TaxTMI 
TaxTMI 
2013 (11) TMI 305
X X X X Extracts X X X X
X X X X Extracts X X X X
....ores out of which Rs.Rs.75 lakhs was to be paid as down payment and the balance of Rs.1.50 crores was to be paid in instalments starting with the year ending 31-3-2006. The assessee had claimed the entire amount of Rs.2.25 crores in the Profit & Loss A/c as expenditure as against the actual payment of Rs.75 lakhs. The Assessing Officer therefore came to the conclusion that the balance amount of Rs.1.50 crores was allowed in excess and as such income to that extent has escaped assessment as it is not allowable as expenditure in the year under consideration since it is payable in instalments in future dates. In course of re-assessment proceedings, the assessee contended that the liability to pay the entire amount of Rs.2.25 crores accrued on the assessee on the date of agreement itself and the liability for the balance amount payable has been duly reflected in the books of accounts. It was further submitted that the payment of the balance amount in instalments does not absolve the assessee from the liability and the acceptance in instalments does not reduce the actual cost of the asset acquired. The assessee submitted that since it is following mercantile system of accounting, the en....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the agreement on purchase of rights of the film were submitted before the Assessing Officer and the assessee had also explained in the course of assessment proceedings that since the assessee is consistently following mercantile system of accounting, the claim of deduction in purchase of rights for Rs.2.25 crores was correct. The Assessing Officer after making enquiry and properly applying his mind, accepted the contention of the assessee. It was contended that the agreement entered into with M/s Suresh Productions which was considered by the Assessing Officer at the time of original assessment was again reviewed by the Assessing Officer in the reassessment proceedings and by interpreting some of the clauses of the agreement, the Assessing Officer inferred that the seller has foregone his right of demanding for advancing the payment before due date of instalment. Further, the liability of the assessee accrues to the extent of instalment amount only It was contended that the reopening was based on the same agreement on a mere change of opinion for which the re- assessment proceedings cannot be initiated. 5. So far as the merits of the disallowance were concerned, it was contended t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....dering the agreement. 6. The CIT (A) further noted that there is no material change in the set of facts as existed at the time of finalisation of original assessment u/s 143(3) and the Assessing Officer has reopened the assessment by considering the same set of facts on mere change of opinion which is not permissible in view of the decision of Hon'ble Delhi High Court in case of Jindal Photo Films Ltd. Vs. Dy. CIT (234 ITR 177) and of Hon'ble Gujarat High Court's decision in the case of Garden Silk Mills (P) Ltd vs. Dy. CIT (151 CTR 533). The CIT (A) further held that the disallowance of Rs.1.5 crores in reassessment proceedings was merely change of opinion. With regard to the merit of the addition also, the CIT (A) held that since the assessee is consistently following the mercantile system for accounting, the entire liability of Rs.2.25 cores is to be allowed as deduction. The CIT (A) on interpreting the provision contained under Rule 9B of Income-tax Rules in the light of the ratio laid down by the Income-tax Appellate Tribunal, Cochin Bench while interpreting the word "paid" in case of Jeeva Films vs. ITO (52 TTJ 450 held that the entire amount agreed to be paid by the assesse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that in case of Consolidated photo & Finewest Ltd. Vs. ACIT (281 ITR 394) the Hon'ble Delhi High Court held that the reassessment based on material available on record, cannot amount to change of opinion and the reopening cannot be challenged if the assessment order passed by the Assessing Officer is silent on a particular aspect. It was submitted that as if the assessee's claim is found not genuine, it needs to be corrected by reopening the same and it is not open to the assessee to get away by making false or untrue statement at the time of original assessment when that false claim comes to the notice of the Assessing Officer while reopening the assessment. In support of such contention, the learned Departmental Representative relied upon the decision of Hon'ble Supreme Court in the case of Phoolchand Bajranglal vs. ITO (203 ITR 456). The learned Departmental Representative also relied upon the decision of the Hon'ble Delhi High Court (FB) in case of CIT vs Usha International Ltd. (348 ITR 485). 10. The learned authorised representative for the assessee strongly supporting the order passed by the CIT (A) submitted that during the original assessment proceedings, the Assessing Of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....change of opinion as the reopening was made by considering the same set of facts and material which were considered at the time of completion of the original assessment. In support of such finding of the CIT (A), the ld. AR at the time of hearing before us has submitted a letter dated 17-11-2005 claimed to have been submitted before the AO in the course of the original assessment proceedings wherein facts relating to payment of royalty for the film "Nee Premakai" was mentioned and copy of the agreement entered with M/s Suresh Production was also enclosed. It was therefore submitted by the learned AR that the entire issue relating to the purchase of rights of "Nee Premakai" having been examined by the AO at the time of original assessment, the reopening of the assessment cannot be made by reviewing the same set of facts and materials. The contents of the letter dated 17-11-2005 claimed to have been submitted by the AO are reproduced hereunder:- " Dt. 17-11-2005. To Office of the Asst. CIT, Cir-13(1), Shapoor House, Adarshnagar, Hyderabad. Sir, Sub: IT asst. Year 2003- 04 - information - reg. We wish to submit the following for your consideration and the relative Xerox copies....
X X X X Extracts X X X X
X X X X Extracts X X X X
....equired to be verified as the letter which was produced by the ld. AR at the time of hearing does not bear any signature and seal of the IT Department in token of its submissions. This fact could not be verified by us also as the assessment record was not produced at the time of hearing. If in fact, the AO at the time of original assessment proceedings had enquired into the matter and the assessee has submitted the primary facts with regard to purchase rights of the film "Nee Premakai" and submitted copy of the agreement with M/s Suresh Productions, it will be deemed that the AO has passed the order after considering the same. If assessee's letter dated 17-11-2005 and copy of the agreement is either available on record or there is an order sheet entry to that effect made by the AO at the time of completion of the original assessment, the assessee cannot be accused of non disclosure of primary facts. Therefore, the re-opening of the assessment on re-appreciation of same set of facts and material would amount to change of opinion. The materials which are available on record and considered at the time of completion of original assessment cannot form the basis of re-assessment proceedi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer. We quote herein below the relevant portion of Circular No. 549, dated October 31, 1989 ([1990] 182 ITR (St.) 1, 29), which reads as follows:- '7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression "reason to believe" in section 147. A number of representations were received against the omission of the words "reason to believe" from section 147 and their substitution by the "opinion" of the Assessing Officer. It was pointed out that the meaning of the expression, "reason to believe" had 'been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression "has reason to believe" in place of the words "for reasons to be recorded by him in writing, is of the opinion". Other provisions of the new section 147, however, remain the same.' For the aforestated reasons, we see no merit in these civil appeals filed ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and true particulars had been furnished by the assessee at the time of the original assessment, it cannot be said that the Assessing Officer had applied his mind to the claims or contentions put forth by the assessee. The observation of the court that" ... it is opposed to normal human conduct that an officer would complete the assessment without looking at the material placed before him" is in substance and effect echoed in the judgment of the Full Bench of this court in Kelvinator (supra). Again, the emphasis is as to whether the assessee has discharged his duty, and if so, he should not be asked to go over the grind again merely on the ground that the Assessing Officer has not examined the facts disclosed fully and truly and, therefore, was in no position to form an opinion. I find it difficult to assent to the contention of the Revenue that section 114(e) of the Evidence Act was incorrectly invoked by the Full Bench of this court in Kelvinator (supra). It has .been held by the seetion143 (3) of the Act and the judgment has been affirmed by the Supreme Court-The last word on the subject has been said. The contention cannot. even be heard. on the first question referred to this ....