TaxTMI 
TaxTMI 
2012 (7) TMI 521
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....ssee Company had claimed excess deduction u/s. 36(1)(viii) of the Income Tax Act on income which included non fund base income and income from short term finance? 3) The appeal is admitted on the above question. At the instance and request of the Advocates for the appellant and the respondent the appeal is taken up for final disposal. 4) The facts leading to this appeal are as under: a) The respondent is a public financial institution. The respondent carries on the business of providing finance in the form of long or medium term loans, equity participation, sponsoring and underwriting new issue of shares and securities, providing hire purchase, lending etc. Its income from business of providing long term finance i.e. loans in excess of five years is referred to as fund based income while income arising from its business other than providing of long term loans is referred to as non-fund based income. b) In its return of income for the Assessment year 1995-96 the respondent had given the complete working of the fund based income (long term finance) and also disclosed that 79.99% of its total income was attributable to it. Consequently the expenses incurred were also shown....
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....t of non fund activity was only 10% and not 20.1% as originally claimed by the respondent during the course of assessment proceeding for the Assessment year 1996-97. f) Being aggrieved by the order dated 22/3/2002, the respondent filed an appeal to the Commissioner of Income Tax (Appeal) inter alia challenging the reopening of assessment for the assessment year 1996- 97 by a notice dated 20/3/2001 under Section 148 of the said Act. On 18/3/2004 the Commissioner of Income Tax (Appeals) disposed of the respondent's appeal by holding that the reopening of assessment for 1996-97 by notice dated 20/3/2001 under Section 148 of the said Act was correct in law. g) Being aggrieved by the order dated 18/3/2004 of the Commissioner of Income Tax (Appeals) the respondent preferred an appeal to the Tribunal. By its Order dated 27th August 2010, the Tribunal allowed the appeal of the respondent holding that the reopening proceedings initiated by notice dated 20/3/2001 was only on account of mere change of opinion and would amount to review which is not permitted. Further, the Tribunal held that the issue on which the appellantrevenue had sought to reopen the assessment for the Assessment Ye....
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....nt assessment year, the Assessing Officer does not have the power to review an assessment. This power can only be exercised when there is reason to believe that income had escaped assessment on the basis of some tangible material. ii) Merely because the original order dated 19/3/1999 as well as the order dated 22/3/2000 passed consequent to the reopening proceeding, do not discuss the issues raised in the present reopening proceedings, it does not follow that the same were not considered. The orders contain no discussion on the same as the Assessing Officer was satisfied with the claim. Mrs. Vissanji relied upon the affidavit in reply to establish that the material on the basis of which deduction is being claimed for expenditure at 20.1% was given to the Assessing officer during the Assessment proceedings. Therefore on the same set of facts seeking to reopen the proceedings amounts to mere change of opinion and is not permissible; iii) There was no tangible material available during the Assessment Year 1998-99 which could lead to the reasonable belief that income had escaped assessment for the Assessment year 1996-97 as the entire exercise of the quantum of deduction to be al....
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....The Assessing Officer has no power to review; he has the power to reassess. But, assessment has to be based on fulfillment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place." Therefore the sina qua non to issue a notice for reopening of assessments even within a period of less than 4 years from the end of the assessment year, is reason to believe that income has escaped assessment and this reason to believe should be on the basis of tangible material, otherwise the exercise of power to reopen would be a review of the assessment order. As held by this Court in the matter of Siemens Information System Ltd. v. Asst. C.I.T in 343 ITR 188 such tangible material could be even on the basis of fresh material obtained during subsequent assessment proceedings. However the test is that the reason to believe that income has escaped assessment should emanate from tangible material. 8) As disclosed in the reasons recorded while issuing notice under Section 148 of the Act, in the present case, the impugned notice was based on the ground that the....
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.... applied his mind to the record when originally assessing the respondent. Therefore, according to him this is not a case of a mere change of opinion but an opinion on the basis of material. In support of the above he states the fact that a material was available and made known to the Assessing officer during the assessment proceedings and he does not deal with/discuss the same in the adjudication order by itself would give rise to the conclusion that he has not formed any opinion on the issue. Consequently in the present case notice under Section 148 of the said Act has been properly issued. 10) The mere fact that an assessment order does not deal with a particular claim cannot lead to the conclusion that while allowing the claim the Assessing Officer had not applied his mind. In Idea Cellular Ltd. v. Deputy Commissioner of Income tax in 301 ITR 407 this Court held as follows: "It was also sought to be contended that since the Assessing Officer had not expressed any opinion regarding this matter in his original assessment order, it could not be said that there was any change of opinion in this case. In our view, once all the material was before the Assessing officer and he ch....
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....state of the law derived from relevant judicial decisions; (2) Where in the original assessment the income liable to tax has escaped assessment due to oversight, in advertence or a mistake committed by the Income-tax officer. This is obviously based on the principle that the tax-payer would not be allowed to take advantage of an oversight or mistake committed by the Taxing Authority; (3) Where the information is derived from an external source of any kind. Such external source would include discovery of new and important matters or knowledge of fresh facts which were not present at the time of the original assessment; (4) Where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law. If these conditions are satisfied then the Income-tax officer would have complete jurisdiction to re-open the original assessment. It is obvious that where the Incometax officer gets no subsequent information, but merely proceeds to re-open the original assessment without any fresh facts or materials or without any enquiry into the ....
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....his case is based on merely change in opinion on the material which was already on record and considered. The Apex Court in the matter of Kelvinator of India Ltd. (supra) held that the reopening of an assessment cannot be on a mere change of opinion as the same would amount to review and there is no power of review given to an Income Tax officer. Further, the Assessing Officer while reassessing the respondent by an order dated 26/3/2002 has in fact taken a ground different from the grounds in the reasons recorded for reopening the assessment under Section 148 of the said Act. The reasons furnished for reopening the assessment alleged that non fund income had been shown in fund based income so as to avail of a higher deduction. However, the basis of the order dated 26/3/2002 was that 20.1% out of the gross expenses attributed to non fund income was excessive and ought to be restricted to only 10%. Thus, the basis of the order is completely different from the reasons recorded for reopening the assessment. This is clearly not permissible as held by this Court in Jet Airways (supra). The Division Bench of this Court in Jet Airways held as under: "Section 147 has this effect that ....