By Ajay R. Singh
Advocate
ACIT vs. Kalyani Hayes Lemmerz Ltd.
ITA No: 802 of 2015 (Bom. HC)
A.Y.: 2003-04 Dated: 29th January, 2018
[ACIT vs. Kalyani Hayes Lemmerz Ltd.
ITA No.2476/PN/2012;
Dated: 24th Aug., 2014 ; Pune. ITAT]
The Assessee Company was
incorporated in 1996 with the Kalyani Group (Indian Partner), holding 75% and
Lemmerz Werke GMBH Germany (German Partner) holding remaining 25% share in it.
Thereafter, the share holding of the Assessee company, underwent a change with
the German Partners, increasing its share holding to 80% in the Assessee
Company by acquiring shares from M/s. Kalyani Group.
The Assessment was
completed u/s. 143 (3) of the Act after having discussed the shareholding
pattern, allowed the carried forward loss under section 79 of the Act.
Thereafter, the assessment was reopened on the point of shares holding pattern
of the company i.e in the assessment
order, applicability of provisions of section
79 of I.T. Act has not been considered by the AO.
Thereafter, the A.O passed
an order u/s. 143 read with 147 of the
Act, rejected the Petitioner’s objection, and thereafter, inter alia,
disallowed the carry forward of business losses u/s. 79 of the Act.
The CIT(A) allowed the
Assessee’s appeal, inter alia, holding that when all facts including the
change in shareholding pattern, had been disclosed during the regular
assessment proceedings, as is evident from the Assessment Order passed in the
regular assessment proceedings, then merely because the Assessing Officer
choose not to apply section 79 of the Act, it could not be said that the
Assessee had failed to disclose fully and truly all material facts, necessary
for assessment. This was a case where the first proviso to section 147 of the
Act will apply as the reopening notice is beyond a period of four years from
the end of the relevant AY.
Being aggrieved, Revenue
filed an appeal to the Tribunal. The Tribunal held that, where an assessment
order u/s. 143(3) of the Act was passed in regular assessment proceedings,
evidencing full and true disclosure of all material facts necessary for the purpose
of assessment. Then mere non consideration of section 79 of the Act by the A.O
cannot lead to the conclusion that the Assessee had failed to disclose all
material facts truly and fully, which were necessary for Assessment. The
Tribunal relied upon the Apex Court’s
decision in Calcutta Discount Company Ltd. vs. CIT 41 ITR 191 – wherein
it has been held that obligation of the Asssessee is to disclose all primary
facts truly and fully to the extent relevant for the purpose of Assessment. The
Assessee is under no obligation to inform the Assessing Officer of the
interference of fact or law to be drawn from the material facts which had been
disclosed fully and truly by the Assessee.
Being aggrieved, Revenue
filed an appeal to the High Court. The grievance of the Revenue is that it was
obligatory on the part of the Assessee to invite the attention of the A.O to
section 79 of the Act during regular assessment proceedings. Thus, not having
done so, it is submitted that the first proviso to section 147 of the Act, can
have no application.
The Hon. High Court
observed that it is an undisputed fact that the regular Assessment Order had
been passed u/s. 143(3) of the Act. The reopening notice has been issued beyond
the period of four years from the end of the relevant AY. Therefore, the first
proviso to section 147 of the Act is applicable and reopening notice can only
be sustained in cases where there is failure to disclose fully and truly all
material facts necessary for assessment. The reasons in support of the impugned
notice itself records the fact that the issue of shareholding pattern of the
company was discussed by the A.O in his Assessment order passed in the regular
assessment proceedings. The only basis of reopening is that the A.O in the
regular assessment did not apply provisions of section 79 of the Act, to
determine the taxable income. This non application of mind by the A.O while
carrying out assessment cannot lead to the conclusion that there has been any
failure on the part of the Assessee to truly and fully disclose all material
facts necessary for Assessment. The Tribunal correctly placed reliance upon the
decision of the Supreme Court in Calcutta Discount Company Ltd., (supra) to
hold that not pointing out the inference to be drawn from facts will not amount
to failure to disclose truly and fully all material facts, necessary for
assessment. In view of the above the, Appeal of dept was dismissed.
