TaxTMI 
TaxTMI 
2014 (3) TMI 213
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....sis of these seized documents, the AO has estimated income of the assessee (appellant) from property business at Rs.13,11,200 and unexplained investment in property at Rs.15,00,000 totaling to Rs.28,11,200/-. But the then ld. CIT(A) deleted this addition in his order dated 20.05.2009 and this decision of the then ld. CIT(A)-I has been further confirmed by the Hon'ble ITAT Agra vide its order dated 21st April, 2011. Meanwhile, the assessment proceeding of the assessee (appellant) has been reopened u/s.147 after recording reason to believe on 10.09.2009 and the same is reproduced as under: "A search was conducted at the premises of the assessee on 16.09.2004 in which several books of account, documents etc. was seized including Annexure A-1. Annexure A-1 is a binded ledger which contains details of expenditure made by the assessee in various properties. In this book, property wise ledger account has been maintained and amount and dates of making payments in respect of each property is clearly mentioned. Such details contain payment made towards purchase of land, stamp, dalali expenses, registration expenses and construction expenses. The details of expenditure made as per entries ....
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....nce of taking loans by the assessee is also not there on record nor from perusal of reply of assessee the same appears to be furnished. On the contrary, it has been observed that in the asst. order itself that the books of a/c produced by assessee, did not give correct picture to explain invests made in above properties. Precisely, on examination of records including seized material, no evidence or explanation to justify the source of expenditure of Rs.96,17,600/- is found. Thus at the most addition of Rs.13,11,000/- only was made on a/c of unexplained expenditure as against total unexplained expenditure of Rs.96,17,600/- made during A.Y. 2004-05 & 2005-06 in above properties. In view of the above discussion, it is clear that amount of at least Rs.37,92,600/- for A.Y. 2004-05 & Rs.45,14,000/- for A.Y. 2005-06 being unexplained expenditure in properties as mentioned above, have escaped from assessment and such unexplained expenditure is income of assessee under the provisions of sec.69C of the I.T. Act. In view of above facts and circumstances of the case, I have reason to believe that on account of failure on the part of the assessee to disclose truly and fully all material f....
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....n of Rs.30,13,800/- on the basis of the seized document Annexure A-1(pages 8, 20, 21, 30 & 31) and finding of the AO as discussed in the assessment order is given as under: "In this book, property wise ledger account has been maintained and amount and dates of making payments in respect of each property is clearly mentioned. Such details contain payment made towards purchase of land, stamp, dalali expenses, registration expenses and construction expenses. The details of expenditure made as per entries in this ledger are as under: Payment/expenditure made during F.Y. 2004-05 (A.Y. 2005-06) Page no. of Annexure A-1 Description of property Amount paid on different dates Period of payments 8 Bayu Vihar Patholi Rs.14,84,000 20.07.2004 to 20.10.2004 30 Advance for Rahul Vihar Cash - Rs.8,61,000 06.04.2004 to 05.08.2004 31 Land at Vaibhav Kunj, Dayalbagh, Agra Rs.34,80,000 10.04.2004 to 27.04.2004 Total Rs.58,25,000 As per ledger Annexure A-1 Page 8,30 & 31 an investment of Rs.58,25,000/- was made during A.Y. 2005-06. In this connection, assessee filed a letter dated 07.12.2010 the relevant portion of th....
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....cords including seized material, no evidence or explanation to justify the source of expenditure of Rs.8,25,000/- is found. Thus, at the most addition of Rs.28,11,000 (15,00,000 + 13,11,200) was made on a/c of unexplained expenditure / investment as against total unexplained expenditure / investment of Rs.58,25,000/- made during A.Y. 2005-06 in above properties. In view of the above discussion, it is clear that amount of at least Rs.30,13,800/- [58,25,000 (-) 28,11,200 already considered vide order dated 29.12.2006] for A.Y. 2005-06 being unexplained expenditure / investment in properties as mentioned above, have escaped from assessment and such unexplained expenditure is income of assessee under the provisions of sec.69C of the IT Act, 1961 and added back to the income of the assessee." 2.2 As per the above discussion made in the assessment order, the AO has made addition of Rs.30,13,800 after taking into account the additions of Rs.15 lac and Rs.13,11,200/- totaling to Rs.28,11,200/- already made in the original assessment order and this amount has been deducted out of the total amount of investment of Rs.58,25,000/- found recorded in the seized document pertaining to th....
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....see vide order dated 20.05.2009. The department preferred appeal before the ITAT, Agra Bench against this order of the ld. CIT(A) and the Tribunal dismissed the departmental appeal vide order dated 21.04.2011. It was, therefore, explained that re-assessment proceedings have been initiated again on the similar issue and on identical facts which have already been considered in the original assessment proceedings. It is a clear case of change of opinion and no new material has been brought on record to justify the additions. The facts were all within the knowledge of the AO. The assessee relied upon certain decisions in support of her contention. The remand report from the AO was called for which is reproduced in the appellate order. Rejoinder was also filed by the assessee. The ld. CIT(A), considering the facts of the case in the light of all the material and evidences on record, annulled the reassessment proceedings because the same were invalid and have been done on mere change of opinion considering the same facts and the seized material. The appeal of the assessee was accordingly allowed. The findings of the ld. CIT(A) in para 10 to 14 in the appellate order are reproduced as und....
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....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 re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549 , dated 31-10-1989, 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 'fo....
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....ld have formed an opinion at the first instance, i.e., in the proceedings under section 143(3) and now by initiation of the reassessment proceeding, the Assessing Officer proposes or wants to take a different view. [Para 6] The word 'opinion' is derived from the latin word 'opinari' which means 'to believe', 'to think'. The word 'opinion' as per the Blacks Law Dictionary means a statement by a Judge or a Court of a decision reached by him incorporating cause tried or argued before them, expounding the law as applied to the case and, detailing the reasons upon which the judgment is based. Advanced Law Lexicon by P. Ramanatha Aiyar (3rd Edition) explains the term 'opinion' to mean 'something more than mere retaining of gossip or hearsay; it means judgment or belief, that is, a belief or a conviction resulting from what one thinks on a particular question ........ An opinion is a conviction based on testimony..... they are as a result of reading, experience and reflection'. [Para 7] In the context of assessment proceedings, it means formation of belief by an Assessing Officer resulting from what he thinks on a particular qu....
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.... record and available at the time of the assessment order, the principle of 'change of opinion' will not apply. The reason is that 'opinion' is formed on facts. 'Opinion' formed or based on wrong and incorrect facts or which are belied and untrue do not get protection and cover under the principle of 'change of opinion'. Factual information or material which was incorrect or was not available with the Assessing Officer at the time of original assessment would justify initiation of reassessment proceedings. The requirement in such cases is that the information or material available should relate to material facts. The expression 'material facts' means those facts which if taken into account would have an adverse affect on the assessee by a higher assessment of income than the one actually made. They should be proximate and not have remote bearing on the assessment. The omission to disclose may be deliberate or inadvertent. The question of concealment is not relevant and is not a precondition which confers jurisdiction to reopen the assessment. [Para 16] Correct material facts can be ascertained from the assessment records also and it is not....
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....closures made by him are relevant. However, when the proviso is not applicable, the said precondition is not applicable. This additional requirement is not to be satisfied when re-assessment proceedings are initiated within four years of the end of the assessment year. The sequitor is that when the proviso does not apply, the reassessment proceedings cannot be declared invalid on the ground that the full and true disclosure of material facts was made. In such cases, re-assessment proceedings can be declared invalid when there is a change of opinion. As a matter of abundant caution it is clarified that failure to state true and correct facts can vitiate and make the principle of change of opinion inapplicable. This does not require reference to and the proviso is not invoked. The difference is this; when proviso applies the condition stated therein must be satisfied and in other cases it is not a prerequisite or condition precedent but the defence/plea of change of opinion shall not be available and will be rejected. [Para 24] Thus if a subject matter, entry or claim/deduction is not examined by an Assessing Officer, it cannot be presumed that he must have examined the claim/dedu....
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....o section 114 of the Evidence Act. The doctrine of merger, if applied, would require that one will accept and apply the reasoning and ratio given by the Supreme Court. By applying the 'doctrine of merger' it cannot be held that the reasoning or the ratio given by the Supreme Court is the reasoning given by the High Court. The Supreme Court in the present case has given detailed reasons and ratio why 'change of opinion' cannot be a ground to reopen assessment. The said reasoning or ratio are the binding precedent. [Para 31] If a particular subject matter, item, deduction or claim is not examined by the Assessing Officer, it will nevertheless be a case of change of opinion and the reassessment proceedings will be barred. [Para 36] What is important and relevant is that the principle of 'change of opinion' was equally applicable under the unamended provisions. [Para 37] There may be cases where the Assessing Officer does not and may not raise any written query but still the Assessing Officer in the first round/ original proceedings may have examined the subject matter, claim etc., because the aspect or question may be too apparent and obvious. To hold ....
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....rest of revenue, they are entitled to and can invoke the power u/s.263. Therefore, in view of the above two decisions, one by Hon'ble Supreme Court in case of CIT vs. Kelvinator India (supra)(relied upon by the ld. AR) and another decision of Hon'ble Delhi High Court in case of Usha International Ltd.(supra)(relied upon by the AO), it would depend on the facts of each case whether, there is change of opinion while reopening of the assessment proceeding or not. However, in both the decisions, it is very clear that re-assessment proceeding initiated merely on the basis of change of opinion is invalid. In the decision of CIT vs. Usha International Ltd. (supra), the Hon'ble Delhi High Court has discussed about the expression "change of opinion" and it has been held that question of change of opinion arises when the AO forms an opinion and decide not to make addition or holds that the assessee is correct and accept his position or stand. In order to examine, whether in the instant case, the reopening of assessment proceeding is merely on the basis of change of opinion or otherwise, the discussion made by the AO in the original assessment order dated 29.12.2006 with respect to examinatio....
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....er. After examining the decision of the AO in the original assessment order as well as in the re-assessment order passed u/s.147 read with section 143(3), it is very clear that the first AO has applied his mind while completing the original assessment and after examination of the seized documents in which investment in property was recorded, he arrived to the conclusion for making addition of only Rs.28,11,200/- instead of the total amount of investment recorded in the seized document and, therefore, the second AO in the reassessment order, has made addition, only on account of balance amount. Therefore, it can be said that the first AO in the original assessment has formed his opinion about making the addition of only Rs.28,11,200/- after computing the profit earned by the assessee(appellant) on undisclosed receipts and also making an addition of Rs.15 lac to cover the value of properties shown as being invested and recorded in the seized documents. Under such circumstances, if it has been felt by the second AO that the addition made by the earlier AO who made the original assessment was not correct and he should have made the addition for the total amount of investment made in....
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....reopening u/s.147 is invalid. As the reopening of assessment proceeding for passing the impugned order passed u/s.147 read with section 143(3) has itself been found to be invalid, consequent notice issued u/s.148 is also invalid and the subsequent assessment order passed u/s.143(3) is void ab initio and deserves to be quashed. Therefore, the impugned assessment order passed u/s.147 / 143(3) dated 10.12.2010 is annulled. 13. As the reopening of assessment proceeding u/s.147 has been found to be invalid and the consequent assessment order passed u/s.147 read with section 143(3) has been annulled, I have not decided the grounds taken on the merit of addition because the adjudication on the merit of addition would be only on academic nature. 14. In the result, appeal is allowed." 3. The ld. DR relied upon the order of the AO and submitted that the investment in the properties were not properly considered at the original assessment stage, therefore, it is not a case of change of opinion and relied upon the decision of Hon'ble Delhi High Court in the case of Consolidated Photo & Finest Ltd. vs. ACIT, 281 ITR 394, in which the writ petition was dismissed for failure to disclose f....
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....nge of opinion - law same before and after amendment by direct tax laws. Hon'ble Supreme Court in the case of Indian Oil Corporation, 159 ITR 956 held that no case u/s 148 is made out when the facts were known all along with to the revenue while making the original assessment. Hon'ble Supreme Court in the case of Associated Stone Industry Ltd., 224 ITR 560 held that the assessee shall have to disclose only the primary facts. Considering the above legal propositions decided in the above cases, it is clear that AO is not justified in reopening the assessment on mere change of opinion. It is admitted fact that Annexure A1 was considered at the original assessment stage and on that basis, the AO made addition on account of unexplained investment in property in a sum of Rs.15,00,000/- (total addition Rs.28,11,200/-). The AO has referred to the same properties in the original assessment order, which are referred to now in the reasons for reopening of assessment for the year under consideration. The assessee filed explanation and evidences before the AO at original assessment stage explaining the investment in the properties. Therefore, the same seized material, which is basis of ....
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.... duly considered by the first appellate authority prior to reopening of assessment. The ld. CIT(A), therefore, on proper appreciation of facts and material on record, rightly quashed the reassessment proceedings. We, therefore, do not find any infirmity in the order of the ld. CIT(A) in quashing and annulling the reassessment order. The departmental appeal thus fails and is accordingly dismissed. 6. In the result, the departmental appeal is dismissed. Order pronounced in the open court. ============= Document 1 "3. सरà¥à¤š की कारà¥à¤¯à¤µà¤¾à¤¹à¥€ के दौरान निरà¥à¤§à¤¾à¤°à¤¿à¤¤à¥€ के घर से पà¥à¤°à¤¾à¤ªà¥à¤¤ अनेकà¥à¤¸à¤° à¤-1 के पेज 8 पर वायॠविहार पथौली में रू.14,84,000 की पà¥à¤°à¤¾à¤ªà¤°à¥à¤Ÿà¥€ को खरीदने क....
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....ट इतà¥à¤¯à¤¾à¤¦à¤¿ पà¥à¤°à¤¸à¥à¤¤à¥à¤¤ किया। निरà¥à¤§à¤¾à¤°à¤¿à¤¤à¥€ ने जो खाते पà¥à¤°à¤¸à¥à¤¤à¥à¤¤ किये उसमें विà¤à¤¿à¤¨à¥à¤¨ जमीनों को खरीदने से संबंधित à¤à¥à¤—तान इतà¥à¤¯à¤¾à¤¦à¤¿ दिखाये गये हैं। निरà¥à¤§à¤¾à¤°à¤¿à¤¤à¥€ ने यह à¤à¥€ बताया कि उसने उपने परिवार के सदसà¥à¤¯à¥‹à¤‚ से समय समय पर लोन लिये थे। केस कà¥....
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....रापà¥à¤¤à¤¿à¤¯à¤¾à¤‚ रू.2,00,00,000 अनà¥à¤®à¤¾à¤¨à¤¿à¤¤ की जाती हैं जिस पर 8 पà¥à¤°à¤¤à¤¿ ति की दर से शà¥à¤¦à¥à¤§ लाठDocument 2 रà¥.16,00,000 निकाला जाता है। इसमें से निरà¥à¤§à¤¾à¤°à¤¿à¤¤à¥€ ने रू. 2,88,800 की आय दिखा रखी है à¤à¥‹à¤¶ रू. 13.11,200 निरà¥à¤§à¤¾à¤°à¤¿à¤¤à¥€ की अघोशित आय मानी जाती है। निरà¥à¤§à¤¾à¤°à¤¿à¤¤à¥€ ने अपने वà¥à¤¯à¤µà¤¸à¤¾à¤¯ व अपने वà¥à¤¯à¤µà¤¸à¤¾à¤¯ à¤....