AMBUJA CEMENT INDIA P.LTD, MUMBAI V. ASST CIT CIR 3(1), MUMBAI

ITA 2600/MUM/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3294 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 17-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATISH CHANDRA RAJORE
• Assessee Lawyers: HARISH AGARWAL
• Keywords: Reopening of assessment; Business income; Depreciation; Search and seizure; Earning of tax free income; Period of limitation; Question of law; Tangible material; Speculation loss; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 234B; 14A; 115JB; 80IB; 148; 56; 10; 139

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.2600/ MUM/2014 ( / ASSESSMENT YEAR : 2005 - 06) AMBUJA CEMENT INDIA PRIVATE LTD. (SINCE MERGED WITH HOLCIM INDIA P. LTD.), 106, MAKER CHAMBER - III, NARIMAN POINT, MUMBAI - 400021 / V. ACIT CIR 3(1) AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 ./ PAN : AACCA3390A ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY: SHRI. SOUMEN ADAK & SHRI. HARISH AGARWAL REVENUE BY : SHRI SATISH CHANDRA RAJORE, DR / DATE OF HEARING : 06.08.2018 / DATE OF PRONOUNCEMENT : 27 .08.2018 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE , BEING ITA NO. 2600/MUM/2014, IS DIRECTED AGAINST APPELLATE ORDER DATED 30.01.2014 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 5, MUMBAI (HEREINAFTER CALLED THE CIT(A)), FOR ASSESSMENT YEAR 2005 - 06, THE APPELLATE PROCEEDINGS HAD ARISEN BEFOR E LEARNED CIT(A) FROM ASSESSMENT ORDER DATED 27 TH NOVEMBER 2012 PASSED BY LEARNED ASSESSING OFFICER (HEREINAFTER CALLED THE AO) U/S 143 (3) R.W.S. 147 OF THE INCOME - TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) FOR AY 2005 - 06. I.T.A. NO.2600/MUM/2014 2 2. THE GROUNDS OF APPEAL R AISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME - TAX APPELLATE TRIBUN AL, MUMBAI (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER: - 1 (A) THAT ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE, THE LD. CIT( APPEALS) ERRED IN CONFIRMING THE ACTION OF THE AO IN INITIATING THE REASSESSMENT PROCEEDINGS U/S 147/148 WITHOUT APPRECIATING THE FACT THAT THE SAME HAS BEEN DONE IN UTTER DISREGARD OF THE EXPRESS PROVISIONS OF THE ACT, ON FRESH APPLICATION OF MIND ON THE SAME SET OF FACTS, MORE SO WHEN THERE WAS NO FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE TRULY AND FULLY ALL THE FACTS NECESSARY FOR COMPLETION OF THE ORIGINAL ASSESSMENT U/S 143(3) . L(B) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(APPEA LS) ERRED IN NOT HOLDING THAT THE ORDER U/S 143 R.W.S 147 DATED 27 - 11 - 2012 PASSED BY THE AO IS UNJUSTIFIED, ERRONEOUS AND NEEDS TO BE SUMMARILY CANCELLED. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND WITHOUT PREJUDICE TO GROUND NO. L(A), L(B) & L(C) TAKEN HERE IN ABOVE, THE LD. CIT (APPEALS) WAS NOT JUSTIFIED AND GROSSLY ERRED IN CONFIRMING THE ACTION OF A.O. IN ASSESSING INTEREST EARNED ON FIXED DEPOSITS, AMOUNTING TO RS. 2,24,06,786/ - , UNDER THE HEAD 'INCOME FROM OTHER SOURCES' AND NOT UNDER THE HEAD 'PROFIT AND GAINS FROM BUSINESS AND PROFESSION'. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND W ITHOUT PREJUDICE TO GROUND NO. 1(A), 1(B) & 1 (C) TAKEN HERE IN ABOVE, THE LD. CI T(APPEALS) WAS NOT JUSTIFIED AND GROSSLY ERRED IN CONFIRMING THE DENIAL OF SET OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINST INTEREST EARNED ON FIXED DEPOSITS. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, NECESSARY DIRECTION MAY PLEASE BE GIVEN TO THE AO TO RE - COMPUTE THE INTEREST U/S 23 4B ON DISPOSAL OF THE APPEAL OR OTHERWISE. 5. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND, MODIFY, RESCIND, SUPPLEMENT OR ALTER ANY GROUNDS OF THE GROUNDS STATED HERE - IN - ABOVE EITHER BEFORE OR AT THE TIME OF HEARING OF THE APPEAL. 3 .1 . THE ASSESSEE COMPANY IS AN INVESTMENT COMPANY WHICH IS ENGAGED IN MAKING STRATEGIC INVESTMENTS IN THE COMPANIES ENGAGED IN MANUFACTURING OF CEMENT AND ALLIED PRODUCTS . THE ASSESSEE FILED ITS RETURN OF INCOME WITH REVENUE ON 27.10.2005 DECLARING N IL INCOME . THE ASSES SMENT WAS ORIGINALLY FRAMED BY THE AO U/S. 143(3) OF THE 1961 ACT VIDE ASSESSMENT ORDER DATED 26.11 .2007 WHEREIN ADDITIONS TO THE INCOME WERE MADE BY THE AO TOWARDS DISALLOWANCE OF I.T.A. NO.2600/MUM/2014 3 EXPENDITURE INCURRED IN RELATION TO THE EARNING OF AN EXEMPT INCOME U/S 1 4A OF THE 1961 ACT . T HE AO WHILE FRAMING AFORESAID ASSESSMENT U/S. 143(3) OF THE 1961 ACT FOR IMPUGNED ASSESSMENT YEAR OBSERVED THAT THE ASSESSEE HAS RECEIVE D DIVIDEND INCOME OF RS. 9,86,8 0 ,000 / - ON INVESTMENTS AND INTEREST INCOME OF RS. 2,24,06,786/ - ON F IXED D EPOSIT S WITH BANKS , WHICH INCOME WAS CREDITED TO P ROFIT & L OSS A CCOUNT . IT WAS OBSERVED BY THE AO WHILE FRAMING ORIGINAL ASSESSMENT ORDER DATED 26.11.2007 PASSED U/S 143(3) OF THE 1961 ACT THAT AGAINST THESE INCOME S BY WAY OF INTEREST ON FIXED DEP OSITS WITH BANKS AND DIVIDEND RECEIVED ON SHARES HELD BY IT , THE ASSESSEE HAD CLAIM ED CERTAIN EXPENSES BY WAY OF SALARY, OPERATING EXPENSES AND DEPRECIATION , AGGREGATING TO RS. 8,84,937/ - . THE AO ASKED THE ASSESSEE TO EXPLAIN WHY DISALLOWANCE OF EXPENSE S U/S 14A OF THE 1961 ACT BE NOT MADE IN RESPECT OF EXPENSES INCURRED IN RELATION TO EARNING OF AN EXEMPT INCOME BEING DIVIDEND INCOME EARNED BY THE ASSESSEE DURING RELEVANT PREVIOUS YEAR TO THE IMPUGNED ASSESSMENT YEAR . THE AASSESSEE SUBMITTED BEFORE THE AO THAT DIVIDEND INCOME WAS EARNED ON ITS SHAREHOLDING IN ASSOCIATED CEMENT COMPANY LTD. (FOR SHORT ACC) AND THE INVESTMENTS WERE MADE OUT OF INTERNAL ACCRUALS. IT WAS SUBMITTED THAT NO DIRECT EXPENSES WERE INCURRED FOR EARNING DIVIDEND INCOME. THE AO AFTER CONSIDERING SUBMISSIONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE HAS INCURRED EXPENSES FOR DAY TO DAY ACTIVITIES AND PART OF THESE EXPENSES ARE RELATABLE TO THE EARNING OF DIVIDEND INCOME OF RS.9,86,80,000/ - WHICH WAS CLAIMED AS AN EXEMPT I NCOME U/S 10 OF THE 1961 ACT. THE AO OBSERVED THAT THE ASSESSEE IS MAINTAINING COMMON BOOKS OF ACCOUNTS AND HENCE THE EXPENSES ARE TO BE APPORTIONED BETWEEN DIFFERENT HEADS OF INCOME. THE AO DISALLOWED EXPENSES ON PROPORTIONATE BASIS TO THE TUNE OF RS. 7,2 1,181/ - U/S 14A OF THE 1961 ACT WHILE FRAMING ORIGINAL ASSESSMENT ORDER DATED 26.11.2007 PASSED U/S 143(3) OF THE 1961 ACT. THIS ASSESSMENT ORDER PER - SE HAD NOW ATTAINED FINALITY AND ADDITIONS AS WERE MADE BY THE AO U/S 14A OF THE 1961 ACT STOOD AFFIRMED IN APPELLATE PROCEEDINGS . I.T.A. NO.2600/MUM/2014 4 3.2. L ATER IT TRANSPIRED THAT THE R EVENUE WAS OF THE VIEW ON PERUSAL OF THE RECORDS THAT INCOME FROM INTEREST ON FIXED DEPOSIT S WITH BANKS AMOUNTING TO RS. 2, 24,06,786/ - EARNED BY THE ASSESSEE DURING THE PREVIOUS YEAR RELEVANT TO THE IMPUGNED ASSESSMENT YEAR OUGHT TO HAV E BEEN ASSESSED BY THE AO UNDER THE HEAD OF INCOME NAMELY I NCOME FROM THE OTHER SOURCES INSTEAD OF HEAD OF INCOME NAMELY PROFITS AND GAINS OF BUSINESS OR PROFESSION UNDER WHICH THE SAID INCOME WAS ASSESSED BY THE AO ORIGINALLY WHILE FRAMING ASSESSMENT ORDER DATED 26.11.2007 PASSED U/S 143(3) OF THE 1961 ACT FOR WHICH REASONS WERE RECORDED BY THE AO FOR REOPENING OF THE CONCLUDED ASSESSMENT WITHIN MANDATE OF SECTION 147 OF THE 1961 ACT AND NOTICE WAS ISSUED BY THE AO TO THE ASSESSEE ON 22.03.2012 U/S. 148 OF THE ACT, WHICH WAS UNDISPUTEDLY DULY SERVE D ON THE ASSESSEE ON 26.03.2012 AS DETAILED HERE UNDER: - 'IN THIS CASE, ASSESSMENT U/S.1 43(3) OF THE 1. T . ACT, 1961 WAS COMPLETED ON 26.11.2007, ASSESSING THE TOTAL INCOME AT RS. NIL UN DER NORMAL PROVISIONS OF THE I.T .A CT AND BOOK PROFIT AT RS.80,18,149/ - U/S.115JB OF THE I.T.ACT. 2. ON PERUSAL OF THE RECORDS, IT IS SEEN FROM THE P& L ACCOUNT THAT THE ASSESSEE RECEIVED INCOME OF RS. 2,24,0 6,786/ - AS INTEREST ON FIXED DEPOSIT IN BANKS. HOWEVER, THIS WAS INCLUDED UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS OR PROFESSION' AS AGAINST THE HEAD 'INCOME FROM OTHER SOURCES' UNDER WHICH THE SAID INTEREST INCOME IS CORRECTLY CHARGEABLE TO TAX. DURING THE YEAR, THE ASSESSEE HAS CLAIMED AND WAS ALLOWED SET - OFF OF BUSINESS LOSS OF RS. 2,22,50,406/~ AGAINST THE SAID INTEREST INCOME. THE INTEREST INCOME ON FIXED DEPOSITS SHOULD HAVE BEEN CONSIDERED AS INCOME FROM OTHER SOURCES. AS PER PROVISION OF SECTION 72 OF INCOME TAX ACT, 1961 BROUGHT FORWARD BUSINESS LOSS IS NOT ALLOWED TO BE SET OFF AGAINST INCOME FROM OTHER SOURCES. HENCE, THE ASSESSEE, SUO MOTO, OUGHT NOT TO HAVE CLAIMED SET - OFF OF BUSINESS LOSS AGAINST INTEREST INCOME AND OFFERED THE SAID INTEREST INCOME FOR TAX UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. THE ISSUE WAS ALSO NOT EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S.L43(3) OF THE I.T.ACT. 3. THE REFORE, THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION . 4. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT THE INCOME AS AFORESAID CHARGEABLE TO TAX EXCEEDING RS. 1 LAKH HAS E SCAPED ASSESSMENT, RESULTING INTO SHORT LEVY OF TAX. HENCE, THE ASSESSEE'S CASE IS HEREBY REOPENED FOR REASSESSMENT U/S.147 R.W.S14 3(3) OF THE I.T.ACT, 1961 FOR A.Y.2005 - 06. I.T.A. NO.2600/MUM/2014 5 THE NECESSARY PRIOR APPROVAL IN THIS REGARD HAS BEEN GIVEN BY THE C.I.T. - 3, MUMBAI VIDE LETTER DATED 20.03.2012 . 3.3 . THE ASSESSEE WAS SERVED BY THE AO WITH THE COPY OF AFORESAID REASONS FOR REOPENING OF THE CONCLUDED ASSESSMENT . IT IS UNDISPUTED BETWEEN RIVAL PARTIES FIRSTLY THAT THE ASSESSMENT WAS ORIGINALLY FRAMED BY THE AO U/S 143(3) OF THE 1961 ACT WHICH WAS FRAMED BY THE AO AFTER TAKING CONSCIOUS DECISION TO ASSESS INTEREST INCOME AS BUSINESS INCOME AND SECONDLY THAT THE NOTICE U/S 148 FOR REOPENING OF CONCLUDED ASSESSMENT WAS ISSUED AFTER THE E XPIRY OF FOUR YEARS FROM TH E END OF RELEVANT ASSESSMENT YEAR AND FIRST PROVISO TO SECTION 147 OF THE 1961 ACT IS APPLICABLE. T HE ASSESSEE IN REPLY BEFORE THE AO AT THE OUTSET SUBMITTED THAT PROCEEDINGS FOR REOPENING OF THE CONCLUDED ASSESSMENT WITHIN PROVISIONS OF SECTION 147 OF THE 1 961 ACT IN THE INSTANT CASE ARE BAD IN LAW . THE ASSESSEE RAISED FOLLOWING OBJECTIONS WHICH WERE SUMMARIZED BY THE AO AS HERE UNDER: - (A) PROCEEDINGS U/S. 147 ARE INVALID SINCE THE NOTICE WAS ISSUED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RE LEVANT ASSESSMENT YEAR. B) THERE IS NO FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSURE OF MATERIAL FACTS NECESSARY FOR COMPLETING THE ASSESSMENT. (C)THE ASSESSMENT U/S. 143(3) FOR A.Y.2005 - 06 HAS BEEN COMPLETED BY THE A.O. WITHOUT DISTURBING THE COMPUTATION OF TOTAL INCOME SHOWN BY THE ASSESSEE. (D)THE FACTS ON THE BASIS OF WHICH THE PROCEEDING WERE INITIATED ARE AVAILABLE ON THE RECORDS AND NO NEW MATERIAL HAS BEEN BROUGHT ON THE RECORD AFTER PASSING OF THE ASSESSMENT ORDER. E) PROCEEDINGS U/S.14 7 ARE BARRED BY LIMITATION AND HENCE NEED TO BE DROPPED. (F) THE ASSESSEE HAS ALSO PLACED RELIANCE ON THE DECISIONS OF VARIOUS HON'BLE COURTS IN SUPPORT OF ITS CONTENTION. 3.4. THE AO DISPOSE D OF THE OBJECTION RAISED BY THE ASSESSEE CHALLENGING THE LEGALITY AND VALIDITY OF REOPENING OF THE CONCLUDED I.T.A. NO.2600/MUM/2014 6 ASSESSMENT AND UPHELD THE INITIATION OF REASSESSMENT PROCEEDINGS U/S 147/148 OF THE 1961 ACT, BY HOLDING AS UNDER: - 3. THE OBJECTIONS RAISED BY THE ASSESSEE HAVE BEEN CAREFULLY APPRE CIATED. IT IS CLEAR THERE FROM THAT THE ASSESSEE SUFFERS FROM A HUGE OBSESSION OF THE FACT THAT THE REOPENING OF ASSESSMENT, AS DONE IN ITS CASE, IS NOTHING BUT CHANGE OF OPINION AND THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRU LY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT. THE VARIOUS CONTENTIONS RAISED BY THE ASSESSEE CLEARLY INDICATE ITS PERCEPTION THAT ALL SUCH RE - OPENING OF ASSESSMENTS IS UNJUST, ARBITRARY AND CAPRICIOUS. IN FACT, THAT WAS PRECISELY THE HIGHLIGHT OF THE ENTIRE CONTENTION OF THE ASSESSEE IN ITS SUBMISSION GIVEN VIDE LETTER DATED 12 - 10 - 2012. HOWEVER THE CONTENTIONS OF THE ASSESSEE ARE NOT FOUND TO BE ACCEPTABLE AND ARE REJECTED ON FOLLOWING GROUNDS: - 3.1 IT IS INCORRECT ON THE PART OF THE ASSESSEE TO STATE THAT THE NOTICE IS BAD IN LAW AS IT HAS BEEN ISSUED BEYOND THE TIME LIMIT OF FOUR YEARS PRESCRIBED U/S.147. IN THIS CONNECTION ATTENTION IS INVITED TOWARDS THE PROVISIONS OF SECTION 149 WHICH IS REDUCED AS UNDER: 149, (1) NO NOTICE UNDER SECTION 148 SHALL BE ISSUED FOR THE RELEVANT ASSESSMENT YEAR, (A) IF FOUR YEARS HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE CASE FALLS UNDER CLAUSE (B ); (B} IF FOUR YEARS, BUT NOT MORE THAN SIX YEARS, HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO ONE LAKH RUPEES OR MORE FOR THAT YEAR. EXPLANATION. IN DETERMINING INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT FOR THE PURPOSES OF THIS SUB - SECTION, THE PROVISIONS OF EXPLANATION 2 OF SECTION 147 SHALL APPLY AS THEY APPLY FOR THE PURPOSES OF THAT SECTION.] A PLAIN READING OF THE PROVISIONS OF THE SECTION 149 CLEARLY SHOWS THAT A NOTICE U/S 148 CAN BE ISSUED UPTO SIX YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IF THE INCOME CHARGEABLE TO TAX, WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO O R IS LIKELY TO AMOUNT TO RS. 1,00 ,000/ - OR MORE FOR THAT YEAR. IN THE CASE OF THE ASSESSEE COMPANY ON THE BASIS OF MATERIAL AVA ILABLE ON RECORD AND REASONS RECORDED THEREOF THE ESCAPEMENT OF INCOME FROM TAX WAS IN EXCESS OF RS. 1 LAKHS THEREBY NECESSITATING THE REOPENING OF THE ASSESSMENT U/S. 148. THUS NOTICE U/S 148, WHICH IS ISSUED ON 22.03.2012 AND SERVED ON 26.03.2012, IS WELL WITHIN THE PROVISION OF SECTION 149 OF THE IT ACT. 3.2 THE ASSESSEE HAS FURTHER OBJECTED THAT ALL MATERIAL FACTS WERE FULLY AND TRULY DISCLOSED AT THE TIME OF ORIGINAL ASSESSMENT AS SUCH REOPENING OF THE ASSESSMENT IS BAD IN LAW AND REQUIRES TO BE DROPP ED. IN THIS CONNECTION THE ASSESSEE HAS PLACED RELIANCE ON VARIOUS JUDICIAL DECISIONS AND CONTENDED THAT RE - OPENING OF ASSESSMENT IN ITS CASE IS VOID AB - INITIO. THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE CONSIDERING THE FACT THAT THE ASSESSMENT WAS R E - I.T.A. NO.2600/MUM/2014 7 OPENED ON THE BASIS OF A CONCRETE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. AS STATED IN PARA 2 ABOVE, THE A SSESSEE HAD CLAIMED INTEREST OF RS. 2,24,06,786/ - EARNED ON F IXED DEPOSITS IN BANKS W AS CHARGEABLE UNDER THE HEA D 'BUSINESS INCOME' AS AGAINST THE HEAD 'INCOME FROM OTHER SOURCES UNDER WHICH THE SAID INTEREST INCOME IS CORRECTLY CHARGEABLE TO TAX. BY ADOPTING THIS TREATMENT, THE ASSESSEE HAS AVAILED THE UNDUE BENEFIT OF SET - OFF IN RESPECT OF BUSINESS LOSS OF RS 2,22,50,406/ - AGAINST THE AFORESAID INTEREST INCOME, WHICH OTHERWISE WOULD NOT HAVE BEEN ALLOWED. THE INTEREST INCOME ON FIXED DEPOSITS SHOULD HAVE BEEN CONSIDERED AS INCOME FROM OTHER SOURCES. AS PER PROVISION OF SECTION 72 OF INCOME TAX ACT, 1961 BROUGH T FORWARD BUSINESS LOSS IS NOT ALLOWED TO BE SET OFF AGAINST INCOME FROM OTHER SOURCES. HENCE, THE ASSESSEE, SUO MOTO, OUGHT NOT TO HAVE CLAIMED SET - OFF OF BUSINESS LOSS AGAINST INTEREST INCOME AND OFFERED THE SAID INTEREST INCOME FOR TAX UNDER THE HEAD 'I NCOME FROM OTHER SOURCES'. THIS HAS RESULTED INTO ESCAPEMENT OF INCOME INVOLVING SHORT LEVY OF TAX. THE ISSUE WAS ALSO NOT EXAMINED BY THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE I.T.ACT, THUS NECESSITATING REOPENIN G OF ASSESSMENT, WHICH IS LAWFULLY VALID AND JUSTIFIED. 3. 3 AS STATED ABOVE THE REASSESSMENT PROCEEDINGS HAVE BEEN INITIATED AFTER RECORDING REASONS TO BELIEVE ONLY AND THERE IS NO CHANGE OF OPINION. AS A MATTER OF FACT, THIS ISSUE WAS NOT EXAMINED DURIN G THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. IN THIS REGARD, THE PROVISIONS OF S .147 ARE S QUARELY APPLICABLE IN THIS CASE , AS IS EVIDENT FROM THE FOLLOWING: AS PER EXPLANATION 1 TO S.147 'PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OT HER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSIN G OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO' . EXPLANATION 2 TO S.147, READS AS FOLLOWS: 'FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY : - (A) (B).. C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT - (I ) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASSESSED ; OR ( II ) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE ; OR (II I ) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT; OR - ( IV ) EXCESSIVE LOSS OR DEPRECIATIO N ALLOWANCE OR ANY OTHER ALLOW ANCE UNDER THIS ACT HAS BEEN COMPUTED'. THEREFORE, IT CAN BE NOTICED THAT PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOK OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL N OT NECESSARILY I.T.A. NO.2600/MUM/2014 8 AMOUNT TO DISCLOSURE. HENCE, THE ASSESSMENT HAS BEEN CORRECTLY REOPENED AS PER THE PROVISIONS OF INCOME TAX ACT AND THERE IS NO CHANGE OF OPINION. 3.4 AS DISCUSSED ABOVE THE NOTICE U/S 148 WAS ISSUED IN THIS CASE ON THE BASIS OF DETAILS AVAILABLE ON RECORD, WHICH FORMED THE SUFFICIENT BASIS FOR REASON TO BELIEVE THAT THE INCOME HAS ESCAPED FROM ASSESSMENT THEREBY NECESSITATING THE ISSUANCE OF NOTICE U/S 148. THE OBJECTIONS RAISED BY THE ASSESSEE, IN THIS REGARD VIDE LETTERS DATED 12/04/20 12, 18/04/2012 AND 20/10/2012 ARE THEREFORE REJECTED. WHILE COMING TO THIS CONCLUSION THE UNDERSIGNED ALSO PLACES RELIANCE ON THE DECISION GIVEN BY THE HON'BLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF JAWA ND SONS VS. CIT(APPEALS ) - II , LUDHIANA [326 ITR 39(PUN. & HAR. (2010)], THE RELEVANT PORTION THE DECISION GIVEN IN THIS CASE JUSTIFYING THE ISSUANCE OF NOTICE U/S. 148 IS REPRODUCED AS UNDER: AFTER HEARING LEARNED COUNSEL FOR THE APPELLANT - ASSESSEE AND GOING THROUGH THE ORDER PASSED BY THE IT AT, WE DO NOT FIND ANY GROUND TO INTERFERE IN THIS APPEAL, AS IN OUR OPINION NO SUBSTANTIAL QUESTION OF LAW IS ARISING IN THIS APPEAL, BECAUSE A PURE FINDING OF FACT HAS BEEN RECORDED TO THE EFFECT THAT THE REASSESSMENT PROCEEDINGS HAVE RIGHTLY BEEN INITIATED AFT ER FRAMING THE OPINION THAT SOME INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. UNDER SECTION 147 OF THE ACT, AFTER ITS AME NDMENT WITH EFFECT FROM 1 - 4 - 1989 , WIDE POWER HAS BEEN GIVEN TO THE ASSESSING OFFICER EVEN TO COVER THE CASES WHERE THE ASSESSEE HAD FULLY DISCLOSED THE MATERIAL FACTS. THE ONLY CONDITION FOR ACTION IS THAT THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. SUCH BELIEF CAN BE REACHED IN ANY MANNER, AND IS NOT QUALIFIED BY A PRE - CONDITION OF FAITH AND TRUE DISCLOSURE OF MATERIAL FACTS BY THE ASSESSEE AS CONTEMPLATED IN THE PRE - AMENDED SECTION 147(A) OF THE ACT. IN THE INSTANT CASE, AS FAR AS MERITS OF THE CASE IS CONCERNED, WITH REGARD TO THE PERMISSIBLE DEDUCTION UNDER SECTION 8 0 - IB OF THE ACT, IT IS CLEAR POSITION THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION ON ACCOUNT OF DUTY DRAW BACK AND DEPB INCENTIVES, AS THESE INCENTIVE PROFITS DO NOT FALL WITHIN EXPRESSION 'PROFITS DERIVED FROM INDU STRIAL UNDERTAKING' IN SECTION 8 0 - IB OF THE ACT. THEREFORE, DUTY DRAW BACK AND DEPB DO NOT FORM PART OF NET PROFITS OF THE INDUSTRIAL UNDERTAKING FOR THE PURPOSES OF SECTION 80 - IB OF THE ACT.' [EMPHASIS SUPPLIED] 3.5 THE CONTENTION OF THE ASSESSEE THAT ALL RELEVANT FACTS AND MATERIAL WERE ALREADY PLACED BEFORE THE A.O. AND THE RE - OPENING IS NOTHING BUT MERE 'CHANGE OF OPINION' IS NOT ACCEPTABLE IN VIEW OF THE RATIO OF DECISION GIVEN BY HON'BLE HIGH COURT OF DELHI IN THE CASE OF CONSOLIDATED PHOTO & FLNVEST LTD. [(2006) 281 1TR 394], WHEREIN THE HON' BLE COURT HAS HELD AS UNDER: IT IS CLEAR FROM THE ABOVE, THAT THE TWO CRITICAL ASPECTS WHICH NEED TO BE ADDRESSED IN ANY ACTION UNDER SECTION 147 ARE WHETHER THE ASSESSING OFFICER HAS 'REASON TO BELIEVE' , THAT ANY 'INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND WHETHER THE PROPOSED REASSESSMENT IS WITHIN THE PERIOD OF LIMITATION PRESCRIBED UNDER THE PROVISO TO SECTION 147. EXPLANATION (1) TO THE SAID PROVISION MAKES IT CLEAR THAT I.T.A. NO.2600/MUM/2014 9 PRODUCTION OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WH ICH THE ASSESSING OFFICER COULD WITH DUE DILIGENCE DISCOVER MATERIAL EVIDENCE WOULD NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISO THAT STIPULATES AN EXTENDED PERIOD OF LIMITATION FOR ACTION IN THE CASES WHERE THE ESCAPEMENT ARISES OUT OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT EXPLANATION (2) TO SECTION 147 STIPULATES THE CIRCUMSTANCES IN WHICH INCOME CHARGEABLE TO TAX SHALL BE DEEMED TO HAVE ESCAPED ASSESSMENT. [PARA 8] THE CASES FALLING I N CLAUSE (C) OF EXPLANATION (2) IN WHICH INCOME CHARGEABLE TO TAX HAS BEEN UNDER - ASSESSED OR ASSESSED AT TOO LOW A RATE OR CASES IN WHICH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THE ACT OR WHERE EXCESSIVE LO SS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THE ACT HAS BEEN COMPUTED, WOULD CONSTITUTE CASES OF INCOME ESCAPING ASSESSMENT. THERE IS CONSIDERABLE AUTHORITY FOR THE PROPOSITION THAT THE JURISDICTION OF THE ASSESSING OFFICER TO INITIATE PROCEE DINGS WOULD DEPEND UPON WHETHER HE HAS REASONS TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. A LONG STRING OF DECISIONS RENDERED BY THE SUPREME COURT HAS EMPHASIZED THAT THE BELIEF OF THE ASSESSING OFFICER MUST BE IN GOOD FAITH AND M UST NOT BE A MERE PRETENCE. THAT THERE MUST BE A NEXUS BETWEEN THE MATERIAL BEFORE THE ASSESSING OFFICER AND THE BELIE F WHICH HE FORMS REGARDING THE ESCAPEMENT OF THE ASSESSEE'S INCOME. A WRIT COURT, THEREFORE, IS ENTITLED TO EXAMINE WHETHER THE ASSESSING OFFICER'S BELIEF WAS IN GOOD FAITH AND WHETHER SUCH REASONS HAD A NEXUS WITH THE ACTION PROPOSED TO BE TAKEN. [PARA 9] IT WAS COMMON GROUND THAT, IN THE INSTANT CASE, THE ASSESSING OFFICER HAD NOT RECEIVED ANY ADDITIONAL INFORMATION FROM ANY OUTSIDE SOUR CE OR QUARTER BUT THE FACT THAT THERE WAS NO SUCH INFORMATION DID NOT MAKE ANY MATERIAL DIFFERENCE. ACTION UNDER SECTION 147 IS PERMISSIBLE EVEN IF THE ASSESSING OFFICER GATHERED HIS REASONS TO BELIEVE FROM THE VERY SAME RECORD AS HAD BEEN THE SUBJECT - MATT ER OF THE COMPLETED ASSESSMENT PROCEEDINGS. [PARA 10] THE PROVISO TO SECTION 147 ENVISAGES ACTION IN THE ORDINARY COURSE WITHIN A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THAT LIMITATION DOES NOT, HOWEVER, APPLY TO THE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT ON AC COUNT, INTER ALIA, OF THE FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. THE ARGUMENT THAT PRODUCTION OF THE ACCOUNT BOOKS AND OTHER DOCUMENTARY EVIDENCE RELEVANT FOR ASSESSMENT MUST IMPLY A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS MUST BE REJECTED OUT OF HAND IN THE LIGHT OF THE PROVISIONS OF EXPLANATION (C ), ACCORDING TO WHICH MERE PRODUCTION OF THE BOOKS OF ACCOUNT OR OTHER EVIDENCE FROM WHICH THE ASSESSING OFFICER COULD HAVE, WITH DUE DILIGENCE, DISCOVERED THE MATERIAL EV IDENCE DOES NOT NECESSARILY AMOUNT TO A DISCLOSURE WITHIN THE MEANING OF THE PROVISO. THE ACTION INITIATED BY THE REVENUE DID NOT IN THAT VIEW SUFFER FROM ANY ERROR OF JURISDICTION TO WARRANT I.T.A. NO.2600/MUM/2014 10 INTERFERENCE FROM THE COURT IN EXERCISE OF ITS WRIT JURISDICTION . [PARA 1 1][EMPHASIS SUPPLIED] 3.6 IN THIS CONNECTION FURTHER RELIANCE IS ALSO PLACED ON THE DECISION GIVEN BY THE JURISDICTIONAL HIGH COURT O F BOMBAY IN THE CASE OF D R. AMIN 'S PATHALOGY LABORATORY {( 2001)(252 ITR 673], WHEREIN THE HON'BLE COURT HAS AS UNDER: AS REGARDS THE ASSESSEE'S CONTENTION THAT THE IMPUGNED NOTICE WAS ISSUED AFTER EXPIRY OF PERIOD OF LIMITATION, IT WAS SEEN THAT THE PERIOD OF FOUR YEARS HAD SINCE ELAPSED. TH EREFORE , THE PROVISO, TO SECTION 14 7 CAME INTO THE PICTURE. UNDER THE SAI D PROVISO, NO ACTION CAN BE TAKEN AFTER FOUR YEARS UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE ASSESSEE HAD BEE N FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING FOR ALL ITEMS OF EXPENDITURE AND INCOME EXCEPT FOR ALL COLLECTIONS WHICH WERE UNDER CASH BASIS. A READING OF THE ASSESSMENT ORDER CLEARLY SHOWED THAT THE ASSESSING OFFICER FAILED TO NOTICE AN IMPORTANT ITEM, VIZ., AN AMOUNT OF WHICH REPRESENTED UNPAID PURCHASES. THE ASSESSEE - FIRM HAD CLAIMED EXPENSES IN RESPECT OF ALL PURCHASES. HOWEVER, AN AMOUNT REPRESENTED UNPAID PURCHASES. IT W AS FOR THAT REASON THAT THE ASSESSING OFFICER HAD COME TO THE CONCLUSION FOR ISSUANCE OF NOTICE UNDER SECTION 148 THAT THE ASSESSEE - FIRM HAD SUPPRESSED AN INCOME TO THE EXTENT AMOUNT OF UNPAID PURCHASES . UNDER EXPLANATION 1 TO THE PROVISO TO SECTION 147, MER E PRODUCTION OF ACCOUNT BOOKS FROM WHICH MATERIAL EVIDENCE COULD HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISO. THEREFORE, MERE PRODUCTION OF THE BALANCE - SHEET, PROFIT AND LOSS ACC OUNT OR ACCOUNT BOOKS WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE PROVISO. IN THE INSTANT CASE, THE FACTS SHOWED THAT THE ASSESSING OFFICER OVERLOOKED THE AFORESTATED ITEM. THAT, HE NOTICED IT SUBSEQUENTLY. THAT, AT THE TIME OF PASS ING THE ORIGINAL ORDER OF ASSESSMENT, HE COULD NOT BE SAID TO HAVE OPINED ON THE ABOVE ITEM. CONSEQUENTLY, THERE WAS NO CHANGE OF OPINION. THEREFORE, IN THE INSTANT CASE, THE IMPUGNED NOTICE WAS TO BE SUSTAINED. ][EMPHASIS SUPPLIED] 3.7 FURTHER, RELIANCE IS ALSO PLACED ON THE DECISION OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF A.L.A. FIRM [(1991) (189ITR 285)], WHEREIN THE HON,BLE APEX COURT HAS HELD AS UNDER: N O DOUBT, IN THE FACE OF ALL THE DETAILS AND STATEMENT PLACED BEFORE THE ITO AT THE TIME OF THE ORIGINAL ASSESSMENT, IT WAS DIFFICULT TO TAKE THE VIEW THAT THE ITO HAD NOT AT ALL APPLIED HIS MIND TO THE QUESTION WHETHER THE SURPLUS WAS TAXABLE OR NOT. IT WAS TRUE THAT THE RETURN WAS FILED AND THE ASSESSMENT WAS COMPLETED ON THE SAME DATE. NEVE RTHELESS, IT WAS OPPOSED TO NORMAL HUMAN CONDUCT THAT AN OFFICER WOULD COMPLETE THE ASSESSMENT WITHOUT LOOKING AT THE MATERIAL PLACED BEFORE HIM. IT WAS NOT AS IF THE ASSESSMENTS RECORD CONTAINED A LARGE NUMBER OF DOCUMENTS OR THE CASE RAISED COMPLICATED I SSUES RENDERING I.T.A. NO.2600/MUM/2014 11 IT PROBABLE THAT THE ITO HAD MISSED THESE FACTS. IT WAS A CASE WHERE THERE WAS ONLY ONE CONTENTION RAISED BEFORE THE ITO AND IT WAS IMPOSSIBLE TO HOLD THAT THE ITO DID NOT AT ALL LOOK AT THE RETURN FILED BY THE ASSESSEE AND THE STATEMENTS A CCOMPANYING IT. THE MORE REASONABLE VIEW TO TAKE WOULD BE THAT THE ITO LOOKED AT THE FACTS AND ACCEPTED THE ASSESSEE'S CONTENTION THAT THE SURPLUS WAS NOT TAXABLE. BUT IN DOING SO, HE OBVIOUSLY MISSED TO TAKE NOTE OF THE LAW LAID DOWN IN G,R. RAMACHARI & C O.'S CASE ('SUPRA) AND THERE WAS NOTHING TO SHOW THAT CASE HAD BEEN BROUGHT TO HIS NOTICE. WHEN HE SUBSEQUENTLY BECAME AWARE OF THE DECISION, HE INITIATED PRO CEEDINGS UNDER SECTION 147(B). THE MATERIAL WHICH CONSTITUTED INFORMATION AND ON THE B ASIS OF WHI CH THE ASSESSMENT WAS REOPENED WAS THE DECISION IN G.R. RAMACHARI & CO.'S CASE (SUPRA). THIS MATERIAL WAS NOT CONSIDERED AT THE TIME OF THE ORIGINAL ASSESSMENT. THOUGH IT WAS A DECISION OF 1961 AND THE ITO COULD HAVE KNOWN OF IT HAD HE BEEN DILIGENT, THE OBVIOUS FACT WAS THAT HE WAS NOT AWARE OF THE EXISTENCE OF THAT DECISION THEN AND, WHEN HE CAME TO KNOW ABOUT IT, HE RIGHTLY INITIATED PROCEEDINGS FOR ASSESSMENT. 3.8 IN VIEW OF THE FACTS OF THE CASE AS DISCUSSED ABOVE THE UNDERSIGNED FIND S NO MERITS IN THE OBJECTIONS RAISED BY THE ASSESSEE AND EACH OF THE OBJECTION IS THEREFORE REJECTED IN THE MANNER AS DISCUSSED IN ABOVE PARAS AND THE REOPENING OF ASSESSMENT BY WAY OF ISSUE OF NOTICE U/S 148 IS CONSIDERED LAWFULLY VALID AND JUSTIFIED. THE OBJECTIONS RAISED BY THE ASSESSEE ARE THUS DISPOSED OFF IN ACCORDANCE WITH THE PARAMETERS LAID DOWN BY THE HON'BLE SUPREME COURT IN THE CASE OF GKN DRIVE SHAFT (INDIA) LTD [(2002) 125 TAXMAN 963 (SC)] AND THE ISSUES RAISED ARE CONSIDERED AS ADEQUATELY DEA LT WITH. 4. WE ARE DEALING IN OUR ORDER FIRSTLY TO CHALLENGE MADE BY THE ASSESSEE TO THE LEGALITY AND VALIDITY OF REOPENING OF THE CONCLUDED ASSESSMENT U/S. 147 OF THE ACT BY REVENUE BY CONTENDING THAT REOPENING OF THE CONCLUDED ASSESSMENT U/S 147 OF THE 1961 ACT WAS IN ITSELF BAD IN LAW LIABLE TO BE QUASHED , AND IF WE FIND THAT REOPENING OF THE CONCLUDED ASSESSMENT U/S 147 OF THE 1961 ACT IS IN ITSELF NOT SUSTAINABLE IN THE EYES OF THE LAW WHICH REQUIRES OUR INTERFERENCE BY QUASHING REOPENING OF THE CONCLUDED ASSESSMENT ITSELF , THEN IN THAT SITUATION NO OCCASION WILL ARISE FOR US TO DISCUSS THE ISSUE S IN THIS APPEAL ON MERITS AS THE SAME WILL BECOME ACADEMIC AND INFRUCTUOUS BUT IN THE EVENTUALITY OF OUR UPHOLD ING THE LEGALITY AND VALIDITY OF THE DECI SION OF THE LEARNED ASSESSING OFFICER OF REOPENING OF THE CONCLUDED ASSESSMENT U/S. 147/148 OF THE 1961 ACT THEN IN THAT SITUATION WE I.T.A. NO.2600/MUM/2014 12 WILL BE PROCEEDINGS TO ADJUDICATE THE ISSUE S ARISING IN THIS APPEAL ON MERIT S . 5. 1 A GGRIEVED BY THE DECISION OF THE LEARNED AO , THE ASSESSEE FILED FIST APPEAL BEFORE LEARNED CIT(A) AND CHALLENGED INTER - ALIA REOPENING OF THE CONCLUDED ASSESSMENT U/S. 147 OF THE ACT AFTER THE EXPIRY OF THE FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR . THE ASSESS EE DURING THE APPELLATE PROCEEDINGS BEFORE LEARNED CIT(A) SUBMITTED FOLLOWING SUBMISSIONS CHALLENGING LEGALITY AND VALIDITY OF REOPENING OF THE CONCLUDED ASSESSMENT U/S. 147 AND 148 OF THE ACT BY THE AO , BY SUBMITTING AS UNDER: - 3] GROUND NO. 2(A), 2(B) & 2(C) : INITIATION OF REASSESSMENT PROCEEDINGS IS BAD IN LAW: THE APPELLANT HAS FILED ITS RETURN OF INCOME ON 27 - 10 - 2005 DETERMINING TOTAL INCOME AT NIL COMPUTED UNDER THE PROVISIONS OF THE ACT OTHER THAN SECTION 115JB. IN THE SAID RETURN, BOOK PROFIT AS PER THE PROVISIONS OF SECTION 115JB WAS COMPUTED AT RS. 72,96,968/ - . THE SAID RETURN WAS PROCESSED VIDE INTIMATION U/S 143(1) DATED 12 - 10 - 2007 ACCEPTING THE RETURNED INCOME. SUBSEQUENT TO THE AFORESAID PROCEEDINGS, THE DEPUTY COMMISSIONER OF INCOME TAX (H ERE IN AFTER REFERRED AS 'LD. DCI T') PASSED ORDER U/S 143(3) ON 26 - 11 - 200 7. IN THE SAID ORDER, THE LD. DCI T MADE DISALLOWANCE U/S 14A AND ACCORDINGLY TOTAL INCOME UNDER THE PROVISIONS OF THE ACT OTHER TH AN SECTION 115JB WAS COMPUTED AT NIL AND BOOK PROFIT U/S SEC. 115JB WAS COMPUTED AT RS. 80,18,149/ - . 3.1] SUBSEQUENT TO THE ABOVE, PROCEEDINGS U/S 147/ 148 WAS INITIATED VIDE NOTICE DATED 22 - 03 - 2012. IN RESPONSE TO THE SAID NOTICE, THE APPELLANT VIDE LETT ER DATED 12 - 04 - 2012, ASKED FOR THE REASONS FOR INITIATING THE REASSESSMENT PROCEEDINGS. COPY OF THE LETTER DATED 12 - 04 - 2012. DURING THE COURSE OF REASSESSMENT PROCEEDINGS THE APPELLANT WAS SERVED WITH LETTER DATED 17 - 04 - 2012 STATING THE REASONS FOR INITIAT ION OF REASSESSMENT PROCEEDINGS, WHEREIN IT WAS STATED THAT THE APPELLANT HAS WRONGLY SHOWN INTEREST EARNED ON FIXED DEPOSI TS AMOUNTING TO RS. 2,24,06,786/ - AS BUSINESS INCOME INSTEAD OF INCOME FROM OTHER SOURCE. FURTHER, IT WAS CONTENDED THAT THE APPELLAN T HAD WRONGLY CLAIMED SET OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINST THE SAID INTEREST INCOME WHICH IS AGAINST THE PROVISIONS OF SEC. 72 OF THE INCOME TAX ACT. 3.2] IN RESPONSE TO THE SAME THE APPELLANT VIDE LETTER DATED 12 - 10 - 2012 OBJECTED TO THE INIT IATION OF REASSESSMENT PROCEEDINGS AND ALSO EXPLAINED THAT INTEREST FROM FIXED DEPOSITS SHOULD BE CLASSIFIED UNDER THE HEAD 'PROFITS AND GAINS FROM BUSINESS OR PROFESSION'. WITHOUT PREJUDICE TO THE ABOVE, THE APPELLANT ALSO SUBMITTED THAT EVEN IF FOR THE P URPOSE OF COMPUTATION OF INCOME, I.T.A. NO.2600/MUM/2014 13 INTEREST ON FIXED DEPOSIT IS SEPARATELY CLASSIFIED UNDER THE HEAD 'INCOME FROM OTHER SOURCE', THEN ALSO THE SAME DOES NOT CEASE TO BE INCOME OF THE BUSINESS AND THE APPELLANT WOULD BE ENTITLED FOR SET OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINST THE SAID INCOME IN TERMS OF SEC. 72 OF THE ACT. 3.3] DISREGARDING THE SUBMISSIONS MADE BY THE APPELLANT, THE LD. ASSISTANT COMMISSIONER OF INCOME TAX (HERE IN AFTER REFERRED TO AS LD. ACT) PASSED ORDER U/S 147 R.W.S 143(3) ON 27 - 11 - 2012 DETERMINING TOTAL INCOME AT RS. 2,22,50,410 / - COMPUTED UNDER THE PROVISIONS OF THE ACT OTHER THAN SEC. 115JB AND RAISING A DEMAND OF RS. 1,32,78,039 / - . IN THE SAID ORDER, AMONG OTHERS, THE LD. ACIT HAS TAXED INTEREST EARNED ON FIXED DEPOSITS AS 'INCOM E FROM OTHER SOURCES' INSTEAD OF INCOME UNDER THE HEAD ' PROFIT AND GAINS FROM BUSINESS AND PROFESSION', WHILE COMPUTING THE TOTAL INCOME UNDER THE NORMAL PROVISIONS OF THE ACT. 3.4] PROCEEDINGS U/S 147 IS TIME BARRED : AT THE OUTSET, IT IS PERTINENT TO NOTE THE PROVISIONS OF SECTION 147 WHICH PROVIDES AS UNDER: '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, ASS ESS 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 ALLOW ANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED............' 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 SUC H 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 SUBSECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR H IS ASSESSMENT, FOR THAT ASSESSMENT YEAR' (EMPHASIS ADDED) 3.5] ON PERUSAL OF THE ABOVE, IT IS APPARENTLY CLEAR THAT AN ASSESSMENT MADE U/S 143(3) CAN BE REOPENED AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR ONLY IF ANY OF T HE FOLLOWING CONDITIONS ARE SATISFIED. A. NON - FILING OF RETURN U/ S 139(1) B. NON - APP EARANCE IN RESPONSE TO NOTICE U/ S 142(1) OR 148. C. NON - DISCLOSURE OF MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. 3.6] IN THE PRESENT CASE THE NOTICE INITIATING REASSESSMENT PROCEEDINGS HAVE BEEN ISSUED AND SERVED ON 22 - 03 - 2012 I.E., MUCH AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. FURTHER, IN THE INSTANT CASE, THE APPELLANT I.T.A. NO.2600/MUM/2014 14 HAD FILED ITS RETURN OF INCOME ON 27 - 05 - 2005 U/S 139(1) AND THERE HAS BEEN NO DEFAULT IN COMPLIANCE WITH THE NOTICES U/S 142(1). 3.7] AS REGARDS DISCLOSURE OF MATERIAL FACTS NECESSARY FOR COMPLETING THE ASSESSMENT, IT IS SUBMITTED THAT THERE IS NO FAILURE ON THE PART OF THE APPELLANT IN THIS REGARD. ALL THE MATERIAL ON THE BASIS OF WHICH THE AO HAS REASONS TO BELIEVE WAS AVAILABLE ON RECORD AT THE TIME OF THE COMPLETION OF THE ORIGINAL ASSESSMENT U/S 143(3). 3.8] IN THIS REGARD, IT IS PERTINENT TO NOTE THAT IN THE INSTANT Y EAR THE APPELLANT HAS EARNED DIVIDEND INCOME OF RS. 9,86,80,000 / - AND INTEREST ON FIXED DEPOSITS FROM BANK OF RS. 2,24,06,786 / - . THE SAME WAS REFLECTED ON THE FACE OF THE PROFIT AND LOSS A/C UNDER THE HEAD ' INCOME'. IN THIS REGARD, RELEVANT EXTRACTS OF TH E AUDITED ACCOUNTS FOR THE FINANCIAL YEAR ENDED 31 - 03 - 2005. FURTHER, IN THE RETURN OF THE INCOME FILED ON 27 - 10 - 2005, THE APPELLANT CLAIMED THE INTEREST INCOME ON FIXED DEPOSI TS AMOUNTING TO RS. 2,24,06,786/ - UNDER THE HEAD OF 'PROFITS AND G AINS FROM BUSIN ESS OR PROFESSION' AND DIVIDEND INCOME OF RS 9,86,80,000 / - UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. THEREAFTER, THE APPELLANT HAS SET OFF BROUGHT FORWARD LOSS OF RS. 2,15,29,225/ - AGAINST INC OME UNDER THE HEAD PROFITS AND G AINS OF BUSINESS OR PROFESSION . 3.9] FURTHER, THE CASE WAS SELECTED FOR SCRUTINY AND ORDER U/S 143(3) DATED 26 - 11 - 2007 WAS PASSED WHEREIN THE AO HAS CLEARLY STATED THE FACT THAT IN THE INSTANT YEAR THE APPELLANT HAS EARNED DIVIDEND OF RS. 9,86,80,000/ - AND INTEREST ON FIXED DEPOSIT O F RS. 2,24,06,786 / - WHICH HAS BEEN DULY CREDITED IN THE PROFIT AND LOSS A/C. IN THE ORDER U/S 143(3), AFTER CONSIDERING ALL THE MATERIAL FACTS AVAILABLE ON RECORDS, THE AO MADE A SOLITARY DISALLOWANCE U/S 14A OF RS. 7,21,181/ - . THEREAFTER THE AO STARTED TH E COMPUTATION OF TOTAL INCOME BY TAKING NET PROFIT AS PER P&L ALE AND AFTER MAKING VARIOUS A DJUSTMENTS COMPUTED 'PROFITS & G AINS FROM BUSINESS/PROFESSION' WHICH WAS SUBSEQUENTLY SET OFF WITH BROUGHT FORWARD BUSINESS LOSS. THEREAFTER IT COMPUTED 'INCOME FRO M OTHER SOURCES' WHEREIN DIVIDEND INCOME WAS ONLY INCLUDED. COPY OF THE ASSESSMENT ORDER U/S 143(3) DATED 26 - 11 - 2007 IS ALREADY ENCLOSED AS ANNEXURE - 1 (REFER PAGE NO 31 TO 35 OF W/S). . 3.10] IN VIEW OF THE ABOVE, IT COULD BE SEEN THAT THE REASONS MENTIONED IN THE NOTICE DATED 22 - 03 - 2012 FOR INITIATING THE REASSESSMENT PROCEEDINGS HAVE BEEN MADE ON THE BASIS OF CERTAIN FACTS, ALL OF WHICH WERE AVAILABLE IN THE ASSESSMENT RECORDS AND NO NEW MATERIAL HAS BEEN BROUGHT TO THE NOTICE OF THE LD. ACIT SUBS EQUENT TO THE PASSING OF ASSESSMENT ORDER. THUS, BY VIRTUE OF THE EXPRESS PROVISIONS OF THE STATUTE, AS ENUMERATED HERE - IN ABOVE, PROCEEDINGS INITIATED U/ S 147 IS BARRED BY LIMITATION. 3.11] ATTENTION IN THIS REGARD IS DRAWN TO THE DECISION OF THE HON'B LE BOMBAY HIGH COURT IN THE CASE OF ICICI SECURITIES LTD. - VS. - AC IT (W.P. NO 1919 OF 2006) BOM) ( COPY OF THE AFORESAID DECISIONS I S ENCLOSED AS ANNEXURE - 8 ) (REFER P QGE NO 60 TO 65 OF WS). IN THE SAID CASE REASSESSMENT WAS MADE SINCE THE ASSESSEE HAD TR EATED LOSS ON TRADING IN SHARES AS BUSINESS LOSS AND NOT AS SPECULATIVE LOSS. AFTER EXAMINING THE FACTS OF THE CASE, IT WAS HELD AS UNDER: - I.T.A. NO.2600/MUM/2014 15 I N THE FACTS OF THE PRESENT CASE, THERE IS NOTHING NEW WHICH HAS COME TO THE NOTICE OF THE REVENUE. THE ACCOUNTS H AVE BEEN FURNISHED BY THE PETITIONER WHEN CALLED UPON. THEREAFTER THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, NOW, ON A MERE RELOOK, THE OFFICER HAS COME TO THE CONCLUSION THAT THE INCOME HAS ESCAPED ASSESSMENT AND HE IS OF COURSE JUSTIFIED IN HIS ANALYSES. IN OUR VIEW, THIS IS NOT SOMETHING WHICH IS PERMISSIBLE UNDER THE PROVISION TO SECTION 14 7 OF THE INCOME TAX ACT WHI CH SPEAKS ABOUT A FAILURE ON THE PART OF THE ASSESSEE TO MAKE A PROPER RETURN. IN THE PRESENT CASE, NO SU CH CASE IS MADE OUT ON THE RECORD.'.. THE DECISION OF THE JURISDICTIONAL HIGH COURT HAS SINCE BEEN AFFIRMED BY THE APEX COURT IN ACIT - VS. - ICICI SECURITIES PRIMARY DEALERSH IP LTD. (2012) 348 ITR 299 (SC) . 3.12] RELIANCE IN THIS REGARD IS PLACED ON T HE DECISION IN THE CASE OF BHAVESH DEVELOPERS - VS. - AO (2010) 229 CTR 160 (BOM) WHEREIN THE AO REOPENED THE ASSESSMENT AFTER EXPIRY OF FOUR YEARS ON THE CONT ENTION THAT DEDUCTION U/S 80IB I S NOT TO BE ALLOWED ON OTHER INCOME WHICH MAINLY COMPRISES OF SOCIE TY DEPOSIT, STILT PARKING AND SUNDRY CREDIT BALANCE. THE HON'BLE HIGH COURT IN ARRIVING AT THE DECISION HELD THAT REASONS WHICH HAVE BEEN DISCLOSED TO THE APPELLANT SHOWS THAT THE FINDINGS IS BASED ON THE DETAILS FILED BY THE APPELLANT AND THE P&L A/C. THE RE WAS NO FAILURE ON THE PART OF THE APPELLANT TO FULLY AND TRULY DISCLOSE ALL NECESSARY FACTS FOR THE PURPOSE OF ASSESSMENT AND HENCE REOPENING OF ASSESSMENT AFTER FOUR YEARS IS NOT VALID IN THE PRESENT CASE. 3.13] RELIANCE CAN ALSO BE PLACED IN THE CAS E OF NIHILEN T TECHNOLOGIES PVT LTD - VS. - DCIT (2011 - TLOL - 451 - HC - MUM - IT] WHEREIN IT HAS BEEN HELD THAT IF THERE IS NO FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE PURPOSE OF ASSESSMENT, THEN, AS PER THE PROVISO TO SECTION 147 OF THE ACT REOPENING OF THE ASSESSMENT BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR CANNOT BE SUSTAINED. 3.14] FURTHER, IN THE CASE OF SUPREME TREVES PVT. LTD. - VS. - DCIT (2009) 23 DTR 215(BOM) THE AO REOPENED THE ASSESSMENT AFTER EXPIRY OF FOUR YEARS ON THE CONTENTION THAT THE GOODWILL IS NOT AN INTANGIBLE ASSET ELIGIBLE FOR DEPRECIATION AND THE ASSESSEE HAS NOT DISCLOSED THE NATURE OF GOODWILL ON WHICH DEPRECIATION HAS BEEN PROVIDED I N ASSESSMENT. THE HON'BLE HIGH COURT HAS HELD THAT, IF ACCORDING TO REVENUE, NO DEPRECIATION IS ALLOWABLE ON THE GOODWILL, THEN, IT WOULD BE WHOLLY IRRELEVANT TO CONSIDER THE NATURE OF THE GOODWILL, FURTHER THE RETURN OF INCOME FILED BY ASSESSEE, PARTICULA RLY THE NOTES AND SCHEDULE ATTACHED TO THE BALAN CE SHEET CLEARLY SHOWED THAT ALL FACTS RELATING TO CLAIM OF DEPRECIATION ON GOODWILL HAD BEEN FULLY DISCLOSED BY THE ASSESSEE. AS THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ELL FACTS, THE RE OPENING OF ASSESSMENT AFTER THE EXPIRY OF FOUR YEARS COULD NOT BE SUSTAINED. 3.15] RELIANCE IN THIS REGARD IS ALSO PLACED ON THE DECISION IN THE CASE OF IDEA CELLULAR LTD, - VS. - DCIT & ORS. (2008) 301 ITR 407 (BOM} WHEREIN THE AO REOPENED THE ASSESSMENT AFTER EXPIRY OF FOUR YEARS ON THE CONTENTION THAT I.T.A. NO.2600/MUM/2014 16 AMALGAMATION RESERVE CREDITED DIRECTLY TO RESERVES AND SURPLUS ACCOUNT HAS ESCAPED ASSESSMENT. THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT, SINCE THE PETITIONER HAS MENTIONED THE ACCOUNTING ENTRY FOR AMALGA MATION RESERVE IN THE RETURN ITSELF AND ALSO ANSWERED QUERIES RAISED BY AO DURING ASSESSMENT ON THE ISSUE, THERE WAS NO FAILURE ON THE PART OF THE PETITIONER TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT OF THE RELEVANT ASSESSMENT YEAR. THE PRE - REQUISITE CONDITION CONTAINED IN THE PROVISO TO SEC. 147 HAS TO BE MET BEFORE INITIATING REASSESSMENT PROCEEDINGS AFTER THE EXPIRY OF THE PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. ONCE A LL THE MATERIAL WAS AVAILABLE BEF ORE THE AO AND HE CHOSE NOT TO DEAL WITH THE SEVERAL CONTENTIONS RAISED BY THE PETITIONER IN HIS FINAL ASSESSMENT ORDER, IT CANNOT BE SAID THAT HE HAD NOT APPLIED HIS MIND WHEN ALL THE MATERIALS WAS PLACED BY THE PETITIONER BEFORE HIM. 3.16] FURTHER, REL IANCE IS ALSO PLACED ON THE DECISION IN THE CASE OF GANGO SARAN & SONS PVT. LT D, - VS. - CIT (1981) 130 ITR 01(SC) WHEREIN IT WAS HELD THAT IT IS WELL SETTLED THAT TWO DISTINCT CONDITIONS MUST BE SATISFIED BEFORE ISSUE OF NOTICE U/S. 147(A). FIRSTLY, THE AO MUST HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT AND SECONDLY, HE HAS THE REASON TO BELIEVE THAT SUCH ESCAPEMENT IS MADE BY REASON OF THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. IF EITHE R OF THESE CONDITIONS IS NOT FULFILLED, THE NOTICE OF THE ITO WOULD BE WITHOUT JURISDICTION. 3.17] RELIANCE IS ALSO PLACED ON THE DECISION OF BOMBAY HIGH COURT KIMPLAS TRENTON FITTINGS LTD, - VS. - ACIT (2012) 340 ITR 299{BOM), WHEREIN IT HAS BEEN H ELD THAT THE ASSESSEE HAVING DISCLOSED DURING THE ASSESSMENT PROCEEDINGS THE FACT THAT UNDER AN MOU WITH A SWISS COMPANY LENDER THE OUTSTANDING L OAN WAS SETTLED AT SWISS FRANCS 4,80,000 AS AGAINST THE OUTSTANDING BALANCE OF 8,00,000 SWISS FRANCS AND THAT I T HAS WRITTEN BACK AN AMOUNT OF RS. 1.10 CRORES EQUIVALENT TO SWISS FRANCS 3,20,000 AND RELIED UPON A CASE LAW IN SUPPORT OF THE SUBMISSION THAT THE WRITING BACK OF THE LOAN DID NOT CONSTITUTE INCOME ALL MATERIAL FACTS AND SUCH FACTS ARE WERE WITHIN THE KN OWLEDGE OF THE AO, IT CANNOT BE HELD THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERIAL FACTS NECESSARY FOR ASSESSMENT AND, THEREFORE, REOPENING OF ASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE REL EVANT ASSESSMENT YEAR IS NOT VALID. 3.18] IN THIS REGARD RELIANCE IS ALSO PLACED ON THE DECISION OF BOMBAY HIGH COURT IN THE CASE O F GERMAN REMEDIES LTD, - VS. - PCI T (2006) 287 ITR 494 (BOM). WHEREIN IT HAS BEEN HELD THAT WHERE THE ASSESSEE HAS DISCLOSED ALL THE RELEVANT FACTS SUPPORTED BY STATUTORY AUDIT AS WELL AS TAX AUDIT REPORTS, THE MERE FACT THAT VALUATION OF CLOSING STOCK MAY HAVE TO BE DIFFERENT WOULD NOT JUSTIFY A REASSESSMENT NOTICE AFTER FOUR YEARS. 3.19] IN THIS REGARD, RELIANCE IS PLACED ON THE DECISION OF THE FULL BENCH OF THE DELHI HIGH COURT IN THE CASE OF CIT - VS. - KELVINATOR OF INDI A LIMITED (2002) 256 ITR 1 (DEL) (FB) WHEREIN IT HAS BEEN HELD THAT INITIATION OF RE - ASSESSMENT PROCEEDINGS ON THE BASIS OF INFORMATION IN THE TAX AUDIT REPOR T IS NOT ACCEPTABLE SINCE THE SAME WAS SUBMITTED BY THE APPELLANT ALONG WITH THE RETURN OF INCOME. IT IS ONE THING TO SAY THAT THE AO HAD RECEIVED INFORMATION I.T.A. NO.2600/MUM/2014 17 FROM AN AUDIT REPORT WHICH WAS NOT BEFORE HIM, BUT IT IS ANOTHER THING TO SAY THAT SUCH INFORMATI ON CAN BE DERIVED BY THE MATERIAL WHICH HAD BEEN SUPPLIED BY THE APPELLANT HIMSELF. WHILE ARRIVING AT THE SAID DECISION THE HON'BLE DELHI HIGH COURT REFERRED TO THE CBDT CIRCULAR NO. 549 DATED 31.10.1989 WHICH, WHILE EXPLAINING THE SCOPE AND EFFECT OF SECT ION 147, MADE IT VERY CLEAR THAT A MERE CHANGE OF OPINION CANNOT FORM THE BASIS OF REOPENING A COMPLETED ASSESSMENT AND ALSO HELD THAT THE CIRCULAR ISSUED BY THE BOARD IS LEGALLY BINDING ON THE REVENUE. THE HON'BLE DELHI HIGH COURT FURTHER ADDED THAT IN TH E EVENT THE INCOME TAX OFFICER EXERCISES ITS JURISDICTION U/S 147 UPON A MERE CHANGE OF OPINION THE SAME MAY BE HELD TO BE UNCONSTITUTIONAL SINCE A STATUTE CONFERRING AN ARBITRARY POWER MAY BE HELD TO BE ULTRA VIRES ARTICLE 14 OF THE CONSTITUTION OF INDIA. IT WAS ALSO HELD THAT WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF SECTION 143(3), A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BEEN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN THAT A PRESUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUSE (E) OF SECTION 114 OF THE INDIAN EVIDENCE ACT, 1872, JUDICIAL AND OFFICIAL ACTS HAVE TO BE REGULARLY PERFORMED. THE AFORESAID VIEW HAS BEEN FORTIFIED BY THE APEX COURT IN CASE OF CI T - VS. - KELVINATOR OF INDIA LTD. (2010) 320 ITR 561 (SO WHEREIN THE HON'BLE APEX COURT HAS HELD THAT, AFTER 01 - 04 - 1989, THE A.O. HAS POWER TO RE - OPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMA TION OF THE BELIEF. THE APEX COURT FURTHER HELD THAT, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH, SECTION 147 WOULD GIVE ARBITRARY POWER TO THE A.O. TO REOPEN ASSESSMENT ON THE BASIS OF MERE CHANGE OF OPINIO N WHICH CANNOT BE PER SE REASON TO REOPEN. 3.20] RECE NTLY, THE FULL BENCH OF THE HON 'BLE DELHI HIGH COURT IN THE CASE OF CIT - VS . USHA INTERNATIONAL LTD (2012)348 ITR 485(DEL) ON THE ISSUE OF VALIDITY OF INITIATION OF REASSESSMENT PROCEEDINGS HAS HELD THAT EVEN IN CASE WHERE THE ASSESSING OFFICER HAS NOT RAISED ANY PARTICULAR QUERY, IF THE ISSUE IS SO APPARENT AND OBVIOUS THAT TO SOY THAT THE AO HAS NOT FORMED AN OPINIO N WOULD BE CONTRARY AND OPPOSED TO NORMAL HUMAN CONDUCT. 3.21] SIMITAR VIEW HAS ALSO BEEN EXPRESSED IN THE FOLLOWING CASES: - - INDIA STEAMSHIP CO. LTD - VS. - JCIT AN D OTHERS (2005) 275 ITR 155 (CAL ) - APPOLO HOSPITAL ENTERPRISES - VS. - AC IT (2006) 28 7 ITR 25 (MAD) - GARDEN SILK MILLS PVT LTD, - VS. - DCIT(1999) 237 ITR 663.675 (GUI) - BALLARPUR PAPER AND STRAW BOARD MILLS LTD . (1975) 101 ITR 55 (CAL ) 3.22] IN THE CASE OF ICICI BANK LTD, - VS. - DCIT & ORS. (2004) 268 ITR 203 (BOM) WHEREIN IT WAS HELD THAT CONCLUDED ASSESSMENTS CAN BE REOPENED BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEARS ONLY IF THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE PURPOSE OF ASS ESSMENT. 3.23] FURTHER, IN THE CASE OF JASHAN TEXTILE MILLS (P) LTD, - VS. - DCIT & ORS. (2006) 284 ITR 542 (BOM) WHEREIN IT HAS BEEN HELD THAT REOPENING OF ASSESSMENT AFTER EXPIRY OF FOUR YEARS SOLELY BASED ON MATERIALS ALREADY ON I.T.A. NO.2600/MUM/2014 18 RECORD IN THE ABSENCE OF ANY ALLEGATION OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS CANNOT BE SUSTAINED. IT WAS FURTHER HELD THAT REASSESSMENT CANNOT BE MADE BEYOND FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR UNLESS IT IS ESTABLIS HED THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. SIMILAR VIEW HAS BEEN TAKEN IN THE CASE OF HIMSON TEXTILE ENGINEERING INDUSTRIES LTD, - VS. - N. N. KRISHNAN OR HIS SUCCESSORS TO OFFICE (2013) - 83 DTK 1 32 (GUI) WHEREIN FT HAS BEEN HEL D THAT MERELY BY ADDING A LINE IN THE REASONS RECORDED BY THE AO THAT THE PETITIONER HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS, THE REQUIREMENT OF THE PROVISO TO SECTION 147 OF THE ACT WOULD NOT BE SATISFIED FO R THE PURPOSE OF REOPENING THE ASSESSMENT U/S 147. 3.24] RELIANCE IS ALSO PLACED IN THE CASE OF FENNER (LNDIA) LTD, - VS. - DCI T (2 000) 241 1TR 672 (MAD}. IN THE SAID CASE THE REASSESSMENT WAS MADE BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. THE HON'BLE HIGH COURT WHILE DE CIDING THE CASE HELD AS UNDER: 'THE DUTY OF AN ASSESSEE IS LIMITED TO FULLY AND TRULY DISCLOSE ALL THE MATERIAL FACTS. THE ASSESSEE IS NOT REQUIRED THEREAFTER TO PREPARE A DRAFT ASSESSMENT ORDER. IF THE DETAILS PLACED BY THE ASSESSEE BEFORE THE AO WAS IN CONFORMITY WITH THE REQUIREMENTS OF ALL APPLICABLE LAWS AND KNOWN ACCOUNTING PRINCIPLES, AND MATERIALS DETAILS HAD BEEN EXHIBITED BEFORE THE AO, IT IS FOR THE AO TO REACH SUCH CONCLUSIONS AS HE CONSIDERED WAS WARRANTED FROM SUCH DATA AND ANY FAILURE ON HIS PART TO DO SO CANNOT BE REGARDED AS ASSESSEE'S FAILURE TO FURNISH THE MATERIAL FACTS TRULY AND FULLY. ANY LACK OF COMPREHENSION ON THE PART OF THE AO IN UNDERSTANDING THE DETAILS PLACED BEFORE HIM CANNOT CONFER A JUST IFICATION FOR REOPENING THE ASSESSMENT, LONG AFTER THE PERIOD OF FOUR YEARS HAD EXPIRED. ON THE FACTS OF THIS CASE, IT IS CLEAR THAT THE ESCAPEMENT OF INCOME IF ANY ON THIS ACCOUNT IS NOT ON ACCOUNT OF ANY FAILURE ON THE ASSESSEE'S PART TO DISCLOSE THE MAT ERIAL FACTS FULLY AND TRULY. THE NOTICE ISSUED BY THE AO IN EXERCISE OF HIS POWER UNDER S. 147, THEREFORE, CANNOT BE SUSTAINED.' 3.25 ) IN SITA WORLD TRAVEL (INDIA) LTD. - VS. - CIT (2004) 274 ITR 186 (DEL) IT WAS HELD THAT FROM THE ORIGINAL ASSESSMENT ORDERS AS WELL AS ORDER MADE BY THE APPELLATE AUTHORITY, IT IS VERY CLEAR THAT THE AO WAS WELL AWARE ABOUT THE PRIMARY FACTS, NAMELY, THE CLAIM MADE BY THE ASSESSEE, THE CIRCUMSTANCES UNDER WHICH THE CLAIM WAS MADE AND THE PROVISIONS OF LAW WHICH COULD BE APPLIED WHILE GRANTING THE BENEFITS. A DECISION MAY BE WRONG OR RIGHT IS NONE OF THE CONCERN OF THE SUBSEQUENT OFFICER. IF THE PRIMARY FACTS WERE NOT AVAILABLE OR THERE WAS CONCEALMENT OR THERE WAS NO APPLICATION OF THE MIND AT ALL, THEN A CASE FOR REOPENI NG THE ASSESSMENT COULD BE MADE OUT. BUT WHEN ALL THE FACTS WERE PLACED BEFORE THE AO AND THE AO CONSCIOUSLY CONSIDERED THE FACTS AND ARRIVED AT A DECISION THEN IT CANNOT BE REOPENED MERELY BECAUS E SUBSEQUENTLY HE CHANGES HIS OPINION OR SOME OTHER OFFICER TAKES A DIFFERENT VIEW. THE RELEVANT FACTS WERE TAKEN INTO CONSIDERATION BY THE AO WHILE MAKING THE ASSESSMENT WHICH IS INDICATE D HEREINABOVE AND , THEREFORE, THERE IS NO QUESTION OF ANY ESCAPEMENT OF INCOME CHARGEABLE TO INCOME - TAX. THEREFORE, THIS IS A CASE OF WRONGFUL ASSUMPTION OF JURISDICTION AND AS SUCH THE NOTICES, THE I.T.A. NO.2600/MUM/2014 19 SPEAKING ORDERS AND THE ASSESSMENT ORDERS MADE IN PURSUANCE TO THE NOTICES ARE REQUIRED TO BE QUASHED AND SET ASIDE AND ARE ACCORDINGLY SET ASIDE. 3.26] FURTHER RELIANCE IS ALSO PLA CED ON THE DECISION IN THE CASE OF I NDIA STEAMSHIP CO. LTD, - VS. - JCI T AND OTHERS (2005) 275 ITR 155 (CAL) WHEREIN IT HAS BEEN HELD THAT IT COULD BE SEEN FROM RECORDED REASONS THAT THERE IS NO ALLEGATION WHATSOEVER OF ANY NATURE OF ANY FACT NOT BEING DISCL OSED BY THE ASSESSEE IN ANY OF THE ASSESSMENTS. IN THE BALANCE SHEETS WHICH WERE FILED ALONG WITH THE RETURNS, ALL THE FACTS RELATING TO THE EXPENSES WERE FULLY DISCLOSED IN SEVERAL ASSESSMENT YEARS AND ASSESSING OFFICER AF TER CONSIDERING SUCH FACTS HAD AL LOWED THE DEDUCTION. THE RE - ASSESSMENT PROCEED INGS COULD NOT BE SUSTAINED AS THEY HAD BEEN INITIATED ON A MERE CHANGE OF OPINION ON THE SAME SET OF FACTS. SIMILAR VIEW HAS ALSO BEEN TAKEN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF RALIIS INDIA LTD - VS . - ACIT (2010) 323 ITR 54 (BOM). 3.27] THE HON'BLE DELHI HIGH COURT IN THE CASE OF HCL CORPORATION LTD, - VS. - ACIT (2012) 66 DTR 473 (DELHI), HELD THAT THE PETITIONER HAVING SUPPLIED RELEVANT INFORMATION IN ITS RETURN INDICATING THAT IT HAD RECEIVED DIVID END INCOME AND THAT IT HAD INCURRED EXPENSES FOR THE PURPOSES OF EARNING THE SAID DIVIDEND INCOME AND ALSO FILED DETAILS BY WAY OF A LETTER, AND THERE BEING NO SPECIFIC AVERMENT OR ALLEGATION THAT ANY PARTICULAR EXPENSE HAS NOT BEEN MENTIONED BY THE PETITI ONER AT THE TIME OF ORIGINAL ASSESSMENT PROCEEDINGS, IMPUGNED NOTICE UNDER S.' 148 ISSUED BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AS WELL AS ALL PROCEEDINGS PURSUANT THERETO ARE CONTRARY TO LAW AND THE SAME ARE SET ASID E. 3.28] RELIANCE IS ALSO PLACED ON THE DECISION OF HON'BLE BOMBAY HIG H COURT IN THE CASE OF GODREJ AG ROVET LTD, - VS. - ACIT (2007) 290 ITR 252(BOM) WHEREIN THE AO HAS REOPENED THE ASSESSMENT ON THE GROUND THAT HE HAS FAILED TO CONSIDER THE EFFECT OF SECTION 80 I B(13) R.W .S. 80IA(9) IN REGULAR ASSESSMENT. IN THE SAID CASE ON SIMILAR FACTS IT HAS BEEN HELD THAT THERE WERE NO REASONS ON THE BASIS OF WHICH PRIMA FACIE IT COULD BE SAID THAT INCOME HAD ESCAPED ASSESSMENT. ALTHOUGH IT WAS ALLEGED T HAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS, IN FACT THE REOPENING WAS BASED ON THE FACTS WHICH WERE ALREADY ON RECORD. THEREFORE, IT COULD NOT BE SAID THAT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AND THE NOTICE WAS LIABLE TO BE QUASHED. HENCE, IN VIEW OF THE DECISION OF JURISDICTIONAL HIGH COURT, INITIATION OF REASSESSMENT PROCEEDINGS ON THIS ISSUE IS NOT TENABLE. 3.29] THE ISSUE RELATING TO THE TAXABILITY OF INTEREST INC OME EARNED ON FIXED DEPOSITS IS ALREADY TAKEN INTO CONSIDERATION BY THE DCIT, WHILE FRAMING THE ORIGINAL ASSESSMENT ORDER U/S 143(3) AND SUCH ISSUE HAS ATTAINED FINALITY. FURTHER IN VIEW OF THE AFORESAID FACTUAL AND LEGAL POSITION AND IN ABSENCE OF ANY FAI LURE OF THE NATURE REFERRED TO IN PROVISO TO SECTION 147, IT IS HUMBLY SUBMITTED THAT THE ORDER PASSED U/S. 143(3) R.W.S 147 NEEDS TO BE SUMMARILY CANCELLED. 5.2 . THE LD. CIT(A) REJECTED THE CONTENTION OF THE ASSESSEE VIDE APPELLATE ORDER DATED 30.01.20 14 PASSED BY LEARNED CIT(A) WHEREIN I.T.A. NO.2600/MUM/2014 20 LEARNED CIT(A) UPHELD THE REOPENING OF THE CONCLUDED ASSESSMENT BY THE AO U/S 147/148 OF THE 1961 ACT , BY HOLDING AS UNDER: - 4.2 GROUND NO (2): THROUGH THIS GROUND [I.E. 2A, 2B & 2C] THE ASSESSEE HAS CHALLENGED THE RE - ASSESSMENT PROCEEDINGS U/S 147. IT HAS BEEN CONTENDED THAT THE AO WAS NOT JUSTIFIED IN REOPENING OF ASSESSMENT AS THERE WAS FRESH APPLICATION OF THE MIND ON HIS PART TO THE SAME SET OF FACTS AND THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY FACTS NECESSARY FOR THE COMPLETION OF THE ASSESSMENT. BRIEFLY THE FACTS ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN BUSINESS OF INVESTMENT / ACQUISITION IN / OF THE COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND / OR SALE OF CEMENTS; THE ASSESSEE COMPANY HOLDS SUBSTANTIAL SHARES OF TWO MAJOR CEMENT MANUFACTURING COMPANIES' VIZ. ACC LTD AND AMBUJA CEMENTS LTD. THE SOURCE OF ITS INCOME IS DIVIDEND FROM THE SAID TWO COMPANIES AND THE INTEREST ON FIXED DEPOSITS IN BANK. DURING THE YEAR THE ASSESSEE COMPANY RECEIVED DIVIDEND OF RS 9,86,80,000 / - [WHICH IS EXEMPT U/S 10(34)] AND THE INTEREST ON BANK FDS OF RS 2,24,06,786 / - . THE EXPENDITURE CLAIMED TOTALED TO RS 8, 84,937/ - [SALARY RS 4,66,870 / - , OPERATING E XPENSES - RS 3,50,478/ - AND DEPRECIATION RS 67,589/ - ]. IN THE STATEMENT OF COMPUTATION OF TOTAL INCOME, THE ASSESSEE HAS CLAIMED ENTIRE DIVIDEND OF RS 9.86,80,000 / - AS EXEMPT U/S 10(34) AND COMPUTED ITS TOTAL INCOME FOR THE YEAR AT RS 2,15,29,225/ - . THUS, I N EFFECT THE TOTAL INCOME SO COMPUTED CONSISTED OF INTEREST INCOME ON BANK FDS ONLY. RATHER THE ENTIRE EXPENSES ON ACCOUNT OF SALARY, OPERATING EXPENSES AND DEPRECIATION HAS BEEN CLAIMED AS DEDUCTION AGAINST THAT INTEREST INCOME, AS IF ALL ITS EXPENSES WER E INCURRED FOR EARNING THE INTEREST ON BANK FDS AND NO EXPENSE WAS INCURRED IN MANAGING & CONTROL OF THE TWO SAID COMPANIES ACC LTD AND AMBUJA CEMENTS LTD WHEREIN IT HAS INVESTED ITS SUBSTANTIAL FUNDS. THE FIXED DEPOSITS IN BANK WERE OF SURPLUS FUND ONLY A ND IN THAT TRANSACTION HARDLY ANY EFFORT AND EXPENSE WOULD BE MADE. FURTHER, AGAINST THAT TOTAL INCOME OF RS 2,15,29,225/ - , THE ASSESSEE CLAIMED SET OFF OF UNABSORBED BUSINESS LOSS PERTAINING TO AY 2000 - 01 TO THAT EXTENT AND OFFERED ITS INCOME UNDER THE NO RMAL PROVISION AS NIL. THE AO IN THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS DISALLOWED RS 7,21,181 / - U/S 14A. THE ASSESSMENT WAS COMPLETED IN THE ROUTINE MANNER WITHOUT EXAMINING AS TO UNDER WHICH HEAD THE INTEREST INCOME WAS TO BE TAXED. 4.2.1 IN THE COURSE OF RE - ASSESSMENT PROCEEDINGS, THE ASSESSEE RAISED THE ISSUE OF LEGALITY OF PROCEEDINGS INITIATED U/S 147. THE BASIC PLEA TAKEN BY IT ARE SUMMARIZED BY THE AO IN THE ASSESSMENT ORDER AND THAT WERE - (A) PROCEEDINGS U/S 147 ARE INVALID SINCE THE NOTI CE WAS ISSUED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR; (B) THERE IS NO FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSURE OF MATERIAL FACTS NECESSARY FOR COMPLETING THE ASSESSMENT; AND (C) THE FACTS ON THE BASIS OF WHICH THE PROCEEDINGS WERE INITIATED ARE AVAILABLE ON THE RECORDS AND NO NEW MATERIAL HAS BEEN BROUGHT ON THE RECORD AFTER PASSING OF THE ASSESSMENT ORDER. THE AO DEALT WITH THE VARIOUS ISSUES / OBJECTIONS RAISED BY THE ASSESSEE ON THE LEGALITY OF THE PROCEEDINGS. T HE AO OBSERVED THAT AS PER THE PROVISIONS OF SECTION 149 THE NOTICE U/S 148 CAN BE ISSUED UPTO SIX YEARS FROM THE END OF THE ASSESSMENT YEAR IF THE INCOME CHARGEABLE TO TAX, WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO RS 1 LACS OR MOR E FOR THAT YEAR; AND THAT IN THE PRESENT CASE THE AMOUNT THAT HAD ESCAPED ASSESSMENT WAS MORE THAN RS 1 LAC; THAT I.T.A. NO.2600/MUM/2014 21 INTEREST FROM BANK FDS WAS CHARGEABLE UNDER THE HEAD, 'INCOME FROM SOURCES' AND AS PER THE PROVISIONS OF SECTION 72 OF THE I T ACT, THE BROUGH T FORWARD BUSINESS LOSS WAS NOT ALLOWED TO BE SET OFF AGAINST INCOME FROM OTHER SOURCES. THE AO ALSO OBSERVED THAT AS PER THE PROVISIONS OF THE I T ACT, THE ASSESSEE, SUO MOTO, OUGHT NOT TO HAVE CLAIMED SET OFF OF BUSINESS LOSS AGAINST INTEREST INCOME AND OFFERED THE SAID INTEREST INCOME UNDER THE HEAD, 'INCOME FROM OTHER SOURCES'. THE AO ALSO TOOK NOTE OF THE FACT THAT IN THE ORIGINAL ASSESSMENT PROCEEDINGS, THE ISSUE OF TAXABILITY OF INTEREST INCOME ON BANK FDS VIS - A - VIS THE HEAD OF INCOME WAS NEITHER EXA MINED NOR ASSESSEE HAD GIVEN ANY EXPLANATION, BASED ON ANY JUDICIAL PRONOUNCEMENTS, EITHER WHILE FILING THE RETURN OR DURING THE ASSESSMENT PROCEEDINGS; AND THEREFORE, THERE WAS NO CHANGE OF OPINION ON THE ISSUE. THE AO ALSO TOOK NOTE OF THE EXPLANATION 1 TO SECTION 147 WHICH PROVIDES THAT THE PRODUCTION BEFORE THE AO OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE AO WILL NOT NECESSARILY AMOUNT TO DISCLOSURE. IN THE CONTEXT, THE AO ALSO PLACED RELIANCE ONTO THE DECISIONS IN CASES OF JAWAND SONS [(2010) 326 ITR 39 (P & H)], CONSOLIDATED PHOTO A FINVEST LTD [(2006) 281 ITR 394 (DEL)], DR AMIN'S PATHOLOGY LABORATORY [(2001) 252 ITR 673 (BOM)] AND ALA FIRM [(1991 189 ITR 285 (SC)]. I HAVE CO NSIDERED THE ISSUE AND GONE THROUGH THE DETAILED SUBMISSIONS FILED BY THE ASSESSEE DURING THE APPEAL PROCEEDINGS, WHICH FINDS PLACE IN PARA 3 OF THIS ORDER ABOVE. THE ISSUE OF CHARGEABILITY OF INTEREST INCOME EARNED ON BANK FIXED DEPOSITS, OUT OF SURPLUS FUNDS [OR EVEN OUT OF BORROWED FUNDS] UNDER THE HEAD 'INCOME FROM OTHER SOURCES' HAS REACHED TO FINALITY AS PER NUMBER OF JUDICIAL DECISIONS. IN THE CASE OF TUTICORIN ALKALI CHEMICALS A FERTILIZERS LTD (1997) 227 ITR 172 (SC) THE HON'BLE SUPREME COURT HAD HELD THAT INTEREST ON FIXED DEPOSITS [OUT OF INVESTMENT OF BORROWED FUNDS] PRIOR TO COMMENCEMENT OF BUSINESS IS ASSESSABLE U/S 56. THE RATIO OF THIS DECISION WAS AGAIN APPROVED BY THE HON'BLE SUPREME COURT IN THE CASE OF AUTOCAST LTD [2001] 248 ITR 110 (SC ) WHEREIN IT WAS HELD THAT INTEREST EARNED ON SHORT TERM DEPOSITS IN BANKS IS ASSESSABLE AS INCOME FROM OTHER SOURCES U/S 56. THE RATIO OF SUPREME COURT DECISION IN THESE TWO CASES WERE APPLIED BY VARIOUS OTHER COURTS IN THE CASES OF CIT V/S GIMPEX P LTD [ 2004] 268 ITR 377 (MAD); CHANDPUR SUGAR COMPANY LTD V/S CIT [2006] 280 ITR 612 (ALL); FERRO CONCRETE CONSTRUCTIONS (I) PVT LTD V/S CIT [2007] 290 ITR 713 (MP); CIT V/S WINSOME DYEING A PROCESSING LTD [2008] 306 ITR 340 (HP) AND SHIPPING CORPN OF INDIA LTD V/S ADDL CIT [2012] 020 ITR TRIB (332) ITAT, MUMBAI. THE PROVISIONS OF THE I T ACT ARE ALSO CRYSTAL CLEAR. THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2005 - 06 AND BY THEN THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CASE OF TUTICORIN ALKALI CHEMICALS & FERTILISERS LTD AND AUTOCAST LTD (SUPRA) WERE DULY AVAILABLE. IN THE CONTEXT, THE MERE CLAIM OF THE TAXABILITY OF THE INTEREST INCOME AS BUSINESS INCOME BY WAY OF COMPUTATION SHOWN IN THE STATEMENT OF TOTAL INCOME CANNOT BE CONSIDERED AS FULL DISCLOSURE. NOWHERE IN THE RETURN OR EVEN DURING THE ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSEE GAVE ANY EXPLANATION AS TO WHY IN ITS CASE THE INTEREST INCOME FROM BANK FDS WAS TO BE TAXED UNDER THE HEAD, BUSINESS INCOME AND NOT AS INCOME FROM OTHER SOURCES INSP ITE OF THE DECISIONS GIVEN BY THE HON'BLE SUPREME COURT IN THE AFORESAID TWO CASES. THUS, I AGREE WITH THE AO'S VIEW THAT REOPENING OF THE CASE U/S 147 HAS BEEN IN ACCORDANCE WITH LAW AND THE PROVISIONS OF THE I T ACT AND THEREFORE, THE GROUND RAISED BY TH E ASSESSEE IS REJECTED. I.T.A. NO.2600/MUM/2014 22 6 . 1. AGGRIEVED BY THE APPELLATE ORDER DATED 30.01.2014 PASSED BY LEARNED CIT(A) , THE ASSESSEE HAS FILED AN APPEAL BEFORE THE TRIBUNAL . THE ASSESSEE HAS FILED WRITTEN SUBMISSIONS BY WAY OF SYNOPSIS AND HAS ALSO FILED PAPER BOOK BEFORE THE TRIBUNAL. THE ASSESSEE HAS CITED LARGE NUMBER OF JUDICIAL PRECEDENTS IN WRITTEN SUBMISSIONS TO SUPPORT ITS CONTENTIONS. THE SAID WRITTEN SUBMISSIONS ARE REPRODUCED HEREUNDER: AMBUTA CEMENT INDIA PRIVATE LIMITED (SINCE MERGED WITH HOLCIM (INDI A) FVT. LTD, AND SUBSEQUENTLY WITH AMBUJA CEMENTS LIMITED) ASSESSMENT YEAR 2005 - 06 ASSESSEE 'S APPEAL_BEFORE THE HON'BLE IT AT AGAINST ORDER U/S 143(3)/147 I.T.A. NO. 2600/M/2014; BENCH - 'A' SYNOPSIS OF GROUNDS GR NO. PARTICULARS KEY SUBMISSIONS PRECEDENC E 1(A) & 1(B) VALIDITY OF REASSESSMENT P ROCEEDINGS U/S 147/148 OF THE ACT BRIEF FACTS: RETURN OF INCOME FOR THE INSTANT ASSESSMENT YEAR WAS FILED ON 27 - 10 - 2005 DISCLOSING TOTAL INCOME AT RS. NIL AS PER NORMAL PROVISIONS AND RS. 72,96,968/ - U/S 115JB. IN THE SAID RETURN, INTEREST INCOME EARNED ON SHORT TERM DEPOSITS OF SURPLUS FUNDS WAS OFFERED TO TAX UNDER THE HEAD 'PROFIT AND GAINS FROM BUSINESS/ PROFESSION' AND WAS SET OFF AGAINST BUSINESS LOSS BROUGHT FORWARD FROM EARLIER YEARS [REFER PB PG. NO. 13], ORD ER U/SJL43(3): INTEREST EARNED ON FIXED DEPOSITS WAS ASSESSED UNDER THE HEAD BUSINESS INCOME AND THE SAME WAS SET OFF WITH THE BROUGHT FORWARD BUSINESS LOSS [REFER ANNEXURE - 1, PG. NO. 6 - 10 AT PG. NO. 9 - 101. REASSESSMENT BEYOND 4 YEARS W ITHOUT FAILURE TO DISCLOSE MATERIAL FACTS IS INVALID ASSESSMENT FOR THE YEAR UNDER CONSIDERATIO N WAS MADE U/S 143(3) VIDE ORDER DATED 26 - 11 - 2007 [REFER ANNEXURE - 1, PG. NO. 6 - 10]. NOTICE U/S 148 WAS ISSUED ON 22 - 03 - 2012 [REFER PB PG. NO. 17] I.E. AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT AY [LAST DATE BEING 31 - 03 - 2010] AND BEFORE THE EXPIRY OF 6 YEARS [LAST DATE BEING 31 - 03 - 2012] REASONS FOR RE - OPENING THE ASSESSMENT [REFER PB PG. NO. 18 - 19] WAS ASSESSING INTEREST EARNED ON FIXED DEPOSITS UNDER THE HEAD 'INCOME FROM OTHER SOURCES' INSTEAD OF INCOME UNDER THE HEAD 'PROFITS AND GAIN S FROM BUSINESS OR PROFESSION' AND NON - SET OFF OF BROUGHT FORWARD BUSINESS LOSS AGAINST SUCH INCOME. AS PER 1ST PROVISO TO SEC. 147, REASSESSMENT CAN BE MADE AFTER THE EXPIRY OF 4 YEARS ON FAILURE ON THE PART OF THE ASSESSEE OF THE FOLLOWING : - I.T.A. NO.2600/MUM/2014 23 ORDER U/S 147: ON SCRUTINY OF THE ASSESSMEN T RECORDS, IT IS NOTICED THAT INTEREST EARNED ON FIXED DEPOSITS HAS BEEN INCLUDED UNDER THE HEAD 'PROFITS & GAINS FROM BUSINESS OR PROFESSION' AS AGAINST THE HEAD 'INCOME FROM OTHER SOURCES'. AS PER SEC. 72, BROUGHT FORWARD BUSINESS LOSS IS NOT ALLOWED TO BE SET OFF AGAINST 'INCOME FROM OTHER SOURCES'. [AO'S ORDER PG. NO. 4] ORDER OF CIT( A): NOWHERE IN THE RETURN OF INCOME OR EVEN DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS, THE ASSESSEE GAVE ANY EXPLANATION AS TO WHY INTEREST INCOME EARNED ON FIX ED DEPOSIT SHALL BE TAXABLE UNDER THE HEAD BUSINESS INCOME. THE REASSESSMENT IS ACCORDINGLY UPHELD. [CIT(A)'S ORDER PG. NO. 32 - 34] (I) MAKE A RETURN U/S 139 - ROI WAS DULY FILED ON 27 - 10 - 2005 U/S 139(1) [PG 12 OF PB] (II) MAKE A RETURN IN RESPONSE TO NOTICE ISSUED U/S 142(1)/148 - NO SUCH NOTICE WAS ISSUED OR THERE IS NO SUCH ALLEGATION. [PG 1, PARA 2 OF ORDER U/S 143(3)] [REFER ANNEXURE - 1, PG. NO. 6 - 10] (III) TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT FOR THAT AY - IN THE INSTANT YEAR, THE ASSESSEE HAS EARNED INTEREST ON FIXED DEPOSITS OF RS. 2,24,06,786/ - AND THE SAME IS REFLECTED ON THE FACE OF THE PROFIT AND L OSS A/C. THE SAID INCOME WAS TREATED AS PROFITS & GAINS FROM BUSINESS & PROFESSION. [REFER PB PG. 1 - 11 AT PG. NO. 5] IN THE ASSESSMENT ORDER U/S 143(3) DATED 26 - 11 - 2007, THE AO HAS ACKNOWLEDGED THE FACT THAT THE ASSESSEE HAS EARNED INTEREST ON FIXED DEPOS IT TO THE TUNE OF RS. 2,24,06,786/ - WHICH IS CREDITED TO THE P&L A/C. WHILE COMPUTING TAXABLE INCOME, THE AO HAS ALSO CONSIDERED INTEREST INCOME AS 'BUSINESS INCOME.' [REFER ANNEXURE - 1, PG. NO. 6 - 10 AT PG. NO. 9] ON PERUSAL OF THE ABOVE, IT CAN BE SEEN T HAT ALL THE MATERIAL FACTS WERE AVAILABLE BEFORE THE AO AT THE TIME OF PASSING OF THE ASSESSMENT ORDER AND NO NEW INFORMATION CAME TO THE POSSESSION OF THE AO. IN FACT, THE AO HAS ALSO APPLIED HIS MIND ON THE SAME SET OF FACTS WHILE ASSESSING INTEREST INCO ME UNDER THE HEAD BUSINESS INCOME. HENCE, RE - OPENING OF ASSESSMENT AFTER 4 YEARS IS INVALID AS: I) ALL THE MATERIAL FACTS WERE AVAILABLE ON RECORD II) NO FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. III) NO NEW MATERIAL/INFORMATION CAME TO THE POSSESSION OF THE AO. IV) IT IS MERELY FRESH APPLICATION OF MIND TO THE SAME SET OF FACTS, V) REASSESSMENT IS BASED ON MERE CHANGE OF OPINION. I.T.A. NO.2600/MUM/2014 24 THE PROPOSITION THAT WHEN ALL MATERIAL FACTS WERE AVAILABLE ON RECORD AND THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS REOPENING OF ASSESSMENT IS NOT VALID IS SUPPORTED BY THE FOLLOWING DECISIONS: - ICICI SECURITIES LTD, - VS. - ACIT (W.P. NO 1919 OF 2006)