TaxTMI 
TaxTMI 
2012 (4) TMI 236
X X X X Extracts X X X X
X X X X Extracts X X X X
....8,887/- and subsequently assessed u/s 143(3) dated 16.03.2006 at a loss of Rs.6,45,338/-. On perusal of astt records, and P&L A/cs an amount of Rs.2,12,31,472/- was shown payment towards software consultation overseas (M/s Artex Information System LLC) and was remitted to foreign company without deducting tax at source. However, during the asstt proceedings the assessee stated that payment made for consultancy services outside India are not chargeable under this act. As per clause (vii) of sub section (i) of Section 9, this clause is not applicable to assessee company in this case because as per 3 CD report (Sl. No.28a) assessee had neither any sale of software outside nor earn any income from outside India and consumed all software in house. Therefore, the consultancy charges paid to foreign company was to be disallowed and added back in the taxable income of the assessee. In view of the above, I have reason to believe that an amount to the extent mentioned above chargeable to tax has escaped assessment for the assessment year 2003-04 and, hence, clearly attracts the provisions of 147 of the IT Act. Therefore, notice u/s 148 of the Act is to be issued. Put up for statutory appr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....not taken the recourse to Section 263 of the Act. Dealing with the scope and ambit of Section 147 of the Act and the validity of initiation of reassessment proceedings, in the case of CIT vs. Kelvinator of India Ltd. (2002) 256 ITR 1 (Del), it has been observed as under:- "From a bare perusal of the provisions contained in section 147 of the said Act, as it stood up to March 31, 1989, it is evident that to confer jurisdiction under section 147(a) of the Act two conditions were required to be satisfied, viz., (1) the Assessing Officer must have reason to believe that income charge- able to tax has escaped assessment ; and (2) he must also have a reason to believe that such escapement occurred by reason of either ; (a) omission or failure on the part of the assessee to make a return of his income under section 139 or (b) omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. The afore- mentioned requirements of law must be held to be conditions precedent for invoking jurisdiction of the Assessing Officer to reopen the assessment under section 147 of the said Act. It is trite that both the conditions a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the assessing officer. Hence, after 1-4-1989, the assessing officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the assessing officer." 7. In view of the aforesaid legal position it is clear that the present case is of change of opinion and the Assessing Officer in the first/original assessme....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... second portion of the reasons recorded, which refers to Form No.3CD(i.e. the audit report) serial No. 28(a) is factually incorrect. He has filed before us a copy of the audit report in Form No. 3CD, which is taken on record, the relevant portion of Sl.No.28(a) reads as under:- "28 (a) In the case of a trading concern Micrografx Give quantitative details of principal items of goods traded: (i) opening stock 173 (ii) purchases during the NIL previous year (iii) sales during the 138 (Software used previous year in house, hence capitalized) (iv) closing stock Nil (v) shortage/excess 35(Written Off) if any" 11. It is apparent from the reading of the aforesaid paragraph 28(a), that the same relates to the software purchase from the Micrografx. This does not pertain to transaction or the payment made by the petitioner to M/s Artech Information Sys. LLC. 12. We may also note that the in respect of software purchase from Micrografx, the Assessing Officer in the order sheet dated 22.02.2006 has asked the petitioner to explain:- "In audit report u/s 44AB, clause 28(a) shows that 138 items of Micrographic software has been used-in-house & 35 items have been written off. To give exact na....