Neptune Textile Mills Pvt. Ltd., Ahmedabad V. The DY.CIT, Circle-5, Ahmedabad

ITA 2681/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9001 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 23-03-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 18-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C N SHAH
• Keywords: Reopening of assessment; Depreciation; Question of law; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 148; 139

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO. 2681/AHD/2013 / ASSESSMENT YEAR: 2003-04 NEPTUNE TEXTILE MILLS PVT LTD, 375, GIDC INDUSTRIAL ESTATE, B/H WATER TANK, ODHAV, AHMEDABAD-382415 PAN : AAACN 5339 G VS. DCIT, CIRCLE -5, AHMEDABAD [ / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI C.N. SHAH, AR REVENUE BY : SHRI SANJEEV KUMAR, SR DR / DATE OF HEARING : 23/03/2017 / DATE OF PRONOUNCEMENT: 28/03/2017 / O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 200 3-04 IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-XI, AHMEDABAD VIDE APPEAL NO.CIT(A)- XI/157/CIR-5/10-11 DATED 10.09.2013, ARISING OUT OF ORDER UNDER SECTION 143(3) R.W.S. 147 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) DATED 15.09.2010 FRAMED BY THE DCIT, CIRCLE-5, AHME DABAD. 2. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPE AL:- 1. THE C.I.T. (APPEALS) OUGHT TO HAVE HELD TH AT SECTION 147/148 NOTICE DATED 30/03/2010 IS BAD IN LAW AS ALSO ON FACTS AND SO AL SO THE ASSESSMENT ORDER DATED 15/09/2010 BECAUSE THE ASSESSEE HAD FULLY AND TRULY DISCLOSED ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT VIDE PARA 8 OF HIS LETTER DATED 03/10/2005 IN RESPECT OF DETAILS OF LOANS & ADVANCES ABOVE RS.1 LAKH GIVEN B Y THE COMPANY AND INTEREST CHARGED THEREON AND WHICH WAS ALLOWED BY THE ASSESS ING OFFICER IN ASSESSMENT ORDER U/S. 143(3) DATED 20/02/2006 BY MENTIONING TH AT 'THE ASSESSEE FURNISHED THE DETAILS CALLED FOR. THE CASE WAS DISCUSSED WITH HIM.' ITA NO. 2681/AHD/2013 NEPTUNE TEXTILE MILLS PVT LTD VS. DCIT AY : 2003-04 - 2 2. THE CIT(APPEALS) OUGHT TO HAVE FOLLOWED THE DECISION OF INCOME-TAX APPELLATE TRIBUNAL, AHMEDABAD BENCH 'B' IN ITA NO. 2195/AHD/2009 FOR ASST. YEAR 2001-02 IN APPELLANT'S OWN CASE. 3. WITH PREJUDICE TO THE ABOVE, THE CIT(APPEAL S) ERRED IN DISALLOWING INTEREST OF RS.52,22,886/-IGNORING THE REPLY TO NOTICE U/S.1 48 DATED 30/04/2010. 3. FROM GOING THROUGH THE ABOVE GROUNDS, WE FIND TH AT ASSESSEE HAS RAISED TWO ISSUES; FIRSTLY, CHALLENGING THE REASSESSMENT P ROCEEDINGS U/S 147 OF THE ACT AND SECONDLY, RELATING TO ADDITION ON MERITS FOR DI SALLOWANCE OF INTEREST OF RS.55,22,886/-. 4. WE WILL FIRST TAKE UP GROUND NO.1, CHALLENGING T HE REASSESSMENT PROCEEDINGS. 5. BRIEFLY STATED FACTS RELATING TO THIS GROUND ARE THAT THE ASSESSEE BEING A LIMITED COMPANY FILED ITS RETURN OF INCOME ON 30.11 .2003 DECLARING TOTAL LOSS OF RS.1,37,56,622/-. THE CASE WAS SELECTED FOR SCRUTI NY ASSESSMENT AND THE NECESSARY DETAILS, AS CALLED FOR, WERE DULY FURNISH ED AND THE ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED ON 20.02.2006 DETER MINING TOTAL LOSS AT RS.1,37,56,622/-. THEREAFTER, ON 10.06.2009, LD. D CIT, CIRCLE-5, AHMEDABAD CALLED FOR CERTAIN CLARIFICATIONS WITH REGARD TO AS SESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2003-04, WHEREIN INTEREST OF RS.79, 45,188/- WAS PAID ON THE FUNDS BORROWED FOR BUSINESS PURPOSES AND LOANS AND ADVANCES GIVEN BY THE ASSESSEE INCLUDED LOAN OF RS.2,07,29,272/- TO A COM PANY UNDER THE SAME MANAGEMENT AND, ON THIS ALLEGED ADVANCE, NO INTERES T WAS CHARGED BY THE ASSESSEE-COMPANY. ON THE BASIS OF THIS INFORMATION , IT WAS ALLEGED THAT THE ASSESSEE HAS DIVERTED ITS INTEREST BEARING FUNDS FO R THE PURPOSES OTHER THAN BUSINESS AND THEREFORE, THE INTEREST PAID SHOULD BE DISALLOWED PROPORTIONATELY. NECESSARY REPLY AGAINST THIS LETTER WAS FILED BY AS SESSEE SUBMITTING THAT INFORMATION RELATING TO LOANS AND ADVANCES GIVEN AN D INTEREST PAID WERE DULY CALLED FOR BY THE ASSESSING OFFICER AND NECESSARY I NFORMATION WAS SUPPLIED TO HIM. SUBSEQUENTLY ON 30.03.2010 NOTICE U/S 148 WAS ISSUED FOR REOPENING OF ITA NO. 2681/AHD/2013 NEPTUNE TEXTILE MILLS PVT LTD VS. DCIT AY : 2003-04 - 3 ASSESSMENT AND REASSESSMENT PROCEEDINGS UNDER SECTI ON 147 OF THE ACT WERE COMMENCED. ASSESSEE CHALLENGED THIS REOPENING OF AS SESSMENT BEFORE THE CIT(A) BUT COULD NOT SUCCEED AS LD. CIT(A) WAS OF T HE VIEW THAT APPELLANT FAILED TO FULLY DISCLOSURE ALL NECESSARY FACTS FOR ASSESSM ENT AND THEREFORE, ASSESSEES CASE WAS A FIT CASE FOR ATTRACTING PROVISIONS OF SE CTION 147. LD. CIT(A) FURTHER HELD THAT, IN ABSENCE OF COMPLETE DETAILS ON THE PA RT OF THE ASSESSEE, THE PLEA RELATING TO CHANGE OF OPINION CANNOT BE CONSIDERED ACCEPTABLE. 6. AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 7. LD. COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED S UPPORTING THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND F URTHER, RELYING ON THE DECISION OF CO-ORDINATE BENCH IN ASSESSEES OWN CAS E IN ITA NO.2195/AHD/2009 DATED 05.05.2011 RELATING TO AY 20 01-02, SUBMITTED THAT THE REOPENING PROCEEDINGS WERE BAD IN LAW. LD. AR ALSO ADDED THAT DURING THE COURSE OF ASSESSMENT U/S 143(3) OF THE ACT, INFORMA TION WERE CALLED FOR VIDE NOTICE U/S 142(1) OF THE ACT DATED 02.09.2005, RAIS ING 25 QUESTIONS WHICH, INTER ALIA, INCLUDED QUESTION NO.8, SEEKING DETAILS OF LOANS AN D ADVANCES OF RS.1 LAKH AND ABOVE GIVEN BY THE COMPANY ALONGWITH NAMES AND ADDRESS OF THE PARTIES AND ALSO PARTY-WISE DETAILS OF INTEREST RECEIVED AN D INTEREST PAID INCLUDING RATE OF INTEREST. ASSESSEE REPLIED TO THE NOTICE U/S 14 2(1) OF THE ACT DATED 02.09.2005 VIDE LETTER DATED 03.10.2005 PLACED AT PAGE 6-9 OF THE PAPER-BOOK AND IN PARA 8 OF THIS LETTER, REPLY WAS FURNISHED ALONG WITH ANNE XURES F & G SHOWING LOANS AND ADVANCES GIVEN ABOVE RS.1 LAKH AND DETAILS OF I NTEREST CHARGED. IT WAS ALSO SUBMITTED THAT ALL THESE DETAILS WERE DULY EXAMINED BY LD. ASSESSING OFFICER AND FULL APPLICATION OF MIND WAS MADE ON THE ALLEGE D ISSUE. LD. AR, REFERRING TO THE DECISION OF CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR AY 2001-02, ADDED THAT SIMILAR ISSUE WAS ADJUDICATED AND REOPEN ING OF THE ASSESSMENT WAS HELD TO BE BAD IN LAW. ITA NO. 2681/AHD/2013 NEPTUNE TEXTILE MILLS PVT LTD VS. DCIT AY : 2003-04 - 4 8. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THROUGH THIS GROUND, ASSESSEE HAS CHALL ENGED THE REASSESSMENT PROCEEDINGS TAKEN UP BY REVENUE ON THE BASIS OF INF ORMATION OF THE LD. ASSESSING OFFICER THAT THE ASSESSMENT PROCEEDINGS U NDER SECTION 143(3) OF THE ACT WERE COMPLETED WITHOUT EXAMINING THE DETAILS OF DIVERSION OF INTEREST BEARING FUNDS TOWARDS INTEREST FREE LOANS AND ADVAN CES TO OTHER COMPANIES UNDER SAME MANAGEMENT AND FURTHER ALLEGED THAT ASSE SSEE HAS CLAIMED EXCESS INTEREST EXPENDITURE AND IT NEED TO BE DISALLOWED P ROPORTIONATELY TO THE EXTENT OF FUNDS GIVEN TO COMPANIES WITHOUT CHARGING ANY IN TEREST. 10. ON PERUSAL OF RECORDS, WE OBSERVE THAT LD. COU NSEL HAS LAID EMPHASIS ON THE FACT THAT DURING THE COURSE OF ASSESSMENT PROCE EDINGS U/S 143(3) OF THE ACT, SPECIFIC INFORMATION WERE CALLED FOR BY LD. ASSESSI NG OFFICER RELATING TO LOANS AND ADVANCES GIVEN DURING THE YEAR AND DETAILS WERE ALSO CALLED FOR TOWARDS INTEREST PAID AND INTEREST RECEIVED. LD. ASSESSIN G OFFICER HAS COMPLETED THE ASSESSMENT AFTER GOING THROUGH ALL NECESSARY DETAIL S AND MADE APPLICATION OF MIND BEFORE FINALIZING THE ASSESSMENT. LD. COUNSEL ALSO SUBMITTED THAT ASSESSMENT WAS REOPENED AFTER COMPLETION OF FOUR YE ARS AS FOR REOPENING ASSESSMENT U/S 143(3) FOR AY 2003-04 NOTICE U/S 148 WAS ISSUED ON 30.03.2010, WHICH IS ALMOST SIX YEARS FROM THE END OF THE ASSES SMENT YEAR 2003-04. 11. WE FURTHER OBSERVE THAT CO-ORDINATE BENCH, ADJU DICATING SIMILAR ISSUE IN ASSESSEES OWN CASE FOR AY 2001-02 IN ITA NO.2195/A HD/2009, HAS QUASHED THE RE-ASSESSMENT PROCEEDINGS AND HELD IN FAVOUR OF THE ASSESSEE, BY OBSERVING AS FOLLOWS:- 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IN OUR CONSIDERED VIEW THE REOPENING OF THE ASSESSMENT IS BAD IN LAW. FOR THE SAKE OF CONVENIENCE WE REPRODUCE SECTION 147 AN D PROVISO THERETO:- ITA NO. 2681/AHD/2013 NEPTUNE TEXTILE MILLS PVT LTD VS. DCIT AY : 2003-04 - 5 147. IF THE ASSESSING OFFICER HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153 AS SESS OR RE-ASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTED T HE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS T HE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTIO N AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR): PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSM ENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SEC TION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT, FOR THAT ASSESSMENT YEAR; [PROVIDED FURTHER THAT THE AO MAY ASSESS OR REASSES S SUCH INCOME OTHER THAN THE INCOME INVOLVING MATTERS WHICH ARE THE SUB JECT MATTERS OF ANY APPEAL, REFERENCE OR REVISION WHICH IS CHARGEABLE T O TAX AND HAS ESCAPED ASSESSMENT]. THE REQUIREMENTS OF THE SECTION ARE AS UNDER :- (1) THE AO HAS REASON TO BELIEVE; (2) THAT AN INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT; (3) IF FOUR YEARS HAVE EXPIRED FROM THE E ND OF THE RELEVANT ASST. YEAR THEN SUCH ESCAPEMENT WAS DUE TO FAILURE ON THE PART OF THE ASSESSEE - (I) TO FILE A RETURN U/S 139; (II) TO FILE A RETURN IN RESPONSE TO NOTICE U/S 142 (1) OR SECTION 148; (III) TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACT S NECESSARY FOR THE ASSESSMENT. ALL THESE ASPECTS MUST COME IN THE REASONINGS RECOR DED BY THE AO. THE REASONS RECORDED BY THE AO SHOULD REFLECT - (I) ASSESSEE IN RESPECT OF WHOM ASSESSMENT IS SOUG HT TO BE REOPENED; (II) ASSESSMENT YEAR AS SOUGHT TO BE REOPENED; (III) AMOUNT OF INCOME WHICH HAS ESCAPED ASSESSMENT ; (IV) HOW THE ORIGINAL ASSESSMENT HAS BEEN DONE WHET HER U/S 143(1) OR U/S 143(3) OR SEC.147/148; (V) WHAT IS THE REASON OF ESCAPEMENT OF ASSESSMENT ; (VI) WHETHER THERE IS ANY FAILURE AS MENTIONED IN T HE PROVISO IF ASSESSMENT IS SOUGHT TO BE REOPENED AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASST. YEAR; ITA NO. 2681/AHD/2013 NEPTUNE TEXTILE MILLS PVT LTD VS. DCIT AY : 2003-04 - 6 (VII) IN PARTICULAR, WHETHER THERE IS ANY THE FAILU RE OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS FULLY AND TRULY NECESSARY FOR THE AS SESSMENT FOR THAT ASSESSMENT YEAR. (VIII) IF ASSESSMENT IS DONE U/S 143(1), THEN WHETH ER THE PROVISION OF SECTION 149 ARE APPLICABLE. 8. IF REASONS RECORDED DID NOT REFLECT THESE INGRED IENTS THEN REOPENING CANNOT BE SUSTAINED. ON THE ASPECT OF NECESSITY TO MENTION TH E FAILURE OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSA RY FOR ASSESSMENT HON. ALLAHABAD HIGH COURT IN CIT VS. PRADESHIYA INDUSTRI AL AND INVESTMENT CORPORATION OF UTTAR PRADESH LTD (2011) 332 ITR 324 (ALL) HAS OBSERVED AS UNDER :- 'ADMITTEDLY, NOTICE UNDER SECTION 148 OF THE ACT WA S ISSUED AFTER THE EXPIRY OF FOUR YEARS. THE NOTICE UNDER THE PROVISO OF SECTION 147 OF THE ACT CAN BE ISSUED AFTER THE EXPIRY OF FOUR YEARS ONLY I N CASE WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PAR! OF THE ASSESSES TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. FROM THE PERUSAL OF THE REASO N RECORDED IT IS APPARENT THAT NO CASE HAS BEEN MADE OUT THAT THE AS SESSES HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT AND NO OBSERVATION HAS BEEN MADE IN THIS REGARD, ON THE BASIS OF THE SAME MATERIAL WHICH WAS AVAILABLE ON RECORD, THE ASSESSI NG AUTHORITY WAS OF THE VIEW THAT THE DEDUCTION HAD BEEN WRONGLY ALLOWED UN DER SECTION 36(1)(VIII) OF THE ACT. THE TRIBUNAL OBSERVED THAT THE ASSESSEE HAD FURNISHED THE REQUISITE DETAILS IN RESPECT OF LEASI NG INCOME AND UPFRONT FEE AS RECEIVED IN THE ASSESSMENT YEAR UNDER CONSIDERAT ION AND THE SAME WAS DULY DISCLOSED IN THE AUDITED PROFIT AND LOSS ACCOU NT, AS IS EVIDENT FROM PAGES 4 AND 5 OF THE PAPER BOOK READ WITH PAGE 23 O F THE PAPER BOOK AND ALSO COMPUTATION OF INCOME FILED ALONG WITH RETURN, A COPY OF WHICH IS PLACED AT PAGES 33 TO 35 OF THE PAPER BOOK. THIS FI NDING OF THE TRIBUNAL HAS NOT BEEN DISPUTED BY RAISING ANY QUESTION AND D URING THE COURSE OF THE ARGUMENT BY THE LEARNED COUNSEL FOR THE APPELLA NT. THEREFORE, WE ARE OF THE VIEW THAT ON THE FACTS AND CIRCUMSTANCES, NO SU BSTANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION BY THIS COURT. LEARNED COUNSEL FOR THE APPELLANT CITED A DECISION OF THE BOMBAY HIGH COURT IN THE EASE OF DR. AMIN'S PATHOLOGY LABORATOR Y V. P. M. PROSAD, JOINT CIT [2001] 252 ITR 673 ; [2002] 172 CTR 696. WE HAVE GONE THROUGH THE DECISION OF THE BOMBAY HIGH COURT. WE A RE OF THE VIEW THAT THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE SAID CASE, THE BOMBAY HIGH COURT HAS HELD THAT THE ASSESSING AUTHORITY HAS OVERLOOKED THE DISPUTED ITEM WHICH HE HAS NOTIC ED SUBSEQUENTLY AND AT THE TIME OF PASSING THE ORIGINAL ORDER OF ASSESS MENT, HE COULD NOT BE ITA NO. 2681/AHD/2013 NEPTUNE TEXTILE MILLS PVT LTD VS. DCIT AY : 2003-04 - 7 SAID TO HAVE OPINED ON THE ABOVE ITEM. THEREFORE, T HERE WAS NO CHANGE OF OPINION. WHILE IN THE PRESENT CASE, COMPLETE DETAIL S WERE FURNISHED ALONG WITH THE RETURN AND DURING THE COURSE OF THE ASSESS MENT PROCEEDINGS AND AFTER AN APPLICATION OF MIND, THE DEDUCTION UNDER S ECTION 36(1)(VIII) OF THE ACT WAS ALLOWED. IN THE REASON RECORDED NO CASE HAS BEEN MADE OUT THAT THERE WAS FAILURE TO DISCLOSE ANY MATERIAL PARTICUL AR ON THE PART OF THE ASSESSEE. THEREFORE, LIMITATION BEYOND THE PERIOD O F FOUR YEARS WAS NOT AVAILABLE TO THE ASSESSING AUTHORITY. ADMITTEDLY, T HE NOTICE WAS ISSUED AFTER FOUR YEARS, THEREFORE, THE PROCEEDING WAS BAR RED BY TIME AND THE TRIBUNAL HAS RIGHTLY HELD SO. FOR THE REASONS STATED ABOVE, THE APPEAL FAILS AND IS DISMISSED.' HON. BOMBAY HIGH COURT, IN THE CASE OF BHAVESH DEVE LOPERS VS. A.O. & OTHERS (2010) 329 ITR 249 (BOM), NOTED THAT THE REC ORDED REASONS DID NOT SHOW FINDING THAT THERE WAS A FAILURE TO DISCLOSE NECESS ARY FACTS. IN THAT CASE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IB(10) FOR RS.3.85 CROR ES WHICH WAS ALLOWED BY THE AO VIDE ORDER U/S 143(3) AND ASSESSMENT WAS SOUGHT TO BE REOPENED AFTER EXPIRY OF FOUR YEARS ON THE GROUND THAT THE CLAIM OF DEDU CTION U/S 80IB(10) INCLUDED INELIGIBLE ITEMS OF OTHER INCOME SUCH AS SOCIETY DE POSITS, STREET PARKING CHARGES, SUNDRY BALANCES, ETC. HON. BOMBAY HIGH COURT IN THE CASE OF BHAVESH DEVELOPERS VS. A.O. & OTHERS (SUPRA) OBSERVED AS UN DER :- 'HELD, ALLOWING THE PETITION, THAT EX FACIE, THE RE ASONS WHICH HAD BEEN DISCLOSED TO THE ASSESSEE WOULD SHOW THAT THE INFER ENCE THAT THE INCOME HAD ESCAPED ASSESSMENT WAS BASED ON THE DISCLOSURE MADE BY THE ASSESSEE ITSELF. THE REASONS SHOWED THAT THE FINDING WAS BAS ED ON THE DETAILS FILED BY THE ASSESSEE AND FROM THE PROFITS AND LOSS ACCOU NT. THEREFORE, IT WAS IMPOSSIBLE FOR THE ASSESSING OFFICER TO EVEN DRAW T HE INFERENCE THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLO SE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR ASS ESSMENT YEAR 2002-03. SIGNIFICANTLY, THE REASONS THAT HAD BEEN DISCLOSED TO THE ASSESSEE DID NOT CONTAIN A FINDING TO THE EFFECT THAT THERE WAS A FA ILURE TO FULLY AND TRULY DISCLOSE ALL NECESSARY FACTS, NECESSARY FOR THE PUR POSE OF ASSESSMENT. IN THESE CIRCUMSTANCES, THE CONDITION PRECEDENT TO A V ALID EXERCISE OF THE POWER TO REOPEN THE ASSESSMENT, AFTER A LAPSE OF FO UR YEARS FROM THE RELEVANT ASSESSMENT YEAR, WAS ABSENT IN THE PRESENT CASE. THE NOTICE WAS NOT VALID AND WAS LIABLE TO BE QUASHED.' HON. SUPREME COURT IN THE CASE OF ITO VS. LAKHMANI MEWAL DAS (1976) 103 ITR 437 (SC) HELD THAT WHERE ASSESSMENT IS SOUG HT TO BE REOPENED AFTER EXPIRY OF FOUR YEARS REASONS FOR BELIEF MUST SHOW L IVE LINK BETWEEN THE MATERIAL AND BELIEF. THERE SHOULD BE A RATIONAL CONNECTION O R RELEVANT BEARING ON THE FORMATION OF THE BELIEF. RATIONAL CONNECTION POSTUL ATES THAT THERE MUST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO T HE NOTICE OF THE ITO AND THE FORMATION OF THE BELIEF THAT THERE IS AN ESCAPEMENT OF INCOME OF THE ASSESSEE FOR ITA NO. 2681/AHD/2013 NEPTUNE TEXTILE MILLS PVT LTD VS. DCIT AY : 2003-04 - 8 THAT PARTICULAR YEAR BECAUSE OF HIS FAILURE TO DISC LOSE FULLY AND TRULY ALL MATERIAL FACTS. EVEN THOUGH COURT CANNOT GO INTO SUFFICIENC Y OR ADEQUACY OF THE MATERIAL AND SUBSTITUTE ITS OWN OPINION FOR THAT OF THE ITO ON THE POINT AS TO WHETHER ACTION SHOULD BE INITIATED FOR REOPENING OF THE ASS ESSMENT, BUT AT THE SAME TIME WE HAVE TO BEAR IN MIND THAT IT IS NOT ANY AND EVER Y MATERIAL, HOWSOEVER VAGUE AND INDEFINITE OR DISTANT, REMOTE AND FAR FETCHED, WHICH WOULD WARRANT THE FORMATION OF THE BELIEF RELATING TO ESCAPEMENT OF T HE INCOME OF THE ASSESSEE FROM ASSESSMENT. HON. SUPREME COURT IN THE CASE OF CIT VS. KELVINATO R INDIA LTD. (2010) 320 ITR 561(SC), WHILE DISMISSING THE LEGISLATION O F SECTION 147, HELD THAT EXPRESSION 'REASONS TO BELIEVE' NEEDS TO BE GIVEN S CHEMATIC INTERPRETATION IN ORDER TO ENSURE AGAINST AN ARBITRARY EXERCISE OF PO WER BY THE AO. THE POWER TO REOPEN THE ASSESSMENT IS NOT AKIN TO POWER TO REVIE W THE ASSESSMENT AND MERE CHANGE OF OPINION WOULD NOT JUSTIFY THE COURSE OF A CTION U/S 147. UNLESS THE AO HAS TANGIBLE MATERIAL FACT TO REOPEN THE ASSESSMENT , POWER U/S 147 CANNOT BE VALIDLY EXERCISED. 9. IN THE PRESENT CASE THERE IS A CLEAR CASE OF CHA NGE OF OPINION. EVEN THOUGH RELIANCE HAS BEEN PLACED ON THE DECISION OF HON. SU PREME COURT IN BALLIMAL NAVALKISHORE AND OTHERS VS. CIT (SUPRA), THAT JUDGM ENT EXISTED AT THE TIME WHEN THE AO TOOK THE DECISION U/S 143(3) AND HELD THE EX PENDITURE AS CURRENT REPAIRS ALLOWABLE IN THE PROFIT AND LOSS ACCOUNT UNDER SECT ION 143(3). WITHOUT THERE BEING MATERIAL ON RECORD AND AN ALLEGATION OF FAIL URE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL WHICH COULD HAVE MADE THE AO TO BELIEVE THAT EXPENDITURE SO INCURRED WAS CAPITAL IN NATURE, NEW VIEW SO TAKEN FOR REOPENING OF ASSESSMENT WOULD BE ONLY A CHANGE OF OPINION. EA RLIER SAME EXPENDITURE WAS HELD AS REVENUE IN NATURE AND NOW CONSIDERED AS CAP ITAL WOULD BE AKIN TO REVIEWING HIS OWN DECISION ON THE SUBJECT. HON. BOM BAY HIGH COURT IN THE CASE OF ICICI PRUDENCIAL LIFE INSURANCE CO. LTD. VS. ACI T (2010) 325 ITR 471 (BOM) ALSO HELD THAT WHEN THERE IS NO MATERIAL ON RECORD AND WITHOUT THERE BEING ANY ALLEGATION OF FAILURE OF THE ASSESSEE TO DISCLOSE S UCH MATERIAL FACT, ASSESSMENT CANNOT BE REOPENED AFTER FOUR YEARS. HON. GUJARAT H IGH COURT IN INDUCTO ISPAT ALLOYS LTD. VS. ACIT (2010) 320 ITR 458 (GUJ) AND N IKHIL K. KOTAK VS. MAHESH KUMAR (2009) 319 ITR 445 (GUJ) ALSO HELD THAT WHERE THE PERIOD OF FOUR YEARS HAS EXPIRED FROM THE END OF RELEVANT ASST. YEAR THE PROVISO TO SECTION 147 WOULD COME INTO PLAY. IT STIPULATES THREE CONDITIONS AND ONE OF THOSE CONDITIONS IS SHOWING OMISSION OR FAILURE ON THE PART OF THE ASSE SSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. WH EN WE GO THROUGH THE REASONS RECORDED AND AS MENTIONED ABOVE WE DO NOT FIND ANY REFERENCE TO SUCH FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ANY MATERIAL F ACT NECESSARY FOR ASSESSMENT AND IN FACT NARRATION GIVEN IN THE REASONS DO NOT SHOW ANY SUCH FAILURE WHICH COULD BE INFERRED EVEN IF NOT SO MENTIONED SPECIFICALLY I N THE REASONS. IN OUR CONSIDERED VIEW WHEN NEITHER THERE IS ANY ALLEGATION OF FAILU RE NOR THE AO HAS BROUGHT ANY MATERIAL ON RECORD TO SUGGEST ESCAPEMENT OF INCOME THEN IT IS ONLY A CHANGE OF OPINION AND THEREFORE ASSESSMENT CANNOT BE REOPENED AFTER EXPIRY OF FOUR YEARS. ITA NO. 2681/AHD/2013 NEPTUNE TEXTILE MILLS PVT LTD VS. DCIT AY : 2003-04 - 9 UNDER THESE CIRCUMSTANCES, WE ALLOW THE GROUND NOS. 1 & 2 OF THE ASSESSEE AND ACCORDINGLY QUASH THE ASSESSMENT. OTHER GROUNDS BEC AME INFRUCTUOUS AND HENCE NOT SEPARATELY DISCUSSED. AS A RESULT, THE APPEAL F ILED BY THE ASSESSEE IS ALLOWED. 12. NOW, IN ORDER TO ADJUDICATE THE FACTS IN THE LI GHT OF DECISION OF CO- ORDINATE BENCH REFERRED ABOVE, WE FIND THAT ON 02.0 9.2005 NOTICE UNDER SECTION 142(1) WAS ISSUED CALLING AS MANY AS 25 INFORMATION FROM THE ASSESSEE AND IN THIS NOTICE, AT QUESTION NO. 8, FOLLOWING INFORMATI ON WAS CALLED FOR BY THE LD. ASSESSING OFFICER, WHICH READS AS UNDER:- 8. WITH REFERENCE TO LOANS AND ADVANCES ABOVE RS. 1 LAC GIVEN BY THE COMPANY, GIVE DETAILS REGARDING THE NAME AND ADDRESS OF THE PARTIES TO WHOM THE SAME HAS BEEN ADVANCED. GIVE PARTY-WISE DETAILS OF INTEREST RECEIVED AND INTEREST PAID INCLUDING RATE OF INTEREST. IN CASE, INTEREST HAS NOT BEEN CHARGED OR CHARGED AT LOWER RATE BY YOU ON CERTAIN LOANS AND ADVANCES EXP LAIN WHY CORRESPONDING INTEREST ON BORROWED FUNDS SHOULD NOT BE DISALLOWED U/S 36(1)(III). PLEASE FURNISH THE COPIES OF ACCOUNTS IN RESPECT OF OUTSTA NDING LOANS AND ADVANCES GIVEN INDICATING BUSINESS PURPOSE. 13. IN REPLY TO THE ABOVE QUESTION, ASSESSEE VIDE I TS REPLY DATED 03.10.2005 SUBMITTED THE DETAILS OF LOANS AND ADVANCES GIVEN A BOVE RS.1 LAC VIDE ANNEXURE-F AND ALSO FURNISHED DETAILS OF INTEREST C HARGED. COPIES OF INTEREST ACCOUNTS VIDE ANNEXURE-G WERE ALSO PLACED ON RECORD . THEREAFTER, ON 20.02.2006, ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED AT THE RETURNED INCOME AND LD. ASSESSING OFFICER HAS MENTI ONED THAT ALL DETAILS WERE FURNISHED AS CALLED FOR. ALL THESE SERIES OF FACTS CLEARLY SHOW THAT LD. ASSESSING OFFICER HAS MADE FULL APPLICATION OF MIND ON THE DE TAILS OF LOANS AND ADVANCES GIVEN AND INTEREST PAID BEFORE FINALIZING THE ASSES SMENT UNDER SECTION 143(3) OF THE ACT AND THE ALLEGED ACTION OF REOPENING UNDER S ECTION 147 OF THE ACT CANNOT BE HELD TO BE CORRECT IN THIS CASE WHEREIN REOPENIN G HAS TAKEN PLACE AFTER EXPIRY OF FOUR YEARS AND THERE IS NO NEW MATERIAL AVAILABL E WITH THE REVENUE TO SHOW THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. ITA NO. 2681/AHD/2013 NEPTUNE TEXTILE MILLS PVT LTD VS. DCIT AY : 2003-04 - 10 14. WE, THEREFORE, RESPECTFULLY FOLLOWING THE DECIS ION OF CO-ORDINATE BENCH, IN VIEW OF OUR DISCUSSION ABOVE AND TOTALITY OF FAC TS, ARE OF THE CONSIDERED VIEW THAT REASSESSMENT PROCEEDINGS UNDER SECTION 147 ARE BAD IN LAW AND LIABLE TO BE QUASHED. IN THE RESULT, GROUND NOS. 1 & 2 OF THE ASSESSEE ARE ALLOWED. 15. SECOND ISSUE RELATING TO MERITS RAISED BY THE A SSESSEE IN GROUND NO.3 BECOMES INFRUCTUOUS AS WE HAVE ALREADY QUASHED THE REASSESSMENT PROCEEDINGS UNDER SECTION 147 OF THE ACT. 16. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE COURT ON 28 TH MARCH 2017 AT AHMEDABAD. SD/- SD/- ( S.S. GODARA ) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER AHMEDABAD; DATED, 28/03/2017 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ & / CONCERNED CIT 4. & ) ( / THE CIT(A)- 5. $ , $ , /DR,ITAT, AHMEDABAD, 6. 0 / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT.REGISTRAR) $ ITAT, AHMEDABAD