West Bengal Essential Commodities Supply Corporation Ltd, Kolkata V. C.I.T - VIII,kolkata, Kolkata

ITA 909/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4532 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 2 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 01-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 23-04-2013
• Court: TRIBUNAL
• Department Lawyers: NIRAJ KUMAR
• Assessee Lawyers: B C JAIN
• Keywords: Reopening of assessment; Search and seizure; Audit objection; Question of law; Tangible material; Difference of opinion; Assessment record; Tax effect; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 115JB; 37(1); 147; 148; 263; 154; 139

Judgement Text

1 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH B KOL KATA [BEFORE HONBLE SHRI N.V.VASUDEVAN, JM & SHRI M.B ALAGANESH, AM ] ITA NO.909/KOL/2013 ASSESSMENT YEAR : 2005-06 WEST BENGAL ESSENTIAL COMMODITIES -VERSUS- J.C.I.T ..(OSD) TO SUPPLY CORPORATION LTD., KOLKATA C.I.T.-III,KOL KATA (PAN:AAACW 2985 M) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI B.C.JAIN, AR FOR THE RESPONDENT: SHRI NIRAJ KUMAR, CIT(DR) DATE OF HEARING : 01.06.2016. DATE OF PRONOUNCEMENT : ORDER PER N.V.VASUDEVAN, JM: THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 25.02.2013 OF CIT(A) VIII, KOLKATA, RELATING TO AY 2005-06. 2. GROUNDS NO.1 TO 4 RAISED BY THE ASSESSEE READS AS FOLLOWS: 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE ID CIT [ A ] ERRED IN LAW IN UPHOLDING THE ACTION OF THE ID A.O AS IN CONFORMITY OF LAW IN REOPENING THE ASSESSMENT. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID CIT[A] ERRED IN HOLDING THAT THE GROUND NO 1 TAKEN BEFORE HIM WAS GENERAL IN NAT URE AND THEREBY NOT ADJUDICATING THEREON WHEREIN THE APPELLANT CHALLENGED THE EXPART E ASSESSMENT MADE BY THE ID A.O. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID CIT[A] ERRED IN HOLDING THAT THE GROUND NO 3 TAKEN BEFORE HIM RELATED TO ASSUMPT ION OF JURISDICTION UNDER SEC 148 , WHEREAS THE APPELLANT HAS CHALLENGED THE COMPLETION OF REASSESSMENT BY THE ID A.O WITHOUT FURNISHING THE REASONS RECORDED FOR REOPENI NG THE ASSESSMENT. 4. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID CIT[A] ERRED IN HOLDING THAT THE GROUND NO 4 TAKEN BEFORE HIM RELATED TO ASSUMPT ION OF JURISDICTION UNDER SEC 148 , WHEREAS THE APPELLANT HAS CHALLENGED THE COMPLETION OF REASSESSMENT BY THE ID A 0, AS BARRED BY LIMITATION. 2 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 3. THE ASSESSEE WAS INCORPORATED BY THE GOVERNMENT OF WEST BENGAL WITH AN OBJECTIVE OF SUPPLYING ESSENTIAL COMMODITIES IN THE STATE WITH A VIEW TO STABILIZE THE MARKET PRICE AS WELL AS TO ENSURE THE AVAILABILITY OF SUCH COMMODITIES TO THE PEOPLE OF STATE. 4. FOR AY 2005-06, THE ASSESSEE DID NOT FILE ANY R ETURN OF INCOME ON OR BEFORE THE DUE DATE U/S.139(1) OF THE INCOME TAX ACT, 1961 (AC T). A NOTICE U/S.148 OF THE ACT WAS ISSUED ON 29.1.2008. IN RESPONSE TO THE SAME T HE ASSESSEE FILED RETURN OF INCOME ON 1.2.2008 DECLARING TOTAL INCOME OF RS.41,78,301 /-. AN ORDER OF ASSESSMENT U/S.143(3) READ WITH SEC.147 OF THE ACT WAS PASSED ON 23.12.2008 DETERMINING THE TOTAL INCOME OF THE ASSESSEE UNDER THE NORMAL PROVI SIONS OF THE ACT AT NIL. THE TOTAL INCOME WAS DETERMINED ON THE BASIS OF BOOK PROFIT AS PER SECTION 115JB OF THE ACT OF RS.47,35,090/-. 5. ON 23.3.2011 THE AO ISSUED ANOTHER NOTICE U/S.1 48 OF THE ACT DATED 23.3.2011 INFORMING THE ASSESSEE THAT HE HAS REASON TO BELIEV E THAT INCOME CHARGEABLE TO TAX FOR AY 2005-06 HAS ESCAPED ASSESSMENT WITHIN THE MEANIN G OF SEC.147 OF THE ACT AND THEREFORE THE AO PROPOSE TO RE-ASSESS THE INCOME FO R THE SAID AY. THE AO CALLED UPON THE ASSESSEE TO FILE RETURN OF INCOME IN RESPO NSE TO THE SAID NOTICE. BEFORE ISSUE OF NOTICE U/S.148 OF THE ACT, THE AO HAS RECORDED T HE FOLLOWING REASONS FOR PROCEEDING U/S.147 OF THE ACT. IN RESPONSE TO NOTICE U/S.148, THE ASSESSEE COMPAN Y M/S. WEST BENGAL ESSENTIAL COMMODITIES SUPPLY CORPORATION LTD. (PAN: AAACW2986 M) FILED ITS RETURN OF INCOME FOR THE ABOVE ASSESSMENT YEAR ON 01-02-2008 DECLARING A TOTAL INCOME OF RS.41,78,301/-. THE ASSESSMENT WAS COMPLETED VIDE O RDER U/S.143(3)/147 DATED 2312- 2008 ON A TOTAL INCOME OF RS. NIL BUT CALCULATION O F TAX WAS MADE ON A BOOK PROFIT OF RS.47,35,090/- U/S.115JB OF I. T. ACT, 1961 AND REF UND OF RS.73,99,016/- WAS ISSUED VIDE CHEQUE NO.980315 DATED 11-05-2009. ON SCRUTINY OF ASSESSMENT RECORDS FOR THE ABO VE ASSESSMENT YEAR, IT IS REVEALED THAT THE ASSESSEE WAS ENGAGED IN TRADING OF ESSENTIAL CO MMODITIES AS PER DIRECTION OF THE GOVT. OF WEST BENGAL. DURING THIS FINANCIAL YEAR TH E ASSESSEE DEBITED RS.110,94,58,668/- TOWARDS CARRIAGE INWARD IN RESPE CT OF PURCHASE OF 569,29,90,826/-, WHEREAS AN AMOUNT OF RS.2,06,43,162/- ONLY WAS INCU RRED FOR CARRIAGE INWARD DURING FINANCIAL YEAR 2003-04 FOR PURCHASE OF RS.469,35,73 ,464/-. IN VIEW OF THE ABOVE THIS OMISSION RESULTED I N UNDERASSESSMENT OF INCOME OF RS. 108,44,80,442/- WITH CONSEQUENTIAL TAX EFFECT OF RS .39,68,38,505/-. 3 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 THUS, I HAVE REASON TO BELIEVE THAT INCOME CH ARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 6. THE ASSESSEE IN RESPONSE TO THE NOTICE U/S.148 OF THE ACT, THE ASSESSEE REQUESTED THE AO TO TREAT THE RETURN ALREADY FILED IN RESPONS E TO THE FIRST NOTICE U/S.148 OF THE ACT DATED 29.1.2008, AS A RETURN FILED IN RESPONSE TO T HE SECOND NOTICE U/S.148 OF THE ACT, DATED 23.3.2011. THE AO PASSED AN ORDER U/S.144 OF THE ACT (BEST JUDGMENT ASSESSMENT) ON 30.12.2011 AND THE REASONS FOR MAKIN G AN ASSESSMENT EX-PARTE TO THE BEST OF HIS JUDGMENT ARE SET OUT IN PARAGRAPH 2 OF HIS ORDER WHICH READS THUS: 2. IT IS PERTINENT TO MENTION AND NOTE BEFORE DISC USSING OBSERVATIONS AND MAKING ADDITIONS IN THE HANDS OF THE ASSESSEE THAT, THE AS SESSEE WAS UN-COOPERATIVE THROUGHOUT THE COURSE OF ASSESSMENT PROCEEDINGS AND FAILED TO SHOW COMPLIANCE WITH NOTICES AND QUESTIONNAIRES ISSUED. THE AR OF THE ASSESSEE APPEA RED ON 01.09.2011, 02.11.2011 AND' 16.12.2011 BUT ONLY SUBMITTED INCOMPLETE DETAILS. H EARING WAS ADJOURNED TO 28.12.2011 WHERE THE ASSESSEE WAS ASKED TO FURNISH CERTAIN SPE CIFIC DETAILS REGARDING ITS IRON ORE AND CEMENT CLINKER EXPORT BUSINESS AND THE CORRESPO NDING DISPROPORTIONATE FREIGHT CHARGES CLAIMED BY IT, BUT THERE WAS NO COMPLIANCE BY THE ASSESSEE ON THE SAID DATE. TILL THE DATE OF PASSING THIS ORDER, THE ASSESSEE DID N OT COMPLY AND SUBMIT REMAINING REQUISITE DETAILS. HENCE, IT IS SEEN THAT THE ASSES SEE IS A HABITUAL NON COMPLIER, IS NON COOPERATIVE AND HAS NO REGARD AND RESPECT FOR LAW O F THE LAND. THERE IS, THEREFORE, NO ALTERNATIVE BUT TO PASS THE ORDER EX-PARTE . 7. THE AO THEREAFTER MADE A REFERENCE TO THE FACT THAT THE ASSESSEE WAS ESTABLISHED WITH THE OBJECT OF TRADING OF ESSENTIAL COMMODITIES AS PER DIRECTION OF GOVERNMENT OF WEST BENGAL BUT HAD DURING THE PREVIOUS YEAR VENTUR ED INTO THE ARENA OF TRADING OF NON-ESSENTIAL COMMODITIES LIKE IRON ORE AND CEMENT CLINKERS. THE AO HAS MADE A REFERENCE TO THE AUDIT REPORT (COMMERCIAL) FOR THE YEAR ENDED 31 ST MARCH, 2006 OF THE PRINCIPAL ACCOUNTANT GENERAL (AUDIT), WEST BENGAL A ND COUNTERSIGNED BY THE CAG OF INDIA THAT THE EXPORTS OF NON-ESSENTIAL COMMODITIES WERE MADE BASED ON A SUO MOTO PROPOSAL BY THE MANAGING DIRECTOR OF THE ASSESSEE W ITHOUT APPROVAL OF THE BOARD OF DIRECTORS OF THE ASSESSEE IN A NON TRANSPARENT MANN ER AND IN VIOLATION OF THE BASIC PRINCIPLES OF FINANCIAL PROPRIETY AND REGULARITY. THE AO HAS ALSO REFERRED TO THE FACT THAT THE SAID REPORT ALSO MENTIONS THAT ASSOCIATES AND SHIPPING AGENTS WERE ALSO APPOINTED IN A NON TRANSPARENT MANNER WITHOUT VERIF YING THEIR CREDENTIALS AND WITHOUT 4 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 ENTERING INTO FORMAL AGREEMENTS AND ALSO THAT VESSE LS WERE CONTRACTED THROUGH THESE AGENTS WITHOUT FLOATING MARKET TENDERS AS IS THE MA NDATORY NORM WITH GOVERNMENT UNDERTAKINGS. 8. THE AO THEREAFTER REFERRED TO THE FACT THAT CEM ENT CLINKER AND IRON ORE WERE EXPORTED BY THE ASSESSEE THROUGH SHIPPING AGENTS WH O WERE NOT SELECTED THROUGH COMPETITIVE TENDER BIDDING AND THEREFORE THE FREIGH T RATES QUOTED BY THEM WERE EXCESSIVE. THE ASSESSEE HAD CLAIMED EXPENDITURE ON SEA FREIGHT CHARGES OF RS. 257,61,59,728 FOR EXPORT OF IRON ORE AND RS.32,24,6 7,459 FOR EXPORT OF CEMENT CLINKER. THE AO COMPUTED THE EXCESS FREIGHT CHARGE PAID OF R S.14,04,36,698 ON EXPORT OF IRON ORE AND RS.6,44,93,491/- ON EXPORT OF CEMENT CLINKE RS. THE SAID EXCESS SUMS OF FREIGHT CHARGES TOTALLING RS.20,49,30,189 WAS ADDED TO THE TOTAL INCOME OF NIL DETERMINED AS PER THE NORMAL PROVISIONS OF THE ACT IN THE FIRST ORDER PASSED U/S.148 OF THE ACT DATED 23.12.2008. 9. BEFORE CIT(A) THE ASSESSEE CONTENDED AS FOLLOWS :- A) INITIATION OF REASSESSMENT PROCEEDINGS IS BAD IN LA W BECAUSE PROVISO TO SEC.147 WILL APPLY IN THE PRESENT CASE AND THEREFOR E THE INITIATION OF REASSESSMENT PROCEEDINGS CAN BE ONLY IF THERE WAS F AILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE MATERIAL F ACTS NECESSARY FOR ASSESSMENT OF INCOME FOR AY 05-06. B) INITIATION OF REASSESSMENT PROCEEDINGS ARE MERELY O N A CHANGE OF OPINION AND THEREFORE BAD IN LAW. 10. THESE OBJECTIONS WERE DEALT WITH BY THE CIT(A) AS FOLLOWS: 5.2 GROUND NOS. 2,3,& 4 : IN THESE GROUNDS OF APPE AL, THE APPELLANT HAS CHALLENGED THE VALIDITY OF THE RE-OPENING OF THE ASSESSMENT AND CO MPLETING THE ASSESSMENT U/S 147/143(3)1144 OF THE ACT. AFTER CAREFULLY CONSIDERING THE SUBMISSION O F THE APPELLANT ALONG WITH THE CASE LAWS RELIED UPON, PERUSING THE FACTS OF THE CASE INCLUDI NG THE OBSERVATION OF THE AO AND OTHER MATERIALS BROUGHT ON RECORD, THESE GROUNDS OF THE A PPEAL REGARDING THE VALIDITY OF THE RE- OPENING OF THE ASSESSMENT IS DECIDED AS UNDER :- 5 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 I) THE A/R HAS SUBMITTED THAT THE ASSESSMENT OF TH E APPELLANT HAS BEEN COMPLETED UNDER SECTION 143(3) OF THE ACT AND DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING THE INFORMATION ABOUT THE ISSUES ON WHICH THE RE-ASSESS MENT PROCEEDING HAS BEEN INITIATED WAS AVAILABLE WITH THE AO PASSING THE EARLIER ASSES SMENT ORDERS. HENCE THE RE- OPENING OF THE ASSESSMENT IS NOTHING BUT CHANGE IN OPINION AND IN VIEW OF SETTLED LEGAL POSITION THE A/R SUBMITTED THAT FOR CHANGE OF OPINION RE-ASS ESSMENT PROCEEDING CANNOT BE INITIATED. I HAVE GONE THROUGH THE SUBMISSION OF THE APP ELLANT AND THE REPORT OF AO AND OTHER MATERIAL AVAILABLE IN RECORD. I HAVE FOUND THAT DUR ING THE COURSE OF EARLIER ASSESSMENT THE AO HAS NOT ENQUIRED ABOUT. THE CARRIAGE INWARD EXPENSE OF RS.110, 94,58,668/- AND THE QUANTITATIVE DETAILS OF PURCHASE AND SALE OF IR ON-ORE AND CEMENT CLINKER AND OTHER RELATED ISSUES LIKE EXCESS PAYMENT ETC. THIS FACT H AS NOT BEEN CONTROVERTED BY THE A/R DURING THE COURSE OF HEARING OF THE APPEAL. IN THE CASE OF YUVRAJ V UNION OF INDIA & OTH ER (2009) 315 ITR 84 THE HON'BLE BOMBAY HIGH COURT HAS HELD THAT IF THE ASSESSING OF FICER DURING THE COURSE OF ASSESSMENT PROCEEDING HAS NOT APPLIED HIS MIND ON A N ISSUE THAN HE CAN REOPEN THE ASSESSMENT ON THAT ISSUE. THE RELEVANT PORTION FROM PARA 10(PAGE 90) OF THE REPORT IS REPRODUCED:- 'WE HAVE PERUSED THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, ON JANUARY 9, 1998. THE ASSISTANT CO MMISSIONER OF INCOME TAX, CIRCLE 2(1), DHULE, WHILE PASSING THE ASSESSMENT OR DER OBSERVED IN PARAGRAPH 3 THAT THE ASSESSEE HAS SOLD HIS RIGHT TO PURCHASE AND DEE D IN RESPECT TO RIGHT TO PURCHASE EXECUTED BY THE BUILDERS WERE F LED ON RECORD. AFTE R SAYING SO THE ASSISTANT COMMISSIONER OBSERVED THAT SUBJECT TO THE ABOVE REM ARKS THE TOTAL INCOME WAS COMPUTED AS PER THE CHART MENTIONED IN THE ORDER. F ROM THE PERUSAL OF THE ORDER WE DO NOT FIND ANY APPLICATION OF MIND ON THE PART OF THE ASSISTANT COMMISSIONER OF INCOME-TAX TO THE FACTS OF THE CASE, THE ISSUE TO BE DEALT WITH AND THE REASONS FOR PASSING THE ORDER. THE VALUE OF THE LAND WAS NOT WI TH AND THE REASONS FOR PASSING THE ORDER. THE VALUE OF THE LAND WAS NOT DETERMINED BY THE REVENUE. THE ISSUE RELATING TO CAPITAL GAIN OR CASUAL INCOME WAS ALSO NOT ADDRESSE D BY THE REVENUE: IN THE LIGHT OF THE SAME, IN THE FACTS OF THE CASE, WE FIND THAT TH E ASSESSING OFFICER WAS JUSTIFIED IN ISSUING THE NOTICE UNDER SECTION 148 OF THE ACT ON MAY 17,2000.' IN VIEW OF THE ABOVE DISCUSSED LEGAL AND FACTUAL PO SITION, I AM OF THE VIEW THAT IN THE CASE OF THE APPELLANT THE RE-ASSESSMENT PROCEEDING HAS NOT BEEN INITIATED ON CHANGE OF OPINION. II) THE SECOND SUBMISSION OF THE LD AR THAT THE RECTIFICATION PROCEEDING UNDER SECTION 154 WAS INITIATED HENCE THE REASSESSMENT PROCEEDING CANNOT BE INITIATED. THE ISSUE OF INITIATION OF RE-ASSESSMENT PROC EEDING IN THE CASE WHERE RECTIFICATION PROCEEDING WAS INITIATED ON THE SAME ISSUE HAS BEEN CONSIDERED AND DECIDED BY HON 'BLE HIGH COURTS. IN THE CASE OF CIT V INDIA SEA FOODS ( 2011) 332 ITR 424 THE HON 'BLE KERALA HIGH COURT HAS HELD THAT THE PROVISION REGAR DING RE-ASSESSMENT PROCEEDING AND RECTIFICATION OF PROCEEDING ARE SELF CONTAINED PROV ISION AND THERE IS NO BAR THAT IF RECTIFICATION PROCEEDING IS INITIATED THEN RE-ASSES SMENT PROCEEDING CANNOT BE INITIATED. IN VIEW OF ABOVE, I AM OF THE CONSIDERED VIEW THAT THE AO WAS FULLY JUSTIFIED IN INITIATING THE RE-ASSESSMENT PROCEEDING THOUGH THE RECTIFICATION PROCEEDING WAS ALSO INITIATED. 6 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 III) THE THIRD SUBMISSION OF AIR THAT THE RE-ASS ESSMENT PROCEEDING IS INITIATED ON THE BASIS OF AUDIT NOTE. FROM THE PERUSAL OF REASON RECORDED AND C OMMUNICATED TO THE CIT FOR OBTAINING THE APPROVAL IT IS EVIDENT THAT THE REASON FOR RE-O PENING ARE RECORDED BY THE A0..AT HIS OWN AND THEY ARE NOT THE RE-PRODUCTION OF AUDIT NOT E WITHOUT APPLICATION OF MIND. FROM THE RECORD IT IS EVIDENT THAT THE AUD IT OBJECTIONS DREW THE ATTENTION OF ASSESSING OFFICER TO THE DISCREPANCIES NOTICED BY T HE AUDIT PARTY AND IT DID NOT AMOUNT TO AN EXPRESSION OF OPINION BUT THE AUDIT NOTE WAS TO CONVEY INFORMATION TO THE AO. IT IS THE ASSESSING OFFICER WHO AFTER GOING THROUGH THE R ECORD HAS DECIDED TO RE-OPEN THE ASSESSMENT. HENCE THERE IS NO INFIRMITY IN THE RE-O PENING OF THE ASSESSMENT. THIS VIEW OF MINE IS SUPPORTED BY THE CASE G.T.N. TEXTILES V CIT (1990) 184 ITR 366 AND CIT V KUMARARANI SMT. MEENAKSHI ACHI (2003) 185 CTR 199. IV) IN VIEW OF ABOVE AND CONSIDERING THE ENTRE F ACTS OF THE CASE, I AM OF THE VIEW THAT THE RE-OPENING OF THE ASSESSMENT IN THE CASE OF THE APPELLANT HAS BEEN INITIATED IN CONFORMITY TO THE PROVISION OF LAW AND ACCORDINGLY THE ACTION OF THE AO IS UPHELD AND THE GROUNDS OF APPEAL OF THE APPELLANT ARE DISMISSE D. 11. ON THE MERITS OF THE ADDITION MADE BY THE AO, THE CIT(A) UPHELD THE ACTION OF THE AO. THE FOLLOWING WERE THE RELEVANT OBSERVATIO NS OF THE CIT(A): IV) DUE TO NON-CO-OPERATIVE ATTITUDE OF THE APPELL ANT THE AO RELYING ON THE AVERAGE SEA FREIGHT RATE AVAILABLE ON PUBLIC RECORD HAS HELD TH AT 'AVERAGE SEA FREIGHT RATE OF US $ PER 20 PER WMT AND HAS WORKED OUT THE EXCESS FREIGHT PA YMENT OF RS.14,04,36,698/- ON IRON-ORE AND HAS ALSO WORKED OUT EXCESS SEA FREIGHT PAYMENT OF RS.6,44,93,491/- ON CEMENT CLINKER. THE A/R HAS SUBMITTED THAT THE AO HAS NOT INFORMED ABOUT THE INFORMATION COLLECTED DURING THE COURSE OF ASSESSMENT PROCEEDING. THE AO HAS INFORMED THAT THE INFORMATION USED BY HIM IS AVAILABLE IN PUBLIC RECORD. IT IS FU RTHER SUBMITTED THAT THE LD AR HAS NOT DISPUTED WITH ANY MATERIAL EVIDENCE THE CORRECTNESS OF THE RATE ADOPTED BY THE AO. ON THE CONTRARY THE AR IN HIS SUBMISSION HAS ADMITTED THAT EXCESS PAYMENT HAS BEEN MADE. THE RELEVANT PORTION FROM THE SUBMISSION OF THE AIR IS REPRODUCED HEREINAFTER :- 'WITHOUT PREJUDICE TO THE VARIOUS SUBMISSIONS AND A RGUMENTS AND WITH REFERENCE TO VARIOUS IRRELEVANT FACTS NARRATED IN THE ASST ORDER , THIS IS TO SUBMIT THAT THE APPELLANT, A JURISTIC PERSON AND A STATE GOVT. COMPANY, HAD TO A CT THRU SOME MORTAL PERSONS AND IF ANYTHING HAS BEEN DONE BY SUCH PERSONS EXCEEDING TH E AUTHORITIES, RESULTING IN SOME LOSSES TO THE APPELLANT, ,THE APPELLANT IS ENTITLED TO DEDUCTION OF THE AMOUNT OF SUCH LOSSES UNDER THE RESIDUARY SEC 37[1] AS THE AMOUNT WENT OUT OF COFFERS OF THE COMPANY - IT WAS NOT AN EXPENDITURE OF CAPITAL OR PERSONAL NA TURE. IT MAY BE EQUIVALENT TO EMBEZZLEMENT OR FRAUD COMMITTED ON THE APPELLANT AN D THEREFORE, EVEN ON FACTS AND MERITS OF THE CASE, THERE SHOULD BE NO ADDITION OR DISALLOWANCE OF SUCH AMOUNTS - THAT TOO FOR THE ENTIRE AMOUNTS ( EMPHASIS SUPPLIED). ' V) AS PER THE A/R EXCESS FREIGHT PAID BY THE COMP ANY HAS GONE OUT OF COFFER OF THE APPELLANT COMPANY AND EVEN IF THE AMOUNT IS EMBEZZL ED OR FRAUD HAS BEEN COMMITTED THEN ALSO FULL FREIGHT EXPENSE IS ALLOWABLE. THIS S UBMISSION OF THE AR IS NOT IN ACCORDANCE WITH EXPLANATION TO SECTION 37(1) OF THE ACT WHICH PROVIDES THAT ANY EXPENDITURE INCURRED FOR THE PURPOSE WHICH IS AN OF FENCE OR IS PROHIBITED BY LAW SHALL NOT BE ALLOWED AS BUSINESS EXPENSE. SINCE IN THE CA SE OF THE APPELLANT, AS ADMITTED BY LD 7 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 AR, THE EXCESS FREIGHT AMOUNT PAID AMOUNTS TO EMBEZ ZLEMENT OR FRAUD, WHICH IS AN OFFENCE AND IS PROHIBITED BY LAW. HENCE, I AM OF TH E VIEW THAT EXCESS FREIGHT OF RS.20,49,30, 189/- PAID BY THE APPELLANT IS NOT AN ALLOWABLE EXPENSE. ACCORDINGLY THIS DISALLOWANCE OF RS.20,49,30, 189/- MADE BY THE AO I S CONFIRMED AND THESE GROUNDS OF APPEAL OF THE APPELLANT ARE DISMISSED. 12. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSE SSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. WE SHALL FIRST DEAL WI TH GR.NO.1 TO 4 RAISED BEFORE THE TRIBUNAL IN WHICH THE VALIDITY OF ASSUMPTION OF JUR ISDICTION U/S.147 OF THE ACT BY THE AO IS CHALLENGED. 13. THE LEARNED COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE PROVISIONS OF SECTION 147 OF THE ACT AND PROVISO TO SECTION 147 W HICH READS AS UNDER:- 147: INCOME ESCAPING ASSESSMENT. IF THE ASSESSING OFFICER, HAS REASON TO BELIEVE THA T ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YE AR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR RE ASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS E SCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURS E OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DE PRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE AS SESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTION S 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR): 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, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETUR N UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) O F SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FAC TS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR: 14. IT WAS SUBMITTED BY HIM THAT AS PER THE PROVISO TO SECTION 147 OF THE ACT, WHERE AN ASSESSMENT U/S. 143(3) OF THE ACT HAS BEEN MADE IN ANY ASSESSMENT YEAR AND IF AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR, ACTION IS SOUGHT TO BE TAKEN U/S. 147 OF THE ACT, SUCH ACTION CAN BE ON LY IN CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH A SSESSMENT YEAR, BY REASON OF 8 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE TRU LY AND FULLY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YE AR. HE DREW OUR ATTENTION TO THE REASONS RECORDED BY THE AO U/S. 147 OF THE ACT BEFO RE ISSUE OF NOTICE U/S. 148 OF THE ACT AND SUBMITTED THAT IN THE REASONS SO RECORDED B Y THE AO, THERE HAS BEEN NO ALLEGATION THAT THERE WAS ESCAPEMENT OF INCOME DUE TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ASSESSMENT OF INCOME OF THE ASSESSEE FOR A.Y. 2005-06. IT WAS THU S SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT REOPENING OF THE ASSESSMENT SHOUL D BE HELD TO BE BAD IN LAW, AS THE AO IN THE PRESENT CASE HAS NOT RECORDED SPECIFICALL Y THAT ESCAPEMENT OF INCOME WAS DUE TO THE FAILURE ON THE PART OF THE ASSESSEE TO D ISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THE A.Y. 200 5-06. 15. ON THE REOPENING OF ASSESSMENT BEING MERELY ON A CHANGE OF OPINION, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE REAS ONS RECORDED THE AO HAS NOT MADE ANY REFERENCE TO THE FACT THAT THERE WAS AUDIT OBJE CTION AND THEREFORE THE ASSESSMENT WAS REOPENED. HE POINTED OUT THAT THE REASONS RECO RDED MERELY MENTIONS THAT ON SCRUTINY OF ASSESSMENT RECORDS FOR THE RELEVANT AY, IT REVEALED THAT THE ASSESSEE HAD DEBITED CARRIAGE INWARD OF RS.110,94,58,668/- DURIN G THE PREVIOUS YEAR ON PURCHASES OF RS.569,29,90,826, WHEREAS THE CARRIAGE INWARD I N RESPECT OF THE EARLIER FINANCIAL YEAR WAS ONLY RS.2,06,43,162/- ON PURCHASES OF RS.4 69,35,73,464/-. ACCORDING TO HIM THESE FACTS WERE VERY MUCH AVAILABLE IN THE AUD ITED ACCOUNTS OF THE ASSESSEE WHICH WAS AVAILABLE BEFORE THE AO WHEN THE ORIGINAL ASSESSMENT U/S.147 OF THE ACT WAS COMPLETED ON 23.12.2008. NO NEW MATERIAL CAME INTO POSSESSION OF THE AO AFTER COMPLETING OF THE ORIGINAL ASSESSMENT PROCEEDINGS O N 23.12.2008 AS PER THE REASONS RECORDED AND THEREFORE THE REOPENING IS PURELY ON T HE BASIS OF CHANGE OF OPINION. IT WAS SUBMITTED THAT THERE BEING NO MATERIAL WHICH HA S COME TO THE POSSESSION OF THE AO SINCE THE CONCLUSION OF THE ORIGINAL ASSESSMENT PROCEEDINGS, IT WAS NOT POSSIBLE FOR THE AO TO CHANGE OR FORM A DIFFERENT OPINION ON THE SAME SET OF FACTS AND RESORT TO REOPENING OF A COMPLETED ASSESSMENT. ACCORDING TO HIM, DOING SO WILL RESULT IN THE AO REVIEWING HIS OWN ORDER WHICH IS NOT LEGALLY PER MISSIBLE. ACCORDING TO HIM EVEN 9 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 ASSUMING THAT THERE WAS A FAILURE ON THE PART OF TH E AO IN THIS REGARD, THE APPROPRIATE ACTION CAN ONLY BE UNDER SECTION 263 OF THE ACT. I T WAS HIS SUBMISSION THAT THE LAW IS WELL SETTLED THAT TO ASSUME JURISDICTION U/S. 147 O F THE ACT, THERE SHOULD BE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT. SUCH REASON TO BELIEVE CANNOT BE ON A MERE CHANGE OF OPINION. ACCORDING T O HIM THIS POSITION IS WELL SETTLED BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD., 320 ITR 561 (SC) . 16. THE LEARNED DR RELIED ON THE ORDER OF THE AO A ND SUBMITTED THAT THE PRESENT PROCEEDINGS U/S.147 OF THE ACT WERE INITIATED ON TH E BASIS OF AUDIT QUERY DATED 20.7.2010 POINTING OUT THE ABNORMAL INCREASE IN THE CARRIAGE INWARD EXPENSES CLAIMED BY THE ASSESSEE BY 5274% COMPARED TO THE EARLIER YE AR WHEN PURCHASES HAVE INCREASED ONLY 21%. THE DEPARTMENT HAS ACCEPTED TH E AUDIT OBJECTION AND INITIATED THE PROCEEDINGS U/S.147 OF THE ACT. ACCORDING TO HIM T HEREFORE THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY MATERIAL FA CTS NECESSARY FOR ASSESSMENT AND THAT THE REOPENING OF ASSESSMENT IS NOT ON A MERE CHANGE OF OPINION. HE ALSO SUBMITTED THAT IN THE ORIGINAL ASSESSMENT COMPLETED THERE WAS NO DISCUSSION WHATSOEVER ON THE FREIGHT CHARGES CLAIMED BY THE ASSESSEE. 17. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE REI TERATED HIS EARLIER SUBMISSION BROUGHT TO OUR NOTICE THAT THE REASONS RECORDED DOE S NOT ANYWHERE MENTION ABOUT THE AUDIT OBJECTION. IT IS NOT OPEN TO THE REVENUE TO IMPROVE THE REASONS RECORDED BY RELYING ON EXTRANEOUS MATERIAL. THE VALIDITY OF TH E INITIATION OF REASSESSMENT PROCEEDINGS HAVE TO BE JUDGED ONLY ON THE BASIS OF REASONS RECORDED AND NOTHING CAN BE LOOKED INTO TO SUBSTITUTE OR ADD TO THE REASONS RECORDED BY THE AO. 18. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. WE ARE ALSO OF THE VIEW THAT INITIATION OF REASSESSMENT PROCEED INGS WILL HAVE TO BE HELD AS INVALID FOR THE REASON THAT REASONS RECORDED BY THE AO DO N OT SPELL OUT THAT ESCAPEMENT OF INCOME WAS DUE TO THE ASSESSEE NOT FULLY AND TRULY DISCLOSING ALL MATERIAL FACTS NECESSARY FOR COMPLETION OF ASSESSMENT FOR THE RELE VANT ASSESSMENT YEAR. ADMITTEDLY 10 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 THE PROVISO TO SEC.147 OF THE ACT WAS APPLICABLE IN THE PRESENT CASE. THE AO IN THE REASONS RECORDED HAS NOT SPELT OUT AS TO HOW THERE WAS A FAILURE ON THE PART OF THE ASSESSEE TO FULLY AND TRULY DISCLOSE ALL MATERIAL F ACTS. IN FACT THERE IS NO SUCH ALLEGATION AT ALL IN THE REASONS RECORDED BY THE AO . WHEN THE ORIGINAL PROCEEDINGS WERE CONCLUDED ALL FACTS WITH REGARD TO INCREASE IN FREIGHT CHARGES VIS--VIS PURCHASES WERE MUCH AVAILABLE BEFORE THE AO. 19. OUR CONCLUSION AS ABOVE IS SUPPORTED BY THE DE CISION OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT AND ACIT V. HEWELETT PACKARD DIGITAL GLOBAL SOL UTIONS LTD., ITA NO.406 OF 2007, JUDGMENT DATED 19.09.2011 , WHEREIN THE HONBLE KARNATAKA HIGH COURT AFTER MAKING A REFERENCE TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTAN LEVER LTD. V. R.B. WADKAR (2004) 137 TAXM ANN 479 (BOM) OBSERVED AS FOLLOWS:- 7. IT IS OBSERVED IN THE SAID JUDGMENT THAT TH E REASON RECORDED BY THE ASSESSING OFFICER NO WHERE STATE THAT THERE WAS FAI LURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR THE ASSESSMENT OF THAT ASSESSMENT YEAR. IT IS FOR THE A SSESSING OFFICER TO DISCLOSE AND OPEN HIS MIND THROUGH REASONS. HE HAS TO SPEAK THROUGH HIS REASONS. IT IS FOR THE ASSESSING OFFICER TO REACH T HE CONCLUSION AS TO WHETHER THERE WAS FAILURE ON THE PART OF THE ASSESS EE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT FOR THE-CONCERNED ASSESSMENT YEAR. IT IS FOR THE ASSESSING OFFICER TO FORM HIS OPINION. IT IS FOR HIM TO PUT HIS OPINION ON RECORD IN BLACK AND WHITE . THE REASONS RECORDED SHOULD BE CLEAR AND UNAMBIGUOUS AND SHOULD NOT SUFF ER FROM ANY VAGUENESS. THE REASONS RECORDED MUST DISCLOSE, HIS MIND. THE REASONS ARE THE MANIFESTATION OF THE MIND OF THE ASSESSING OFFI CER. THE REASONS RECORDED SHOULD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR THE REASONS. REASONS PROVIDE THE LINK BETWEEN CONCLUSION AND EVIDENCE. THE ORDER PASSED BY THE ASSESSING AUTHORI TY DID NOT STATE ANYWHERE THAT THERE WAS A FAILURE ON THE PART OF TH E ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR TH E ASSESSMENT OF THAT YEAR. ALL THAT HAS BEEN STATED IN THE ORDER IS THAT THE A SSESSEE HAS APPENDED THE NOTE AND AT NO POINT OF TIME, THE ASSESSEE HAS DISC LOSED AS TO THE NEXUS BETWEEN THE AMOUNT OF RS. 10,06,617/- AND THE 10A U NIT. THE DISCLOSURE HAS TO BE FULL AND TRUE. BOTH THE CRITERIA HAVE TO BE M ET. IN THE ASSESSEES CASE, BY FAILING TO BRING OUT THE NEXUS BETWEEN THE 10A U NIT AND THE INTEREST INCOME, THE ASSESSEE HAS NOT DISCHARGED ITS RESPONS IBILITY OF FURNISHING FULL DISCLOSURE OF FACTS. AS SET OUT ABOVE, THE NOTE CLE ARLY SETS OUT THE INTEREST INCOME EARNED BY THE STP UNIT AND THE CLAIM OF THE ASSESSEE FOR EXEMPTION UNDER SECTION 10A. IT IS NOT THE REQUIREMENT OF LAW THAT FURTHER THE ASSESSEE 11 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 SHOULD SHOW THE NEXUS BETWEEN THE AMOUNT CLAIMED AN D 10A UNIT. WHEN HE HAS CATEGORICALLY STATED THAT THE INTEREST, WHICH I S EARNED FROM STP UNIT, IS ELIGIBLE FOR EXEMPTION UNDER SECTION 10A, EVEN THAT NEXUS IS MANIFEST. THE ASSESSING AUTHORITY HAS NOT PROPERLY APPLIED HIS MI ND TOWARDS THE STATUTORY PROVISIONS AND HAS NOT TAKEN INTO CONSIDE RATION THAT THE ORIGINAL ASSESSMENT PASSED UNDER SECTION 143(3) WHICH WAS AL SO REOPENED ONCE AND ADJUSTMENT WAS MADE. IT IS FOR THE SECOND TIME, HE WAS RAISING ALL THESE OBJECTIONS. WHEN ADMITTEDLY THE SECOND REOPENING OF THE ASSESSMENT IS BEYOND FOUR YEARS, UNDER LAW, IT IS BARRED BY TIME AND THE FINDINGS RECORDED BY THE TRIBUNAL IS LEGAL AND VALID AND DOE S NOT SUFFER FROM ANY LEGAL INFIRMITY. IN THAT VIEW OF THE MATTER, NO SUB STANTIAL QUESTION OF LAW ARISES FOR CONSIDERATION IN THESE APPEALS. ACCORDIN GLY, THE APPEALS ARE DISMISSED. 20. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF GENERAL MOTORS INDIA PVT. LTD. VS. DCIT, 360 ITR 527 (GUJ) HAS ALSO TAKEN THE SAME VIEW AND HAS HELD AS FOLLOWS: IT IS REQUIRED TO BE NOTED THAT IN THE PRESENT CAS E NOTICE U/S 148 OF THE ACT HAD BEEN ISSUED ON 27/4/2011 IN RELATION TO THE ASS ESSMENT YEAR 2005-06. HENCE, ADMITTEDLY THE SAME HAD BEEN ISSUED AFTER EX PIRY OF A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. UNDER THE CIRCUMSTANCES, IN LIGHT OF THE PROVISO TO SECTION 1 47 OF THE ACT, IN CASE, WHERE ASSESSMENT HAS BEEN FRAMED UNDER SECTION 143( 3) OF THE ACT, NO ACTION CAN BE TAKEN UNDER SECTION 147, UNLESS INCOM E CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT, FOR THE ASSESSMENT YEAR. THERE WAS NOT EVEN A WHISPER T O THE EFFECT THAT INCOME HAS ESCAPED ASSESSMENT ON ACCOUNT OF ANY FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR ITS ASSESSMENT. EVEN WHILE CONSIDERING THE OBJECTIONS R AISED BY THE ASSESSEE AND REPLYING TO THE ASSESSEE, THERE WAS NO SUCH CAS E PLEADED ON BEHALF OF THE REVENUE EVEN IN THE AFFIDAVIT-IN-REPLY FILED, T HERE WAS NO ALLEGATION OF ANY SUCH FAILURE ON THE PART OF THE ASSESSEE. THE A O WAS NOT IN A POSITION TO SATISFY THE COURT WITH RESPECT TO COMPLIANCE / S ATISFACTION OF THE REQUIREMENT OF THE PROVISO TO SECTION 147 OF THE AC T. UNDER THE CIRCUMSTANCES, IT WAS APPARENT THAT THE REQUIREMENT OF THE PROVISO TO SECTION 147 WAS NOT SATISFIED. SECONDLY, IN ABSENCE OF ANY SATISFACTION HAVING BEEN RECORDED BY THE ASSESSING OFFICER THAT THE INCOME HAS ESCAPED BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR IT S ASSESSMENT FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, ASSUMPTION OF JURISDICTION U/S 147 OF THE ACT WAS FAILURE AND THEREFORE, THE IMPUGNED NOTICE U/S 147 OF THE ACT, CANNOT BE SUSTAINED. IDENTICAL QUESTION CAME TO BE CONSIDERED BY THE DIVISION BENCH OF THIS COURT IN THE CASE OF KANAK F ABRICS VS. INCOME TAX OFFICER IN SPECIAL CIVIL APPLICATION NO. 335 OF 200 1 AND IN ABSENCE OF ANY 12 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 SUCH SATISFACTION BY THE ASSESSING OFFICER, THE DIV ISION BENCH OF THIS COURT HAS QUASHED AND SET ASIDE THE NOTICE OF REASSESSMEN T U/S 148. IN VIEW OF THE ABOVE AND FOR THE REASONS STATED ABOVE NOTICE OF RE ASSESSMENT U/S 148 QUASHED AND SET ASIDE. (EMPHASIS SUPPLIED) 21. WITH REGARD TO THE CONTENTION THAT THE REOPENI NG OF ASSESSMENT IS INVALID BECAUSE REOPENING WAS MADE PURELY ON A CHANGE OF OPINION, THE FOLLOWING OBSERVATIONS OF THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD (SUPRA), ARE RELEVANT.:- ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE T O S. 147 OF THE ACT, WE FIND THAT, PRIOR TO DIRECT TAX LAWS (AMENDMENT) ACT, 198 7, REOPENING COULD BE DONE UNDER ABOVE TWO CONDITIONS AND FULFILLMENT OF THE S AID CONDITIONS ALONE CONFERRED JURISDICTION ON THE AO TO MAKE A BACK ASSESSMENT, B UT IN S. 147 OF THE ACT (W.E.F. 1ST APRIL, 1989), THEY ARE GIVEN A GO BY AND ONLY O NE CONDITION HAS REMAINED, VIZ., THAT WHERE THE AO HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT, CONFERS JURISDICTION TO REOPEN THE ASSE SSMENT. THEREFORE, POST 1ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOWEVER , ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WORDS 'REASON TO BE LIEVE' FAILING WHICH, WE ARE AFRAID, S. 147 WOULD GIVE ARBITRARY POWERS TO THE A O 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 DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE AO HAS NO POWER TO REVIE W; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ON FULFI LLMENT OF CERTAIN PRE-CONDITION AND IF THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVE D, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CHANGE OF OPI NION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE AO. HENCE, AFTER 1ST AP RIL, 1989, AO HAS POWER TO REOPEN, PROVIDED THERE IS 'TANGIBLE MATERIAL' TO CO ME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MU ST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. 22. IN THE PRESENT CASE, THE REASONS RECORDED BY T HE AO DOES NOT REFER TO ANY NEW MATERIAL THAT CAME INTO HIS POSSESSION BASED ON WHI CH HE ENTERTAINED BELIEF THAT INCOME OF ASSESSEE CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT. THE FACTS WITH REGARD TO THE FREIGHT CHARGES AND QUANTUM OF PURCHASES FOR TH E PREVIOUS YEAR AND THE EARLIER PREVIOUS YEAR WERE AVAILABLE WITH THE AO WHEN THE C ONCLUDED THE FIRST ASSESSMENT PROCEEDINGS. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF HINDUSTHAN LEVER LTD. (SUPRA) HAS HELD THAT VALIDITY OF INITIATION OF REA SSESSMENT PROCEEDINGS HAVE TO BE JUDGED ON THE BASIS OF REASONS RECORDED BY THE AO A ND NOT BY LOOKING INTO ANY EXTRANEOUS MATERIAL. THE FOLLOWING WERE THE RELEVA NT OBSERVATIONS OF THE COURT: 13 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 THE REASONS ARE REQUIRED TO BE READ AS THEY WERE RECORDED BY THE ASSESSING OFFICER. NO SUBSTITUTION OR DELETION IS PERMISSIBLE . NO ADDITIONS CAN BE MADE TO THOSE REASONS. NO INFERENCE CAN BE ALLOWED TO BE DRAWN BA SED ON REASONS NOT RECORDED. IT IS FOR THE ASSESSING OFFICER TO DISCLOSE AND OPEN H IS MIND THROUGH REASONS RECORDED BY HIM. HE HAS TO SPEAK THROUGH HIS REASONS. IT IS FOR THE ASSESSING OFFICER TO REACH TO THE CONCLUSION AS TO WHETHER THERE WAS FAILURE ON T HE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT FOR THE CONCERNED ASSESSMENT YEAR. IT IS FOR THE ASSESSING OFFICER TO FORM HIS OPINION. IT IS FOR HIM TO PUT HIS OPINION ON RECORD IN BLACK AND WHITE. THE REASO NS RECORDED SHOULD BE CLEAR AND UNAMBIGUOUS AND SHOULD NOT SUFFER FROM ANY VAGUENES S. THE REASONS RECORDED MUST DISCLOSE HIS MIND. REASONS ARE THE MANIFESTATIONS O F MIND OF THE ASSESSING OFFICER. THE REASONS RECORDED SHOULD BE SELF-EXPLANATORY AND SHOULD NOT KEEP THE ASSESSEE GUESSING FOR THE REASONS. REASONS PROVIDE LINK BETW EEN CONCLUSION AND EVIDENCE. THE REASONS RECORDED MUST BE BASED ON EVIDENCE. THE ASS ESSING OFFICER, IN THE EVENT OF CHALLENGE TO THE REASONS, MUST BE ABLE TO JUSTIFY T HE SAME BASED ON MATERIAL AVAILABLE ON RECORD. HE MUST DISCLOSE IN THE REASONS AS TO WH ICH FACT OR MATERIAL WAS NOT DISCLOSED BY THE ASSESSEE FULLY AND TRULY NECESSARY FOR ASSESSMENT OF THAT ASSESSMENT YEAR, SO AS TO ESTABLISH VITAL LINK BETWEEN THE REA SONS AND EVIDENCE. THAT VITAL LINK IS THE SAFEGUARD AGAINST ARBITRARY REOPENING OF THE CO NCLUDED ASSESSMENT. THE REASONS RECORDED BY THE ASSESSING OFFICER CANNOT BE SUPPLEM ENTED BY FILING AFFIDAVIT OR MAKING ORAL SUBMISSION, OTHERWISE THE REASONS WHICH WERE LACKING IN MATERIAL PARTICULARS WOULD GET SUPPLEMENTED, BY THE TIME THE MATTER REACHES THE COURT, ON THE STRENGTH OF AFFIDAVIT OR ORAL SUBMISSION ADVANCED . 23. THE LEARNED DRS REFERENCE TO THE AUDIT OBJECT ION ON THE QUANTUM JUMP IN EXPENSES ON FREIGHT VIS--VIS THE PURCHASE OF THE A SSESSEE COMPARED TO THE EARLIER PREVIOUS YEAR HAS NOT BEEN SPELT OUT IN THE REASONS RECORDED. ON THE REASONS RECORDED BY THE AO, THERE IS NO OTHER CONCLUSION POSSIBLE EX CEPT THE CONCLUSION THAT THE REOPENING OF ASSESSMENT IS NOT BASED ON TANGIBLE MA TERIAL WHICH CAME INTO POSSESSION OF THE AO AFTER CONCLUSION OF THE ORIGINAL ASSESSME NT PROCEEDINGS. ON THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE ARE OF THE VI EW THAT INITIATION OF REASSESSMENT PROCEEDINGS HAS BEEN MERELY ON THE BASIS OF CHANGE OF OPINION AND IN VIEW OF THE LAW LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) , INITIATION OF REASSESSMENT PROCEEDINGS HAS TO BE HELD AS NOT PROPER. BEFORE US, THE LD. DR HAD PLACED STRONG RELIANCE ON THE OR DER OF THE CIT(APPEALS) ON THE ISSUE OF VALIDITY OF INITIATION OF REASSESSMENT PROCEEDIN GS. IN OUR VIEW, THE LD. CIT(APPEALS) HAS MERELY PROCEEDED ON THE BASIS THAT IN THE EARLIER ASSESSMENT THE AO HAS NOT ENQUIRED ABOUT THE CARRIAGE INWARD EXPENSE AND THE QUANTITATIVE DETAILS OF PURCHASE AND SALE OF IRON ORE AND CEMENT CLINKER AN D OTHER RELATED ISSUES. HE HAS NOT 14 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06 ADDRESSED THE ISSUE WITH REGARD TO APPLICABILITY OF PROVISO TO SECTION 147 OF THE ACT OR THE QUESTION WHETHER REASSESSMENT PROCEEDINGS WERE INITIATED MERELY ON CHANGE OF OPINION. 24. WE ARE, THEREFORE, OF THE VIEW THAT IN THE GIV EN FACTS AND CIRCUMSTANCES OF THE CASE, INITIATION OF REASSESSMENT PROCEEDINGS U/S 14 7 OF THE ACT IS HELD TO BE ILLEGAL AND CONSEQUENTLY, ORDER PASSED U/S. 147 OF THE ACT IS C ANCELLED ON THIS GROUND. IN VIEW OF THE ABOVE CONCLUSION, WE ARE NOT DEALING WITH THE O THER GROUNDS RAISED BY THE ASSESSEE BEFORE US. 25. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOW ED. O RDER PRONOUNCED IN THE COURT ON 08.07.2016. SD/- SD/- [M.BALAGANESH ] [ N.V.VASUDEVAN ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 08.07.2016. [RG PS] COPY OF THE ORDER FORWARDED TO: 1.WEST BENGAL ESSENTIAL COMMODITIES SUPPLY CORPORAT ION LTD., 11A, MIRZA GHALIB STREET, KOLKATA-700087. 2. J.C.I.T. (OSD) TO C.I.T.-III, KOLKATA. 3.. CIT-(A)-VIII, KOLKATA. 4. C.I.T.-III, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, ASST. REGISTRAR, ITAT, KOLKATA BENCH ES 15 ITA NO.909/KOL/2013-WEST BENGAL ESSENTIAL COMMODITI ES SUPPLY CORPN. LTD.A.Y.-2005-06