D.C.I.T., Circle-10, Kolkata, Kolkata V. M/s Vatican Commercial ltd., Kolkata

ITA 2623/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1490 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 27-04-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 18-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K CHANDA
• Assessee Lawyers: A K TIBREWAL
• Keywords: Reopening of assessment; Depreciation; Difference of opinion; Validity of assessment; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 14A; 115JB; 147; 148; 139

Judgement Text

I.T.A. NO. 2623/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 1 OF 12 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 2623/KOL/ 2013 ASSESSMENT YEAR: 2004-2005 DEPUTY COMMISSIONER OF INCOME TAX,................. ................APPELLANT CIRCLE-10, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, 3 RD FLOOR, KOLKATA-700 069 -VS.- M/S. VATICAN COMMERCIAL LIMITED,................... ....................RESPONDENT VAIBHAV, 4, LEE ROAD, KOLKATA-700 020 [PAN: AAACV 0690 G] APPEARANCES BY: SHRI M.K. CHANDA, JCIT, SR. D.R., FOR THE DEPARTMEN T SHRI A.K. TIBREWAL, FCA, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JULY 05, 2017 DATE OF PRONOUNCING THE ORDER : JULY 26, 2017 O R D E R PER SHRI P.M. JAGTAP, A.M. .: THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOLKATA D ATED 13.08.2013. 2. IN GROUND NO. 1, THE REVENUE HAS CHALLENGED THE ACTION OF THE LD. CIT(APPEALS) IN CANCELLING THE ASSESSMENT MADE BY T HE ASSESSING OFFICER UNDER SECTION 143(3)/147 OF THE ACT BY HOLDING THAT THE INITIATION OF THE RE-ASSESSMENT PROCEEDINGS BY THE ASSESSING OFFICER ITSELF WAS INVALID. 3. THE ASSESSEE IN THE PRESENT CASE IS A NON-BANKIN G FINANCE COMPANY, WHICH IS ENGAGED IN THE BUSINESS OF DEALIN G IN SHARES AND SECURITIES AS WELL AS INVESTMENT AND FINANCING. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 11. 10.2004 DECLARING TOTAL I.T.A. NO. 2623/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 2 OF 12 INCOME AT NIL AND BOOK PROFIT OF RS.86,43,592/- U NDER SECTION 115JB OF THE INCOME TAX ACT, 1961. ALTHOUGH THE SAID RETURN WAS INITIALLY PROCESSED BY THE ASSESSING OFFICER UNDER SECTION 14 3(1) ON 09.05.2005, HE SUBSEQUENTLY REOPENED THE ASSESSMENT AND ISSUED A NOTICE UNDER SECTION 148 AFTER RECORDING THE REASONS. IN PURSUAN CE OF THE SAID NOTICE, ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER U NDER SECTION 143(3)/147 OF THE ACT VIDE AN ORDER DATED 26.12.200 8 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.1,69,53,757/- AF TER MAKING ADDITIONS ON ACCOUNT OF DISALLOWANCE OF PROVISION FOR DOUBTFUL D EBTS, DISALLOWANCE OF INTEREST, DISALLOWANCE UNDER SECTION 14A AND ADDITI ON ON ACCOUNT OF INTEREST. THEREAFTER THE ASSESSMENT WAS AGAIN REOPE NED BY THE ASSESSING OFFICER FOR THE SECOND TIME FOR THE REASONS THAT 15 % SHARE OF THE ASSESSEE FROM JOINT VENTURE BUSINESS AMOUNTING TO RS.52,93,5 87/- HAD ESCAPED ASSESSMENT. ACCORDINGLY, A NOTICE UNDER SECTION 148 WAS ISSUED BY HIM ON 26.05.2010, IN REPLY TO WHICH A LETTER DATED 28.06. 2010 WAS FILED BY THE ASSESSEE STATING THAT THE RETURN FILED ORIGINALLY O N 11.10.2004 MAY BE TREATED AS THE RETURN FILED IN RESPONSE TO NOTICE U NDER SECTION 148. DURING THE COURSE OF SECOND REASSESSMENT PROCEEDING S, IT WAS SUBMITTED BY THE ASSESSEE THAT THE SPECULATION PROFIT OF RS.5 2,93,587/- RECEIVED FROM JOINT VENTURE WAS ALREADY INCLUDED IN THE TOTA L SPECULATION PROFIT OF RS.95,95,588/- OFFERED FILED BY IT IN THE RETURN OF INCOME. THIS EXPLANATION OF THE ASSESSEE, HOWEVER, WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER AS, ACCORDING TO HIM, IT WAS NOT ASCERTAINABLE AS TO WHETHER THE PROFIT OF RS.52,93,587/- RECEIVED FROM JOINT VENTURE WAS INCLUDED BY THE ASSESSEE IN THE SPECULATION PROFIT OF RS.95,95,588/-. HE HELD THAT THE ENTIRE SPECULATION PROFIT OF RS.3,52, 71,950/- OF THE JOINT VENTURE ACTUALLY BELONGED TO THE ASSESSEE AND ACCOR DINGLY THE SAME WAS ADDED BY HIM TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED UNDER SECTION 143(3)/147 VIDE AN ORDER DA TED 15.12.2011. 4. AGAINST THE ORDER PASSED BY THE ASSESSING OFFICE R UNDER SECTION 143(3)/147 ON 15.12.2011, AN APPEAL WAS PREFERRED B Y THE ASSESSEE BEFORE THE LD. CIT(APPEALS) CHALLENGING THE VALIDIT Y OF THE SAID I.T.A. NO. 2623/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 3 OF 12 ASSESSMENT AS WELL AS DISPUTING THE ADDITION MADE B Y THE ASSESSING OFFICER THEREIN ON ACCOUNT OF ENTIRE SPECULATION PR OFIT OF THE JOINT VENTURE BUSINESS. DURING THE COURSE OF APPELLATE PROCEEDING S BEFORE THE LD. CIT(APPEALS), DETAILED SUBMISSION WAS MADE BY THE A SSESSEE IN SUPPORT OF ITS CASE, WHICH WAS FORWARDED BY THE LD. CIT(APPEAL S) TO THE ASSESSING OFFICER FOR THE LATERS COMMENTS. IN THE REMAND REP ORT SUBMITTED TO THE LD. CIT(APPEALS), THE ASSESSING OFFICER OFFERED HIS COMMENTS ON THE WRITTEN SUBMISSION MADE BY THE ASSESSEE AND AFTER T AKING INTO CONSIDERATION THE SAME AS WELL AS THE OTHER MATERIA L AVAILABLE ON RECORD, THE LD. CIT(APPEALS) FOUND MERIT IN THE PRELIMINARY ISSUED RAISED BY THE ASSESSEE CHALLENGING THE VALIDITY OF ASSESSMENT MAD E BY THE ASSESSING OFFICER UNDER SECTION 143(3)/147 AND CANCELLED THE SAME BY HOLDING IT INVALID IN LAW FOR THE FOLLOWING REASONS GIVEN AT P AGES 25 TO 29 OF HIS IMPUGNED ORDER:- AS REGARDS THE RE-ASSESSMENT PROCEEDINGS, IT MAY B E SEEN THAT THE FOLLOWING TWIN CONDITIONS ARE TO BE SATISFIED FOR I NVOKING PROVISIONS OF SEC. 147 OF THE ACT- CONDITION ONE:- THE ASSESSING OFFICER MUST HAVE REA SON TO BELIEVE THAT INCOME OR PROFITS OR GAINS CHARGEABLE TO INCOME-TAX HAD ESCAPED ASSESSMENT. CONDITION TWO:- THE ASSESSING OFFICER MUST ALSO HA VE REASON TO BELIEVE THAT SUCH ESCAPEMENT HAD OCCURRED BY REASON OF EITHER OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FAC1S NECESSARY FOR HIS ASSESSME NT OF THAT YEAR OR FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N OF INCOME UNDER SECTION 139 OR IN RESPONSE TO NOTICE ISSUED UNDER SECTION 142(1) OR 148. WHEN BOTH THESE CONDITIONS SHOULD BE SATISFIED TO T AKE ACTION UNDER SEC. 147- BOTH THESE CONDITIONS SHOULD BE SATISFIED IF THE ORIGINAL ASSESSMENT WAS MADE UNDER SECTION 143(3)/147 AND TH E ASSESSING OFFICER WANTS TO TAKE ACTION AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR [PROVISO TO SECTION 147]. WHEN ONLY CONDITION ONE SHOULD BE SATISFIED TO TAKE ACTION UNDER SECTION 147- IN THE FOLLOWING CASES ONLY CONDITION ONE SHOULD BE SATISFIED- IF THE ASSESSING OFFICER WANTS TO TAKE ACTION WITHI N 4 YEARS (FROM THE END OF THE ASSESSMENT YEAR) AND THE ORIGINAL ASSESS MENT WAS COMPLETED UNDER SECTION 143(1), 143(3), 144; OR I.T.A. NO. 2623/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 4 OF 12 (B) IF THE ASSESSING OFFICER WANTS TO TAKE ACTION A FTER THE EXPIRY OF 4 YEARS (BUT NOT BEYOND 6 YEARS) FROM THE END OF ASSE SSMENT YEAR AND THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SECTION 143 ( 1) OR 144. IN CASE (A) AND CASE (B] THE ASSESSING OFFICER IS F REE TO INITIATE PROCEEDINGS UNDER SECTION 147 AND FAILURE TO TAKE S TEPS UNDER SECTION 143(3) WILL NOT RENDER THE ASSESSING OFFICER POWERL ESS TO INITIATE REASSESSMENT PROCEEDINGS EVEN WHEN INTIMATION UNDER SECTION 143(1)(A) HAD BEEN ISSUED - CIT V.RAIESH JHAVERI STOCK BROKER S (P)LTD., [2007J 161 TAXMAN 316 (SC). THE APPELLANT'S CASE IS COVERED BY CONDITION NO.2. THE RE-ASSESSMENT PROCEEDINGS HAVE BEEN INITIATED AFTER THE EXPIRY OF FOUR YEARS. THERE IS NO FRESH MATERIAL BROUGHT ON RECORD TO BELIEVE THAT ESCAPEMENT OF INCOME HAD OCCURRED BY REASON OF EITHER OMISSION OR FAILURE ON THE PART OF THE APPELLANT TO DISCLOSE FULLY AND TRULY ALL MA TERIAL FACTS NECESSARY FOR HIS ASSESSMENT OF THAT YEAR OR FAILURE ON THE P ART OF THE APPELLANT TO MAKE A RETURN OF INCOME UNDER SECTION 139 OR IN RES PONSE TO NOTICE ISSUED UNDER SECTION 142(1) OR 148. IT IS WELL-SETT LED LAW THAT OH ASSESSMENT CANNOT BE REOPENED ONLY BECAUSE OF CHANG E OF OPINION. THE MERE CHANGE OF OPINION OR WRONG LEGAL REFERENCE WIL L NOT EMPOWER THE ASSESSING OFFICER TO REOPEN ASSESSMENT- CIT V, BHNJ I LAVJI [L971J 79 ITR 582 (SC). SIMILARLY, REASSESSMENT CANNOT BE MADE ON FRESH OPINION ON THE SAME FACTS - SIRPUR PAPER MILLS LTD. V. ITO [19 78J 114 ITR 404 (AP) OR IN VIEW OF CHANGED LEGAL POSITION - MAHARAJA SHR I UMAID MILLS LTD. VS.- ITO (1962) 44 ITR 303 (PUNJ.). IN KAMALCHAND V . ITO (1981) 128, ITR 290/ (L980J 4 TAXMAN 216 (MP), AN ASSESSMENT WA S SOUGHT TO BE REOPENED BY THE ASSESSING OFFICER ON THE GROUND THA T HIS PREDECESSOR-IN OFFICE HAD COMMITTED ON ERROR IN ALLOWING CERTAIN D EDUCTIONS. THE MADHYA PRADESH HIGH COURT HELD THAT SINCE NO FRESH INFORMATION HAD COME INTO POSSESSION OF THE ASSESSING OFFICER, THE ASSESSMENT COULD NOT BE REOPENED. THE COURT HELD THAT IF AMOUNTS ONLY TO CHANGE OF OPINION WITHOUT ANYTHING ELSE. REASSESSMENT WITHOUT ANY ADD ITIONAL INFORMATION AMOUNTS TO CHANGE OF OPINION FLUORESCENT FIXTURES (P.) LTD. V. ITO [2009] 34 SOT 48 (MUM). SIMILARLY, WHERE FULL FACTS AND INFORMATION REGARDING CLAIM OF DEPRECIATION AT HIGHER RATE ON C OMMERCIAL VEHICLES WERE FURNISHED BY THE ASSESSEE AND THE ASSESSING OF FICER HAD CONSISTENTLY TAKEN A VIEW THAT HIGHER DEPRECIATION WAS AVAILABLE , HE COULD NOT RE- OPEN ASSESSMENTS SUBSEQUENTLY UNDER SECTION 147 ON MERE CHANGE OF OPINION THAT HIGHER DEPRECIATION WAS NOT AVAILABLE -PRESSMEN ADVERTISING & MARKETING LTD. V. CIT [2005] 142 TAXM AN 17 (KOL.). SECTION 147 DOES NOT EMPOWER THE ASSESSING OFFICER TO REVIEW ALREADY CONCLUDED ISSUES - CIT V. RANJI KAUR [2003] 81 TTJ (CHD) 269. SECTION 147 DOES NOT AUTHORIZE THE ASSESSING OFFICER TO REO PEN ASSESSMENT UNDER GARB OF 'REASON TO BELIEVE' TO REVIEW ITS OWN DECIS ION - CIT V. SMITHKLINE BEECHAM CONSUMER BRANDS LTD. [2003] 126 TAXMAN 104 (CHD.) (MAG.). IN OIL & NATURAL GAS CORPN. LTD. V. CIT [2003] 133 TAXMAN 27 (UTTARANCHAL), IT HAS BEEN HELD THAT IF THE ASSESSE E HAS DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR PURPOSE OF ASSESSMENT, AN ACTION UNDER SECTION 147 CANNOT BE TAKEN AFTER EXPI RY OF 4 YEARS FROM RELEVANT ASSESSMENT YEAR ON BASIS OF MERE CHANGE OF OPINION OF THE ASSESSING OFFICER THAT A LARGER SUM OUGHT TO [HAVE BEEN DISALLOWED UNDER ORIGINAL ASSESSMENT. ' I.T.A. NO. 2623/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 5 OF 12 THE ALLAHABAD HIGH COURT IN J.P. BAJPAI (HUF) V. CI T [2004] 140 TAXMAN 34 HELD THAT THE RESPONSIBILITY OF THE ASSESSEE IS LIMITED TO THE DISCLOSURE OF ALL PRIMARY FACTS AND NOTHING BEYOND. ONCE THE A SSESSEE HAS DISCLOSED ALL THE PRIMARY FACTS THAT IS THE END OF HIS DUTY. IT IS THEN FOR THE ASSESSING AUTHORITY TO DRAW THE PROPER CONCLUSIONS FROM THE FACTS. IF THE CONCLUSIONS DRAWN BY THE ASSESSING OFFICER FROM THE PRIMARY FACTS DISCLOSED BY THE ASSESSEE ARE ERRONEOUS, THE ASSESS ING AUTHORITY CANNOT REOPEN THE ASSESSMENT MERELY ON THE BASIS OF A CHAN GE IN OPINION. A MERE CHANGE IN OPINION WOULD NOT CONFER JURISDICTIO N UPON THE ASSESSING OFFICER TO INITIATE PROCEEDING UNDER SECTION 147. I F, HOWEVER, 'REASON TO BELIEVE' OF THE ASSESSING OFFICER IS FOUNDED ON AN INFORMATION WHICH MIGHT HAVE BEEN RECEIVED BY THE ASSESSING OFFICER A FTER COMPLETION OF ASSESSMENT, IT MAY BE A SOUND FOUNDATION FOR EXERCI SING POWER UNDER SECTION 147, READ WITH SECTION 148 CIT VS.- KELV INATOR OF INDIA LTD. [2002] 123 TAXMAN 433 / 256 ITR 1 (DELHI) (FB). MOR EOVER, THERE IS NOTHING IN SECTION 147 TO SUGGEST THAT AN ASSESSING OFFICER CANNOT REOPEN AN ASSESSMENT WHERE HE HAD FAILED TO INVESTI GATE AND FIND OUT TRUTH AT INITIAL STAGE - RAM PRASAD V. ITO [1995] 8 2 TAXMAN 199 (ALL). HOWEVER, THE ACTION UNDER SECTION 147 CAN BE TAKEN ONLY ON THE BASIS OF RULES MENTIONED SUPRA. FROM THE FOREGOING LEGAL: PROPOSITIONS, IT ABUNDANT LY CLEAR THAT AN ASSESSMENT COMPLETED UNDER SECTION 143(3) OR 147 CO N BE REOPENED AFTER 4 YEARS ONLY IF AN INCOME HAS ESCAPED ASSESSMENT BE CAUSE OF AN OMISSION ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIA L FACTS. NOW, IN THE PRESENT CASE, THE ASSESSING OFFICER HAV ING EXAMINED THE ISSUE RELATING TO THE INCLUSION OF SHARE OF JOINT VENTURE PROFITS IN THE PROFITS DECLARED IN THE ORIGINAL ASSESSMENT AND HAVING NOT MADE ANY ADDITION AFTER BEING SATISFIED WITH THE EXPLANATION OF THE A PPELLANT IN THE MATTER, HAD SPECIFICALLY EXPRESSED A VIEW OR OPINION ON THE SAID ISSUE AND THEREFORE , THE REOPENING OF THE SAID ASSESSMENT ON THE BASIS OF THE SAME ISSUE WITHOUT THERE BEING ANYTHING NEW BROUGHT ON R ECORD CLEARLY AMOUNTED TO A MERE CHANGE OF OPINION. THE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY IOTA OF EVIDENCE TO JUSTIFY H IS FINDING THAT 85% OF THE SHARE PROFIT ATTRIBUTABLE TO JOINT VENTURE PART NER, MACKERTICH CONSULTANCY SERVICES PVT. LTD., IS ASSESSABLE IN TH E APPELLANT'S HANDS. EVEN THE REMAND REPORT IS SILENT ON THE ISSUE. IN VIEW OF THE FACTS OF THE CASE AND THE EMERGING L EGAL POSITION, I AM OF THE CONSIDERED VIEW THAT THE INITIATION OF REASSESS MENT PROCEEDINGS IN THE PRESENT CASE BY THE ASSESSING OFFICER BEING MER ELY ON THE BASIS OF CHANGE OF OPINION WAS NOT PERMISSIBLE UNDER SEC. 14 7 READ WITH SECTION 148 OF THE ACT AND SUCH THE RE-ASSESSMENT PROCEEDIN GS ARE INVALID. 5. THE LD. D.R., AT THE OUTSET, INVITED OUR ATTENTI ON TO THE COPY OF THE REASONS RECORDED BY THE ASSESSING OFFICER FOR REOPE NING THE ASSESSMENT TO POINT OUT THAT THE FAILURE ON THE PART OF THE AS SESSEE TO DISCLOSE FULLY I.T.A. NO. 2623/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 6 OF 12 AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSE SSMENT FOR THE YEAR UNDER CONSIDERATION WAS SPECIFICALLY POINTED OUT BY THE ASSESSING OFFICER IN THE REASONS RECORDED. HE CONTENDED THAT REQUIREM ENT OF FIRST PROVISO TO SECTION 147 THUS WAS DULY COMPLIED WITH BY THE A SSESSING OFFICER AND THE INITIATION OF REASSESSMENT PROCEEDINGS BY HIM B EYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR WAS IN ACCORDANCE WITH LAW. HE ALSO PLACED ON RECORD A COP Y OF THE CONFIDENTIAL LETTER DATED 09.11.2009 ADDRESSED TO THE LD. CIT, K OLKATA-XI BY LD. CIT, CENTRAL-I, KOLKATA POINTING OUT THAT ALL THE ACTIVI TIES OF THE JOINT VENTURE WERE BEING CONDUCTED BY THE ASSESSEE AND THE JOINT VENTURE AGREEMENT WAS EXECUTED WITH AN INTENTION TO DIVERT THE PROFIT S ASSESSABLE IN THE HANDS OF THE ASSESSEE, A PROFIT MAKING CONCERN, TO THE EXTENT OF 85% TO MCS, WHICH HAD INCURRED HUGE LOSS DURING THE RELEVA NT YEAR. HE CONTENDED THAT THIS NEW INFORMATION RECEIVED BY THE ASSESSING OFFICER VIDE A LETTER DATED 09.11.2009 AFTER COMPLETION OF THE FIRST ASSESSMENT ON 26.12.2008 WAS THE BASIS OF REOPENING OF ASSESSMENT FOR THE SECOND TIME AND THE LD. CIT(APPEALS), THEREFORE, WAS NOT JUSTIF IED IN HOLDING THE ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SECT ION 143(3)/147 VIDE AN ORDER DATED 15.12.2011 AS INVALID ON THE GROUND THAT THE REOPENING WAS BASED ON A MERE CHANGE OF OPINION. HE CONTENDED THAT THERE WAS THUS NO LEGAL INFIRMITY IN THE ORDER OF THE ASSESSING OF FICER PASSED UNDER SECTION 143(3)/147 AS ALLEGED BY THE LD. CIT(APPEAL S) AND THERE IS NO JUSTIFICATION IN THE ACTION OF THE LD. CIT(APPEALS) IN CANCELLING THE SAID ASSESSMENT BY TREATING THE SAME AS BAD-IN-LAW. 6. IN REPLY, THE LD. COUNSEL FOR THE ASSESSEE REFER RED TO THE REASONS RECORDED BY THE ASSESSING OFFICER TO POINT OUT THAT THERE IS NO MENTION WHATSOEVER TO THE LETTER DATED 09.11.2009 AS NOW RE LIED UPON BY THE LD. D.R. HE CONTENDED THAT THE SAID LETTER NOT REFERRED TO BY THE ASSESSING OFFICER IN THE REASONS RECORDED IS THUS AN EXTERIOR MATERIAL, WHICH CANNOT BE TAKEN INTO ACCOUNT WHILE DECIDING THE VALIDITY O F REOPENING. IN SUPPORT OF THIS CONTENTION, HE RELIED ON THE DECISION OF TH E HONBLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER LIMITED VS.- ACIT & OTHERS I.T.A. NO. 2623/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 7 OF 12 REPORTED IN 268 ITR 332. HE ONCE AGAIN INVITED OUR ATTENTION TO THE REASONS RECORDED BY THE ASSESSING OFFICER AND POINT ED OUT THAT THE ASSESSMENT WAS REOPENED BY THE ASSESSING OFFICER TO BRING TO TAX THE INCOME OF RS.52,93,587/- BEING 15% OF THE PROFIT OF JOINT VENTURE BUSINESS AS THE SAME, ACCORDING TO THE ASSESSING OF FICER, HAD ESCAPED ASSESSMENT. IN THIS REGARD, HE INVITED OUR ATTENTIO N TO THE WRITTEN SUBMISSION DATED DECEMBER 10, 2008 FILED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ORIGINAL REASSESSMENT PROCEEDI NGS TO SHOW THAT A SPECIFIC QUERY WAS RAISED BY THE ASSESSING OFFICER IN THIS REGARD AND WHILE REPLYING THE SAME, IT WAS CATEGORICALLY SUBMI TTED BY THE ASSESSEE THAT THE SPECULATION PROFIT OF RS.95,95,588/- DECLA RED BY IT WAS INCLUSIVE OF A PROFIT OF RS.52,93,587/- BEING 15% OF THE PROF IT FROM JOINT VENTURE. HE CONTENDED THAT THERE WAS THUS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY THE RELEVANT INFORMATION O R MATERIAL AS ALLEGEDLY POINTED OUT BY THE LD. D.R. FROM THE REASONS RECORD ED BY THE ASSESSING OFFICER AND THE REOPENING OF ASSESSMENT AFTER THE E XPIRY OF FOUR YEARS WAS BARRED BY LIMITATION AS PER THE FIRST PROVISO TO SE CTION 147. THE LD. COUNSEL FOR THE ASSESSEE THUS STRONGLY SUPPORTED TH E IMPUGNED ORDER OF THE LD. CIT(APPEALS) CANCELLING THE ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3)/147 BY HOLDING THE SAM E TO BE INVALID AND URGED THAT THE SAME MAY BE UPHELD ON THIS ISSUE. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IN ORDER TO APPRECIATE THE CONTENTIONS RAISED BY THE LD. REPRESENTATIVES OF BO TH THE SIDES AND DECIDE THE PRELIMINARY ISSUE RELATING TO THE VALIDITY OF R EOPENING, IT WOULD BE RELEVANT TO REFER TO THE REASONS RECORDED BY THE AS SESSING OFFICER FOR REOPENING THE ASSESSMENT, WHICH ARE EXTRACTED BELOW :- M/S. MCS LTD. CLAIMED TO HAVE MADE A JOINT VENTURE WITH M/S. VATICAN COMMERCIALS LTD. (VATICAN), THE ASSESSEE-CO MPANY, W.E.F. 01.07.2003 UNDER THE NAME AND STYLE VATICAN MACHERTICH JV AS PER AGREEMENT DT. 24.07.2003. THE SAID AGREE MENT WAS SHOWN TO HAVE BEEN NOTARIZED ON 25.06.2003 I.E. PRI OR TO THE DATE OF AGREEMENT DT. 24.07.2003 HAVING EFFECT FROM I.T.A. NO. 2623/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 8 OF 12 01.07.2003. THE PROFIT OF THE JOINT VENTURE VATICA N MACHERTICH JV FROM AUGUST 2003 TO MARCH, 2004 WAS FOR RS.3,52 ,71,950/-. THE SHARE OF M/S. MCS LTD. AND VATICAN COMMERCIAL L TD. IS IN THE RATIO OF 85% AND 15%, HENCE THEIR SHARE OF PROF IT COMES TO RS.2,99,78,363/- AND RS.52,93,587/- RESPECTIVELY. T HESE ARE ALSO A RELATED PARTIES. COMPUTATION AND THE BALANCE SHEET OF THE ASSESSEE C O. ARE EXAMINED TO FIND AS TO WHETHER THE INCOME OF RS.52, 93,587/- (I.E. 15% SHARE OF THE J.V.) HAS BEEN DISCLOSED AS INCOME OR NOT. BUT NO SUCH INCOME ARE FOUND DISCLOSED. M/S. MCS LTD. AND THE JOINT VENTURE M/S. VATICAN M ACHERTICH JV ARE A RELATED PARTY AS PER ACT, HENCE NECESSARY INFORMATION W.R.T. INVESTMENT/TRANSACTION WAS REQUIRED TO BE FU RNISHED IN THE NOTES FORMING PART OF THE AUDITED ACCOUNTS. T HE SAME WAS EXAMINED VIDE SCH. 17(5) AND NOTICED THE COMMENT OF THE AUDITOR- DISCLOSURE AS REQUIRED BY ACCOUNTING STANDARD 18 ( AS-18) RELATED PARTY DISCLOSURES ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA ARE AS FOLLOWS:- NAMES OF THE RELATED PARTIES AND DESCRIPTION OF R ELATIONSHIP: KEY MANAGEMENT PERSONNEL: ANAND KRISHNA MARTIN (D IRECTOR) SANJAY KUMAR THARD (DIRECT OR PAWAN KUMAR GOEL (DIRECTOR) THERE WERE NO TRANSACTIONS BETWEEN THE COMPANY AND THE AFORESAID RELATED PARTIES DURING THE YEAR. THE ABOVE FACTS CONCLUSIVELY PROVES THAT TOTAL INC OME OF RS.52,93,587/- I.E. 15% OF THE J.V. EARNING AS PER AGREEMENT (SUPRA) HAVE NOT BEEN DISCLOSED BY THE ASSESSEE COMPANY WHI CH HAS ESCAPED ASSESSMENT AND TO TAX THE SAME PROPOSAL FOR RE-OPEN ING THE ASSESSMENT FOR A.Y. 2004-05 IS SUBMITTED. A PERUSAL OF THE REASONS RECORDED BY THE ASSESSING OFFICER SHOWS THAT THE ASSESSMENT ORIGINALLY COMPLETED UNDER SECTION 143(3 )/147 VIDE AN ORDER DATED 26.12.2008 WAS REOPENED BY THE ASSESSING OFFI CER TO BRING TO TAX THE INCOME OF RS.52,93,587/- REPRESENTING SHARE OF PROFIT OF 15% OF THE ASSESSEE FROM JOINT VENTURE, WHICH ACCORDING TO THE ASSESSING OFFICER HAD ESCAPED ASSESSMENT AS A RESULT OF THE FAILURE OF TH E ASSESSEE TO DISCLOSE THE SAME. IN THIS REGARD, THE LD. COUNSEL FOR THE A SSESSEE HAS RELIED ON THE SUBMISSIONS MADE IN WRITING BY THE ASSESSEE VIDE LE TTER DATED 10.12.2008 FILED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER DURING THE COURSE OF THE FIRST RE-ASSESSMENT PROCEEDINGS, WHEREIN IT WAS SUB MITTED BY THE I.T.A. NO. 2623/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 9 OF 12 ASSESSEE IN REPLY TO A SPECIFIC QUERY RAISED BY THE ASSESSING OFFICER THAT IT HAD EARNED A SPECULATION PROFIT OF RS.95,95,588/-, WHICH WAS INCLUSIVE OF A PROFIT OF RS.52,93,587/- BEING 15% OF THE PROFIT FROM JOINT VENTURE WITH MCS. IT WAS ALSO CLARIFIED BY THE ASSESSEE THAT ALL THESE TRANSACTIONS INCLUSIVE OF 15% OF RS.3,52,71,950/- BEING PROFIT F ROM JOINT VENTURE BUSINESS WERE SHOWN AS SPECULATION PROFIT IN THE PR OFIT & LOSS ACCOUNT. KEEPING IN VIEW THESE SUBMISSIONS MADE BY THE ASSES SEE IN WRITING CATEGORICALLY DURING THE COURSE OF FIRST RE-ASSESSM ENT PROCEEDINGS, WE FIND THAT THERE WAS NO FAILURE ON THE PART OF THE A SSESSEE TO FULLY AND TRULY DISCLOSE ITS SHARE OF PROFIT OF 15% FROM JOINT VENT URE AS ALLEGED BY THE ASSESSING OFFICER IN THE REASONS RECORDED AND INITI ATION OF REASSESSMENT PROCEEDINGS BY HIM AFTER THE COMPLETION OF FOUR YEA RS FROM THE END OF THE ASSESSMENT YEAR UNDER CONSIDERATION WAS NOT VALID A S PER THE FIRST PROVISO TO SECTION 147. 8. IT IS ALSO OBSERVED THAT THE REOPENING OF ASSESS MENT AS MADE BY THE ASSESSING OFFICER FOR THE SECOND TIME IS TREATED AS INVALID BY THE LD. CIT(APPEALS) VIDE HIS IMPUGNED ORDER ON THE GROUND THAT THE SAME WAS BASED MERELY ON THE CHANGE OF OPINION. IN THIS REGA RD, THE LD. D.R. HAS RELIED ON THE CONFIDENTIAL LETTER DATED 09.11.2009 STATED TO BE AVAILABLE ON RECORD BEFORE THE ASSESSING OFFICER. HE HAS CONT ENDED THAT THE INFORMATION COMING TO THE POSSESSION OF THE ASSESSI NG OFFICER VIDE THE SAID LETTER AFTER THE COMPLETION OF THE FIRST REASS ESSMENT ON 26.12.008 FORMED THE BASIS OF THE REOPENING OF ASSESSMENT FOR THE SECOND TIME, WHICH CANNOT BE SAID TO BE MERELY ON THE BASIS OF C HANGE OF OPINION. WE ARE UNABLE TO ACCEPT THIS CONTENTION OF THE LD. D.R . FIRST OF ALL, IT IS OBSERVED THAT THERE IS NO MENTION WHATSOEVER TO THE SAID LETTER DATED 09.11.2009 REFERRED TO AND RELIED UPON BY THE LD. D .R. IN THE REASONS RECORDED BY THE ASSESSING OFFICER. MOREOVER, THE CO NTENTS OF THE SAID LETTER CALL FOR THE PROTECTIVE ASSESSMENT OF THE WH OLE OF THE INCOME OF RS.3,52,71,950/- OF THE JOINT VENTURE IN THE HANDS OF THE ASSESSEE WHILE THE REASONS RECORDED BY THE ASSESSING OFFICER FOR R EOPENING THE ASSESSMENT WERE BASED ON THE BELIEF OF THE ASSESSIN G OFFICER ABOUT THE I.T.A. NO. 2623/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 10 OF 12 ESCAPEMENT OF INCOME OF THE ASSESSEE ONLY TO THE EX TENT OF RS.52,93,587/- BEING THE SHARE OF PROFIT OF 15% OF THE JOINT VENTU RE EARNING. THE ENTIRE INCOME OF THE JOINT VENTURE WAS CONSIDERED BY THE A SSESSING OFFICER IN THE HANDS OF THE ASSESSEE ONLY IN THE ASSESSMENT FINALL Y COMPLETED UNDER SECTION 143(3)/147 WHILE THE REASONS RECORDED BY HI M FOR REOPENING CONFINED ONLY TO THE SHARE OF PROFIT OF 15% OF THE ASSESSEE OF THE JOINT VENTURE, WHICH WAS ALLEGED TO HAVE ESCAPED ASSESSME NT. IT IS THUS DIFFICULT TO ACCEPT THE CONTENTION OF THE LD. D.R. THAT THE L ETTER DATED 09.11.2009 WAS AVAILABLE ON RECORD BEFORE THE ASSESSING OFFICE R AT THE RELEVANT TIME AND THE SAME FORMED THE BASIS OF REOPENING OF ASSES SMENT. IN ANY CASE, THERE WAS NO REFERENCE WHATSOEVER TO THE SAID LETTE R IN THE REASONS RECORDED BY THE ASSESSING OFFICER AS RIGHTLY POINTE D OUT BY THE LD. COUNSEL FOR THE ASSESSEE. IN THE CASE OF HINDUSTAN LEVER LI MITED VS- ACIT & OTHERS (SUPRA) CITED BY THE LD. COUNSEL FOR THE ASS ESSEE, HONBLE BOMBAY HIGH COURT HAS HELD THAT THE REASONS RECORDED BY TH E ASSESSING OFFICER ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY TH E ASSESSING OFFICER. NO SUBSTITUTION OR DELETION IS PERMISSIBLE. IT IS F OR THE ASSESSING OFFICER TO DISCLOSE AND OPEN HIS MIND THROUGH REASONS RECOR DED BY HIM AND HE HAS TO SPEAK THROUGH HIS REASONS. THE REASONS ARE T HE MANIFESTATION OF THE MIND OF THE ASSESSING OFFICER AND THE SAME SHOU LD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR THE R EASONS. THE ASSESSING OFFICER, IN THE EVENT OF CHALLENGE TO THE REASONS, MUST BE ABLE TO JUSTIFY THE SAME BASED ON MATERIAL AVAILABLE ON RECORD. HE MUST DISCLOSE IN THE REASONS SUCH MATERIAL RELIED UPON BY HIM SO AS TO E STABLISH THE VITAL LINK BETWEEN THE REASONS AND EVIDENCE. IT WAS HELD THAT SUCH VITAL LINK IS THE SAFE GUARD AGAINST ARBITRARY REOPENING OF THE CONCL UDED ASSESSMENT AND THE REASONS RECORDED BY THE ASSESSING OFFICER CANNO T BE SUPPLEMENTED BY FILING AN AFFIDAVIT, OR MAKING AN ORAL SUBMISSION. KEEPING IN VIEW THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF HINDUSTAN LEVER LIMITED (SUPRA) AND HAVING PERUSED THE REASONS RECO RDED BY THE ASSESSING OFFICER, WHICH CLEARLY SHOW THAT THERE IS NO NEW INFORMATION OR MATERIAL WHICH HAS BEEN REFERRED TO OR RELIED UPON BY THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT, WE FULLY AGREE WI TH THE LD. CIT(APPEALS) I.T.A. NO. 2623/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 11 OF 12 THAT THE REOPENING OF ASSESSMENT MADE BY THE ASSESS ING OFFICER WAS BASED ON A MERE CHANGE OF OPINION, WHICH IS NOT PER MISSIBLE IN LAW. WE, THEREFORE, UPHOLD THE IMPUGNED ORDER OF THE LD. CIT (APPEALS) CANCELLING THE ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3)/147 OF THE ACT BY TREATING THE SAME AS INVALID AND DISM ISS GROUND NO. 1 OF THE REVENUES APPEAL. 9. KEEPING IN VIEW OUR DECISION RENDERED ABOVE ON T HE PRELIMINARY ISSUE RAISED IN GROUND NO. 1 UPHOLDING THE IMPUGNED ORDER OF THE LD. CIT(APPEALS), WHEREBY HE CANCELLED THE ASSESSMENT O RDER MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3)/147, THE OTH ER GROUNDS RAISED IN THE APPEAL OF THE REVENUE RELATING TO THE ADDITION MADE ON ACCOUNT OF JOINT VENTURE PROFIT ON MERIT HAVE BECOME INFRUCTUO US AND THE SAME ARE ACCORDINGLY DISMISSED. 10. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFO RE THE TRIBUNAL, THE ASSESSEE HAS FILED A PETITION UNDER RULE 27 OF INCO ME TAX APPELLATE TRIBUNAL RULES, 1963 SUPPORTING THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) CANCELLING THE ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3)/147 ON ONE LEGAL GROUND, WHICH HAS BEEN DECIDED BY THE LD. CIT(APPEALS) AGAINST THE ASSESSEE. HOWEV ER, KEEPING IN VIEW OUR DECISION RENDERED ABOVE UPHOLDING THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) CANCELLING THE ASSESSMENT MADE BY THE ASSESSING OFFICER UNDER SECTION 143(3)/147 ON THE OTHER GROUNDS, THE ISSUE RAISED BY THE ASSESSEE IN ITS PETITION UNDER RULE 27 HAS BECOME I NFRUCTUOUS OR ACADEMIC. WE, THEREFORE, DO NOT CONSIDER IT NECESSA RY OR EXPEDIENT TO ADJUDICATE UPON THE SAME. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON JULY 26, 2017 . SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT ME MBER KOLKATA, THE 26 TH DAY OF JULY, 2017 I.T.A. NO. 2623/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 12 OF 12 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-10, KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, 3 RD FLOOR, KOLKATA-700 069 (2) M/S. VATICAN COMMERCIAL LIMITED, VAIBHAV, 4, LEE ROAD, KOLKATA-700 020 (3) COMMISSIONER OF INCOME TAX (APPEALS)-XII, KOL KATA (4) COMMISSIONER OF INCOME TAX ,KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, HEAD OF OFFICE/DDO INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.