IN INCOME-TAX APPELLATE TRIBUNAL B BENCH, CHENNAI Before Shri A. Mohan Alankamony, Accountant Member & Shri Duvvuru RL Reddy, Judicial Member I T.A. No. 1741/Mds/2016 Assessment Year :2006-07 M/s. A.A. Modern Rice Mill, Income Tax Officer, C/o Sri T.N. Seetharaman, Vs. Business Ward I (4), Advocate, # 384 (Old No. 196), Vellore. Lloyds Road, Chennai 600 086. [PAN:AAAFA9952F] (Appellant) ( Respondent) Appellant by : Shri R. Kumar, Advocate Respondent by : Shri Supriyo Pal, JCIT Date of hearing : 06.09.2016 Date of Pronounce ment : 28.09.2016 O R D E R PER DUVVURU RL REDDY, JUDICIAL MEMBER: This appeal filed by assessee is directed against order of ld. Commissioner of Income Tax (Appeals), Chennai, dated 03.03.2016 relevant to assessment year 2006-07. In principle, assessee has challenged assessment order passed under section 143(3) r.w.s. 147 of Income Tax Act, 1961 [ Act in short] and on merits, it has challenged 2 I.T.A. No.1741/M/16 confirmation of addition .1,33,142/- towards unexplained investment in colour sorter machine. 2. Brief facts of case are that assessee is engaged in business of rice mill and filed its return of income admitting taxable income at .29,595/-. return filed by assessee was processed under section 143(1) of Act on 23.07.2007. Thereafter, case of assessee was taken for scrutiny and assessment under section 143(3) of Act was completed under section 143(3) of Act on 16.09.2008 assessing taxable income at .59,600/-. 2.1 Subsequently, after recording reasons for reopening of assessment that investment made towards import of colour sorter machine escaped assessment, assessment was reopened by issue of notice under section 148 of Act on 29.03.2011 and served on assessee on 30.03.2011. Thereafter, after service of notice under section 143(2) of Act dated 24.04.2011, assessee s representative appeared and produced books of account and furnished details as called for. After verifying books of account and considering submissions of assessee, Assessing Officer has observed that cost of colour sorter machine was .15,02,934/- and break up given by AR of assessee has been verified and found that there is difference of .3,32,577/-, being difference required to be explained. Out of above sum of .3,32,577/-, 3 I.T.A. No.1741/M/16 .1,99,435/- paid as custom duty was already capitalized in for assessment year 2005-06 and same should not be considered for assessment year 2006-07. However, since for remaining amount of .1,33,142/-, assessee could not furnish any evidence, same was treated as unexplained investment and brought to tax. 2.2 assessee carried matter in appeal before ld. CIT(A). assessee filed detailed written submissions with regard to both issues. After considering submissions of assessee, ld. CIT(A) sustained reopening of assessment. With regard to unexplained investment, written submissions filed by assessee were forwarded to Assessing Officer to file remand report. After considering remand report and submissions of assessee, ld. CIT(A) sustained addition made by Assessing Officer. 3. On being aggrieved, assessee is in appeal before Tribunal. By relying upon grounds of appeal, ld. Counsel for assessee has submitted that Assessing Officer has reopened assessment based on very same set of books of accounts, bank statement, evidence for payment, etc. as placed during course of assessment proceedings without any additional facts or material evidence. Therefore, reopening of assessment is bad in law. With regard to addition towards unexplained investment, he has submitted that authorities below have failed to take 4 I.T.A. No.1741/M/16 into account actual cost of equipment and its payment made through bank. Therefore, addition made by Assessing Officer is not warranted. 4. On other hand, ld. DR supported orders of authorities below. 5. We have heard both sides, perused materials on record and gone through orders of authorities below. With regard to reopening of assessment, contention of ld. Counsel for assessee is that reassessment was done only on basis of same set of facts, which were already available on record and it cannot be ground for reopening of assessment. It is settled law that on basis of material, if there is prima facie cause available before Assessing Officer, he can form opinion that income chargeable to tax has escaped assessment. After recording reasons for reopening of assessment, assessment was reopened under section 147 of Act. word reason in phrase reason to believe would mean cause or justification. In case Assessing Officer has cause or justification to know or suppose that income has escaped assessment, action under section 148 of Act can be taken. But obviously, there should be relevant material on which reasonable man could have formed requisite belief. Whether this material(s) would conclusively prove escapement of income is not concern at that 5 I.T.A. No.1741/M/16 particular stage. So what is required is subjective satisfaction of Assessing Officer based on objective material evidence. In given case, original assessment was completed on 16.09.2008 under section 143(3) of Act. reason for reopening was recorded as discussed above. 5.1 ld. Counsel for assessee has contended that in this case, Assessing Officer have no tangible fresh material for reassessment for that assessment year. As seen from reasons recorded which gives clear picture that Assessing Officer has got material evidence to form his opinion that income has escaped assessment that is why he reopened assessment and issued notice under section 148 of Act. There cannot be two opinions. At that point of time of reopening when reasons are recorded after forming opinion of escapement of income is only relevant. Hence, plea of ld. Counsel for assessee is not tenable in eyes of law. Under section 147, Assessing Officer can either assess or re-assess but for taking action there under, he has to record reasons that income chargeable to tax has escaped assessment. It is also mandated by section 148(2) to record reasons in writing. reassessment proceedings under section 147 are further subject to sections 148,149,150,151,152 and 153. In present case, we are required to decide limited issue regarding validity of proceedings undertaken within four years of assessment year in question. Assessing Officer is required to see if 6 I.T.A. No.1741/M/16 conditions laid in Explanation 2(c) because in this case assessment was completed u/s 143(3) are satisfied or not. In case, (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low rate; or (iii) such income has been made subjective of excess relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed, Assessing Officer would have valid cognizance u/s 147 of Act. reasons recorded by Assessing Officer clearly demonstrates that though assessee produced books of account, discrepancy noticed by Assessing Officer can only be pointed out that due diligent of Assessing Officer. As such, production of books itself cannot constitute full disclosure of all material facts for purpose of assessment. Being so, we are satisfied that Assessing Officer has reasons to believe that income has escaped assessment. This fact confers jurisdiction on Assessing Officer to reopen assessment. power under section 147 to re-assess income post 1st April, 1989 are much wider than these used to be before. But still schematic interpretation of words reason to believe failing which section 147 would give arbitrarily powers to Assessing Officer to reopen assessment on power to Assessing Officer to reopen any and every assessment order which would simply amount to review. concept change of opinion is in-built test to check abuse of power by Assessing Officer. On basis of change of opinion which, cannot be per se reason 7 I.T.A. No.1741/M/16 to reopen assessment. In our opinion, as seen from above reasons recorded, assessing Officer would have ascertained escapement of income at time of original assessment also only with due diligent. Hence, reopening is held to be valid. Even otherwise, it is duty of assessee to bring all facts to knowledge of Assessing Officer at time of original assessment and only just filing of documents at time of assessment is not enough and he should be drew attention of Assessing Officer to all necessary material. Consequently, we hold that entire assessment in this case is valid and therefore, reopening of assessment is upheld. 6. Coming to second issue of unexplained investment, with regard to cost of equipment imported by assessee, assessment order does not speak as to what was actual cost of equipment as per bill of lading. It is not disputed that payment towards import of equipment was made through banking channel. In remand report submitted by Assessing Officer before ld. CIT(A), Assessing Officer has given his observation that On verification of exchange rate for month of January, 2005, it is found that actual rate of 100 Japan Yen on 13.01.2005 [i.e. date of delivery of machine] was 42.55 INR. But, rate adopted in bill of entry was 42.700 INR. Hence, it is submitted that rate of 42.55 INR may be considered while passing order . 8 I.T.A. No.1741/M/16 From above observation of Assessing Officer, it is evident that he has not made any independent enquiry and properly examined case of assessee. Before us, ld. Counsel for assessee has demonstrated that actually, Assessing Officer has taken value as on 16.01.2005 under Bill of entry for home consumption dated 13.01.2005 at 100 Yen equal to 42.700 INR or cost of equipment at .13,03,498/- as per customs provisional value. cost of imported machine was paid by assessee on 16.01.2006 through State Bank of India, Tiruvannamalai Branch towards retirement of LC originally opened on 02.12.2014 by calculating cost fixed at 30,00,000 Japanese Yen equal to .11,70,357/- at then rate of 100 JPN Yen equal to 39.10 INR. By filing copy of certificate issued by Bank, above cost of equipment at .11,70,357/- has been debited from assessee s account towards retirement of LC for value of Japanese Yen 30,00,000/-. Without considering this actual fact, ld. CIT(A) has confirmed addition made by Assessing Officer. In fact, Customs authorities have taken exchange rate at 42.700 INR for purpose of customs duty cannot be value of equipment when assessee made actual payment towards cost of equipment at exchange rate of 39.10 INR through Bank. Therefore, we of considered opinion that without making any independent enquiry and by assuming that exchange rate for customs duty payment as actual exchange value of cost of equipment, addition made by Assessing Officer cannot 9 I.T.A. No.1741/M/16 be sustained under eyes of law when certificate issued by Bank towards release of payment was not disputed by Department. ld. CIT(A) has also not analysed above facts in right perspective. Under above facts and circumstances, we set aside order of ld. CIT(A) on this issue and direct Assessing Officer to delete addition made on this account. This ground of appeal of assessee is allowed. 7. In result, appeal filed by assessee is partly allowed. Order pronounced on 28th September, 2016 at Chennai. Sd/- Sd/- (A. MOHAN ALANKAMONY) (DUVVURU RL REDDY) ACCOUNTANT MEMBER JUDICIAL MEMBER Chennai, Dated, 28.09.2016 Vm/- Copy to: 1. Appellant, 2. Respondent, 3. CIT(A), 4. CIT, 5. DR & 6.GF. M/s. A.A. Modern Rice Mill v. Income Tax Officer, Business Ward I (4), Vellore