M.R.M.Plantations P. Ltd., CHENNAI V. ACIT, Karaikudi

ITA 519/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5865 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 24-07-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 02-03-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B SAGADEVAN JCIT D R
• Assessee Lawyers: R KUMAR
• Keywords: Reopening of assessment; Business income; Depreciation; Earning of tax free income; Period of limitation; Tangible material; Difference of opinion; Time period of passing order; Reason to believe; Change of opinion
• Section: 143(3); 147; 148; 11; 139

Judgement Text

, C/ SMC , IN THE INCOME TAX APPELLATE TRIBUNAL C/SMC BENCH, CHENNAI . , BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER I.T.A.NO.519 /MDS./2017 ( ASSESSMENT YEAR : 2004-05 ) M/S. M.R.M. PLANTATIONS P. LTD., NO.40,M.R.M.ARCADE, AMMAN SANNATHI STREET, KARAIKUDI. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-I, KARAIKUDI.630 002 PAN AACCM 9058 R ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : MR.R.KUMAR, ADVOCATE / RESPONDENT BY : MR.B.SAGADEVAN, JCIT, D.R ! ' / DATE OF HEARING : 09.11.2017 #$%& ! ' /DATE OF PRONOUNCEMENT : 22.11.2017 / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-3, MADURA I DATED 27.12.2016 PERTAINING TO ASSESSMENT YEAR 2004-05. ITA NO. /MDS/2017 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS F OR ADJUDICATION. 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS) IS BAD IN LAW AND IS OPPOSED TO THE RECORD OF THE CASE. 2. THE COMMISSIONER (APPEALS) ERRED IN ENHANCING TH E ASSESSMENT ADDING A TOTAL SUM OF ` 19,57,872/- REPRESENTING INTEREST INCOME AS INCOME FROM OTHER SOURCES. 3. THE APPELLANT SUBMITS THAT THE ASSESSMENT MADE B Y ASSESSMENT ORDER DT.29.12.2006 PASSED U/S 143(3) OF THE ACT, IMPUGNE D BEFORE THE COMMISSIONER (APPEALS), HAD BEEN REOPENED BY ISSUE OF NOTICE U/S 148 (DT24.03.2011) AND A REASSESSMENT HAD BEEN COMPLETE D BY ORDER U/S 143(3) R.W.SEC.147 OF THE ACT DATED 29.12.2011 BRIN GING TO TAX, INTER ALIA, THE INTEREST INCOME OF ` 19,57,872; ON AN APPEAL BY THE APPELLANT THE SAID REASSESSMENT ORDER WAS HELD BY THIS HONBLE TRIBUNA L TO BE BAD AND UNSUSTAINABLEVIDE ORDER DT.5.07.2013 OF THE HONBL E ITAT D BENCH, CHENNAI IN L.T.A.NO.2326/MDS/2012. 4. THE APPELLANT FURTHER SUBMITS THAT IN PARA 14 OF THE HONBLE ITATS ORDER CITED ABOVE THE ISSUE REGARDING THE INCLUSION OF IN TEREST INCOME OF ` 19,57,872/- IN THE REASSESSMENT ORDER DT.29.12.2011 HAD BEEN CONSIDERED WITH THE FINDING THAT ON THIS COUNT REOP ENING OF THE ASSESSMENT WAS NOT JUSTIFIED. 5. THE APPELLANT RESPECTFULLY SUBMITS THAT IN ENHAN CING THE ASSESSMENT BY THE APPELLATE ORDER NOW IN APPEAL THE COMMISSIONER (APPEALS) HAS OVERLOOKED THE FINDING OF THE HONBLE TRIBUNAL REFE RRED TO ABOVE FOR THE SAME ASSESSMENT YEAR AND RE-ADJUDICATED THE ISSUE I N A MANNER CLEARLY IMPERMISSIBLE UNDER THE SCHEME OF THE ACT. 6. WITHOUT PREJUDICE TO THE ABOVE CONTENTION, ON ME RITS, THE APPELLANT SUBMITS THAT THE APPELLANT BEING A CORPORATE ENTITY HAD TO NECESSARILY INCUR VARIOUS ADMINISTRATIVE EXPENSES AND SUCH EXPENSES ( AMOUNTING TO ITA NO. /MDS/2017 3 ` 15,34,428/-) ARE PROPERLY ALLOWABLE, WHETHER THE IN COME IS ASSESSABLE UNDER THE HEAD BUSINESS OR OTHER SOURCES. 7. THE APPELLANT SUBMITS THAT ITS CLAIM FOR DEDUCTI ON OF THE EXPENSES FINDS SUPPORT IN THE JUDGMENT OF THE HONBLE CALCUTTA HIG H COURT IN CIT VS GANGA PROPERTIES LTD., (1993) 199 ITR 94 (CAL) AND ORDER OF THE HONBLE ITAT , MUMBAL BENCH C IN PREIMUS INVESTMENTS & FI NANCE LTD., VS DEPUTY CIT., (2015) 171 TTJ (MUMBAI) 794 AND THE OR DER OF THE HONBLE ITAT A BENCH IN KNP SECURITIES P. LTD., VS ACIT ( 2010)1 ITR (TRIB) 130 (MUMBAI). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASS ESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MONEY LENDING AND DERIVI NG INCOME FROM PLANTATION IN MALAYSIA. FOR THE RELEVANT ASST.YEAR, THE ASSESSEE FILED ITS RETURN OF INCOME ON 20.10.2004 ADMITTING TOTAL INCOME OF ` 1,03,890/- WHICH WAS ACCEPTED U/S.143(1) OF THE ACT . SUBSEQUENTLY, THE ASSESSING OFFICER SELECTED THE CASE FOR SCRUTIN Y AND COMPLETED THE ASSESSMENT U/S.143(3) DETERMINING THE TOTAL INC OME AT ` 20,73,8851-. WHILE DOING SO, LD. ASSESSING OFFICER DISALLOWED ` 4,50,000/-, WHICH WAS CLAIMED AS SALARY AND COMMIS SION TO THE MANAGING DIRECTOR. AGGRIEVED BY THE ORDER OF LD. A SSESSING OFFICER, THE ASSESSEE CARRIED THE APPEAL BEFORE THE LD.CIT(A ). ON APPEAL, ITA NO. /MDS/2017 4 LD.CIT(A) OBSERVED THAT THE ASSESSEE WAS EARNING IN TEREST INCOME OF ` 4,37,912/- ON WHICH THE ASSESSEE HAD CLAIMED EXPEN DITURE TOWARDS MANAGING DIRECTOR SALARY, COMMISSION, MOTOR CAR EXP ENSES, LEGAL FEES, SALARY AND BONUS AND EXCHANGE FLUCTUATION BET WEEN INDIA AND MALAYSIA AT ` 7,35,145/-. ACCORDING TO LD.CIT(A), THE ASSESSEE COULD NOT CLAIM LOSS UNDER THE HEAD BUSINESS AS THE ALLEG ED BUSINESS INCOME OF THE ASSESSEE WAS ONLY INTEREST INCOME OF ` 4,37,912/- FROM OTHERS. IN THE ASSESSMENT YEARS 2005-06 AND 2006-07 THE CHENNAITRIBUNAL HELD IN THE ASSESSEES OWN CASE THA T THE LOSS CLAIMED UNDER THE HEAD BUSINESS COULD NOT BE ALLOWE D. ACCORDINGLY, IT WAS NOTICED THAT THE ASSESSMENT WAS TO BE ENHANCED AS PER THIS OFFICE ENHANCEMENT NOTICE DATED 27.10.2016. THE ASS ESSEE FILED OBJECTIONS TO THE SAME BY LETTER DATED 11.11.2016. IN THE SAID LETTER, THE ASSESSEE SUBMITTED THAT THE INTEREST INCOME REC EIVED FROM OTHERS IS ONLY BUSINESS INCOME ON WHICH THE ASSESSEE IS EN TITLED TO CLAIM VARIOUS DEDUCTIONS LIKE SALARIES, MOTOR CAR EXPENSE S AND EXCHANGE FLUCTUATION. THE ASSESSEE ALSO RELIED ON THE DECISI ON OF THE HONBLE MUMBAI TRIBUNAL IN THE CASE OF PREIMUS INVESTMENT A ND FINANCE LTD. (171 TTJ 794). FURTHER, THE LD.CIT(A) WAS OF THE O PINION THAT THE ITA NO. /MDS/2017 5 ENHANCEMENT NOTICE DATED 27.10.2016 WAS ISSUED BASE D ON THE DECISION OF THE HONBLE TRIBUNAL IN THE ASSESSEES OWN CASE FOR ASST.YEARS 2005-06 AND 2006-07. ACCORDINGLY, THE DE CISION OF THE HONBLE MUMBAI TRIBUNAL RELIED ON BY THE ASSESSEE C ANNOT BE APPLIED TO THE FACTS OF THIS CASE. ACCORDINGLY, THE ASSESSMENT IS ENHANCED AS PROPOSED IN THE ENHANCEMENT NOTICE. THE TOTAL INCOME IS DETERMINED AS UNDER: INCOME FROM HOUSE PROPERTY .... .... 5,23,165/- INCOME FROM OTHER SOURCES (A) BANK INTEREST ... RS.15,19,960/- (B) LNTEREST FROM OTHERS ... RS. 4,37,912/- 19,57,872/- TOTAL INCOME RS.24,81,037/- ACCORDINGLY, LD.CIT(A) DIRECTED THE LD. ASSESSING O FFICER TO ENHANCE THE ASSESSMENT . AGAINST THE ORDER OF LD.CIT(A), NO W THE ASSESSEE IS IN APPEAL BEFORE US. 4. BEFORE ME, THE LD.A.R BROUGHT ON RECORD THE FOL LOWING DOCUMENTS FOR MY CONSIDERATION. ITA NO. /MDS/2017 6 SL.NO. DATE PARTICULARS PAGE NO. IN PAPER BOOK 1 29.12.2011 RE-ASSESSMENT ORDER OF THE AO U/S.143(3) R.W.S.147 OF THE ACT 1 2 05.07.2013 ORDER OF TRIBUNAL IN ITA NO.2326/MDS./2012 AGAINST THE ORDER OF RE-ASSESSMENT (PARA NO.14) 8 3 27.10.2016 NOTICE OF ENHANCEMENT ISUSED BY THE CIT(A)-3,MADURAI 24 4 28.01.2013 ORDER OF TRIBUNAL IN ITA NO.6552/MDS./2011 IN M/S.VATSALYA ENTERPRISES PVT LTD. VS.ACIT MUMBAI 25 5 09.05.1989 JUDGMENET OF CALCUTTA HIGH COURT IN CIT VS. GANGA PROPERTIES LTD.(1993) 199 ITR 94(CAL.) 36 6 29.05.2009 KNP SECURITIES P. LTD. VS. ACIT (2010) 1 ITR(TRIB) 130 (MUM.) 40 7 13.05.2015 PREIMUS INVESTMENT & FINANCE LTD. VS. DCIT (2015) 171 TTJ (MUM.) 794. 45 IT WAS SUBMITTED BY THE LD.A.R THAT ON EARLIER OCC ASION, THE LD. ASSESSING OFFICER REOPENED THE ASSESSMENT FOR ASSE SSMENT YEAR UNDER CONSIDERATION AND DEALT THE SAME ISSUE WHILE PASSING THE ASSESSMENT ORDER U/S.143(3) R.W.S.147 OF THE ACT ON 29.12.2011. LATER, THE ABOVE ORDER WAS SUBJECT MATTER OF APPEAL BEFORE THIS TRIBUNAL IN ITA NO.2326/MDS./2012 AND THE TRIBUNAL VIDE ORDER DATED 05.07.2016 HELD AS UNDER:- ITA NO. /MDS/2017 7 10. WE HAVE HEARD BOTH SIDES, PERUSED THE RECORDS A ND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW . THE ASSESSEE COMPANY FILED ITS RETURN OF INCOME ON 28.05.2004 BY ADMITTING TOTAL INCOME OF . 1 .,03,890/-. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT UNDER SE CTION 1 ?() OF THE ACT ON 29.12.2006 AND ASSESSED TOTAL INCOME OF THE ASSESSEE AT .20,73,885I-. IN THE ASSESSMENT ORDER, THE ASSESSIN G OFFICER HAS DISALLOWED MDS SALARY AND COMMISSION ON THE GROUND THAT THE PAYMENT OF COMMISSION TO THE MD IS BASED ON BUSINESS INCOME AT MALAYSIA, WHICH IS AN EXEMPT INCOME AND NOT ALLOWABLE EXPENDITURE. IT MEANS, THE ASSESSING OFFICER WAS AWARE THAT THERE IS AN INCOME FROM MALA YSIA. HAVING NOTICED AND APPLIED HIS MIND, THE ASSESSING OFFICER DISALLO WED THE PAYMENT MADE TO THE MD OF THE MALAYSIAN BRANCH. 11. THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER, AN AMOUNT OF .15,19,959/- SHOWN BY THE ASSESSEE AS INCOME FROM O THER SOURCE, THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. IT IMPLIES THAT THE ASSESSING OFFICER IS AWARE OF THE INTEREST INCOME A ND INTEREST EXPENDITURE ALSO. 12. SUBSEQUENTLY, ON 24.03.2011 THE ASSESSING OFFIC ER ISSUED A NOTICE UNDER SECTION 148 OF THE ACT ON THE GROUND THAT THE RE IS AN ESCAPEMENT OF INCOME AND THE ASSESSMENT WAS REOPENED ON THREE COU NTS I.E. (A) THE ASSESSEE IS IN RECEIPT OF ONLY INTEREST INCOME, AGA INST WHICH THE EXPENDITURE OF WHICH .15,34,428/- IS NOT ALLOWABLE EXPENSES, (B) THE ASSESSEE HAS CLAIMED LOSS OF SALE OF CAR AMOUNTING TO .19,749/- AND INCOME TAX PAID FOR EARLIER YEARS AMOUNTING TO .8,5 O,444/- WHICH WAS NOT ALLOWABLE EXPENSES AND (C) INCOME FROM MALAYSIAN BR ANCH IS NOT INCLUDED ITA NO. /MDS/2017 8 IN THE TOTAL INCOME FOR THE PURPOSE OF TAXATION IN INDIA ON THE BASIS OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F CIT V. PVRM KULANDAYAN CHETTIAR [267 ITR 657], THIS CASE LAW IS NOT APPLICABLE IN THE INSTANT CASE. 13. THE ASSESSING OFFICER HAS REOPENED THE ASSESSME NT FOR THE ABOVE REASONS, WHETHER THE ASSESSING OFFICER HAS APPLIED HIS MIND WITH REGARD TO THE REASONS GIVEN ABOVE HAS TO BE EXAMINED SEPAR ATELY. 14. SO FAR AS INTEREST INCOME AGAINST WHICH EXPENDI TURE IS CLAIMED, THE ASSESSEE HAS DECLARED INTEREST INCOME OF .19,57,872 I- INCLUDING BANK INTEREST OF .15,19,959/- AGAINST WHICH THE ASSESSEE HAS CLAIMED EXPENSES OF V.15,34,428/-. THE ASSESSING OFFICER, IN THE ORI GINA[ ASSESSMENT ORDER, WHILE INCLUDING THE TOTAL INCOME, HE HAD SHOWN INTE REST INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER, AFTER CONSIDERING T HE SAME HAS ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. THEREFORE , ONCE THE ASSESSING OFFICER HAS CONSIDERED THE INTEREST INCOME UNDER SE CTION 143(3) AND THE SAME WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE, IT HAS TO BE UNDERSTOOD THAT THE ASSESSING OFFICER HAS FORMED A OPINION WITH REGARD TO THE INTEREST INCOME. THEREFORE, ISSUING NOTICE AGAI N ON THE SAME SUBJECT IS AMOUNTING TO CHANGE OF OPINION, WHICH IS NOT PERMIS SIBLE UNDER LAW. THEREFORE, ON THIS COUNT, THE REOPENING OF THE ASSE SSMENT IS NOT JUSTIFIED. 15. SO FAR AS EXPENDITURE CLAIM FOR SALE OF CAR IS CONCERNED, NO ADDITION WAS MADE BY THE ASSESSING OFFICER IN THE ASSESSMENT PROCEEDINGS. THIS CANNOT BE A GROUND FOR REOPENING THE ASSESSMENT. 16. SO FAR AS INCOME FROM MALAYSIAN BRANCH IS CONCE RNED, THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HAS CONSIDERED THE MDS SALARY AND COMMISSION OF MALAYSIAN BRANCH AND HAS EXAMINED THE ISSUE AND CAME TO THE CONCLUSION THAT THE INCOME OF MALAYSIAN BRAN CH IS AN EXEMPT INCOME AND THEREFORE, COMMISSION PAID TO THE MD IS NOT ALLOWABLE AND ACCORDINGLY DISALLOWED THE SAME. IT MEANS, THE ASSE SSING OFFICER HAS ITA NO. /MDS/2017 9 EXAMINED THE ISSUE AND APPLIED HIS MIND. THEREFORE, REOPENING OF ASSESSMENT AGAIN ON THE SAME ISSUE IS NOT PERMISSIB LE UNDER LAW. IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA), THE HONB LE SUPREME COURT HAS OBSERVED THAT AFTER 1ST APRIL, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN THE ASSESSMENT UNDER SECTION 147 PROVIDED TH E ASSESSING OFFICER HAS REASONS TO BELIEVE THAT INCOME HAS ESCAPED ASSE SSMENT AND THERE IS NO TANGIBLE MATERIAL TO CORN A CONCLUSION THAT THER E IS AN ESCAPEMENT OF INCOME. MERE CHANGE OF OPINION CANNOT PER SE TO BE REASON TO REOPENING. 17. IN THE PRESENT CASE, THE ASSESSING OFFICER, HAV ING CONSIDERED ENTIRE MATERIAL AND AFTER APPLYING THE MIND, COMPLETED ASS ESSMENT UNDER SECTION 143(3) OF THE ACT. THEREAFTER, A NOTICE UNDER SECTI ON 148 WAS ISSUED ON 24.03.2011 I.E. AFTER FOUR YEARS AND REOPENED THE A SSESSMENT. IN OUR OPINION, THE ASSESSING OFFICER HAS REOPENED THE ASS ESSMENT IS CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE UNDER LAW. THEREF ORE, THE REOPENING IS INVALID. 18. APART FROM THE ABOVE, IN THE PRESENT CASE, THE ASSESSING OFFICER HAS ISSUED A NOTICE UNDER SECTION 148 AFTER FOUR YEARS; THEREFORE, PROVISO TO SECTION 147 IS APPLICABLE TO ASSESSEES CASE. IN TH IS CONTEXT, CERTAIN JUDICIAL PRECEDENCE NEEDS TO BE CONSIDERED TO DECID E THE ISSUE. IN THE CASE OF FENNER (INDIA) LTD. V. DCIT 241 ITR 672, TH E HONBLE JURISDICTIONAL HIGH COURT HAS OBSERVED THAT IN ORDER TO REOPEN AN ASSESSMENT AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR, THE ASSESSING OFFICER MUST SUMMARILY RECORD HIS REASONA BLE 1BELIEF THAT INCOME HAS ESCAPED ASSESSMENT, BUT ALSO DEFAULT ON FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL THE MATERI ALS FACTS. NOTICE ISSUED UNDER SECTION 148 AFTER EXPIRY OF FOUR YEARS CANNOT BE SUSTAINED AS ESCAPEMENT OF INCOME, IF ANY, NOT ON ACCOUNT OF ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE MATERIAL FACTS FULLY AND T RULY. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. ELG I FINANCE LTD. [286 ITR ITA NO. /MDS/2017 10 674] HAS OBSERVED THAT THE ASSESSEE COMPANY HAVIN G TRULY AND FULLY DISCLOSED ALL MATERIAL FACTS NECESSARY FOR WORKING OUT THE QUANTUM OF DEPRECIATION, NOTICE UNDER SECTION 148 ISSUED AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR TO WITHDRA W THE EXCESS DEPRECIATION ALLOWED TO THE ASSESSEE IS BARRED BY L IMITATION AND ILLEGAL. THE HONBLE JURISDICTIONAL HIGH COURT HAS FURTHER O BSERVED THAT THE LAW RELATING TO REASSESSMENT HAS UNDERGONE TO A CHANGE FROM 01.04.1989. THE CHANGE WAS BROUGHT BY DIRECT TAX LAW (AMENDMENT ) ACT, 1987. TWO SETS OF PROVISIONS ARE AVAILABLE UNDER SECTION 147 IN CLAUSE (A) AND CLAUSE (B). THIS DISTINCTION HAS NOW BEEN TAKEN AWAY BY TH E AMENDMENT ACT. PREVIOUSLY, THE LINE OF DISTINCTION WAS A LIMITATIO N PERIOD OF FOUR YEARS AND THE LIMITATION PERIOD EXCEEDING FOUR YEARS. THE ASS ESSING OFFICER WOULD REOPEN A BACK ASSESSMENT WITHIN A PERIOD OF FOUR YE ARS AS LONG AS HE HAD REASON TO BELIEVE IN CONSEQUENCE OF ANY INFORMATION , THAT INCOME HAS BEEN UNDER ASSESSED OR INCOME HAS ESCAPED ASSESSMEN T. IN THE CASE OF LIMITATION, PROVIDING FOR A PERIOD EXCEEDING FOUR Y EARS, THERE SHOULD HAVE BEEN A FAILURE ON THE PART OF THE ASSESSEE TO DISCL OSE FULLY AND TRULY ALL MATERIAL FACTS LEADING TO THE ESCAPEMENT OF INCOME. BUT, AS A RESULT OF THE AMENDMENT BROUGHT WITH EFFECT FROM 01.04.1989, THE ABOVE DISTINCTION HAD BEEN OBLITERATED AND THE ASSESSING OFFICER COULD RE ASSESS THE INCOME AS LONG AS HE HAD REASON TO BELIEVE THAT INCOME CHARGE ABLE HAD ESCAPED ASSESSMENT. THE NEW LAW HAS INSERTED A PROVISO TO S ECTION 147 IN THE FOLLOWING WORDS: PROVIDING THAT WHERE AN ASSESSMENT UNDER SUB-SECTI ON (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE R ELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THI S SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVA NT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAD ESCAP ED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF TH E 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) O F SECTION 142 OR ITA NO. /MDS/2017 11 SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATE RIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YE AR. 19. IN ADDITION TO THE TIME LIMITS PROVIDED FOR UND ER SECTION 149, THE LAW HAS PROVIDED ANOTHER LIMITATION OF FOUR YEARS UNDER THE PROVISO TO SECTION 147. AS FAR AS THE ABOVE PROVISO TO SECTION 147 IS CONCERNED, THE LAW PRESCRIBES A PERIOD OF FOUR YEARS TO INITIATE REASS ESSMENT PROCEEDINGS, UNLESS THE INCOME ALLEGED TO HAVE ESCAPED ASSESSMEN T WAS MADE OUT AS A RESULT OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE HO NBLE JURISDICTIONAL HIGH COURT HAS FURTHER OBSERVED THAT IN CASES WHERE THE INITIATION OF THE PROCEEDINGS IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, THE ASSESSING OFFICER WAS NECESSAR ILY RECORD NOT ONLY HIS REASONABLE BELIEF THAT INCOME HAS ESCAPED ASSES SMENT BUT ALSO THE DEFAULT OR FAILURE ON THE PART OF THE ASSESSEE. FAI LURE TO DO SO WOULD VITIATE THE NOTICE AND THE ENTIRE PROCEEDINGS. MERE ESCAPE OF INCOME IS INSUFFICIENT TO JUSTIFY THE INITIATION OF ACTION AF TER THE EXPIRY OF FOUR YEARS FROM THE, END OF THE ASSESSMENT YEAR. SUCH ESCAPEME NT MUST BE BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE E ITHER TO FILE A RETURN REFERRED TO IN THE PROVISO OR TO TRULY AND FULLY D ISCLOSE THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. 20. IN THE PRESENT CASE, THE NOTICE UNDER SECTION 1 48 WAS ISSUED AFTER FOUR YEARS. THERE IS NO SPECIFIC FINDING BY THE ASSESSIN G OFFICER IN THE REASONS RECORDED AS EXTRACTED FROM THE ASSESSMENT ORDER THA T THE ASSESSEE FAILED TO DISCLOSE FULLY AND TRULY ALL THE PARTICULARS REQ UIRED TO COMPLETE THE ASSESSMENT. THEREFORE, WE FIND THAT THE NOTICE ISSU ED UNDER SECTION 148 IS NOT VALID. ITA NO. /MDS/2017 12 21. IN SIMILAR CIRCUMSTANCES, THE HONBLE BOMBAY HI GH COURT IN THE CASE OF HINDUSTAN LEVER LTD. V. ACIT (268 ITR 332) HAS O BSERVED THAT REASONS RECORDED BY THE ASSESSING OFFICER NOWHERE STATING T HAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND T RULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT AND, REOPENING OF ASSESSME NT MADE UNDER SECTION 143(3), AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT WAS NOT VALID. 22. IN SADBHAV ENGINEERING LTD. V. DCIT (333 ITR 48 3), THE HONBLE GUJARAT HIGH COURT HAS OBSERVED THAT IN THE ABSENCE OF ANY AVERMENT THAT THE ASSESSMENT IS SOUGHT TO BE REOPENED BY REASON O F FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MAT ERIAL FACTS NECESSARY FOR ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR, THE VE RY INITIATION OF PROCEEDINGS UNDER SECTION 147 BY ISSUANCE OF NOTICE UNDER SECTION 148 AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR IS BAD AND CANNOT B SUSTAINED. 23. IN VIEW OF THE ABOVE AND TAKING INTO CONSIDERAT ION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ISSUANCE OF NOTICE U NDER SECTION 148 AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSES SMENT YEAR IS BAD AND CANNOT BE SUSTAINED AND THE GROUND RAISED BY THE AS SESSEE IS ALLOWED. 24. SO FAR AS REVENUES APPEAL IS CONCERNED, ONCE T HE REOPENING OF ASSESSMENT IS DECIDED AS BAD AND NOT VALID, IT IS N OT NECESSARY TO DECIDE THE ISSUES ON MERITS. THEREFORE, THE APPEAL FILED B Y THE REVENUE IS DISMISSED. 4.1 FURTHER, LD.A.R SUBMITTED THAT LD.CIT(A) CO NSIDERED THE SAME ISSUE, WHICH WAS THE SUBJECT MATTER OF REOPENING OF ASSESSMENT FOR ITA NO. /MDS/2017 13 ENHANCING THE INCOME OF ASSESSEE, WHICH IS BAD IN L AW AND TO BE QUASHED. 5. ON THE OTHER HAND, LD.D.R RELIED ON THE ORDER O F THE CIT(APPEALS). 6. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN THIS CASE, THE GROUNDS RAISED BY THE AS SESSEE NAMELY GROUND NOS.3,4 & 5 WERE FIRST TIME RAISED BEFORE TH IS TRIBUNAL AND THE LD.CIT(A) HAS NO OCCASION TO EXAMINE THE SAME. THE SE GROUNDS ARE GOING INTO THE ROOT OF THE MATTER OF THE ISSUE RAIS ED BY THE ASSESSEE WITH REGARD TO ENHANCEMENT MADE BY LD.CIT(A) TOWARD S EXPENDITURE INCURRED TO EARN INTEREST INCOME. IN OTHER WORDS, IT IS THE PLEA OF ASSESSEE THAT THE EARLIER ASSESSMENT HAD BEEN HAD B EEN EFFACED BY THE SUBSEQUENT RE-ASSESSMENT ORDER OF THE AO AND LD .CIT(A) WANTED TO MAKE ADDITION INDIRECTLY, WHICH IS NOT POSSIBLE DIRECTLY. FOR THIS PURPOSE, HE RELIED ON THE JUDGMENT OF SUPREME COURT IN THE CASE OF I.T.O VS. K L SRIHARI (HUF) AND OTHERS REPORTED IN [2001] 250 ITR 193 (SC). AT THIS STAGE, I DECLINE TO COMMENT ON T HE MERIT OF THE GROUNDS RAISED BY THE ASSESSEE, AS LD.CIT(A) HAS TO FIRST ITA NO. /MDS/2017 14 CONSIDER THE SAME AT HIS END. ACCORDINGLY, I REMIT THE ENTIRE ISSUE TO THE FILE OF LD.CIT(A) TO ADJUDICATE THE LEGAL ISSUE FIRST, WHICH IS RAISED BEFORE THE TRIBUNAL AND THEREAFTER ADJUDICATE OTHER GROUNDS, IF NECESSARY. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 22 ND NOVEMBER, 2017. SD/- ( ) ( CHANDRA POOJARI ) /ACCOUNTANT MEMBER CHENNAI, DATED THE 22 ND NOVEMBER, 2017 . K S SUNDARAM. ' ( )!*+ ,+%! / COPY TO: 1 . / APPELLANT 3. ' ' -! () / CIT(A) 5. +0 1 )!)23 / DR 2. / RESPONDENT 4. ' ' -! / CIT 6. 1 45 6 / GF