Facts:
For A.Y. 2007-08, the assessment of total income of the assessee was completed vide order dated 23-3- 2007, passed u/s.143(3) of the Act. While assessing the total income, the Assessing Officer (AO) allowed a deduction of Rs.74,42,770 being the amount of interest on term loan from IDBI which was not paid as due, but was deferred by IDBI and such deferral was regarded as deemed payment.
Subsequently the Assessing Officer (AO) recorded the reasons which were supplied to the assessee vide letter dated 26-8-2009, and issued notice u/s.148. One of the reasons recorded was that on perusal of the assessment records it is noticed that in respect of the loan obtained by the assessee from IDBI, the assessee had not paid interest instalment amounting to Rs.74,42,770 which was deferred by IDBI. This had been treated as deemed payment of interest and was allowed as deduction. Upon receiving the copy of reasons recorded, the assessee objected to the issuance of notice u/s.148 on the ground that the time section 43B was amended after the assessee has filed its return of income, by Finance Act, 2006 with retrospective effect from 1-4-1989 to provide for disallowance of interest which has been converted into loan and also that since the amount under consideration has been paid in subsequent years it will not have any impact on the income-tax liability ultimately. The assessee consented that this can be rectified u/s.154 of the Act. The AO without disposing of the assessee’s objections proceeded to complete the reassessment and added the sum of Rs.74,42,770 to the total income of the assessee.
Aggrieved, the assessee preferred an appeal to the CIT(A) who confirmed the action of the AO in reopening the assessment u/s.147 r.w.s. 148 of the Act on the ground that the assessee has admitted one of the reasons recorded for reopening the assessment. Aggrieved the assessee preferred an appeal to the Tribunal.
Held:
The Tribunal noted that in view of the retrospective amendment of section 43B of the Act by the Finance Act, 2006, subsequent to the filling of the return, certain disallowance under this provision was called for, which was consented by the assessee by filing rectification petition vide letter dated 30-9-2009. The amendment was on the statute even at the time when the AO completed assessment u/s.143(3) of the Act. On behalf of the assessee, relying on the decision of the Bombay High Court in the case of Hindustan Unilever Ltd. v. DCIT, (325 ITR 102) (Bom.) it was contended that proceedings u/s.147 were being objected to as there was no escapement of income.
The Tribunal held that:
(1) Mere fresh application of mind to the same set of facts or mere change of opinion does not confer jurisdiction even after amendment in section 147 w.e.f. 1-4-1989.
(2) When a regular order of assessment is passed in terms of section 143(3), a presumption can be raised that such an order has been passed on application of mind. A presumption can also be raised to the effect that in terms of section 114(e) of the Indian Evidence Act, 1872, judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the AO to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take, benefit of its own wrong.
(3) Considering the ratio of the decisions of the Delhi High Court in the case of Jindal Photo Films Ltd. v. DCIT, 234 ITR 170 (Del.) and also the decision of the Full Bench of the Delhi High Court in the case of CIT v. Kelvinator India Ltd., (256 ITR 1) which has been affirmed by the Supreme Court in 320 ITR 561 (SC), in order to invoke the provisions of section 147, the AO is required to have some tangible material pinpointing escapement of income from assessment and in the absence of any fresh material, sufficient to lead inference of escapement of income, the AO cannot exercise jurisdiction u/s.147 r.w.s. 148 of the Act.
(4) The amendment to section 43B was available to the AO while framing assessment, even otherwise, based on the ratio of the decision of the Bombay High Court in the case of Hindustan Unilever Ltd. (supra) it can be safely concluded that once there is retrospective amendment to the statute, the earlier order which is not in conformity with the amended provisions, can be rectified u/s.154 of the Act.
The Tribunal held that the jurisdiction is to be assumed by the AO u/s.154 of the Act and not 148 of the Act. The Tribunal allowed this issue of the assessee’s cross-objections.
