2015 (6) TMI 136

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....nd had set up one industrial undertaking in the notified area of Jammu & Kashmir for manufacturing of rosin, turpentine and rosin derivatives to avail of the benefit under section 80HH of the Income-tax Act. The appellant derived income of interest, dividend and rental income out of surplus funds and short term advances which accrued to the appellant company from the profits and as such were considered as income derived from the industrial undertaking set up in the backward area and deduction under section 80HH of the Act on the same was allowed while computing the total income of the appellant in the original assessment order passed under section 143(3) of the Act on 15.12.1989, which was challenged in appeal before the Commissioner of Inc....

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....ing aggrieved by the said order of the Tribunal, the appellant has preferred this appeal. The revenue has not preferred any appeal against the adverse order passed by ITAT. 5. On 10th December, 2014, this Court had passed the following order :- "1. Being aggrieved and dissatisfied with the impugned order dated 09.03.2000 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench in Income Tax Appeal No. 2428/Ahd/1994 for the assessment year 1987-88, the assessee has preferred the present tax appeal. 2. This Court admitted the present appeal for consideration of the following substantial question of law: (i) Whether on the facts and in the circumstances of the case, the Tribunal was justified in upholding the validity of the Reass....

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....he primary facts necessary for assessment are fully and truly disclosed, the Income Tax Officer will not be entitled on change of opinion to commence proceedings for reassessment. 3.1 In support of her submissions, Ms. Shah has relied upon the following decisions: I. Ador Technopack Ltd. vs. Dr. Zakir Hussein, Deputy Commissioner of Income Tax reported in [2004] 271 ITR 50 (Bom) wherein it is held as under: ... The words "reasons to believe" suggest honest belief of a reasonable man based on direct or circumstantial evidence held in good faith; not a mere pretense. Belief must not be arbitrary or irrational. It must be reasonable or, in other words, it must be based on reasons which are relevant an & material. It must be found on r....

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....final order.... II. Commissioner of Income Tax, Delhi vs. Kelvinator of India Limited reported in [2010] 320 ITR 561, para 6 of which reads as under: On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open the assessment. Therefore, p....

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....ve", 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 31st October, 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 omissio....

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....at the Assessing Officer in the assessment proceedings under section 143(3) of the Act did not give any opinion regarding the allowability or otherwise of deduction u/s 80IB (10) of the Act is not a ground of invoking Section 147 of the Act. On consideration of the entire materials on record, we thus find that the condition precedent for exercising power of reopening the assessment as provided in section 147 of the Act is absent and the Assessing Officer acted illegally in issuing notice of reassessment by forming a second opinion on the selfsame materials without having any tangible material to exercise jurisdiction. 4. However, Mr. K.M. Parikh, learned advocate appearing for the revenue requests for time. Matter is adjourned to 12.1....