SICOM LTD, MUMBAI V. DCIT RG 3(3), MUMBAI

ITA 3130/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8591 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 26-09-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 21-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: R R VORA
• Keywords: Capital asset; Business income; Search and seizure; Tangible material; Bad and doubtful debts; Difference of opinion; Revised return; Reason to believe; Change of opinion; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 142(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI N.K. BILLAIYA (A.M.) ITA NO. 3130/MUM /2011 ASSESSMENT YEAR : 2003-04 SICOM LIMITED, SOLITAIRE CORPORATE PARK, BUILDING NO. 4, GURU HARGOVINDJI ROAD, MUMBAI 400093 PAN AAACS5524J VS. DY. COMMISSIONER OF INCOME TAX RANGE 3(3), 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI - 400 020. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI R.R. VORA & SHRI NIKHIL TIWARI DEPARTMENT BY : SHRI A.B. KOLI DATE OF HEARING 26-9-2012 DATE OF PRONOUNCEMENT 10-10-2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DTD. 3-2-2011 PASSED BY THE LD. CIT(A) 7, MUMBAI FOR THE A.Y. 2003-04. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF FINANCE, LEASING, BANKIN G AND INVESTMENT COMPANY (NON-BANKING FINANCIAL COMPANY). THE RETURN WAS FILED DECLARING TOTAL LOSS OF RS. 84,29,79,390/-. HOWEVER , THE ASSESSMENT WAS COMPLETED AT AN INCOME OF RS. 30,90,29,470/- VIDE O RDER DTD. 12-12- 2005 PASSED U/S 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT). ITA NO. 3130/MUM/2011 2 SUBSEQUENTLY, THE A.O. REOPENED THE ASSESSMENT BY I SSUANCE OF NOTICE U/S 148 OF THE ACT ON 28-3-2008 AFTER RECORDING THE FOLLOWING REASONS:- ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 27-1 1-2003 DECLARING TOTAL LOSS OF RS. 84,29,79,390/-. ORDER U/S 143(3) WAS PASSED ON 12-12-2005 ASSESSING THE TOTAL INCOME AT RS. 30,90, 29,466/-. 2.1 AS PROVISIONS CONTAINED IN SECTION 36(2), NO DE DUCTION TOWARDS BAD DEBTS SHALL BE ALLOWED UNLESS SUCH DEBT OR PART THEREOF HAS BEEN TAKEN INTO ACCOUNT IN COMPUTING THE INCOME OF THE A SSESSEE OF THE PREVIOUS YEAR IN WHICH THE AMOUNT OF SUCH BAD DEBTS IS WRITTEN OFF OR OF AN EARLIER PREVIOUS YEAR OR REPRESENTS MONEY LENT I N THE ORDINARY COURSE OF THE BUSINESS OF BANKING OR MONEY LENDING WHICH I S CARRIED ON BY THE ASSESSEE. 2.2 FROM THE PROFIT & LOSS ACCOUNT OF ASSESSEE FOR THE YEAR ENDED 31-3-2003, IT IS SEEN THAT THE ASSESSEE HAD WRITTEN OFF FOLLOWING AMOUNTS IN THE BOOKS (AS PER SCHEDULE -19). IRRECOVERABLE AMOUNT WRITTEN OFF ON - LOANS RS. 8021.35 LAKHS - INVESTMENTS RS. 1336.09 LAKHS - INTER CORPORATE DEPOSIT RS. 1549.97 LAKHS - OTHER ASSETS RS. 139.18 LAKHS THE DEDUCTION CLAIMED BY THE ASSESSEE WAS FULLY ALL OWED IN THE ASSESSMENT ORDER: 2.3 AS PER THE PROVISION OF SECTION 36(2), MONEY LE NT IN THE ORDINARY COURSE OF BANKING OR MONEY LENDING IS ONLY ALLOWABL E AS BAD DEBTS. HENCE ONLY LOANS WRITTEN OFF CAN BE ALLOWED AS BAD DEBT AS PER THE PROVISION. ACCORDINGLY WRITE OFF OF INVESTMENTS (R S. 1336.09 LAKHS), INTER CORPORATE DEPOSIT (RS. 1549.97 LAKHS) AND OTHER ASS ETS (RS. 139.18 LAKH) CANNOT BE ALLOWED AS PERMISSIBLE DEDUCTION UNDER TH IS PROVISION. 3. AS THERE IS A FAILURE ON THE PART OF THE ASSESSE E TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSE SSMENT, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT FOR THIS ASSESSMENT YEAR, COMING WITHIN THE MEANING OF SECTI ON 147 OF THE INCOME-TAX ACT, 1961. IN RESPONSE TO THE NOTICE ISSUED U/S 148 OF THE ACT , NO RETURN WAS FILED. THE A.O. ISSUED FRESH STATUTORY NOTICE U/S 143(2) A ND 142(1) OF THE ACT ITA NO. 3130/MUM/2011 3 ALONG WITH REASONS FOR REOPENING OF THE ASSESSMENT. THE ASSESSEE VIDE LETTER DTD. 18-7-2008 STATED THAT THERE HAS BEEN NO FAILURE ON THEIR PART TO DISCLOSE ALL THE MATERIAL FACTS IN ITS RETURN OF INCOME. HOWEVER, THE A.O. OBSERVED THAT THE ASSESSEE FAILED TO FURNISH N ECESSARY DETAILS IN RESPECT OF NATURE OF ASSETS WRITTEN OFF. THEREFORE , IT WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL THE MATERIAL F ACTS IN ITS RETURN OF INCOME. THE A.O. FURTHER OBSERVED THAT THE ASSESSE E RELIED ON ALL THE DETAILS AND EXPLANATIONS FILED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE A.O. OBSERVED THAT THE REPLY FILE D BY THE ASSESSEE IS NOT SATISFACTORY. HE FURTHER OBSERVED THAT THE ASSESSE E HAS MADE FOLLOWING CLAIMS OF WRITE OFF :- INVESTMENTS RS. 13,36,09,000 INTER CORPORATE DEPOSIT RS. 15,49,97,000 OTHER ASSETS RS. 1,39,18,000 TOTAL RS. 30,25,24,000 ACCORDING TO THE A.O., THE WRITE OFF OF INVESTMENT IS A CAPITAL LOSS, THE SAME CANNOT BE ALLOWED AS A REVENUE EXPENDITURE. SI MILARLY, ICD AND OTHER ASSETS WRITTEN OFF CONSTITUTE CAPITAL LOSS AS THESE WERE THE CAPITAL ASSETS OF THE ASSESSEE, THEREFORE, THEY ARE ALSO NO T ALLOWABLE AS REVENUE EXPENDITURE AND ACCORDINGLY THE A.O. ADDED THE SAME I.E. RS. 30,25,24,000/- TO THE TOTAL INCOME OF THE ASSE SSEE AND COMPLETED THE ASSESSMENT AT AN INCOME OF RS. 63,64,95,160/- V IDE ASSESSMENT ORDER DTD. 30-9-2008 PASSED U/S 143(3) R.W.S. 147 O F THE ACT. ITA NO. 3130/MUM/2011 4 3. ON APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE HAS CHALLENGED THE VALIDITY OF THE PROCEEDING INITIATED U/S 147 OF THE ACT AND AS WELL AS THE ADDITION MADE BY THE A.O. THE LD. CIT(A) WHILE UP HOLDING THE ACTION OF THE A.O. FOR REOPENING OF THE ASSESSMENT U/S 147, P ARTLY ALLOWED THE APPEAL ON MERITS. 4. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE ASS ESSEE IS IN APPEAL BEFORE US CHALLENGING IN ALL THE GROUNDS REOPENING OF THE ASSESSMENT, SUSTENANCE OF ADDITION AND LEVY OF INTEREST U/S 234 D OF THE ACT. 5. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE ON THE REOPENING OF THE ASSESSMENT SUBMITS THAT THE ASSESS EE IN RESPONSE TO THE QUERY RAISED BY THE A.O. IN RESPECT OF WRITE OF F DONE IN THE BOOKS OF ACCOUNTS OF INTER-CORPORATE DEPOSITS, OTHER ASSETS AND INVESTMENT HAS FILED DETAILED REPLY DTD. 10-11-2005 APPEARING AT P AGE 28 TO 30 OF THE ASSESSEES PAPER BOOK SUPPORTED BY THE FINDING GIVE N BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1981-8 2, 1982-83 AND 1983-84. HE FURTHER SUBMITS THAT THE A.O. AFTER CO NSIDERING THE SAME HAS PASSED THE ASSESSMENT ORDER U/S 143(3) OF THE A CT DETERMINING THE TOTAL INCOME AT RS. 30,90,29,470/- VIDE ORDER DTD. 12-12-2005 PASSED U/S 143(3) OF THE ACT WHEREIN NO SUCH ADDITION WAS MADE. HE FURTHER SUBMITS THAT DURING THE REASSESSMENT PROCEEDING, SI MILAR REPLY WAS GIVEN BY THE ASSESSEE VIDE LETTER DTD. 18-7-2008 AP PEARING AT PAGE 36-38 OF THE ASSESSEES PAPER BOOK. HE FURTHER SUBMITS TH AT BEFORE THE LD. ITA NO. 3130/MUM/2011 5 CIT(A) THE ASSESSEE HAS AGAIN REITERATED THE SAME V IDE WRITTEN SUBMISSION APPEARING AT PAGES 1-14 OF THE ASSESSEE S PAPER BOOK. IN THE LIGHT OF THE ABOVE FACTS, THE LD. COUNSEL FOR THE A SSESSEE SUBMITS THAT UNDER THE LAW THE REOPENING WITHOUT ANY TANGIBLE MA TERIAL IS NOT PERMISSIBLE AND FOR THIS PROPOSITION THE RELIANCE W AS ALSO PLACED ON THE FOLLOWING DECISIONS:- 1. CIT VS. KELVINATOR OF INDIA LTD. (2010)228 CTR ( SC) 488 : (2010) 320 ITR 561 : (2010) 187 TAXMAN 312 : (2010) 34 DTR 49 2. ASIAN PAINTS LTD. VS. DCIT & ANR. (2009) 223 CTR (BOM) 141 : (2009) 308 ITR 195 : (2009) 19 DTR 215 3. ASTEROIDS TRADING & INVESTMENT (P) LTD. VS. DCIT (2009) 223 CTR (BOM) 144 : (2009) 308 ITR 190 : (2009) 19 DTR 218 4. RAMESH K. SHAH & ORS. VS. DCIT (2005) 93 TTJ (B ANG) 556 5. CARTINI INDIA LTD. VS. ACIT & ORS. (2009) 224 CT R (BOM) 82 : (2009) 314 ITR 275 : (2009) 179 TAXMAN 157 : (2009) 21 DTR 281. 6. AVENTIS PHARMA LTD. VS. ACIT & ORS. (2010) 233 C TR (BOM) 258 : (2010) 323 ITR 570 : (2010) 37 DTR 353 7. SIEMENS INFORMATION SYSTEM LTD. VS. ACIT & ORS. (2008) 214 CTR (BOM) 16 : (2007) 295 ITR 333 (BOM) : (2008) 168 TA XMAN 209 8. AUDCO INDIA LTD. VS. ITO (2010) 39 SOT 481 (MUM BAI ITAT) HE FURTHER SUBMITS THAT REOPENING OF THE ASSESSMENT ON THE SAME SETS OF FACT IS ALSO NOT PERMISSIBLE AS IT AMOUNTS TO CHANG E OF OPINION AND FOR THIS PROPOSITION THE RELIANCE WAS ALSO PLACED ON TH E TRIBUNAL DECISION IN M/S DIAMANT INVESTMENT & FINANCE LTD. VS. ACIT (ITA NO. 2491/MUM/2010 FOR A.Y. 2003-04 DTD. 27 APRIL 2012) . THE LD. COUNSEL FOR THE ASSESSEE ALSO RELIED ON THE RECENT DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. SHRI AMITABH B ACHCHAN IN INCOME ITA NO. 3130/MUM/2011 6 TAX APPEAL NO. 4646 OF 2010 DTD. 5 TH JULY 2012. HE, THEREFORE, SUBMITS THAT THE ORDER PASSED U/S 143(3)/147 OF THE ACT BE QUASHED. 6. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE ORD ER OF THE A.O. AND THE LD. CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUT E THAT THE A.O. HAS INITIATED PROCEEDING U/S 147/148 ON 28-3-2008 I.E. WITHIN FOUR YEARS FROM THE END OF THE RELEVANT A.Y. 2003-04. THE CON TENTION OF THE LD. COUNSEL FOR THE ASSESSEE IS THAT THE ISSUE/QUESTION OF TAXABILITY OF THE WRITE OFF OF INTER-CORPORATE DEPOSIT, OTHER ASSETS AND INVESTMENT WAS SPECIFICALLY EXAMINED BY THE A.O. DURING THE ORIGIN AL ASSESSMENT PROCEEDING AND THEREAFTER THE ASSESSMENT ORDER WAS PASSED ON 12-12- 2005. THE ASSESSEE HAS ALSO PLACED ON RECORD THE C OPY OF THE SAID LETTER DTD. 10-11-2005 WHICH IS REPRODUCED AS UNDER:- SICOM LIMITED NIRMAL, IST FLOOR NARIMAN POINT MUMBAI-400 021,INDIA TEL [phone] 3018 FAX [phone] 3602 2282 5781 2202 3923 REF. NO: ITAX/AY 2003-2004 DATED : NOVEMBER 10,2005 THE DEPUTY COMMISSIONER OF INCOME TAX, RANGE 3(3), AAYAKAR BHAVAN, ROOM # 617/670, 6 TH FLOOR, MAHARSHI KARVE MARG, MUMBAI 400 021. ITA NO. 3130/MUM/2011 7 KIND ATTN. : MR. ARUNKUMAR DEAR SIR, RE.: WRITE- OFFS DONE IN THE BOOKS ON ACCOUNT OF IN TER-CORPORATE DEPOSITS, OTHER ASSETS AND INVESTMENTS. IN RESPONSE TO YOUR QUERY REGARDING THE ABOVE, WE E NCLOSE THE FOLLOWING- WRITE OFFS ON ACCOUNT OF AMOUNT(RS) REASON INTER-CORPORATE DEPOSITS 1549.97 THIS IS ANOTHER FO RM OF LOAN, HENCE WRITE OFF OF THE SAME NEEDS TO BE TREATED AS WRITE OFF, OF LOAN. OTHER ASSETS PROPERTY ACQUIRED IN SETTLEMENT OF DEBT 130.76 THESE ASSETS ARE SHOWN AS CURRENT ASSETS. HENCE THE COST OF THESE ASSETS AS OF YEAR END IS COMPARED WITH THE MARKET VALUE. IF THE MARKET VALUE IS LOWER THAN THE COST THEN THE DIFFERENCE IS WRITTEN OFF. OTHER ASSETS 7.13 THESE ASSETS ARE SHOWN AS CURRENT ASSETS. HENCE THE COST OF THESE ASSETS AS OF YEAR END IS COMPARED WITH THE MARKET VALUE. IF THE MARKET VALUE IS LOWER THAN THE COST THEN THE DIFFERENCE IS WRITTEN OFF. HOUSING LOAN AND INTEREST ACCRUED THEREON 1.28 CONSEQUENT UPON THE DEATH OF ONE OF THE EMPLOYEES THE PRINCIPAL AND INTEREST OUTSTANDING HAS BEEN WRITTEN OFF. INCOME RECEIVED FROM SUCH HOUSING LOANS IS OFFERED TO TAX AS BUSINESS INCOME. INVESTMENTS 1336.09 THESE ARE SHOWN AS INVESTMENTS IN THE ACCOUNTS. THE VALUE OF THOSE PREFERENCE SHARES, THE REDEMPTION DATE OF WHICH HAS LONG PASSED BY OR WHERE THE COMPANIES ARE REGISTERED WITH BIFR AS SICK COMPANIES, IS WRITTEN DOWN TO RS. 1000/-. THE DIFFERENCE IN SUCH CASE IS WRITTEN OFF. IN CASE OF EQUITY SHARE THE DIFFERENCE BETWEEN COST AND MARKET VALUE/BOOK VALUE IS WRITTEN OFF. NO CAPITAL GAINS WOULD HAVE BEEN CLAIMED IN CASE THESE INVESTMENTS WERE SOLD OFF. RELEVANT EXTRACT OF THE ITAT ORDER FOR AY 1981-82,1 982-83 AND 1983-84, BASED ON WHICH THE INVESTMENTS MADE BY THE COMPANY ARE CL ASSIFIED AS BUSINESS TRANSACTIONS IS REPRODUCED BELOW - ITA NO. 3130/MUM/2011 8 THE FIRST COMMON DISPUTE IN ALL THE THREE APPEALS I S WITH REGARD TO THE ASSESSMENT OF PROFIT ON SALE OF SHARES AND SECURITI ES AS INCOME FROM BUSINESS. THE APPEAL FOR ASSESSMENT YEAR 1981-82 IS IN SECOND ROUND BEFORE US. IT CAME IN ITA NO. 3458/BOM/83 ORIGINALLY AND WAS DISPOSED OF BY THE ORDER DATED 4.10.1985 AND THE MATTER REGARDING ACCESSIBILITY OF SALE PROCEEDS OF SECURITIES WAS SET ASIDE FOR CROSS EXAMINATION. THE ASSESSEE H ELD AND DEALT IN THREE TYPES OF SHARES AND SECURITIES VIZ (1) SHARES AND SECURIT IES RECEIVED ON ITS FORMATION FROM THE DEPARTMENT OF INDUSTRIES, GOVERNMENT OF MA HARASHTRA (2) SHARES AND SECURITIES ACQUIRED IN THE COURSE OF UNDERWRITING O PERATIONS CARRIED ON BY THE ASSESSEE AND (3) SHARES PURCHASED AND SOLD DIRECTLY . THE PROFIT OR LOSS MADE ON SALE OF SHARES AND SECURITIES OF THE NATURE STATED AT SR. NO. (1) WAS HELD TO BE ASSESSABLE UNDER THE HEAD CAPITAL GAINS BY THE CI T (APPEALS) AND IS NOT IN DISPUTE BEFORE US. THE SHARES OF THE NATURE AS STAT ED AT SR. NO. (2) ABOVE ARE HELD TO BE DURING THE COURSE OF THE CARRYING OF THE BUSINESS OF UNDERTAKING AND THEREFORE LIABLE TO BE TAXED UNDER THE HEAD BUSINES S AS PER DECISION OF THE TRIBUNAL IN THE ASSESSEE OWN CASE FOR THE ASSESSMEN T YEAR 1978-79 IN ITA NO. 1183/BOM/83 DATED 15.1.1985. NO DISTINGUISH IN FEAT URES BROUGHT TO OUR NOTICE TO TAKE CONTRARY VIEW. WE THEREFORE UPHOLD THE ORDE R OF THE CIT (APPEALS) FOR THE REASONS GIVEN IN THE AFORESAID ORDER FOR THE ASSESS MENT YEAR 1978-79. AS REGARDS THE SHARE PURCHASED AND SOLD DIRECTLY THE T RIBUNAL DIRECTED IN ITS ORDER IN EARLIER APPEAL FOR ASSESSMENT YEAR 1981-82 THAT IT WOULD BE NOT NECESSARY TO HAVE COMPLETE PICTURE OF THE SHARES PURCHASED AND S OLD BY THE ASSESSEE- CORPORATION SINCE INCEPTION VIS-A-VIS CLAUSE 3(A)(5 ) OF THE OBJECTS AND MEMORANDUM OF ASSOCIATION OF THE ASSESSEE CORPORATI ON WERE IN SIC IT WAS STATED THAT THE VERY PURPOSE OF THE ASSESSEE CORPORATION W AS TO ACQUIRED SHARES AND TO UNDER-WRITE SHARES OF THE NEW INDUSTRIAL UNDERTAKIN G IN THE STATE WITH THE PURPOSE OF ENCOURAGING THE INDUSTRIAL DEVELOPMENT T O BENEFICIARIES OF THE ASSESSEE CORPORATION AND THAT OF THE INVESTMENT COM PANY WHICH MEANT PURCHASE OF SHARES AND SECURITIES. IN VIEW OF THE F INDINGS OF THE CIT (APPEALS) THAT THE ASSESSEE HAS BEEN ENGAGED IN BUYING AND SE LLING IN SHARES AND SECURITIES REGULARLY WE HOLD THAT THE INCOME OF THE ASSESEE ON SUCH TRANSACTIONS WOULD BE IN THE NATURE OF BUSINESS. IT MAY BE STATE D HERE THAT THE ASSESSEE HAD NOT BROUGHT THE MATERIAL ON RECORD OF SUCH TRANSACT IONS SINCE ITS INCEPTION AS DIRECTED BY THE TRIBUNAL IN ITS EARLIER ORDER. THE ORDER OF THE CIT (APPEALS) FOR BRINGING TO TAX THE PROFIT OR GAINS ON THE SALE OF SHARES AND SECURITIES DEALT IN DIRECTLY AS BUSINESS INCOME, IS, ACCORDINGLY, CONFI RMED. THANKING YOU, YOURS FAITHFULLY, SD/- (RAVINDRA MHROTRA) - ASSOCIATE VICE PRESIDENT ITA NO. 3130/MUM/2011 9 8. ON THE QUESTION OF CHANGE OF OPINION, THE LAW IS WELL SETTLED. THE HONBLE SUPREME COURT IN CIT VS. KELVINATOR OF INDI A LTD. (2010) 320 ITR 561 (SC) HAS LUCIDLY EXPLAINED AND ELUCIDATED THE S COPE AND JURISDICTIONAL PRE-CONDITIONS WHICH SHOULD BE SPECI FIED WHEN PROCEEDINGS U/S 147/148 ARE INITIATED. IT HAS BEEN HELD THAT ( PAGE 564 OF ITR 320 PLACITUM 6) :- ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE T O SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, REOPENING COULD BE DONE UNDER THE ABOVE TWO CONDITIONS AND FULFILMENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT I N SECTION 147 OF THE ACT (WITH EFFECT FROM 1ST APRIL, 1989), THEY ARE G IVEN A GO-BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., THAT WHERE THE ASSES SING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSME NT, CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. THEREFORE, P OST-1ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BELIEVE' FA ILING WHICH, WE ARE AFRAID, SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEE P IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND P OWER TO REASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW ; HE H AS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFI LMENT OF CERTAIN PRECONDITIONS AND IF THE CONCEPT OF 'CHANGE OF OPIN ION' IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPINION' AS AN IN-BUILT TEST TO CHECK AB USE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1ST APRIL, 1989, TH E ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERI AL' TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BE LIEF... 9. IN SHRI AMITABH BACHCHAN (SUPRA) THEIR LORDSHIPS HAVE HELD VIDE PARA 8 OF THE JUDGMENT AS UNDER:- 8) BOTH THE COMMISSIONER OF INCOME TAX (APPEAL) AN D THE TRIBUNAL HAVE CORRECTLY COME TO THE CONCLUSION THAT THERE WAS NO FRESH TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER TO REACH A RE ASONABLE BELIEF THAT THE ITA NO. 3130/MUM/2011 10 INCOME LIABLE TO TAX HAS ESCAPED ASSESSMENT. THE OR DER PASSED ORIGINALLY ON 29TH MARCH 2005 UNDER SECTION 143(3) OF THE SAID ACT WAS PASSED AFTER THE RESPONDENT HAD MADE ADHOC CLAIM FOR EXPEN DITURE AT 30% OF THE PROFESSIONAL RECEIPTS IN THE REVISED RETURN OF INCO ME WHICH WAS LATER WITHDRAWN. IN FACT THE REASONS FOR REOPENING THE AS SESSMENT FOR THE YEAR 2002-03 ITSELF RECORDS THAT THE CLAIM OF 30% ADHOC EXPENSES WAS WITHDRAWN WHEN THE RESPONDENT ASSESSEE WAS ASKED TO SUBSTANTIATE THE CLAIM. THEREFORE, THE SAME MATERIAL WAS A SUBJECT M ATTER OF CONSIDERATION DURING THE PROCEEDINGS FOR ASSESSMENT LEADING TO OR DER DATED 29TH MARCH, 2005. IN THE CIRCUMSTANCES THERE COULD BE NO BASIS FOR THE ASSESSING OFFICERS TO FORM A BELIEF THAT INCOME HAS ESCAPED ASSESSMENT. IT IS A SETTLED POSITION OF LAW THAT REVIEW UNDER T HE GARB OF REASSESSMENT IS NOT PERMISSIBLE. IN THE CIRCUMSTANCES, WE UPHOLD THE ORDER OF THE TRIBUNAL DATED 19TH MARCH, 2010. 10. IN BLB LIMITED VS. ACIT (2012) 343 ITR 129 (DEL HI) THE HONBLE DELHI HIGH COURT HAS HELD AS UNDER (HEADNOTE) :- HELD, ALLOWING THE PETITION, THAT THE ASSESSEE HAD DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS RELEVANT FOR THE ASSESSMEN T. THE REASONS RECORDED DID NOT DISCLOSE OR STATE THAT THERE WAS FAILURE OR OMISSION TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS. THERE WAS NO IN DICATION AND IT WAS NOT ALLEGED THAT THERE WAS SOME MATERIAL OR INFORMATION AVAILABLE ON RECORD WHEN REASONS TO REOPEN WERE RECORDED, TO SHOW THAT THE ASSESSEE HAD CONCEALED OR HAD NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS. IN THE ORIGINAL ASSESSMENT PROCEEDINGS THE ASSESSING OFFIC ER HAD CONSIDERED AND EXAMINED WHETHER OR NOT THE NON-COMPETE FEE PAY MENT WAS OF CAPITAL OR REVENUE NATURE. THE ASSESSING OFFICER AC CEPTED THE STAND OF THE ASSESSEE AND TREATED THE NON-COMPETE FEE AS A R EVENUE EXPENDITURE. THE REASSESSMENT PROCEEDINGS COULD NOT, THEREFORE, BE INITIATED ON THE GROUND THAT THE ASSESSING OFFICER WAS LEGALLY WRONG AND HAD MISAPPLIED AND WRONGLY UNDERSTOOD THE LAW/LEGAL POSITION. 11. IN M/S DIAMANT INVESTMENT & FINANCE LTD. (SUPRA ) IT HAS BEEN HELD IN PARA 25 AS UNDER:- 25. APPLYING THE RATIO OF THE ABOVE DECISIONS TO T HE FACTS OF THE PRESENT CASE WE FIND THE ASSESSEE HAS NOT FAILED OR OMITTED TO DISCLOSE MATERIAL FACTS EITHER DELIBERATELY OR INTENTIONALLY. ON THE OTHER HAND, FULL AND TRUE INFORMATION AND DETAILS WERE FURNISHED AND GIVEN DU RING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDINGS. THE RELEVANT AND G ERMANE FACTS WERE TRULY AND FULLY DISCLOSED. IN OUR VIEW ONCE PRIMARY FACTS HAVE BEEN DISCLOSED THEN, IT IS FOR THE AO TO DRAW PROPER LEG AL CONCLUSION AND APPLY THE PROVISIONS OF THE STATUTE. IN THE PRESENT CASE, IT IS NOT ALLEGED THAT ANY FACT OR FACTUAL DETAIL WAS EMBEDDED IN THE EVID ENCE/BOOKS OF ACCOUNT WHICH THE ASSESSING OFFICER COULD HAVE UNCOVERED BU T HE FAILED TO DO SO. THE DETAILS SUBMITTED BY THE ASSESSEE ALONG WITH TH E RETURN OF INCOME ITA NO. 3130/MUM/2011 11 INCLUDING COPY OF BUSINESS PURCHASE AGREEMENT WITH M/S VESUVIUS INDIA LTD. DATED 25.2.2003, SPELT OUT AND IN CATEGORICAL TERMS HAD STATED TRULY AND FULLY THE MATERIAL FACTS. NOTHING REMAINS TO BE DISCOVERED OR UN- EARTHED. THIS BEING THE POSITION THE JURISDICTION P RECONDITIONS REQUIRED FOR REOPENING OF THE ASSESSMENT ORDER ARE NOT SATIS FIED IN THE PRESENT CASE AND ACCORDINGLY THE PROCEEDINGS INITIATED AND COMPLETED BY THE AO U/S 147/148 AND CONFIRMED BY THE LD.CIT(A) ARE QUAS HED. THE GROUNDS TAKEN BY THE ASSESSEE ARE, THEREFORE, ALLOWED. 12. THUS, IF IN THE COURSE OF ORIGINAL ASSESSMENT P ROCEEDING THE A.O. HAS CONSIDERED AND EXAMINED THE PARTICULAR ASPECT, THE SAID ASPECT CANNOT BE MADE A GROUND TO REOPEN AND INITIATE REAS SESSMENT PROCEEDINGS. THE ASSESSING AUTHORITY CANNOT HAVE A FRESH LOOK AND REOPEN AN ASSESSMENT ON THE GROUND OF CHANGE OF OPI NION. THE FACTS NOTICED ABOVE CLEARLY SHOW THAT IN THE ORIGINAL ASS ESSMENT PROCEEDINGS, THE A.O. HAD CONSIDERED AND EXAMINED WHETHER OR NOT WRITE OFF OF THE AMOUNT OF INTER-CORPORATE DEPOSITS, OTHER ASSETS AN D INVESTMENTS WAS OF REVENUE NATURE. THE A.O. ACCEPTED THE STAND OF THE ASSESSEE AND HAS MADE NO ADDITION IN THE ORIGINAL ASSESSMENT PROCEED INGS. THE REASSESSMENT PROCEEDING CANNOT, THEREFORE, BE INITI ATED ON THE GROUND THAT THE SAID CLAIM OF THE ASSESSEE CANNOT BE ALLOW ED AS PERMISSIBLE DEDUCTION UNDER THE PROVISIONS OF THE ACT. 13. IN THE PRESENT CASE IT IS NOTICEABLE THAT THE A SSESSEE HAD DISCLOSED FULLY AND TRULY ALL THE MATERIAL FACTS RELEVANT FOR THE ASSESSMENT. THERE IS NO INDICATION AND IT IS NOT ALLEGED THAT THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. IN FACT ALL THE MATERIAL FACTS WERE ON RECORD AND HAD BEEN ITA NO. 3130/MUM/2011 12 DISCLOSED BY THE ASSESSEE. IN THESE CIRCUMSTANCES AND IN THE ABSENCE OF ANY TANGIBLE MATERIAL PLACED ON RECORD BY THE REV ENUE TO SHOW THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT, WE A RE OF THE VIEW THAT REASSESSMENT PROCEEDING HAVE NOT BEEN VALIDLY INITI ATED AND ACCORDINGLY THE PROCEEDING INITIATED AND COMPLETED BY THE A.O. U/S 147/148 AND CONFIRMED BY THE LD. CIT(A) ARE QUASHED. THE GROUN DS TAKEN BY THE ASSESSEE ARE, THEREFORE, ALLOWED. 14. SINCE WE HAVE QUASHED THE ASSESSMENT ORDER, WE DO NOT CONSIDER IT NECESSARY TO ADJUDICATE THE OTHER GROUNDS TAKEN BY THE ASSESSEE ON MERITS AND, HENCE, THE SAME ARE REJECTED. 15. IN THE RESULT, ASSESSEES APPEAL STANDS ALLOWED . ORDER PRONOUNCED ON 10-10-2012. SD/- (N.K. BILLAIYA) ACCOUNTANT MEMBER SD/- (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED : 10-10-2012. RK ITA NO. 3130/MUM/2011 13 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 7, MUMBAI 4. COMMISSIONER OF INCOME TAX -3, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH E, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI