TaxTMI 
TaxTMI 
2012 (4) TMI 455
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....n of income on 29th October, 2001. The case was taken up for scrutiny by issue of notice dated 28th October, 2002 under Section 143(2) of the Act. The assessment order under Section 143(3) was passed on 30th January, 2004, computing the total income at Rs.7,02,73,350/-, as against the declared income of Rs.6,92,16,132/-. 4. Vide reasons recorded on 30th May, 2005, the assessment was reopened under Section 147 of the Act by issue of notice dated 30th May, 2005, under Section 148 of the Act. 5. The reasons recorded read:- "It is from the Notes of accounts that the assessee has received a sum of Rs.173 lakhs as consideration for the transfer of exclusive distribution rights of AC and water cooler. The amount was credited by assessee to the capital reserve account /c and was not treated as income for the year. The amount was chargeable under the head Capital gains being transfer of distribution rights. The Assessing Officer while completing the assessment has also not added the amount of capital gains and taxed accordingly. In view of the above, I have reason to believe that amount of Rs.173 lakhs being capital gains has escaped assessment. Notice under....
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.... at the time of original assessment. Thus, it is a case of change of opinion and accordingly the ratio of the decision of Full Bench of this Court in CIT vs. Kelvinator of India Ltd., (2002) 256 ITR 1, which has been affirmed by Supreme Court in CIT vs. Kelvinator of India Ltd., (2010) 2 SCC 723, is applicable. 8. Section 147 of the Act 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 in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this....
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....o be satisfied:- (i) The Assessing Officer must form a tentative or prima facie opinion on the basis of material that there is under-assessment or escapement of income; (ii) He must record the prima facie opinion into writing; (iii) The opinion formed is subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion. (iv) Reasons recorded and/or the documents available on record must show a nexus or that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income. (v) In cases where the first proviso applies, there is an additional requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts. Explanation to the Section stipulates that mere production of books of accounts or other documents from which the Assessing Officer could have, with due diligence, inferred material facts, does not amount to "full and true disclosure of material facts". 10. For the present case, however, the proviso is not applicable as the "reason to believe" for issue of ....
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....nt cannot be faulted as the same was based on information derived from the tax audit report. The tax audit report had already been submitted by the assessee. It is one thing to say that the Assessing Officer had received information from an audit report which was not before the Income-tax Officer, but it is another thing to say that such information can be derived by the material which had been supplied by the asses- see himself. 23. We also cannot accept the submission of Mr. Jolly to the effect that only because in the assessment order, detailed reasons have not been recorded an analysis of the materials on the record by itself may justify the Assessing Officer to initiate a proceeding under section 147 of the Act. The said sub- mission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the In....
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.... assessee in Note No. 10 had stated as under:- "10. A sum of Rs.173 lacs received from M/s Daikin Shriram Airconditioning Private Limited as consideration for the transfer of exclusive distribution rights of Air conditioner and Water Cooler has been credited to Capital Reserve Account and out of the consideration of Rs.27 lacs for the transfer of Assets, a sum of Rs.13.32 lacs has been credited to respective assets Account and the balance Rs.14.68 lacs of Profits and Loss Account." 14. In paragraph 11 of the impugned order quoted above the tribunal has stated that in the original assessment proceedings, no query was raised by the Assessing Officer with regard to the impugned receipt of Rs.173 lacs and this was held to be a lapse and failure on the part of the Assessing Officer but it has been observed that it cannot be a ground to reopen the proceedings. Lapse on the part of the Assessing Officer cannot be a justification/cause to reopen assessment. This is a significant finding and the effect thereof has to be examined in the context of the plea of "change of opinion". We may, in this connection, also note the stand of the Revenue before us and what was recorded in the....
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....a case of change of opinion? 17. The aforesaid questions arise in context that the re-assessment proceedings have been initiated on the basis of audit objections that "non-inclusion of this amount i.e. Rs.173 lacs in the assessee's total income has resulted in income amounting to Rs.173 lacs escaping assessment with consequent short levy of tax by Rs.39,09,800/- @ 20% + 13% SC - being tax on capital gains." Under the earlier provisions assessment would be reopened on basis of subsequent information. However, the Supreme Court in Indian & Eastern Newspaper Society Vs. Commissioner of Income Tax, (1979) 119 ITR 996 (SC), had held that audit objection on a point/opinion of law does not constitute "information" for reopening. It is submitted by the assessee that the object behind the principle of finality and the doctrine of change of opinion is that assessment should not be disturbed when there is no fault of the assessee. Thus, when an assessee is not to be blamed and has furnished full and true particulars, reopening is abuse of said power. Further once a note or specific entry is mentioned in the return/documents enclosed with the return of income, then it is for the Asse....
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....8. Referring to the decision of the Supreme Court in Kelvinator (supra), it is submitted that the words "tangible material" appearing therein would clearly show that there should be something new which should come to the knowledge of the Assessing Officer. It is submitted that in terms of the decision of the Supreme Court in Indian and Eastern Newspaper (supra), opinion of the audit party on a legal issue cannot be ground/reason to reopen. It is, accordingly, stated that notice under Section 147/148 cannot be issued even within a period of four years and is valid only if the following three conditions are satisfied:- (i) Full and true particulars have not been filed at the time of original assessment. (ii) Original assessment order does not show application of mind, and (iii) The Assessing Officer had not raised queries to show application of mind. The queries need not specifically relate to point in issue, but can relate to other aspects. In such cases, the observations of the Full Bench of the Delhi High Court in the case of Kelvinator will apply. 19. On the other hand, the Revenue has submitted that change of opinion necessarily postulates and requires application of....
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.... issue notice under Section 148 read with Section 147(a) but under the substituted Section 147 existence of only the first condition suffices. In other words if the assessing officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to Section 147. The case at hand is covered by the main provision and not the proviso." 20. With effect from 1st April, 1989, the provisions of Section 147 underwent substantial changes. It is agreed that the provisions have been widened, but still do not include mere change of opinion. The cases wherein Assessing Officer has specifically examined the material and referred to the same in the assessment order, pose no difficulty. Delhi High Court in the case of CIT vs. Eicher Ltd. (2007) 294 ITR 310 (Del.) has observed that if the entire material has been placed by the assessee before the Assessing Officer during the original assessment and the Assessing Officer had applied his mind and accepted the view canvassed by the assessee, then merely because this is ....
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....lies to procedural aspects or even to substantive assertions relevant to the assessment. 23. Having considered the matter in depth, we feel that the matter should be examined by a larger Bench. We may note that the decision in the case of Rajesh Jhaveri Stock Brokers Pvt. Ltd.,(supra) relates to processing of returns under Section 143(1)(a) and not to regular assessment under Section 143(3). The Supreme Court in their decision CIT vs. Kelvinator of India Ltd. (supra) has not specifically referred to Section 114 of the Evidence Act and has also not specifically disapproved or approved the observations of the Full Bench of Delhi High Court with reference to the said Section. The Supreme Court in Indian & Eastern Newspaper Society (supra) had examined their earlier decision in Kalyanji Mavji & Co. Vs. CIT (1976) 102 ITR 287 (SC) and observed as under:- "It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the ITO discovers that he has committed an error in consequence of which inco....
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....ome-tax Officer accepts the plea of an assessee that a particular receipt is not income liable to tax. But, on further research into law, he finds that there was a direct decision holding that category of receipt to be an income receipt. He would be entitled to reopen the assessment under section 147(b) by virtue of proposition (4) of Kalyanji Mavji [1976] 102 ITR 287 (SC). The fact that the details of sales of house properties were already in the file or that the decision subsequently come across by him was already there, would not affect the position because the information that such facts or decision existed, comes to him only much later. What then, is the difference between the situations envisaged in propositions (2) and (4) of Kalyanji Mavji [1976] 102 ITR 287 (SC). The difference, if one keeps in mind the trend of the judicial decisions, is this. Proposition (4) refers to a case where the Income-tax Officer initiates reassessment proceedings in the light of "information" obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, e.g., as in ....
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....the said material in the original assessment itself, then he would be powerless to start the proceedings for the reassessment. Where, however, the Income-tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147 (b) of the Act." Let us now examine the position in the present case keeping in mind the narrow but real distinction pointed out above. On behalf of the assessee, it is emphasised (a) that the amount of surplus is a very substantial amount, (b) that full details of the manner in which it had resulted had been disclosed, (c) that the profit and loss account, the profit and loss adjustment account and statement made before the Income-tax Officer had brought into focus the question of taxability of the surplus, and (d) that the decision in G. R. Ramachari's case [1961] 41 ITR 142 (Mad), had been reported by April 10, 1962. No Income-tax Officer can be presumed to have completed the assessment without looking at all of this material and the said decision. No doubt, some doubt had been thrown as to whether a statement had been given at the time of original ass....