Akzo Nobel India Ltd.(formerly known as IC India Ltd.), Kolkata V. DCIT, Circle - 10, Kolkata, Kolkata

ITA 173/KOL/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7650 (ITAT-KOLKATA)
• Duration Of Justice: 11 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 28-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S GAUTAM
• Assessee Lawyers: DR DEBI PAL; SOMAK BASU
• Keywords: Reopening of assessment; Cost of acquisition; Tangible material; Fair market value; Difference of opinion; Valuation report; Revised return; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 139(5); 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA () BEFORE , /AND , ! . '# . ) [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SHR I C. D. RAO, AM] $ $ $ $ / I.T.A NO. 173/KOL/2011 %& '( %& '( %& '( %& '(/ // / ASSESSMENT YEAR : 2003-04 AKZO NOBEL INDIA LTD. (FORMERLY KNOWN VS. DEPUTY COMMISSIONER OF INCOME-TAX AS IC INDIA LTD.) (PAN:AAACI 6297CA) CIRCLE-10, KO LKATA. (*+ /APPELLANT ) (,-*+/ RESPONDENT ) DATE OF HEARING: 04.01.2012 DATE OF PRONOUNCEMENT: 06 .01.2012 FOR THE APPELLANT: DR. DEBI PAL & SHRI SOMAK BASU FOR THE RESPONDENT: SHRI S. S. GAUTAM . / ORDER PER MAHAVIR SINGH, JM ( , , , , ) THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-XII, KOLKATA IN APPEAL NO.776/CIT(A)/XII/CIR-10/09-10 DATED 18.11.2010. AS SESSMENT WAS FRAMED BY DCIT, CIRCLE- 10, KOLKATA U/S. 147/143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2003-04 VIDE HIS ORDER DATED 24 .09.2009. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) UPHOLDING THE REASSESSMENT PROCEEDINGS INITIATED U/S. 147 R.W.S. 148 OF THE ACT ON THE BASIS OF DVOS REPORT. FOR THIS, THE ASSESSEE HAS RAISED FOLLOWING TWO GRO UNDS: 1 THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HEREINAFTER REFERRED AS CIT(A) ERRED IN HOLDING THAT THE PROCEEDINGS UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (ACT) READ WITH SECTION 148 OF THE ACT WERE VA LIDLY INITIATED ON THE BASIS OF DEPARTMENTAL VALUATION OFFICERS (DVOS) REPORT. 2.THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN HOLDING THAT THE PROCEEDINGS UNDER SECTION 147 OF THE ACT READ W ITH SECTION 148 OF THE ACT WERE VALIDLY INITIATED WHEN THE INITIATION OF THE PROCEEDING IS BARRED BY LIMITATION. 3. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE A SSESSEE FILED ITS ORIGINAL RETURN FOR THE RELEVANT ASSESSMENT YEAR 2003-04 ON 28.11.2003. TH E ASSESSEE SUBSEQUENTLY REVISED THE RETURN U/S. 139(5) OF THE ACT ON 25.03.2004 DISCLOS ING THE SAME INCOME. THE ASSESSING OFFICER ACCEPTED THE REVISED RETURN. THE ASSESSEE COMPANY OWNED PLOT OF LAND AT DOOR NOS. 1 & 2, BOAT CLUB, SECOND AVENUE, CHENNAI EVEN PRIOR TO 01. 04.1981. THE ASSESSEE COMPANY, VIDE 2 ITA 173/K/2011 AKZO NOBEL INDIA LTD. A.Y.03-04 TWO AGREEMENTS BOTH DATED 14.12.2000, SOLD TWO PORT IONS OF LAND (SIX GROUNDS EACH) OF THE PROPERTY CRESCENT GARDENS, DOOR NOS. 1 & 2, BOAT CL UB, CHENNAI TO INDIAN NIPPON ELECTRICALS LTD. AND SUNDARAM FASTENERS LTD. AT A CONSIDERATION OF RS.3,43,50,000/- EACH AND TOTAL CONSIDERATION BECAME RS.6.87 CR. DUE TO DISPUTE WI TH TAMIL NADU GOVT., ASSESSEE COULD NOT EXECUTE THE SALE DEEDS WITH THOSE PURCHASERS AND FI NALLY, DEEDS WERE EXECUTED IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATIO N. THE ASSESSEE COMPANY COMPUTED LONG TERM CAPITAL GAINS ON THE ABOVE SALE TRANSACTION CL AIMING FAIR MARKET VALUE AS ON 01.04.1981 AT RS.2,01,60,000/- ON THE BASIS OF ESTIMATE MADE B Y REGISTERED VALUERS REPORT(COPY OF THE SAME WAS FILED BEFORE ASSESSING OFFICER DURING THE COURS E OF ORIGINAL ASSESSMENT PROCEEDINGS). THE ASSESSING OFFICER NOT CONVINCED WITH THE VALUE ADOP TED BY REGISTERED VALUER, REFERRED THE MATTER TO DVO TO ESTIMATE FAIR MARKET VALUE U/S. 55 A OF THE ACT, REQUESTING HIM TO FURNISH SUCH REPORT ON OR BEFORE 14.02.2000, BUT NO SUCH REPORT WAS RECEIVED TILL THE COMPLETION OF ASSESSMENT. THE ASSESSING OFFICER ACCEPTED THE CLAI M OF CAPITAL LOSS OF RS.2,30,33,200/- CLAIMED BY ASSESSEE ON SALE OF ABOVE PLOT OF LAND A T AN INDEXED COST REACHED BY THE ASSESSEE AT RS.9,01,15,200/- AS AGAINST SALE CONSIDERATION OF R S.6.87 CR. THE ASSESSING OFFICER ACCEPTED THE COMPUTATION OF LONG TERM CAPITAL GAIN VIDE ORDE R DATED 28.02.2006 U/S. 143(3) OF THE ACT BY GIVING FOLLOWING REMARK: IN CONSIDERATION OF THE ABOVE FACT, THE LOSS OF RS .2,30,33,200/- CLAIMED BY THE ASSESSEE FOR SALE OF LAND AT CHENNAI IS ALLOWED FOR THE TIME BEI NG. ON RECEIPT OF THE REPORT FROM THE DISTRICT VALUATION OFFICER, CHENNAI, APPROPRIATE AC TION UNDER THE LAW WOULD BE TAKEN FOR DEALING WITH THE LOSS CLAIMED BY THE ASSESSEE ON TH IS ACCOUNT. SUBSEQUENTLY, DCIT, CIRCLE-10, KOLKATA REOPENED THE ASSESSMENT BY RECORDING REASONS AND ISSUED NOTICE U/S 148 OF THE ACT. THE ASSESSING OFF ICER IN VIEW OF THE DVOS REPORT, NOT ACCEPTED THE FAIR MARKET VALUE ADOPTED BY ASSESSEE AT RS.2,01,60,000/-, BUT ASSESSED LTCG ON THE BASIS OF FAIR MARKET VALUE ADOPTED BY DVO AS ON 01.04.1981 AT RS.2,76,000/- ONLY. ACCORDINGLY, HE COMPUTED LONG TERM CAPITAL GAIN AT RS.6,58,48,280/- AS AGAINST THE CAPITAL LOSS COMPUTED BY ASSESSEE AT RS.2,30,33,200/-. AGG RIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND BEFORE HIM ADDITIONAL GROUNDS WERE TAKEN IN RESPECT TO ASSUMPTION OF JURISDICTION BY ASSESSING OFFICER THAT REOPENING U/S. 147 R.W.S. 148 OF THE ACT HAS BEEN ASSUMED WITHOUT JURISDICTION. THE CIT(A) CONFIRMED THE ASSUMPTION O F JURISDICTION BY ASSESSING OFFICER FOR REOPENING THE ASSESSMENT VIDE HIS ORDER DATED 18.11 .2010. AGGRIEVED, ASSESSEE CAME IN APPEAL BEFORE TRIBUNAL. 3 ITA 173/K/2011 AKZO NOBEL INDIA LTD. A.Y.03-04 4. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE PERUSED THE ORDERS OF THE LOWER AUTHORITIES . THE FACTS TO BE CONSIDERED FOR THE ISSUE OF REOPENING ARE THAT THE ASSESSEE BEING OWNER OF PLOT OF LAND AT DOOR NO. 1 & 2, BOAT CLUB, 2 ND AVENUE, CHENNAI NAMED AS CRESCENT GARDENS ACQUIRE D EVEN BEFORE 01.04.1981, SOLD VIDE TWO AGREEMENTS DATED 14.12.2000 I.E. IN TWO PLOTS OF LA ND (SIX GROUNDS EACH) TO INDIAN NIPPON ELECTRICAL LTD. AND SUNDARAM FASTENERS LTD. FOR A C ONSIDERATION OF RS.3,43,50,000/- EACH, TOTALING TO RS.6.87 CR. DUE TO RESTRICTION OF TAMIL NADU GOVT. SALE DEED COULD NOT BE EXECUTED AND FINALLY THIS WAS EXECUTED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE COMPUTED LTCG BY TAKING THE FAIR MARKET VALUE OF THESE TWO P LOTS OF LAND, AS ON 01.04.1981, AT RS.2,01,60,000/- AND AFTER INDEXATION ARRIVED AT TH E COST OF LAND AS ON THE DATE OF SALE AT RS.9,01,15,200/- AS AGAINST THE SALE CONSIDERATION OF RS.6.87 CR. AS NOTED IN THE SALE DEEDS. THEREBY THE ASSESSEE CLAIMED CAPITAL LOSS OF RS.2,3 0,33,200/- AFTER ADJUSTING THE COST OF TRANSACTION OF RS.16,18,000/-. TO SUPPORT THE FAIR MARKET VALUE ADOPTED BY ASSESSEE AS ON 01.04.1981, A COPY OF REGISTERED VALUERS REPORT WA S FILED BEFORE THE ASSESSING OFFICER AND EVEN BEFORE CIT(A). THE ASSESSING OFFICER NOT CONV INCED BY THE FAIR MARKET VALUE DETERMINED BY REGISTERED VALUER, REFERRED THE FAIR MARKET VALU E TO THE DVO, CHENNAI U/S. 55A OF THE ACT. BUT BEFORE THE REPORT IS RECEIVED, ASSESSING OFFICE R FRAMED ASSESSMENT U/S. 143(3) OF THE ACT VIDE ORDER DATED 28.02.2006, INSPITE OF THE FACT TH AT TIME BARRING OF THIS ASSESSMENT IS HAPPENING ON 31.03.2006, ACCEPTING THE RETURNED LOS S. THE ASSESSING OFFICER SUBSEQUENTLY AFTER RECEIPT OF VALUATION REPORT ON 13.03.2006 DET ERMINED FAIR MARKET VALUE OF THIS PROPERTY AT RS.2,76,000/- AS ON 01.04.1981 RECORDED THE REASONS AND ISSUED NOTICE U/S. 148 OF THE ACT DATED 28.08.2008, WHICH WAS SERVED ON THE ASSESSEE ON 19 .09.2008. THE ONLY REASON RECORDED FOR REOPENING OF ASSESSMENT IS THAT THE FAIR MARKET VAL UE DETERMINED BY DVO AS ON 01.04.1981 IS AT RS.2.76 LACS AS AGAINST ADOPTED BY THE ASSESSEE @ R S.16.80 LACS PER GROUND. THE ASSESSING OFFICER REOPENED THE ASSESSMENT, AS PER REASONS RE CORDED, JUST ON THE BASIS OF DVOS REPORT, WHICH WAS RECEIVED AFTER THE COMPLETION OF ASSESSME NT U/S. 143(3) OF THE ACT DATED 28.02.2006, WHEREBY TIME BARRING OF THIS ASSESSMENT WAS DUE ON 31.03.2006. 5. ON THESE FACTS, THE LD. SR. ADVOCATE DR. DEBI PA L, FIRST OF ALL, ARGUED THAT NO REOPENING IS POSSIBLE U/S. 148 R.W.S. 147 OF THE ACT, WHERE A SSESSMENT IS FRAMED U/S. 143(3) OF THE ACT AND FOUR YEARS HAS EXPIRED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THERE IS CHARGE ON THE ASSESSEE THAT INCOME CHARGEABLE TO TAX HAS ESCA PED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS 4 ITA 173/K/2011 AKZO NOBEL INDIA LTD. A.Y.03-04 NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YE AR IN THE RETURN OF INCOME OF THE ASSESSEE. LD. SR. ADVOCATE DREW OUR ATTENTION TO REASONS RECO RDED, WHICH READS AS UNDER: DURING THE PREVIOUS YEAR RELEVANT TO A.Y. 2003-04 THE ASSESSEE SOLD AN IMMOVABLE PROPERTY BEING DOOR NO.1 & 2, BOAT CLUB, 2ND AVENUE , CHENNAI-600 006 FOR A NET CONSIDERATION OF RS. 687 LACS. AS THE SAID PROPERTY WAS ACQUIRED PRIOR TO 1.4.1981, THE MARKET VALUE AS ON 1.4.1981 WAS TO BE TAKEN AS THE BASIS FOR COMPUTING THE COST OF ACQUISITION. IN THE RETURN THE ASSESSEE CLAIMED SUCH MARKET VALU E AS ON 1.4.1981 AT RS.201.60 LACS ON THE BASIS OF A REGISTERED VALUERS REPORT. FROM THE SAID REPORT IT IS FOUND THAT THE REGISTERED VALUER ADAPTED THE LAND RATE OF RS.700 P ER SQ. FT. OR RS. 16,80,000/- PER GROUND AS ON 1.4.1981. THE VALUE DOES NOT APPEAR TO BE SUP PORTED BY ANY ACCEPTABLE SALE EVIDENCE OR OTHER MATERIALS ON RECORD. AS THE SAID REGISTERED VALUERS REPORT SUFFERED FRO M THOSE DEFICIENCIES, REFERENCE WAS MADE IN COURSE OF ASSESSMENT PROCEEDING TO THE DIST RICT VALUATION OFFICER, VALUATION CELL, CHENNAI. THE REPORT FROM THE DIST. VALUATION OFFICE R WAS NOT HOWEVER RECEIVED IN TIME. IN THE CIRCUMSTANCES, THE ASSESSING OFFICER HAD NO OTH ER ALTERNATIVE BUT TO COMPLETE THE ASSESSMENT AS PER SCHEDULE IN COMPLIANCE WITH THE E XECUTIVE DIRECTIONS. IN ASSESSMENT, THE CAPITAL GAINS FROM THE SAID IMMO VABLE PROPERTY HAD TO BE ACCEPTED AT A LOSS OF RS.230.33 LACS AS DECLARED IN THE RETURN AS THE REGISTERED VALUERS REPORT FILED BY THE ASSESSEE COULD NOT BE CONFRONTED IN ABSENCE OF OTHER SIMILAR VALUATION REPORT. THE D.V.O, CHENNAI REPORTED AS BELOW:- 1) WHEREAS THE DETERMINATION OF THE FAIR MARKET VA LUE OF THE PROPERTY IN RESPECT OF LAND AT DOOR NO. 1 & 2, BOAT CLUB, SECOND AVENUE, CHENNA I-600 006 AS ON 1.4.81 WAS REFERRED BY THE ADDITIONAL COMMISSIONER OF INCOME T AX, RANGE 10, KOLKATA VIDE LETTER NO. ADDL. CIT,R-10/KO1/05-06 DATED 23.1.2006. 2) WHEREAS A NOTICE WAS ISSUED TO M/S. ICI INDIA LT D., 34, CHOWRINGHEE ROAD, KOLKATA700 071 ASSESSEE OF MY PROPOSAL TO ESTIMATE THE FAIR MA RKET VALUE OF THE PROPERTY AT RS.2,76,000/- AS ON 1.4.1981 IN RESPECT OF PROPERTY AT DOOR NO. 1 & 2, BOAT CLUB, SECOND AVENUE, CHENNAI-600 006. 3) WHEREAS THE ASSESSEE HAS SUBMITTED ITS OBJECTION VIDE HIS LETTER NO. NIL DATED 28.02.2006. 4) HAVING CONSIDERED THE EVIDENCE PRODUCED BY THE A SSESSEE AND TAKING INTO ACCOUNT ALL RELEVANT MATERIALS GATHERED BY ME, I ESTIMATE THE F AIR MARKET VALUE OF THE PROPERTY AT DOOR NO. 1 & 2, BOAT CLUB, SECOND AVENUE, CHENNAI-600 00 6 AT RS.2,76,000/- AS PER ANNEXURE (VALUATION REPORT) ENCLOSED. FROM THE ABOVE FACT IT IS CLEAR THAT AT THE TIME OF COMPLETING ASSESSMENT U/S. 143(3) ON 28.02.2006 THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY ADOPTING THE MARKET VALUE OF THE PROPERTY AT RS.201.60 LACS ON 1.4.1981 @ RS. 16,80,000/- PER GROUND. THE D.V.O. HAS REPORTED THE SAME AT RS.2,76,000/- AS ON 1.4.1981. CHART SHOWING ESCAPEMENT OF RS.6,58,48,280/- IS GIVEN AS UNDER :- 5 ITA 173/K/2011 AKZO NOBEL INDIA LTD. A.Y.03-04 IN THE CIRCUMSTANCES IT IS BELIEVED THAT INCOME CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT AND TO RECOMPUTE THE TOTAL INCOME OF THE ASSESSEE N ECESSARY APPROVAL TO RE-OPEN THE COMPLETED ASSESSMENT RECEIVED FROM CIT-IV, KOLKATA VIDE LETTER NO.CIT, KOL-IV/147- 1/2008-09/2731 DATED 27.08.2008. IN VIEW OF THE ABOVE FACTS AND REASONS TO RE-ASSESS THE ESCAPED INCOME NOTICE U/S. 148 IS ISSUED. LD. SR. ADVOCATE DR. DEBI PAL STATED THAT ONLY GROU ND FOR REOPENING, AS PER REASONS RECORDED, IS THAT THE DVO, CHENNAI HAS ASSESSED THE FAIR MARKET VALUE AS ON 01.04.1981, FOR COMPUTING LTCG, AT RS.2.76 LACS INSTEAD OF FAIR MARKET VALUE DISCLOSED BY ASSESSEE AT RS. 16.80 PER GROUND. LD. SR. ADVOCATE DR. DEBI PAL STATED THAT ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT BY THE ASSESSING OFFICER VIDE ORD ER DATED 28.02.2006 AND COMPLETE FACTS REGARDING THESE TRANSACTIONS WERE BEFORE THE ASSESS ING OFFICER AND ASSESSING OFFICER KNOWINGLY PASSED THE ASSESSMENT ORDER AFTER CONSIDE RING ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, WHICH WAS SUBMITTED BY ASSESSEE ITSELF AND CONSIDERING THE REGISTERED VALUERS REPORT ACCEPTED THE LOSS RETURNED AT RS.2,30,33,200 /-. IN SUCH CIRCUMSTANCES, LD. SR. ADVOCATE DR. DEBI PAL STATED THAT NO REOPENING IS POSSIBLE A ND IN SUPPORT OF HIS ARGUMENT HE REFERRED TO THE CASE LAW OF HONBLE SUPREME COURT IN THE CASE O F ACIT VS. DHARIYA CONSTRUCTION CO. (2010) 328 ITR 515 (SC). HE ALSO REFERRED TO THE D ECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELIVNATOR INDIA LTD. [2010] 320 IT R 561 (SC) WHERE THE CONCEPT OF CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER TO REO PEN THE ASSESSMENT DOES NOT STAND OBLITERATED EVEN AFTER SUBSTITUTION OF SECTION 147 OF THE ACT B Y THE DIRECT TAX LAWS (AMENDMENT) ACTS, 1987 AND 1989. AFTER THE AMENDMENT, THE ASSESSING OFFICER HAS TO HAVE REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT BUT THIS DOES NOT IMP LY THAT THE ASSESSING OFFICER CAN REOPEN AN ASSESSMENT ON MERE CHANGE OF OPINION. LD. SR. A DVOCATE DR. DEBI PAL STATED THAT THE CONCEPT OF CHANGE OF OPINION MUST BE TREATED AS AN INBUILT TEST TO CHECK THE ABUSE OF POWER AND HENCE, AFTER 01.04.1989, THE ASSESSING OFFICER HAS POWER TO REOPEN AN ASSESSMENT PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSIO N THAT THERE WAS ESCAPEMENT OF INCOME FROM ASSESSMENT. LD. SR. ADVOCATE DR. PAL EXPLAINED THA T REASONS MUST HAVE A LINK WITH THE 6 ITA 173/K/2011 AKZO NOBEL INDIA LTD. A.Y.03-04 FORMATION OF THE BELIEF WHICH IS MISSING IN THE PRE SENT CASE. LD. SR. ADVOCATE DR. PAL ALSO REFERRED THE DECISION OF HONBLE CALCUTTA HIGH COUR T IN THE CASE OF HOTEL REGAL INTERNATIONAL VS. ITO (2010) 320 ITR 573 (CAL) WHICH ARE EXACTLY THE SIMILAR FACTS WERE THERE AND RATIO LAID DOWN IS APPLICABLE TO THE FACTS OF THE PRESENT CASE . 6. NOW WE HAVE ALSO TO CONSIDER THE CASE LAWS REFER RED BY LD. CIT DR SHRI S. S. GAUTAM WHEREIN HE HAS REFERRED TO THE DECISION OF HONBLE KERALA HIGH COURT IN THE CASE OF CIT VS. MEDICAL TRUST HOSPITAL (2010) 325 ITR 191 (KER) AN D ACIT VS. RAJESH JHAVERI STOCK BROKERS P. LTD. (2007) 291 ITR 500 (SC). FIRST OF ALL, IT IS CLEAR THAT THERE IS NO DISPUTE AS REGARDS TO THE FACTS OF THE CASE ARE CONCERNED. THE CASE LAWS REFERRED BY LD. CIT DR SHRI S. S. GAUTAM THAT OF HONBLE SUPREME COURT OF RAJESH JHAVERI STO CK BROKERS P. LTD. (SUPRA), ON FACTS THE CASE IS ENTIRELY DIFFERENT AND THE ISSUE BEFORE HON BLE SUPREME COURT WAS THE ADJUDICATION OF REASSESSMENT PROCEEDINGS QUA PROCESSING OF RETURN O F INCOME U/S. 143(1) OF THE ACT AND NOT SEC. 143(3) OF THE ACT. HENCE, TO THE FACTS OF THIS PRE SENT CASE, THE RATIO WILL NOT APPLY. NOW, WHETHER THE ASSESSING OFFICER CAN VALIDLY REOPEN TH E ASSESSMENT FRAMED JUST ON THE BASIS OF DVOS REPORT WHICH WAS RECEIVED AFTER COMPLETION OF ASSESSMENT OR NOT. THIS ISSUE HAS BEEN CONSIDERED BY HONBLE CALCUTTA HIGH COURT IN THE CA SE OF HOTEL REGAL INTERNATIONAL (SUPRA) WHEREIN REASSESSMENT POWER WAS INVOKED FOR ALLEGED CONCEALMENT, WHICH WAS INFERRED FROM THE UNDERSTATEMENT OF COST WITH REFERENCE TO A VALU ATION REPORT FROM DVO AFTER THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE ACT. THE COPY OF THE VALUATION REPORT WAS ALSO NOT MADE AVAILABLE TO ASSESSEE. HENCE, ASSESSEE FILED A WRIT PETITION AGAINST NOTICE U/S 148 OF THE ACT. IT WAS NOTICED THAT THE ASSESSEE HAD FILED A V ALUATION REPORT FROM A REGISTERED VALUER AT THE TIME OF ASSESSMENT AND THIS WAS ACCEPTED, SO THAT T HE VALUATION REPORT OBTAINED BY THE ASSESSING OFFICER FROM THE DVO AFTER THE ASSESSMENT COULD NOT BE TREATED AS INFORMATION AND THAT AT ANY RATE, IT AMOUNTED TO RECONSIDERATION OF THE MATERIA LS PLACED BY THE ASSESSEE AT THE TIME OF ASSESSMENT. HONBLE CALCUTTA HIGH COURT IN THE GIVE N FACTS HELD THAT ASSESSEES OBJECTION TO JURISDICTION WAS NOT CONSIDERED BY THE ASSESSING OF FICER WHILE TURNING DOWN SUCH OBJECTIONS, SO THAT THE ORDER OF THE ASSESSING OFFICER UPHOLDIN G JURISDICTION WAS SET ASIDE. THE FACT IN THE PRESENT CASE ALSO REVEALS THAT REOPENING WAS DONE W ITH REFERENCE TO UNDERSTATEMENT OF FAIR MARKET VALUE WITH REFERENCE TO DVOS REPORT, WHICH WAS RECEIVED AFTER THE COMPLETION OF ASSESSMENT UNDER SECTION 143(3) OF THE ACT. IN THI S CASE THE ASSESSEE FILED A VALUATION REPORT FROM REGISTERED VALUER AT THE TIME OF FRAMING OF OR IGINAL ASSESSMENT AND THIS WAS ACCEPTED AND FAIR MARKET VALUE DETERMINED BY THE REGISTERED VALU ER WAS MADE THE BASIS OF ASSESSMENT. FACTS OF THE PRESENT CASE BEFORE US AND WHAT WAS BEFORE H ONBLE CALCUTTA HIGH COURT IN THE CASE OF 7 ITA 173/K/2011 AKZO NOBEL INDIA LTD. A.Y.03-04 HOTEL REGAL INTERNATIONAL (SUPRA) ARE ALMOST SIMILA R, HENCE, RATIO LAID DOWN IN THAT CASE WILL BE APPLICABLE TO THE FACTS OF THE PRESENT CASE ALSO. HENCE, THE JURISDICTION ASSUMED BY AO BY INVOKING REASSESSMENT PROCEEDINGS U/S. 147 R.W. S 1 48 OF THE ACT IS WITHOUT SANCTION OF LAW AND QUASHED. 7. ANOTHER ASPECT ARGUED BY LD. SR. ADVOCATE DR. P AL WAS THAT THERE IS NO REASON TO BELIEVE ON THE PART OF THE AO FOR INITIATING REASSE SSMENT PROCEEDINGS U/S. 147 OF THE ACT AND FOR THIS, HE STATED THAT ONLY BASIS, AS IS EMANATING FR OM REASONS RECORDED, IS THAT THE FAIR MARKET VALUE DETERMINED BY DVO AND THAT ALSO AFTER COMPLET ION OF ASSESSMENT U/S. 143(3) OF THE ACT. LD. SR. ADVOCATE DR. PAL EXPLAINED THAT AFTER AMEND MENT THERE IS ONLY ONE CONDITION IN THE PROVISIONS OF SECTION 147 OF THE ACT THAT THERE IS REASONS TO BELIEVE FOR ESCAPEMENT OF INCOME BUT THEN ONE HAS TO INTERPRET THE WORDS REASONS TO BELIEVE IN A SCHEMATIC MANNER SO THAT POWER U/S. 147 OF THE ACT CANNOT BE MISUNDERSTOOD AS CONF ERRING ARBITRARY POWER ON MERE CHANGE OF OPINION AND ACCORDING TO HIM, WHICH CANNOT BE PER S E A REASON FOR ASSUMPTION OF JURISDICTION U/S. 147 OF THE ACT. HE EXPLAINED THAT REVIEW CANN OT BE UNDERTAKEN IN THE GARB OF REASSESSMENT AND BAR AGAINST CHANGE OF OPINION IS AN INBUILT REQ UIREMENT IN THE PROVISION ITSELF. WE AFTER GOING THROUGH THE PROVISIONS OF THE ACT AND AMENDME NT MADE IN REASSESSMENT LAW BY SUBSTITUTION OF SECTION 147 OF THE ACT BY DIRECT TA X LAWS (AMENDMENT) ACT, 1987 AND 1989 FIND THAT THERE HAS BEEN CONSIDERABLE CONTROVERSY, SO THE SUPREME COURT IN CIT V. KELVINATOR OF INDIA LTD. [2010] 320 ITR 561 HAS CLEARLY SETTLED T HE ISSUE IN RESPECT TO CHANGE OF OPINION AND INTERPRETATION OF THE WORDS REASON TO BELIEVE. TH E HONBLE SUPREME COURT COMPARED THE PROVISION BEFORE AND AFTER THE AMENDMENT AND INTERP RETED THAT PRIOR TO THE AMENDMENT, THERE SHOULD BE ESCAPEMENT OF INCOME ARISING ON ACCOUNT O F NON-FILING OF RETURN OR NONDISCLOSURE OF MATERIAL FACTS OR THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE ESCAPEMENT IN CONSEQUENCE OF INFORMATION IN HIS POSSESSION. AFTER THE AMENDMENT, THERE IS ONLY ONE CONDITION, THAT THERE IS REASON TO BELIEVE ESCAPE MENT OF INCOME, SO THAT THE POWER HAS BECOME MUCH WIDER. HONBLE APEX COURT IN THIS CASE INTERPR ETED THAT, ONE HAS TO GIVE SCHEMATIC INTERPRETATION OF THE WORDS REASON TO BELIEVE, SO THAT THE POWER UNDER SECTION 147 MAY NOT BE MISUNDERSTOOD AS CONFERRING ARBITRARY POWERS ON ME RE CHANGE OF OPINION, WHICH CANNOT PER SE BE A REASON FOR JURISDICTION. THE POWER TO REASS ESS IS DIFFERENT FROM POWER TO REVIEW, WHICH IS NOT PERMISSIBLE. IT FOLLOWS THAT REVIEW CANNOT B E UNDERTAKEN IN THE GARB OF REASSESSMENT. FINALLY, HONBLE SUPREME COURT INTERPRETED THAT THE BAR AGAINST CHANGE OF OPINION IS AN INBUILT REQUIREMENT TO CHECK ABUSE OF POWER AND, THEREFORE, FOLLOWS, THAT THERE SHOULD BE TANGIBLE MATERIAL TO COME TO A CONCLUSION THAT THERE IS ESCA PEMENT OF INCOME. HONBLE SUPREME COURT 8 ITA 173/K/2011 AKZO NOBEL INDIA LTD. A.Y.03-04 GOING BY THE HISTORY OF THE LEGISLATION, POINTED OU T THAT THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 HAD EARLIER OMITTED THE EXPRESSION REASON TO BELIEVE SUBSTITUTING IT BY THE WORD OPINION. ON REPRESENTATION, THE EXPRESSION REASO N TO BELIEVE WAS REINTRODUCED SUBSTITUTING THE WORD OPINION BY THE DIRECT TAX LAWS (AMENDMEN T) ACT 1989. THIS WAS ALSO EXPLAINED IN BOARD CIRCULAR NO. 549 DATED OCTOBER 31, 1989[1990] 182 ITR (ST.) 1, 29. IT IS IN THE LIGHT OF THIS, HONBLE SUPREME COURT CONFIRMED THE DECISION OF THE FULL BENCH OF THE DELHI HIGH COURT IN CIT V. KELVINATOR OF INDIA LTD. [2002] 256 ITR 1 . 8. IN THE PRESENT CASE BEFORE US ALSO, THE AO ORIGI NALLY FRAMED ASSESSMENT U/S. 143(3) OF THE ACT AND ALL MATERIAL FACTS NECESSARY FOR ASSESS MENT OF THE LTCG ON SALE OF ASSESSEES PROPERTY AND EVEN COPY OF REGISTERED VALUERS REPOR T DETERMINING FAIR MARKET VALUE AS ON 01.04.1981 WAS BEFORE HIM. THE AO REFERRED THE MAT TER TO THE DVO U/S. 55A OF THE ACT BUT BEFORE RECEIPT OF DVOS REPORT FRAMED ASSESSMENT U/ S. 143(3) VIDE ORDER DATED 28.02.2006 AND SUBSEQUENTLY ON 13.03.2006 THE SAME WAS RECEIVED. THE ASSESSMENT WAS GETTING TIME BARRED AS ON 31.03.2006. IT IS NOT THE FAILURE OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YE AR IN THE RETURN OF INCOME OF THE ASSESSEE AND ASSESSMENT WAS REOPENED AFTER THE EXPIRY OF FOU R YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, WHICH IS NOT PERMISSIBLE IN THE GI VEN FACTS AND CIRCUMSTANCES OF THE CASE. FROM THE REASONS RECORDED, IT IS CLEAR THAT THE AO HAVE NOT FORMED ANY REASON TO BELIEVE FOR ESCAPEMENT OF LTCG RATHER HE WANTED TO REVIEW THE A SSESSMENT ON THE BASIS OF OPINION OF DVO WHO HAS OPINED FOR A LOWER FAIR MARKET VALUE AS ON 01.04.1981. WE ARE IN AGREEMENT WITH THE ARGUMENTS OF LD. SR. ADVOCATE DR. PAL AND FACTS OF THE CASE THAT THE JURISDICTION ASSUMED FOR REASSESSMENT IS WITHOUT VALID SANCTION OF LAW AND HENCE QUASHED. 9. AS REGARDS TO MERITS OF THE CASE, ASSESSEE HAS N OT MADE ANY SUBMISSIONS AND HAS ALSO NOT ARGUED BEFORE THE BENCH, HENCE, WE DO NOT ADJUD ICATE THE ISSUE ON MERITS. 10. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 11. ORDER PRONOUNCED IN OPEN COURT ON 06.01.12 SD/- SD/- . '# '#'# '# . ! , (C. D. RAO) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( #! #! #! #!) )) ) DATED : 6TH JANUARY, 2012 /0 %12 3 JD.(SR.P.S.) 9 ITA 173/K/2011 AKZO NOBEL INDIA LTD. A.Y.03-04 . 4 ,5 6 5'7- COPY OF THE ORDER FORWARDED TO: 1 . *+ / APPELLANT AKZO NOBEL INDIA LTD. (FORMERLY KNOWN A S IC INDIA LTD.), 8B, MIDDLETON STREET, KOLKATA-700 071. 2 ,-*+ / RESPONDENT, DCIT, CIRCLE-10, KOLKATA. 3 . .% ( )/ THE CIT(A), KOLKATA 4. .% / CIT, KOLKATA 5 . >? ,% / DR, KOLKATA BENCHES, KOLKATA -5 ,/ TRUE COPY, .%@/ BY ORDER, 2 /ASSTT. REGISTRAR .