A Naga Srinivas, Hyd, Hyderabad V. DCIT, Circle-13(1), Hyd, Hyderabad

ITA 944/HYD/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6097 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-06-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-10-2018
• Assessment Year: 2009-2010
• Appeal Filed On: 01-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M H NAIK
• Keywords: Reopening of assessment; Depreciation; Salary income; Double taxation relief; Source of fund; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148

Judgement Text

ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 1 OF 14 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NO.944/HYD/2017 (ASSESSMENT YEAR: 2009-10) SHRI A. NAGA SRINIVAS HYDERABAD PAN: AEK PA5809H VS DY. COMMISSIONER OF INCOME TAX, CIRCLE 13(1) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI A. SRINIVAS FOR REVENUE : SHRI M.H. NAIK, DR O R D E R PER SMT. P. MADHAVI DEVI, J.M. THIS IS ASSESSEES APPEAL FOR THE A.Y 2009-10 AGAIN ST THE ORDER OF THE CIT (A)-6, HYDERABAD, DATED 1.11.2 016. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE APPELLATE COMMISSIONER IS CONTR ARY TO LAW, FACTS & CIRCUMSTANCES OF THE CASE. 2. THE APPELLATE COMMISSIONER OUGHT NOT TO HAVE DIS MISSED THE APPEAL WITHOUT GIVING ADEQUATE OPPORTUNITY TO T HE ASSESSEE TO PRESENT ITS CASE. 3. WITHOUT PREJUDICE TO THE GROUND AT ITEM NO.2 ABO VE, THE APPELLATE COMMISSIONER OUGHT NOT TO UPHELD THAT THE ISSUANCE OF NOTICE BY THE AO U/S.148 WHEN ALL FACTS WERE BEFORE THE AO AT THE TIME OF ORIGINAL ASSESSMENT MA DE U/S.143(3). 4. THE APPELLATE COMMISSIONER OUGHT NOT TO HAVE UPH ELD THE VALIDITY OF THE NOTICE U/S.148 WAS CORRECT, WHEN IN FACT THE NOTICE U/S.148 ISSUED BY THE AO, TANTAMOUNTED TO CH ANGE OF DATE OF HEARING: 31.05.2018 DATE OF PRONOUNCEMENT: 0 8 . 0 6 .2018 ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 2 OF 14 OPINION ON THE SAME FACTS, WITHOUT ANY FRESH EVIDEN CE OR INFORMATION BEING BROUGHT ON RECORD. 5. WITHOUT PREJUDICE TO THE GROUNDS AT 2 3, & 4, AB OVE THE APPELLATE COMMISSIONER OUGHT NOT TO HAVE CONFIRMED THE ORDER OF THE AO DISALLOWING AN AMOUNT OF RS.20,OO,O OO/- U/S.40(A)(IA). 6. THE APPELLATE COMMISSIONER OUGHT NOT TO HAVE UPH ELD THE ORDER OF THE AO IN APPLYING THE PROVISION U/S. 40(A )(IA) WHEN IN FACT THE AMOUNT OF RS.20,00,000/- DEBITED TO THE PROFIT AND LOSS ACCOUNT WAS NOT ELIGIBLE FOR TDS. 2. AT THE TIME OF HEARING, THE LEARNED COUNSEL FO R THE ASSESSEE SUBMITTED THAT HE DOES NOT WISH TO PRESS T HE GROUND OF APPEAL NO.2 AND ACCORDINGLY, THE SAID GROUND IS REJ ECTED AS NOT PRESSED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE, A N INDIVIDUAL, DERIVING INCOME FROM THE ACTIVITY OF DI RECTION OF CINE FILMS, HAS FILED HIS RETURN OF INCOME FOR THE A.Y 2 009-10 ORIGINALLY ON 18.02.2010 ADMITTING TOTAL INCOME OF RS.45,25,33 0. THE ASSESSMENT ORDER U/S 143(3) OF THE ACT WAS PASSED O N 14.12.2011 DETERMINING THE TAXABLE INCOME AT RS.46,89,333 AFTE R MAKING DISALLOWANCE OF 20% OF THE SALARY CLAIMED I.E. RS.1 ,64,000 ONLY. THEREAFTER, THE AO, ON PERUSAL OF ASSESSMENT RECORD S, OBSERVED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.20.00 LAKHS IN THE P&L A/C FOR THE A.Y 2009-10 AS PAYMENT TO M/S. SUMA NTH ART PRODUCTION AND THAT THOUGH THE TDS NEEDS TO BE MADE , THE ASSESSEE HAS NOT DEDUCTED THE TDS. HE OBSERVED THAT IN VIEW OF THE ABOVE FACTS AND AS PER SECTION 40(A)(IA) OF THE ACT, THE ENTIRE EXPENDITURE HAS TO BE DISALLOWED AND BROUGHT TO TAX . THEREFORE, A SHOW CAUSE NOTICE U/S 148 OF THE ACT WAS ISSUED TO THE ASSESSEE. ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 3 OF 14 THE ASSESSEE REQUESTED FOR REASONS FOR THE REOPENIN G AND THE SAME WAS FURNISHED TO THE ASSESSEE ON 1.8.2013. 4. THEREAFTER, THE ASSESSEE FILED A LETTER EXPLAINI NG THAT HE HAS RECEIVED THE SUM OF RS.20.00 LAKHS AS ADVANC E FOR AN UPCOMING PROJECT DURING THE FINANCIAL YEAR 2006-07 RELEVANT TO THE A.Y 2007-08 AND THAT THE TDS CERTIFICATE WAS ER RONEOUSLY ISSUED AS PAYMENT OF INTEREST INSTEAD OF PROFESSION AL FEES. THE CONFIRMATION FROM M/S SUMANT ART PRODUCTION WAS FIL ED IN SUPPORT OF THE SAID CONTENTION. IT WAS FURTHER SUBM ITTED THAT THE SAID PRODUCTION DID NOT MATERIALIZE AND THE ADVANCE WAS RETURNED TO THE SAID PARTY IN THE FINANCIAL YEAR 2008-09 REL EVANT TO THE A.Y 2009-10 AND BY FOLLOWING THE CASH SYSTEM OF ACCOUNT ING IT WAS DEBITED TO THE P&L A/C. IT WAS SUBMITTED THAT THIS TRANSACTION IS NOT COVERED BY THE TDS PROVISIONS. THE AO HOWEVER, WAS NOT CONVINCED WITH THE ASSESSEES CONTENTIONS AND HELD THAT THE RETURN OF MONEY WAS SUBJECT TO TDS AND SINCE NO TDS WAS MADE, IT IS TO BE DISALLOWED U/S 40(A)(IA) OF THE ACT. AC CORDINGLY, HE BROUGHT IT TO TAX. AGGRIEVED, THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE CIT (A), WHO CONFIRMED THE ORDER OF THE AO AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND S UBMITTED THAT THE CHAPTER XVIIB OF THE ACT, DEALS WITH THE D EDUCTION OF TAX AT SOURCE AND THE NATURE OF TRANSACTIONS FOR WHICH TDS IS TO BE MADE. HE SUBMITTED THAT THE RETURN OF ADVANCE, BY T HE ASSESSEE, DOES NOT FALL UNDER ANY OF THESE CATEGORIES. THERE FORE, ACCORDING ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 4 OF 14 TO HIM, NO DISALLOWANCE U/S 40(A)(IA) CAN BE MADE. HE ALSO DREW OUR ATTENTION TO THE NOTICE ISSUED BY THE AO DATED 15.07.2011 DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE ACT, WHEREIN THE ASSESSEE WAS ASKED TO EXPLAIN, THE DETAILS OF T HE SUM CLAIMED AS EXPENSES, AND THAT THE ASSESSEE HAS GIVEN THE DE TAILS OF THE EXPENSES, WHICH IS PLACED AT PAGE 5 OF THE PAPER BO OK WHEREIN THE ADVANCE RETURNED TO M/S SUMANT ART PRODUCTION AMOUN TING TO RS.20.00 LAKHS IS REFLECTED. HE ALSO DREW OUR ATTEN TION TO THE P&L A/C WHEREIN THE ASSESSEE HAS DEBITED THE EXPENSES O F RS.20.00 LAKHS. THEREFORE, ACCORDING TO HIM, THE AO WAS AWAR E OF THE ADVANCE RETURNED TO M/S. SUMANT ART PRODUCTION AND AFTER CONSIDERING THE SAID ISSUE ALSO, THE AO HAS NOT BRO UGHT IT TO TAX. THEREFORE, ACCORDING TO HIM, THE REOPENING OF THE A SSESSMENT U/S 147 OF THE ACT ON THIS GROUND, IS NOTHING BUT ON TH E CHANGE OF THE OPINION WHICH CAN BE PERMITTED NOT AS HELD IN THE D ECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF KELVINATOR IND IA LTD REPORTED IN 320 ITR 561 (S.C) AND ALSO IN THE CASE S. RANJITH REDDY VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -6(1), HYDERABAD REPORTED IN 144 ITD 461 (HYD.) AT PARAS 2 8 TO 33. THEREFORE, ACCORDING TO HIM, THE ASSESSMENT ORDER I S NOT SUSTAINABLE BOTH ON THE LEGAL GROUND AS WELL AS ON MERITS. 6. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE M ATERIAL ON RECORD, WE FIND THAT IN THE CASE OF THE ASSESSEE , THE ASSESSMENT HAS BEEN COMPLETED U/S 143(3) ON 14.12.2 011, WHILE ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 5 OF 14 THE NOTICE U/S 148 WAS ISSUED ON 4.1.2013 I.E. WITH IN FOUR YEARS FROM THE END OF THE RELEVANT A.Y. WE FIND THAT THE AO, DURING THE ORIGINAL ASSESSMENT PROCEEDINGS U/S 143(3), HAD CAL LED FOR DETAILS OF THE EXPENDITURE AND THE ASSESSEE HAS FURNISHED T HE DETAILS AND IT IS ONLY THEREAFTER, THE REGULAR ASSESSMENT WAS C OMPLETED. THEREFORE, THE PRESUMPTION TO BE DRAWN IS THAT THE AO WAS SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSE E AS HELD BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. USH A INTERNATIONAL LTD REPORTED IN (2012) 348 ITR 485 (DEL.) AND HENCE HAS NOT MADE ANY ADDITION AND REOPENING AMOUNTS TO CHANGE OF OPI NION. THE REOPENING OF THE ASSESSMENT ON THE VERY SAME GROUND ON WHICH AN INQUIRY WAS MADE DURING THE ASSESSMENT PROCEEDIN GS WOULD AMOUNT TO REOPENING ON CHANGE OF OPINION AS ALSO HE LD BY THE HON'BLE SUPREME COURT IN THE CASE OF KELVINATOR IND IA LTD IN 320 ITR 561 (SC) (F.B). 8. THE ABOVE DECISION WAS CONSIDERED BY THE COORDIN ATE BENCH OF THE TRIBUNAL AT HYDERABAD IN THE CASE OF S . RANJITH REDDY VS. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE -6(1), HYDERABAD REPORTED IN 144 ITD 461 (HYD.) AND AT PAR AS 28 TO 33 IT WAS HELD AS UNDER: 28. NOW, UNDOUBTEDLY AN ORDER OF THE ASSESSMENT WHICH HAS BEEN PASSED IN SUBSEQUENT ASSESSMENT YEAR MAY FURNISH A FOUNDATION TO REOPEN AN ASSESSMENT FOR AN EARLIER ASSESSMENT YEAR. HOWEVER, THERE MUST BE SOME NEW FACTS WHICH COME TO LIGHT IN THE COURSE OF ASSESSMENT FOR THE SUBSEQUEN T ASSESSMENT YEAR WHICH EMERGE IN THE ORDER OF THE ASSESSMENT. OTHERWISE, A MERE C HANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT F OR A SUBSEQUENT ASSESSMENT YEAR WOULD NOT BY ITSELF LEGITIMISE REOPENING OF ASSESSM ENT FOR AN EARLIER YEAR. THE POINT, WE MAKE IT CLEAR HEREIN IS THAT WHETHER IN THE COUR SE OF ASSESSMENT PROCEEDINGS FOR SUBSEQUENT YEAR CERTAIN ADDITIONAL INFORMATION IS O BTAINED BY THE REVENUE WHICH WAS NOT AVAILABLE TO IT IN THE COURSE OF ASSESSMENT FOR AN EARLIER YEAR, THAT MAY LEGITIMATELY BE UTILISED AS A GROUND FOR REOPENING OF ASSESSMENT OF THE EARLIER YEAR. WHETHER THE REOPENING HAS TAKEN PLACE WITHIN FOUR Y EARS THAT MAY LEGITIMATELY GIVE RISE TO AN INFERENCE OF ESCAPEMENT OF INCOME. THE N EW INFORMATION WHICH HAS COME TO THE KNOWLEDGE OF THE REVENUE, THEREFORE, CONSTIT UTES TANGIBLE MATERIAL. IF THERE IS ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 6 OF 14 A FRESH MATERIAL THAT THAT WOULD NOT PRECLUDE THE A SSESSING OFFICER TO REOPEN THE ASSESSMENT FOR AN EARLIER YEAR ON THE BASIS OF FRES H MATERIAL WHICH HAS COME TO LIGHT IN THE COURSE OF ASSESSMENT FOR A SUBSEQUENT ASSESS MENT YEAR. NOW IN THE ABOVE BACKGROUND, CONSIDERING THE FACTS OF THE PRESENT CA SE, THERE IS NO DISPUTE THAT THE ASSESSEE FURNISHED A DETAILED NOTE ANNEXED TO THE R ETURN OF INCOME. FOR CLARITY, WE REPRODUCE THE NOTE APPENDED TO THE RETURN OF INCOME . 'S. RANJITH REDDY S/O. LATE S. HANUMANTH REDDY PAN NO: AOMPS8851D ASSESSMENT YEAR: 2006-07 ACCOUNTING YEAR: 2005-06 NOTE APPENDED TO AND FORMING PART OF RETURN OF INCO ME THE RETURN OF THE INCOME FOR THE ACCOUNTING YEAR EN DING ON 31-03-2006 RELEVANT TO THE ASSESSMENT YEAR 2006-07 IS SUBMITTED. 1. THE SOURCES OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION CONSIST OF (A) INCOME FROM HOUSE PROPERTY (B) INCOME FROM CAPITAL GAINS (C) INCOME FROM SALARY AND (D) INCOME FROM OTHER SOURCES. 2. MY FATHER SRI S. HANUMANTH REDDY DIED ON 07 - 07-2005. HE WAS ASSESSED TO INCOME TAX (A) IN HIS INDIVIDUAL STATUS UNDER PAN NO. AIRPS8649A AND (B) IN HUF STATUS PAN NO. AADGS8526A. HE WAS IN RECEIPT OF PROPERTY INCOME AND INTEREST INCOME IN THE INDIVIDUAL STATUS THAT WAS BEING ADMITTED YEAR AFTER YEAR. THE HUF WAS IN RECEIPT OF PROPERTY INCOME, INTEREST INCOME AND AGRICULTURAL INCOME THAT WAS ALSO BEING ADMITTED YEAR AFTER YEAR. (A) UNDER MY LATE FATHER S. HANUMANTH REDDY'S INDIVIDUAL STATUS AS PER THE HINDU SUCCESSION ACT, AS LEGAL HEIR PER SCHEDULE I, I BECAME ENTITLED TO 1/4TH SHARE IN HIS INDIVIDUAL PROPERTY INCOME AND HIS INTEREST INCOME. ACCORDINGLY THE PROPERTY INCOME DECLARED IN AN AMOUNT OF RS. 3,39,195/- AND INTEREST INCOME IN AN AMOUNT OF RS. 7,658/- THUS REPRESENTS MY 1/4TH SHARE AS ONE OF THE LEGAL HEIRS OF MY LATE FATHER SRI S. HANUMANTH REDDY. THE SAID RENTAL INCOME ON THE PROPERTY SUCCEEDED IS FOR THE PERIOD FROM 08 -07-2005 TO 31-03-2006. ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 7 OF 14 (B) UNDER MY LATE FATHER S. HANUMANTH REDDY'S HUF STATUS AS PER THE HINDU SUCCESSION ACT, AS LEGAL HEIR PER SCHEDULE I, I BECAME ENTITLED TO 1/4TH OF 1/3RD SHARE OF HIS TOTAL HUF PROPERTY, INTEREST AND AGRICULTURAL INCOME. ACCORDINGLY THE PROPERTY AND INTEREST INCOME DECLARED IN AN AMOUNT OF RS. 25,821/- AND AGRICULTURAL INCOME OF RS. 15,833/- THUS REPRESENTS MY 1/4TH SHARE OF 1/3RD SHARE AS ONE OF THE LEGAL HEIRS OF MY LATE FATHER SRI S. HANUMANTH REDDY. 3. (A) AS A CONSEQUENCE OF DEATH OF MY FATHER I BECAME ONE OF THE SUCCESSOR TO THE INTERESTS AND RIGHTS IN THE LAYOUT AT GACHIBOWLI VILLAGE, SERILINGAMPALLY MANDAL, R.R. DISTRICT, ENTRUSTED FOR DEVELOPMENT TO M/S. LUMBINI CONSTRUCTIONS LTD, AS EVIDENCED BY THE DEVELOPMENT AGREEMENT DATED 28TH FEBRUARY 2006, DULY REGISTERED WITH THE OFFICE OF SUB- REGISTRAR, MOOSAPET ON 31ST MARCH 2006 (VIDE DOCUMENT NO. 5630/2006). I BECAME ENTITLED TO 9 PLOTS (BEARING NOS. 3, 11, 54, 67, 72, 75, 85 & 95) ON WHICH HOUSES SHALL BE CONSTRUCTED AND IN ONE PLOT I AM AN EQUAL CO-OWNER WITH MY OLDER BROTHER S. NARAYAN REDDY IN THE LAYOUT (BEARING NO. 7) IN THE PROJECT THAT IS IN PROGRESS. (B) ON ONE SUCH ALLOTTED PLOTS BEARING NO. 7 THAT IS EQUALLY OWNED BY MYSELF AND MY BROTHER I RECEIVED AN AMOUNT OF RS. 2,50,000 AS ADVANCE TOWARDS MY 1/2 SHARE FROM N. VASUMATHI REDDY. THE LIABILITY TO THE CAPITAL GAINS, TAX WILL ARISE IN THE YEAR IN WHICH THE PROPERTY, SHALL BE TRANSFERRED TO THE VENDEE. 4. IN THE YEAR UNDER CONSIDERATION, I JOINTLY PURCHASED 28.75 GUNTAS OF LAND FROM S. SURESH KUMAR ON FEBRUARY 16TH, 2006 VIDE REGISTERED SALE DEED (DOC. NO. 2277/2006) IN SHAMSHABAD VILLAGE, SHAMSHABAD MANDAL R.R DISTRICT. I OWN 50% SHARE. TOWARDS MY SHARE I PAID AN AMOUNT OF RS. 2,87,500 (VIDE CHEQUE NO. 559536 DRAWN FROM SYNDICATE BANK SOMAJIGUDA) ON FEBRUARY 16, 2006 TOWARDS THE PURCHAS E OF 28.75 GUNTAS OF LAND AS A CO-OWNER FOR 50% SHARE TO S. SURESH KUMAR. THE SAID LAND IS SITUATED IN SY. NO. 656/PART ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 8 OF 14 SHAMSHABAD VILLAGE, SHAMSHABAD MANDAL, R.R. DISTRICT. THE OTHER 50% SHARE IS PURCHASED BY RASURI SATISH KUMAR REDDY. THE SOURCES FOR THE PURCHASE ARE MET FROM THE BALANCE TO THE CREDIT OF SAVINGS I.E. MY SYNDICATE BANK CURRENT ACCOUNT (BEARING NO. 201/14508) AT SOMAJIGUDA BRANCH. 5. DURING THE YEAR I SOLD 2,02,616 SHARES OF MALI FLOREX LIMITED TO MY BROTHER S. NARAYAN REDDY FOR A CONSID ERATION OF RS. 2,02,616/-. THE SAID AMOUNT IS YET TO BE RECEIVED. THE SAID COMPANY WAS NOT HAVING ANY ACTIVITY. THE FURTHER DETAILS FOR THE COMPUTATION AS PER SECTION 45 OF THE INCOME-TAX ACT, 1961 ARE AS FOLLOWS: SHARES WERE ALLOTTED IN 15/12/03) THE PARTICULARS ARE AS PER THE INFORMATION FILED BEFORE THE REGISTRAR OF COMPANIES VALUE TAKEN AS ON DATE OF ALLOTMENT RS. 4,40,000 SALE OF SHARES DURING THE YEAR TO S. NARARAYAN REDDY FOR A CONSIDERATION OF (DATE OF TRANSFER 30/7/2005) RS. 2,02,616 AS NOTICED ABOVE THE TRANSFER RESULTED IN CAPITAL L OSS OF RS. 2,37,384/- THAT IS ENTITLED TO BE CARRIED FORWARD FOR SET OFF IN FUTURE YEARS.' 29. THE CONTENTION OF THE DEPARTMENT IS THAT THERE IS N O ASSESSMENT U/S. 143(3) OF THE ACT FOR THIS ASSESSMENT YEAR 2006-07 AND ONLY RETUR N WAS PROCESSED U/S 143(1) AND THE ASSESSING OFFICER IS WITHIN THE JURISDICTION OF REOPENING THE ASSESSMENT AND THERE IS NO CHANGE OF OPINION. THE DEPARTMENT TO SAY THAT THERE IS NO CHANGE OF OPINION, IT SHOULD BE INCUMBENT UPON THE DEPARTMENT TO DEMONSTR ATE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y. 2007-08 SOME NEW IN FORMATION HAD BEEN BROUGHT ON RECORD, WHICH WAS NOT AVAILABLE WHEN THE RETURN OF INCOME WAS PROCESSED FOR A.Y. 2006-07 OR BEFORE THE EXPIRY OF TIME LIMIT TO COMPLETE THE ASSESSMENT FOR A.Y. 2006-07 IN REGULAR COURSE. THAT INDEED IS NOT THE C ASE OF THE REVENUE. ALL THE MATERIAL WHICH WAS RELEVANT TO DETERMINE THE INCOME WERE AVAILABLE WITH THE ASSESSING OFFICER WHEN THE REGULAR ASSESSMENT WAS T O BE COMPLETED FOR A.Y. 2006- 07. THERE IS REQUISITE MATERIAL TO COMPLETE THE ASS ESSMENT, THE ASSESSING OFFICER HAS NOT CONSIDERED THE SAME AND THERE WAS NO ASSESSMENT . CONSEQUENTLY, MERE FORMATION OF ANOTHER VIEW IN THE COURSE OF ASSESSME NT PROCEEDINGS FOR A.Y. 2007-08 WOULD NOT JUSTIFY THE REVENUE FOR REOPENING THE ASS ESSMENT FOR A.Y. 2006-07 THOUGH THE REOPENING OF ASSESSMENT HAS TAKEN PLACE WITHIN THE PERIOD OF 4 YEARS. THE POWER TO REOPEN ASSESSMENT IS STRUCTURED BY LAW. GUIDING PRINCIPLES WHICH WERE LAID DOWN BY THE SUPREME COURT IN THE CASE OF KELVINATOR OF I NDIA LTD. (SUPRA) MUST BE FULFILLED. IN THE PRESENT CASE, THERE IS NO TANGIBL E MATERIAL, NO NEW INFORMATION AND NO FRESH MATERIAL WHICH CAME BEFORE THE REVENUE IN THE COURSE OF ASSESSMENT FOR A.Y. 2007-08 TO JUSTIFY REOPENING OF ASSESSMENT FOR A.Y. 2006-07. THE DEPARTMENT REPRESENTATIVE TAKEN A PLEA BEFORE US THAT IN VIEW OF JUDGEMENT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PVT. LTD., (CITED SUPRA), THE RETURN WAS PROCESSED ONLY U/S. 143(1) OF THE ACT AND THERE IS NO REGULAR ASSESSMEN T AND REOPENING OF ASSESSMENT IS JUSTIFIED. THE DR SUBMITTED THAT THE JUDGEMENT IN T HE CASE OF KELVINATOR OF INDIA ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 9 OF 14 LTD. (CITED SUPRA) COVERS CASES WHERE THE FIRST ASS ESSMENT WAS MADE U/S. 143(3) AND THAT IT DOES NOT APPLY TO CASES WHERE THE RETURN WA S PROCESSED U/S. 143(1) OF THE ACT. THIS PROPOSITION CANNOT BE ACCEPTABLE BECAUSE THE S UPREME COURT WAS EXPOUNDING THE PROVISIONS OF SECTION 147 AND THE WORDS 'REASON TO BELIEVE' APPEARING THEREIN. IT WAS HELD THAT SCHEMATIC INTERPRETATION HAS TO BE GI VEN TO THESE WORDS - FAILING WHICH SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSE SSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF A MERE CHANGE OF OPINIO N. IT WAS FURTHER HELD THAT THERE IS A CONCEPTUAL DIFFERENCE BETWEEN THE POWER TO REV IEW AND THE POWER TO REASSESS AND SECTION 147 CANNOT BE INTERPRETED IN SUCH A MAN NER TO GIVE A POWER OF REVIEW. THE CONTENTION OF THE DEPARTMENT BEFORE US IS THAT WHERE NO VIEW HAS BEEN TAKEN AS TO THE CORRECTNESS OF THE RETURN IN THE FIRST INSTA NCE, THE ASSESSING OFFICER CANNOT BE SAID TO EXERCISE A POWER OF REVIEW WHEN HE REOPENS THE ASSESSMENT WHICH HAS BEEN EARLIER PASSED UNDER 143(1). THIS ARGUMENT IS SIMIL AR TO THE ARGUMENT THAT IF NO OPINION CAN BE SAID TO HAVE BEEN FORMED BY THE ASSE SSING OFFICER WHEN THE RETURN WAS MERELY PROCESSED UNDER SECTION 143(1), BY ISSUI NG NOTICE UNDER SECTION 148 HE CANNOT BE SAID TO HAVE CHANGED HIS OPINION. BUT IT NEEDS TO BE REMEMBERED THAT SECTION 147 APPLIES BOTH TO SECTION 143(1) AS WELL AS SECTION 143(3) AND, THEREFORE, EXCEPT TO THE EXTENT THAT THE REASSESSMENT NOTICE I SSUED UNDER SECTION 148 IN A CASE WHERE THE ORIGINAL ASSESSMENT WAS MADE UNDER SECTIO N 143(1) CANNOT BE CHALLENGED ON THE GROUND OF A MERE CHANGE OF OPINION, STILL IT IS OPEN TO AN ASSESSEE TO CHALLENGE THE NOTICE ON THE GROUND THAT THERE IS NO REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. THE REASO N TO BELIEVE MUST HAVE A LIVE LINK WITH THE FORMATION OF THE BELIEF THAT INCOME C HARGEABLE TO TAX HAD ESCAPED ASSESSMENT WHEN THE RETURN WAS PROCESSED AND ACCEPT ED UNDER SECTION 143(1). TO HOLD THAT IN EVERY CASE WHERE A RETURN WAS PROCESSE D AND ACCEPTED UNDER SECTION 143(1) THE ASSESSING OFFICER WILL BE FREE TO REOPEN THE SAME UNDER SECTION 148 EVEN IN THE ABSENCE OF A LIVE LINK BETWEEN THE REASONS R ECORDED AND THE FORMATION OF THE BELIEF WOULD BE TO MAKE THE CONDITIONS OF SECTION 1 47 AND SECTION 148 AS REGARDS NOTICES OF REOPENING ISSUED IN CASES WHERE THE RETU RN WAS ORIGINALLY PROCESSED UNDER SECTION 143(1). THERE IS NO EXCLUSION IN SECT ION 147 TO THE EFFECT THAT WHERE THE RETURN WAS EARLIER PROCESSED UNDER SECTION 143( 1} IT IS NOT NECESSARY FOR THE ASSESSING OFFICER TO HOLD OR ENTERTAIN A BELIEF THA T INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR THE REASONS RECORDED BY HIM. THEREFORE, THE CONDITION THAT THE ASSESSING OFFICER MUST HAVE REASON TO BELIEVE A ND THE FURTHER CONDITION THAT THOSE REASONS MUST HAVE A LIVE LINK WITH THE FORMAT ION OF THE BELIEF IS APPLICABLE EQUALLY TO CASES WHERE THE RETURN WAS PROCESSED UND ER SECTION 143(1) AS ALSO TO CASES WHERE THE RETURN WAS EXAMINED AND AN ASSESSME NT WAS MADE BY A SPEAKING ORDER UNDER SECTION 143(3). THE ONLY DISTINCTION RE COGNIZED IN SECTION 147 BETWEEN THE TWO IS WHERE IT IS PROVIDED BY THE PROVISO THAT WHERE THE EARLIER ASSESSMENT WAS MADE UNDER SECTION 143(3), NO ACTION FOR REOPENING THE ASSESSMENT CAN BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BEC AUSE OF THE FAILURE ON THE PART OF THE ASSESSEE TO FILE A RETURN OR TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. SUCH AN EXCEPTION HAS NOT BEEN PROVIDED FOR IN A CASE WHERE THE RETURN HAS BEEN PROCESSED UNDER SECTION 1 43(1) IN WHICH CASE THE PROVISO WILL HAVE NO APPLICATION. IF IT IS CORRECT THAT AN INTIMATION UNDER SECTION 143(1) AS WELL AS AN ASSESSMENT ORDER UNDER SECTION 143(3) AR E BOTH AMENABLE TO SECTION 147, IT SHOULD ALSO BE CONCEDED THAT EVEN IN A CASE WHER E THE ORIGINAL RETURN WAS MERELY PROCESSED UNDER SECTION 143(1) THE ASSESSING OFFICE R MUST HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMEN T. HE HAS ALSO TO RECORD REASONS UNDER SECTION 148(2) FOR REOPENING THE EARL IER ASSESSMENT MADE UNDER SECTION 143(1). ALL THAT HAS BEEN EXCLUDED IS THAT THE ASSESSEE, IN WHOSE CASE THE ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 10 OF 14 RETURN WAS FIRST PROCESSED UNDER SECTION 143(1) CAN NOT CHALLENGE THE NOTICE OF REOPENING ON THE GROUND THAT IT IS PROMPTED BY A ME RE CHANGE OF OPINION. ONLY TO THIS LIMITED EXTENT THERE IS A DISABILITY ON THE PA RT OF THE ASSESSEE TO CHALLENGE THE NOTICE OF REOPENING IN A CASE WHERE HIS RETURN WAS EARLIER PROCESSED UNDER SECTION 143( 1) OF THE ACT. 30. THE RELIANCE PLACED BY THE LEARNED DR ON THE JUDGME NT OF THE SUPREME COURT IN RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA) WO ULD BE APPOSITE IN ALL CASES WHERE THE RETURN WAS PROCESSED UNDER SECTION 143( 1 ) BUT LATER NOTICE WAS ISSUED UNDER SECTION 148 AND THE ASSESSEE CHALLENGES THE N OTICE ON THE GROUND THAT IT IS PROMPTED BY A MERE CHANGE OF OPINION, IN THIS JUDGM ENT IT WAS HELD THAT THERE WAS NO ASSESSMENT UNDER SECTION 143( 1) IN THE SENSE TH AT THE RETURN IS SCRUTINIZED AND AN OPINION IS FORMED ABOUT THE ASSESSEE'S CLAIMS AN D CONTENTIONS AND, THEREFORE, IT IS NOT POSSIBLE TO SAY THAT WHEN THE ASSESSING OFFICER REOPENS THE ASSESSMENT UNDER SECTION 148, IT WAS PROMPTED BY A MERE CHANGE OF OP INION. EXCEPT TO THIS LIMITED EXTENT, THE NOTICE OF REOPENING ISSUED IN A CASE WH ERE THE RETURN WAS FIRST PROCESSED UNDER SECTION 143(1) IS OPEN TO CHALLENGE ON ALL GR OUNDS AVAILABLE TO THE ASSESSEE, INCLUDING THE GROUND THAT THERE WAS NO REASON TO BE LIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT OR THAT THE MATERIALS BE FORE THE ASSESSING OFFICER HAD NO LIVE LINK OR NEXUS WITH THE FORMATION OF SUCH BE LIEF OR THAT THE REASONS ARE BASED ON GOSSIP OR RUMOUR OR WERE A MERE PRETENCE. THIS I S MADE CLEAR BY THE OBSERVATIONS OF THE COURT AT PAGE 512 OF THE REPORT WHERE IT WAS HELD' THAT 'SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULFILLED' TH E ASSESSING OFFICER CAN REOPEN THE PROCEEDINGS EVEN WHERE INTIMATION UNDER SECTION 143 (1) HAD BEEN ISSUED. THUS FULFILMENT OF THE CONDITIONS OF SECTION 147, INCLUD ING THE ONE THAT THERE SHOULD BE 'REASON TO BELIEVE', IS ESSENTIAL FOR THE VALIDITY OF THE NOTICE UNDER SECTION 148. IT IS WHILE EXPOUNDING THE WORDS 'REASON TO BELIEVE' THAT THE SUPREME COURT IN THE LATER JUDGMENT IN KELVINATOR OF INDIA LTD. (SUPRA) HELD T HAT THERE SHOULD BE 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT INCOME HAD ESCAPED ASSESSMENT. THUS, WHILE RESORTING TO SECTION 147 EVEN IN A CASE WHERE ONLY AN INTIMATION HAD BEEN ISSUED UNDER SECTION 143(1)(A) IT IS ESSENTIAL THAT THE ASSESSING OFFICER SHOULD HAVE BEFORE HIM TANGIBLE MATERIAL JUSTIFYING HIS REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. 31. THE ASSESSEE CONTENDED BEFORE US THAT THERE WAS NO SUCH TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER FROM WHICH HE CAN ENTE RTAIN THE BELIEF THAT THERE IS TRANSFER U/S 2(47)(V) OF THE ACT RESULTED IN ESCAPE MENT OF INCOME CHARGEABLE TO TAX. IN THE REASSESSMENT ORDER THE ASSESSING OFFICER HAS STATED THAT ORIGINALLY THE RETURN WAS PROCESSED. IT WAS NOTICED THAT THE ASSESSEE HAS UNDERSTATED ITS INCOME BY NON- DISCLOSING THE INCOME FROM CAPITAL GAINS. HE HAS NO T REFERRED TO ANY TANGIBLE MATERIAL BEFORE HIM, IN TERMS OF THE JUDGMENT OF TH E SUPREME COURT IN KELVINATOR OF INDIA LTD. (SUPRA), ON THE BASIS OF WHICH HE ENTERT AINED THE PRIMA FACIE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. TH OUGH IT IS NOT POSSIBLE TO CHALLENGE THE ACTION OF THE ASSESSING OFFICER ON TH E GROUND OF A CHANGE OF OPINION BECAUSE IN THE PRESENT CASE THE RETURN WAS EARLIER MERELY PROCESSED UNDER SECTION 143(1), HIS ACTION CAN BE CHALLENGED ON THE BASIS O F THE LAW DECLARED BY THE SUPREME COURT IN THE AFORESAID JUDGMENT. IN OUR OPINION, ON A PROPER UNDERSTANDING OF THE JUDGMENTS OF THE SUPREME COURT BOTH IN THE CASE OF RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA) AND KELVINATOR OF INDIA LTD. (SUPR A), IT IS STILL OPEN TO AN ASSESSEE TO CHALLENGE THE NOTICE UNDER SECTION 148, IN A CASE W HERE THE RETURN WAS EARLIER PROCESSED UNDER SECTION 143(1) ON THE GROUND THAT T HERE WAS NO TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER TO ENABLE HIM TO ENTER TAIN A PRIMA FACIE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. WE MAY ALSO ADD THAT BEFORE US ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 11 OF 14 THE DEPARTMENT HAS NOT PRODUCED ANY TANGIBLE MATERI AL ON THE BASIS OF WHICH THE REASONS WERE RECORDED TO DEMONSTRATE THAT THERE WAS A LIVE LINK OR NEXUS BETWEEN THEM AND THE REQUISITE BELIEF. BEING SO, THE REOPEN ING CANNOT BE HELD AS VALID. 32. SAME VIEW WAS TAKEN BY THE THIRD MEMBER MUMBAI BEN CH IN THE CASE OF TELCO DADAJEE DHACKAJEE LTD. V. DY. CIT, ITA NO. 4613/MUM /2005 DATED 12TH MAY 2010 . FURTHER SAME VIEW WAS TAKEN BY DELHI HIGH COURT IN THE CASE OF CIT V. ORIENT CRAFTS LTD. [2013] 29 TAXMANN.COM 392 AND ALSO BY GUJARAT HIGH COURT IN THE CASE OF INDUCTOTHERM (INDIA) (P.) LTD. V. DY. CIT IN SPE CIAL CIVIL APPLICATION 858 OF 2006 DATED 6.8.2012. FURTHER, BOMBAY BENCH IN THE CASE O F DELTA AIRLINES INC.V. ITO(INTERNATIONAL TAXATION) [2013] 33 TAXMANN.COM 192 (MUM.) WHEREIN IT WAS HELD AS FOLLOWS: '8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. IT IS OBSERVED THAT IN THE RETURN OF INCOME ORIGINALLY FILED FOR THE YEAR UNDER CONSIDERATION ON 18.10.2001, EXEMPTION WAS CLAIMED BY THE ASSESSEE IN RESPECT OF INTEREST INCOME AS PER PROVISIONS OF ARTICLE-7 OF I NDO-US TREATY AND THIS FACT WAS CLEARLY MENTIONED IN THE NOTE (COPY PLACED AT PAGE NO .16 OF THE PAPER BOOK) FILED ALONG WITH THE SAID RETURN. THE SAID RETURN WAS INI TIALLY PROCESSED BY THE ASSESSING OFFICER U/S. 143(1) ON 2.1.2003. SUBSEQUENTLY, HE H OWEVER REOPENED THE ASSESSMENT FOR THE FOLLOWING REASONS RECORDED U/S. 148(2). '30.9.2005: THE ASSESSEE FILED ITS RETURN OF INCOME ON 18.10.2001, DECLARING NIL INCOME. THE RETURN WAS PROCESSED U/: 143(1)(A) OF T HE 1 T ACT, 1961 ON 2.1.2003, ACCEPTING THE NIL INCOME DECLARED BY THE ASSESSEE A ND A REFUND OF RS. 1,58,701/- WAS DETERMINED AND ISSUED TO THE ASSESSEE. THE ASSE SSEE HAS RECEIVED INTEREST WHICH IS NOT CONNECTED WITH OPERATION OF AIRCRAFTS BUT CL AIMED EXEMPTION ON ALL INCOME UNDER ARTICLE 8 OF INDO-US DTAA, AND THAT THE INTER EST SHOULD BE TAXED UNDER ARTICLE 11 OF THE DTAA @ 15%. SINCE NO PRIMA FACIE ADJUSTMENT CAN BE MADE UNDER THE STATUTORY PROVISIONS HENCE THE RETUNED INCOME W AS ACCEPTED WHILE PROCESSING THE RETURN. HOWEVER, REMEDIAL ACTION BY REOPENING T HE ASSESSMENT U/S. 148 OF THE IT ACT, 1961 IS SUGGESTED. THE LAST DATE FOR ISSUING O F NOTICE U/ S. 148 IS 31.3.2008. SUBMITTED FOR YOUR KIND APPROVAL PLEASE.' 9. AS IS CLEARLY EVIDENT FROM THE REASONS RECORDED BY THE ASSESSING OFFICER AS ABOVE, THERE WAS NO NEW MATERIAL COMING TO THE POSSESSION OF THE ASSESSING OFFICER ON THE BASIS OF WHICH ASSESSMENT COMPLETED U/S. 143(1) WAS REOPENED AND THIS POSITION HAS NOT BEEN DISPUTED EVEN BY LEARNED DEPARTMENTAL REPR ESENTATIVE. SHE HOWEVER HAD SUBMITTED THAT THE ASSESSMENTS COMPLETED IN THE CAS E OF THE ASSESSEE FOR THE EARLIER YEARS WERE AVAILABLE ON RECORD BEFORE THE ASSESSING OFFICER AND THEY FORMED THE BASIS FOR REOPENING THE ASSESSMENT. THERE IS HOWEVE R NO MENTION WHATSOEVER TO ANY SUCH ASSESSMENT IN THE REASONS RECORDED BY THE ASSE SSING OFFICER. IT IS WELL SETTLED THAT THE VALIDITY OF REOPENING HAS TO BE JUDGED ON THE BASIS OF REASONS RECORDED BY THE ASSESSING OFFICER AND THE DOCUMENT OR MATERIAL REFERRED TO THEREIN AND NOT ON THE BASIS OF ANY EXTERIOR MATERIAL WHICH HAS NOT BE EN REFERRED TO IN THE REASONS RECORDED. LEARNED DEPARTMENTAL REPRESENTATIVE HAS A LSO RELIED UPON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF PRAFUL CH UNILAL PATEL (SUPRA) IN SUPPORT OF THE REVENUE'S CASE ON THE ISSUE UNDER CONSIDERAT ION WHICH HAS BEEN RELIED UPON BY LEARNED CIT(A) IN HIS IMPUGNED ORDER. AS POINTED OUT BY LEARNED COUNSEL, THE VIEW EXPRESSED BY HON'BLE GUJARAT HIGH COURT IN THE SAID CASE THAT THERE IS NO NECESSITY FOR THE ASSESSING OFFICER TO HAVE FRESH F ACTS COMING TO HIS NOTICE SUBSEQUENT TO ORIGINAL ASSESSMENT TO JUSTIFY REOPEN ING HAS NOT BEEN SUBSCRIBED TO BY THE FULL BENCH OF HON'BLE DELHI HIGH COURT IN THE C ASE OF KELVINATOR OF INDIA LTD. (SUPRA) WHICH HAS BEEN AFFIRMED BY HON'BLE SUP REME COURT. AS HELD BY HON'BLE ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 12 OF 14 DELHI HIGH COURT, IF THE CONTENTION OF THE REVENUE BASED ON THE DECISION OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNILAL P ATEL (SUPRA) IS ACCEPTED, THE SAME WOULD CONFER AN ARBITRARY POWER UPON THE ASSES SING OFFICER TO REOPEN THE PROCEEDINGS ONLY ON THE SLIGHTEST PRETEXT, WHICH IS NOT PERMISSIBLE. 10. LEARNED DEPARTMENTAL REPRESENTATIVE HAS ALSO RE LIED ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK B ROKERS (P) LTD. (SUPRA) TO CONTEND THAT THE REOPENING OF ASSESSMENT COMPLETED ORIGINALLY UJS. 143(1) IS PERMISSIBLE WITHOUT THERE BEING ANY NEW MATERIAL CO MING TO THE POSSESSION OF THE ASSESSING OFFICER IF THE REASONS RECORDED FOR REOPE NING OF ASSESSMENT ARE OTHERWISE VALID. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HAND, HAS RELIED ON THIRD MEMBER DECISION OF THE TRIBUNAL IN THE CASE OF TELC O DADAJI DHACKJEE LTD. (SUPRA) STATING THAT A SIMILAR ISSUE INVOLVED IN THE SAID C ASE HAS BEEN DECIDED BY THE THIRD MEMBER IN FAVOUR OF THE ASSESSEE AFTER TAKING INTO CONSIDERATION THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA) RELIED UPON BY THE LEARNED OR. IN THE SAID CASE, TH E RETURN FILED BY THE ASSESSEE WAS ORIGINALLY ACCEPTED U/S. 143(1). IN THE SAID RETURN THE ASSESSEE HAD CLAIMED DEDUCTION FOR PAYMENT OF NON-COMPETE FEES OF RS. 75 LAKHS WHICH INCLUDED PAYMENT OF RS. 15 LAKHS TO DIRECTORS. THE ASSESSEE HAD ALSO CLAIMED DEPRECIATION OF RS. 1,41,848/ - ON LEASE PREMISES. THE ASSESSING OFFICE R ISSUED NOTICE U/S 148 ON THE GROUND THAT THESE WERE NOT ALLOWABLE EXPENSES AND I NCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. HE ACCORDINGLY DISALLOWED BOTH THE ITEMS IN THE REASSESSMENT ORDER. WHEN THE MATTER REACHED TO THE TRIBUNAL, THE LEARNED JUDICIAL MEMBER TOOK THE VIEW THAT THERE WAS NO FRESH MATERIAL TO SUPPOR T THE FORMATION OF THE BELIEF OF THE ASSESSING OFFICER THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT AND IN THE ABSENCE OF ANY FRESH TANGIBLE MATERIAL, HE CAME TO THE CONCLUSION THAT IT WAS NOT PERMISSIBLE FOR THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT. THE LEARNED ACCOUNTANT MEMBER, HOWEVER, TOOK A DIFFERENT VIEW R ELYING ON THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA) AND THE MATTER, THEREFORE, WAS REFERRED TO A THIRD MEMBER FOR RESOLVING INTER ALIA, THE FOLLOWING POINT OF DIFFERENCE :- 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE PROC EEDINGS INITIATED BY THE AO U/ S 147 IS LIABLE TO BE CONFIRMED OR QUASHED WHEN THERE WAS NO FRESH MATERIAL AVAILABLE WITH THE AO AND THE ASSESSMENT HAD BEEN COMPLETED O RIGINALLY U/ S 143(1).' THE THIRD MEMBER AGREED WITH THE VIEW TAKEN BY THE LEARNED JUDICIAL MEMBER RELYING MAINLY ON THE DECISION OF HON'BLE SUPREME C OURT .IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) AND EICHER LTD. 320 ITR 561 . IT WAS HELD BY THE THIRD MEMBER THAT SECTION 147 APPLIES BOTH TO SECTION 143(1) AS WELL AS SECTION 143(3) AND, THEREFORE, EXCEPT TO THE EXTENT THAT A REASSESSMENT NOTICE ISSUED U/S 148 IN A CASE WHERE THE ORIGINAL ASSESSMENT WAS MADE U/S 143(1) C ANNOT BE CHALLENGED ON THE GROUND OF A MERE CHANGE OF OPINION, IT IS OPEN TO A N ASSESSEE TO CHALLENGE THE NOTICE ON THE GROUND THAT THERE IS NO REASON TO BELIEVE TH AT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. AS REGARDS THE DECISION OF HON' BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA) CI TED BY THE REVENUE AND RELIED UPON BY THE ACCOUNTANT MEMBER, THE THIRD MEMBER HEL D THAT THE SAME WAS APPLICABLE IN CASES WHERE THE RETURN WAS PROCESSED U/S 143(1) BUT LATER ON NOTICE WAS ISSUED U/S 148 AND THE ASSESSEE CHALLENGES THE NOTICE ON THE GROUND THAT IT IS PROMPTED BY A MERE CHANGE OF OPINION. THE THIRD MEM BER THEN REFERRED TO THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF KE LVINATOR OF INDIA LTD. (SUPRA) WHEREIN IT WAS HELD THAT THERE SHOULD BE 'TANGIBLE MATERIAL' TO COME TO THE CONCLUSION THAT INCOME HAD ESCAPED ASSESSMENT. RELY ING ON THE SAID DECISION, IT WAS ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 13 OF 14 HELD BY THE THIRD MEMBER THAT WHILE RESORTING TO SE CTION 147 EVEN IN A CASE WHERE ONLY AN INTIMATION HAD BEEN ISSUED U/S 143(1)(A), I T IS ESSENTIAL THAT THE ASSESSING OFFICER SHOULD HAVE BEFORE HIM TANGIBLE MATERIAL JU STIFYING HIS REASON TO BELIEVE THAT INCOME HAD ESCAPED ASSESSMENT. SINCE THERE WAS NO S UCH TANGIBLE MATERIAL BEFORE THE AO FROM WHICH HE COULD ENTERTAIN THE BELIEF THA T INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT, THE THIRD MEMBER HELD THAT REASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER WERE LIABLE TO BE QUASHED ON THE GROUND THAT THERE WAS NO TANGIBLE MATERIAL BEFORE T HE ASSESSING OFFICER EVEN THOUGH THE ASSESSMENT WAS COMPLETED ORIGINALLY U/S 143(1). IN OUR OPINION, THE THIRD MEMBER DECISION OF THE TRIBUNAL IN THE CASE OF TELC O DADAJEE DHACKJEE LTD. (SUPRA) IS SQUARELY APPLICABLE IN THE PRESENT CASE AND RESP ECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE INITIATION OF REASSESSMENT PROCEEDING S BY THE ASSESSING OFFICER ITSELF WAS BAD IN LAW AND THE REASSESSMENT COMPLETED IN PU RSUANCE THEREOF IS LIABLE TO BE QUASHED BEING INVALID. WE ORDER ACCORDINGLY AND ALL OW GROUND NO. 1 OF THE ASSESSEE'S APPEAL. 11. AS A RESULT OF OUR DECISION RENDERED ABOVE ON T HE PRELIMINARY ISSUE QUASHING/CANCELLING THE ASSESSMENT MADE BY THE ASSE SSING OFFICER U/S. 143(3) READ WITH SECTION 147, THE OTHER ISSUES RAISED IN THE AP PEALS OF THE ASSESSEE IN RESPECT OF ADDITION MADE IN THE SAID ASSESSMENT HAVE BECOME IN FRUCTUOUS AND WE DO NOT DEEM IT NECESSARY OR EXPEDIENT TO DECIDE THE SAME.' 33. THE FACTS BEFORE US SUGGEST THAT THE INFORMATION W HAT IS CONSIDERED BY THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT WAS ALRE ADY ON RECORD AND IF AO FAILS TO CONSIDER THE SAME FOR FRAMING THE ASSESSMENT BY ISS UING NOTICE U/S. 143(2) OF THE ACT HE IS PRECLUDED FROM CONSIDERING THE SAME MATERIAL FOR REOPENING OF THE ASSESSMENT U/S. 147 READ WITH SECTION 148 OF THE ACT. ACCORDIN GLY, WE ARE INCLINED TO QUASH THE ASSESSMENT. 9. THE FACTS AND CIRCUMSTANCES OF THE CASE BEFORE U S BEING SIMILAR, WE ARE INCLINED TO ACCEPT THE CONTEN TION OF THE ASSESSEE AND HOLD THAT THE RE-ASSESSMENT PROCEEDING S ARE NOT VALID. THE GROUNDS OF APPEAL NOS. 3 & 4 ARE ACCORDI NGLY ALLOWED. 10. EVEN ON MERITS, WE FIND THAT THE ADVANCE RECEIV ED BY THE ASSESSEE TOWARDS HIS PROFESSIONAL FEE, WHEN IT IS RETURNED, IS NOT COVERED BY ANY OF THE PROVISIONS OF CHAPTER XVI IB REQUIRING TDS. HOWEVER, IN VIEW OF OUR HOLDING THAT THE RE-AS SESSMENT PROCEEDINGS ARE NOT VALID, THE GROUNDS AGAINST THE DISALLOWANCE U/S 40(A)(IA) OF THE ACT NEED NO ADJUDICATION. THER EFORE, GROUNDS 5 & 6 ARE NOT ADJUDICATED AT THIS STAGE. ITA NO 944 OF 2017 A NAGA SRINIVAS HYDERABAD. PAGE 14 OF 14 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JUNE, 2018. SD/- SD/- (S.RIFAUR RAHMAN) ACCOUNTANT MEMBER (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED 8 TH JUNE 2018. VINODAN/SPS COPY TO: 1 SHRI A. SRINIVAS, 20/20A FLAT NO.101, SWARNA RESI DENCY, SRINAGAR COLONY, HYDERABAD 500073 2 DY.CIT, CIRCLE 13(1) HYDERABAD 3 CIT (A) - 6 HYDERABAD 4 PR. CIT 6 HYDERABAD 5 THE DR, ITAT HYDERABAD 6 GUARD FILE BY ORDER