ADIT(E)I(2), MUMBAI V. TATA INSTITUTE OF SOCIAL SCIENCE, MUMBAI

ITA 5685/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8827 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 30-08-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 09-08-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYA KUMAR
• Assessee Lawyers: S N INAMADAR
• Keywords: Depreciation; Transfer pricing; Search and seizure; International transaction; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 80IB; 147; 148; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH : MUMBAI BEFORE SHRI R.S. SYAL, ACCOUTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 5685/MUM/2011 (ASSESSMENT YEAR: 2003-04) ADIT(E)(2), R. NO.504, PIRAMAL CHAMBERS, 5TH FLOOR, PAREL, MUMBAI -400 012 VS TATA INSTITUTE OF SOCIAL SCIENCE, SION-TROMBAY ROAD, DEONAR, MUMBAI -400 088 PAN: AAATT 4224 B APPELLANT RESPONDENT APPELLANT BY : SHRI JAYAKUMAR RESPONDENT BY : S/SHRI S.N. INAMADAR & ANIL SATHE DATE OF HEARING : 30.08.2012 DATE OF PRONOUNCEMENT : 26.09.2012 O R D E R PER VIVEK VARMA, JM: THE APPEAL FILED BY THE DEPARTMENT PERTAINS TO ASSE SSMENT YEAR 2003- 04. THE APPEAL HAS BEEN FILED AGAINST THE ORDER OF CIT (A)-1, MUMBAI DATED 05.04.2011. THE FOLLOWING GROUNDS HAVE BEEN TAKEN B Y THE DEPARTMENT: 1. WHETHER ON THE FACTS OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN QUASHING THE ASSESSMENT ORDER U/S 143 R.W.S. 147 DA TED 22.12.2010 AND STATING THE FACT THAT NOTICE U/S 148 WAS BARRED BY LIMITATION OF TIME AND WRONG DUE TO ABSENCE OF REASON TO BELIEVE. 2. WHETHER ON THE FACTS OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN UPHOLDING THE CONTENTIONS OF THE ASSESSEE THAT THE AO WAS NOT CORRECT IN REOPENING THE ASSESSMENT OF THE ASSESSEE AS THE CASE IS NOT BARRED BY THE LIMITATION AS SET OUT IN THE PROVISO, WHICH IS 6 YEARS WITH PRIOR APPROVAL OF THE LD. DIT(E). 3. WHETHER ON THE FACTS OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN ALLOWING THE ASSESSEES CLAIM OF EXEMPTION U/S 10(2 3C)(IIIAB) OF THE ACT WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE IS NOT WHOLLY OR SUBSTANTIALLY FINANCED BY THE GOVT. IN VIEW OF EXPL ANATION TO SUB SECTION (1) OF SECTION 14 OF THE COMPTROLLER AND AU DITOR GENERALS (DUTIES, POWERS AND CONDITIONS OF SERVICE) ACT, 197 1 AS THE TOTAL GOVT. TATA INSTITUTE OF SOCIAL SCIENCE ITA NO.5685/MUM/2011 2 GRANT DURING THE YEAR IS LESS THAN 75% OF THE TOTAL EXPENDITURE OF THE ASSESSEE. 4. THE APPELLANT PRAYS THAT THE ORDER OF THE LD CIT (APPEALS)-I, MUMBAI BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. 2. GROUND NO. 1 IS AGAINST THE REOPENING OF THE ASS ESSMENT PROCEEDINGS. THE FACTS, AS REPRODUCED BY THE CIT(A) IN HIS ORDER ARE, THAT FOR THE ASSESSMENT YEAR 2003-04 THE RETURN OF INCOME WAS FI LED ON 14.10.2004 IN FORM NO.3A ALONG WITH COMPUTATION OF INCOME, AUDITE D INCOME & EXPENDITURE AMOUNT AND BALANCE SHEET ALONG WITH ITS ENCLOSURES DISCLOSING TOTAL INCOME AS NIL. THE REGULAR ASSESSMENT U/S 143 (3) FOR THE RELEVANT ASSESSMENT YEAR 2003-04 WAS COMPLETED ON 28.02.2006 CONFIRMING THE RETURNED INCOME AS ASSESSED INCOME AT RS. NIL AND A LLOWING THE CLAIM OF EXEMPTION U/S 10(23C)(IIIAB) OF RS. 2,31,15,083/-. THE ASSESSMENT CLEARLY RECORDS THAT THE APPELLANT INSTITUTION IS WHOLLY AN D SUBSTANTIALLY FINANCED BY THE GOVERNMENT. HOWEVER SUBSEQUENTLY, THE CASE WAS REOPENED VIDE NOTICE U/S 148 DATED 19.03.2010 STATING THAT THE ASSESSING OFFICER HAD REASONS TO BELIEVE THAT THE INCOME HAD ESCAPED ASSESSMENT, ON THE BASIS OF OBSERVATIONS DISCUSSED IN THE ASSESSMENT ORDER U/S 143(3) FOR A.Y. 2007-08. 3. AT THE TIME OF REOPENING OF THE ASSESSMENT PROCE EDINGS, THE AO RECORDED THE FOLLOWING REASONS WHICH THE AO CONVEYE D TO THE ASSESSEE ALONG WITH THE REPLY TO THE OBJECTIONS: THE ASSESSEE IS CLAIMING EXEMPTION U/S 10(23C)(III AB). PERUSAL OF THE CASE RECORDS REVEAL THAT THE ASSESSEE IS AN EDUCATI ONAL INSTITUTION WHICH IS EXISTING SOLELY FOR THE PURPOSE OF EDUCATI ON AND NOT FOR THE PURPOSE OF EDUCATION AND NOT FOR THE PURPOSE OF PRO FIT. HOWEVER THE INSTITUTION IS NEITHER WHOLLY NOT SUBSTANTIALLY FIN ANCED BY THE GOVERNMENT. THEREFORE, IT DOES NOT QUALIFY FOR EXEM PTION U/S 10(23C)(IIIAB). AS DISCUSSED IN DETAIL IN ORDER U/S 143(3) FOR ASSESSMENT YEAR 2007-08, THE GOVERNMENT GRANT CONST ITUTES OF LESS THAN 75%. FURTHER, THE ASSESSEE HAS FAILED TO GET ITS BOOKS OF ACCOUNTS AUDITED U/S 12A. THEREFORE, IT IS NOT ENTITLED FOR BENEFIT U/S 11. THEREFORE, I HAVE REASONS TO BELIEVE THAT INCOME HA S ESCAPED ASSESSMENT, AS THE ASSESSEE HAS BEEN WRONGLY ALLOWE D BENEFITS OF SECTION 10(23C)(IIIB).. IN THE FINAL ANALYSIS, THE OBJECTIONS OF THE ASS ESSEE ARE DEVOID OF ANY MERIT. IN FACT THE REASONS FOR ISSUE OF NOTICE EXISTED AT THE TIME OF SUCH ISSUE AND THE REASONS ARE GENUINE. IN VIEW OF THE FACTS MENTIONED AND DISCUSSION MADE ABOVE, I HOLD THAT NOTICE U/S 148 IS VALIDLY ISSUED AND OBJECTIONS OF THE ASSESSEE HAVE NO TATA INSTITUTE OF SOCIAL SCIENCE ITA NO.5685/MUM/2011 3 MERITS FOR DROPPING PROCEEDINGS U/S 147 AND THE ASS ESSEES VARIOUS CONTENTIONS ARE HEREBY REJECTED. 4. IN THE INSTANT CASE, THE NOTICE WAS ISSUED ON 14 .03.2010, I.E. BEYOND FOUR YEARS BUT WITHIN SIX YEARS, BECAUSE REGULAR AS SESSMENT HAD BEEN COMPLETED U/S 143(3), THEREFORE, THE AO HAD THE EXT ENDED PERIOD UPTO SIX YEARS, SUBJECT TO THE CONDITIONS LAID DOWN IN THE F IRST PROVISO TO SECTION 147 HAD BEEN COMPLIED WITH. THE OTHER FACTOR INVOLVED I N THAT PERIOD OF SIX YEARS WERE AVAILABLE ONLY IF THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL FACTS. SINCE THE REASON TALKS OF THE ISSUE WHICH WAS EARLIER DEALT WITH BY THE AO IN REGULAR A SSESSMENT, THE TIME LIMIT GETS RESTRICTED TO FOUR YEARS AND IN THE INSTANT CA SE, THE NOTICE U/S 148 COULD ONLY HAVE BEEN ISSUED UPTO 31.03.2008, I.E. A S PER 149(1)(A) AND AS PER FIRST PROVISO TO SECTION 147. 5. THE CIT(A), ON CONSIDERATION OF DETAILED SUBMISS IONS MADE BEFORE HIM AND REPRODUCED IN THE IMPUGNED ORDER, OBSERVES: 4.4 ON COMPREHENSIVE READING OF THE PROVISIONS, I F IND THAT THE PARLIAMENT HAS IN ITS WISDOM USED THE WORD ACTION IN THE FIRST PROVISO TO SECTION 147 BUT HAS USED THE WORD NOTICE IN SE CTION 149(1). UNDER SECTION 147 THE ASSESSMENT CAN BE RE-OPENED SUBJECT TO SATISFACTION OF CIRCUMSTANCES SPECIFIED IN THE SAID SECTION. HOWEVE R ONCE THE ASSESSMENT IS REOPENED IT IS INCUMBENT UPON THE A.O . TO GIVE NOTICE U/S 148 TO THE ASSESSEE. THE ISSUANCE OF NOTICE UNDER S EC 148 IS SUBJECT TO LIMITATION SPECIFIED IN SECTION 149. HOWEVER WHERE AN ORDER OF ASSESSMENT HAS BEEN ALREADY MADE, THERE IS AN EXPRE SS BAR TO INITIATION OF ACTION AFTER EXPIRY OF FOUR YEARS FRO M THE END OF THE RELEVANT ASSESSMENT YEAR EXCEPT IN THE CIRCUMSTANCES STATED IN PROVISO TO SECTION 147. SECTION 149 PERTAINS TO TIMELIMIT FOR ISSUANCE OF NOTICE. WHERE ASSESSMENT HAD BEEN MADE UNDER SEC 143(3) AND THE INCOME CHARGEABLE TO TAX WHICH HAD ESCAPED ASSESSMENT WAS LIKELY TO BE RUPEES ONE LAKH OR MORE, THE NOTICE CAN BE ISSUED A FTER FOUR YEARS BUT WITHIN SIX YEARS. 4.5 THE PROVISO TO SECTION 147 CARVES OUT AN EXCEPT ION FROM THE MAIN PROVISIONS OF 147. ONCE THE EXCEPTION BY THE P ROVISO COMES INTO PLAY, THE CASE WOULD FALL OUTSIDE THE AMBIT OF SECT ION 147. EXAMINING THE PROVISO TO SECTION 147, ONE FINDS THAT AN ACTIO N CAN BE TAKEN UNDER SEC 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IF THE FOLLOWING CONDITIONS ARE SAT ISFIED: A) AN ASSESSMENT UNDER SEC 143(3) OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR AND B) INCOME CHARGEABLE 10 TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF FAILURE ON THE PART OF THE ASSESSEE: TATA INSTITUTE OF SOCIAL SCIENCE ITA NO.5685/MUM/2011 4 I. TO MAKE A RETURN UNDER SEC 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SEC 142(1) OR 148 OR II. TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE ASSESSMENT YEAR 4.6 I FIND THAT IN THE PRESENT CASE THE CONDITION ( A) IS ADMITTEDLY SATISFIED IN AS MUCH AS THE ORIGINAL ASSESSMENT WAS COMPLETED UNDER SEC 143(3). CONDITION (B) DEALS WITH A SPECIAL KIND OF ESCAPEMENT OF INCOME CHARGEABLE TO TAX, TO THE EXTENT THAT THE ES CAPEMENT MUST ARISE OUT OF THE FAILURE ON THE PART OF THE ASSESSEE. SIN CE THE APPELLANT HAS FILED ITS RETURN OF INCOME, THERE BEING NO FAILURE ON THE PART OF THE ASSESSEE, THE ESCAPEMENT OF INCOME CANNOT BE ATTRIB UTED TO SUCH FAILURE. THIS LEAVES ONE WITH ESCAPEMENT OF INCOME CHARGEABLE TO TAX WHICH ARISES OUT OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT. 4.7 THEREFORE THE KEY QUESTION IN THE GIVEN CASE IS TO EXAMINE WHETHER OR NOT THE APPELLANT HAD MADE A TRUE AND FULL DISCL OSURE OF ALL MATERIAL FACTS. IF IT IS FOUND THAT THE ASSESSEE HAS MADE FU LL DISCLOSURE, THEN NO ACTION UNDER SEC 147 CAN BE TAKEN AFTER THE PERIOD OF FOUR YEARS AS INDICATED ABOVE. 4.8 ON PERUSAL OF THE REASONS RECORDED FOR RE-OPENI NG INDICATES THAT, THERE IS NOT A WHISPER SPEAKING OF ANY ALLEGATION, THAT THE APPELLANT FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FAC TS NECESSARY FOR ASSESSMENT. MERELY HAVING A REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT IS NOT SUFFICIENT TO REOPEN THE ASSESSMENTS BEYOND THE FOUR YEAR PERIOD INDICATED ABOVE. THE ES CAPEMENT OF INCOME FROM ASSESSMENT MUST ALSO BE OCCASIONED BY F AILURE ON THE PART OF THE ASSESSEE. THIS IS A NECESSARY CONDITION FOR OVERCOMING THE BAR SET UP BY THE PROVISO TO SEC 147 OF THE ACT. IF THI S CONDITION IS NOT SATISFIED, THE BAR WOULD OPERATE AND NO ACTION UNDE R SEC 147 COULD BE TAKEN. THE REASONS SUPPLIED TO THE APPELLANT DO NOT CONSIST OF ANY SUCH ALLEGATION. IN THE SAID REASONS, NOWHERE IT IS MENT IONED THAT INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT OF ANY FAILURE OF THE ASSESSEE. ON THE CONTRARY, THE REASONS RECORDED INDICATE THAT TH E CASE HAS BEEN RE- OPENED AS THE ASSESSEE HAS BEEN WRONGLY ALLOWED BEN EFIT U/S 10(23C)(IIIAB). THIS EXPLICITLY SHOWS THAT THE ASSE SSMENT HAS BEEN RE- OPENED AS A MEASURE TO RECTIFY THE MISTAKE OF EXEMP TION GRANTED TO THE APPELLANT AS PER PROVISIONS OF SECTION 10(23C)(IIIA B) OF THE ACT. 4.9 FURTHER IT IS FOUND THAT THE AO HAS RELIED ON T HE DISCUSSIONS MADE IN THE ASSESSMENT ORDER FOR AY 2007-08 FOR FORMING A BELIEF THAT THE GOVERNMENT GRANT FOR THE CURRENT ASSESSMENT YEAR IS LESS THAN 75% AND NOT ENTITLED FOR EXEMPTION U/S 10(23C)(IIIAB). ON E XAMINING THE ORIGINAL ASSESSMENT ORDER FOR A.Y. 2003-04, I FIND THAT THE AO HAS CLEARLY RECORDED HIS FINDING IN THE ASSESSMENT ORDER (PG 2) TO STATE THAT IT IS FOUND THAT THE INSTITUTION EXISTS FOR EDUCATIONAL P URPOSES AND CONSIDERED TO BE A DEEMED UNIVERSITY. THE EXPENSES ARE FOUND TO BE SUBSTANTIALLY FINANCED BY GOVT. DURING THE RELEVANT YEAR, THE INSTITUTION HAS INCURRED EXPENSES ON EDUCATIONAL ACT IVITIES TO THE TUNE OF RS. 8.6 CRORES OUT OF WHICH MORE THAN RS. 8 CRORES IS FOUND TO BE FINANCED BY UGC . THE INSTITUTE IS FOUND TO BE COVERED AND APPROVED U/S 10(23C)(IIIAB) OF THE I. T. ACT. 4.10 THEREFORE FROM THE REASONS RECORDED AND THE F ACTS OF THE CASE, IT IS EVIDENT THAT THE ASSESSING OFFICER, BASED ON THE SE FACTS, HAD COME TO A CONCLUSION THAT THE APPELLANT IS AN INSTITUTION W HOLLY AND TATA INSTITUTE OF SOCIAL SCIENCE ITA NO.5685/MUM/2011 5 SUBSTANTIALLY FINANCED BY THE GOVERNMENT. THE REOPE NING IS NOT ON ACCOUNT OF ANY FRESH FACTS OR MATERIAL. THE REOPENI NG IS BASED PURELY ON A CHANGE IN OPINION WITH THERE BEING NO CHANGE I N FACTS. 4.11 CONSEQUENTLY, CONSIDERING THE PROVISIONS OF SE CTION 147. I AM OF THE CONSIDERED VIEW THAT. THE REOPENING IS INCORREC T BOTH AT THE THRESHOLD I.E IT IS MERELY A CHANGE IN OPINION AND IT IS ALSO BARRED BY THE LIMITATION SET OUT IN THE PROVISO WHICH IS 4 YE ARS. AS A RESULT THE NOTICE U/S 148 DATED 19.03.2010 BASED ON THE RECORD ED REASONS AS SUPPLIED TO THE APPELLANT AS WELL AS THE CONSEQUENT ASSESSMENT ORDER U/S 143(3) R.W.S. 147 DATED 22.12.2010 ARE WITHOUT JURISDICTION AND DESERVES TO BE QUASHED. THESE PRINCIPLES ARE CONTAI NED IN PLETHORA OF DECISIONS INCLUDING DECISIONS REFERRED TO BE BY THE LEARNED A/R. RESPECTFULLY RELYING ON THE DECISIONS OF THE APEX C OURT AS WELL AS THE JURISDICTIONAL HIGH COURT, DEPICTED IN PARA 1.1 (PA GE 6) AND PARA 1.2 (PAGE 8) OF THE ORDER, I UPHOLD THE CONTENTIONS OF THE APPELLANT THAT THE AO WAS NOT CORRECT IN REOPENING THE ASSESSMENT OF T HE APPELLANT. SUBSEQUENTLY THE ORDER PASSED BY THE AO U/S. 143(3) R.W.S. 147 OF THE ACT, IS ANNULLED. ACCORDINGLY, THE APPELLANTS APPE AL IS ALLOWED. 6. AGAINST THESE OBSERVATIONS, THE DEPARTMENT HAS R AISED THE GROUND. 7. THE DR RELIED ON THE ORDER OF THE AO. 8. THE AR, ON THE OTHER HAND, REITERATED THE SUBMIS SIONS MADE BEFORE THE CIT(A) AND STRONGLY SUBMITTED THAT THE INITIATI ON, FROM THE VERY BEGINNING, I.E. RECORDING OF THE REASON HAD BEEN BA D IN LAW. THE AR POINTED OUT THAT THE ISSUE RAISED IN THE REASSESSMENT PROCE EDINGS, PERTAINED TO THE EXEMPTION CLAIMED BY THE ASSESSEE UNDER SECTION 10( 23C)(IIIAB). THIS ISSUE WAS DEALT WITH BY THE AO IN THE REGULAR ASSESSMENT. THEREFORE, ACCORDING TO THE AR, IT WAS MERELY A CHANGE OF OPINION, WHICH DO ES NOT ALLOW THE AO TO INITIATE THE REASSESSMENT PROCEEDINGS. THE AR, RELI ED ON THE FOLLOWING DECISIONS : CIT VS. KELVINATOR OF INDIA LTD :(320 ITR 561) SC AVENTIS PHARMA LTD. VS. ACIT & ORS. :(323 ITR 570) BOM SIESTA STEEL CONSTRUCTION (P) LTD. VS. KK SHIKARE & OR :(154 ITR 547) BOM NIBA INDIA & ANR. VS. SMT. ARTI HANDA, ACIT & ORS. :(300 ITR 283) BOM SANGHVI SWISS REFILLS (P) LTD. ARTI HANDA, ACIT & O RS. :(300 ITR 276) BOM CIT VS. TUBE INVESTMENTS :(11 DTR 73) MAD CIT VS. EICHER LTD. :(294 ITR 310) DEL INDIA STEAMSHIP CO. LTD. VS. JCTI :(275 IT R 155) CAL TATA INSTITUTE OF SOCIAL SCIENCE ITA NO.5685/MUM/2011 6 9. THE AR, THEREFORE, PLEADED THAT SINCE THE ISSUE OF CHANGE OF OPINION HAS BEEN DECIDED BY A NUMBER OF COURTS, INCLUDING T HE HON'BLE JURISDICTIONAL HIGH COURT AT BOMBAY, THE REASSESSMENT PROCEEDINGS BE QUASHED. 10. WE HAVE HEARD THE ARGUMENTS AND HAVE PERUSED TH E ORDERS OF THE REVENUE AUTHORITIES. WE FIND THAT THE AO UNDERTOOK REASSESSMENT PROCEEDINGS UNDER SECTION 148 ON 19.03.2010 ON AN A SSESSMENT FRAMED UNDER SECTION 143(3), I.E. MUCH AFTER THE EXPIRY OF FOUR YEARS, WHICH EXPIRED ON 31.03.2008. TO CORRECTLY REOPEN THE PROCEEDINGS UNDER SECTION 148 ON A REGULAR ASSESSMENT, ATTENTION HAS TO BE PAID, THAT THE FOUNDING ISSUE HAS NOT BEEN DEALT WITH IN THE REGULAR ASSESSMENT. IF, THE ISSUE HAS BEEN DEALT WITH BY THE AO IN REGULAR ASSESSMENT THEN THE ONLY BASIS FOR REOPENING CAN BE THAT THE AO MUST HAVE EVIDENCE, TO PROVE THAT TH E MATERIAL FACT WAS NOT MADE AVAILABLE TO THE AO. IN THE PRESENT SET OF CIR CUMSTANCES, THERE WAS NO MATERIAL FACT, WHICH WAS NOT AVAILABLE WITH THE AO IN THE REGULAR ASSESSMENT PROCEEDINGS, OR WHICH HAD NOT BEEN DEALT WITH BY TH E AO IN THOSE PROCEEDINGS. IN OUR OPINION, THE RATIO IN THE CASE OF CIT VS. KELVINATOR OF INDIA, REPORTED IN 320 ITR 561 (SC) WILL SQUARELY A PPLY ON THE ISSUE AT HAND. THE HON'BLE SUPREME COURT IN THE JUDGEMENT AT PAGE 564 HELD, HOWEVER, ONE NEEDS TO GIVE SCHEMATIC INTERPRETATIO N TO THE WORDS REASON TO BELIEVE FAILING WHICH, WE ARE AFRAID, S ECTION 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 KEEP IN MIND THE CONCEPTUAL DI FFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE ASSESSIN G OFFICER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFILMENT OF CERTAIN PRECONDITIONS AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEH ALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSE SSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CH ANGE OF OPINION AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASS ESSING OFFICER. HENCE, AFTER 1ST APRIL, 1989, THE ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO TH E CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REAS ONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. 11. HONBLE BOMBAY HIGH COURT IN THE CASE OF AVENTI S PHARMA LTD. VS ACIT, REPORTED IN 323 ITR 570, HELD, ON FACTS, THE SUBMISSION WHICH HAS BEEN URGED ON BEHALF OF T HE ASSESSEE IS THAT A FULL DISCLOSURE WAS MADE IN THE RETURN OF IN COME. PURSUANT TATA INSTITUTE OF SOCIAL SCIENCE ITA NO.5685/MUM/2011 7 THERETO, THE ASSESSING OFFICER PASSED AN ORDER OF A SSESSMENT UNDER SECTION 143(3). IT WAS URGED THAT THE ASSESSING OFF ICER APPLIED HIS MIND SPECIFICALLY TO BOTH THE ASPECTS OF THE CASE NOTED EARLIER AND TO THE EXPLANATION FURNISHED BY THE ASSESSEE DURING THE CO URSE OF ASSESSMENT PROCEEDINGS. IT HAS BEEN URGED THAT THERE WAS NO TA NGIBLE MATERIAL BEFORE THE ASSESSING OFFICER ON THE BASIS OF WHICH HE COULD HAVE FORMED A REASON TO BELIEVE THAT INCOME CHARGEABLE T O TAX HAD ESCAPED ASSESSMENT. CONSEQUENTLY, IT HAS BEEN URGED THAT TH E ASSESSMENT IS SOUGHT TO BE REOPENED ON A MERE CHANGE OF OPINION, WHICH IS NOT PERMISSIBLE. DURING THE COURSE OF SUBMISSION, COUNS EL APPEARING ON BEHALF OF THE ASSESSEE ASSISTED THE COURT IN PERUSI NG THE ENTIRE RECORD BEFORE THE COURT, INCLUDING IN PARTICULAR THE DISCL OSURES WHICH WERE MADE DURING THE COURSE OF ASSESSMENT. IN ORDER TO OBVIATE A REPETITION IT WOULD BE PROPER TO REFER TO THE RELEVANT ASPECTS OF THE RECORD WHILE DEALING WITH THE SUBMISSIONS WHICH HAVE BEEN URGED ON BEHALF OF THE ASSESSEE.. 12. THE HONBLE BOMBAY HIGH COURT, IN THIS CASE, HE LD (HEAD NOTE), THE POWER TO REOPEN AN ASSESSMENT IS CONDITIONAL ON THE FORMATION OF A REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT. THE POWER IS NOT AKIN TO A REVIEW. THE EXISTENCE OF TANGIBLE MATERIAL IS NECESSARY TO ENSURE AGAINST AN ARBITRARY EXERCISE OF POWER. 13. THESE JUDGEMENTS, ALONGWITH OTHER CITED JUDGEME NTS, WHEN TAKEN INTO CONSIDERATION, WILL ONLY LEAD TO ONE CONCLUSION THA T THE AO ERRED IN INITIATING THE REASSESSMENT PROCEEDINGS. 14. EXAMINING THE ISSUE FROM THE OTHER ANGLE, I.E. WHETHER, IN THE GIVEN SET OF CIRCUMSTANCES, THE AO WAS CORRECT IN INITIAT ING REASSESSMENT PROCEEDINGS, AFTER THE EXPIRY OF FOUR YEARS. THE FA CT IS, THAT BECAUSE THE REGULAR ASSESSMENT UNDER SECTION 143(3) HAD BEEN FR AMED ON THE ASSESSEE, THE AO HAD THE LEGISLATIVE LEVERAGE OF ANOTHER TWO YEARS, I.E. A TOTAL OF SIX YEARS. THIS EXTENDED PERIOD OF TWO FURTHER YEARS IS SUBJECT TO THE CONDITIONS LAID DOWN IN THE FIRST PROVISO TO SECTION 147, WHIC H READS AS UNDER: PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLES S ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSE E 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 FU LLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT, FOR TH AT ASSESSMENT YEAR: TATA INSTITUTE OF SOCIAL SCIENCE ITA NO.5685/MUM/2011 8 (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RATE ; OR (III) SUCH I NCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS AC T ; OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED;] 15. IN CASE WHERE THERE IS IN EXISTENCE OF A REGULA R ASSESSMENT, THE PERIOD OF SIX YEARS BECOMES AVAILABLE TO THE AO ONLY IN A CASE WHERE THERE IS A FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TR ULY DISCLOSE ALL MATERIAL FACTS. IF IN CASE, THE REASONS BEING RECORDED AND R ELIED UPON BY THE AO HAS BEEN DEALT WITH IN THE REGULAR ASSESSMENT, THE PERI OD AVAILABLE IS ONLY FOUR YEARS AS PER EXPLANATION TO SECTION 149(1) READ WIT H CLAUSE (C) TO EXPLANATION 2 TO SECTION 147. THE RELEVANT PROVISIO NS ARE : 149 (1) NO NOTICE UNDER SECTION 148 SHALL BE ISSUED FOR THE RELEVANT ASSESSMENT YEAR, [(A) IF FOUR YEARS HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE CASE FALLS UNDER CLAUSE (B) EXPLANATION.IN DETERMINING INCOME CHARGEABLE TO TA X WHICH HAS ESCAPED ASSESSMENT FOR THE PURPOSES OF THIS SUB-SEC TION, THE PROVISIONS OF EXPLANATION 2 OF SECTION 147 SHALL APPLY AS THEY APPLY FOR THE PURPOSES OF THAT SECTION. EXPLANATION 2 TO SECTION 147 EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT, NAMELY : (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF AN Y OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DU RING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARG EABLE TO INCOME- TAX ; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE A SSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN ; TATA INSTITUTE OF SOCIAL SCIENCE ITA NO.5685/MUM/2011 9 (BA) WHERE THE ASSESSEE HAS FAILED TO FURNISH A RE PORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE WAS SO REQUIRE D UNDER SECTION 92E; (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDERASS ESSED ; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RAT E ; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCE SSIVE RELIEF UNDER THIS ACT ; OR (IV) EXCESSIVE LOSS OR DEPREC IATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPU TED;] (D) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCA TED OUTSIDE INDIA. 16. IN THE INSTANT CASE, ASSESSMENT UNDER SECTION 1 43(3) WAS FRAMED ON 28.02.2006. THE AO, THEREFORE, COULD ISSUE THE NOTI CE UNDER SECTION 148 ONLY UPTO 31.03.2008, AS PER THE PROVISIONS OF SECT ION 149(1)(A). BUT THE NOTICE, HAVING BEING RECEIVED AFTER 31.03.2008, IN THE PRESENT SET OF CIRCUMSTANCES, BECOMES VOID. THE LEARNED A.R. HAD P LACED RELIANCE ON THE FOLLOWING DECISIONS: CALCUTTA DISCOUNT CO. LTD. VS. ITO :41 ITR 191 (S C) HINDUSTAN LEVER LTD. VS. R.B. WADKAR :268 ITR 339 (BOM HC) HINDUSTAN PETROLEUM CORPORATION LTD. VS. DCIT :192 TAXMAN 178 (BOM) MISTRY LALJI NARSI DEVELOPMENT CORP. VS. ACIT :323 ITR 194 (BOM) 3I INFOTECH LTD. VS. ACIT :192 TAXMAN 137 (BOM) HARYANA ACRYLIC MANUFACTURING CO. VS. CIT :308 ITR 38 (DEL HC) STERLITE INDUSTRIES (I) LTD. VS. ACIT :305 ITR 3 39 (CAL HC) ANIL KUMAR BHANDARI VS. JCIT :294 ITR 222 (CAL HC ) CIT & ANR. VS. SAIPEM SPA :300 ITR 133(UTTARAKH AND) CIT VS RAJASTHAN PATRIKA LTD. :258 ITR 300 (RAJ. ) NIKHIL KOTAK VS. MAHESH KUMAR, A.O. :319 ITR 445 (GUJ.) OF THE FOLLOWING DECISIONS, WE WOULD LIKE TO MAKE M ENTION OF THE LATEST OF THESE JUDGMENTS IN THE CASE OF MISTRY LALJI NARSI D EVELOPMENT CORP. VS ACIT, 323 ITR 194, THE HONBLE BOMBAY HIGH COURT IN A SIMILAR CIRCUMSTANCE, AS NOTED, THAT THE ASSESSMENT WAS COM PLETED U/S 143(3), TAKING INTO ACCOUNT THE CLAIM OF DEDUCTION U/S 80IB (10). IN THIS CASE, THE SOLE ISSUE ON WHICH THE REASSESSMENT PROCEEDINGS WE RE INITIATED WERE THAT TATA INSTITUTE OF SOCIAL SCIENCE ITA NO.5685/MUM/2011 10 COMMENCEMENT CERTIFICATE HAD BEEN ISSUED ON 24.07.1 993, WHEREAS A DEDUCTION UNDER THE PROVISION IS PERMISSIBLE ONLY W HEN THE UNDERTAKING HAS COMMENCED CONSTRUCTION, HENCE THE DEDUCTION WAS WRO NGLY TAKEN. THE HONBLE HIGH COURT CONCLUDED, SIGNIFICANTLY, THE REASONS WHICH HAVE BEEN RECORDE D BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT SHOW THAT RELIANCE IS PLACED ON A COMMENCEMENT CERTIFICATE WHICH IT IS NOW COMMON GROUND BEFORE TH E COURT WAS ALREADY ON RECORD BEFORE THE ASSESSING OFFICER WHEN THE ORIGIN AL ORDER UNDER SECTION 143(3) WAS PASSED. THE REASONS DISCLOSED TO THE ASS ESSEE STATE THAT COPIES OF THE COMMENCEMENT CERTIFICATES WERE MADE AVAILABLE B Y THE JOINT COMMISSIONER OF INCOME-TAX SUBSEQUENT TO THE ORDER OF ASSESSMENT UNDER SECTION 143(3). SINCE THE DOCUMENTS ON THE BASIS OF WHICH ASSESSMEN T WAS SOUGHT TO BE REOPENED HAD ALREADY BEEN FURNISHED TO THE ASSESSIN G OFFICER IN THE COURSE OF THE PROCEEDINGS UNDER SECTION 143(3), IT CANNOT POS SIBLY BE CONTENDED THAT THE ASSESSEE HAD FAILED TO DISCLOSE DOCUMENTS OR THE MA TERIAL FACTS. MOREOVER, IT IS ALSO COMMON GROUND BEFORE THE COURT THAT A DEDUCTION HAS BEEN GRANTED UNDER SECTION 80IB(10) TO THE ASSESSEE FOR THE ASSESSMENT YEAR 2002- 03. THIS STATEMENT OF FACT BY THE COUNSEL APPEARING ON BEHALF OF THE ASSESSEE HAS NOT BEEN CONTROVERTED BY COUNSEL FOR THE REVENU E DURING THE COURSE OF SUBMISSIONS. WE WOULD, WHILE CONCLUDING ONCE AGAIN CLARIFY THAT IN THE PRESENT CASE, WE ARE NOT CONCERNED WITH THE QUESTION AS TO WHETHER A DED UCTION UNDER SECTION 80IB(10) WAS VALIDLY GRANTED SINCE THE ONLY QUESTIO N THAT FALLS FOR CONSIDERATION IS WHETHER A CASE IS MADE OUT FOR REO PENING OF THE ASSESSMENT UNDER THE POWERS CONFERRED BY SECTION 148. FOR THE REASONS AFOREMENTIONED, WE ARE OF THE VIEW THAT RECOURSE TO THE PROVISIONS OF SECTION 148 READ WITH SECTION 147 CAN NOT BE SUSTAINED. 17. IT MAY BE SEEN THAT THE JURISDICTIONAL HIGH COU RT AT BOMBAY HAS VERY CATEGORICALLY CONCLUDED THAT NOTICE WAS ILLEGAL. 18. IN THE INSTANT CASE, AS MENTIONED EARLIER, IN THE ASSESSMENT FRAMED U/S 143(3), THE ISSUE OF 10(23C)(IIIAB) HAD BEEN GO NE INTO AND THE AO, ONLY INITIATED THE REASSESSMENT PROCEEDINGS, BECAUSE HE HAD TAKEN A DIVERGENT VIEW ON THE ALLOWABILITY OF EXEMPTION. SINCE THE IS SUE WAS DISCUSSED IN REGULAR ASSESSMENT PROCEEDINGS AND THE AO DID NOT S TUMBLE UPON ANY EVIDENCE/MATERIAL, WHICH WAS NOT PLACED BEFORE HIM, THE INITIATION CANNOT BE SUSTAINED. IN ANY CASE, THE INITIATION CANNOT SURVI VE, BECAUSE EVEN THE BASIS OF INITIATION HAS BEEN DELETED BY US IN ITA NO. 439 4/MUM/2011. 18. GOING INTO THE FACTS AND CIRCUMSTANCES OF THE C ASE AND RELYING ON EACH OF CATENA OF DECISIONS, AS MENTIONED ABOVE WE, RESPECTFULLY FOLLOWING TATA INSTITUTE OF SOCIAL SCIENCE ITA NO.5685/MUM/2011 11 THE RATIO DECIDED IN THESE CELEBRATED JUDGEMENTS, H OLD THAT THE INITIATION OF REASSESSMENT PROCEEDINGS HAD BEEN BAD IN LAW AND HE NCE VOID. IN THE CIRCUMSTANCES, WE HAVE NO HESITATION TO HOLD THAT C ONSEQUENTIAL ORDER PASSED BY THE AO WAS BAD IN LAW, AS HELD BY THE CIT (A), WHOSE ORDER WE SUSTAIN. 19. SINCE WE TOO HAVE ANNULLED THE REASSESSMENT PRO CEEDINGS, WE DO NOT INTEND TO GO INTO THE ISSUE INVOLVED IN THE GROUNDS , INVOKING THE MERITS. 20. THE APPEAL FILED BY THE DEPARTMENT IS, THEREFOR E, DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 6 TH SEPTEMBER, 2012 SD/- SD/- ( R.S. SYAL ) ACCOUTANT MEMBER ( VIVEK VARMA ) JUDICIAL MEMBER MUMBAI, DATE: 26 TH SEPTEMBER, 2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)-1, MUMBAI. 4) THE DIT (EXEMPTION)/ CIT__CONCERNED, MUMBAI, 5) THE D.R. E BENCH, MUMBAI. 6) COPY TO GUARD FILE. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *PS