2015 (8) TMI 1161

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....by issuance of notice u/s 148 of the Act on 12.05.2010. The assessee had claimed transportation charges of Rs. 7,80,475/- as deduction in the return for A.Y.2006-07 and out of this, it was found that a sum of Rs. 4,76,218/- representing payments were made by the assessee to four parties in excess of Rs. 50,000/- per annum without deducting of tax at source. AO accordingly invoked the provision of section 40(a)(ia) of the Act r.w.s. 194C of the Act and disallowed a sum of Rs. 4,76,218/-. Aggrieved by this order, the assessee challenged this issue on jurisdiction as well as on merits before the ld. CIT(A). The ld. CIT(A) upheld the assumption of jurisdiction of the AO on the ground that though specific details were called for by the ld. AO towards transportation charges in the original scrutiny assessment proceedings and the same were duly replied to by the assessee, no specific query was put across by the AO with regard to the transportation charges from the angle of section 40(a)(ia) of the Act. Accordingly, he concluded that the ld. AO had not formed any opinion. Hence, the ground that the reopening was based on change of opinion raised by the assessee, was dismissed. The ld. CI....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... make any addition in this regard in the original assessment u/s 143(3) of the Act. This indicates formation of an opinion and application of mind by the ld.AO. There is no doubt or dispute as to the fact in the instant case that there is no tangible material available with the ld. AO to justify the impugned action and restoring to reopen the assessment as it would tantamount to a case of mere change of opinion. Again where there is no material or information which came to the knowledge of the AO to re-initiate the proceedings and since he had derived the facts and materials placed by the assessee himself during the original assessment proceedings, that had not constituted new information. Since in this case, a regular assessment was made u/s 143(3) of the Act, presumption can be drawn that such an order has been passed on application of mind and the subsequent action of the ld. AO is nothing but a change of opinion. Approaching the verification of the transportation charges from an angle of section 40(a)(ia) of the Act is only one of the angles available to the ld. AO. When the entire details of the transportation charges are called for by the AO and the same were duly furnished....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....J.Kapadia held that the concept of " change of opinion" must have treated as an inbuilt test to check the abuse of power by AO and that the reasons must have a live link with the formation of belief. Important extracts of the decision is reproduced herein below :- " However, one needs to give schematic interpretation to the words " reason to believe" , failing which 147 would give arbitrary powers to the AO to reopen the assessment on the basis of " mere change of opinion" , which cannot be per se the reason to reopen. One must also keep in mind the conceptual difference between power to review and power to re-assess. The AO has no power to review; he has the power to re-assess, but the re-assessment has to be based on fulfillment of certain pre-conditions and if the concept of " change of opinion" is removed as contended on behalf of the department, then in the garb of reopening of reassessment, review would take place. One must treat the concept of change of opinion as an inbuilt test to check abuse of power by the AO. Hence, after 01.04.1989, the AO has power to reopen, provided there is " tangible material" to come to the conclusion that there is escapement of income from asse....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

.... facts and in the circumstances of the case the Tribunal was justified in law, in deciding the appeal holding that it has a change of opinion ignoring the fact that the AO had not, based on materials availing to him taken a view and form an opinion." "whether on the facts and in the circumstances of the case the Learned Tribunal was justified in passing the order in favour of the assessee without acknowledging the fact that in case of violation u/s 40(a)(ia) the AO has no scope of his discretion and hence it is covered under Explanation 2(c) (iv) of Section. 147." These two questions were decided in favour of the assessee by the Jurisdictional High Court and the facts of the instant case before me are exactly similar to the facts before the Hon'ble Calcutta High Court. (c) In CIT vs Usha International Ltd. (2012)348 ITR 485 (Delhi), it was held that it is categorically settled that re-assessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings and AO does not make any addition in assessment order with regard to that query. (d) It has been held in the case of CIT vs Bhanji Lavji (1971) 79 ITR 582....