ITO, Ward-3, Vellore V. V M Venkatesa Mudaliar & Sons, Arakkonam

ITA 922/CHNY/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9266 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 04-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Depreciation; Search and seizure; Audit objection; Tangible material; Difference of opinion; Non compliance; Tax effect; Reason to believe; Change of opinion; Reassessment proceedings; TDS; Set aside
• Section: 143(3); 148; 139

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NO.922/CHNY/2019 ! / ASSESSMENT YEAR : 2011-2012. THE INCOME TAX OFFICER, WARD 3, VELLORE VS. M/S. V.M. VENKATESA MUDALIAR & SONS, 42-A, MELKALATHUR VILLAGE, KARNAM STREET, ARAKKONAM 631 001. [PAN AAEFV 5324J] ( / APPELLANT) ( /RESPONDENT) '# $ % / APPELLANT BY : SHRI. M. KARUNAKARAN, ADV. &' '# $ % /RESPONDENT BY : SHRI. AR.V. SREENIVASAN, JCIT. ( ) $ * /DATE OF HEARING : 06-01-2020 +,! $ * /DATE OF PRONOUNCEMENT : 09-01-2020 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 3, CHENNAI (CIT(A) FOR SHORT) DATED 14.12.2018 FOR THE ASSES SMENT YEAR (AY) 2011-12. ITA NO. 922/2019. :- 2 -: 2. THE REVENUE RAISED THE FOLLOWING GROUNDS OF AP PEAL: 1.THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO FA CTS AND CIRCUMSTANCES OF THE CASE. 2.THE LEARNED CIT(A) ERRED IN HOLDING THAT THE REOP ENING OF THE ASSESSMENT IS NOT LEGALLY VALID AND THEREBY DELETIN G THE DISALLOWANCE OF RS.60,10,655/- MADE UNDER SEC.40(A) (IA) OF THE I.T. ACT, 1961. 3.THE LD CIT(A) FAILED TO APPRECIATE THAT THE ABOVE ISSUE ARISES VIDE RAP OBJECTION. AS PER CIRCULAR NO.3/2018 WHICH STATES AS UNDER: THE ABOVE ISSUES SHOULD BE CONTESTED ON MERITS NOTWITHSTANDING THAT THE TAX EFFECT ENTAILED IS LES S THAN THE MONETARY LIMIT SPECIFIED IN PARA 3 OF CIRCULAR NO.3 /20 18 OR THERE IS NO TAX EFFECT. PARA 10 (C) WHERE REVENUE AUDIT OBJECTION IN THE CA SE HAS BEEN ACCEPTED BY THE DEPARTMENT. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEAR NED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER REST ORED. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE RESPONDENT-ASSESSEE IS AN INDIVIDUAL CARRYING O N THE BUSINESS IN THE NAME AND STYLE OF M/S. V.M. VENKATE SA MUDALIAR & SONS IS ENGAGED IN PURCHASE AND SALE OF LUNGIES. TH E RETURN OF INCOME FOR THE AY 2011-12 WAS FILED ON 24.02.2012 DISCLOS ING TOTAL INCOME OF RS.1,81,490/-. AGAINST THE SAID RETURN OF INCOME, T HE ASSESSMENT WAS COMPLETED BY THE INCOME TAX OFFICER, WARD-3, VELLO RE, (HEREINAFTER CALLED AO) VIDE ORDER DATED 31.03.2013 PASSED U/S . 143(3) OF THE ITA NO. 922/2019. :- 3 -: INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS. 2,75,190/-. SUBSEQUENTLY, THE ASSESSING OFFICER F ORMED AN OPINION THAT INCOME GOT ESCAPED ASSESSMENT TO TAX. ACCORD INGLY, INITIATED REASSESSMENT PROCEEDINGS BY ISSUE OF NOTICE U/S.148 OF THE ACT ON 28.03.2017. THE ASSESSING OFFICER COMPLETED THE RE ASSESSMENT DISALLOWING DYING EXPENDITURE OF RS.60,10,655/- ON THE GROUND THAT TDS PROVISIONS WAS NOT COMPLIED WITH AND ACCORDINGL Y DISALLOWED THE SAME VIDE ASSESSMENT ORDER DATED 29.12.2017 PASSE D U/S.143(3) R.W.S. 147 OF THE ACT. 4. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD.CIT(A) CONTESTING VALIDITY OF REOPENING PROCEEDINGS ON TH E GROUND THAT THE ASSESSING OFFICER HAD NO REASON TO BELIEVE THAT IN COME HAD ESCAPED ASSESSMENT, ON MERE CHANGE OF OPINION THE REASSESSM ENT PROCEEDINGS ARE INITIATED AND THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS FULLY AND TRULY NECES SARY FOR ASSESSMENT. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD T HAT THERE IS NO TANGIBLE FRESH MATERIAL AVAILABLE ENABLING THE ASS ESSING OFFICER TO FORM AN OPINION THAT INCOME ESCAPED ASSESSMENT TO TAX. THERE IS NO ALLEGATION BY THE ASSESSING OFFICER THAT ASSESSEE H AD FAILED TO DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE PURPOSE OF MA KING ASSESSMENT AND ACCORDINGLY HELD THAT REASSESSMENT PROCEEDINGS WERE INVALID IN LAW. ITA NO. 922/2019. :- 4 -: 5. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFOR E US IN THE PRESENT APPEAL. LD. DEPARTMENTAL REPRESENTATIVE S UBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) OUGHT NOT HAVE SQUASHED THE REASSESSMENT PROCEEDINGS AS THE ASSESSEE FAILED TO DISCLOSE FACTUM OF NON COMPLIANCE WITH TDS PROVISIONS ON DYE ING EXPENSES. 6. ON THE OTHER HAND, THE LD. AUTHORISED REPRESENTA TIVE SUBMITTED THAT REASSESSMENT PROCEEDINGS IS BASED ON MATERIAL ALREADY AVAILABLE ON RECORD AND THERE WAS NO FRESH TANGIBLE MATERIAL BROUGHT ON RECORD SUGGESTING ESCAPEMENT OF INCOME TO TAX. HE FURTHE R SUBMITTED THAT THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE ALL MATERIAL FACTS NECESSARY FOR THE PURPOSE OF ASSESSMENT AND HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SCHWING SHETTER INDIA P. LTD, (2015) 122 D TR 289 . 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL ON RECORD. THE ONLY ISSUE IN THE PRESENT APPEAL RELA TES TO THE VALIDITY OF REASSESSMENT PROCEEDINGS. ADMITTEDLY, THE ORIGINAL ASSESSMENT WAS COMPLETED U/S.143(3) OF THE ACT. THE ASSESSMENT WA S SOUGHT TO BE REOPENED AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IT IS NOT THE CASE OF THE ASSESSI NG OFFICER THAT ASSESSEE HAD FAILED TO FILE RETURN OF INCOME U/S.1 39 OF THE ACT OR FAILED TO RESPOND TO NOTICE ISSUED U/S.142 OF THE ACT. THE FACT THAT IN ITA NO. 922/2019. :- 5 -: THE ORIGINAL ASSESSMENT ORDER, THE ASSESSING OFFICE R MADE SOME ADDITIONS SUGGESTS THAT ASSESSEE HAD FILED ALL REQU ISITE DETAILS REQUIRED TO COMPLETE THE ASSESSMENT. FOR THE PURPOSE OF A SSUMPTION OF JURISDICTION U/S.147 OF THE ACT, THE ASSESSING OFFI CER SHOULD HAVE REASONS TO BELIEVE THAT INCOME ESCAPED ASSESSMENT B ASED ON SOME TANGIBLE NEW MATERIALS. FROM THE PERUSAL OF THE AS SESSMENT ORDER, IT IS CLEAR THAT THE ASSESSING OFFICER HAD NOT MADE REFERENCE TO ANY TANGIBLE MATERIAL NOR WHICH HAS COME TO HIS NOTICE AFTER COMPLETION OF ORIGINAL ASSESSMENT WHICH ENABLE THE ASSESSING OFFI CER TO FORM AN OPINION THAT INCOME ESCAPED ASSESSMENT. THEREFORE, IT CAN BE SAFELY CONCLUDED THAT REASSESSMENT PROCEEDINGS WAS INITIAT ED BASED ON MATERIALS ALREADY AVAILABLE ON RECORD. IT IS A C ASE OF MERE CHANGE OF OPINION ON THE SAME SET OF INFORMATION/MATERIAL. T HE OTHER REQUISITE CONDITION TO BE SATISFIED IN CASE WHERE THE REOPENI NG IS SOUGHT AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR IS THAT THERE SHOULD BE FAILURE ON THE PART OF THE ASS ESSEE TO DISCLOSE ALL MATERIAL FACTS WHICH ARE NECESSARY FOR THE PURPOSE OF ASSESSMENT. IN THE PRESENT CASE, ADMITTEDLY, THERE IS NO ALLEGATIO N BY THE ASSESSING OFFICER THAT THERE IS ANY SUCH FAILURE ON THE PART OF THE ASSESSEE. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT A SSESSING OFFICER WAS NOT JUSTIFIED IN INITIATING REASSESSMENT PROCEE DINGS. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SCHWING SHETTER INDIA P. LTD ITA NO. 922/2019. :- 6 -: (SUPRA) , WHEREIN IT WAS HELD AS FOLLOWS IN THE IDENTICAL F ACTS OF THE CASE. 13. FOR THE PURPOSE OF ASSUMPTION OF JURISDICTION U NDER SECTION 147 OF THE INCOME TAX ACT, THE OFFICER MUST HAVE RE ASON BASED ON MATERIALS THAT THERE HAS BEEN AN INCOME ESCAPING AS SESSMENT, WHICH WARRANTED ASSUMPTION OF JURISDICTION UNDER SECTION 147 OF THE INCOME TAX ACT. A PERUSAL OF THE ASSESSMENT ORDER SHOWS TH AT THE ASSESSING OFFICER HAD NOT MENTIONED THAT THERE ARE MATERIALS FOR ESCAPEMENT OF INCOME. THE ASSESSING OFFICER ALSO DID NOT RECORD A NY REASON THAT THERE WAS FAILURE ON THE PART OF THE ASSESSEE TO DI SCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. 14. WE FIND FROM THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS) AND THE TRIBUNAL AND ALSO ON FACTS AS HAS BEEN CULLED OUT FROM THE ASSESSMENT ORDER IN QUESTION THAT THERE IS NO ELEMENT OF FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FA CTS NECESSARY FOR ASSESSMENT. 15. THE RELIANCE PLACED BY THE LEARNED STANDING COU NSEL APPEARING FOR THE REVENUE ON EXPLANATION (1) TO SECTION 147 OF TH E INCOME TAX ACT CANNOT BE PRESSED INTO SERVICE BY THE DEPARTMENT IN THE INSTANT CASE, BECAUSE THE DETAILS OF SUCH CLAIM HAS BEEN REVEALED IN THE TAX AUDIT REPORT AND APPARENTLY, THE SAME HAS BEEN CONSIDERED BY THE ASSESSING OFFICER AT THE TIME OF PASSING AN ORDER U NDER SECTION 143(3) OF THE INCOME TAX ACT. THEREFORE, EXPLANATIO N (1) DOES NOT GET ATTRACTED TO THIS CASE. EXPLANATION (2)(C)(I) A ND (III) TO SECTION 147 OF THE INCOME TAX ACT, WHICH IS SOUGHT TO BE IN VOKED IN THE PRESENT CASE, CAN ARISE ONLY IN A CASE WHERE THE DE PARTMENT IS ABLE TO ESTABLISH THAT THERE IS INCOME ESCAPING ASSESSMENT AND THE PROVISO TO SECTION 147 GETS ATTRACTED. IN THIS CASE, WE FIN D THAT THE FINDING OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND THE TR IBUNAL IS THAT THE PROVISO TO SECTION 147 OF THE INCOME TAX ACT DI D NOT GET ATTRACTED AND IT IS A CASE OF MERE CHANGE OF OPINION OF THE A SSESSING OFFICER. 16. OUR VIEW IS FORTIFIED BY THE DECISION OF THE FU LL BENCH OF THE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TA X V. KELVINATOR OF INDIA LTD. REPORTED IN [2002] 256 ITR 1 (DEL), W HEREIN, THE DELHI HIGH COURT HELD AS FOLLOWS: WE ALSO CANNOT ACCEPT THE SUBMISSION OF MR. JOLLY T O THE EFFECT THAT ONLY BECAUSE IN THE ASSESSMENT ORDER, DETAILED REASONS HAVE NOT BEEN RECORDED AN ANALYSIS OF THE MATERIALS ON THE RECORD BY ITSELF MAY JUSTIFY THE ASSESSING OFFICER TO INITIATE A PROCEEDING UNDER SECTION 147 OF THE ACT. THE SAID S UBMISSION ITA NO. 922/2019. :- 7 -: IS FALLACIOUS. AN ORDER OF ASSESSMENT CAN BE PASSED EITHER IN TERMS OF SUB-SECTION (1) OF SECTION 143 OR SUB-SECT ION (3) OF SECTION 143. WHEN A REGULAR ORDER OF ASSESSMENT IS PASSED IN TERMS OF THE SAID SUB-SECTION (3) OF SECTION 143 A PRESUMPTION CAN BE RAISED THAT SUCH AN ORDER HAS BE EN PASSED ON APPLICATION OF MIND. IT IS WELL KNOWN THAT A PRE SUMPTION CAN ALSO BE RAISED TO THE EFFECT THAT IN TERMS OF CLAUS E (E) OF SECTION 114 OF THE INDIAN EVIDENCE ACT JUDICIAL AND OFFICIAL ACTS HAVE BEEN REGULARLY PERFORMED. IF IT BE HELD T HAT AN ORDER WHICH HAS BEEN PASSED PURPORTEDLY WITHOUT APPLICATI ON OF MIND WOULD ITSELF CONFER JURISDICTION UPON THE ASSESSING OFFICER TO REOPEN THE PROCEEDING WITH OUT ANYTHING FURTHER, TH E SAME WOULD AMOUNT TO GIVING A PREMIUM TO AN AUTHORITY EX ERCISING QUASI-JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG. 17. THE ABOVE SAID DECISION OF THE FULL BENCH OF TH E DELHI HIGH COURT WAS UPHELD BY THE SUPREME COURT IN THE DECISION REP ORTED IN [2010] 320 ITR 561 (SC) COMMISSIONER OF INCOME-TAX V. (1) KELVINATOR OF INDIA LTD., WHEREIN THE SUPREME COURT HELD THAT THE CONCEPT OF 'CHANGE OF OPINION' ON THE PART OF T HE ASSESSING OFFICER TO REOPEN THE ASSESSMENT DID NOT STAND OBLI TERATED AFTER THE SUBSTITUTION OF SECTION 147 OF THE INCOME TAX ACT. THE SUPREME COURT ALSO HELD THAT THE ASSESSING OFFICER HAS POWER TO R EOPEN THE ASSESSMENT, PROVIDED THERE IS 'TANGIBLE MATERIAL' T O COME TO A CONCLUSION THAT THERE WAS AN ESCAPEMENT OF INCOME F ROM ASSESSMENT. FOR BETTER APPRECIATION, THE RELEVANT PORTION OF TH E SAID DECISION READS AS FOLLOWS: 6. ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE TO SECTION 147 OF THE ACT, WE FIND THAT, PRIOR TO T HE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, REOPENING COULD BE DONE UNDER THE ABOVE TWO CONDITIONS AND FULFILMENT OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFIC ER TO MAKE A BACK ASSESSMENT, BUT IN SECTION 147 OF THE ACT (WIT H EFFECT FROM 1ST APRIL, 1989), THEY ARE GIVEN A GO-BY AND O NLY ONE CONDITION HAS REMAINED, VIZ., THAT WHERE THE ASSESS ING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSES SMENT, CONFERS JURISDICTION TO REOPEN THE ASSESSMENT. THER EFORE, POST- 1ST APRIL, 1989, POWER TO REOPEN IS MUCH WIDER. HOW EVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATION TO THE WOR DS ' REASON TO BELIEVE' FAILING WHICH, WE ARE AFRAID, SECTION 1 47 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF ' MERE CHANGE OF OPINIO N', WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEE P IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW A ND POWER TO REASSESS. THE ASSESSING OFFICER HAS NO POWER TO REVIEW ; HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE BASED ITA NO. 922/2019. :- 8 -: ON FULFILMENT OF CERTAIN PRECONDITIONS AND IF THE C ONCEPT OF ' CHANGE OF OPINION' IS REMOVED, AS CONTENDED ON BEHA LF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSE SSMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF ' CHANGE OF OPINION' AS AN IN-BUILT TEST TO CHECK ABU SE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1ST APRIL, 1 989, THE ASSESSING OFFICER HAS POWER TO REOPEN, PROVIDED THE RE IS ' TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT T HERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REASONS MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF. OUR VIE W GETS SUPPORT FROM THE CHANGES MADE TO SECTION 147 OF THE ACT, AS QUOTED HEREIN ABOVE. UNDER THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, PARLIAMENT NOT ONLY DELETED THE WORDS ' REASO N TO BELIEVE' BUT ALSO INSERTED THE WORD ' OPINION' IN S ECTION 147 OF THE ACT. HOWEVER, ON RECEIPT OF REPRESENTATIONS FRO M THE COMPANIES AGAINST OMISSION OF THE WORDS ' REASON TO BELIEVE', PARLIAMENT REINTRODUCED THE SAID EXPRESSION AND DEL ETED THE WORD ' OPINION' ON THE GROUND THAT IT WOULD VEST AR BITRARY POWERS IN THE ASSESSING OFFICER. WE QUOTE HEREINBEL OW THE RELEVANT PORTION OF CIRCULAR NO. 549 DATED OCTOBER 31, 1989 ([1990] 182 ITR (ST.) 1,29), WHICH READS AS FOLLOWS : '7.2 AMENDMENT MADE BY THE AMENDING ACT, 1989, TO REINTRODUCE THE EXPRESSION ' REASON TO BELIEVE' IN SECTION 147. A NUMBER OF REPRESENTATIONS WERE RECEIVED AGAINST THE OMISSION OF THE WORDS ' REASON TO BELIEVE' FROM SECTION 147 AND THEIR SUBSTITUTION BY THE ' OPINION' OF THE ASSESSING OFF ICER. IT WAS POINTED OUT THAT THE MEANING OF THE EXPRESSION, ' R EASON TO BELIEVE' HAD BEEN EXPLAINED IN A NUMBER OF COURT RU LINGS IN THE PAST AND WAS WELL SETTLED AND ITS OMISSION FROM SEC TION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OF FICER TO REOPEN PAST ASSESSMENTS ON MERE CHANGE OF OPINION. TO ALLAY THESE FEARS, THE AMENDING ACT, 1989, HAS AGAIN AMENDED SECTION 147 TO REINTRODUCE THE EXPRESSION ' HAS REASON TO BELIEVE' IN PLACE OF THE WORDS ' FOR REAS ONS TO BE RECORDED BY HIM IN WRITING, IS OF THE OPINION' . OT HER PROVISIONS OF THE NEW SECTION 147, HOWEVER, REMAIN THE SAME.' (EMPHASIS SUPPLIED) 18. SIMILAR VIEW HAS BEEN TAKEN BY THIS COURT IN TH E DECISION REPORTED IN [2009] 309 ITR 110 (MAD) COMMISSIONER OF INCOME- TAX V. CHOLAMANDALAM INVESTMENT AND FINANCE CO. LTD. , WHE REIN IT WAS HELD AS FOLLOWS: ITA NO. 922/2019. :- 9 -: IN THOSE CIRCUMSTANCES, IT COULD NOT BE REGARDED TH AT THE ASSESSEE HAD FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT FOR THE ASSESSMENT. AS THE FACTS REVEALED THAT THE ASSESSING OFFICER WHO MADE THE ORIGINAL ASSESSMENT ORDER HAS CALLED FOR ALL THE DETAILS REGARDING THE CASE WHERE 100 PER CENT. DEPRECIATION WERE CLAIMED AND THE ASSESSEE HAD FURN ISHED THE INVOICES FOR PURCHASE OF ASSETS ON WHICH 100 PER CE NT. DEPRECIATION WERE CLAIMED, THERE WAS NO FAILURE ON THE PART OF THE ASSESSEE AND IF AT ALL THERE WAS ANY FAILURE, A CCORDING TO THE COMMISSIONER OF INCOME-TAX (APPEALS), IT WAS ON THE PART OF THE ASSESSING OFFICER, WHO MADE THE ORIGINAL ASS ESSMENT WITHOUT GOING BEHIND THE NATURE OF THE TRANSACTIONS ACCEPTING THE DETAILS FURNISHED BY THE ASSESSEE. THE TRIBUNAL ALSO EXTRACTED THAT PORTION OF THE ORDER AND FOUND ON TH E FACT THAT THERE WAS NO FAULT ON THE PART OF THE ASSESSEE SO A S TO ENABLE THE DEPARTMENT TO REOPEN THE ASSESSMENT AS THE PROV ISO TO SECTION 147 OF THE INCOME-TAX ACT WOULD SQUARELY APPLY TO THE CASE OF THE ASSESSEE. WE FIND NO INFIRMITY IN T HE ORDER PASSED BY THE TRIBUNAL. HENCE, THE APPEAL IS DISMIS SED. 19. IN AN IDENTICAL CIRCUMSTANCE, A LEARNED SINGLE JUDGE OF THIS COURT HAD CONSIDERED THE ISSUE IN THE DECISION REPORTED I N [2000] 241 ITR 672 (MAD) FENNER (INDIA) LTD. V. DEPUTY COMMISSIONE R OF INCOME-TAX, WHEREIN, IT WAS OBSERVED AS FOLLOWS: THE PRE-CONDITION FOR THE EXERCISE OF THE POWER UN DER SECTION 147 IN CASES WHERE POWER IS EXERCISED WITHIN A PERI OD OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR IS THE BELIEF REASONABLY ENTERTAINED BY THE ASSESSING OFFI CER THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR THAT ASSESSMENT YEAR. HOWEVER,WHEN THE POWER IS INVOKED AFTER THE EXPIRY OF THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, A FURTHER PRE-CONDITION FOR SUCH E XERCISE IS IMPOSED BY THE PROVISO NAMELY, THAT THERE HAS BEEN A FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SECTION 142 OR SECTION 148 OR FAILURE ON THE PART OF THE AS SESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR. UNLESS, THE CO NDITION IN THE PROVISO IS SATISFIED, THE ASSESSING OFFICER DOE S NOT ACQUIRE JURISDICTION TO INITIATE ANY PROCEEDING UNDER SECTI ON 147 OF THE ACT AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. THUS, IN CASES WHERE THE INITIATIO N OF THE PROCEEDINGS IS BEYOND THE PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, THE ASSESSING OFFICER MUST NEC ESSARILY RECORD NOT ONLY HIS REASONABLE BELIEF THAT INCOME H AS ESCAPED ASSESSMENT BUT ALSO THE DEFAULT OR FAILURE COMMITTE D BY THE ASSESSEE. FAILURE TO DO SO WOULD VITIATE THE NOTICE AND THE ITA NO. 922/2019. :- 10 -: ENTIRE PROCEEDINGS. THE RELEVANT WORDS IN THE PROVI SO ARE, . . . . UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE O N THE PART OF THE ASSESSEE ... . . MERE ESCAPE OF INCOME IS INSUFFICIENT TO JUSTIFY THE INITIATION OF ACTION AFTER THE EXPIRY O F FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. SUCH ESCAPEMENT MUS T BE BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE E ITHER TO FILE A RETURN REFERRED TO IN THE PROVISO OR TO TRULY AND F ULLY DISCLOSE THE MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. WHENEVER A NOTICE IS ISSUED BY THE ASSESSING OFFICE R BEYOND A PERIOD OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR, SUCH NOTICE BEING ISSUED WITHOUT RECORDING TH E REASONS FOR HIS BELIEF THAT INCOME ESCAPED ASSESSMENT, IT C ANNOT BE PRESUMED IN LAW THAT THERE IS ALSO A FAILURE ON THE PART OF THE ASSESSEE TO FILE THE RETURNS REFERRED TO IN THE PRO VISO OR A FAILURE TO FULLY AND TRULY DISCLOSE THE MATERIAL FA CTS. THE REASONS REFERRED TO IN THE MAIN PARAGRAPH OF SECTION 147 WO ULD, IN CASES WHERE THE PROVISO IS ATTRACTED, INCLUDE REASO NS REFERRED TO IN THE PROVISO AND IT IS NECESSARY FOR THE ASSES SING OFFICER TO RECORD THAT ANY ONE OR ALL THE CIRCUMSTANCES REFERR ED TO IN THE PROVISO EXISTED BEFORE THE ISSUE OF NOTICE UNDER SE CTION 147. AFTER AN ASSESSMENT HAS BEEN MADE, IN THE NORMAL CIRCUMSTANCES, THERE WOULD BE NO REASON FOR ANYONE TO DOUBT THAT THE ASSESSMENT HAS BEEN MADE ON THE BASIS OF A LL RELEVANT FACTS. IF THE ASSESSING OFFICER CHOOSES TO ENTERTAI N THE BELIEF THAT THE ASSESSMENT HAS BEEN MADE IN THE BACKGROUND OF THE ASSESSEE S FAILURE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS, IT IS NECESSARY FOR HIM TO RECORD THAT FACT, AND IN TH E ABSENCE OF A RECORD TO THAT EFFECT, IT CANNOT BE HELD THAT A NOT ICE ISSUED WITHOUT RECORDING SUCH A FACT IS CAPABLE OF BEING R EGARDED AS A VALID NOTICE. AS TO WHETHER THE MATERIAL FACTS DISC LOSED BY THE ASSESSEE ARE FULL AND TRUE IS ALWAYS A QUESTION OF FACT AND UNLESS THE FACTS DISCLOSED HAD BEEN EXAMINED IN REL ATION TO THE EXTENT OF FAILURE IF ANY ON THE PART OF THE ASSESSE E, IT IS NOT POSSIBLE TO FORM THE OPINION THAT THERE HAD BEEN A FAILURE ON THE ASSESSEE S PART TO TRULY AND FULLY DISCLOSE THE MATERIAL FACTS. A NOTICE ISSUED WITHOUT A RECORD OF THE ASSE SSING OFFICER S REASONABLE BELIEF THAT THERE WAS SUCH FAILURE ON THE PART OF THE ASSESSEE WOULD BE INDICATIVE OF A FAILU RE ON THE PART OF THE ASSESSING OFFICER TO APPLY HIS MIND TO MATER IAL FACTS, AND ON THAT GROUND ALSO THE NOTICE ISSUED WOULD BE VITI ATED. THE REASONS ACTUALLY RECORDED AND AS SET OUT BY THE OFFICER IN THE COUNTER AFFIDAVIT ARE SUCH THAT EVEN AFTER CLOS E SCRUTINY THEY DO NOT ESTABLISH EVEN PRIMA FACIE A FAILURE ON THE PART OF ITA NO. 922/2019. :- 11 -: THE ASSESSEE TO FULLY AND TRULY DISCLOSE THE MATERI AL FACTS FOR THE ASSESSMENT. ......... THE DUTY OF AN ASSESSEE IS LIMITED TO FULLY AND TRU LY DISCLOSING ALL THE MATERIAL FACTS. THE ASSESSEE IS NOT REQUIRE D THEREAFTER TO PREPARE A DRAFT ASSESSMENT ORDER. IF THE DETAILS PL ACED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER WERE IN CONFO RMITY WITH THE REQUIREMENTS OF ALL APPLICABLE LAWS AND KNOWN A CCOUNTING PRINCIPLES, AND MATERIAL DETAILS HAD BEEN EXHIBITED BEFORE THE ASSESSING OFFICER, IT IS FOR THE ASSESSING OFFICER TO REACH SUCH CONCLUSIONS AS HE CONSIDERED WAS WARRANTED FROM SUC H DATA AND ANY FAILURE ON HIS PART TO DO SO CANNOT BE REGA RDED AS THE ASSESSEE S FAILURE TO FURNISH THE MATERIAL FACTS TRULY AND F ULLY. ANY LACK OF COMPREHENSION ON THE PART OF THE ASSESS ING OFFICER IN UNDERSTANDING THE DETAILS PLACED BEFORE HIM CANN OT CONFER A JUSTIFICATION FOR REOPENING THE ASSESSMENT, LONG AF TER THE PERIOD OF FOUR YEARS HAD EXPIRED. ON THE FACTS OF THIS CAS E, IT IS CLEAR THAT THE ESCAPEMENT OF INCOME, IF ANY, ON THIS ACCO UNT IS NOT ON ACCOUNT OF ANY FAILURE ON THE ASSESSEE S PART TO DISCLOSE THE MATERIAL FACTS FULLY AND TRULY. THE NOTICE ISSUED B Y THE ASSESSING OFFICER IN EXERCISE OF HIS POWER UNDER SE CTION 147, THEREFORE, CANNOT BE SUSTAINED. 20. IN THE CASE OF ICICI SECURITIES LTD. V. ASSISTA NT COMMISSIONER OF INCOME TAX 3(2), MUMBAI, THE BOMBAY HIGH COURT VIDE ORDER DATED 22.08.2006 IN W.P.NO.1919 OF 2006, WHILE DEALING WI TH THE ISSUE ON THE REOPENING OF ASSESSMENT, HELD AS FOLLOWS: '7. IN THE FACTS OF THE PRESENT CASE, THERE IS NOTH ING NEW WHICH HAS COME TO THE NOTICE OF THE REVENUE. THE ACCOUNTS HAD BEEN FURNISHED BY THE PETITIONER WHEN CALLED UPON. THERE AFTER THE ASSESSMENT WAS COMPLETED UNDER SECTION 143(3) OF TH E INCOME TAX ACT. NOW, ON A MERE RELOOK, THE OFFICER HAS COM E TO THE CONCLUSION THAT THE INCOME HAS ESCAPED ASSESSMENT A ND HE IS OF COURSE JUSTIFIED IN HIS ANALYSIS. IN OUR VIEW, T HIS IS NOT SOMETHING WHICH IS PERMISSIBLE UNDER THE PROVISO TO SECTION 147 OF THE INCOME TAX ACT WHICH SPEAKS ABOUT A FAIL URE ON THE PART OF THE ASSESSEE TO MAKE A PROPER RETURN. IN TH E PRESENT CASE, NO SUCH CASE IS MADE OUT ON THE RECORD. 8. IN THE CIRCUMSTANCES, WE ALLOW THIS PETITION IN TERMS OF PRAYER (A) AND QUASH AND SET ASIDE THE NOTICE DATED 27TH MARCH 2006 DIRECTING REOPENING OF THE ASSESSMENT FO R THE YEAR 1999-2000.' ITA NO. 922/2019. :- 12 -: 21. THE ABOVE-SAID VIEW OF THE BOMBAY HIGH COURT WA S AFFIRMED BY THE SUPREME COURT IN CIVIL APPEAL NO.5960 OF 2012. 22. IN THE LIGHT OF THE ABOVE, WE HOLD THAT WHEN TH E ASSESSING OFFICER HAD FAILED TO RECORD ANYWHERE HIS SATISFACTION OR B ELIEF THAT THE INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT ON ACCOUNT OF THE FAILURE OF THE ASSESSEE TO DISCLOSE TRULY AND FULLY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT, THE NOTICE ISSUED UNDER S ECTION 147 OF THE INCOME TAX ACT BEYOND THE PERIOD OF FOUR YEARS WAS WHOLLY WITHOUT JURISDICTION AND CANNOT BE SUSTAINED. 23. HENCE, WE HAVE NO HESITATION IN HOLDING THAT RE OPENING IS BAD. ACCORDINGLY, WE UPHOLD THE FINDINGS OF THE TRIBUNAL THAT IT IS A CASE OF MERE CHANGE OF OPINION ON THE SAME MATERIAL ALREADY AVAILABLE ON RECORD, WHICH HAS BEEN SUBMITTED BY THE ASSESSEE IN ANNEXURE 1A OF THE TAX AUDIT REPORT AT POINT NO.12(B) OF THE RETUR N OF INCOME. IN THE LIGHT OF THE ABOVE FACTS AND LEGAL POSITION S, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS). THE APPEAL FILED BY THE REVENUE ST ANDS DISMISSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE S TANDS DISMISSED. ORDER PRONOUNCED ON 9TH DAY OF JANUARY, 2020, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER - ) / CHENNAI . / DATED:9 TH JANUARY, 2020 KV $ &*01 21!* / COPY TO: 1 . '# / APPELLANT 3. ( 3* () / CIT(A) 5. 16 &*7 / DR 2. &' '# / RESPONDENT 4. ( 3* / CIT 6. 8 9) / GF