ACIT, CC - I (2), CHENNAI V. M/S. BALAJI HOTELS & ENTERPRISES LTD., CHENNAI

ITA 208/CHNY/2020

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8558 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 06-02-2024
• Assessment Year: 2009-2010
• Appeal Filed On: 26-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Capital asset; Business income; Depreciation; Earning of tax free income; Cost of acquisition; Bad and doubtful debts; Difference of opinion; Capital receipt; Revised return; Reason to believe; Change of opinion; Reassessment proceedings; Rule 8D; Set aside; Capital Gains
• Section: 147; 148; 37; 28; 43B; 139; 143(3); 142(1); 14A; 115JB; 139(5); 251; 208; 264; 13; 153; 22; 20

Judgement Text

आयकर अपीलीय अिधकरण, ‘बी’ ᭠यायपीठ,चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ᮰ी महावीर ᳲसह, उपा᭟यᭃ एवं ᮰ी मनोज कुमार अᮕवाल, लेखा सद᭭य के समᭃ BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENTAND SHRI MANOJ KUMAR AGGARWAL, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.: 207, 208 & 209/CHNY/2020 िनधाᭅरण वषᭅ/Assessment Years: 2008-09, 2009-10 & 2010-11 The Asst. Commissioner of Income Tax, Corporate Circle -1(2), Chennai. Vs. Balaji Hotels & Enterprises Ltd., No.17/1, Bazullah Road, T.Nagar, Chennai -600 017. PAN: AAACB 1445P (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri V. Nandakumar, CIT ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri D. Anand, Advocate सुनवाई कᳱ तारीख/Date of Hearing : 07.02.2024 घोषणा कᳱ तारीख/Date of Pronouncement : 23.02.2024 आदेश /O R D E R PER MAHAVIR SINGH, VICE PRESIDENT: These appeals by the Revenue are arising out of different orders of the Commissioner of Income Tax (Appeals)-4(i/c), Chennai in ITA No.13/10-11/CIT(A)-4/A.Y.2008-09, 458/16-17/CIT(A)-4/A.Y.2009- 10 & 361/13-14/CIT(A)-4/A.Y.2010-11 dated 11.11.2019 & 05.11.2019. The assessments were framed by the Assistant Commissioner of Income Tax, Company Circle I(3), Chennai for the - 2 - ITA Nos.207 to 209/Chny/2020 assessment years 2008-09 & 2010-11 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide orders dated 31.12.2010 & 27.03.2013 respectively and by the Deputy Commissioner of Income Tax for the assessment year 2009-10 u/s.143(3) r.w.s.147 of the Act vide order dated 15.03.2016 ITA No.207/CHNY/2020, Assessment year 2008-09 2. The only issue in this appeal of Revenue is as regards to the order of CIT(A) allowing the claim of assessee i.e., increase in computation of capital loss, claimed at assessment stage only by way of filing a letter instead of revised return of income. For this, Revenue has raised the following ground Nos.2 to 5:- 2. The learned CIT(A) erred in allowing assessee's appeal without appreciating the fact that the assessee's claim is not regarding any omission of claiming deduction, whose relevent particulars are already disclosed in original/ revised ROI but the assessee's claim is regarding increase in computation of capital loss which has been claimed in assessment stage only which can not be allowed without filing revised ROI as per the provisions of IT Act? 3. The learned CIT(A) erred in allowing assessee's appeal, without appreciating the Hon’ble supreme Court Judgement in the case of M/s Goetze (India) Ltd 284 ITR 323(SC) wherein it has been held that- an assessee can not amend a return fled by him for making a claim for deduction other than by filing a revised return? 4. Whether on facts and circumstances of the case, the ld. CIT(A) was right in allowing assessee's appeal by relying on the cases such as CIT Vs Shri Someshwvar Sahakari Karkhana Ltd [177 ITR 443(BOM), CIT Vs Mahendra Mills (243 ITR 56(SC) where cases relates to depreciation to be considered as per revised ROI filed whereas circumstances of the present case of the assessee is different as there is no revised return? 5. The learned CIT(A) failed to appreciate the decision of Hon'ble ITAT, Mumbai in the case of IO - 11(2)2), Mumbai Vs Dr. Dhruman Desai (in ITA. - 3 - ITA Nos.207 to 209/Chny/2020 NO.4066/MUM/ 2013 dated 1/3/2016)reported in 2016-LL-0301-115 wherein it was held the revised computation of income has been filed beyond the time limit prescribed for filing revised return of income u/s 139/5) of the Act and we have held that the assessee is not entitled to make good his omission to file revised return of income by filing the revised computation of income, since the said action of the assessee would defeat the statutory mandate of the provisions of sec139(5) r.w.s. 139(3) of the Act. Accordingly, we are of the view that the assessing officer was justified in ignoring the loss occurred in F & O transactions and declared in the revised computation of income, since the said claim has been made beyond the time limit prescribed u/s 139(5) of the Act? 3. Brief facts are that the assessee is a property developer carrying out hotel projects and commercial projects but did not carry out any business activity during the year under consideration, for the reason that these projects got struck for various reasons and therefore, remained as capital work in progress. The assessee has obtained substantial loans to develop these projects and the debt to the banks i.e., IFCI & TFCI could not be settled and hence, the company was taken over by Asset Reconstruction Company (India) Ltd. During the year under consideration, hotel property was sold by IFCI to Robust Hotels Ltd., for a total consideration of Rs.251 crores and commercial complex was mortgaged to ICICI Bank and which was ultimately sold to Ramani Hotels Ltd., for a consideration of Rs.63 crores. In aggregate, the total sale value was Rs.314,11,72,802/-. The AO during the course of scrutiny assessment proceedings noted that the assessee has admitted loss in the return of income at Rs.105,99,78,952/- for future carry - 4 - ITA Nos.207 to 209/Chny/2020 forward and set off against long term capital gains. Further, the assessee filed revised computation of income during the course of assessment proceedings, filed documents in proof of sale value adopted in it, the value of indexed cost of acquisition of the asset including interest cost and other indirect costs and therefore, the long term capital loss by way of this revised computation claimed at Rs.173,59,69,695/-. But the AO noted that this loss i.e., enhanced loss is not claimed through revised return of income and hence, following the decision of Hon’ble Supreme Court in the case of Goetze (India) Ltd., vs. CIT reported in 284 ITR 323 (SC) allowed the claim to the extent of Rs.105,99,78,952/- for future carry forward and set off as the same has been claimed in the return of income. Aggrieved, assessee preferred appeal before the CIT(A). 4. The CIT(A) noted the fact that in assessee’s case, the claim was not missed altogether in the return of income but the same was claimed through revised computation of income and assessee has disclosed the loss from the sale of property in the Profit & Loss account in Schedule-R under the head ‘exceptional items’ as under:- Loss on sale of Hotel Complex - Rs.56,62,54,982/- Loss on sale of Commercial Complex - Rs.44,53,94,431/- TOTAL - Rs.101,16,49,413/- - 5 - ITA Nos.207 to 209/Chny/2020 Further, the CIT(A) noted that in column No.47 of Part A of Profit & Loss account filed along with return of income the assessee has shown profit after tax as Rs.102,83,71,570/- comprised of the above referred loss of Rs.101,16,49,413/-. The CIT(A) noted that the AO appeared to have factually erred in stating that the assessee did not make the claim in its return of income and mere omission of loss relating to the sale of commercial property under ‘capital gains’ in the return of income shall not mean that assessee did not make a claim in the loss in the first place. He noted that the assessee has furnished the statement of total income during the assessment proceedings and there mistake crept in, which was subsequently filed in the revised computation of income but not new claim has been made. The CIT(A) also noted in regard to loss on commercial property as computed u/s.45 of the Act, for a sum of Rs.51,05,33,252/- was although not claimed but entire transaction of sale of commercial property was available in the return of income as the creditors of the assessee sold the hotel of commercial property for an aggregate consideration of Rs.314,11,72,802/-, which included the commercial property for a price of Rs.63 crores. The CIT(A) relying on various case loss including the Goetze (India) Ltd., supra allowed the claim of assessee by observing in para 9 as under:- - 6 - ITA Nos.207 to 209/Chny/2020 “In view of the above discussion, more particularly the fact that the appellant’s claim of long term capital loss claimed is allowable by the AO when all the facts relating thereto were undisputedly already on record and in light of the judicial precedents quoted supra, the disallowance of such long term capital loss of Rs.157,05,12,204/- is held to be untenable and therefore allowed as long term capital loss for the current year. This ground is therefore allowed.” Aggrieved, now Revenue is in appeal before the Tribunal. 5. Before us, the ld.CIT-DR only relied on the decision of Geotze (India) Ltd., supra and stated that the issue as to whether claim for deduction could be made by way of letter before the AO, if, it did not form part of the original return, the Hon’ble Supreme Court ruled that while doing so, the AO did not have the power to entertain the claim for deduction made after the return was filed otherwise than by filing of revised return. The ld.CIT-DR stated that the CIT(A) should not have entertained this new claim but when Bench put a query to him, whether all the facts relating to sale and purchase of hotel property and commercial complex by IFCI & ICICI Bank was available before the AO, he should have computed the aggregate income of the assessee as held by the Hon’ble Supreme Court in the case of CIT vs. Kanpur Coal Syndicate reported in (1964) 53 ITR 225, that the scope of power of the appellate authority i.e., of CIT(A) is co-terminus with that of the AO and he can do what the AO can do and also direct him to do what he has failed to do. - 7 - ITA Nos.207 to 209/Chny/2020 6. On the other hand, the ld.counsel for the assessee supported the order of CIT(A) and also filed copy of decision of Hon’ble Madras High Court in the case of Abhinitha Foundation Pvt. Ltd., reported in (2017) 396 ITR 251 (Mad). 7. We have heard rival contentions and gone through facts and circumstances of the case. Admittedly, the AO is aware about the fact that the properties of assessee i.e., hotel property was sold by IFCI to Robust Hotels Ltd., for a total consideration of Rs.251 Crores and commercial complex mortgaged to ICICI Bank was sold to Ramani Hotels Ltd., for a total consideration of Rs.63 Crores. In aggregate, the total consideration from both the parties is Rs.314,11,72,802/-. During the course of scrutiny assessment proceedings, the assessee provided the complete computation of long term capital loss arising from the sale of property at Rs.173,59,69,695/- as against Rs.105,99,78,952/- originally returned by the assessee, the revised computation of income provided by assessee, filed documents and proof of sale value adopted, value of indexed cost of acquisition of assets including interest cost and other indirect costs which were verified by the AO. This fact is noted by himself in the assessment order at para 2. Admittedly, the assessee has filed this claim by way of revised - 8 - ITA Nos.207 to 209/Chny/2020 computation of income along with a letter during the course of assessment proceedings. We noted that this issue has been settled by the Hon’ble Supreme Court in the case of Goetze India Ltd., supra, wherein the Hon’ble Supreme Court has noted that the issue for consideration before the Supreme Court was, as to whether a claim for deduction could be made by way of letter before the AO, if, it did not form part of the original return. The Hon’ble Supreme Court ruled this while doing so, to their minds, the AO did not have the power to entertain the claim for deduction made after the return of income was filed, otherwise than by filing a revised return of income but it did not exclude the power of the Tribunal to consider the claim in exercise of its appellate power u/s.254 of the Act. The Hon’ble Supreme Court has observed in para 4 as under:- “4. The decision in question is that the power of the Tribunal under S.254 of the IT Act, 1961, is to entertain for the first time a point of law provided the fact on the basis of which the issue of law can be raised before the Tribunal. The decision does not in any way relate to the power of the AO to entertain a claim for deduction otherwise than by filing a revised return. In the circumstances of the case, we dismiss the civil appeal. However, we make it clear that the issue in this case is limited to the power of the assessing authority and does not impinge on the power of the Tribunal under s.254 of the IT Act, 1961. There shall be no order as to costs.” 7.1 We also noted that the Division Bench of Bombay high Court in the case of CIT vs. Pruthvi Brokers & Shareholders P. Ltd., reported - 9 - ITA Nos.207 to 209/Chny/2020 in [2012] 349 ITR 336 has considered an identical issue and held as under:- ''14. A long line of authorities establish clearly that an assessee is entitled to raise additional grounds not merely in terms of legal submissions, but also additional claims to wit claims not made in the return filed by it. It is necessary for us to refer to some of these decisions only to deal with two submissions on behalf of the department. The first is with respect to an observation of the Supreme Court in Jute Corporation of India Limited v. Commissioner of Income Tax, 1991 Supp (2) SCC 744 = (1991) 187 ITR 688. The second submission is based on a judgment of the Supreme Court in Goetze (India) Limited v. Commissioner of Income Tax, (2006) 157 Taxman 1. (A). In Jute Corporation of India Limited v. CIT, for the assessment year 1974-75 the appellant did not claim any deduction of its liability towards purchase tax under the provisions of the Bengal Raw Jute Taxation Act, 1941, as it entertained a belief that it was not liable to pay purchase tax under that Act. Subsequently, the appellant was assessed to purchase tax and the order of assessment was received by it on 23rd November, 1973. The appellant challenged the same and obtained a stay order. The appellant also filed an appeal from the assessment order under the Income Tax Act. It was only during the hearing of the appeal that the assessee claimed an additional deduction in respect of its liability to purchase tax. The Appellate Assistant Commissioner (AAC) permitted it to raise the claim and allowed the deduction. The Tribunal held that the AAC had no jurisdiction to entertain the additional ground or to grant relief on a ground which had not been raised before the Income Tax Officer. The Tribunal also refused the appellant's application for making a reference to the High Court. The High Court upheld the decision of the Tribunal and refused to call for a statement of case. It is in these circumstances that the appellant filed the appeal before the Supreme Court. 15.The Supreme Court held as under (page 693) :- ''In CIT v. Kanpur Coal Syndicate, a three Judge bench of this Court discussed the scope of Section 31(3)(a) of the Income Tax Act, 1922 which is almost identical to Section 251(1)(a). The court held as under: (ITR p. 229) “If an appeal lies, Section 31 of the Act describes the powers of the Appellate Assistant Commissioner in such an appeal. Under Section 31(3)(a) in disposing of such an appeal the Appellate Assistant Commissioner may, in the case of an order of assessment, confirm, reduce, - 10 - ITA Nos.207 to 209/Chny/2020 enhance or annul the assessment; under clause (b) thereof he may set aside the assessment and direct the Income Tax Officer to make a fresh assessment. The Appellate Assistant Commissioner has, therefore, plenary powers in disposing of an appeal. The scope of his power is co-terminus with that of the Income-tax Officer. He can do what the Income-tax Officer can do and also direct him to do what he has failed to do.” (emphasis supplied) The above observations are squarely applicable to the interpretation of Section 251(1)(a) of the Act. The declaration of law is clear that the power of the Appellate Assistant Commissioner is coterminus with that of the Income Tax Officer, if that be so, there appears to be no reason as to why the appellate authority cannot modify the assessment order on an additional ground even if not raised before the Income Tax Officer. No exception could be taken to this view as the Act does not place any restriction or limitation on the exercise of appellate power. Even otherwise an Appellate Authority while hearing appeal against the order of a subordinate authority has all the powers which the original authority may have in deciding the question before it subject to the restrictions or limitations if any prescribed by the statutory provisions. In the absence of any statutory provision the Appellate Authority is vested with all the plenary powers which the subordinate authority may have in the matter. There appears to be no good reason and none was placed before us to justify curtailment of the power of the Appellate Assistant Commissioner in entertaining an additional ground raised by the assessee in seeking modification of the order of assessment passed by the Income Tax Officer. ‘[emphasis supplied]'' (B) It is clear, therefore, that an assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised. It cannot, however, be said that they have no jurisdiction to consider the same. They have the jurisdiction to entertain the new claim. That they may choose not to exercise their jurisdiction in a given case is another matter. The exercise of discretion is entirely different from the existence of jurisdiction.” 7.2 The Hon’ble Jurisdictional High Court in the case of Abhinitha Foundation Pvt. Ltd., supra has finally considered and held that, - 11 - ITA Nos.207 to 209/Chny/2020 what emerges from a perusal of the ratio of the judgments cited above, in particular, the judgments rendered by the Supreme Court in the case of Goetze India Ltd., and National Thermal Power Co. Ltd.'s case, and those, rendered by the Division Bench of this Court in Ramco Cements Ltd. and CIT vs Malind Laboratories P. Ltd., as also the judgments of the Delhi High Court in Sam Global Securities Ltd.'s case and Jai Parabolic Springs Ltd.'s case, that, even if, the claim made by the assessee company does not form part of the original return or even the revised return, it could still be considered, if, the relevant material was available on record, either by the appellate authorities, (which includes both the CIT (A) and the Tribunal) by themselves, or on remand, by the Assessing Officer. In the instant case, the Tribunal, on perusal of the record, found that the relevant material qua the claim made by the assessee company under Section 80 IB (10) of the Act was placed on record by the assessee company during the assessment proceedings and therefore, it deemed it fit to direct its reexamination by the Assessing Officer. 8. In view of the above legal position noted by Hon’ble Supreme Court and almost all High Courts in unanimity and also Jurisdictional High Court in the case of Abhinitha Foundation Pvt. Ltd., supra, we uphold the order of CIT(A) and dismiss this appeal of Revenue. - 12 - ITA Nos.207 to 209/Chny/2020 ITA No.208/CHNY/2020, Assessment year 2009-10 9. The only issue in this appeal of Revenue is against the order of CIT(A) quashing the reassessment proceedings. For this, Revenue has raised the following grounds:- 2. Whether on fact and circumstances of the case, the Ld. CITA) was right in quashing the reassessment proceeding by holding that reassessment proceeding was change of opinion but not regarding any factual finding or information, whereas in this assessee's case, based on RAP objection the case was reopened and new material fact brought on record that the assessee has claimed Bad debt as expenses which was not allowable in accordance with 36(1)(Vii) ? 3. Whether on fact and circumstances of the case and in law, the Ld. CIT(A) was right in quashing the reassessment proceeding by holding that reassessment proceeding was change of opinion but not regarding any factual finding or information, without appreciating the fact that as per explanation 1 to the provided clause of section 147 - "Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure"? 4. Whether on fact and circumstances of the case, the Ld.CIT(A) was right in quashing the reassessment proceeding in light of the decision of the Hon'ble Supreme Court, in the case of M/s P. V.S. Beedies (P.) Ltd VS CIT, in CA No. 1564-65 of 1987 dated October 1st , 1997, held that -where audit party had merely pointed out a fact which had been overlooked by Assessing Officer and this was not a case of information on a question of law, hence, reopening of case under section 147(b) on basis of factual information given by internal audit party was valid in law.? 5. D. Whether on fact and circumstances of the case, the Ld.CIT(A) was right in quashing the reassessment proceeding in light of the decision Hon’ble Delhi High Court in the case of M/s. Consolidated Photo and Finvest Ltd. Vs. ACIT (2006) [151 Taxman 41] wherein it was held that the Assessing Officer can resort to reassessment without any new evidence on - 13 - ITA Nos.207 to 209/Chny/2020 the issue which was not a part of the original assessment order. Further, the Court held, "the other argument that production of the account books and documentary evidences relevant for assessment must imply full and true disclosures of all material facts must be rejected out of hand in the light of the provisions of explanation (1)" 6. Whether on fact and circumstances of the case, the Ld. CIT(A) was right in quashing the reassessment proceeding in light of the decision of the Hon'ble supreme court in the case of Phool Chand Bajrang Lal v. ITO, (1993) 4 SCC 77, wherein it was held "Under section 147 cases having wilfully made false or untrue statements at the time of original assessment and when that falsity comes to notice, it is not fair on the part of the petitioner to turn around and say you accepted my lie, now your hands are tied and you can do nothing ? 10. At the outset, the ld.counsel for the assessee, with permission of the Bench stated that the issue in this appeal of Revenue is falling under the proviso to section 147 of the Act and reopening of assessment u/s.148 of the Act. 11. Brief facts are that the assessee company filed its original return of income on 27.09.2009 for the relevant assessment year 2009-10. The original assessment was completed u/s.143(3) of the Act vide order dated 31.12.2011 after making disallowance of expenses relatable to exempt income under Rule 8D of the Income Tax Rules, 1962 (hereinafter the ‘Rules) read with provisions of Section 14A of the Act. Subsequently, the AO issued notice u/s.148 of the Act dated 14.03.2015 and in consequent to the same, the assessee filed a letter dated 26.09.2015 stating that the original - 14 - ITA Nos.207 to 209/Chny/2020 return of income filed for the relevant assessment year may be treated as return filed in response to notice u/s.148 of the Act. The assessment for assessment year 2009-10 was reopened u/s.147 of the Act, since there was reason to believe that the assessee has claimed bad debt of Rs.55,92,38,563/- despite the fact that there was no business carried out by the assessee during the relevant assessment year and income shown as exceptional item of Rs.32,65,14,574/- was not offered to tax in the profit & loss account. Accordingly, reassessment was framed u/s.143(3) r.w.s. 147 of the Act vide order dated 15.03.2016. The assessee required the reasons recorded for reopening of assessment which was supplied by the Revenue vide letter dated 29.09.2015 for reopening of assessment, which reads as under:- "On verification of Balance sheet the profits as per the Profit and loss Accounts were not adopted for computation. The in terest income received from RSEB and on Deposits - Rs.1,61, 16,262 and interest on working capital from Corporation Bank (Not disallowed u/s 43B in respective years) written back on account of OTS - Rs.4, 19,11,786 was offered as income and a sum of Rs.56,00,61,915, which included the bad debts written off Rs.55,92,38,563 was claimed as deduction and finally the loss was arrived at Rs.49,90,77,075/-. The book profits u/s 115JB was also a negative figure in view of the deduction of Rs.55,92,38,563/- towards "provisions written back". The income shown as "exception al items" in the Profit and Loss account, which were not offered for taxation was taken into consideration and finally the loss was reduced to Rs. (-) 26,14,02,950/-. The facts, as stated in the Statutory Auditors and in the Directors Report of the various Annual Reports since the period 2002-03, amply show that the company did not have any business activity. Therefore, the question of chargeability of - 15 - ITA Nos.207 to 209/Chny/2020 income/loss under section 28 did not arise (as per the judicial decisions also) and consequently the loss determined was required to be disallowed. The following observations with regard to the allowance of bad debts are made: Section 28 applies only in respect of business, profit of which is assessable under the IT Act. Therefore, the question of deduction of expenditure under sections 30 to 37 arises only if profits of a business are assessable to tax under the Act. In order to claim allowance for bad debts u/s 36(1) (vii), the debt should be in respect of the business carried on the assessee in the PY, relevant to the AY. No allowance can, therefore, be claimed in respect of bad debts of a business which has been discontinued before the commencement of the PY. Such bad debt cannot be deducted even from the profits of a separate existing business. An assessee can avail deduction of bad debt of business which is carried on by him for at least some times during the PY. From the above, it is evident that there is no business activity undertaken by the company during the PY relevant to AY 2009-10 and consequently there was no business profits and therefore, any computation of income under the head 'profits and gain of business’ does not arise. It is also verified, the allowance of bad debts of Rs.55,92,38,563/- u/s 36(1)(vii) is not in order and the loss of Rs.26,14,02,950/- determined in the scrutiny assessment is to be disallowed.” Accordingly, the AO framed reassessment despite the fact that the assessee has raised objection to reopening of assessment vide letter dated 06.10.2015 on merits as well as on the issue of reopening that all details inspite of issue sought to be reopened have been furnished and considered even at the time of original assessment proceedings and he relied on the decision of Hon’ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd., reported in 320 ITR - 16 - ITA Nos.207 to 209/Chny/2020 561. The AO rejected the objections by a speaking order, which is part of assessment order para 3 and main crux of AO for rejecting the objection is that the assessee’s case does not fall under the proviso to section 147 of the Act, as the assessee has not disclosed fully and truly material fact necessary for its assessment. But, the AO has not pointed out that what is the failure of the assessee and which information was not submitted by assessee. The relevant sub-para 4.3 & 4.4 of para 3 reads as under:- 4.3 The argument of the assessee that the proviso of section 147 prohibits the re-assessment is totally a misconception by the assessee and cannot be accepted. The proviso comes to the rescue of the assessee only when the assessee has disclosed fully and truly all material facts necessary for the assessment for the respective assessment year. In the present case the assessee has not submitted all the relevant material which enables the Assessing Officer to decide whether the Bad debt was allowable expenditure though the assessee has not carried out any business activities during the respective assessment year. It is emphasized that "failure" on part of the tax payer to fully and truly disclosures all the material facts was not restricted only to disclosers made at the time of filing of the return of income but also extends to Assessment proceedings. The burden to make full and true disclosure is on the tax payer and there can be failure or omission on part of the tax payer even at the time of Assessment proceedings. The assessee was aware that the Bad debt was claimed without offering any business income and the income shown as exceptional item was not offered for tax. 4.4 Further the claim of the assessee that the company had carried out various businesses is also factually incorrect. It is ascertained from the Profit and Loss account submitted for the F.Y. 2008-09, no business activity was Carried out as the assessee has not declared any business income. Aggrieved, assessee preferred appeal before CIT(A). - 17 - ITA Nos.207 to 209/Chny/2020 12. The CIT(A) categorically noted that in the instant case of assessee, there was no omission on the part of the assessee to disclose any material fact necessary relating to the assessment of this assessment year during the original assessment proceedings completed u/s.143(3) of the Act and assessee’s case was reopened after expiry of 4 years from the relevant assessment year and therefore, assessee’s case squarely falls under the proviso to section 147 of the Act and hence, there is no scope for reassessment. The CIT(A) noted that this fact in para 6.5 & 6.6 as under:- 6.5. In the instant appellant's case there was no omission on the part of the appellant to disclose any material facts necessary relating to the details/evidence called for vide notice u/s 142(1) of the Act enumerated supra and on the contrary as stated earlier the AO has clearly held that such details/evidence furnished by the AR during assessment proceedings were examined and after due verification the assessment was completed originally u/s 143(3) of the Act and therefore there was no scope for reassessment in the absence of any fresh material against the appellant coming to light in the instant case. 6.6. The reassessment could therefore be said to be reopened without any new material or evidence coming to the notice of the AO as stated earlier and appears only to review the stand originally taken by the AO's predecessor and therefore the reopening could be said to be based on change of opinion which cannot be the reason for reopening of an validly completed assessment u/s 143(3) as held by various courts including the Apex Court in the case of Kelvinator of India Ltd. (320 ITR 561), followed by the decision of the jurisdictional Madras High Court in the case of M/s. Schwing Stetter India (P) Ltd. in TCA No. 217 of 2015 dated 02.06.2015 among others. - 18 - ITA Nos.207 to 209/Chny/2020 Accordingly, the CIT(A) quashed the reopening. Aggrieved, Revenue is in appeal before the Tribunal. 13. The ld.CIT-DR mainly relied on the reasons cited by the AO rejecting the objections. He argued that the burden to make full and true disclosure is on the taxpayer and there can be failure or omission on the part of the taxpayer even at the time of assessment proceedings, as in the present case, the assessee was aware that the bad debts was claimed without offering any business income and even income shown as exceptional item was not offered to tax. He argued that the claim of assessee that the business has been carried out is also factually incorrect and according to him, it is ascertained from profit & loss account submitted for financial year 2008-09 relevant to this assessment year that no business activity was carried out as the assessee has not declared any business income. In term of the above, he argued that the CIT(A) has misconstrued the facts and quashed the reassessment without any reason. 14. We have heard rival contention and gone through the facts and circumstances of the case. Admittedly, original assessment was completed u/s.143(3) of the Act for the relevant assessment year 2009-10 on 31.12.2011. Subsequently, notice u/s.148 of the Act - 19 - ITA Nos.207 to 209/Chny/2020 dated 14.03.2015 was issued and reassessment was completed u/s.143(3) r.w.s. 147 of the Act vide order dated 15.03.2016. From the above reasons recorded, which are reproduced in para 11, it is clear that the AO has recorded the reason from verification of balance sheet and the profit declared from the profit & loss account, which was subject matter of original assessment proceedings u/s.143(3) of the Act. From the reason, it is not coming out that what is the failure of the assessee to disclose fully and truly the material facts relating to this assessment year for assessment of the assessee’s income, which has escaped assessment. As cited by, the ld.counsel for the assessee relied on the Co-ordinate Bench decision in the case of Crown Real Estate Pvt. Ltd., in ITA No.353/CHNY/2023, wherein the Tribunal relying on the decision of Hon’ble Supreme Court in the case of CIT vs. Foramer France, (2003) 264 ITR 566 has considered the issue as under:- 7. We have heard rival contentions and gone through the facts and circumstances of the case. Admittedly, the AO during the course of assessment proceedings was aware about the share application money received by assessee because the audited accounts were available before him during the course of original assessment proceedings. From the reasons recorded, there is no iota of thinking or words in the reasons recorded that there is any failure on the part of the assessee to disclose fully and truly all material facts relating to the income for the relevant assessment year. Admittedly the reopening is beyond 4 years because relevant assessment year involved is 2013-14 and notice u/s.148 of the Act is issued on 29.03.2019, which means admittedly it is beyond 4 years. In our view, there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for framing of assessment and assessment was completed - 20 - ITA Nos.207 to 209/Chny/2020 originally u/s.143(3) of the Act and admittedly the reopening is beyond 4 years because notice u/s.148 of the Act was issued on 29.03.2019, no re- opening is possible. This view of ours is supported by the decision of Hon’ble Supreme Court in the case of CIT vs. Foramer France, (2003) 264 ITR 566, wherein the Supreme Court has affirmed the decision of Hon’ble Allahabad High Court in the case of Foramer France vs. CIT, (2001) 247 ITR 436 by observing as under:- 14. Having heard learned counsel for the parties, we are of the view that these petitions deserve to be allowed. 15. It may be mentioned that a new Section substituted Section 147 of the Income-tax Act by the Direct Tax Laws (Amendment) Act, 1987, with effect from April 1, 1989. The relevant part of the new Section 147 is as follows : "147. If the Assessing Officer, has reason to believe that any income 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 proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this Section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under Sub-section (3) of Section 143 or this Section has been made for the relevant assessment year, no action shall be taken under this Section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under Sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year." 16. This new Section has made a radical departure from the original Section 147 inasmuch as clauses (a) and (b) of the original Section 147 have been deleted and a new proviso added to Section 147. 17. In Rakesh Aggarwal v. Asst. CIT (1997] 225 ITR 496, the Delhi High Court held that in view of the proviso to Section 147 notice for reassessment under Section 147/148 should only be issued in accordance with the new Section 147, and where the original assessment had been made under Section 143(3) then in view of the proviso to Section 147, the notice under section 148 would be illegal if issued more than four years after the end of the relevant assessment - 21 - ITA Nos.207 to 209/Chny/2020 year. The same view was taken by the Gujarat High Court in Shree Tharad Jain Yuvak Mandal v. ITO [2000] 242 ITR 612. 18. In our opinion, we have to see the law prevailing on the date of issue of the notice under Section 148, i.e., November 20, 1998. Admittedly, by that date, the new Section 147 has come into force and, hence, in our opinion, it is the new Section 147 which will apply to the facts of the present case. In the present case, there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment. Hence, the proviso to the new Section 147 squarely applies, and the impugned notices were barred by limitation mentioned in the proviso.” 7.1 In view of above facts and circumstances, we are of the view that reopening is beyond 4 years and as the original assessment was framed u/s.143(3) of the Act, the Revenue could not establish any failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment, the reopening in present case is bad in law. Hence, reopening is quashed and this jurisdictional issue is allowed in favour of assessee. 14.1 From the reasons recorded in the present case, we could not comprehend what is the failure of the assessee, as there is no mention by the AO in the reasons recorded of any failure of the assessee to disclose fully and truly all material facts for framing of assessment for the relevant assessment year of escaped income. Once this is the position, we are of the view that the assessee’s case is fully covered by the proviso to section 147 of the Act and the decision of Hon’ble Supreme Court in the case of Foarmer France, supra squarely applies. We uphold the order of CIT(A) and dismiss this appeal of Revenue. - 22 - ITA Nos.207 to 209/Chny/2020 ITA No.209/CHNY/2020, Assessment year 2010-11 15. The only issue in this appeal of Revenue is against the order of CIT(A) deleting the addition made by the AO of business income of Rs.2 crores being advance and deposits written off. Further, the Revenue has raised the issue of violation of Rule 46A of the Income Tax Rules, 1962 (hereinafter the ‘Rules’) and admitted additional evidence without providing opportunity to the AO. For these issues, the Revenue has raised the following two grounds:- 2. Whether on the facts and in the circumstances of the case and on a proper interpretation of Rule 46A of the Income Tax Rules, 1962, the ld.CIT(A) was right in taking a decision on the merits of an issue which has not been decided in the assessment order without affording an opportunity to the assessing officer of being heard as envisaged in sub-Rule (3) of Rule 46A ? 3. Whether on facts and circumstances of the case the CIT(A) was right allowing assessee's appeal and thereby directing to delete disallowance of Rs.2 Crore as business income, whereas disallowances or addition, w.r.to this assessee's claim of wrong classification of capital receipt amounting Rs.2 Crore as business income, has never been discussed in the assessment order and since, the issue itself has merely been ignored by AO without any further verification of assessee's claim regarding wrong classification and further addition(u/s 37 regarding advances and deposits written off) have happened on returned income basis, the CIT(A) ought have called for a remand report thereby giving opportunity to AO u/s 46AP 16. Briefly stated facts are that the assessee a public limited company in which public are substantially interested and engaged in the manufacture of IMFL, trading in IMFL, Beer & Steel Products and also in business of leasing, filed its return of income. The AO during the course of assessment proceedings noted that the assessee has - 23 - ITA Nos.207 to 209/Chny/2020 not admitted any business income but the assessee has received ‘other income’ for a sum of Rs.8,61,13,215/- including interest received of Rs.7,02,976/- and also provision written back of Rs.8,46,67,035/-. According to AO, as there was no business activity during the year, the assessee has claimed expenditure of Rs.7,15,89,563/- being main expenditure relates to advances written off of Rs.6,83,25,663/- and deposits written off of Rs.23,35,807/-. According to AO, the expenses could not be allowed during the year as the assessee has not carried out any business. The assessee was asked to furnish details of advances written off, the nature of transaction with the parties and steps taken to recover the amount. The assessee furnished breakup of advances, deposits written off and advances given during the course of business which remained unfulfilled for the reason that the parties failed to perform their part as agreed and also failed to repay the amount. The AO noted that the expenditure relates to advances written off and deposits written off with regard to trade advance. According to him, since there is no business, the advances written off relating to trade cannot be allowed. Therefore, he disallowed the claim of advances / deposits written off for an amount of Rs.7,06,61,470/-. Aggrieved, assessee preferred appeal before CIT(A). - 24 - ITA Nos.207 to 209/Chny/2020 17. Apart from other issue of allowances of trade advances / deposits written off, the assessee has challenged before CIT(A), the classification of Rs.2 crores received on capital receipt held as business income by the AO. The assessee before CIT(A) vide letter dated 05.12.2012, which was addressed to the AO during the course of assessment proceedings, it was explained that a sum of Rs.2 crores in connection with the sale of hotel assets was considered as part of business income whereas this amount represent sale consideration against sale of capital asset, which figured as work-in- progress in the books of accounts. Since the assessee has inadvertently and mistakenly treated this sum of Rs.2 crores as business income wrongly shown as ‘business income’ but in the revised statement filed during the course of assessment proceedings on 05.12.2012 and 20.03.2013, the AO should have considered the plea of the assessee. The CIT(A) by relying on various case laws considered this Rs.2 crores as capital receipt as against treated by AO as business income. The CIT(A) treated this as capital receipt and deleted the addition by observing in paras 6.3 & 7 as under:- 6.3. In the instant case, even though there was wrong classification as to whether Rs. 2 crores on account of capital receipts or business income as held by the AO, as stated earlier the following case laws also among other decisions holds in favour of the appellant in respect of the proposition that the CIT has power to allow fresh claims made by the assessee for the first time even if no revised return is filed as also the duty of the AO to allow deductions Suo moto even if not claimed by the assessee directly when all - 25 - ITA Nos.207 to 209/Chny/2020 the information relating to the transaction was on record and duly evidenced as it undisputably was in the instant case. (i). Emerson Network Power India (P) Ltd. vs. ACIT [2009] 27 SOT 593 (mum) (ii). Chicago Pneumatic India Ltd. vs. DCIT [2007| 15 SOT 252 (Mum); and (iii). CIT vs. Ramco International (2009] 180 Taxman 584 (Punj. & Har.) (iy). CBDT Circular No. 14 (XL-35) of 1955 dated April 11, 1955; (u). Dattatraya Gopal Shette vs. CIT [1984] 150 ITR 460 (Bom) (vi). Cholkshi Metal Refinery vs. CIT (1977) 107 ITR 63 (Guj.): (vii). CIT vs. Shri. Someshwar Sahakari Karkhana Ltd. (1989) 177 ITR 443 (Bom) (affirmed, by the Supreme Court in CIT vs. Mahendra Mills [2000] 243 ITR 56 (SC) (viii). ITO vs. Cosmic Engg. Co. [1984] 20 TTJ (Ahd.) 271, 273. In view of the above discussion, more particularly the fact that the appellant's claim of sale of capital assets is to be treated as capital receipts in nature and is allowable by the AO when all the facts relating thereto were undisputedly already on record and in light of the judicial precedents quoted supra in favour of the appellant's point of view, the disallowance of such receipts amounting to Rs.2,00,00,000/ - as business income is held to be untenable and therefore directed to be deleted. This ground is therefore allowed. Aggrieved, Revenue is in appeal before the Tribunal. 18. We have heard rival contentions and gone through facts and circumstances of the case. When it was pointed out at the time of hearing, the ld.CIT-DR could not explain what was the new evidence filed before CIT(A) by the assessee which lead to violation of Rule 46A of the Rules. The ld.CIT-DR was appraised that the explanation of this sum of Rs.2 crores received in connection with sale of hotel assets was before the AO vide letter dated 05.12.2012 and vide - 26 - ITA Nos.207 to 209/Chny/2020 letter dated 20.03.2013. Firstly, this information is available before the AO there cannot be any violation of Rule 46A of the Rules. Secondly, it is a fact that this Rs.2 crores received on account of capital receipt and it cannot be treated as business asset because the amount was received in connection with sale of hotel assets but inadvertently declared by assessee as business income. Since, such amount represents sale consideration against sale of capital asset, it should be adjusted against capital work in progress and it cannot be held as business income. The CIT(A) has rightly deleted the addition. Hence, we confirm the order of CIT(A) and accordingly, the appeal of Revenue is dismissed. 19. In the result, the appeals filed by the Revenue in ITA Nos.207, 208 & 209/CHNY/2020 are dismissed. Order pronounced in the open court on 23rd February, 2024 at Chennai. Sd/- Sd/- (मनोज कुमार अᮕवाल) (MANOJ KUMAR AGGARWAL) लेखा सद᭭य/ACCOUNTANT MEMBER (महावीर ᳲसह ) (MAHAVIR SINGH) उपा᭟यᭃ /VICE PRESIDENT चे᳖ई/Chennai, ᳰदनांक/Dated, the 23 rd February, 2024 RSR आदेश कᳱ ᮧितिलिप अᮕेिषत/Copy to: 1. अपीलाथᱮ/Appellant 2. ᮧ᭜यथᱮ/Respondent 3. आयकर आयुᲦ /CIT 4. िवभागीय ᮧितिनिध/DR 5. गाडᭅ फाईल/GF.