M/s. Neptune Textile Mills Ltd., Ahmedabad V. The ACIT.,(OSD)Range-5, Ahmedabad

ITA 2195/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6609 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 05-05-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 13-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P TALATI
• Assessee Lawyers: C N SHAH
• Keywords: Reopening of assessment; Depreciation; Question of law; Difference of opinion; Reason to believe; Change of opinion; Capital expenditure; Set aside
• Section: 143(3); 142(1); 143(1); 147; 148; 139

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M NEPTUNE TEXTILE MILLS PRIVATE LTD., 128, NEW CLOTH MARKET, OUTSIDE RAIPUR GATE, AHMEDABAD. VS. ASSTT. CIT (OSD) RANGE-5, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI C. N. SHAH, AR RESPONDENT BY:- SHRI S.P. TALATI, SR.DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FO LLOWING GROUNDS :- (1) THE LEARNED CIT (APPEALS) ERRED IN NOT TREATI NG THE ORDER OF ASSESSING OFFICER AS BAD IN LAW AND ERRONEOUS AS TO FACTS IN AS MUCH AS THE APPELLANT COMPANY HAD DISCLOSED FULLY AND TRULY AIL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE ASSESSMENT YEA R AND WAS IN POSSESSION BEFORE THE NOTICE ALLEGED TO BE ISSUED U /S. 148 DATED 26.10.2006 (2) THE LEARNED CIT (APPEALS) OUGHT TO HAVE HELD THAT IT WAS MERELY CHANGE OF OPINION AS THE JUDGMENT RELIED UPON BY TH E ASSESSING OFFICER OF THE HON'BLE SUPREME COURT WAS ON RECORD AT THE LIME OF ISSUE OF ALLEGED NOTICE U/S, 148 ON 26.10.2006 IN AS MUCH AS THE JUD GMENT WAS DELIVERED ON 10.0L1997 MID HENCE IT WAS NOT HIS REASON TO BEL IEVE OF ESCAPEMENT OF INCOME, (3) ON FACTS AND IN CIRCUMSTANCE OF THE CASE AND IN LAW THE LEARNED CIT (APPEALS) ERRED IN UPHOLDING THE EXPENSES ON MACHIN ERY REPAIRS OF ITA NO.2195/AHD/2009 ASST. YEAR 2001-02 ITA NO.2195/AHD/2009 ASST. YEAR 2001-02 2 RS.3500103/- AS CAPITAL EXPENDITURE DESPITE THE FAC T THAT THE APPELLANT COMPANY IS A TEXTILE PROCESSING UNIT AND THAT EXPEN DITURE INCURRED THROUGHOUT THE YEAR IS ON SMALL PARTS AND THAT NO C APITAL ASSET HAS COME INTO EXISTENCE. (4) ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (A) OUGHT TO HAVE APPRECIATED THAT NEITHER STATUTOR Y AUDITOR NOR TAX AUDITOR HAVE TREATED THE EXPENDITURE ON MACHINERY' REPAIRS AS CAPITAL EXPENDITURE AND QUALIFIED THE REPORT ACCORDINGLY. (5) ON FACTS AND IN CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT (APPEALS) XI ERRED IN UPHOLDING THE EXPENSES ON OTH ER REPAIRS LIKE FURNITURE ETC. OF RS.1029107/- ON CAPITAL EXPENDITU RE BASED ON QUANTUM OF EXPENSES AND WITHOUT ASSIGNING ANY REASON OF TREATI NG THE SAME AS CAPITAL EXPENDITURE. (6) THE LEARNED CIT (APPEALS) FAILED TO APPRECIAT E THE RATIO LAID DOWN BY HON'BLE SUPREME COURT IN THE CASE OF EMPIRE JUTE CO. LTD. V/S CIT (SC) 124 ITR 2 LAYING DOWN THAT BY THE PURCHASE OF LOOM HOURS NO NEW ASSET WAS CREATED AND THERE WAS NO ADDITION TO OR E XPANSION OF THE PROFIT MAKING APPARATUS OF THE APPELLANT. THE TEST OF ENDURING BENEFIT IS THEREFORE NOT CERT AIN OR CONCLUSIVE TEST AND IT CANNOT BE APPLIED BLINDLY AND MECHANICALLY WITHOUT REGARD TO THE PARTICULAR FACTS AND C IRE AN I STANCES OF A GIVEN CASE, (7) IT IS THEREFORE, PRAYED THAT THE ORDER OF THE CIT (APPEALS) BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 2. AT THE OUTSET THE LD. AR SUBMITTED THAT IF GROUN D NOS.1 & 2 RELATING TO REOPENING OF ASSESSMENT ARE DECIDED IN FAVOUR OF ASSESSEE THEN OTHER GROUNDS WILL NOT SURVIVE ON MERITS. 3. THE FACTS RELATING TO REOPENING OF ASSESSMENT AR E THAT ASSESSEE HAS FILED RETURN OF INCOME FOR ASST. YEAR 2001-02 ON 31 .10.2001 DECLARING LOSS OF RS.2,30,92,073/-. IT WAS EARLIER ACCEPTED U /S 143(1) VIDE ORDER ITA NO.2195/AHD/2009 ASST. YEAR 2001-02 3 DATED 6.3.2003 BUT LATER THE CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT U/S 143(3) WAS DONE ON 18.3.2004 ON A LOSS OF RS.2, 27,71,096/-. SUBSEQUENTLY THE AO CONSIDERED THAT THERE IS AN ESC APEMENT OF INCOME AND HE ISSUED NOTICE U/S 148(1) ON 26.10.2006 BY RE CORDING FOLLOWING REASONS, AS MENTIONED IN THE ASSESSMENT ORDER PASSE D ON 12.12.2007:- THE ASSESSEE HAD DEBITED TO P & L A/C REPAIRS TO B UILDING OF RS.550688/, REPAIRS TO MACHINERY OF RS.3500103/- AND REPAIRS TO OTHERS OF RS.1029107/- AS AGAINST THE WRITTEN DOWN VALUE OF R S.154684/-, RS.7836844/- AND RS.296335/- RESPECTIVELY. AS DECID ED BY THE HONNLE SUPREME COURT, IN THE CASE OF BALLIMAL NAVALKISHORE AND OTHERS VS. CIT 224 ITR414 WHERE THE COST OF REPLACED PARTS OR REPA IRS CONSTITUTE SUBSTANTIAL VALUE OF OLD MACHINERY, BUILDING ETC., THE EXPENDITURE REQUIRES TO BE CAPITALIZED. THUS, THE AO HAD REASON TO BELIE VE THAT THERE IS INCOME OF RS.50.80 LACS WHICH ESCAPED ASSESSMENT AND REQUI RED TO BE REASSESSED U/S 147 OF THE ACT. THE REASON FOR ISSUANCE OF NOTICE U/S 148(1) WAS TH AT AO VERIFIED THE RECORDS OF THE ASSESSEE AND FOUND THAT IT HAS DEBIT ED TO PROFIT AND LOSS ACCOUNT, REPAIRS OF BUILDING OF RS.5,50,688/-, REPA IRS TO MACHINERY OF RS.35,00,103/- AND OTHER REPAIRS RS.10,29,107/- AS AGAINST WRITTEN DOWN VALUE OF RS.15,42,684/-, RS.78,36,844/- AND RS.2,96 ,335/- RESPECTIVELY UNDER THREE HEADS. THE AO THEN REFERRED TO THE DECI SION OF HON. SUPREME COURT IN THE CASE OF BALLIMAL NAVALKISHORE AND OTHE RS VS. CIT (SUPRA) WHEREIN IT IS HELD THAT WHERE COST ON REPLACED PART S OR REPAIRS CONSTITUTED SUBSTANTIAL VALUE OF OLD MACHINERY, BUILDING ETC. T HE EXPENDITURE REQUIRED ITA NO.2195/AHD/2009 ASST. YEAR 2001-02 4 TO BE CAPITALIZED. THUS THE EXPENDITURE SO CLAIMED SHOULD HAVE BEEN DISALLOWED AS CAPITAL EXPENDITURE. 4. IN RESPECT OF THE ISSUE OF REOPENING OF ASSESSME NT THE LD. CIT(A) SUMMARILY CONFIRMED THE REOPENING BY OBSERVING AS U NDER :- 2. WITH REGARD TO THE FIRST GROUND OF APPEAL, IT I S SUBMITTED BY THE A.R. THAT THE AO IS NOT JUSTIFIED TO REOPEN THE ASS ESSMENT WHICH ONLY CAN BE CALLED AS A CHANGE OF OPINION. THE SUBMISSIONS M ADE BY THE AR HAVE BEEN TAKEN INTO CONSIDERATION. IT IS SEEN THAT THE AO HAS FOLLOWED THE DUE PROCEDURE FOR REOPENING OF THE ASSESSMENT. THEREFOR E, THE OBJECTIONS RAISED BY THE AR CANNOT BE ACCEPTED. HENCE, THIS GR OUND OF APPEAL IS DISMISSED. 5. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT REOPENING IS BAD IN LAW BECAUSE ASSESSMENT HAS BEEN REOPENED AFT ER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASST. YEAR AND THERE IS NO CHARGE OF ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MAT ERIAL FACTS NECESSARY FOR ASSESSMENT. THERE IS ONLY A CHANGE OF VIEW. EARLIER THE EXPENDITURE WAS TREATED AS REVENUE IN NATURE AND SUBSEQUENTLY NOW A FTER EXPIRY OF FOUR YEARS THEY ARE SOUGHT TO BE TREATED AS CAPITAL EXPE NDITURE MERELY BY RELYING ON THE DECISION OF HON. SUPREME COURT IN TH E CASE OF BALLIMAN NAVALKISHORE & OTHERS (SUPRA). IN ANY CASE IF ASSES SMENT IS SOUGHT TO BE REOPENED WITHIN THE PROVISO TO SECTION 147 THEN CON DITIONS LAID DOWN THEREIN SHOULD HAVE BEEN SATISFIED. SINCE THEY ARE NOT SATISFIED ASSESSMENT IS BAD IN LAW. ITA NO.2195/AHD/2009 ASST. YEAR 2001-02 5 6. THE LD. DR ON THE OTHER HAND SUPPORTED THE ORDER S OF AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE REOPENING OF THE ASSESSMENT IS BAD IN LAW. FOR THE SAKE OF CONVENIENCE WE REPRODUCE SE CTION 147 AND PROVISO THERETO:- 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 RE-ASSESS SUCH INC OME 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 RECOMPUTED THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALL OWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTIO N AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR): PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF S ECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT Y EAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS F ROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON TH E 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; [ PROVIDED FURTHER THAT THE AO MAY ASSESS OR REASSESS SUCH INCOME OTH ER THAN THE INCOME INVOLVING MATTERS WHICH ARE THE SUBJECT MATT ERS OF ANY APPEAL, REFERENCE OR REVISION WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT]. THE REQUIREMENTS OF THE SECTION ARE AS UNDER :- (1) THE AO HAS REASON TO BELIEVE; (2) THAT AN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESS MENT; (3) IF FOUR YEARS HAVE EXPIRED FROM THE END OF THE RELE VANT ASST. YEAR THEN SUCH ESCAPEMENT WAS DUE TO FAILURE ON THE PART OF THE ASSESSEE - ITA NO.2195/AHD/2009 ASST. YEAR 2001-02 6 (I) TO FILE A RETURN U/S 139; (II) TO FILE A RETURN IN RESPONSE TO NOTICE U/S 142(1) O R SECTION 148; (III) TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR THE ASSESSMENT. ALL THESE ASPECTS MUST COME IN THE REASONINGS RECOR DED BY THE AO. THE REASONS RECORDED BY THE AO SHOULD REFLECT - (I) ASSESSEE IN RESPECT OF WHOM ASSESSMENT IS SOUGHT TO BE REOPENED; (II) ASSESSMENT YEAR AS SOUGHT TO BE REOPENED; (III) AMOUNT OF INCOME WHICH HAS ESCAPED ASSESSMENT; (IV) HOW THE ORIGINAL ASSESSMENT HAS BEEN DONE WHETHER U /S 143(1) OR U/S 143(3) OR SEC.147/148; (V) WHAT IS THE REASON OF ESCAPEMENT OF ASSESSMENT; (VI) WHETHER THERE IS ANY FAILURE AS MENTIONED IN THE PR OVISO IF ASSESSMENT IS SOUGHT TO BE REOPENED AFTER FOUR YEAR S FROM THE END OF THE RELEVANT ASST. YEAR; (VII) IN PARTICULAR, WHETHER THERE IS ANY THE FAILURE OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS FULLY AND TRULY NECESSARY F OR THE ASSESSMENT FOR THAT ASSESSMENT YEAR. (VIII) IF ASSESSMENT IS DONE U/S 143(1), THEN WHETHER THE PROVISION OF SECTION 149 ARE APPLICABLE. 8. IF REASONS RECORDED DID NOT REFLECT THESE INGRED IENTS THEN REOPENING CANNOT BE SUSTAINED. ON THE ASPECT OF NECESSITY TO MENTION THE FAILURE OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERI AL FACTS NECESSARY FOR ASSESSMENT HON. ALLAHABAD HIGH COURT IN CIT VS. PRA DESHIYA INDUSTRIAL AND INVESTMENT CORPORATION OF UTTAR PRADESH LTD (20 11) 332 ITR 324(ALL) HAS OBSERVED AS UNDER :- ADMITTEDLY, NOTICE UNDER SECTION 148 OF THE ACT WA S ISSUED AFTER THE EXPIRY OF FOUR YEARS. THE NOTICE UNDER THE PROVISO OF SECTION 147 OF THE ACT CAN BE ISSUED AFTER THE EXPIRY OF FOUR YEARS ONLY IN CASE WHERE INCOME CHAR GEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PAR! OF THE ASSESSES TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR ITA NO.2195/AHD/2009 ASST. YEAR 2001-02 7 SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATE RIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. FROM THE PERUS AL OF THE REASON RECORDED IT IS APPARENT THAT NO CASE HAS BEEN MADE OUT THAT THE AS SESSES HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT AND NO OBSERVATION HAS BEEN MADE IN THIS REGARD, ON THE BASIS OF THE SAME MATER IAL WHICH WAS AVAILABLE ON RECORD, THE ASSESSING AUTHORITY WAS OF THE VIEW THA T THE DEDUCTION HAD BEEN WRONGLY ALLOWED UNDER SECTION 36(1)(VIII) OF THE ACT. THE T RIBUNAL OBSERVED THAT THE ASSESSEE HAD FURNISHED THE REQUISITE DETAILS IN RESPECT OF L EASING INCOME AND UPFRONT FEE AS RECEIVED IN THE ASSESSMENT YEAR UNDER CONSIDERATION AND THE SAME WAS DULY DISCLOSED IN THE AUDITED PROFIT AND LOSS ACCOUNT, AS IS EVIDE NT FROM PAGES 4 AND 5 OF THE PAPER BOOK READ WITH PAGE 23 OF THE PAPER BOOK AND ALSO C OMPUTATION OF INCOME FILED ALONG WITH RETURN, A COPY OF WHICH IS PLACED AT PAGES 33 TO 35 OF THE PAPER BOOK. THIS FINDING OF THE TRIBUNAL HAS NOT BEEN DISPUTED BY RA ISING ANY QUESTION AND DURING THE COURSE OF THE ARGUMENT BY THE LEARNED COUNSEL FOR T HE APPELLANT. THEREFORE, WE ARE OF THE VIEW THAT ON THE FACTS AND CIRCUMSTANCES, NO SU BSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION BY THIS COURT. LEARNED COUNSEL FOR THE APPELLANT CITED A DECISION OF THE BOMBAY HIGH COURT IN THE EASE OF DR. AMIN'S PATHOLOGY LABORATORY V. P. M. PR OSAD, JOINT CIT [2001] 252 ITR 673 ; [2002] 172 CTR 696. WE HAVE GONE THROUGH THE DECISION OF THE BOMBAY HIGH COURT. WE ARE OF THE VIEW THAT THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE SAID CASE, THE BOMBAY HIGH COU RT HAS HELD THAT THE ASSESSING AUTHORITY HAS OVERLOOKED THE DISPUTED ITEM WHICH HE HAS NOTICED SUBSEQUENTLY AND AT THE TIME OF PASSING THE ORIGINAL ORDER OF ASSESSMEN T, HE COULD NOT BE SAID TO HAVE OPINED ON THE ABOVE ITEM. THEREFORE, THERE WAS NO C HANGE OF OPINION. WHILE IN THE PRESENT CASE, COMPLETE DETAILS WERE FURNISHED ALONG WITH THE RETURN AND DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS AND AFTER AN A PPLICATION OF MIND, THE DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT WAS ALLOWED. I N THE REASON RECORDED NO CASE HAS BEEN MADE OUT THAT THERE WAS FAILURE TO DISCLOSE AN Y MATERIAL PARTICULAR ON THE PART OF THE ASSESSEE. THEREFORE, LIMITATION BEYOND THE PERI OD OF FOUR YEARS WAS NOT AVAILABLE TO THE ASSESSING AUTHORITY. ADMITTEDLY, THE NOTICE WAS ISSUED AFTER FOUR YEARS, THEREFORE, THE PROCEEDING WAS BARRED BY TIME AND TH E TRIBUNAL HAS RIGHTLY HELD SO. FOR THE REASONS STATED ABOVE, THE APPEAL FAILS AND IS DISMISSED. HON. BOMBAY HIGH COURT, IN THE CASE OF BHAVESH DEVE LOPERS VS. A.O. & OTHERS (2010) 329 ITR 249 (BOM), NOTED THAT THE REC ORDED REASONS DID NOT SHOW FINDING THAT THERE WAS A FAILURE TO DISCLO SE NECESSARY FACTS. IN THAT CASE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB(1 0) FOR RS.3.85 CRORES WHICH WAS ALLOWED BY THE AO VIDE ORDER U/S 143(3) A ND ASSESSMENT WAS SOUGHT TO BE REOPENED AFTER EXPIRY OF FOUR YEARS ON THE GROUND THAT THE ITA NO.2195/AHD/2009 ASST. YEAR 2001-02 8 CLAIM OF DEDUCTION U/S 80IB(10) INCLUDED INELIGIBLE ITEMS OF OTHER INCOME SUCH AS SOCIETY DEPOSITS, STREET PARKING CHARGES, S UNDRY BALANCES, ETC. HON. BOMBAY HIGH COURT IN THE CASE OF BHAVESH DEVEL OPERS VS. A.O. & OTHERS (SUPRA) OBSERVED AS UNDER :- HELD, ALLOWING THE PETITION, THAT EX FACIE, THE RE ASONS WHICH HAD BEEN DISCLOSED TO THE ASSESSEE WOULD SHOW THAT THE INFER ENCE THAT THE INCOME HAD ESCAPED ASSESSMENT WAS BASED ON THE DISCLOSURE MADE BY THE ASSESSEE ITSELF. THE REASONS SHOWED THAT THE FINDIN G WAS BASED ON THE DETAILS FILED BY THE ASSESSEE AND FROM THE PROFITS AND LOSS ACCOUNT. THEREFORE, IT WAS IMPOSSIBLE FOR THE ASSESSING OFFI CER TO EVEN DRAW THE INFERENCE THAT THERE WAS A FAILURE ON THE PART OF T HE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR IT S ASSESSMENT FOR ASSESSMENT YEAR 2002-03. SIGNIFICANTLY, THE REASONS THAT HAD BEEN DISCLOSED TO THE ASSESSEE DID NOT CONTAIN A FINDING TO THE EFFECT THAT THERE WAS A FAILURE TO FULLY AND TRULY DISCLOSE ALL NECES SARY FACTS, NECESSARY FOR THE PURPOSE OF ASSESSMENT. IN THESE CIRCUMSTANCES, THE CONDITION PRECEDENT TO A VALID EXERCISE OF THE POWER TO REOPE N THE ASSESSMENT, AFTER A LAPSE OF FOUR YEARS FROM THE RELEVANT ASSESSMENT YEAR, WAS ABSENT IN THE PRESENT CASE. THE NOTICE WAS NOT VALID AND WAS LIAB LE TO BE QUASHED. HON. SUPREME COURT IN THE CASE OF ITO VS. LAKHMANI MEWAL DAS (1976) 103 ITR 437 (SC) HELD THAT WHERE ASSESSMENT IS SOUG HT TO BE REOPENED AFTER EXPIRY OF FOUR YEARS REASONS FOR BELIEF MUST SHOW LIVE LINK BETWEEN THE MATERIAL AND BELIEF. THERE SHOULD BE A RATIONAL CONNECTION OR RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RATIONAL CO NNECTION POSTULATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN T HE MATERIAL COMING TO THE NOTICE OF THE ITO AND THE FORMATION OF THE BELI EF THAT THERE IS AN ESCAPEMENT OF INCOME OF THE ASSESSEE FOR THAT PARTI CULAR YEAR BECAUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIA L FACTS. EVEN THOUGH COURT ITA NO.2195/AHD/2009 ASST. YEAR 2001-02 9 CANNOT GO INTO SUFFICIENCY OR ADEQUACY OF THE MATER IAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE ITO ON THE POINT AS TO WHETHER ACTION SHOULD BE INITIATED FOR REOPENING OF THE ASSESSMENT, BUT A T THE SAME TIME WE HAVE TO BEAR IN MIND THAT IT IS NOT ANY AND EVERY MATERI AL, HOWSOEVER VAGUE AND INDEFINITE OR DISTANT, REMOTE AND FAR FETCHED, WHIC H WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF T HE INCOME OF THE ASSESSEE FROM ASSESSMENT. HON. SUPREME COURT IN THE CASE OF CIT VS. KELVINATO R INDIA LTD. (2010) 320 ITR 561(SC), WHILE DISMISSING THE LEGISLATION O F SECTION 147, HELD THAT EXPRESSION REASONS TO BELIEVE NEEDS TO BE GI VEN SCHEMATIC INTERPRETATION IN ORDER TO ENSURE AGAINST AN ARBITR ARY EXERCISE OF POWER BY THE AO. THE POWER TO REOPEN THE ASSESSMENT IS NOT A KIN TO POWER TO REVIEW THE ASSESSMENT AND MERE CHANGE OF OPINION WO ULD NOT JUSTIFY THE COURSE OF ACTION U/S 147. UNLESS THE AO HAS TANGIBL E MATERIAL FACT TO REOPEN THE ASSESSMENT, POWER U/S 147 CANNOT BE VALI DLY EXERCISED. 9. IN THE PRESENT CASE THERE IS A CLEAR CASE OF CHA NGE OF OPINION. EVEN THOUGH RELIANCE HAS BEEN PLACED ON THE DECISION OF HON. SUPREME COURT IN BALLIMAL NAVALKISHORE AND OTHERS VS. CIT (SUPRA) , THAT JUDGMENT EXISTED AT THE TIME WHEN THE AO TOOK THE DECISION U /S 143(3) AND HELD THE EXPENDITURE AS CURRENT REPAIRS ALLOWABLE IN THE PRO FIT AND LOSS ACCOUNT UNDER SECTION 143(3). WITHOUT THERE BEING MATERIAL ON RECORD AND AN ITA NO.2195/AHD/2009 ASST. YEAR 2001-02 10 ALLEGATION OF FAILURE ON THE PART OF THE ASSESSEE T O DISCLOSE ANY MATERIAL WHICH COULD HAVE MADE THE AO TO BELIEVE THAT EXPEND ITURE SO INCURRED WAS CAPITAL IN NATURE, NEW VIEW SO TAKEN FOR REOPEN ING OF ASSESSMENT WOULD BE ONLY A CHANGE OF OPINION. EARLIER SAME EXP ENDITURE WAS HELD AS REVENUE IN NATURE AND NOW CONSIDERED AS CAPITAL WOU LD BE AKIN TO REVIEWING HIS OWN DECISION ON THE SUBJECT. HON. BOM BAY HIGH COURT IN THE CASE OF ICICI PRUDENCIAL LIFE INSURANCE CO. LTD . VS. ACIT (2010) 325 ITR 471 (BOM) ALSO HELD THAT WHEN THERE IS NO MATER IAL ON RECORD AND WITHOUT THERE BEING ANY ALLEGATION OF FAILURE OF TH E ASSESSEE TO DISCLOSE SUCH MATERIAL FACT, ASSESSMENT CANNOT BE REOPENED A FTER FOUR YEARS. HON. GUJARAT HIGH COURT IN INDUCTO ISPAT ALLOYS LTD. VS. ACIT (2010) 320 ITR 458 (GUJ) AND NIKHIL K. KOTAK VS. MAHESH KUMAR (200 9) 319 ITR 445 (GUJ) ALSO HELD THAT WHERE THE PERIOD OF FOUR YEARS HAS EXPIRED FROM THE END OF RELEVANT ASST. YEAR THE PROVISO TO SECTION 1 47 WOULD COME INTO PLAY. IT STIPULATES THREE CONDITIONS AND ONE OF THO SE CONDITIONS IS SHOWING OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. WH EN WE GO THROUGH THE REASONS RECORDED AND AS MENTIONED ABOVE WE DO NOT F IND ANY REFERENCE TO SUCH FAILURE ON THE PART OF THE ASSESSEE TO DISCLOS E ANY MATERIAL FACT NECESSARY FOR ASSESSMENT AND IN FACT NARRATION GIVE N IN THE REASONS DO NOT SHOW ANY SUCH FAILURE WHICH COULD BE INFERRED EVEN IF NOT SO MENTIONED SPECIFICALLY IN THE REASONS. IN OUR CONSIDERED VIEW WHEN NEITHER THERE IS ITA NO.2195/AHD/2009 ASST. YEAR 2001-02 11 ANY ALLEGATION OF FAILURE NOR THE AO HAS BROUGHT AN Y MATERIAL ON RECORD TO SUGGEST ESCAPEMENT OF INCOME THEN IT IS ONLY A CHAN GE OF OPINION AND THEREFORE ASSESSMENT CANNOT BE REOPENED AFTER EXPIR Y OF FOUR YEARS. UNDER THESE CIRCUMSTANCES, WE ALLOW THE GROUND NOS.1 & 2 OF THE ASSESSEE AND ACCORDINGLY QUASH THE ASSESSMENT. OTHER GROUNDS BEC AME INFRUCTUOUS AND HENCE NOT SEPARATELY DISCUSSED. AS A RESULT, THE AP PEAL FILED BY THE ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN OPEN COURT ON 5/5/11. SD/- SD/- (BHAVNESH SAINI) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMB ER AHMEDABAD, DATED : 5/5/11. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NO.2195/AHD/2009 ASST. YEAR 2001-02 12 1.DATE OF DICTATION 5/5/2011 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 10/5/ 2011 MEMBER .OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..