Gaekwad Investment Corpn. Pvt. Ltd., Mumbai V. The ACIT., Circle-1(1), Surat

ITA 1832/AHD/2009

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9188 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 1995-1996
• Appeal Filed On: 02-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: J P SHAH
• Keywords: Depreciation; Retrospective amendment; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings; Set aside
• Section: 271(1)(c); 143(3); 192; 147; 148; 139

Judgement Text

IN THE INCOME_TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI H.L.KARWA AND SHRI A.N.PAHUJA ITA NOS.1832 & 1833/AHD/2009 (ASSESSMENT YEAR : 1995-96) GAEKWAD INVESTMENT CORPN. PVT. LTD. C/O BARODA RAYON CORPORATION HOECHST HOUSE, GROUND FLOOR, 193, BACK BAY RECLAMATION, NARIMAN POINT, MUMBAI-400021. VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 1(1), SURAT. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI J.P.SHAH, A.R. RESPONDENT BY : SHRI C.K.MISHRA, D.R. ( (( ( )/ )/)/ )/ ORDER PER KARWA, JM: THESE TWO APPEALS BY THE ASSESSEE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CO NVENIENCE. 2. GROUND NO.1 OF ITA NO.1832/AHD/2009 READS AS UNDER : 1.0 THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 IS BAD IN LAW AND ON FACTS. 1.1 THE APPELLANT SUBMITS THAT THERE IS NO OMISSION O N THE PART OF THE APPELLANT TO FURNISH AND/OR DISCLOSE THE MATERIAL NECESSARY INFORMATION FOR THE COMPLETION OF ORIGINAL ASSESSMENT. IT IS WELL SETTLED LAW THAT WHEN THE PRIMARY FACTS NECESSARY FOR ASSESSMENT ARE FULLY AND TRULY DISCLOSED, THE ASSESSING OFFICER WILL NOT BE ENTITLED TO COMMENCE PROCEED INGS FOR RE-ASSESSMENT. 2 1.2 THE APPELLANT, THEREFORE, PRAYS THAT THE ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX A CT, 1961 DESERVES TO BE QUASHED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASS ESSEE, A COMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED, IS ENGAGED IN THE BUSINESS OF INVESTMENT IN MOVABLE AND IMMOVABLE PROPERT IES SINCE LAST SEVERAL YEARS. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U /S 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT ) ON 12.3.1998 DETERMINING THE TOTAL INCOME AT RS.17,87,790/-. THERE AFTER, NOTICE U/S 148 WAS ISSUED BY THE ASSESSING OFFICER FOR THE FOLLOWING R EASONS: 'IT HAS BEEN NOTICED THAT INTEREST AND FINANCIAL CHARGE S DEBITED TO THE PROFIT & LOSS ACCOUNT ARE INCLUSIVE OF T HE INTEREST PERTAINING TO EARLIER ASSESSMENT YEAR AMOUNTING TO RS.15 ,30,000/- AS PER NOTE AT SR.NO.9 OF PARA B OF SCHEDULE XIV. WHI LE PASSING ORDER U/S. 143(3) OF THE ACT ON 12.3.98, TOTAL INCOME WAS DETERMINED AT RS.17,87,790/-. WHILE PASSING THE SAID OR DER, FINANCIAL CHARGES AGGREGATING TO RS.39,25,919/- WERE A LLOWED AS CLAIMED BY YOU. THE SAID FINANCIAL CHARGES INCLUDES INT EREST PERTAINING TO EARLIER YEAR AMOUNTING TO RS, 15,30,0 00/-. THERE IS UNDERASSESSMENT OF INCOME OF RS.15,30,000/- WHILE PASSING THE ORDER U/S. 143(3) OF THE ACT DATED 12.3.98 3.1 THE ASSESSING OFFICER ISSUED A LETTER DATED 08.7.2002 COMMUNICATING THE ABOVE REASONS FOR RE-OPENING AND ASKI NG THE ASSESSEE AS TO WHY ADDITION OF RS.15,30,000/- BE NOT MADE BECAU SE WHILE PASSING THE ORDER FINANCE CHARGES AGGREGATING TO RS.39,25,919/- WAS ALLOWED WHICH CONSISTED INTEREST OF EARLIER YEAR AMOUNTING TO R S.15,30,000/-. 3.2 IN RESPONSE TO ABOVE LETTER, THE ASSESSEE MADE DETAIL ED SUBMISSIONS VIDE ITS LETTER DATED 02.9.2009 STATING AS UN DER: 'IN THIS CONTEXT, WE HAVE BEEN ASKED TO STATE THAT OUR CLIENTS HAD TAKEN A LOAN FROM M/S. GOKAMA INVESTMENT CORPORAT ION PRIVATE LIMITED WHICH WAS AN INTEREST FREE LOAN AND HENCE, NO PROVISION FOR INTEREST PAYABLE WAS MADE IN THE YEAR RELEVANT TO THE ASST.YEAR 1994-95. HOWEVER, SUBSEQUENTLY I.E., IN THE YEAR UNDER 3 CONSIDERATION, THE LENDER COMPANY INFORMED OUR CLIENT T HAT IT HAS BEEN DECIDED IN THE BOARD MEETING OF THE LENDER COMPA NY THAT THE SAID LOAN MAY BE CONVERTED INTO AN INTEREST BEARING LO AN WITH RETROSPECTIVE EFFECT. ACCORDINGLY, SINCE THE MATTER WAS DECI DED IN THE YEAR UNDER CONSIDERATION TO CHARGE INTEREST NECESSARY PROVISION WAS MADE IN THE ACCOUNTS OF THE YEAR UNDER CONSIDERATION VLZ FINANCIAL YEAR RELEVANT TO THE ASST.YEAR 1995-96. IT IS THEREFORE, SUBMITTED THAT IN THE EARLIER YEAR T HERE WAS NO LIABILITY EXISTING FOR PAYMENT/PROVISION FOR INTEREST . THE SAID LIABILITY HAD ARISEN FOR THE FIRST TIME ONLY DURING THE YEAR UN DER CONSIDERATION AND ACCORDINGLY, THE PROVISION WAS MADE. UN DER THE CIRCUMSTANCES, THE QUESTION OF TREATING THE SAID PROVISION OF RS.15,30,000/- TOWARD INTEREST PAYABLE AS EXPENDITURE PERTAINING TO THE EARLIER YEAR DOES NOT ARISE AT ALL. WITHOUT PREJUDICE TO THE ABOVE, IT IS ALSO SUBMITTED TH AT THE MATTER RELATING T THE SAID INTEREST HAD ALREADY BEEN CLARIFIED BY WAY OF NOTE TO THE ANNUAL ACCOUNTS FOR THE YEAR UNDER CONSID ERATION. (REFER NOTE NO.9 OF SCHEDULE 14 - PART B). THUS THERE IS NO OMISSION ON THE PART OF OUR CLIENT TO FURNISH AND/OR DI SCLOSE THE MATERIAL NECESSARY FOR THE COMPLETION OF ORIGINAL ASSESSMEN T.' THE ASSESSING OFFICER DID NOT ACCEPT THE ABOVE REPLY OF T HE ASSESSEE AND RECOMPUTED THE TOTAL INCOME BY MAKING ADDITION ON ACCO UNT OF EARLIER YEARS EXPENSES AMOUNTING TO RS.15,30,000/-. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). BEFO RE THE CIT(A), THE ASSESSEE CHALLENGED THE ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SEC. 147 ON THE GROUND THAT SAME IS BAD IN LAW AS THERE WAS NO OMISSION ON THE PART OF THE ASSESSEE TO FURNISH OR DISCLOSE THE MAT ERIAL NECESSARY FOR COMPLETION OF THE ASSESSMENT. 5. THE CIT(A) REJECTED THE GROUND OF APPEAL OBSERVING AS UNDER: 3.3 I HAVE CONSIDERED THE SUBMISSION MADE BY THE APPELLANT AND THE OBSERVATION OF THE A.O. THE ORIGINAL ORDER U/S. 143(3) WAS PASSED ON 12.03.1998 WHEREAS THE NOTICE U/S. 148 WAS ISSUED ON 20.03.2002 AND 4 THE SAME WAS SERVED UPON THE ASSESSEE ON 28.03.2002, I.E. WITHIN FOUR YEARS FROM THE END OF THE ASSESSMENT OR,DER IN WHIC H ORDER U/S.143(3) WAS PASSED. W.E.F. 01.04.1989 AN ORDER PASSED U/S. 143(3) CAN BE REOPENED WITHIN FOUR YEARS. ONLY RESTRICTION MADE B Y THE PROVISO OF SECTION 147 IS THAT NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS UNLESS ANY INCOME CHARGEAB LE TO TAX HAS ESCAPED ASSESSMENT BY THE REASONS OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL. THIS CONDITION DOES NOT APPLY IF THE REOPENING IS DONE WITHIN FOUR YEAR S. AS PER EXPLANATION-2 CLAUSE-(C) SUB-CLAUSE-1, IF THE INCOM E CHARGEABLE TO TAX UNDER ASSESSED THEN AS PER THE DEEMING CLAUSE OF EX PLANATION-2, IT IS A CASE OF INCOME HAVING ESCAPED ASSESSMENT. IN VIEW OF THIS REASON, THE REOPENING IS IN ORDER AND THIS GROUND OF APPEAL IS DISMISSED. 6. BEFORE US, SHRI J.P.SHAH, THE LEARNED COUNSEL FOR T HE ASSESSEE VEHEMENTLY ARGUED THAT THE ORDER OF THE CIT(A) IS P ATENTLY WRONG SINCE HE HAS NOT APPRECIATED THE PROVISIONS OF LAW. SHRI J.P .SHAH, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS OBSER VED THAT THE ORIGINAL ORDER U/S 143(3) WAS PASSED ON 12.3.1998 WHERE AS THE NOTICE U/S 148 WAS ISSUED ON 20.3.2002 AND THE SAME WAS SERVED U PON THE ASSESSEE ON 28.3.2002, I.E. WITHIN FOUR YEARS FROM THE E ND OF THE ASSESSMENT ORDER U/S 143(3) WAS PASSED. SHRI J.P.SHAH, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT FIRST PROVISO TO SEC. 147 OF THE ACT SAYS THAT WHERE AN ASSESSMENT UNDER SUB. SECTION (3) O F SEC. 143 OR U/S 147 HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, N O 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 TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAI LURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN U/S 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB SECTION (1) OF SEC. 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR H IS ASSESSMENT, FOR THAT ASSESSMENT YEAR. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE THE PERIOD OF FOUR YEARS HAS TO BE COUNTED FROM THE EN D OF THE RELEVANT ASSESSMENT YEAR AND NOT FROM THE END OF THE ASSESSMENT ORD ER, AS HELD BY THE CIT(A). SHRI J.P.SHAH, THE LEARNED COUNSEL FOR THE ASSESSEE 5 SUBMITTED THAT NOTICE ISSUED U/S 148 ON 20.3.2002 WAS AF TER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE IN THE INSTANT CASE, ASSESSMEN T YEAR ENDED ON 31.3.1996 AND, THEREFORE, THE NOTICE ISSUED U/S 148 ON 20.3.2002 WAS BEYOND THE PERIOD OF FOUR YEARS FROM TH E END OF THE ASSESSMENT YEAR. 6.1 AS REGARDS VALIDITY OF REOPENING, SHRI J.P.SHAH, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT DURING THE YEAR UNDER CON SIDERATION, THE ASSESSEE COMPANY HAD BOOKED TOTAL INTEREST EXPENSES OF RS.39 ,25,919/- WHICH INCLUDED INTEREST EXPENSES OF RS.15,30,000/- PERTA INING TO ASSESSMENT YEAR 1994-95 AS THE SAME WAS CRYSTALLIZED IN THE ASSESSMENT YEAR 1995-96 AND WAS PROVIDED IN THE YEAR UNDER CONSID ERATION. THIS FACT WAS ALSO DISCLOSED IN THE NOTES TO ACCOUNT BY WAY OF DISCL OSURE IN NOTE NO.9 IN PART B TO THE NOTES TO THE ACCOUNTS. HE FURTHER SUBMITTED THAT DURING THE COURSE OF ORIGINAL ASSESSMENT, THE DETAILS IN RESPECT OF INTEREST PAYABLE ON DEPOSIT WERE ALSO FURNISHED VIDE LETTER DAT ED 18.2.1998. IN THE SAID LETTER, IT WAS CLEARLY SUBMITTED IN THE FORM O F TABLE THAT DETAILS OF INTEREST AND THE INTEREST PROVIDED INCLUDES RS.15,30,000 /- PERTAINING TO ASSESSMENT YEAR 1994-95 I.E. FINANCIAL YEAR 1993-94. THE FACT THAT THE SAME WAS CLEARLY DISCLOSED AND SPECIFIC INFORMATION WAS SUBM ITTED AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS, THEREFORE, THE ASSESSMENT CANNOT BE REOPENED DUE TO CHANGE IN THE OPINION OF TH E SUBSEQUENT ASSESSMENT BY THE ASSESSING OFFICER. SHRI J.P.SHAH, THE LEAR NED COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTENTION TO PAGE 2 OF TH E ORIGINAL ASSESSMENT ORDER WHERE THE ASSESSING OFFICER HIMSELF STATED T HAT ON FURTHER SCRUTINY OF THE BALANCE SHEET AND NOTE APPENDED TO THE STATEMENT OF TOTAL INCOME AND ACCOUNT, IT IS SEEN THAT THE ASSESSEE HA S NOT CHARGED INTEREST ON CLOSING BALANCE OF LOAN. SHRI J.P.SHAH, TH E LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT FROM THE ABOVE STATEMENT, IT IS CLEAR THAT THE ASSESSING OFFICER HAS SEEN NOTES TO ACCOUNT ALSO HIMSELF REFERR ING I.E. 6 NOTE NO.11 AND THE DISCLOSURE OF DEBITED INTEREST ON LO AN OF RS.15,30,000/- IS CLEARLY THERE IN NOTE NO.9 ABOVE NOT E NO.11. THUS, THE ASSESSEE HAD SUBMITTED ALL THE DETAILS IN RESPECT OF LOAN A ND ALSO CLEARLY MAKING FULL DISCLOSURE TO THE EFFECT OF INTEREST INCLUDI NG INTEREST OF RS.15,30,000/- PERTAINING TO ASSESSMENT YEAR 1994-95. IN VIEW OF THE ABOVE, SHRI J.P.SHAH, THE LEARNED CO UNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD DISCLOSED ALL THE PAR TICULARS IN RESPECT OF INTEREST AND REOPENING OF CASE U/S 147 IS MERE LY A CHANGE OF OPINION AND, THEREFORE, REOPENING THE CASE BEYOND FOU R YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IS INCORRECT AND AGAIN ST THE PROVISIONS OF SEC. 147 OF THE ACT. ACCORDINGLY, IT WAS SUBMI TTED THAT RE- ASSESSMENT PROCEEDINGS MAY BE CANCELLED. 7. SHRI C.K.MISHRA, THE LD. D.R. HEAVILY RELIED ON T HE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AN D HAVE ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. IN OUR VIE W, THE CIT(A) WAS NOT JUSTIFIED IN STATING THAT NOTICE U/S 148 OF THE ACT ISSUED ON 20.3.2002 AND SERVED UPON THE ASSESSEE ON 28.3.2002 WAS WITHIN THE FOUR YEARS FROM THE DATE OF ASSESSMENT ORDER. IN OUR VIEW, THIS OB SERVATION OF THE CIT(A) IS PATENTLY NOT CORRECT AND AGAINST THE PROVISION S OF LAW. AS PER THE LAW, FOUR YEARS HAS TO BE COUNTED FROM THE END OF THE ASSESSMENT YEAR AND NOT FROM THE DATE OF PASSING OF THE ASSESSMENT O RDER AS STATED BY THE CIT(A). IN THE INSTANT CASE, ADMITTEDLY, THE ASSE SSMENT YEAR ENDED ON 31.3.1996 AND, THEREFORE, THE NOTICE ISSUED O N 20.3.2002 U/S 148 WAS SERVED UPON THE ASSESSEE ON 28.3.2002 WAS BEYOND F OUR YEARS FROM THE END THE ASSESSMENT YEAR. 8.1 AS REGARDS THE VALIDITY OF REOPENING, WE FIND THA T DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD BOOKED TOTAL INTEREST 7 EXPENSES OF RS.39,25,919/- WHICH INCLUDED INTEREST EXPENSE S OF RS.15,30,000/- PERTAINING TO ASSESSMENT YEAR 1994-95 AS THE SAME WAS CRYSTALLIZED IN THE ASSESSMENT YEAR 1995-96 AND WAS PROVID ED IN THE YEAR UNDER CONSIDERATION. THIS FACT IS CLEAR FROM THE NOTES T O ACCOUNT BY WAY OF DISCLOSURE IN NOTE NO.9 IN PART B TO THE NOTES OF T HE ACCOUNTS WHICH READS AS UNDER: 9) THE INTEREST AND FINANCE CHARGES AGGREGATING TO RS.39,25,919/-, INTER ALIA, INCLUDES INTEREST PERTAINS T O EARLIER YEAR ACCOUNTING TO RS. 15,30,000/-. WE ALSO FIND THAT DURING THE COURSE OF ORIGINAL ASSESSMEN T, THE DETAILS IN RESPECT OF INTEREST PAYABLE ON DEPOSIT WERE ALSO FURNISH ED VIDE LETTER DATED 18.2.1998 WHICH READS AS UNDER: 4]INTEREST PAYABLE ON DEPOSITS RS.44,06,629/- : AMOUNT RS. INTEREST PAYABLE TO GOKRNA INV. PVT. LTD. (1994- 95) 11,78,100.00 INTEREST PAYABLE TO GOKRNA INV. PVT. LTD. (1993- 94) 15,30,000.00 INTEREST PAYABLE ON DEPOSIT (BARODA) (1994-95) 4,725.00 INTEREST PAYABLE ON DEPOSIT (OLD) 75,698.87 INTEREST PAYABLE ON DEPOSIT (1989-90) 3,26,205.00 INTEREST PAYABLE ON DEPOSIT (BOMBAY) 3,56,546.95 INTEREST PAYABLE ON DEPOSIT (1991-92) 75,098.60 INTEREST PAYABLE ON DEPOSIT (1993-94) 76,350.00 INTEREST PAYABLE ON DEPOSIT (1994-95) 3,69,925.25 INTEREST PAYABLE ON FIXED DEPOSIT SMT. M.D.PAUR UPTO 31.3.93 4,13,979.33 TOTAL 44,06,629.33 WE HAVE, THEREFORE, BEEN ASKED TO REQUEST YOU TO KIND LY TAKE THE ABOVE INFORMATION ON RECORD AND OBLIGE. IF ANY FURTH ER CLARIFICATION AND/OR INFORMATION IS REQUIRED, THE SAME SHALL BE FURN ISHED IMMEDIATELY ON HEARING FROM YOU. THANKING YOU, YOUR FAITHFULLY , , 8 FOR HARIBHAKTI & CO. , CHARTERED ACCOUNTANTS SD/- (HITESH J. DESAI) PARTNER FROM THE ABOVE LETTER, IT IS CLEAR THAT THE ASSESSEE HAD CLEARLY SUBMITTED IN THE FORM OF TABLE THE DETAILS OF INTEREST AND THE INTEREST PROVIDED INCLUDED RS.15,30,000/- PERTAINING TO THE ASSESSMENT YEAR 1994-95 FOR THE FINANCIAL YEAR 1993-94. THUS, IT IS CLEAR THAT THE ASSESSEE HAD DISCLOSED AND SPECIFIC INFORMATION WAS SUBMITTED AT THE T IME OF ORIGINAL ASSESSMENT PROCEEDINGS. NOW, THE ASSESSMENT CANNOT BE REOPEN ED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. WE HAVE ALSO PERUSED THE ORIGINAL ASSESSMENT ORDER DATED 12.3.199 8 PASSED U/S 143(3) OF THE ACT. WE FIND THAT AT PAGE 2 OF THE ASSE SSMENT ORDER, THE ASSESSING OFFICER HAS HIMSELF STATED THAT ON FURTHER SCRUTIN Y OF THE BALANCE SHEET AND NOTES APPENDED TO THE STATEMENT OF TO TAL INCOME AND ACCOUNT, IT IS SEEN THAT THE ASSESSEE HAS NOT CHARGED INTEREST ON CLOSING BALANCE OF LOAN. FROM THE ABOVE, IT IS CLEAR THAT TH E ASSESSING OFFICER HAS SEEN NOTE ON ACCOUNT ALSO WHICH HE HIMSELF REFERRED I .E. NOTE NO.11 AND THE DISCLOSURE OF DEBITED INTEREST ON LOAN OF RS.15, 30,000/- IS CLEARLY THERE IN NOTE NO.9 ABOVE NOTE NO.11. IN OUR CONSIDERE D VIEW, THE ASSESSEE HAS SUBMITTED ALL THE DETAILS IN RESPECT OF LOAN AN D ALSO CLEARLY MAKING FULL DISCLOSURE TO THE INTEREST INCLUDING INTEREST OF RS.15,30,000/- PERTAINING TO THE ASSESSMENT YEAR 1994-95. 9. NOW, WE WILL EXAMINE THE RELEVANT PROVISIONS OF LA W. PROVISO 1 TO SECTION 147 READS AS UNDER: 147. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY I NCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE 9 PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTED THE LOSS OR T HE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CA SE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RE LEVANT ASSESSMENT YEAR): PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVAN T ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE R ELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UN DER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SE CTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSED FULLY AN D TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR. 10. FROM THE ABOVE PROVISIONS OF LAW, IT IS CLEAR THA T U/S 147 OF THE ACT, ASSESSMENT MADE U/S 143(3) OF THE ACT CAN BE REOPENED AFT ER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YE AR, IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHAR GEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NE CESSARY FOR THE ASSESSMENT OF THAT ASSESSMENT YEAR. IN THE INSTANT CASE, THE ORIGINAL ASSESSMENT ORDER U/S 143(3) WAS PASSED ON 12.3.1998 DETERM INING THE TOTAL INCOME OF RS.17,87,790/-. THEREAFTER, NOTICE U/S 148 WAS ISSUED ON 20.3.2002 AND THE SAME WAS SERVED UPON THE ASSESSEE ON 28 .3.2002, I.E. BEYOND FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. A S WE HAVE ALREADY OBSERVED THAT IN THE INSTANT CASE, THE ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS IN THE FORM OF LETTERS, NOTES AND THE SCH EDULE ANNEXED TO THE BALANCE SHEET, IN THAT VIEW OF THE MATTER, THE CO NTENTION OF THE REVENUE THAT THE ASSESSEE HAS FAILED TO DISCLOSE THE MATERI AL FACTS, IS NOT TENABLE. 10.1 IN THE CASE OF FENNER (INDIA) LTD. VS. DCIT (200 0) 241 ITR 672 (MAD.), THE HONBLE HIGH COURT HELD THAT IN ORDE R TO REOPEN AN 10 ASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM THE END OF TH E RELEVANT ASSESSMENT YEAR, THE ASSESSING OFFICER MUST NECESSARILY RECORD NO T ONLY HIS REASONABLE BELIEF THAT INCOME HAS ESCAPED ASSESSMENT BUT ALSO THE DEFAULT OR FAILURE OF ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS; NOTICE ISSUED U/S 148 AFTER EXPIRY OF FOUR YEARS CANNOT B E SUSTAINED AS ESCAPEMENT OF THE INCOME, IF ANY, IS NOT ON ACCOUNT OF AN Y FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE MATERIAL FACTS FULLY A ND TRULY. 10.2 IN THE CASE OF DULI CHAND SINGHANIA VS. ACIT ( 2004) 269 ITR 192 (P&H), THE HONBLE HIGH COURT HELD THAT IN THE ABSE NCE OF ANY ALLEGATION IN THE REASONS RECORDED OF FAILURE ON ASSESSEE S PART TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE AS SESSMENT, NO ACTION U/S 147 COULD BE TAKEN AFTER THE EXPIRY OF FOUR YEAR S FROM THE END OF THE RELEVANT ASSESSMENT YEAR IN VIEW OF THE PROVISO TO SEC. 14 7 OF THE ACT. 10.3 IN THE CASE OF HARYANA ACRYLIC MANUFACTURING CO. VS. CIT & ANR. (2009) 308 ITR 38, THE HONBLE DELHI HIGH COURT HELD THAT THERE BEING NO WHISPER IN THE REASONS SUPPLIED TO THE ASSESSEE T HAT INCOME ESCAPED ASSESSMENT BY WAY OF REASON OF ASSESSEES FAILURE TO MA KE FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS NECESSARY FOR NO TICE U/S 147 ISSUED BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WAS BARRED BY LIMITATION UNDER PROVISO TO SEC. 147, HEN CE WITHOUT JURISDICTION. 10.4 IN THE CASE OF KRISHNA METAL INDUSTRIES VS. H.M.ALG OTAR, ACIT (1997) 225 ITR 853 (GUJ.), THE HONBLE HIGH COURT HEL D THAT ASSESSMENT HAVING BEEN MADE U/S 143(3) AND THERE BEING NO ALLEG ATION IN THE NOTICE U/S 148 THAT ASSESSEE HAS FAILED TO MAKE FULL AND TRUE D ISCLOSURE; NOTICE U/S 148 ISSUED BEYOND FOUR YEARS FROM THE END OF THE R ELEVANT ASSESSMENT YEAR WAS BARRED BY LIMITATION. 10.5 IN THE CASE OF AVANI CORPORATRION VS. ITO (1999 ) 238 ITR 407 (GUJ.), THE HONBLE HIGH COURT HELD THAT INITIATION O F PROCEEDINGS U/S 147 PURSUANT TO NOTICE U/S 148 ISSUED BEYOND FOUR YEARS FROM THE END OF THE 11 RELEVANT ASSESSMENT YEAR WAS WITHOUT JURISDICTION AS THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS. 10.6 IN THE CASE OF VARELI WEAVERS PVT. LTD. VS. DCIT (1999) 240 ITR 77 (GUJ.), THE HONBLE GUJARAT HIGH COURT HELD TH AT INITIATION OF ACTION U/S 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END O F RELEVANT ASSESSMENT YEAR WAS CLEARLY BARRED BY TIME AS THE REASONS RE CORDED BY ASSESSING OFFICER DID NOT MENTION ABOUT FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS WHICH ALLEGEDLY LED TO ESCAPEMENT OF INCOME. 11. IN THE INSTANT CASE ALSO, THE REASONS RECORDED BY THE ASSESSING OFFICER DID NOT MENTION ABOUT FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS WHICH ALLEGED LY LED TO ESCAPEMENT OF INCOME AND, THEREFORE, INITIATION OF PRO CEEDINGS U/S 147 OF THE ACT AFTER THE EXPIRY OF FOUR YEARS FROM THE END O F THE RELEVANT ASSESSMENT YEAR IS CLEARLY BARRED BY LIMITATION. 12. IN THE INSTANT CASE, WE ARE ONLY CONCERNED WITH THE ISSUE AS TO WHETHER THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRU LY ALL MATERIAL FACTS REGARDING CLAIM OF INTEREST. ONCE WE HAVE HELD THA T THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL FACTS, THE REOPENING OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 1995-96 AFTER THE EX PIRY OF FOUR YEARS CANNOT BE SUSTAINED. WHILE HOLDING SO, WE ARE ALSO FORTIFIED BY THE DECISIONS REFERRED TO ABOVE. IN VIEW OF THE ABOVE, WE HOLD THAT THE REOPENING O F THE ASSESSMENT, IN THE INSTANT CASE WAS BAD IN LAW AND THUS, TH E CONSEQUENTIAL ORDER PASSED U/S 143(3) READ WITH SEC. 147 O F THE ACT DATED 30.9.2002 IS LIABLE TO BE QUASHED. WE ACCORDINGLY CANCEL THE IMPUGNED ORDER PASSED U/S 143(3) READ WITH SEC. 147 OF T HE ACT. THUS, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED. 12 13. IN VIEW OF OUR DECISION ABOVE, WE DO NOT THINK IT NECESSARY TO DECIDE THE OTHER GROUNDS OF APPEAL I.E. GROUND ON MER ITS. ITA NO.1833AHD/2009: 14. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE OR DER OF CIT(A), SURAT IN CONFIRMING THE PENALTY OF RS.6,57,900/- LEVI ED U/S 271(1)(C) OF THE ACT FOR THE ASSESSMENT YEAR 1995-96. 15. HEARD. IN OUR VIEW, ORDINARILY, PENALTY CANNOT STA ND IF THE ASSESSMENT ITSELF IS SET ASIDE. WHILE DECIDING ITA NO.1832/A HD/2009 (SUPRA), WE HAVE CANCELLED THE REASSESSMENT PROCEEDINGS AN D QUASHED THE ORDER OF CIT(A) AND, THEREFORE, PENALTY DOES NOT SURVIVE. IT IS WELL SETTLED LAW THAT WHERE AN ORDER OF ASSESSMENT OR REASSESSM ENT ON THE BASIS OF WHICH PENALTY HAS BEEN LEVIED ON THE ASSESSEE HAS I TSELF BEEN FINALLY SET ASIDE OR CANCELLED BY THE TRIBUNAL OR OTHER WISE, THE PENALTY CANNOT STAND BY ITSELF AND THE SAME IS LIABLE TO BE CAN CELLED. IN VIEW OF THE SETTLED LAW, WE CANCEL THE IMPUGNED PENALTY. 16. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 04.9. 2009. SD/- (A.N.PAHUJA) ACCOUNTANT MEMBER SD/- (H.L.KARWA) JUDICIAL MEMBER AHMEDABAD, DATED:04.9.2009 PSP* 13 COPY TO : (1) THE ASSESSEE (2) THE ASSESSING OFFICER (3) THE CIT(A) CONCERNED, (4) THE CIT, CONCERNED, (5) THE DR, ITAT, AHMEDABAD, (6) GUARD FILE. BY ORDER ASSTT. REGISTRAR / D EPUTY REGISTRAR ITAT, AHMEDABAD BENCHES AHMEDABAD.