RAJES KUMAR, J. - (1.) THE present appeal at the instance of the revenue under Section 260A of the Income -tax Act (hereinafter referred to as the 'Act') is against the order of the Tribunal dated 16 -3 -2007 in Income -tax Appeal No. 138/LUCK./2005 for the assessment year 1996 -97.
(2.) THE brief facts of the case are that the assessee -opposite party (hereinafter referred to as the 'Assessee') was a Company and was a recognized financial institution. The assessee derived income from interest on finances and financial assistance given to medium and large scale industries in U.P. It also derived income from dividend, securities, deposits, leasing operations, sale of shares and office premises, etc. The assessee filed return of income on 29 -11 -1996 declaring total income at Rs. 2,07,07,980. The return was processed under Section 143 (1)(a) of the Act on 17 -11 -1997 determining income at Rs. 2,13,88,621 after making certain adjustments. Subsequently, assessment order under Section 143(3) of the Act was passed on 4 -1 -1999 assessing total income at Rs. 3,93,64,880. It is relevant to state that assessee claimed deduction under Section 36(1)(iii) of the Act and the same was allowed to the extent of Rs. 1,54,10,800. The assessee filed appeal before the first appellate authority and the learned CIT(A) partly allowed the appeal of the assessee vide order dated 2 -2 -2000. It is relevant to state that the issue of deduction allowed under Section 36(1)(iii) of the Act was not subject -matter of appeal filed by the assessee before the first appellate authority. The Assessing Officer gave effect to the appellate order dated 2 -2 -2000 vide order dated 16 -2 -2001 and assessed total income at Rs. 2,23,55,860. Subsequently, the Assessing Officer initiated proceedings under Section 147 of the Act and issued notice under Section 148 of the Act dated 28 -3 -2003 on the ground that the assessee was allowed a deduction of Rs. 60,70,447 under the provisions of Section 36(1)(viii) of the Act which was not allowed. He has a reason to believe that income of Rs. 60,70,447 has escaped assessment within the meaning of Section 147 of the Act. A reason was recorded which is referred in the order of the Tribunal as follows: The assessment was completed on 16 -2 -2001 under Section 143(3)/251 /154 at total income of Rs. 2,23,55,860. It is noticed that while passing order the assessee was allowed a deduction of Rs. 60,70,447 under the provisions of Section 36(1)(viii) of the Act on the business income of Rs. 1,51,76,118 at the rate of 40 per cent. The income from business or profession as arrived at as above while passing order on 16 -2 -2001 included the income from leasing operations amounting to Rs. 2,56,52,516. These incomes were not includible in the long -term finance as mentioned in the provisions of Act for computing deduction under Section 36(1)(viii) of the Act. If the income of Rs. 3,59,98,984 (2,56,52,516 -1,03,46,468) is reduced from the income determined, the income from the business of the long -term finance as required under the provisions of Section 36(1)(viii) of the Act will arrive at in negative and there will be no deduction under Section 36(1)(viii) of the Act. Therefore, deduction under the said section amounting to Rs. 60,70,447 was not allowable. As such I have reason to believe that an income of Rs. 60,70,447 has escaped assessment within the meaning of Section 147.
(3.) PURSUANT thereto, the Assessing Officer completed assessment vide order dated 23 -3 -2004 denying deduction claimed by the assessee under Section 36(1)(viii) of the Act. Being aggrieved by the assessment order, the assessee filed appeal before the Commissioner of Income -tax (Appeals). The Commissioner of Income -tax (Appeals) has confirmed the order of the Assessing Officer. Being further aggrieved, the assessee filed the appeal before the Tribunal. The Tribunal by the impugned order allowed the appeal and set aside the reassessment order passed under Section 147 read with Section 143(3) of the Act. The Tribunal held that reopening of the proceeding was barred by limitation. The findings of the Tribunal are as follows: It is evident from the proviso to Section 147 of the Act that if an assessment is made under Section 143(3) of the Act for relevant assessment year, no action can be taken for reopening of such assessment after expiry of four years from the end of relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for that assessment year. There is no dispute that assessment in this case was made under Section 143(3) of the Act. Therefore, the only question is whether the assessee at the time of original assessment disclosed fully and truly all material facts necessary for its assessment for the assessment year under consideration. We have already extracted reasons which have been recorded by the Assessing Officer. On perusal of the reasons recorded, it is evident that it is not the case of the Assessing Officer that any income had escaped assessment on account of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for assessment year 1996 -97. We find substance in the submission of the learned authorized representative of the assessee that the Assessing Officer has re -initiated assessment proceedings on the basis that there was a mistake in allowing deduction to the assessee under Section 36(1)(viii) of the Act in respect of income on leasing transaction and upfront fee which had resulted under assessment. We are of the considered view that there is no failure on the part of the assessee to disclose truly and fully all material facts at the time of assessment proceedings in regard to claim of deduction under Section 36(1 )(viii) of the Act. We observe that assessee furnished requisite details in respect of leasing income and upfront fee as received in assessment year under consideration and the same was duly disclosed in the audited profit and loss account, as is evident from pages 4 and 5 of the paper book read with page 23 of the paper book and also computation of income filed along with return, a copy of which is placed at pages 33 to 35 of the paper book. We are of the considered view that the Assessing Officer while completing assessment proceedings under Section 143(3) of the Act had allowed the claim of the assessee with due application of mind and subsequent action of the Assessing Officer by issuing notice under Section 148 of the Act is a change of opinion. The Hon'ble Full Bench of Delhi High Court has also held in the case of CIT v. Kelvinator India Limited (supra) that when a regular order of assessment is passed under Section 143(3) of the Act, a presumption could be raised that such an assessment order has been passed with due application of mind. We are of the considered view that same analogy is applicable in the case before us that the Assessing Officer, when passed assessment order under Section 143 of the Act, had considered with due application of mind the claim of the assessee under Section 36(1)(viii) of the Act. Not only this, we observe, as mentioned hereinabove, that there is no averments by the Department in the reasons recorded that there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that assessment year and hence we are of the considered view that proviso to Section 147 of the Act will be applicable. Since notice issued under Section 148 of the Act has been issued after expiry of four years from the end of relevant assessment year under consideration, we are inclined to accept the contention of the assessee that the said notice was barred by limitation and thus subsequent proceedings are also bad in law. In view of the above, we hold that initiation of reassessment proceedings by the Assessing Officer under Section 148 of the Act is not a valid assessment being barred by limitation and consequently the assessment order passed pursuant to the said notice is also not valid in law.;