 56 . ORDER PRONOUNCED IN THE OP EN COURT ON 03 RD JULY,2013 '1 + ./% ' 8 9$ 3 ! Q YKB YKBYKB YKB Z , 2013 / + 0 : SD/- SD/- ( .. / B.R. MITTAL ) ( !'# !'# !'# !'# / RAJENDRA ) / JUDICIAL MEMBER ' ' ' ' /ACCOUNTANT MEMBER / MUMBAI, 9$ /DATE: 3 RD JULY, . 2013 SK '1 '1 '1 '1 + ++ + (,; (,; (,; (,; <';%, <';%, <';%, <';%, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT (A) / = > 4. THE CONCERNED CIT / = > 5. DR I BENCH, ITAT, MUMBAI / ;?0 (,$ , . . . 6. GUARD FILE/ 0 @ );, (, //TRUE COPY// 8 ITA NO.167/MUM/2010,(AY-2002-03) INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD . '1$ / BY ORDER, A / 5 ! DY./ASST. REGISTRAR , /ITAT, MUMBAI