MARKS SHIPPING P.LTD, MUMBAI V. ASST CIT CIR 4(2), MUMBAI

ITA 6363/MUM/2013

• Counselvise Citation: 636319914 RSA 2013
• Duration Of Justice: 1 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 30-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Keywords: Reopening of assessment; Gift; Depreciation; Retrospective amendment; Tangible material; Bad and doubtful debts; Difference of opinion; Reason to believe; Unabsorbed depreciation; Change of opinion; Reassessment proceedings
• Section: 143(3); 14A; 115JB; 37(1); 147; 148

Judgement Text

1 , INCOME TAX APPELLATE TRIBUNAL,MUMBAI B BENCH , , , BEFORE S/SH. JOGINDER SINGH,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.6363, 6364, 6365 AND 6366/MUM/2013, / ASSESSMENT YEAR - 2005 - 06, 2006 - 07, 2007 - 08 AND 2008 - 09 M/S. MARKS SHIPPING PVT. LTD. 401, A TLANTA TOWERS, 4 TH FLOOR SAHAR CHAKALA, ANDHERI(E) MUMBAI - 400 099. PAN: AAACM 3202 B VS ACIT CIRCLE - 4(2) MUMBAI. ( / APPELLANT ) ( / RESPONDENT ) /. ITA NO. 17, 18, 19 AND 20 /MUM/201 4 , / ASSESSMENT YEAR - 20 05 - 06, 2006 - 07, 2007 - 08 AND 2008 - 09 ACIT CIRCLE - 4(2) MUMBAI. VS M/S. MARKS SHIPPING PVT. LTD. MUMBAI - 400 099. PAN: AAACM 3202 B ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI PRAMOD KUMAR PARIDA WITH MS. SANJUKTA CHOWDHURY / REVENUE BY :SHRI AKHILENDRA YADAV - DR / DATE OF HEARING : 06 - 07 - 2015 / DATE OF PRONOUNCEMENT : 22 - 07 - 2015 , 1961 254 ( 1 ) ORDER U/S.25 4(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDERS DATED OF THE CIT(A),MUMBAI,THE ASSESSEE AND THE ASSESSING OFFICERS (AO.S)HAVE FILED CROSS APPEALS FOR ABOVE MENTIONED FOUR ASSESSMENT YEARS(AY.S.)R AISING VARIOUS GROUNDS OF APPEAL: ITA/6363/MUM/2013 - AY.05 - 06: 1. DEFECTIVE JURISDICTION - ISSUE OF NOTICE U/S. 148 ON A CHANGE OF OPINION - RE - ASSESSMENT ORDER MAY BE QUASHED I) THE L D. CIT(A) ERRED IN TREATING THE ISSUE OF NOTICE U/S. 148 AS PROPER W ITHOUT APPRECIATING THAT DURING ORIGINAL SCRUTINY ASSESSMENT, ENTIRE MATERIALS PERTAINING TO THE ISSUE AS PER REASONS WERE FURNISHED BEFORE THE ASSESSING OFFICER WHO HAD DULY APPLIED HIS MIND AND INFACT CONSIDERED THE SAME CLAIM WHILE MAKING DISALLOWAN CE U/S. 14A; THEREFORE, IN THE ABSENCE OF' ANY ALLEGATION THAT 6363 - AND ORS/MUM/13 MSPL - AY.S. 2 THERE WAS NO TRUE AND FULL DISCLOSURE OF MATERIAL FACTS BY THE APPELLANT, THE JURISDICTION ACQUIRED THROUGH THE ISSUE OF NOTICE U/S. 148 BECOMES DEFECTIVE AND UNTENABLE FOR BEING TAINTED WIT H A CHANGE OF OPINION AND THE ORDER MAY, CONSEQUENTLY, BE QUASHED. II) THE L D. CIT(A) FAILED TO APPRECIATE THE IMPLICATION OF MANDATORY PROVISO TO SEC. 147 WHERE IT IS STIPULATED THAT NO ACTION SHALL BE TAKEN FOR RE ASSESSMENT BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IN THE ABSENCE OF ANY FAILURE ON THE' 'PART OF APPELLANT; THEREFORE, THE NOTICE ISSUED U/S. 148 DOES NOT HAVE THE MANDATE OF LAW AND MAY, THEREFORE, BE TREATED AS VOID AB INITIO. III) WITHOUT PREJUDICE TO ABOVE , THE NOTICE U/S. 148 CANNOT BE ISSUED TO MAKE ROVING AND FISHING ENQUIRIES OR TO COMPLETE AN UNFINISHED TASK AS POSSIBLY BEEN LEFT OUT DURING ORIGINAL SCRUTINY ASSESSMENT PROCEEDINGS. 2. DISALLOWNCE U/S.36(1)(II) RS.26,47,146/ ON ACCOUNT OF ALLEGED NON ALLOWABLE COMMISSION PAYMENT (RS.16,87,146/ ) TO THE DIRECTORS: I) THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE WITHOUT APPRECIATING THAT THE APPELLANT HAD, AFTER COMPLYING TO THE ENABLING CONDITIONS, PAID COMMISS ION TO TWO OF ITS DIRECTORS IN PARTICULAR AGAINST THEIR FULL TIME RENDERING OF SERVICES THUS THE DISALLOWANCE IS UNCALLED FOR AS THE SAID PAYMENT IS NOT AN APPROPRIATION OF PROFITS OR A PAYMENT IN LIEU OF DIVIDEND BUT PURELY A CHARGE OF AGAINST PROFITS. II) WITHOUT PREJUDICE TO ABOVE, ANY PAYMENT MADE EVEN TO A DIRECTOR WITH SUBSTANTIAL HOLDING PURELY IN TERMS OF APPOINTMENT AGAINST THE SERVICES RENDERED IS OUTSIDE THE SCOPE OF SEC. 36(1 )(II); THUS THE SAME CANNOT BE ATTRIBUTED AS DISTRIBUTION OF D IVIDEND OR PROFITS IN THE GUISE OF COMMISSION. AS THE PAYMENTS HAVE DIRECT NEXUS TO T HE SERVICES RENDERED, SEC. 36(1 )(II) HAS NO ROLE TO PLAY UNDER THE CIRCUMSTANCES AND THE DISALLOWANCE MAY BE DELETED. III) THE L D.. CIT(A) ERRED IN CONFIRMING EVEN THE PAYMENT OF REMUNERATION OF RS.9,60,000/ PAID TO DIRECTORS AS INCLUDIBLE WHILE MAKING DISALLOWANCE U/S.36(1 )(II). IV) THE LOWER AUTHORITIES ERRED IN CONSIDERING DISALLOWANCE U/S. 36(1 )(II) OF RS.26,47,146/ AS RS. 26,57,146/ WHICH MAY BE A TYPOGR APHICAL ERROR THAT NEEDS TO BE RECTIFIED. 3. LEVY OF PENAL INTEREST U/S. 234A, 2348, 234C AND 234D THE APPELLANT, ON MERITS, DENIES ITS LIABILITY TO PENAL INTEREST. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ALL OR ANY OF THE ABOVE GROU NDS OF APPEAL. ITA/ 6364 /MUM/2013 - AY. 20 0 6 - 0 7 : 1. DEFECTIVE JURISDICTION ISSUE OF NOTICE U/S. 148 ON A CHANGE OF OPINION RE ASSESSMENT ORDER MAY BE QUASHED I) THE L D. CIT(A) ERRED IN TREATING THE ISSUE OF NOTICE U/S. 148 AS PROPER WITHOUT APPREC IATING THAT DURING ORIGINAL SCRUTINY ASSESSMENT, ENTIRE MATERIALS PERTAINING TO THE ISSUE AS PER REASONS WERE FURNISHED BEFORE THE ASSESSING OFFICER WHO HAD DULY APPLIED HIS MIND AND INFACT CONSIDERED THE SAME CLAIM WHILE MAKING DISALLOWANCE U/S. 14A ; THEREFORE, IN THE ABSENCE OF ANY ALLEGATION THAT THERE WAS NO TRUE AND FULL DISCLOSURE OF MATERIAL FACTS BY THE APPELLANT, THE JURISDICTION ACQUIRED THROUGH THE ISSUE OF NOTICE U/S. 148 BECOMES DEFECTIVE AND UNTENABLE FOR BEING TAINTED WITH A CHANG E OF OPINION AND THE ORDER MAY, CONSEQUENTLY, BE QUASHED. II) THE L D. CIT(A) FAILED TO APPRECIATE THE IMPLICATION OF MANDATORY PROVISO TO SEC. 147 WHERE IT IS STIPULATED THAT NO ACTION SHALL BE TAKEN FOR RE ASSESSMENT BEYOND FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR 'IN THE ABSENCE OF ANY FAILURE ON THE PART OF APPELLANT; THEREFORE, THE NOTICE ISSUED U/S. 148 DOES NOT HAVE THE MANDATE OF LAW AND MAY, THEREFORE, BE TREATED AS VOID AB INITIO. III) WITHOUT PREJUDICE TO ABOVE , THE NOTICE U/S. 148 CANNOT BE ISSUED TO MAKE ROVING AND FISHING ENQUIRIES OR TO COMPLETE AN UNFINISHED TASK AS POSSIBLY BEEN LEFT OUT DURING ORIGINAL SCRUTINY ASSESSMENT PROCEEDINGS. 2. DISALLOWANCE U/S. 36(1)(II) RS. 29,44.544/ ON ACCOUNT. OF ALLEGED NON ALLOWABLE COMMISSION PAYMENT (RS. 18,64,544/ ) TO THE DIRECTORS 6363 - AND ORS/MUM/13 MSPL - AY.S. 3 I) THE L D. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE WITHOUT APPRECIATING THAT THE APPELLANT HAD, AFTER COMPLYING TO THE ENABLING CONDITIONS, PAID COMMISSION TO TWO O F ITS DIRECTORS IN PARTICULAR AGAINST THEIR FULL TIME RENDERING OF SERVICES; THUS THE DISALLOWANCE IS UNCALLED FOR AS THE SAID PAYMENT IS NO AN APPROPRIATION OF PROFITS OR A PAYMENT IN LIEU OF DIVIDEND BUT PURELY A CHARGE OF AGAINST PROFITS. II) WITHOUT PREJUDICE TO ABOVE, ANY PAYMENT MADE EVEN TO A DIRECTOR WITH SUBSTANTIAL HOLDING PURELY IN TERMS OF APPOINTMENT AGAINST THE SERVICES RENDERED IS OUTSIDE THE SCOPE OF SEC. 36(1 ) (II); THUS THE SAME CANNOT BE ATTRIBUTED AS DISTRIBUTION OF DIVIDEND OR P ROFITS IN THE GUISE OF COMMISSION. AS THE PAYMENTS HAVE DIRECT NEXUS TO THE SERVICES RENDERED, SEC. 36(1)(II) HAS NO ROLE TO PLAY UNDER THE CIRCUMSTANCES AND THE DISALLOWANCE MAY BE DELETED. III) THE L D. CIT(A) ERRED IN CONFIRMING EVEN T HE PAYMENT OF REMUNERATION OF R S .10,80,000/ PAID TO DIRECTORS AS INCLUDIBLE WHILE MAKING DISALLOWANCE U/S.36(1 )(II). 3. LEVY OF PENAL INTEREST U/S. 234A, 2348, 234C AND 234D THE APPELLANT, ON MERITS, DENIES ITS LIABILITY TO PENAL INTEREST. 4. THE APPELL ANT CRAVES LEAVE TO ADD, AMEND OR ALTER ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. ITA/ 6365 /MUM/2013 - AY. 20 0 7 - 0 8 : 1. DEFECTIVE JURISDICTION - ISSUE OF NOTICE U/S. 148 ON A CHANGE OF OPINION - RE - ASSESSMENT ORDER MAY BE QUASHED I) THE L D. CIT(A) ERRE D IN TREATING THE ISSUE OF NOTICE U/S. 148 AS PROPER WITHOUT APPRECIATING THAT DURING ORIGINAL SCRUTINY ASSESSMENT, ENTIRE MATERIALS PERTAINING TO THE ISSUE AS PER REASONS WERE FURNISHED BEFORE THE ASSESSING OFFICER WHO HAD DULY APPLIED HIS MIND AND INF ACT CONSIDERED THE SAME CLAIM WHILE MAKING DISALLOWANCE U/S. 14A; THEREFORE, IN THE ABSENCE OF' ANY ALLEGATION THAT THERE WAS NO TRUE AND FULL DISCLOSURE OF MATERIAL FACTS BY THE APPELLANT, THE JURISDICTION ACQUIRED THROUGH THE ISSUE OF NOTICE U/S. 148 BECOMES DEFECTIVE AND UNTENABLE FOR BEING TAINTED WITH A CHANGE OF OPINION AND THE ORDER MAY, CONSEQUENTLY, BE QUASHED. II) THE L D. CIT(A) FAILED TO APPRECIATE THE IMPLICATION OF MANDATORY PROVISO TO SEC. 14 8 ISSUED EVEN WITHIN FOUR YEARS TIME HAS TO HAVE THE SUPPORT OF ANY EXTERNAL TANGIBLE MATERIAL IN HAND/RECORDS OF THE ASSESSING OFFICE SO AS TO FORM AN OPINION ABOUT POSSIBLE ESCAPEMENT; OTHERWISE, THE VERY ISSUE OF NOTICE BECOMES A NULLITY IN THE EYES OF LAW AS THERE WAS NO REASON TO BELIEF THAT T HE ALLEGED CLAIM OR INCOME HAS ESCAPED THE EYE OF TAXABILITY. III) WITHOUT PREJUDICE TO ABOVE, THE NOTICE U/S. 148 CANNOT BE ISSUED TO MAKE ROVING AND FISHING ENQUIRIES OR TO COMPLETE AN UNFINISHED TASK AS POSSIBLY BEEN LEFT OUT DURING ORIGINAL SCRUTINY ASSESSMENT PROCEEDINGS. 2. DISALLOW A NCE U/S.36(1)(II) RS. 35,65,588 / ON ACCOUNT OF ALLEGED NON ALLOWABLE COMMISSION PAYMENT (RS. 22,45,588 / ) TO THE DIRECTORS: I) THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE WITHOUT APPRECIATING THAT THE APPELLANT HAD, AFTER COMPLYING TO THE ENABLING CONDITIONS, PAID COMMISSION TO TWO OF ITS DIRECTORS IN PARTICULAR AGAINST THEIR FULL TIME RENDERING OF SERVICES THUS THE DISALLOWANCE IS UNCALLED FOR AS THE SAID PAYMENT IS NOT AN APPRO PRIATION OF PROFITS OR A PAYMENT IN LIEU OF DIVIDEND BUT PURELY A CHARGE OF AGAINST PROFITS. II) WITHOUT PREJUDICE TO ABOVE, ANY PAYMENT MADE EVEN TO A DIRECTOR WITH SUBSTANTIAL HOLDING PURELY IN TERMS OF APPOINTMENT AGAINST THE SERVICES RENDERED IS OUTSIDE THE SCOPE OF SEC. 36(1 )(II); THUS THE SAME CANNOT BE ATTRIBUTED AS DISTRIBUTION OF DIVIDEND OR PROFITS IN THE GUISE OF COMMISSION. AS THE PAYMENTS HAVE DIRECT NEXUS TO THE SERVICES R ENDERED, SEC. 36(1 )(II) HAS NO ROLE TO PLAY UNDER THE CIRCUMSTA NCES AND THE DISALLOWANCE MAY BE DELETED. III) THE ID. CIT(A) ERRED IN CONFIRMING EVEN THE PAYMENT OF REMUNERATION OF RS. 13,20 ,000/ PAID TO DIRECTORS AS INCLUDIBLE WHILE MAKING DISALLOWANCE U/S.36(1 )(II). 3. LEVY OF PENAL INTEREST U/S. 234A, 2348 , 234C AND 234D THE APPELLANT, ON MERITS, DENIES ITS LIABILITY TO PENAL INTEREST. 6363 - AND ORS/MUM/13 MSPL - AY.S. 4 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ALL OR ANY OF THE ABOVE GROUNDS OF APPEAL. ITA/ 6366 /MUM/2013 - AY.0 8 - 0 9 : 1. DEFECTIVE JURISDICTION ISSUE OF NOTIC E U/S. 148 ON A CHANGE OF OPINION RE ASSESSMENT ORDER MAY BE QUASHED I) THE L D. CIT(A) ERRED IN TREATING THE ISSUE OF NOTICE U/S. 148 AS PROPER WITHOUT APPRECIATING THAT DURING ORIGINAL SCRUTINY ASSESSMENT, ENTIRE MATERIALS PERTAINING TO THE I SSUE AS PER REASONS WERE FURNISHED BEFORE THE ASSESSING OFFICER WHO HAD DULY APPLIED HIS MIND AND INFACT CONSIDERED THE SAME CLAIM WHILE MAKING DISALLOWANCE U/S. 14A; THEREFORE, IN THE ABSENCE OF ANY ALLEGATION THAT THERE WAS NO TRUE AND FULL DISCLOS URE OF MATERIAL FACTS BY THE APPELLANT, THE JURISDICTION ACQUIRED THROUGH THE ISSUE OF NOTICE U/S. 148 BECOMES DEFECTIVE AND UNTENABLE FOR BEING TAINTED WITH A CHANGE OF OPINION AND THE ORDER MAY, CONSEQUENTLY, BE QUASHED. II) THE L D. CIT(A) OUGH T TO HAVE APPRECIATED THAT THE NOTICE U/S. 148 ISSUED EVEN WITHIN FOUR YEARS TIME HAS TO HAVE THE SUPPORT OF ANY EXTERNAL TANGIBLE MATERIAL IN HAND/RECORDS OF THE ASSESSING OFFICE SO AS TO FORM AN OPINION ABOUT POSSIBLE ESCAPEMENT; OTHERWISE, THE VERY ISSU E OF NOTICE BECOMES A NULLITY IN THE EYES OF LAW AS THERE WAS NO REASON TO BELIEF THAT THE ALLEGED CLAIM OR INCOME HAS ESCAPED THE EYE OF TAXABILITY. III) WITHOUT PREJUDICE TO ABOVE, THE NOTICE U/S. 148 CANNOT BE ISSUED TO MAKE ROVING AND FISHING ENQUIRI ES OR TO COMPLETE AN UNFINISHED TASK AS POSSIBLY BEEN LEFT OUT DURING ORIGINAL SCRUTINY ASSESSMENT PROCEEDINGS. 2. DISALLOWANCE U/S. 36(1)(II) RS.65,23,182/ ON ACCOUNT. OF ALLEGED NON ALLOWABLE COMMISSION PAYMENT (RS.23,23,182/ ) TO THE DIRECT ORS I) THE L D. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE WITHOUT APPRECIATING THAT THE APPELLANT HAD, AFTER COMPLYING TO THE ENABLING CONDITIONS, PAID COMMISSION TO TWO OF ITS DIRECTORS IN PARTICULAR AGAINST THEIR FULL TIME RENDERING OF SERVICES ; THUS THE DISALLOWANCE IS UNCALLED FOR AS THE SAID PAYMENT IS NO AN APPROPRIATION OF PROFITS OR A PAYMENT IN LIEU OF DIVIDEND BUT PURELY A CHARGE OF AGAINST PROFITS. II) WITHOUT PREJUDICE TO ABOVE, ANY PAYMENT MADE EVEN TO A DIRECTOR WITH SUBSTANTIAL HOLDING PURELY IN TERMS OF APPOINTMENT AGAINST THE SERVICES RENDERED IS OUTSIDE THE SCOPE OF SEC. 36(1 ) (II); THUS THE SAME CANNOT BE ATTRIBUTED AS DISTRIBUTION OF DIVIDEND OR PROFITS IN THE GUISE OF COMMISSION. AS THE PAYMENTS HAVE DIRECT NEXUS TO THE SERVICES RENDERED, SEC. 36(1)(II) HAS NO ROLE TO PLAY UNDER THE CIRCUMSTANCES AND THE DISALLOWANCE MAY BE DELETED. III) THE L D. CIT(A) ERRED IN CONFIRMING EVEN THE PAYMENT OF REMUNERATION OF RS.42,00,000/ PAID TO DIRECTORS AS INCLUDIBLE WHILE MAKING DISALLOWANCE U/S.36(1 )(II). 3. LEVY OF PENAL INTEREST U/S. 234A, 2348, 234C AND 234D THE APPELLANT, ON MERITS, DENIES ITS LIABILITY TO PENAL INTEREST. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER ALL OR ANY OF THE ABOVE GROUND S OF APPEAL. ITA/ 17 /MUM/201 4 - AY. 20 0 5 - 0 6 : 1. ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE A.O. TO VERIFY AND ALLOW THE REMUNERATION TO THE DIRECTORS WHICH WAS NOT SEGREGATED FROM COMMISSI ON IN THE TAX AUDIT REPORT AND DIRECTOR'S REPORT. 2.ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTOR ED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA/ 18 /MUM/201 4 - AY. 2006 - 0 7 : 1. ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE A .O. TO VERIFY AND ALLOW THE REMUNERATION TO THE DIRECTORS WHICH WAS NOT SEGREGATED FROM COMMISSION IN THE TAX AUDIT REPORT AND DIRECTOR'S REPORT. 6363 - AND ORS/MUM/13 MSPL - AY.S. 5 2.ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER OF THE LD.CIT(A) IS CON TRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA/ 19 /MUM/201 4 - AY. 2007 - 0 8 : 1. ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE A.O. TO VERIFY AND ALLOW THE REMUNERATION TO THE DIRECTORS WHICH WAS NOT SEGREGATED FROM COMMISSION IN THE TAX AUDIT REPORT AND DIRECTOR'S REPORT. 2.ON T HE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY G ROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. ITA/ 20 /MUM/201 4 - AY. 2008 - 0 9 : 1. ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE LD.CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE A.O. TO VERIFY AND ALLOW THE REMUNERATION TO THE DIRECTORS W HICH WAS NOT SEGREGATED FROM COMMISSION IN THE TAX AUDIT REPORT AND DIRECTOR'S REPORT. 2.ON THE FACTS AND IN THE CIRCUMS TANCES OF THE CASE AND IN LAW, THE IMPUGNED ORDER OF THE LD.CIT(A) IS CONTRARY TO LAW AND CONSEQUENTLY MERITS TO BE SET ASIDE AND TH AT OF THE ASSESSING OFFICER BE RESTORED. 3. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY. DATES OF ORIGINAL ASSESSMENT,ORIGINAL ASSESSED INCOMES,DATES OF PASSING RE - OPENED ASSESSMENTS AND ASSESSE D RE - OPENED INCOMES CAN BE SUMMARIZED AS UNDER: AY. ORIGINALLY ASSESSED ON TOTAL INCOME 147 ORDER DATE ASSESSED INCOME 2005 - 06 RS.94,68,428/ - RS.1,01,65,220/ - 30.3.2012 RS.1,28,22,366/ - 2006 - 07 RS.2,21,56,072/ - RS.2,84,00,300/ - 30.3.2012 RS.3,13,19,513/ - 2007 - 08 RS.1,96,23,610/ - RS.2,14,16,810/ - 30.3.2012 RS.2,49,82,398/ - 2008 - 09 RS.2,56,73,217/ - RS.2,80,41,580/ - 30.3.2012 RS.3,45,64,762/ - ITA/6363/MUM/2013: 2. FIRST WE WILL TAKE THE APPEAL FOR THE AY.2005 - 06. ASSESSEE - COMPANY ENGAGED IN THE BUSINESS O F CUSTOM CLEARING AGENCY FILED ITS RETURN OF INCOME ON 31.10.2005,DECLARING INCOME OF RS. 94.68 LAKHS.THE AO COMPLETED THE ORIGINAL ASSESSMENT,U/S.143(3)OF THE ACT,ON 24.12.2007 DETERMINING THE INCOME OF THE ASSESSEE AT RS.1.01 CRORES.THE AO ISSUED A NOTIC E U/S.148 OF THE ACT,ON 30.03.2012 , RECORDING FOLLOWING REASONS: THE ASSESSEE FILED RETURN INCOME OF RS.94,68,428/ . THE RETURN WAS PROCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961.ORDER U/S. 143(3) WAS PASSED DETERMINING THE TOTAL INCOME OF RS.1, 01,065 ,220/ . ON PERUSAL OF P&L ACCOUNT, IT IS OBSERVED THAT THE ASSESSEE HAS PAID DIRECTORS REMUNERATION OF RS.26,57,146/ TO DIRECTORS. IN THE AY 2009 10, THE ASSESSING OFFICER FOUND THAT THIS PAYMENT MADE TO DIRECTORS INCLUDES COMMISSION PAYMENT. THEREFORE, THIS COMMISSION WAS ADDED U/S. 36(1)(III). AS PER SECTION(1)(II), ONLY SUCH COMMISSION PAYMENTS ARE ALLOWED AS EXPENDITURE AS ANY SUM PAID TO AN EMPLOYEE AS BONUS OR COMMISSION FOR SERVICES RENDERED, WHERE SUCH SUM WOULD NOT HAVE BEEN PAYABLE TO HIM AS PR OFITS OR DIVIDEND, IF IT HAD NOT BEEN PAID AS BONUS OR COMMISSION..THE DIRECTORS OF THIS COMPANY ARE ALSO SHAREHOLDERS IN THE COMPANY.CLEARLY, THE PAYMENTS BEING MADE TO THE SHAREHOLDERS ARE NOT COVERED UNDER THIS SECTION TO BE ELIGIBLE FOR 6363 - AND ORS/MUM/13 MSPL - AY.S. 6 DEDUCTION AS T HE SAME COULD HAVE BEEN MADE TO THE DIRECTOR WHO IS A SHARE HOLDER AS DISBURSEMENT OF PROFIT OR DIVIDEND. SINCE, THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION OF 36(1)(II) IN MAKING SUCH CLAIM OF COMMISSION PAYMENT AS EXPENDITURE, I HAVE REASONS TO B ELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED THE ASSESSMENT. ISSUE NOTICE U/S.148 OF THE IT ACT AFTER SEEKING PRIOR APPROVAL OF CIT 4, MUMBAI VIDE LETTER NO. .. AS REQUIRED U/S. 151 OF THE INCOME TAX ACT, 1961. HE PASSED AN ORDER U/S.143(3)R.W. S.147 OF THE ACT ON 22.03.2013 COMPUTING THE INCOME OF THE ASSESSEE AT RS.1.28 CRORES. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM IT WAS ARGUED THAT REOPENING WAS RESULT OF CHAN GE OF OPINION,THAT THERE WAS NO NEW MATERIAL BEFORE THE AO FOR REOPENING OF ASSESSMENT,THAT THE AO HAD CONSIDERED THE COMMISSION PAID TO THE DIRECTORS WHILE CALCULATING 14A DISALLOWANCE,THAT THE AO HAD ALL THE DETAILS OF COMMISSION PAYMENT AND HAD APPLIED HIS MIND WHILE ALLOWING THE PAYMENT OF COMMISSION TO DIRECTOR AS EXPENDITURE,THAT THE ASSESSEE HAD FILED ALL THE NECESSARY DETAILS OF COMMISSION PAID TO THE DIRECTORS DURING THE ORIGINAL ASSESSMENT PROCEEDINGS,THAT MATTER WAS REOPENED ON THE BASIS OF THE A SSESSMENT PASSED FOR THE AY.2009 - 10 BY INVOKING THE PROVISIONS OF SECTION 36(1)(VII)OF THE ACT AND BY RELYING UPON THE DECISION OF THE SPECIAL BENCH DELIVERED IN THE CASE OF DALAL BROACHA STOCK BROKERS PVT.LTD. (140TTJ129) ,THAT DETAILS OF SALARY AND COMMISS ION PAYMENT WAS FURNISHED TO THE AO IN ALL THE AY.S.FROM AY.1995 - 96,THAT NOTICE FOR REOPENING WAS ISSUED AFTER FOUR YEARS,THAT INCOME HAD NOT ESCAPED TAXATION BECAUSE OF THE FAILURE OF THE ASSESSEE.THE ASSESSEE RELIED UPON THE CASES OF CONVERTECH EQUIPMENT PVT.LTD.(36TAXMANN. 314)AND KELVINATOR OF INDIA LTD(320 ITR 561). AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER THE FAA HELD THAT THE AO HAD ISSUED NOTICE U/S.148 OF THE ACT OBSERVING THAT THE ASSESSEE HAD NOT COMPLIED WITH T HE PROVISIONS OF SECTION 36(1)(II)IN MAKING CLAIM OF COMMISSION PAYMENT,THAT FORM THE P & L ACCOUNT IT WAS EVIDENT THAT THE ASSESSEE HAD PAID REMUNERATION OF RS.26.57 LAKHS TO THE DIRECTORS WHO WERE ALSO SHARE HOLDERS OF THE COMPANY,THAT REMUNERATION INCL UDED COMMISSION PAYMENT, THAT COMMISSION PAYMENT WAS IN VIOLATION TO SECTION 36(1)(II),THAT THE AO HAD ISSUE NOTICE AFTER FOUR YEARS,THAT THE ASSESSEE HAD RAISED OBJECTIONS ABOUT ISSUE OF NOTICE U/S.148,THAT THE AO HAD DISMISSED THE OBJECTIONS RAISED BY TH E ASSESSEE FOLLOWING THE DECISION OF KALYANJI MAVJI & CO. (102ITR287).HE REFERRED TO THE CASES OF PRAFUL CHUNILAL PATEL(148CTR62),CITIBANK N A (179 CTR124),INDO ADAN SALT MFG. & TRADING CO.(P.)LTD.(159ITR624),EXPORT GUARANTEE CORPORA - TION OF INDIA LTD.(35 0ITR651),INDIAN HUME PIPE CO.LTD.(348ITR439) AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. HE FURTHER HELD THAT T HE ASSESSEE WAS A CLOSELY HELD COMPANY WHERE NO DIVIDEND WAS DECLARED,THAT THE COMMISSION WAS PAID TO THE DIRECTOR WHO WAS ALSO ONE OF THE PR OMOTER AND THE FAMILY MEMBER OF THE OTHER DIRECTORS.HE REFERRED TO THE DECISION OF DALAL BROACHA STOCK BROKING (P) LTD.(SUPRA) AND HELD THAT THE COMMISSION PAID TO THE TWO DIRECTORS WAS NOT LINKED TO ANY EXTRA SERVICES RENDERED BY THEM IN DUE COURSE OF THE IR DUTIES,THAT THE PAYMENT WAS APPARENTLY IN LIEU OF THE DIVIDEND AND IS A DEVICE TO AVOID PAYMENT OF FULL TAX,THAT THE COMMISSION PAID TO THE DIRECTORS IS NOT ALLOWABLE U/S. 36(1)(II) OR 37 OF THE ACT.AS REGARDS TO THE MERIT OF THE ADDITION OF COMMISSION U/S. 36(1)(II),HE OBSERVED THAT THE AO HAD TREATED THE ENTIRE PAYMENT MADE TO THE DIRECTORS AS COMMISSION,THAT THE PAYMENT HAS BEEN MADE IN RESPECT OF BOTH THE SALARY AS WELL AS COMMISSION. GIVING BIFURCATION OF THE FIXED REMUNERATI O N AND COMMISSION, THE FAA HELD THAT T HE PAYMENT OF REMUNERATION TO THE DIRECTORS IS BASED ON THE RESOLUTION PASSED BY THE COMPANY 6363 - AND ORS/MUM/13 MSPL - AY.S. 7 IN ITS GENERAL BODY MEETING AS WELL AS GUIDED BY THE PROVISION OF SEC.309(5A) OF THE COMPANIES ACT, 1956. HE FURTHER HELD THAT THE AO HAD NOT VERIFI ED THE ELIGIBILITY / ALLOWABILITY OF THE REMUNERATION TO THE DIRECTORS WHICH WA S ALLOWABLE TO THE WORKING DIRECTOR. HE DIRECTED THE AO TO VERIFY AS TO WHETHER THE REMUNERATION WA S ALLOWABLE TO THE DIRECTORS AND SECONDLY WHETHER THESE REMU NE RATI ON WE RE WITHI N THE LIMIT PRESCRIBED BY THE COMPANIES ACT .HE HELD THAT IF THE DI RECTORS WE RE ALLOWED REMUNERATION AS PER THE COMPANY'S RESOLUTION AND WA S WITHIN THE LIMIT PRESCRIBED BY THE COMPANIES ACT,THE REMUNERATION COULD BE ALLOWED AS ELIGIBLE DEDUCTION. 4. BEFORE US,THE AUTHORISED REPRESENTATIVE ARGUED THAT THE FACT THAT I N AY 20 09 - 10 SIMILAR CLAIM HAD BEEN DISALLOWED WAS NOT ADEQUATE FOR RE - OPENING THE EARLIER YEARS ASSESSMENTS, THAT THERE WAS NO ALLEGATION BY THE AO TO THE EFFECT , THAT THERE WAS FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL THE MATERIAL FACTS NECESSARY FOR ASSESSMENT.HE RELIED UPON THE CAS ES OF OHM STOCK BROKERS P LTD. ( 351 ITR 443 ), CONVERTECH E QUIPMENTS OF DELHI HIGH C OURT (ITA669 OF 2012), M O NITOR INDIA P. LTD.( 252 CTR 78 ) , LYNX (INDIA) LIMITED ( 68 DTR 85 ) ; KELVINATOR INDIA LTD. (320 ITR 561). IT WAS FURTHER ARGUED THAT DURING THE ORIGINAL SCRUTINY ASSESSMENT DETAILS REGARDING PAYMENT TO THE DIRECTORS WAS MADE BY THE AO, THAT THE PAYMENT MADE TO THE DIRECTOR WAS THE SUBJECT MA TTER OF DISCUSSION WHEN THE DISALLOWANCE U/S. 14A WAS MADE BY THE AO, RELYING UPON LATER YEAR S DECISIONS AMOUNTED TO CHANGE OF OPINION. HE REFERRED TO DIRECTORS REPORT. HE FURTHER ARGUED THAT THE PAYMENT OF COMMISSION WAS AGAINST THE SERVICES RENDERED BY D IRECTORS, THAT SIMILAR PAYMENT OF COMMISSION AND REMUNERATION HAD BEEN ALLOWED SINCE 19 95 - 96 ON A CONTINUOUS BASIS UNDER SCRUTINY ASSESSMENT, THAT THE PROVISIONS OF S.36(1)(II) WERE NOT APPLICABLE AS THE REMUNERATION AND COMMISSION HAD BEEN PAID AS A TOTAL PACKAGE APPROVED BY THE BOARD OF DIRECTORS, THAT TDS HAD BEEN DULY DEDUCTED AND PAID TO GOVT., TREASURY, THAT IT WAS NOT A CASE OF PAYMENT IN WHICH PAYMENT WAS MADE IN LIEU OF DIVIDEND, THAT THE ASSESSEE HAD NOT PAID ALL THE SHARE HOLD DIRECTORS.DEPARTMEN TAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF THE AO AND THE FAA AND STATED THAT THE ASSESSEE HAD NOT DISCLOSED THE TRUE FACTS ABOUT THE COMMISSION PAID TO THE DIRECTORS, THAT THERE WAS NO CHANGE OF OPINION, THAT THE REOPENING WAS VALID. 5. A. WE HAVE HEAR D THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.BEFORE PROCEEDING FURTHER, WE WOULD LIKE TO MENTION CERTAIN PRINCIPLES THAT GOVERN THE RE - OPENING OF ASSESSMENT U/S. 147 OF THE ACT AND SAME CAN BE SUMMARISED AS UNDER: I. THE TWIN CONDITIONS REQUIR ED FOR REOPENING AN ASSESSMENT BEYOND THE PERIOD OF FOUR YEARS ARE THAT THERE MUST BE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT AND THAT SUCH ESCAPEMENT OF INCOME IS ON ACCOUNT OF OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS FOR ASSESSMENT OF THE INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION.IN OTHER WORDS,IN THE ABSENCE OF ANY SATISFACTION HAVING BEEN RECORDED BY THE AO,AS REQUIRED UNDER THE PROVISO TO SECTION 147 OF T HE ACT, THAT THE INCOME HAS ESCAPED ASSESSMENT BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ITS ASSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSUMPTION OF JURISDICTION UNDER SE CTION 147 OF THE ACT WOULD BE INVALID. II. FOR THE AO TO INVOKE THE PROVISIONS OF SECTION 147 OF THE ACT,THERE MUST BE MATERIAL FACTS BASED ON SOME REASONABLE BELIEF WHICH WOULD HAVE A MATERIAL BEARING ON THE QUESTION OF UNDER - ASSESSMENT. 6363 - AND ORS/MUM/13 MSPL - AY.S. 8 III. AS LONG AS IT CAN BE DEMONSTRATED THAT BOTH THE CONDITIONS WERE SATISFIED AND THAT THERE WAS MATERIAL BEFORE THE AO ON THE BASIS OF WHICH HE CAME TO SUCH A CONCLUSION IN WHAT MANNER IN THE REASONS RECORDED,HE CONVEYES THIS IS NOT MATERIAL. IV. WHILE ISSUING NOTICE FO R REOPENING AN ASSESSMENT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, IN A CASE WHERE ASSESSMENT WAS PREVIOUSLY FRAMED UNDER SECTION 143(3) OR SECTION 147,SEEKING APPROVAL OF THE COMMISSIONER BY THE AO IS A MUST. V. THE REQU IREMENT UNDER THE LAW IS THAT THE JOINT COMMISSIONER NEEDS TO BE SATISFIED ON THE REASONS RECORDED BY THE AO.CIRCULAR NO. 1 OF 2009, DATED 27.03.2009 STIPULATES THAT THE JOINT COMMISSIONER IS ONLY REQUIRED TO BE SATISFIED ON THE REASONS RECORDED BY THE AO AND NO NOTICE IS REQUIRED TO BE ISSUED BY HIM.COURTS HAVE HELD THAT TO AVOID ALLEGATIONS OF NON - APPLICATION OF MIND ALL THAT IS DESIRABLE IS THAT THE JOINT COMMISSIONER SHOULD BRIEFLY STATE HIS REASONS. VI. JUST BECAUSE HE HAS APPROVED THE PROPOSAL OF TH E AO BY WRITING YES TO THE REASONS RECORDED,THE NOTICE OF REOPENING ON THAT COUNT ALONE CANNOT FAIL HOLDING THAT THE ASSUMPTION OF JURISDICTION UNDER SECTION 147 IS INVALID, IF APPLICATION OF MIND IS DEMONSTRABLE FROM THE MATERIAL ON RECORD. VII. THE AO HAS THE POWER TO REOPEN THE ASSESSMENT,BUT SUCH REASSESSMENT CANNOT BE INITIATED ON A MERE CHANGE OF OPINION TO MERELY RE - EXAMINE AN ISSUE ON THE BASIS OF INFORMATION OR MATERIAL WHICH WAS ALREADY AVAILABLE TO THE AO AT THE TIME OF THE COMPLETION OF THE OR IGINAL ASSESSMENT. REASON TO BELIEVE COULD NEVER BE AN OUTCOME OF A CHANGE OF OPINION. CONSEQUENTLY, BEFORE TAKING ANY ACTION,HE IS REQUIRED TO SUBSTANTIATE HIS SATISFACTION IN THE REASONS RECORDED BY HIM. IF SUCH REASONS RECORDED DISCLOSE A MERE CHANGE OF OPINION THE ASSESSMENT PROCEEDINGS CANNOT BE INITIATED. VIII. ONCE THE AO HAS MADE AN ASSESSMENT ON THE PRIMARY FACTS AND DOCUMENTS PLACED BEFORE HIM, HE CANNOT AT ANOTHER POINT OF TIME FORM ANOTHER OPINION ON THE SAME PRIMARY FACTS AND ARRIVE AT A CONC LUSION THAT HE HAD COMMITTED AN ERROR OR COME TO A CONCLUSION THAT HE HAS NOW REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AND REOPEN THE ASSESSMENT PROCEEDINGS. IX. FURTHER, ON THE BASIS OF AN AUDIT REPORT, NOTICE UNDER SECTION 148 CANNOT BE ISSUE D AS SUCH AUDIT REPORT CANNOT BE REGARDED AS INFORMATION WITHIN THE MEANING OF 147(B) . X. MERELY BECAUSE IN THE REASONS RECORDED, THE AO DID NOT USE PARTICULAR WORDS AND PHRASES THAT WOULD NOT BE FATAL TO THE NOTICE OF REOPENING.WHAT WAS OF IMPORTANCE W AS THE SUBSTANCE AND NOT FORM. 5.B. 1. WE WOULD ALSO LIKE TO REFER TO THREE JUDGMENTS DEALING WITH THE ISSUE.FIRST OF THEM IS MATTER OF OHM STO CK BROKERS PVT.LTD.( 351 ITR 443) OF THE HONBLE MUMBAI HIGH COURT. FACTS OF T HE CASE WERE THAT THE ASSESSEE, FOR THE AY.S.2005 - 06 AND 2006 - 07, HAD BY LETTER S DATED 12.03.2007, AND 31.08.2007 PLACED ON THE RECORD BEFORE THE AO THE NATURE OF PAYMENTS, THE AGREEMENTS WITH THE TWO DIRECTORS IN PURSUANCE OF WHICH THEY WERE PAID A FIXED MONTHLY REMUNERATION AND A COMMISSION/P ERFORMANCE BONUS REPRESENTING 35 % OF THE NET PROFIT BEFORE TAXATION A S WELL AS THE A JUSTIFICATI ON FOR THE PAYMENT.THE AO WAS APPRISED BY THE ASSESSEE OF ALL THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT AND DID NOT MAKE ANY ADDITION.HE REOPENED THE ASSE SSMENTS AFTER FOUR YEARS ON THE GROUND THAT UNDER SECTION 36(1)(II) ONLY SUCH COMMISSION PAYMENTS ARE ALLOWED AS EXPENDITURE AS ARE FOR SERVICES RENDERED, WHERE SUCH SUM WOULD NOT HAVE BEEN PAYABLE TO HIM AS PROFITS OR DIVIDEND, IF IT HAD NOT BEEN PAID AS BONUS OR COMMISSION.DECIDING THE WRIT PETITIONS,THE HONBLE COURT HELD AS UNDER: UNDER THE PROVISO TO SECTION 147 OF THE INCOME TAX ACT, 1961, WHERE AN ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3) ,THE VALIDITY OF REOPENING IT BEYOND FOUR YEARS OF T HE END OF THE RELEVANT ASSESSMENT YEAR IS PRE CONDITIONED BY THE REQUIREMENT THAT THERE IS A FAILURE ON THE PART 6363 - AND ORS/MUM/13 MSPL - AY.S. 9 OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THAT ASSESSMENT YEAR. THERE MUST BE A FAILURE ON TH E PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE MATERIAL FACTS FOR THE ASSESSMENT FOR THE JURISDICTION OF THE ASSESSING OFFICER TO BE INVOKED. THOUGH THE POWER OF THE ASSESSING OFFICER TO REOPEN AN ASSESSMENT WITHIN A PERIOD OF FOUR YEARS IS INDISPUTABL Y WIDER THAN WHEN AN ASSESSMENT IS SOUGHT TO BE REOPENED BEYOND FOUR YEARS, THE POWER IS NONE THE LESS NOT UNBRIDLED. AFTER THE AMENDMENT, WHICH WAS BROUGHT IN BY THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, WITH EFFECT FROM APRIL 1, 1989, THE ASSESSING OFFI CER MUST HAVE REASON TO BELIEVE THAT INCOME HAS ESCAPED THE ASSESSMENT. AT THE SAME TIME, THE ASSESSING OFFICER IS NOT CONFERRED WITH THE POWER TO REVIEW AN ASSESSMENT AND HE CANNOT REOPEN AN ASSESSMENT ONLY BECAUSE OF A MERE CHANGE IN THE OPINION. THE ASS ESSING OFFICER MUST, IN OTHER WORDS, HAVE TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME ... THAT THE ASSESSING OFFICER HAD STATED THAT A PAYMENT MADE TO A SHAREHOLDER WOULD NOT BE COVERED BY SECTION 36(1)(II) TO BE ELIGIBLE FOR DEDUCTION AS THE PAYMENT COULD HAVE BEEN MADE TO A DIRECTOR WHO IS A SHAREHOLDER AS DISBURSEMENT OF PROFIT OR DIVIDEND. THESE REASONS WERE NOT POSTULATED ON THERE BEING ANY SUPPRESSION ON THE PART OF THE ASSESSEE OR A FAILURE ON THE PART OF THE ASSESSE E TO STATE FULLY AND TRULY ALL MATERIAL FACTS NECES SARY FOR THE ASSESSMENT. ADMITTEDLY, FOR THE ASSESSMENT YEAR 2006 07, THE POSITION WAS THE SAME. HENCE, FOR THESE REASONS, THE REOPENING OF THE ASSESSMENTS FOR THE ASSESSMENT YEARS 2005 06 AND 2006 07 DID NOT FULFIL THE REQUIREMENT SET OUT IN THE PROVISO TO SECTION 147 AND THE NOTICES OF REOPENING WOULD ACCORDINGLY HAVE TO BE QUASHED AND SET ASIDE ..... ...... THE MERE FACT THAT THE ORDER OF ASSESSMENT DID NOT SPECIFICALLY DEAL WITH THE ISSUE AS TO WHE THER THE PAYMENT FELL WITHIN THE PURVIEW OF SECTION36(1)(II)WAS NOT DISPOSITIVE. THE TEST IS AS TO WHETHER THE ASSESSEE HAD FURNISHED TO THE ASSESSING OFFICER ALL THE PRIMARY FACTS ON THE BASIS OF WHICH A DEDUCTION WAS CLAIMED IN RESPECT OF THE COMMISSION THAT WAS PAID TO THE TWO DIRECTORS FOR SERVICES RENDERED. THE ASSESSEE HAD SPECIFICALLY PLACED BEFORE THE ASSESSING OFFICER BY ITS LETTER DATED SEPTEMBER 4, 2009, COPIES OF THE AGREEMENTS DATED JUNE 16, 2005, BETWEEN THE ASSESSEE AND ITS DIRECTORS IN PURSU ANCE OF WHICH REMUNERATION WAS PAID TO THEM FOR THE ASSESSMENT YEAR 2007 08 WHICH INCLUDED THE PAYMENT OF COMMISSION. THE ATTENTION OF THE ASSESSING OFFICER WAS CLEARLY AND SPECIFICALLY DRAWN TO THE QUANTUM OF THE FIXED MONTHLY REMUNERATION AND IN ADDITION TO THE PAYMENT OF COMMISSION WHICH WAS COMPUTED AT A STIPULATED PROPORTION OF THE NET PROFITS. THE ASSESSEE EXPLAINED THE BASIS ON WHICH A DECISION WAS TAKEN TO MAKE THE PAYMENT OF COMMISSION AT A FIXED MONTHLY REMUNERATION AND THE REST AT A PROPORTION OF THE NET PROFITS. ACCORDING TO THE ASSESSEE, THIS DECISION WAS BASED ON THE VOLATILITY OF THE STOCK MARKET AND HAVING REGARD TO THE FACT THAT THE INCOME OF THE ASSESSEE FROM SHARE BUSINESS HAD REDUCED AND IN FACT, IT WAS RS. 35.51 CRORES IN COMPARISON TO T HE INCOME OF RS. 57.07 CRORES FOR THE PREVIOUS YEAR. THIS WAS, THEREFORE, A CASE WHERE THE NATURE OF THE PAYMENT, THE BASIS OF THE COMPUTATION AND THE RATIONALE FOR COMPUTING THE REMUNERATION TO THE TWO DIRECTORS WITH REFERENCE TO A FIXED REMUNERATION IN P ART AND A PROPORTION OF THE NET PROFITS IN BALANCE WAS BROUGHT IN FOCUS BEFORE THE ASSESSING OFFICER. HENCE, ALL THE PRIMARY FACTS FOR THE PURPOSE OF A DEDUCTION UNDER SECTION 36(1)(II)WERE PLACED BEFORE THE ASSESSING OFFICER. THE ORDER OF ASSESSMENT UNDER SECTION 143(3)ACCEPTED THE CLAIM ON THIS ISSUE. THERE WAS NO DISPUTE THAT THE TWO DIRECTORS HAD BEEN ASSESSED UNDER SECTION 143(3)ON THE AMOUNTS PAID BY THE ASSESSEE TO THEM. THE REVENUE HAD ADMITTEDLY TREATED THE AMOUNTS PAID TO THE DIRECTORS AS SALARY I NCOME IN THEIR HANDS AND THEIR ASSESSMENTS HAD BEEN COMPLETED ACCORDINGLY. THEREFORE, THE REOPENING OF THE ASSESSMENTS FOR THE ASSESSMENT YEAR 2007 08 MUST BE HELD TO BE BASED ON A PURE CHANGE OF OPINION AND NOT ON TANGIBLE MATERIAL. SINCE THE REOPENING OF THE ASSESSMENT FOR THE ASSESSMENT YEAR 2008 09 WAS ALSO ON SIMILAR GROUNDS THE REOPENING WAS CONTRARY TO LAW AND THE NOTICES FOR BOTH YEARS WERE LIABLE TO BE SET ASIDE. 6363 - AND ORS/MUM/13 MSPL - AY.S. 10 5.B.2. IN THE CASE OF VOLTAS LTD.(349ITR656)THE HONBLE JURISDICTIONAL HIGH COURT HAS ALSO DEALT WITH THE IDENTICAL ISSUE AND HAS HELD AS UNDER: WHILE A SUBSEQUENT DECISION OF A COURT OR A LEGISLATIVE AMENDMENT ENFORCED AFTER THE ORDER OF ASSESSMENT MAY LEGITIMATELY GIVE RISE TO AN INFERENCE OF AN ESCAPEMENT OF INCOME, BEFORE THE ASSESSING OFFICER PROCEEDS TO REOPEN AN ASSESSMENT AFTER THE EXPIRY OF FOUR YEARS OF THE END OF THE RELEVANT ASSESSMENT YEAR, HE MUST NONE THE LESS APPLY HIS MIND TO THE FUNDAMENTAL QUESTION AS TO WHETHER THERE HAS BEEN A FAILURE TO DISCLOSE ON THE PART OF THE ASSE SSEE........ THERE WAS NO ALLEGATION THAT THE ASSESSEE HAD FAILED TO DISCLOSE MATERIAL FACTS NECESSARY FOR ASSESSMENT. MOREOVER, THE RETURN OF INCOME AND THE MATERIAL PLACED ON THE RECORD BY THE ASSESSEE TOGETHER WITH THE RETURN WOULD MAKE IT ABUNDANTLY CL EAR THAT THE ASSESSEE HAD SET FORTH THE BASIS OF ITS CLAIM AND THERE WAS NO SUPPRESSION OF MATERIAL FACTS. FACTS OF THE CASE WERE THAT THE BASIS FOR REOPENING THE ASSESSMENT WAS CONFINED TO TWO ISSUES. THE FIRST ISSUE WAS THAT THE ASSESSEE SET OFF UNABSO RBED DEPRECIATION FOR THE AY.1994 - 95 AMOUNTING TO RS. 25.81 CRORES IN THE AY.2004 - 05.SUBSEQUENTLY THE SPECIAL BENCH OF THE TRIBUNAL HELD THAT UNABSORBED DEPRECIATION FOR THE PERIOD UP TO 1996 - 97 COULD BE CARRIED FORWARD AND SET OFF AGAINST THE INCOME FROM A NY HEAD FOR A MAXIMUM PERIOD OF EIGH T AY.S.HENCE, ACCORDING TO THE AO, THE SET OFF OF UNABSORBED DEPRECIATION FOR THE AY. 1994 - 95 AGAINST THE INCOME OF THE AY.2004 - 05 WAS NOT IN ACCORDANCE WITH LAW AND, CONSEQUENTLY, INCOME HAD ESCAPED ASSESSMENT. THE SECON D ISSUE IN RELATION TO WHICH THE ASSESSMENT WAS REOPENED WAS THAT WHILE GIVING EFFEC T TO THE ORDER OF THE TRIBUNAL, INCOME WAS COMPUTED UNDER SECTION 115JB WITHOUT ANY ADDITION ON ACCOUNT OF PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENT AND PROVISION FOR DOUBTFUL DEBTS/ AD VANCES. IN THIS REGARD RELIANCE HAD BEEN PLACED ON A SUBSEQUENT AMENDMENT MADE BY THE FINANCE (NO. 2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 01. 04. 2001.ACCORDING TO THE AO, SINCE THE AMENDMENT TO SECTION 115JB HAD BEEN BROUGHT ABOUT WITH RETROSPECTIVE EF FECT FROM APRIL 2001, HE WAS IPSO FACTO ENTITLED TO ISSUE A NOTICE UNDER SECTION 148 SINCE THE RELEVANT INCOME BY WAY OF DIMINUTION IN THE VALUE OF ASSETS/INVESTMENTS WHICH WAS REQUIRED TO BE ADDED BACK HAD NOT BEEN BROUGHT TO TAX. THE HONBLE COURT HELD THAT THE FUNDAMENTAL CONDITION FOR REOPENING THE ASSESSMENT BEYOND A PERIOD OF FOUR YEARS HAD NOT BEEN FULFILLED AND THAT THE NOTICE WAS NOT VALID AND WAS LIABLE TO BE QUASHED. 5.B.3. LASTLY WE WOULD LIKE TO DISCUSS THE MATTER OF JAGRAN PRAKASHAN LTD. ( 367 ITR 534 ) OF HONBLE ALLAHABAD HIGH COURT.IN THAT MATTER T HE ASSESSEE WAS CARRYING ON THE BUSINESS OF PUBLISHING A HINDI NEWSPAPER. THE AO IN HIS ORIGINAL ASSESSMENT EXAMINED THE ISSUE OF FIXATION OF THE PURCHASE CONSIDERATION IN DETAIL, W HICH HAD BEEN RECORDED IN THE OFFICE NOTE DATED 16. 03. 1998. AFTER MAKING DETAILED INQUIRIES HE FOUND THAT THE QUANTUM OF PURCHASE CONSIDERATION WAS A PURE BUSINESS TRANSACTION AND THAT THE VALUATION OF RS. 17 CRORES FOR THE COPYRIGHT WAS REASONABLE AND TH AT NO GIFT APPEARED TO BE INVOLVED. THE AO INITIATED REASSESSMENT PROCEEDINGS UNDER SECTION 148 ON THE BASIS OF THE AUDIT REPORT. IT WAS INDICATED THAT AN AMOUNT OF RS. 1.2 CRORES HAD BEEN DISCLOSED AS EXPENSES UNDER SECTION 35A BEING ONE - FOURTEENTH COST O F RS. 17 CRORES, WHICH WAS THE COST OF COPYRIGHT FOR THE USE FOR ITS BUSINESS PURPOSES, THAT THE ASSESSEE PERMITTED OTHER COMPANIES TO PUBLISH THE HINDI NEWSPAPER WITHOUT ANY CONSIDERATION, THAT THE ASSESSEE WAS NOT CHARGING ANY AMOUNT ON THE USE OF THE SA ME COPYRIGHT FROM THESE COMPANIES AND, CONSEQUENTLY, PRIMA FACIE THE EXPENSES OF RS. 1.2 CRORES HAD NOT BEEN USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEES BUSINESS UNDER SECTION 37(1) AND, CONSEQUENTLY, THE ASSESSEE WAS NOT ENTITLED TO CLAIM THE TOTAL EXPENSES OF RS. 1.2 CRORES AS DEBITED IN HIS PROFIT OF LOSS ACCOUNT, THAT THE ASSESSEE PAID SOME AMOUNT OF TAX DEDUCTION AT SOURCE AFTER DUE DATE ON WHICH INTEREST UNDER SECTION 201(1A) WAS TO BE PAID, WHICH HAD NOT BEEN CHARGED. ON THIS BASIS, THE A O WAS OF THE 6363 - AND ORS/MUM/13 MSPL - AY.S. 11 OPINION THAT THERE WERE REASONS TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT FOR THE ASSESSMENT YEAR 1997 - 98. ON A WRIT PETITION THE HONBLE HIGH COURT HELD AS UNDER: FOR THE ASSESSING OFFICER TO HAVE REASON TO BELIEVE THAT THERE HAD BE EN SOME OMISSION OR FAILURE TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT THERE MUST BE MATERIAL FACTS BASED ON SOME REASONABLE BELIEF WHICH WOULD HAVE A MATERIAL BEARING ON THE QUESTION OF UNDERASSESSMENT. IF THERE IS NO MATER IAL FOR THE FORMATION OF ANY BELIEF OR WHERE THE PURPORTED BELIEF WAS NOTHING BUT A MERE CHANGE OF OPINION, IN THAT CASE, HE WOULD HAVE NO JURISDICTION TO INITIATE PROCEEDINGS UNDER SECTION 147 AND SECTION 148 OF THE INCOME TAX ACT, 1961. HE HAS THE POWER TO REOPEN THE ASSESSMENT WHERE HE HAS REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BUT SUCH REASSESSMENT CANNOT BE INITIATED ON A MERE CHANGE OF OPINION TO MERELY RE EXAMINE AN ISSUE ON THE BASIS OF INFORMATION OR MATERIAL WHICH W AS ALREADY AVAILABLE TO THE ASSESSING OFFICER AT THE TIME OF THE COMPLETION OF THE ORIGINAL ASSESSMENT. REASON TO BELIEVE COULD NEVER BE AN OUTCOME OF A CHANGE OF OPINION.CONSEQUENTLY,BEFORE TAKING ANY ACTION, HE IS REQUIRED TO SUBSTANTIATE HIS SATISFACT ION IN THE REASONS RECORDED BY HIM. IF SUCH REASONS RECORDED DISCLOSE A MERE CHANGE OF OPINION THE ASSESSMENT PROCEEDINGS CANNOT BE INITIATED. ONCE THE ASSESSING OFFICER HAS MADE AN ASSESSMENT ON THE PRIMARY FACTS AND DOCUMENTS PLACED BEFORE IT, THE ASS ESSING OFFICER CANNOT AT ANOTHER POINT OF TIME FORM ANOTHER OPINION ON THE SAME PRIMARY FACTS AND ARRIVE AT A CONCLUSION THAT HE HAD COMMITTED AN ERROR OR COME TO A CONCLUSION THAT HE HAS NOW REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT AND REOPEN THE ASSESSMENT PROCEEDINGS. FURTHER, ON THE BASIS OF AN AUDIT REPORT, NOTICE UNDER SECTION 148 CANNOT BE ISSUED AS SUCH AUDIT REPORT CANNOT BE REGARDED AS INFORMATION WITHIN THE MEANING OF 147(B) THE REASONS RECORDED BY THE ASSESSING OFFICER NOWHERE ST ATED THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT FOR THAT ASSESSMENT YEAR. ON THE OTHER HAND, IN PROCEEDINGS UNDER SECTION 143(3) THE ASSESSEE HAD DISCLOSED ALL THE PRIMAR Y FACTS RELEVANT TO THE DECISION ON THE QUESTION OF THE CONSIDERATION PAID FOR PURCHASE OF COPYRIGHT BEFORE THE ASSESSING OFFICER. THE ASSESSING OFFICER HAD MADE A DETAILED DISCUSSION AND RECORDED A DETAILED NOTE WHEREIN THE QUANTUM OF PURCHASE CONSIDERATI ON WAS EXAMINED IN DETAIL. NO NEW FACTS HAD COME TO LIGHT OTHER THAN THE FACTS DISCLOSED BY THE ASSESSEE. ONCE ALL THE PRIMARY FACTS HAD BEEN DISCLOSED, THE ASSESSEE WAS NOT REQUIRED TO PROVIDE ANY FURTHER ASSISTANCE. IT WAS FOR THE ASSESSING OFFICER TO AS SIMILATE THE PRIMARY FACTS DISCLOSED BY THE ASSESSEE AND DRAW INFERENCES, WHICH COULD BE REASONABLY DRAWN. THE ENTIRE MATERIAL HAD BEEN PLACED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AT THE TIME WHEN THE ORIGINAL ASSESSMENT WAS MADE AND THE ASSESSING OFFICER HAD APPLIED HIS MIND TO THAT MATERIAL AND ACCEPTED THE CONTEN TION CANVASSED BY THE ASSESSEE. THE ASSESSING OFFICER HAD DEALT WITH THE AUDIT REPORT AND JUSTIFIED HIS ASSESSMENT ORDER INDICATING IN HIS ORDER THAT THE ISSUE PERTAINING TO DEEMED GIFT AN D THE PURCHASE CONSIDERATION WAS EXAMINED IN DETAIL LOOKING TO THE BUSINESS NECESSITY FOR THE ASSESSEE TO ACQUIRE THE COPYRIGHT AND HELD THAT THE QUANTUM OF PURCHASE CONSIDERATION AS DISCLOSED BY THE ASSESSEE WAS REASONABLE AND WAS A TRUE BUSINESS TRANSACT ION AND THAT NO GIFT WAS FOUND TO BE INVOLVED. THEREFORE, THE NOTICE ISSUED BY THE ASSESSING OFFICER UNDER SECTION 148 WAS WHOLLY ILLEGAL AND HAD BEEN ISSUED WITHOUT ANY APPLICATION OF MIND AND WAS QUASHED. 5.C. THERE IS NO DOUBT THE REASSESSMENT NOTICE WA S ISSUED AFTER FOUR YEARS FOR AY.UNDER APPEAL, THAT THE PROVISIONS OF PROVISO TO SECTION 147 WERE APPLICABLE TO THE CASE,THAT THE AO HAD NOT MENTIONED THAT THE FAILURE OF THE ASSESSEE TO DISCLOSE THE RELEVANT AND MATERIAL FACTS LED TO UNDER ASSESSMENT OR E SCAPEMENT OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION.FROM THE REASONS RECORDED THE BELIEF OF ASSESSEE IN FAILURE OF THE ASSESSEE IS NOT EMERGING.THE FAA HAS ALSO NOT DEALT WITH THE ISSUE AT ALL.THE OPERATIVE PART OF THIS ORDER READS AS UNDER: I N VIEW OF THE FOREGOING,I FIND THAT THE ISSUANCE OF NOTICES U/S.148 BY THE AO IS IN ORDER AND NO INTERFERENCE IS THEREFORE CALLED FOR.THIS GROUND OF APPEAL IS ACCORDINGLY, DISMISSED. 6363 - AND ORS/MUM/13 MSPL - AY.S. 12 NOWHERE HE HAD DISCUSSED AS TO HOW THE FACTS OF THE CASES RELIED UPON BY HIM WERE APPLICABLE TO THE FACTS OF THE CASE UNDER APPEAL.IN THESE CIRCUMSTANCES,IN OUR OPINION,THE ORDER OF THE FAA IS NOT A SPEAKING ORDER.HE HAD NOT DEALT WITH THE OBJECTIONS RAISED BY THE ASSESSEE.AS THE BASIS FOR ENDORSING THE REOPENING AFTER FOUR YE ARS IS MISSING,SO,WE ARE REVERSING HIS ORDER.WE HOLD THAT THE ORDER PASSED BY THE AO AND UPHELD BY THE FAA WAS NOT A VALID ORDER,AS THE TWIN CONDITIONS OF REOPENING OF THE MATTER,AFTER A PERIOD OF FOUR YEARS,WERE MISSING.EFFECTIVE GROUND OF APPEAL FILED BY THE ASSESSEE IS DECIDED IN ITS FAVOUR. AS WE HAVE HELD THAT THE ASSESSMENT ORDER FOR THE AY.UNDER APPEAL WAS NOT VALID,THEREFORE WE ARE NOT ADJUDICATING THE SECOND GROUND RAISED BY THE ASSESSEE. ITA./6364/MUM/2013 - AY.200 6 - 0 7: 6. FACTS AND CIRCUMSTANCES OF THE CASE FOR THE AY.UNDER APPEAL ARE IDENTICAL TO THE FACTS OF THE EARLIER AY. - THE ONLY DIFFERENCE IS ABOUT THE AMOUNT OF COMMISSION.THEREFORE,FOLLOWING OUR ORDER FOR AY.2005 - 06,WE HOLD THE ORDER OF THE AY. UNDER CONSIDERATION WAS INVALID. GROUND NO.1 IS D ECIDED IN FAVOUR OF THE ASSESSEE.IN PURSUANCE OF OUR ORDER FOR IMMEDIATE PRECEDING YEAR,WE ARE NOT ADJUDICATING SECOND GROUND. ITA./6365/MUM/2013 - AY.200 7 - 0 8: 7 . THE FIRST EFFECTIVE GROUND IS ABOUT REOPENING OF THE ASSESSMENT.REASONS RECORDED BY THE AO ARE IDENTICAL TO THE REASONS RECORDED FOR EARLIER YEARS,BUT THE MAJOR DIFFERENCE IS THAT THE REOPENING OF THE AY.UNDER APPEAL IS WITHIN THE PERIOD OF FOUR YEARS.THE ASSESSEE HAD ARGUED THAT THE REOPENING WAS RESULT OF CHANGE OF OPINION.HOWEVER,THE FAA DISMISS ED THE APPEAL FILED BY THE ASSESSEE ON THE SIMILAR REASONS THAT HAVE BEEN NARRATED IN THE EARLIER PART OF OUR ORDER. 8 . BEFORE US,THE AR STATED THAT THE AO CALLED FOR THE DETAILS OF DIRECTORS REMUNERATION FOR MAKING DISALLOWANCE U/S.14 A OF THE ACT,THAT THE ASSESSEE HAD SUPPLIED THE NECESSARY DETAILS TO THE AO,THAT HE HAD APPLIED HIS MIND AND HAD TAKEN AN INFORMED DECISION,THAT BOARD RESOLUTION WAS AVAILABLE WITH THE AO,THAT NO NEW FACT HAD EMERGED,THAT ORDERS FOR EARLIER YEARS WERE PASSED U/S.143(3) OF THE FACT,THAT WHILE PASSING ORDER FOR THE AY2009 - 10 HE RELIED UPON THE DECISION OF THE SPECIAL BENCH AND HAD REOPENED THE ASSESSMENT,THAT FOR RE OPENING AN ASSESSMENT WITHIN A PERIOD OF FOUR YEARS REASONS TO BELIEVE THAT TAXABLE INCOME HAD ESCAPED ASSESSMENT H AS TO BE PROVED,THAT THERE WAS NO EVIDENCE TO PROVE THE PRIMARY FACTS THAT THERE WAS UNDER ASSESSMENT OF INCOME OF ESCAPEMENT OF INCOME.HE REFERRED TO THE CASES THAT FIND PLACE AT PARA NO.4 OF OUR ORDER. 9 .WE FIND THAT WHILE COMPLETING THE ORIGINAL ASSESSM ENT,THE AO HAD CALLED FOR INFORMATION ABOUT COMMISSION PAYMENT AND HAD CONSIDERED IT WHILE COMPUTING THE DISALLOWANCE TO BE MADE UNDER SECTION 14A OF THE ACT.AT THAT TIME IF HE DID NOT INVOKE THE PROVISIONS OF SECTION 36(1)(II)THEN IT HAS TO BE PRESUMED TH AT HE HAD APPLIED HIS MIND AND HAD TAKEN A CONSCIOUS DECISION ABOUT THE DISPUTED ITEM.IT IS NOT THE CASE OF THE AO OR THE FAA THAT MATERIAL WAS NOT AVAILABLE AT THE TIME OF THE ORIGINAL ASSESSMENT.THE AO HAS REVIEWED HIS ORIGINAL ORDER AND IN OUR OPINION I N THE REASSESSMENT PROCEEDINGS IT IS NOT PERMISSIBLE.WE FIND THAT THE AO AND THE FAA HAVE HEAVILY RELIED ON THE ORDER OF THE DALAL BROACHA STOCK BROKERS PVT.LTD. IN OUR OPINION,THE ISSUE OF REOPENING OF COMPLETED ASSESSMENT IN LIGHT OF A SUBSEQUENT JUDGMENT OF HIGHER JUDICIAL FORUM HAS BEEN DEALT IN GREAT LENGTH BY US IN THE EARLIER PART OF THE ORDER.FOLLOWING THE SAME,WE HOLD THAT ACTION TAKEN BY THE AO U/S.147OF THE ACT WITH REGARD TO THE COMMISSION PAYMENT MADE TO THE DIRECTOR IS INVALID.EVEN ON MERITS TH E ISSUE IS COVERED BY THE JUDGMENT OF OHM STO CK 6363 - AND ORS/MUM/13 MSPL - AY.S. 13 BROKERS PVT.LTD. (SUPRA).WE FIND THAT FACTS OF THE JUDGMENT ARE ALMOST SIMILAR TO THE FACTS OF THE PRESENT APPEAL.THEREFORE,IN OUR OPINION,THE ORDER OF THE FAA HAS TO BE REVERSED.EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE AS WE ARE OF THE OPINION THAT THE REASSESSMENT ORDER IS NOT VALID. AS WE HAVE HELD THE PROCEEDINGS OF SECTION 147 INVALID,SO,WE ARE NOT DECIDING THE SECOND GROUND OF APPEAL. ITA./636 6 /MUM/2013 - AY.200 8 - 0 9: 1 0 .GROUNDS OF APPEAL FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THE GROUNDS OF EARLIER AY. THE ONLY DIFFERENCE IS ABOUT THE COMMISSION AMOUNT INVOLVED.FOLLOWING OUR ORDER FOR THE THE IMMEDIATE PAST AY. W E DECIDE GROUND NO.1 IN FAVOUR OF THE ASSESSEE AND HOLD TH AT THE REASSESSMENT PROCEEDINGS WERE INVALID.GROUND NO. 2 IS NOT BEING ADJUDICATED. ITA./ 17 - 18 /MUM/201 - AY.200 5 - 0 6 & 20 06 - 07: 1 1 . EFFECTIVE GROUND OF APPEAL,RAISED BY THE AO IN BOTH THE AY.S.IS ABOUT DIRECTION GIVEN BY THE FAA TO THE AO ABOUT CONSIDERING THE PROVISIONS OF COMPANYS ACT AND ALLOW REMUNERATION ACCORDINGLY.WHILE DECIDING THE APPEAL FOR ABOVE MENTIONED TWO AY.S.WE HAVE HELD THAT THE REASSESSMENT PROCEEDINGS WERE INVALID AS THE AO HAD NOT PROVED THE FAILURE OF THE ASSESSEE IN DISCLOSING TRUE AND F ULL MATERIAL FACTS.THEREFORE,GROUNDS OF APPEAL TAKEN BY THE AO FOR BOTH THE YEARS ARE DECIDED AGAINST HIM. ITA./ 19 - 20 /MUM/201 - AY.200 7 - 0 8 & 20 08 - 09: 1 2 . WHILE DECIDING THE APPEALS FILED BY THE ASSESSEE FOR THE ABOVE TWO AY.S.WE HAVE HELD THAT THE REOPENING WAS RESULT OF CHANGE OF OPINION AND THEREFORE PROCEEDING INITIATED BY THE AO WERE INVALID. FOLLOWING THE SAID ORDERS, WE DECIDE THE EFFECTIVE GROUNDS OF APPEAL AGAINST HIM. AS A RESULT APPEAL S OF THE ASSESSEE STAND ALLOWED A ND THE APPEALS OF THE AO ARE DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND JULY,2015. 22 ND , 2015 SD/ - SD/ - ( / JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTA NT MEMBER / MUMBAI, /DATE: 22 .0 7 .2015 . . . JV. SR.PS. 6363 - AND ORS/MUM/13 MSPL - AY.S. 14 / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONC ERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.