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In the present case, we notice that in two out of four reasons recorded by the Assessing Officer for reopening the assessment, he stated that he need to verify the claims. In the second ground, he had recorded that admissibility of the bad debts written off required to be verified. In the fourth ground also, he had recorded that admissibility of royalty claim was required to be verified.
A perusal of the reasons recorded by the AO in the present case shows that there was no rational or intelligible nexus between the reasons recorded by him and the belief entertained about the escapement of income of the assessee company. There was nothing in the said reasons to show existence of any positive income arising to the assessee company which was assessable in his hands and the belief entertained by the AO was based merely on assumption and surmises.
Adverting to the present case, it is clearly evident that ‘reasons recorded’ were not provided to the assessee despite categorical directions by the ITAT and even when the so-called “reasons recorded” have been supplied after a gap of almost 11 years, it is amply clear from the face of it that the ‘reasons’ were not recorded prior to the issuance of notice under Section 148.
Whether reassessment proceedings initiated u/s 147 to successor of business on account of omission and failure to disclose fully and truly all material facts necessary for determining the income chargeable to tax for these assessment years is valid?
In this case as found by the Commissioner of Income-tax (Appeals) the Assessing Officer in the course of assessment proceedings had called for the particulars regarding various items of income going into the computation of deduction under section 80HHC, for which the assessee had given the requisite details and particulars. Now the Assessing Officer has reopened the assessment to hold that the very same items of receipt has to be excluded in computing relief under section 80HHC. In other words, the Assessing Officer, on a reappraisal of the very same details, which was called for by him and furnished by the assessee, would like to come to a different conclusion. This clearly tantamounts to reopening is merely on a change of opinion.
The assessee had filed and furnished all details and particulars relating to the royalty payment including agreements, calculation and the approval before the Ld. AO during assessment proceedings. There was no failure on the part of the assessee to furnish true and correct all material facts. The facts were available before and were within the knowledge of the AO. The new AO as per the reasons recorded on the basis of the same facts, has observed that royalty payment should have been disallowed as it was capital in nature. This is a question of legal inference or interpretation which has been drawn from the same material facts on record. Therefore, the case falls in the category of change of opinion as at the time of original preceding the AO examined and gone into the question of royalty. Even if there was any legal error or illegality the same cannot be rectified and be made the subject matter of reassessment proceedings u/s 147/148 of the Act. The re-assessment order is also quashed.
When the statements made by the assessees here, later retracted, do not have any evidentiary value, there is no basis in holding that there are materials available before the Assessing Officer to make out cases of escapement of income. A reason must be formed by the Assessing Officer to reopen an assessment on the basis of material or information recognized under law.
There is no requirement in Section 147 or Section 148 or Section 149 that the reasons recorded should also accompany the notice issued under Section 148. The requirement in Section 149(1) is only that the notice under Section 148 shall be issued. There is no requirement that it should also be served on the assessee before the period of limitation
Whether when notice u/s 148 is issued, Revenue is not required to verify the change in address of the assessee – Whether when assessee is aware of the fact that a notice has been issued but wrongly dispatched to his old address, the same is to be treated as deemed served – Whether the requirement u/s 149 is to ‘issue notice’ and not ‘service of notice’ as mandated u/s 34 of I-T Act, 1922.
The Return of Income filed pursuant to a notice notice U/s. 148 is not ‘voluntary’ & it can be readily inferred that the assessee had not furnished full particulars of his true income and so reopening became necessary. The explanation that the income was offered to buy peace is not acceptable because it is a clear case of admission of not offering true income earlier.
