ROHIT PULP & PAPER MILLS LTD ( NOW KNOWN AS CITADEL REALTY & DEVELOPERS LTD), MUMBAI V. ACIT (OSD) 2(3), MUMBAI

ITA 5101/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0284 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 11 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 15-09-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 30-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP ROHIT PULP; PAPER MILLS LTD
• Assessee Lawyers: R MURLIDHAR
• Keywords: Reopening of assessment; Business income; Depreciation; Tangible material; Difference of opinion; Assessment record; Reason to believe; Unabsorbed depreciation; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 234B; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI D.T GARASIA , JUDICIAL MEMBER AND SHRI MANJUNATHA G, ACCOUNTANT MEMBER ITA NO.5101 TO 5104/MUM./2011 (ASSESSMENT YEAR: 2005 - 06 & 2006 - 07) ROHIT PULP & PAPER MILLS LTD, (NOW KNOWN AS CITADEL REALITY & DEVELOPERS . APPELLANT LTD) MARATHON MEXTGEN GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400013 PAN AAACR5066J . APPELLANT ACIT(OSD) 2(3) R. NO. 555, 5 TH FLOOR, AAYAKAR BHAVAN MUMBAI 400020 . RESPONDENT ITA NO.4782/MUM./2011 (ASSESSMENT YEAR: 2005 - 06) . RESPONDENT ACIT , (OSD) 2(3) R. NO. 555, 5 TH FLOOR, AAYAKAR BHAVAN . APPELLANT MUMBAI 400020 ROHIT PULP & PAPER MILLS LTD, (NOW KNOWN AS CITADEL REALITY & DEVELOPER . RESPONDENT LTD) MARATHON MEXTGEN GANPATRAO KADAM MARG LOWER PAREL, MUMBAI 400013 PAN AAACR5066J ASSESSEE BY : SHRI. R. MURLIDHAR REVENUE BY : M S. POOJA SWAROOP ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 2 D ATE OF HEARING 16.05.2017 DATE OF ORDER - 14 .06 .2017 O R D E R PER: MANJUNATHA G. THESE CROSS APPEALS FILED BY THE ASSESSEE , AS WELL AS THE REVENUE ARE DIRECTED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE CIT(A) - 6, MUMBAI DATED 24.03.2011 FOR THE ASSESSMENT YEAR 2005 - 06 AND 2006 - 07. SINCE , THE FACTS ARE IDENTICAL AND ISSUES ARE COMMON, THEY ARE HEARD, AND DISPOSED OFF, BY WAY OF TH IS COMMON ORDER FOR IN THE SAKE OF CONVENIENCE. ITA NO. 5101/MUM/2011, ITA NO. 4782 /MUM/2011 AND ITA NO.5103/MUM/2011 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS COMPANY IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED AND WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND DEALING IN VARIOUS PAPERS , FILED ITS RETURN INCOME FOR THE ASSE SSMENT YEAR 2005 - 06 ON 26.10.200 5 , DECLARING TOTAL INCOME OF RS. NIL. THE ASSESSMENT , FOR THE ASSESSMENT YEAR 2005 - 06 HAS BEEN COMPL ETED U/S. 14 3(3) OF THE I.T ACT , 1961 , ON 05.12.2008, ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 3 DETERMINING THE TOTAL INCOME OF RS. NIL , AFTER SET OFF OF BROUGHT FORWARDS UNABSORB ED LOSS AMOUNTING TO RS.6,07,63,054/ - . 3. SUBSEQUENTLY , THE ASSESSMENT FOR THE ASSESSMENT YEAR 2005 - 06 HAS BEEN REOPENED U/S. 148 OF THE ACT, ON THE GROUND THAT INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT WITHIN THE MEANI NG OF SECTION 147 OF THE I.T. ACT, 1961, AFTER DU LY RECORDED REASONS FOR REOPENING OF ASSESSMENT. THE A.O OBSERVED THAT THE ASSESSEE HAS SOLD CERTAIN ASSET FOR THE CONSIDERATION OF RS.11,10,00,000/ - , WHEREAS WHILE COMPLETING ASSESSMENT U/S. 143(3) , THE A.O HAD TAKEN RS.10,95,00,000/ - FOR THE PURPOSE OF COMPUTATION OF SHORT TERM CAPITAL GAIN, THEREBY THERE IS ESCAPEMENT OF INCOME TO THE TUNE OF RS.15,00,000/ - . IN VIEW OF THE ABOVE , THE A.O HAD REASON TO BELIEVE THAT THE INCOME TO THE EXTENT OF RS.15,00,000/ - CHARG EABLE TO TAX HAD BEEN ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T ACT 1961 AND ACCORDINGLY , ISSUE D NOTICE U/S. 148 OF THE ACT, ON 28.03.20 09, REQUIRING THE ASSESSEE TO FILE RETURN OF INCOME. IN RESPONSE TO NOTICE U/S. 148 OF THE A CT, THE ASSESSEE VIDE ITS LETTER DATED 08.04.2009 REQUESTED TO PROVIDE THE COPY OF REASONS RECORDED FOR ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 4 REOPENING ASSESSMENT. THEREAFTER, THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 23.04.2009 , STATING THAT THE RETURN IS FILE D IN PURSUANCE TO NOTICE U/S . 148 UNDER PROTEST. THE A.O , VIDE HIS OFFICE LETTER DATED 12.08.2009 COMMUNICATED THE RE ASONS RECORDED FOR REOPENING ASSESSMENT. 4 . THE CASE HAS BEEN SELECTED FOR SCRUTINY AND ACCORDINGLY , NOTICES U/S. 143(2) AND 142(1) OF THE ACT, WERE ISSUED. IN RESPONSE TO NOTICES , THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED THE INFORMATION/EVIDENCES AND EXPLANATION AS CALLED FOR. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O NOTICED FROM THE RECORDS THAT DURING THE FINANCIAL YEAR 2004 - 05 RELEVANT TO ASSESSMENT YEAR 2005 - 06, THE ASSESSEE SOLD ITS FACTORY LAND INCLU DING OFFICER COLONY, AND ALL PLANT & MACHINERY, STORE AND SPACE AND OFFERED INCOME THERE FROM UNDER THE HEAD LONG TERM CAPITAL GAINS, SHORT TERM CAPITAL GAIN AND INCOME FROM BUSINESS. THE A.O FURTHER OBSERVED THAT , THE THEN A.O HAS COMPLETED THE ASSESSMENT AFTER REWORKING THE INCOME OFFERED BY THE ASSESSEE UNDER THE HEAD SHO RT TERM CAPITAL GAIN BY EXCLUDING EXPENSES OF TRANSFER BEING EXCISE DUTY PAID ON ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 5 REVERSAL OF MODVAT CREDIT AVAILED ON PLANT & MACHINERY. IN THE PROCESS , THE A.O HAS ARRIVED AT A GROSS CONSIDERATION OF RS.10,95,00,000/ - FR OM SALE OF OFFICER COLONY, SCRAPE PLANT & MACHINERY, DG S E T AND OTHER PLANT & M ACHINERY, WHEREAS THE ASSESSEE HAS SOLD THESE ITEMS OF ASSETS FOR A CONSIDERATION OF RS.11,10,00,000/ - WHICH RESULTS IN SHORT ASSESSMENT OF INCOME TO THE TUNE OF RS.15,00,000/ - WHICH HAS BEEN ESCAPED FOR TAXATION. THEREFORE , ISSUED A S HOW CAUSE NOTICE AND ASKED TO EXPLAIN AS TO WHY THE INCOME FROM SALE OF FACTORY LAND AND OTHER ASSETS CANNOT BE RECOMPUTED. 5 . IN RESPONSE TO SHOW CAUSE NOTICE , THE ASSESSEE FILED HIS WR ITTEN SUBMISSION AND VEHEMENTLY OPPOSED REOPENING OF THE ASSESSMENT ON THE GROUND THAT THE A.O HAD REOPENED THE ASSESSMENT ON THE BASIS OF CHANGE OF OPINION WITHOUT THERE BEING ANY NEW TANGIBLE MATERIAL IN HIS POSSESSION SUBSEQUENT TO COMPLETION OF ORIGINAL ASSESSMENT U/S. 143(3) OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT IT HAD FURNISHED NECESSARY DETAILS BEFORE THE A.O FOR COMPUTATION OF INCOME ARISED FROM SALE OF FACTORY LAND AND OTHER ASSET S AND THE A.O HAS RECOMPUTED INCOME ARISED FROM SALE OF FACTORY LAND AND OTHER ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 6 ASSET WHICH IS EVIDENT FROM THE FACT THA T THE A .O HAS EXCLUDED EXPENSES OF TRANSFER BEING EXCISE DUTY WHILE ARRIVING AT CONSIDERATION FOR SHORT TERM CAPITAL GAIN. THE ASSE SSEE FURTHER SUBMITTED THAT REOPENING IS BASED ON A MERE REAPPRAISAL OF THE MATERIAL WHICH IS ALREADY ON RECORD AND THERE IS NO NEW TANGIBLE MATERIAL TO JUSTIFY THE REOPENING. THE ITEMS OF INCOMES CONSIDERED TO ARRIVE AT ESCAPEMENT OF INCOME OF RS.15 ,00,000/ - CHARGEABLE TO TAX ARE VERY MUCH AVAILABLE WITH THE AO AND THE ASSESSEE HAS FILED COMPLETE DETAILS ALONG WITH COPIES OF AGREEMEN TS VIDE LETTERS DATED 24.12.2007 AND 26.12.2007 WHICH HAS BEEN CONSIDERED BY THE A.O WHILE PASSING THE ASSESSMENT ORDER, THEREFORE REAPPRAISAL OF THE EXISTING PAPERS TO ARRIVE AT A DIFFERENT FIGURE OF CONSIDERATION FOR THE PURPOSE OF COMPUTATION OF LONG TE RM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN IS MERELY A CHANGE OF OPINION ON THIS GROUND THE ASSESSMENT CANNOT BE REOPENED. THE ASSESSEE ALSO FILED NECESSARY PAPERS EXPLAINING THE COMPUTATION OF INCOME UNDER THE HEAD SHORT TERM CAPITAL GAIN, LONG TERM CA PITAL GAIN AND INCOME FROM BUSINESS AND ALSO BROUGHT TO THE NOTICE OF AO HOW HE WOUL D MISCONSTRUE THE FIGURES TO FORM A REASONABLE ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 7 BELIEF THAT INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT. 6 . THE A.O , AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE OBSERVED THAT INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE ACT , AS THE ASSESSEE FAILED TO FILE NECESSARY DETAILS BEFORE THE A.O , AT THE TIME OF OR IGINAL ASSESSMENT TO COMPUTE INCOME UNDER THE HEAD SHORT TERM CAPITAL GAIN, LONG TERM CAPITAL GAIN AND INCOME FROM BUSINESS, WHICH RESULTS IN ESCAPEMENT OF INCOME TO THE TUNE OF RS .15,00,000/ - . T HE A.O FURTHER OBSERVED THAT THE ASSESSEE HAS NOT DISCLOSED FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR COMPUTATION OF INCOME AND THE AO HAS COMPLETED THE ASSESSMENT BASED ON THE MATERIALS SUPPLIED BY THE ASSESSEE , THEREFORE OPINED THAT INCOME CHARGEABLE TAX HAD BEEN ESCAPED ASSESSMENT AND HENCE , REJECTED OBJECTIONS O F THE ASSESSEE AND CO MPLETED ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE ACT, DETERMINING THE TOTAL INCOME OF RS.2,16,15,495/ - ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 8 7 . AGGRIEVED BY THE ASSESSMENT ORDER , THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A) , THE ASSESSEE HAS CHALLENGED THE VALIDITY OF REASSESSMENT PROCEEDINGS ON THE G ROUND THAT THE A.O HAS REOPE NED THE ASSESSMENT ON CHANGE OF OPINION WITHOUT ANY TANGIBLE MATERIALS THAT SUGGEST ESCAPEMENT OF INCOME WITHIN THE MEANING OF SECTION 147 OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT REOPEN ING IS IL LEGAL, BAD IN LAW AND LIABLE TO QUASHED , AS THE A.O HAS FORMED REASONS TO BELIEF ON MISCONCEPTION OF FIGURES TO REWORK THE INCOME ARISED FROM SALE OF FACTORY LAND AND OTHER ASSET UNDER THE HEAD INCOME FROM SHORT TERM CAPITAL GAIN AND INCOME FROM L ONG TERM CAPITAL GAIN , IGNORING THE FACT THAT THE SAME MATERIALS HAS BEEN APPRAISED BY THE A.O WHILE COMPLETING THE ASSESSMENT U/S. 143(3) OF THE ACT. THE ASSESSEE FURTHER SUBMITTED THAT THE A.O HAS MISCONSTRUE D THE AMOUNT RECEIVED FROM SALE OF OFFICERS CO LONY WHICH WAS ASSESSED AS SHORT TERM CAPITAL GAIN IN THE ORIGINAL ORDER, HOWEVER HE HAD CONSIDERED AMOUNT RECEIVED FROM SALE OF OFFICERS COLONY FOR THE PURPOSE OF COMPUTATION OF LONG TERM CAPITAL GAIN WHICH RESULTS IN ESCAPEMENT OF INCOME TO THE TUNE ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 9 OF R S. 15,00,000/ - . BUT , TH E FACT REMAINS THAT THIS FIGURE IS VERY MUCH CONSIDERED BY THE A.O AND AFTER DUE APPLICATION OF MIND REWORKED SHORT TERM CAPITAL GAIN AS WELL AS LONG TERM CAPITAL GAIN, THEREFORE THERE IS NO REASONABLE BELIEF THAT INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT. THE ASSESSEE ALSO AGITATED THE ISSUES ON MERITS. 8 . THE CIT(A) , AFTER CONSIDERING THE RELEVANT SUBMISSIONS OF THE ASSESSEE AND ALSO CONSIDERING CERTAIN JUDICIAL PRECEDENTS , HELD THAT REOPENING OF ASSESSMENT IN THIS CASE IS ON SOUND FOOTING. THE CIT(A) , FURTHER , OBSERVED THAT THE GROUND ON WHICH THE CASE WAS REOPENED RELAT ES TO THE UNDERSTATEMENT OF CONSIDERATION RECEIVED FROM ON SALE OF SCARP, THE AMOUNT OF WHICH COULD NOT BE AS CERTAIN ED BY THE A.O EARLIER IN THE ABSENCE OF DETAILS WHICH WERE NOT FILED BY THE ASSESSEE. THE A.O DID NOT APPLIED HIS MIND WITH REGARD TO THE IMPUGN ED ESCAPEMENT OF RS.15,00,000/ - , WHILE FRAMING THE ORIGINAL ASSESSMENT ORDER. HENCE , THERE WAS NO JUSTIFICATION FOR QUESTIONING REOPENING ON THE GROU ND OF CHANGE OF OPINION. WITH THESE OBSERVATIONS , AND ALSO RELIED UPON THE DECISION OF HONBLE SUPREME COURT , IN PH OOL CHAND PONJRANGLAL VS. ITO 203 ITR ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 10 456 OBSERVED THAT THE A.O VALIDLY REOPENED THE ASSESSMENT , AS THERE IS A CLEAR ESCAPEMENT OF INCOME TO THE EXTENT OF RS.15,00,000/ - ON ACCOUNT OF NON - DISCLOSURE OF FULL MATERIALS FOR COMPUTATION OF IN COME FROM SALE OF FACTORY LAND AND OTHER ASSET. 9. IN SO FAR AS THE ISSUES ON MERITS, THE CIT(A) PARTLY ALLOWED APPEAL FILED BY THE ASSESSEE, WH EREIN UPHELD CLAIM OF THE ASSESSEE WITH REGARD TO SALE OF OFFICERS COLONY AS SHORT TERM CAPITAL GAIN , INSTEAD OF LONG TERM CAPITAL GAIN U/S. 50 OF THE ACT. HOWEVER , CONFIRMED DISALLOWANCE OF EXPENDITURE OF TRANSFER BEING EXCISE DUTY PAID ON REVERSAL OF MOD VAT CREDIT ON PLANT & MACHINERY ON THE GROUND THAT THE SALE OF ASSET BY THE ASSESSEE IS ON AS IS WHERE IS BASIS AND HENCE , THERE IS NO NEED FOR THE ASSESSEE TO INCUR EXPENDITURE TOWARDS PAYMENT OF EXCISE DUTY ON REVERSAL OF MODVAT. THE CIT(A) ALSO DISMIS SED THE GROUND OF THE ASSESSEE CHALLEN GED LEVY OF INTEREST U/S. 234B OF THE ACT, ON THE GROUND THAT QUANTIFICATION OF INTEREST U/S. 234B IS NOT QUESTIONABLE IN APPEAL. IN SO FAR AS , SET OF F OF UNABSORB ED BROUGHT FORWARD DEPRECIATION , DIRECTED THE A.O TO VER IFY THE RECORDS AND TO ALLOW UNABSORBED DEPRECIATION AS PER ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 11 LAW. AGGRIEVED BY THE CIT(A) APPEAL ORDER , THE ASSESSEE , AS WELL AS THE REVENUE ARE IN APPEAL BEFORE US. 10. THE LD. A.R FOR THE ASSESSEE , SUBMITTED THAT REOPENING OF ASSESSMENT IS ILLEGAL, BAD IN LAW , AS THERE IS NO INCOME CHARGEABLE TO TAX HAS BEEN ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147 OF THE I.T. ACT, 1961. THE A.O REOPENED THE ASSESSMEN T MERELY ON CHANGE OF OPINION WITHOUT THERE BEING ANY FRESH MATERIAL WHICH SUGGEST ESCAPEMENT OF INCOME WIT HIN THE MEANING OF SECTION 147(A ) OF THE ACT, WHICH IS A PRECONDITION FOR REOPENING OF ASSESSMENT. THE LD. A.R FURTHER SUBMITTED THAT THE A.O HAS FOR MED REASON TO BELIEVE BASED ON THE EXISTING MATERIALS WHICH WERE PART OF ORIGINAL ASSESSMENT BY MISCONCEPTION OF AMOUNTS RECEIVED TOWARDS SALE OF OFFICER COLONY AND SALE OF SCRAP , TO REWORK THE COMPUTATION OF INCOME FROM LONG TERM CAPITAL GAIN, INCOME FROM SHORT TERM CAPITAL GAIN AND INCOME FROM BUSINESS . THE LD. A.R REFERRING TO THE CHART SHOWING THE DETAILS OF ASSETS SOLD SUBMITTED THAT THE ASSESSEE SOLD THE ASSEST FOR A CONSIDERATION OF RS.16,40 ,00,000/ - AND CONSIDER ED AMOUNTS UNDER THE HEAD SHORT TERM CAPITAL GAIN, LONG TERM CAPITAL GAIN AND BUSINESS ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 12 INCOME. THE ASSESSEE HAS CONSIDERED SALE OF LAND UNDER THE HEAD LONG TERM CAPITAL GAIN AND SALE OF BUILDING, OFFICERS COLONY, PLANT & MACHINERY AND OTHER ASSETS UNDER THE HEAD SHORT TERM CAPITAL GAIN AND SALE OF SC RAP AND STORES UNDER THE HEAD INCOME FROM BUSINESS. WHILE COMPLETING THE ASSESSMENT U/ S. 143(3) OF THE ACT, THE A.O HAS ACCEPTED INCOME DECLARED BY THE ASSESSEE TOWARDS SALE OF FACTORY LAND AND OTHER ASSETS , EXCEPT TO THE EXTENT OF RS.26,83,411/ - , WHICH HAS BEEN EXCLUDED FROM THE GROSS RECEIPTS OF SALE PROCEEDS OF ASSETS FORMING PART OF SHO RT TERM CAPITAL GAIN. 11. THE A.R FURTHER SUBMITTED THAT ON PERUSAL OF REASONS RECORDED FOR REOPENI NG REASSESSMENT, THE A.O HAS CONSIDERED THE VERY SAME AMOUNTS AND REWORKED THE CONSIDERATION RECEIVED FROM ASSET FORMING PART OF LONG TERM CAPITAL GAIN AND SHORT TERM CAPITAL GAIN BY REALLOCATING THE SALE PROCEEDS FOR THE SALE OF OFFICER COLONY FROM SHORT TERM CAPITAL GAIN TO LONG TERM CAPITAL GAIN AND REALLOCATION OF SALE PROCEEDS OF SCARP AND STORES FROM INCOME FROM BUSINESS TO INCOME FROM SHORT TERM CAPITA L GAIN WHICH RESULTS IN DIFFERENCE OF RS.15,00,000/ - . THE A.O MI SCONSTRUED THE FIGURES TO FORM A REASONABLE BELIEF OF ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 13 ESCAPEMENT OF INCOME, OTHERWISE THERE IS NO DIFFERENCE BETWEEN GROSS SALE PROCEEDS CONSIDERED BY THE ASSESS EE IN ITS RETURN OF INCOME , GRO SS RECEIPTS CONSIDER ED BY THE A.O WHILE FRAMING THE ASSESSMENT U/S. 143(3) AND THE GROSS RECEIPTS CONSIDER ED BY THE A.O FOR THE PURPOSE OF REOPENING OF THE ASSESSMENT. THE A.R FURTHER SUBMITTED THAT REOPENING IS BASED ON MERE REAPPRAISAL OF MATERIAL WHICH IS ALREADY ON RECORD AND THERE IS NO NEW OR TANGIBLE MATERIAL TO JUSTIFY THE REOPENING. THE A.R FURTHER SUBMITTED THAT THE A.O HAS CONSIDER ED ALL THE MATERIALS NECESSARY FOR COMPUTATION OF INCOME ARISED FROM SALE OF FACTORY LAND AND OTHER ASSET AND AFTER A PPLICATION OF MIND HAS REWORKED SHORT TERM CAPITAL GAIN, BY DISALLOWING AN AMOUNT OF RS.26,83,411/ - , TOWARDS EXPENSE OF TRANSFER BEING EXCISE DUTY PAID ON REVERSAL OF MODVAT CREDIT ALLOWED ON PLANT & MACHINERY ON THE GROUND THAT THERE IS NO NEED FOR THE AS SESSEE TO INCUR THIS EXPENDITURE, AS THE SALE OF A SSET IS MADE ON AS IS WHERE IS BASIS . EXCEPT THIS, THERE IS NO DIFFERENCE IN INCOME COMPUTED BY THE ASSESSE E AND INCOME ASSESSED BY THE A.O. 12. THE ASSESSEE FURTHER SUBMITTED THAT IT HAD CHALLENGED THE ORIGINAL ASSESSMENT ORDER PASSED BY THE A.O U/S. 143(3) ON THE ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 14 MATTER OF CAPITAL GAINS, THEREFORE THE A.O HAS NO JURISDICTION TO REOPEN THE REASSESSMENT ON THE SAME ISSUE WHICH HAS BEEN SUBJECT MATTER OF ANY APPEAL OR REVISION PROCEEDING. THE A.R FURTHER S UBMITTED THAT THE A.O HAS WRONGLY APPLIED THE RATIO OF HONBLE SUPREME COURT , IN THE CASE OF PHOOL CHAND PONJRANGLAL VS. ITO 203 ITR 456 (SC) TO DECIDE THE GROUND OF REOPENING AGAINST THE ASSESSEE, AS THE FACTS OF THE CASE RELIED UPON BY THE CIT(A) IS ALL TOGETHER DIFFERENT FROM THE FACTS OF THE ASSESSEE CASE. IN THE CASE BEFORE THE HONBLE SUPREME COURT, THERE WAS A NEW MATERIAL IN THE FORM OF CONFESSIONAL STATEMENT OF THE MANAGING DIRECTOR OF THE COMPANY IN RESPECT OF LO ANS AND ADVANCES WHICH CONSTITUTE N EW MATERIAL FOR THE PURPOSE OF REOPENING ASSESSMENT . IN THIS CASE , EXCEPT REALLOCATION OF SALE FIGURES FOR THE PURPOSE OF COMPUTATION OF SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN , THERE IS NO NEW MATERIAL WITH THE A.O TO FORM A REASONABLE BELIEF O F ESCAPEMENT OF INCOME , THEREFORE , THE CI T(A) WAS GROSSLY ERRED IN UPHOLDING REOPENING OF THE ASSESSMENT. IN SUPPORT OF HIS ARGUMENTS , RELIED UPON THE FOLLOWING JUDGEMENTS. ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 15 I) M.D WADDAR & CO. VS ACIT II) SHARP DESIGNERS AND ENGINEERS INDIA PVT. LTD. VS ACIT III) CIT VS. AMITABH BACHCHAN (349 ITR 76) IV) PRASHANT PROJECTS LTD. VS. ACIT (333 ITR 368) V) CHIKA OVERSEAS PVT LTD. VS. ACIT VI) PHOOL CHAND BAJRANG LAL VS. ITO (203 ITR 456) VI) HARYANA ACRYLLIC MANUFACTURING CO. VS CIT (308 ITR 38) VII) CIT VS MULTIPLEX TRADING & INDUSTRIAL CO. LTD (378 ITR 351) (DELHI HIGH COURT) & PR. CIT VS C & G PHARAM INDIA LTD. 13 . PER CONTRA , THE LD. D.R STRON GLY SUPPORTED ORDER OF THE CIT(A) . TH E D.R FURTHER , SUBMITTED THAT THE A. O HAS REOPENED THE ASSESSMENT ON VALID GROUND , AS THERE IS A CLEAR ESCAPEMENT OF INCOME TO THE TUNE OF RS.15,00,000/ - ON ACCOUNT OF UNDER ASSESSMENT OF SHORT TERM CAPITAL GAIN FROM SALE OF FACTORY LAND AND BUILDING WHICH WAS NOT CONSIDERED BY THE A.O IN THE ABSENCE OF NECESSARY MATERIALS AT THE TIME OF ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT. THE D.R FURTHER SUBMITTED THAT FOR REOPENING ASSESSMENT THE A.O HAS TO FORM A REASONABLE BELIEF OF ESCAPEMENT OF INCOME , BASE D ON SUBJECTIVE TO ASSESSMENT OF MATERIALS AVAILABLE WITH HIM WHICH MAY BE FROM THE ASSESSMENT RECORDS; HOWEVER , THERE IS NO NEED OF NEW MATERIAL. IN THIS CASE, THE ASSESSEE HAS FAILED TO ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 16 FURN ISH NECESSARY INFORMATION FOR COMPUTATION OF INCOME ARISED FROM SALE OF FACTORY LAND OF BUILDING WHICH RESULTS IN ESCAPEMENT OF INCOME OF RS.15,00,000/ - , THEREFORE THERE IS SOUND REASON FOR REOPENING OF ASSESSMENT. THE D.R FURTHER SUBMITTED THAT THE SATISFACTION OF THE A.O IS SUBJECTIVE ONE, SO LONG AS THERE IS SOME M ATERIAL, HAVING NEXUS WITH FORMATION OF REASON TO BELIEF, THE SATISFACTION IS NOT LI ABLE TO BE REVIEWED. IT IS NOW WELL SETTLE D THAT SUFFICIENCY OR CORRECTNESS OF THE MATERIAL IS NOT A THING TO BE CONSIDERED AT THE STAGE OF ISSUANCE OF NOTICE . W HAT IS NEED ED IS ONLY PRIMA FACIE EVIDENCES OF ESCAPEMENT. THE A.O HAS ARRIVED AT A ESCAPEMENT OF INCOME BASED ON THE MATERIAL AVAILABLE , THEREFORE THERE IS NO MERITS IN THE CONTENTION OF THE ASSESSEE THAT THE ASSESSMENT IS REOPENED MERELY ON CHANGE OF OPINION . 14 . WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERIALS AVAILABLE ON RECORDS AND GONE THROUGH THE ORDER OF THE AUTHORITIES BELOW. THE FACTUAL MATRIX OF THE CASE WHICH LEAD S TO REOPENING ASSESSMENT IS THAT , DURING THE FINANCIAL YEAR RELEVANT TO ASSESSMENT Y EAR 2005 - 06, THE ASSESSEE SOLD FACTORY LAND ALONG WITH OTHER ASSETS AND COMPUTED INCOME FROM LONG TERM ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 17 CAPITAL GAIN, INCOME FROM SHORT TERM CAPITAL GAIN AND INCOME FROM BUSINESS. THE ASSESSEE HAS COMPUTED LONG TERM CAPITAL GAIN FOR SALE OF LAND AND SHORT T ERM CAPITAL GAIN SALE OF BUILDING, OFFICER COLONY, SCRAP PLANT & MACHINERY, DG SET, OTHER PLANT & MACHINERY AND WIND MILL. THE ASSESSEE HAS COMPUTED INCOME FROM BUSINESS FOR SALE OF SCARP AND STORES. THE ASSESSEE HAS CONSIDER ED TOTAL SALE CONSIDERATION OF RS.16,40,00,000/ - FROM SALE OF ALL THE ASSET AND ARRIVED AT NET SALE CONSIDERATION OF RS.16,33,16,589/ - AFTER REDUCING EXPENSES OF TRANSFER OF RS.26,83,411/ - , BEING EXCISE DUTY PAID ON REVERSAL OF MODVAT CRED IT AVAILED ON PLANT & MACHINERY . THE A.O , WHILE COMPLETING ASSESSMENT U/S.143(3) , HAS CONSIDERED GROSS CONSIDERATION OF RS. 16,40,00 ,000/ - FROM SALE OF ALL ASSET, HOWEVER DISALLOWED EXPENSES OF TRANSFER CLAIMED BY THE ASSESSEE FOR RS.26,83,411/ - , T OWARDS PAYMENT OF EXCISE DUTY ON REVERSAL OF MODV AT CREDIT ON PLANT & MACHINERY SOLD AND RECOMPUTED SHORT TERM CAPITAL GAIN, LONG TERM CAPITAL GAIN AND BUSINESS INCOME. 15 . THE A.O REOPENED THE ASSESSMENT ON THE GROUND THAT INCOME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT WITHIN ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 18 THE ME ANING OF SECTI ON 147 OF THE ACT, O N ACCOUNT OF UNDER ASSESSMENT OF INCOME TO THE TUNE OF RS.15,00,000/ - FROM SALE OF FACTORY LAND AND BUILDING. THE A.O HAS RE CORDED REASONS FOR REOPENING ASSESSMENT. ON PERUSAL OF REASONS RECORDED BY TH E A.O, WE FIND THAT THE A.O HAS OBS ERVED , THE ASSESSEE HAS CONSIDE RED SALE CONSIDERATION OF RS. 10 ,88,16,589/ - , FOR SALE OF ASSETS FORMING PART OF SHORT TERM CAPITAL GAIN WHICH HAS BEEN REWORKED BY THE A.O AT RS.10,95,00,000/ - WHILE FINALIZING THE ORDER U/S. 143(3), WHEREAS THE SAME ASSETS WAS PURCHASED BY M/S. I.B ENTERPRISES ON AS IS WHERE IS BASIS FOR RS.11,10,00,000/ - , THUS THERE IS A DIFFERENCE OF RS.15,00,000/ - IN THE CONSIDERATION TAKEN FOR COMPUTATION OF SHORT TERM CAPITAL GAIN WHICH RESULTS IN ESCAPEMENT OF INCOME TO THE TUNE OF RS.15,00,000/ - . 16. THE A.O RECORDED REASONS BASED ON THE DOCUMENTS AVAILABLE IN THE ASSESSMENT RECORDS WHICH WERE PART OF ORIGINAL ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT. THE A.O ANALYSED SALE CONSIDERATION RECEIVED FROM SALE OF LAND, OFFICERS COL ONY, SCARP PLANT & MACHINERY AND OTHER ASSET TO ARRIVE AT A DIFFERENCE OF RS.15,00,000/ - . THE ASSESSEE HAS FILED A CHART ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 19 SHOWING THE DETAILS O F ASSETS SOLD. T HE ASSESSEE HAS SOLD ENTIRE ASSETS FOR A SALE CONSIDERATION OF RS. 16,40,00,000/ - . THE ASSESSEE HA S COMPUTED SHORT TERM CAPITAL GAIN, LONG TERM CAPITAL GAIN AND BUSINESS INCOME TOWARDS SALE OF ASSETS AFTER REDUCING RS.26,83,411/ - , TOWARD S EXPENSES OF TRANSFER BEING EXCISE DUTY PAID ON REVERSAL OF MODVAT CREDIT AV AILED ON PLANT & MACHINERY. WE FURTHER N OTICED THAT WHILE COMPLETING ASSESSMENT U/S. 143(3) , THE A.O HAS CONSIDERED GROSS CONSIDERATION OF RS.16,40,00,000/ - , HOWEVER DISALLO WED EXPENSES OF TRANSFER CLAIMED BY THE ASSESSEE TO ARRIVE AT GROSS CONSIDERATION OF RS.16,40,00,000/ - . WE FURTHER NOTICED FROM THE REASONS RECORDED BY THE A.O HAS CONSIDERED GROSS CONSIDERATION OF RS.16,40,00,000/ - TO RE WORK SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN. THE ONLY DIFFERENCE IS THAT , WHILE ARRIVING AT A SHORT TERM CAPITAL GAIN AND LONG TERM CAPITAL GAIN , THE A.O HAS REALLOCATED SALE PROCEEDS OF OFFICER COLONY FROM SHORT TERM CAPITAL GAIN TO LONG TERM CAPITAL GAIN AND CONSIDERATION RECEIVED FROM SALE OF SCARP AND STORE FROM INCOME FROM BUSINESS TO SHORT TERM CAPITAL GAIN. FROM THE ABOVE WORKING, THE A.O HA S ARRIVED AT A GROSS CONSIDERATION OF ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 20 RS.11,10,00,000/ - FROM SALE OF ASSET FORMING PA RT OF SHORT TERM CAPITAL GAIN AND RS.5,30,00,000/ - FROM SALE OF ASSETS FORMING PART OF LONG TERM CAPITAL GAIN. EXCEPT THIS REALLOCATION OF FIGURES , THERE IS NO CHANGE IN THE AMOUNTS DECLARED BY THE ASSESSEE IN ITS RETURN OF INCOME AND AMOUNTS CONSIDERED BY THE A.O IN T H E ASSESSMENT ORDER U/S. 143(3) R.W.S 147 OF THE ACT. ALL THESE DETAILS A R E PA RT OF RETURN OF INCOME FILED BY TH E ASSESSEE WHICH HAS B EEN ONCE AGAIN FILED BEFORE THE A.O AT THE TIME OF ASSESSMENT PROCEEDINGS U/S. 143(3) OF THE ACT, AND THE A.O HAS CONSIDERED ALL THE MATERIALS TO COMPLETE THE ASSESSMENT , THEREFORE , WE ARE OF THE CONSIDER ED VIEW THAT THE A.O HAS REOPENED THE ASSESSMENT ON A MERE REAPPRAISAL OF THE MATERIAL WHICH IS ALREADY ON RECORD AND THERE IS NO NEW OR TANGIBLE MATERIAL TO JUSTIFY REOPENING. 17 . THE PROVISION S OF SECTION 147 , PROVIDES FO R REOPENING OF ASSESSMENT, IT THE A.O HAS REASON TO BELIEVE THAT INCOME CHARGEABLE T O TAX HAD BEEN ESCAPED ASSESSMENT. NO DOUBT, THE REASONS TO BELIEF SHOULD BE SUBJECTIVE ASSESSMENT OF MATERIAL AVAILABLE ON RECORD , BUT NOT OBJECTIVE ASSESSMENT OF ISSUES. THEREFORE , THE REASON TO BELIEVE FOR REOPENING ASSESSMENT ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 21 SHOULD BE BASED ON TANGIBL E MATERIAL WHICH WAS NOT AVAILABLE WITH THE A.O AT THE TIME OF ORIGINAL ASSESSMENT, BUT NOT MERELY CHANGE OF OPINION BASED ON SAME SET OF FACTS WHICH WAS AVAILABLE AT THE TIME OF COMPLETION OF ORIGINAL ASSESSMENT. BEFORE , REOPENING THE ASSESSMENT, THE A. O SHOULD HAVE REASON BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. UNLESS , THERE IS A SOUND BASIS FOR FORMATION OF REASON TO BELIEVE FOR REOPENING ASSESSMENT, IT WOULD AMOU NT TO REVIEW OF ALREADY COMPLETED ASSESSMENTS. THEREFORE , IN THE ABS ENCE OF ANY REASON TO BELIEVE , IT AFFECTS VERY JURISDICTION TO INITIATE THE REASSESSMENT PROCEEDINGS. THE CONDITION PRECEDENT FOR ASSUMPTION OF JURISDICTION U/S. 147 OF THE ACT, IS REASON TO BELIEF WHICH IS NECESSARILY TO BE RECORDED WITH THE SOUND FOOTING BASED ON SOME TANGIBLE MATERIALS, OTHER THAN THE MATERIAL ALREADY IN THE POSSESSION OF THE A.O. 18 . THE ASSESSMENT CAN BE REOPENED U/S. 147 OF THE ACT, IF THE A.O HAD REASON TO BELIEVE , BUT IT CANNOT BE REOPENED ON A MERE CHANGE OF OPINION , THAT IS ON THE SAME SET OF FACTS AND MATERIAL WHICH WAS IN THE KNOWLEDGE OF THE A.O. THE A.O CANNOT ISSUE NOTICE U/S.148, MERELY BECAUSE IT FELT THAT A ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 22 DECISION WHICH HAS BEEN TAKEN EARLIER IS NOT CORRECT AND NEEDS TO BE CORRECTED. BUT , TO FORM A REASON TO BELIEF, THERE SHOULD BE TANGIBLE MATERIAL OTHER THAN MATERIAL AVAILABLE WITH THE A.O AT THE TIME OF ORIGINAL ASSESSMENT. IF THE REASONS RECORDED FOR REOPENING IS NOT BASED ON ANY MATERIAL OR WHICH IS BASED ON SAME SET OF FACTS, THEN IT AMOUNTS TO MERE CHANGE OF OPINION , BUT NOT A SOUND REASON TO BELIEVE TO REOPEN THE ASSESSMENT. 19 . HAVING SAID, LET US EXAMINE THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE LEGAL PROPOSITION DISCUSSED IN THE PRECEDING PARAGRAPH. IN THIS CASE , THE A.O HAS RECORDED RE ASON BASED ON REAPPRAISAL OF MATERIAL WHICH IS ALREADY ON RECORD AND THERE IS NO NEW OR TANGIBLE MATERIAL TO JUSTIFY THE REOPENING. THE A.O HAS REALLOCATED EXISTING AMOUNTS CONSIDERED BY THE A.O IN THE ASSESSMENT PROCEEDINGS U/S. 143(3) TO ARRIVE AT A DIFF ERENCE OF RS. 15,00,000/ - FOR COMPUTATION OF SHORT TERM CAPITAL GAIN. EXCEPT THIS , THERE IS NO CHANGE IN THE ITEMS OF INCOMES CONSIDER ED BY THE ASSESSEE IN HIS RETURN , THE A.O IN HIS ASSESSMENT ORDERS AND THE PRESENT A.O FOR THE PURPOSE OF REOPENING OF THE ASSESSMENT. THEREFORE, WE ARE OF THE CONSIDER ED VIEW THAT THE A.O HAS REOPENED THE ASSESSMENT ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 23 MERELY ON THE BASIS OF CHANGE OF OPINION BY REAPPRAISAL OF THE MATERIAL WHICH WAS ALREADY ON RECORD AND CONSIDER ED BY THE A.O IN THE ASSESSMENT PROCEEDING U/S. 143(3) OF THE ACT, AND HENCE , THERE IS NO VALI D REASON FOR THE A.O TO REOPEN THE ASSESSMENT U/S. 147 OF THE ACT. 20 . THE ASSESSEE HAS RELIED UPON THE DECISION OF ITAT , PANAJI TRIBUNAL , IN THE CASE OF M.D WADDAR & CO. VS. ACIT (2014) 41 CCH 0215, ( PANAJI TRIBUNAL ) . WE HAVE GONE THROUGH THE CASE RELIED UPON BY THE ASSESSEE , IN THE LIGHT OF FACTS OF THE PRESENT CASE AND FINDS THAT THE CASE LAWS RELIED UPON BY THE ASSESSEE IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CAS E. WE FURTHER OBSERVED THAT THE C OORDINATE BENCH OF THIS TRIBUNAL , UNDER SIMILAR CIRCUMSTANCES HELD THAT , WHERE THE A.O HAD REOPENED ASSESSMENT BASED ON THE ACCOUNT WHICH WAS SUBMITTED DURING ORIGINAL ASSESSMENT AND CONSIDERED BY THE A.O IN ASSESSMENT ORDER PASSED U/S. 143(3), REOPENING O F ASSESSMENT AMOUNTS TO MERE CHANGE OF OPINION WHICH IS LEGALLY IMPERMISSIBLE. THE RELEVANT PORTION OF ORDER IS EXTRACTED BELOW. THE AO HAD REOPENED THE ASSESSMENT ORDER ON THE GROUND OF THE LIABILITIES WHICH WAS SHOWN IN ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 24 P& L ACCOUNT. THE BASIS OF THE REOPENING OF THE ASSESSMENT ORDER WAS OUTSTANDING LIABILITIES OF SRI M.D. WADDAR & CO. (DISSOLVED) OF RS.17,87,50,629/ - WAS NOT GENUINE. IT WAS HELD THAT THE AO HAD VERIFIED THEN P&L ACCOUNT AND HE HAD ACCEPTED THE BOOKS OF ACCO UNT OF THE ASSESSEE IN THE CASE OF SRI M.D. WADDAR & CO. (DISSOLVE). THE CASE WAS COMPLETED U/S. 143(3) ON 29/12/2010. THE AO HAD NOT BROUGHT ANY NEW MATERIAL FOR DISBELIEVE THIS OUTSTANDING OF RS.17,87,50,629/ - . THE AO HAD 'REASON TO BELIEVE' THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ON THE BASIS THE LIABILITIES SHOWN IN ORIGINAL BALANCE SHEET WHICH WAS SUBMITTED BY THE ASSESSEE ALONG WITH HIS RETURN. THE AO HAD NOT BROUGHT ANY NEW INFORMATION EXCEPT THIS ACCOUNT AND BALANCE SHEET. THE AO HAD SIMPLY RELIED UPON THE LIABILITIES SHOWN IN BALANCE SHEET ACCOUNT AND MOREOVER THE AO HAD ALSO VERIFIED THE BANK ACCOUNTS WHICH WAS SHOWN IN BALANCE SHEET ACCOUNT AND HE HAD 'REASON TO BELIEVE' THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED. IN TRIBUNAL'S OPINION, THIS 'REASON TO BELIEVE' OF THE AO WAS MERELY CHANGE OF OPINION. NO NEW MATERIAL WAS BROUGHT OUT BY THE ASSESSING OFFICER. THE ASSESSEE HAD DISCLOSED ALL THE MATERIAL FACTS DURING THE ORIGINAL ASSESSMENT PROCEEDING. THE ASSESSING OFFICER FAILED TO BRING ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 25 ANY EVI DENCE TO SHOW THAT HE HAD REOPENED THE ASSESSMENT ON SOME REASONABLE BELIEF BUT HE HAD SIMPLY REOPENED ON THE LIABILITIES SHOWN IN P&L ACCOUNT WHICH HAD BEEN ACCEPTED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS OF THE VIEW NOW THIS LIABILITY WAS NO T GENUINE, WHICH IS MERELY CHANGE OF OPINION. FOR THIS TRIBUNAL RELY UPON THE DECISION OF HON'BLE DELHI HIGH COURT (FB) IN THE CASE OF CIT VS. KELVINATOR OF INDIA, 256 ITR 1 (DEL) WHICH WAS AFFIRMED BY THE SUPREME COURT WHEREIN IT IS HELD THAT TO CONFIRM T HE JURISDICTION U/S. 147 TWO CONDITIONS WERE REQUIRED TO BE SATISFIED (I) AO MUST HAVE 'REASON TO BELIEVE' THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. (II) HE MUST HAVE 'REASON TO BELIEVE' THAT SUCH ESCAPEMENT OCCURRED BY THE REASON EITHER AN OMI SSION OR FAILURE ON PART OF ASSESSEE TO MAKE A RETURN OF INCOME U/S. 139 OR OMISSION OR FAILURE ON PART OF ASSESSEE TO DISCLOSE FULLY AND TRULY OF THE MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR. THE AFORESAID REQUIREMENT OF LAW MUST BE HELD TO BE CONDITION PRECEDENT FOR INVOKING THE JURISDICTION OF THE AO TO REOPEN THE ASSESSMENT U/S.147. IT IS TANGIBLE BOTH CONDITIONS AFORESAID MENTIONS ARE CUMULATIVE. IT IS WELL SETTLED PRINCIPLE OF LAW THAT BEFORE JURISDI CTION UNDER 147 IS INVOKED BY AO , H E HAS TO RECORD HIS REASON FOR DOING SO OR ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 26 BEFORE ISSUING ANY NOTICE U/S. 147. THEREFORE, FORMATION OF 'REASON TO BELIEVE' AND RECORDING OF REASONS ARE IMPERATIVE BEFORE AO COULD REOPEN AND COMPLETE THE ASSESSMENT. EVEN BY THE REASON TO SECTION 147 IF ITO EXERCISED ITS JURISDICTION FOR INITIATING A PROCEEDING FOR REASSESSMENT ONLY UPON MERE CHANGE OF OPINION THE SAME MAY BE HELD TO BE UNCONSTITUTIONAL. THEREFORE, SECTION 147 DOES NOT POSTULATE CONFIRMATION OF POWER TO AO TO INITIATE REASSESSMENT PROCEEDING UPON MERE CHANGE OF OPINION. HOWEVER IF THE 'REASON TO BELIEVE' OF AO FOUND AN INFORMATION WHICH MIGHT HAVE BEEN RECEIVED BY AO AFTER COMPLETION OF THE ASSESSMENT, IT MAY BE SOUND FOUNDATION FOR EXERCISING THE POWER U/S. 147 R.W. SECTION 148. THE SUPREME C OURT COMPARED THE PROVISIONS BEFORE AND AFTER THE AMENDED, THERE SHOULD BE ESCAPEMENT OF INCOME OF INCOME ARISING ON ACCOUNT OF NON - FILING OF RETURN OR NON - DISCLOSURE OF MATERIAL FACTS OR THE ASSESSING OFFICER SHOULD HAVE REASON TO BELIEVE ESCAPEMENT IN CO NSEQUENCE OF INFORMATION IN HIS POSSESSION. AFTER THE AMENDMENT, THERE IS ONLY ONE CONDITION, THAT THERE IS 'REASON TO BELIEVE' ESCAPEMENT OF INCOME, SO THAT THE POWER HAS BECOME MUCH WIDER. BUT ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 27 THE, ONE HAS TO GIVE SCHEME INTERPRETATION OF THE WORDS 'REAS ON TO BELIEVE', SO THAT THE POWER UNDER SECTION 147 MAY NOT BE MISUNDERSTOOD AS CONFERRING ARBITRARY POWERS ON 'MERE CHANGE OF OPINION', WHICH CANNOT PER SE BE A REASON FOR JURISDICTION. POWER TO ASSESS IS DIFFERENT FROM POWER TO REVIEW, WHICH IS NOT PERMI SSIBLE. IT FOLLOWS THAT REVIEW CANNOT BE UNDERTAKEN IN THE GARB OF REASSESSMENT. THE BAR AGAINST CHANGE OF OPINION IS IN INBUILT REQUIREMENT TO CHECK ABUSE OF POWER. IT, THEREFORE, FOLLOWS, THAT THERE SHOULD BE TANGIBLE MATERIAL TO COME TO A CONCLUSION, TH AT THERE IS ESCAPEMENT OF INCOME. GOING BY THE HISTORY OF THE LEGISLATION, THE SUPREME COURT POINTED OUT THAT THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 HAD EARLIER OMITTED THE EXPRESSION 'REASON TO BELIEVE' SUBSTITUTING IT BY THE WORD 'OPINION'. ON REPRESE NTATION, THE EXPRESSION 'REASON TO BELIEVE' WAS REINTRODUCED SUBSTITUTING THE WORD 'OPINION' BY THE DIRECT TAX LAWS AMENDMENT) ACT, 1989. THIS WAS ALSO EXPLAINED IN BOARD CIRCULAR NO.S 49 DATED OCTOBER 31, 1989 [1990] 182 ITR (ST.) 1,29. THE OBJECT OF THE A MENDMENT ITSELF WAS TO GO BY THE MEANING OF THE EXPRESSION 'REASON TO BELIEVE' AS UNDERSTOOD ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 28 IN A NUMBER OF COURT RULINGS AND NOT TO GO BY MERE CHANGE OF OPINION. IN INSTANT CASE THE ASSESSEE IN HIS RETURN OF INCOME WHICH WAS FILED DURING THE COURSE OF ASS ESSMENT PROCEEDING ALONG WITH P &L ACCOUNT AND BALANCE SHEET AND AFTER VERIFYING BALANCE SHEET THE AO HAD PASSED THE ORDER U/S. 143(3) ON 29.12.2012. THE ASSESSING OFFICER HAS RELIED UPON THE ACCOUNTS WHICH WAS SUBMITTED BY THE ASSESSEE IN ORIGINAL ASSESSM ENT AND THE ASSESSEE HAD SUBMITTED ALL THE MATERIALS WHICH WAS AVAILABLE WITH THE ASSESSEE AND ASSESSING OFFICER HAD VERIFIED AND FOUND TO BE GENUINE AND THE ASSESSMENT U/S. 143(3) WAS ACCEPTED BY THE ASSESSEE AND HE HAD PAID THE TAX THEREON. NOW, THE ASSE SSING OFFICER WANTED TO RELY UPON THE SAME MATERIAL, SAME P&L ACCOUNT AND HE WANTED TO REOPEN THE ASSESSMENT ON THE GROUND OF LIABILITY OF RS. 17,87,50,629/ - SHOWN IN HIS ORIGINAL RETURN AND ON THE SAME LIABILITIES THE AO HAD REOPENED THE ASSESSMENT WHICH IS NOT PERMISSIBLE IN LAW. THEREFORE, THE AO HAD REOPENED THE ASSESSMENT ORDER BASED ON THE ACCOUNT WHICH WAS SUBMITTED DURING THE ORIGINAL ASSESSMENT ORDER AND NO NEW MATERIAL OR INFORMATION WAS FOUND BY THE ASSESSING OFFICER. ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 29 THEREFORE, IT WAS A MERE CHA NGE OF OPINION WHICH IS NOT PERMITTED. THUS THE ORDER PASSED U/S 147 WAS ANNULLED. 21 . COMING TO THE CASE LAW RELIED UPON BY THE LD. CIT(A) FOR UPHOLDING THE REASSESSMENT ORDER . T HE LD. CIT(A) RELIED UPON THE DECISION OF HONBLE SUPREME COURT , IN PHOOL CH AND PONJRANGLAL VS. ITO 203 ITR 456, TO DECIDE THE REOPENING AGAINST THE ASSESSEE . W E FIND THAT IN THE CASE BEFORE THE HONBLE SUPREME COURT , THE REOPENING WAS ON THE BASIS OF CONFESSIONAL STATEMENT OF THE MANAGING DIRECTOR OF THE LENDING COMPANY WHICH CON STITUTE FACTUAL INFORMATION FOR THE PURPOSE OF REOPENING OF ASSESSMENT. UNDER THESE CIRCUMSTANCES , THE HONBLE SUPREME COURT WAS UPHELD THE REOPENING OF THE ASSESSMENT. WE FURTHER OBSERVED THAT THE CASE LAW RELIE D UPON BY THE LD. CIT(A) HAS NO APPLICATION TO THE FACTS OF THE PRESENT CASE , BECAUSE THERE IS ADMITTEDLY NO FRESH INFORMATION IN THE HAND S OF THE A.O, INSTEAD HE HAS MERELY RECLASSIFIED THE FIGURES TO ARRIVE AT INCOME CHARGEABLE TO TAX HAS BEEN ESCAPED ASSESSMENT, WOULD IT HAS IN FACT BEING ALREADY ASSE SSED . ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 30 THEREFORE , WE ARE OF THE VI EW THAT THE CASE RELIED UPON BY THE LD. CIT(A) I S NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. 22 . IN THIS VIEW OF THE MATTER AND ALSO FOLLOWING THE DECISION OF ITAT , PANAJI , IN THE CASE OF M.D WADDAR & CO. VS. AC IT (SUPRA), WE ARE OF THE CONSIDER ED VIEW THAT THERE IS NO SOUND REASON FOR THE A.O TO REOPEN THE ASSESSMENT. WE FURTHER OBSERVED THAT THE A.O HAS REOPENED THE ASSESSMENT ON MERE REAPPRAISAL OF MATERIALS WHICH IS ALREADY ON RECORD AND CONSIDERED BY THE A.O. THERE IS NO NEW OR TANGIBLE MATERIAL IN THE POSSESSION OF THE A.O TO JUSTIFY THE REOPENING. H ENCE WE ARE OF THE VIEW THAT REOPE NING OF ASSESSMENT FOR THE ASSESSMENT YEAR 2005 - 06 IS BAD IN LAW AND HENCE , THE CONSEQUENTIAL ASSESSMENT PROCEEDINGS ARE HEAR BY QUASHED. 23 . SINCE , WE HAVE ALREADY QUASHED THE REASSESSMENT PROCEEDINGS ON THE GROUND THAT THERE IS NO SOUND BASIS FOR REOPEN ING OF ASSESSMENT, THE ISSUES AGITATED ON MERITS ARE NOT ADJUDICATED AT THIS POINT OF TIME, AS THEY ARE BECAME MERELY ACADEMIC IN NATURE. ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 31 24 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 5101/MUM/2011 IS ALLOWED AND THE APPEAL FILED BY THE REVENU E IN ITA NO. 4782/MUM/2011 IS DISMISSED. ITA NO.5103/MUM/2011 25 . THE FACT AND ISSUE S IN ITA NO. 5103 ARE IDENTICAL TO THE FACTS OF ITA NO. 5101/MUM/2011. IN THE ITA NO. 5101/MUM/2011 , WE QUASHED THE REASSESSMENT PROCEEDINGS AS INVALID, FOR THE SIMILAR RE ASONS RECORDED IN THE PRECEDING PARAGRAPH IN ITA NO. 5101/MUM/2011 WE QUASHED THE REASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2006 - 07. 26 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 5103/MUM/2011 IS ALLOWED. ITA NO. 5102/MUM/2011 AND ITA NO. 5104/MUM/2011 27 . THESE TWO APPEAL S FILED BY TH E ASSESSEE ARE DIRECTED AGAINST SEPARATE, BUT IDENTICAL ORDERS OF THE CIT(A) - 6, MUMBAI FOR THE ASSESSMENT YEAR 2005 - 06 AND 2006 - 07. 28. THE ASSESSEE HAS RAISED TWO GROUNDS FOR THE ASSESSMENT ORDER 2005 - 06 , CHALL ENGING DISALLOWANCE OF EXPENSES OF ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 3 2 RS.25,48,000/ - ON THE GROUND THAT THE SAID E XPENDITURE WAS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE AND ALSO ADOPTION OF SALE CONSIDERATION OF DEPRECIABLE ASSET AT RS.10,95,00,000/ - AS AGAINST RS.10, 88,16,589/ - FOR WORKING OF CAPITAL GAINS. SIMILAR LY, FOR THE ASSESSMENT YEAR 2006 - 07 , THE ASSESSEE HAS CHALLENG ED DISALLOWANCE OF THE EXPENSES OF RS.1,02,48,000/ - ON THE GROUND T HAT SAID EXPENSES WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOS E AND ALSO SETTING OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION AMOUNTING TO RS.54,58,700/ - . THE LD. CIT(A), FOR THE ASSESSMENT YEAR 2005 - 06, FOR STATISTICAL PURPOSE, PARTLY ALLOWED BO TH GROUNDS RAISED BY THE ASSESSEE BY HOLDING THAT REG ARDING DISALLOWAN CE OF EXPENSES ON THE GROU ND THAT THE ASSESSEE HAD CEASED TO CARRY ON BUSINESS HAS BEEN DISCUSSED IN DETAIL HIS ORDER IN THE APPELLATE PROCEEDINGS AGAINST ORDER OF THE A.O U/S.143( 3) R.W.S 147 AND DISMISSED GROUND RAISED BY THE ASSESSEE AS INFRUCTUOUS. SIMILARLY , FOR THE ASSESSMENT YEAR 2006 - 07, THE CIT (A) DISMISSED GROUND NO. 1 RELAT ING TO DISALLOWANCE OF EXPENSES AS INFRUCTUOUS ON SIMILAR FINDING FOR ASSESSMENT YEAR 2005 - 06. IN SO FAR AS SECOND G ROUND RELATING ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 33 TO SETTING OFF OF BROUGHT FORWARD UNABSORB ED DEPRECIATION, THE CIT(A) DISMISSED THE GROUND RAI SED BY THE ASSESSEE , BY HOLDING THAT THE VE RY SAME ISSUE HAS BEEN DISCUSSED IN THE APPELLATE ORDER AGAINST ORDER OF THE A.O U/S. 143(3) R.W.S. 147 OF THE ACT, WITHOUT ANY FINDING ON MERITS OF THE ISSUE. 29 . HAVING HEARD BOTH THE SIDES AND CONSIDERED MATERIALS ON RECORD , WE FIND THAT THE CIT(A) DID NOT GO IN TO MERITS OF THE ISSUES, BECAUSE HE HAD DISCUSSED ALL THE ISSUES, IN HIS ORDER AGAINST ORDER OF THE A.O U/S. 143(3), R.W.S. 147 FOR THE ASSESSMENT YEAR 2005 - 06. SINCE, WE HAVE QUASHED REASSESSMENT ORDER PASSED BY THE A.O, THE ISSUES AGITATED BY THE ASSESSEE REQUIRED TO BE DISCUSSED ON MERITS. SINCE, THE CIT(A) DID NOT DISCUSSED ISSUES ON MERITS, T HESE TWO APPEALS NEEDS TO BE REHEARD BY THE LD.CIT(A). T HEREFORE , WE SET ASIDE THESE TWO APPEALS IN ITA NO. 5102 AND 5104 OF 2011 FOR THE ASSESSMENT YEAR 2005 - 06 AND 2006 - 07, TO THE FILE OF THE CIT(A) AND DIRECT THE CIT(A) TO DISPOSE OFF THE APPEAL S ON M ERITS. ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 34 29 . IN THE RESULTS THE APPEAL S FILED BY THE ASSESSEE IN ITA NO. 5102 AND 5104 OF 2011 ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUN CED IN THE OPEN COURT ON 14 .06 .2017 SD/ - SD/ - ( D.T. GARASIA ) (G. MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 14 .06 .2017 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE. BY ORDER NISHANT VERMA SR. PRIVATE SECRETARY (DY./ASSTT.REGISTRAR) ITAT, MUMBAI ROHIT PULP & PAPER MILLS LTD, ITA NO.5101 TO 5104/MUM./2011 ITA NO.4782/MUM./2011 35