TaxTMI 
TaxTMI 
2010 (10) TMI 683
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....t, departments at Mumbai, Madras, Calcutta and other Metropolitan cities. The assessee filed its return of income declaring income of Rs. 5,16,560/- on 31/10/2001. During the course of assessment proceedings the AO had raised the following queries:- (i) Why depreciation of 100% be allowed on the machinery namely marine outfall machinery ? (ii) Why opening balance of Rs. 8,25,000/- under the head fees receivable be allowed as expenditure in computing the income. As the same is not of a revenue nature ? (iii) Why software expenses of Rs. 1,50,750/- to be allowed as revenue expenditure ? 3. The assessee had given a detailed reply to the AO against the aforesaid queries. The AO after considering the det....
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..... 6. We have heard the learned representatives of the parties and perused the record. The issue to be examined under consideration is whether the AO was correct in reopening the assessment by issuing notice under section 148 dated 27/03/2008 on the completed assessment with the reasons recorded. To examine the issue we would like to refer section 147 which reads as under:- "147 [Income escaping assessment.- If the [Assessing] Officer [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently....
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....l also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed ; or (ii)&n....
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....not have reason to believe that any part of the income of the assessee had escaped assessment under that circumstances the notice issued by him would be liable to be struck down as invalid. 8. The basis for initiating the reassessment proceedings is to be judged solely on the basis of reasons recorded by the Assessing Officer and the material and information referred to by him in the reasons for initiating such action. It is settled law that Assessing Officer cannot initiate the reassessment proceedings merely on the basis of suspicion or for the purpose of making roving and fishy inquires. The Assessing Officer cannot support the reopening of the assessment by collecting the material or by making inquiry subsequently after the date of ini....
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....he ITO will not be entitled on change of opinion to commence proceedings for reassessment. Similarly, if he has raised a wrong legal inference from the facts disclosed, he will not, on that account, be competent to commence reassessment proceedings .Having second thoughts on the same material, and omission to draw the correct legal presumption during original assessment do not warrant the initiation of a proceeding under section 147 .Where it was clear from the original assessment orders as well as order made by the appellate authority that the Assessing Officer was well aware about the primary facts, viz., the claim made by the assessee, the circumstances under which the claim was made, and the provisions of law which could be applied whil....