TaxTMI 
TaxTMI 
2016 (11) TMI 537
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.... of SPM Unions Hosangabad (ITA No.239 to 246/Ind/2012) order dated 25/10/2012. This factual matrix was not controverted by ld.DR. 2.1. We have considered the rival submissions and perused the material available on record. Before coming to any conclusion, we are reproducing hereunder the relevant portion of the order dated 25/02/2015 in the case of M/s Engineering Mazdoor Sabha vs ACIT (case of a sister concern) for ready reference and analysis:- "These seven appeals by the assessee out of which six appeals are arising from the assessment framed u/s 153A for the A.Y. 2005-06 to 2010-11 and one appeal for the A.Y. 2003-04 is arising from the reopening of assessment based on search & seizure operation u/s 132. The facts as well as the issues raised in all these appeals are identical. Therefore, for the sake of convenience all these appeals are heard together and are being disposed off by this Composite order. For the A.Y. 2003-04, the assessee has raised following grounds:- "1 The Ld. CIT(Appeals) erred in confirming the addition made by the learned ACIT in by treating donations received by the ass of Rs. 1,10,07,306/- as professional expenses. 2 The Ld. CIT(Appeals) err....
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.... from the employers and assessed the same as professional income of the assessee. 3. The assessee challenged the action of Assessing Officer before the CIT(A) including the validity of reopening u/s 147 of the Act. The CIT(A) though confirmed the action of Assessing Officer in assessing the contribution /donation received by the assessee from employers as income from professional services, however, the Assessing Officer was directed to allow the expenditure pertaining to earning the said income apart from deleting the addition on account of subscription received from the members. Thus the CIT(A) has granted the relief to the extent of subscription received by the assessee form the Members and further allowing the expenditure incurred for earning the income being contribution by the employers on account of settlement of disputes 4. Before us, the Ld. Authorized Representative of the assessee has submitted that the assessee is a trade union registered with the Government of Maharashtra. The assessee union was formed with the object to secure an effective and complete organization of persons employed in the Engineering Industry in Greater Bombay and also in State of Maharashtra, Guj....
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....pport of his contention, he has relied upon the order of Indore Benches of this Tribunal in the case of Asstt. Commissioner of Income Tax Vs. Coordination Committee of SPM Unions Hoshangabad In ITA nos. 239 to 246/Ind/2012, and submitted that an identical issue has been considered by the Tribunal in the said case and it was held that the 15% incentive bonus payable to workers was contributed by them to the association/union to meet all sort of the expenditure in respect of the disputes between the workers and the employers, therefore, there was clear concept of mutuality. The Ld. Authorized Representative has submitted that in the case of the assessee the constitution provides that on dissolution excess fund to be paid to the member workers. He has further submitted that the amounts are paid to the workers every year under the head worker's bonus/compensation. Therefore, the excess fund is paid to the workers which means that the contribution made by the workers is again going to the workers after meeting the necessary expenditures. 4.1 On query from the Bench on the point of the amount received from employers as contribution under the tripartite agreement should not be treated di....
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....sional services to the corporate entities which has been claimed as voluntary contribution. He has relied upon the order of Assessing Officer and CIT(A). The Ld. DR has further submitted that principle of mutuality is not applicable in the case of the assessee. He has further submitted that the decisions relied upon by the assessee are not applicable in the facts of the present case. The assessee has not produced any record In support of the expenditure claimed. 6. We have considered the rival submissions as well as relevant material on record. There is no dispute that during the search & seizure operation, the department has not recorded even a statement or seized any document from the place of the assessee. Thus it is clear that neither any incriminating record nor any information was gathered by the department as a result of search & seizure action in the case of the assessee. Once there is no document either seized or found and even no statement was recorded during the search proceedings then the addition made by the Assessing Officer is based on existing record and material. The department has not disputed that that the assessee is eligible for exemption u/s 10(24) of the Act....
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....ers and not to earn any income or profit then the contribution received from the employers on account of the settlement between the workers and the employers cannot be said to be the business/professional or occupational income of the assessee. Therefore, the said amount of contribution received from the employers at the most would be the income of the assessee as income from other sources and cannot be regarded as business income and accordingly exempt u/s 10(24) of the Income Tax Act. Apart from the contribution received by the assessee from workers, the fund received by the assessee from employers is otherwise for the purpose of achieving the objects being a welfare body of the workers and excess fund if any after meeting out the expenses incurred on account of activity performed by the assessee, are refunded to the members as bonus then the said consideration received on account of settlement cannot be treated as business income earned by the assessee. An identical issue was considered by the Indore Benches of this Tribunal in the case of Asstt. Commissioner of Income Tax Vs. Coordination Committee of SPM Unions Hoshangabad (supra), in para 20 and 21 as under:- "20. From the ....
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....erefore, there is no material or any fact brought on record by the Assessing Officer to indicate that the amount received by the assessee from workers as well as from the employers are not voluntary but under coercion or force. If the Assessing Officer doubted the voluntary contribution made by the workers and employers then he could have conducted a proper enquiry. In the absence of any contrary fact or evidence found during the search or gathered during the assessment proceedings, the allegation of the authorities below are merely based on assumptions and not on any substance or material. On the contrary the assessee has produced the confirmation letters from the employers who paid the contribution as well as from the workers in whose cases the matters/disputes were settled through the assessee and the contribution was made as per the settlement agreement between the parties. Therefore, the assessee has produced the relevant evidence in support of its claim that this is a voluntary contribution. Once the CIT(A) has accepted the contribution of the workers as exempt from tax u/s 10(24). Similarly the contribution made on account of the same service/activity of the assessee by the ....
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....rging of interest u/s 234B, the appellant is required to approach the A.O. by filing an application u/s. 154 of the Act." 12. The assessee has already filed a petition u/s 154 before the Assessing Officer in this respect. Accordingly, we direct the Assessing Officer to decide this issue as per law after considering the decision of this Tribunal in the case of Datamatics Ltd. Vs. ACIT (supra). 13. Ground no. 3 is regarding validity of reopening. 14. We have heard the Ld. AR as well as Ld. DR and considered the relevant material on record. The assessment was reopened based on the search & seizure operation u/s 132 carried out at the place of the assessee. As we have discussed while dealing with the ground no. 1 that neither any record of material was seized during the search proceedings nor any statement was recorded, therefore, it is manifest that no fresh information or tangible material came to the knowledge of the Assessing Officer to indicate that the income assessable to the tax has escaped assessment. Accordingly, we are of the considered view that the Assessing Officer has reopened the assessment without having any material or information on the basis of which, the Assess....
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.... additions made by A.O. on account of donations and disallowance of compensation/workers aid paid to workers in all five years from A.Y. 2005-06 to A.Y. 2010-11. 20. It is a settled proposition of law that a notice u/s 153A is a necessary consequence of search u/s 132 and thereby the Assessing Officer shall assess or re-assess any assessment order falling within the period of six years from the date of initiation of search u/s 132 or requisition u/s 132A. So far as the assessments pending on the date of search, the same shall be abated and, therefore, the proceedings u/s 153A would be in the nature of assessment. For the assessment years for which the assessment was already completed on the date of initiation of search u/s 132, the proceedings would be in the nature of re-assessment. The addition for the assessment years, where the assessment was completed on the date of search can be made only when some incriminating material is found during the course of search & seizure. In the case in hand, there is no dispute that neither any information/material was found or seized nor any statement was recorded. Therefore, it is a case where the additions were made by the Assessing Officer....
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....that since identical issues involved for A.Y. 2005-06 to 2010-11, hence, all the appeals are disposed off in terms of finding for A.Y. 2005-06 26. In the result, appeals of the assessee are allowed in part." 2.2. We are also reproducing hereunder the order dated 25/10/2012 of the Indore Bench of the Tribunal in the case of ACIT vs Coordination Committee of SPM Unions Hoshangabad (ITA No.239 to 246/Ind/2012) for ready reference and analysis:- "2. The facts, in brief, are that the employees of M/s Security Paper Mill, Hoshangabad, had formed a coordination committee of the Security Paper Mill Unions of Hoshangabad with Shri N.K. Saxena as General Secretary. There was a dispute among the management and the Employee's Unions regarding the Group Incentive Scheme. The Coordination Committee was formed for supervising and coordinating the legal proceedings on various appellant forms. Shri N.K. Saxena was orally nominated as the General Secretary/Chairman of the Coordination Committee of SPM since 1979 and was looking after the work of collection and contribution from various employees and the expenditure thereof under various heads like legal exp. etc. since 1988. A total sum of Rs. 4,....
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....ot accepted by the AO and the action of the AO was confirmed by the CIT(A) after having the following observations:- "3.3 The aforementioned submissions have been carefully considered with reference to the facts obtaining from the record. As rightly concluded by the AO, all these assertions could not absolve the income of the appellant to be charged to IT. Provisions of section 28(iii) of the Act are attracted in the case of the appellant. Income derived by a trade professional or similar association from specific services performed for its members is chargeable to tax under the head 'income from business or profession'. This is an exception to the general principle that a surplus arising to mutual association could not be regarded as income chargeable to tax. Every trade, professional or similar association which renders specific services to its own members for remuneration related to those services, in my considered view, falls within the purview of this sub-section. For this proposition, the AO correctly placed reliance on the decision in Indian Tea Planter's Association Ltd. V. CIT (1971) 82 ITR 322 (Cal) wherein it was held that : A trade association, rendering specific servi....
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....s not require that before income of such association would be chargeable to tax, it should have been earned because of some trade activities by association(CIT vs. Hill Goods Truck Owners Union (1980) 124 ITR 224 (Punj.). This clause is in the nature of a charging provision. It is applicable on its own terms. Income of a trade association not falling within section 28(iii) is not necessarily exempt (CIT vs. Shree Jari Merchants Association (1977) 106 ITR 542 (Guj.) 3.4 The word "specific" only means definite, distinctly formulated or stated with precision. T he words "performing specific services" in this clause means "conferring particular benefits", that is, conferring on the members some tangible benefit which would not be available to them unless they paid the specific fees charged for such benefits (CIT vs. Calcutta Stock Exchange Association Ltd. (1959) 36 ITR 222 (SC); Indian Tea Planters Association vs. CIT (1971) 82 ITR 322 (Cal.) 3.5 The AO mentioned that in the case of the assessee, employees of various SPM Unions gave their 15% incentive bonus to the coordination committee and in lieu of that the Coordination Committee made payment towards various expenses through its G....
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....penses and in the presence of this written authority letter, the AO was of the view that there is no provision for balance, if any, to be refunded to employees. On the basis of individual applications made by all the employees, management of SPM deducted 15% of incentive and paid to the Coordination Committee of SPM Union. The claim of the appellant that the impugned sums were deposits to be refunded to the employees after meeting all the incidental expenses, in the absence of formal or third party evidence, was not accepted by the AO. 3.7 For the reasons extensively enumerated in subsequent paras, the contention of the appellant that its income was not assessable either under the head 'business' or under the head 'profession', is only academic and the grounds relating to this issue, raised by the appellant in all the appeals, under consideration, are accordingly dismissed." 5. The AO also made addition on the plea that the assessee was maintaining books of accounts on mercantile basis. Accordingly, interest income was added under the head 'income from other sources' on the basis of its accrual not-with-standing the fact that the amount was not actually received by the assessee. Th....
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.... as under :- "In this view of the matter, I am of the considered view that taxation of interest on the said loan in each of the assessment years, under consideration, should not have been more than that credited by the debtor viz. Kachhnar Builders. For these reasons, the addition made by the AO in each of the assessment years, under consideration, is reasonably restricted to the sums of interest credited by the debtors. The AO is directed to work out and allow relief to the appellant, on this basis, for each of the assessment years, under consideration." 7. The addition made by the AO on account of estimated undisclosed income presumed to have been earned from investment made outside the books of accounts was deleted by the learned CIT(A) after observing as under :- 7.5 In the given facts and circumstances of the case, the Assessing Officer was not entitled to make pure guess and make the impugned assessment, without reference to any evidence or material at all. If the Assessing Officer presumed that the appellant had in fact suppressed the impugned income, from being disclosed to the department, then, it was incumbent upon the Assessing Officer, to have conducted the needed inv....
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....595/- @ 15% of the amount received by the employees) was deducted from the payments made to individual employees and handed over to the Co-ordination Committee as per the consent of the employees on the direct ion of the MP High Court. This amount was treated as professional receipt received as consideration for the services rendered by the Coordination Committee to the employees for fighting their cases. The excess of income over the expenditure, for the AY 2000-01, was worked out by the AO from Page Nos.20 to 25/Para No.6.4 of the assessment order appealed against and such excess income over expenditure was brought by the Assessing Officer to tax in the assessment year 2000-01. According to the Assessing Officer, in subsequent assessment years i.e. from AY 2001-02 to 2003-04, the excess income over expenditure comes in negative. Since the appellant had not filed returns of income u/s 139 of the Act, the Assessing Officer held that the appellant was not entitled for the benefit of losses. 9. By the impugned order, the CIT(A) deleted the addition after having following observations : "8.2 The rival submissions have been carefully considered with reference to the facts obtaining fro....
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....ng about the settlement and to lend the disputes. During the pendency of Writ Petition No 5696/98, the MP High Court directed payment of 50% of the incentive. Management flied repeated SLI~s before the Supreme Court. These SLPs were dismissed. The Supreme Court in SLP No. 12189/99 by order dated 08.10.1999 directed that the workmen will have to give an undertaking to refund the amount if the petition of the management of SPM is allowed. On the strength of documentary evidence available on record, the appellant established the fact that various amounts were paid by the management from 1999 as per the direction of the MP High Court and Supreme Court and after hearing the arguments at length, the Supreme Court dismissed the SLP on 08.12.2006. From the sequence of facts enumerated above, the impugned deduction of 15% of the incentive and depositing the same with the Co-ordination Committee of SPM Union, could by no stretch of imagination, be construed and presumed as income of the appellant. In my considered view, that was only a deposit meant for meeting expenditure for defending/prosecuting various disputes of the employees. 10. The disallowance was made by the AO out of expenses cla....
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....ing to the AO huge amount was paid by the appellant to Shri P.S. Nair and the members of his family in the assessment years 2005-06 to 2007-08. Shri N.K. Saxena, the General Secretary of the appellant Coordination Committee, when confronted by the AO, was not able to explain why these payments were made to the family members of Shri P./S. Nair. The AO was of the view that, if the amount paid to Shri P.S. Nair represents his professional fee, then the appellant was liable to deduct tax at source u/s 194F of the Act and substantial payments made to various lawyers were without deduction of tax at source. When confronted by the AO to explain reasons for non-deduction of tax at source, it was submitted that provisions of section 490(a)ia) of the Act were not applicable in the present case because there was no business income of the appellant; the receipts were in respect of deposits made by the members and these deposits were not income; since there was no business income, there could be no question of allowing or disallowing any expenditure. 13. By the impugned order, the learned CIT(A) deleted the addition after having the following observations :- "10.5 As such, I am of the consi....
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....larified by the Circular No. 275/201/95-IT(B) dated 29.01.1997 issued by the CBDT. It is undisputed that the circulars issued by the CBDT are binding on all the tax administrators coming within the jurisdiction of CBDT. 10.6 The impugned section seeks to deduct the income of the payee in the hands of the payer. By virtue of the said disallowance provided u/s 40(a)(ia) of the Act, the entirety of the expenses incurred by way of payment to the aforementioned parties, was disallowed on which the appellant failed to deduct TDS but even the income which was received by the aforementioned third party, was treated as the income of the appellant. An outgoing from the appellant's books, which was offered for tax as receipt in the hands of the recipient, before close of the relevant previous year, could by no stretch of imagination, be construed as the income assessable in the hands of the appellant. Section 2(24) of the Act defined the term "income". It included only profits or gains of business or profession and the disallowance provided u/s 40(a)(ia) of the Act is indisputably an expenditure in the hands of the appellant and in the absence of deeming such expenditure as income of the appe....
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....of the amount and to treat this merely as a deposit with a view to meet all sorts of expenditure including lawyer's fees, TA/DA, typing, stenography, court fees and all other incidental expenses and balance, if any, be refunded to the deserving employees. Facts obtaining from the record evidences the fact that substantial amount was already refunded to employees in the years 1999 and 2000 after meeting the expenditure. Had the impugned deposits made by the workers were in the nature of income, as erroneously presumed by the AO, then, in my considered view, there would have been absolutely no question or justification for refunding any amount to the workers. 8.3. Facts obtaining from the record, also demonstrate that nearly 2500 employees were working in the Security Paper Mill and incentives were to be paid to the employees. During the pendency of the disputes, on the basis of settlement in June I 973 and award dated 02.09.1998 several thousand cases were filed before various courts such as under Payment of Wages Act, under 33(c)(1) and 33 (c)(2) of ID Act before various Authorities. Coordination committee used the services of several lawyers and mediators for bringing about ....
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....e all treated SPM Coordination Committee as an association of registered trade union. Furthermore, the Court orders also indicate the assessee as coordination committee of SPM Union. We also find that when the Union of India through their management challenged the award of the Tribunal dated 2.9.1998 in the High Court inW.P. No. 5698/1998, only coordination committee was made a party. 17. In view of the above facts, we are inclined to agree with the learned counsel for the assessee, Shri Sumit Nema, that the assessee as a coordination committee was an association of trade union, therefore, eligible for claim of exemption u/s 10(24) in respect of its income falling under the heads of "income from other sources". We direct accordingly. 18. Once it is held that the assessee is eligible for exemption u/s 10(24), the income earned by the assessee in the form of interest from bank deposits as well as other interest from Kachnar Builders will also qualify for exemption u/s 10(24) insofar as interest income is liable to tax under the head "income from other sources". 19. As we have already held that the interest income earned by the assessee is also liable for exemption u/s 10(24) of th....
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....ng the provisions of section 40a(ia) of the Act. 2.3. If the observation made in the assessment order, leading to addition made to the total income, conclusion drawn in the impugned order as well as aforementioned orders of the Mumbai and Indore Benches of the Tribunal, material available on record, assertions made by the ld. respective counsel, if kept in juxtaposition and analyzed, the issue before us is with respect to addition of Rs. 76,65,304/-, received by the assessee as donation and treated by the Assessing Officer as professional income. The assessee entered into agreements with various companies on behalf of workers for settling industrial disputes or arbitrating between employers & employees. As per the agreement, the union will look after the rights and benefit of the workers for settling any dispute with the management, thereby, avoiding undue hardship both the employers and employees. The assessee union is registered under the Trade Unions Act, 1926. The assessee received contribution/donation of Rs. 76,65,304/- during the relevant period to Assessment Year 2003-04 from various companies for industrial dispute settlement. The agreement and the confirmations from the ....
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....tes between the member workers and the employers with the intention of welfare of the members/workers. Thus, following the aforesaid decisions, it is noted that there is no material brought on record by the Assessing Officer evidencing that the amount received by the assessee from the employers as well as from the workers are not voluntary. In the absence of any contrary material and it has been accepted that the contribution of workers are exempt under section 10(24). Similar is the situation in respect of amounts received from counterparty, being employer, in pursuant to settlement / resolution of disputes, as exempt under section 10(24) of the Act. Following the aforesaid order, we are of the view that the amounts so received by the assessee cannot be treated as business or profession, consequently should have been treated as exempt under section 10(24) of the Act as well as on the principle of mutuality being distributed among the members. Thus, this ground of the assessee is allowed. 3. So far as, ground no.2 is concerned, in the light of the foregoing discussion, as contained above, this ground has remained for academic interest only, and has been discussed / delibera....
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.... each worker viii. Resolution of the Managing committee. Our attention was invited to pages 90 to 95 of the paper book containing the list of workers and the amounts paid to them and also page-96 of the paper book containing the extract of meeting of general council held on 13/08/2005. It was explained that such expenses are authorized by the constitution of the union and the aid was paid to the workers when the units were own strike and such workers were unable to meet there house hold expenditure due to absence of salary/wages. On the other hand, the ld. DR contended that in the absence of vouchers, such expenses cannot be allowed. The ld. counsel for the assessee in reply, explained that, identically no addition was made on this account for Assessment year 2003-04, whereas, identically aid was given to such workers. MUMBAI MAZDOOR SABHA WORKERS AID PAID TO THE WORKMEN FOR THE A.Y.-2005-06 Mulla & Mulla Craigie Blunt & Caroe 1 Shirley James 20,000.00 2 Dalpat Patel 20,000.00 3 Aloo M. Bhathena 20,000.00 4 S. Subramanium 20,000.00 5 Krishna K. Shivalkar 20,000.00 100,000.00 Cable Corporation of I....
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....lekar 10,000.00 10,000.00 Babubhai Jagjivandas 1 Vinod Smpat 20,000.00 2 Sanjay K. Dutia 20,000.00 3 Abdul Karim A. Siragi 20,000.00 4 Mahadeo D. Pawar 20,000.00 5 Mayur M. Mahajan 20,000.00 6 Yogesh K. Khira 20,000.00 7 Rajsingh K. Mawa 20,000.00 8 Pravin J. Kakkad 20,000.00 9 Amrul Y. Bora 20,000.00 10 Kishor Shah 20,000.00 11 Kiran L. Ruparel 20,000.00 12 Rajesh Khatri 20,000.00 13 Shankar U. Tirlotkar 20,000.00 14 Rajaram Naryan Kadam 20,000.00 15 Jaikishan Gurdasani 20,000.00 16 Madan Trivedi 20,000.00 17 M. D. Pawar 20,000.00 18 Himanshu H. Joshi 20,000.00 19 J.K. Rane 20,000.00 20 Satish B. Shah 20,000.00 21 Somaram N. Dave 20,000.00 22 Vinod S. Supawal 20,000.00 23 Dakshesh Shah 20,000.00 24 Suresh A. Sawant 20,000.00 25 Madansingh Rajpurohit 20,000.00 26 Vasant Shah 20,000.00 520,000.00 BCL Forgings Ltd. 1 C.S. Jadhav 18,000.00 2 A.B. ....
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....sp; 4 H.N. Shetigar 20,000.00 5 Sampat Ghavri 20,000.00 6 J.R. Roundal 20,000.00 7 Sopan Naik 20,000.00 8 Rajesh Kapadia 20,000.00 9 Philomina Narona 20,000.00 10 Adhok R. Khopade 20,000.00 11 Vilas Sawant 20,000.00 12 Balram Pawar 20,000.00 13 A.P. Kadam 20,000.00 14 Arjun Gholap 20,000.00 15 Dattaram N. Kerkar 20,000.00 16 V.S. Naikre 20,000.00 17 P.H. Solanki 20,000.00 18 C.N. Balachandran 20,000.00 19 Karmala Fernandes 20,000.00 20 Tejaswani Pawar 20,000.00 21 C.D. Todankar 20,000.00 22 N.R. Sarale 20,000.00 23 K. Balasubramaniam 20,000.00 24 B.S. Chivalkar 20,000.00 25 Yeshwant R. Mate 20,000.00 26 Kishan More 20,000.00 27 Shankar K. Jadhav 20,000.00 28 Sadanand Patil 20,000.00 29 K.M. Dalvi 20,000.00 30 Milan Mehta 20,000.00 31 Rajesh Samani 20,000.00 32 Anita L. D'Souza 20,000.00 33 Kusum Shetty 20,000.00 34 Indrajit Kahar 20,000.00 35 Ha....
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..... Commissioner of Income Tax (Appeals), such vouchers could not be produced. Identical affidavits were filed form the General Secretary of the Union, from accountant of the union, three affidavits from the workers as a sample, detailed chart with name of each worker to whom the aid was provided, resolution of the Managing commission etc. It is also noted that such expenses are authorized by the Constitution of the Union and such aid is paid to the workers when the units of a particular union of workers are on strike and such workers are unable to meet their household expenditure. It is also noted that no such addition was made for Assessment year 2003-04 which is also based on similar facts. The original assessment for earlier three Assessment years was made under section 143(3) of the Act and no addition was made as is evident from pages 88 & 89 of the paper book. Considering the totality of facts, this ground of the assessee is allowed. This view of ours will cover identical ground raised in ITA No.354 & 355/MUM/2014. 7. So far as ground no.4 with respect to charging of interest u/s 234B (3) of the Act was not pressed by the ld. counsel for the assessee, therefore, this g....
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.... of "change of opinion" because reassessment proceedings will be invalid as notices along with detailed questionnaire were issued, query was raised and answered by the assessee in original assessment proceedings. The expression "change of opinion" postulates formation of opinion and then a change thereof. In the context of assessment proceedings, it means formation of belief by an Assessing Officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection. A distinction must be drawn between erroneous application/ interpretation/ understanding of law and cases where fresh or new factual information comes to the knowledge of the Assessing Officer subsequent to the passing of the assessment order. If new facts, material or information comes to the knowledge of the Assessing Officer, which was not on record or not made available by the assessee, during assessment proceedings, the principle of "change of opinion" will 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....
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....ject-matter, claim, etc. The stand and substance of the assessee and the Assessing Officer in such cases are relevant. 10. Section 114 of the Evidence Act, 1872, is permissive and not a mandatory provision. Nine situations by way of illustrations are stated. These are by way of example or guidelines. As a permissive provision it enables to judge to support his judgment but there is no scope of presumption when facts are known. Presumption of facts under section 114 is rebuttable. The presumption raised under illustration (e) to section 114 of the Act means that when an official act is proved to have been done, it will be presumed to have been regularly done but it does not raise any presumption that an act was done for which there is no evidence or proof. (i) Assessments cannot be validly reopened under section 147 of the Act even within four years, if an assessee had furnished full and true particulars at the time of original assessment with reference to the income alleged to have escaped assessment, if the original assessment was made under section 143(3). So long as the assessee has furnished full and true particulars at that time of original assessment and so long as t....
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..... CIT [1979] 119 ITR 996 (SC) (paras 34, 35) Indian Hume Pipe Co. Ltd. v. Asst. CIT [2012] 348 ITR 439 (Bom) (para 17) 3i Infotech Ltd. v. Asst. CIT [2010] 329 ITR 257 (Bom) (para 26) International Woollen Mills v. Standard Wool (U. K.) Ltd. [2001] 5 SCC 265 (para 30) Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC) (paras 9, 33, 34, 35) KLM Royal Dutch Airlines v. Asst. Director of I. T. [2007] 292 ITR 49 (Delhi) (para 12) Kunhayammed v. State of Kerala [2000] 245 ITR 360 (SC) (para 31) Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC) (para 34) Muthukrishna Reddiar v. CIT [1973] 90 ITR 503 (Ker) (para 9) New Light Trading Co. v. CIT [2002] 256 ITR 391 (Delhi) (para 18) Praful Chunilal Patel v. Makwana (M. J.)/Asst. CIT [1999] 236 ITR 832 (Guj) (para 21) Snowcem India Ltd. v. Deputy CIT [2009] 313 ITR 170 (Bom) (para 31) Sri Krishna P. Ltd. v. ITO [1996] 221 ITR 538 (SC) (paras 56, 58) Suresh Budharmal Kalani v. State of Maharashtra [1998] 7 SCC 337 (para 29) Union of India v. Suresh C. Baskey [1996] AIR 1996 SC 849 (para 20) United Mercantile Co. Ltd....
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....ation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the fore going proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to Income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (c) where an assessment has been made, but- (i) income chargeable to tax has been under assessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income h....
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.... "opinion" is derived from the latin word "opinari" which means "to believe", "to think". The word "opinion" as per the Black's 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 (third 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". 14. In the context of assessment proceedings, it means formation of belief by an Assessing Officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection to use the words in Law Lexicon by P. Ramanatha Aiyar. The question of change of opinion arise when an Assessing Officer forms an opinion and decides not to make an addition or holds that the assessee is correct and accepts hi....
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....sumed that those aspects were present to the mind of the Assessing Officer and had been held in favour of the assessee is too far-fetched a proposition to merit acceptance. There may indeed be a presumption that the assessment proceedings have been regularly conducted, but there can be no presumption that even when the order of assessment is silent, all possible angles and aspects of a controversy had been examined and determined by the Assessing Officer. It is trite that a matter in issue can be validly determined only upon application of mind by the authority determining the same. Application of mind is, in turn, best demonstrated by disclosure of mind, which is best done by giving reasons for the view which the authority is taking. In cases where the order passed by a statutory authority is silent as to the reasons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening completed assessments would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a part....
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....rial or information comes to the knowledge of the Assessing Officer, which was not on 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 effect on the assessee by a higher assessment of income than the one actually made. Correct material facts can be ascertained from the assessment records also and it is not necessary that the same may come from a third person or source, i.e., from source other than the assessment records. However, in such cases, the onus will be on the Revenue to show that the assessee had stated incorrect a....
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....retation of law by the audit party, it is entitled to point out a factual error or omission in the assessment and reopening of a case on the basis of factual error or omission pointed out by the audit party is permissible under law. As the Tribunal has rightly noticed, this was not a case of the Assessing Officer merely acting at the behest of the audit party or on its report. It has independently examined the materials collected by the audit party in its report and has come to an independent conclusion that there was escapement of income. The answer to the question is, therefore, in the affirmative, in favour of the Revenue and against the assessee." "As recorded above, the reasons recorded or the documents available must show nexus that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income. At the same time, it is not the requirement that the Assessing Officer should have finally ascertained escapement of income by recording conclusive findings. The final ascertainment takes place when the final or reassessment order is passed. It is enough if the Assessing Officer can show tentatively or prima facie on th....
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.... too broadly expressed and did not lay down the correct law. It was clarified and observed at page 1004 in Indian and Eastern Newspaper Society [1979] 119 ITR 996 (SC) as under : "Now, in the case before us, the Income-tax Officer had, when he made the original assessment, considered the provisions of sections 9 and 10. Any different view taken by him afterwards on the application of those provisions would amount to a change of opinion on material already considered by him. The Revenue contends that it is open to him to do so, and on that basis to reopen the assessment under section 147(b). Reliance is placed on Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC), where a Bench of two learned judges of this court observed that a case where income had escaped assessment due to the 'oversight, inadvertence or mistake' of the Income-tax Officer must fall within section 34(1)(b) of the Indian Income-tax Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the Income-tax Of....
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....cer had not earlier been conscious of. To give a couple of illustrations ; suppose an Income-tax Officer, in the original assessment, which is a voluminous one involving several contentions, accepts a plea of the assessee in regard to one of the items that the profits realised on the sale of a house is a capital realisation not chargeable to tax. Subsequently, he finds, in the forest of papers filed in connection with the assessment, several instances of earlier sales of house property by the assessee. That would be a case where the Income-tax Officer derives information from the record on an investigation or enquiry into facts not originally undertaken. Again, suppose the Income-tax Officer accepts the plea of an assessee that a particular receipt is not income liable to tax. But, on further research into law he finds that there was a direct decision holding that category of receipt to be an income receipt. He would be entitled to reopen the assessment under section 147(b) by virtue of proposition (4) of Kalyanji Mavji. The fact that the details of sales of house properties were already in the file or that the decision subsequently come across by him was already there would not af....
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....in Anandji Haridas 21 STC 326. Even making allowances for this limitation placed on the observations in Kalyanji Mavji, the position as summarised by the High Court in the following words represents, in our view, the correct position in law (at page 629 of 102 ITR) : The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income-tax Officer subsequent to the original assessment. If the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for the reassessment. Where, however, the Income-tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147(b) of the Act'." (emphasis supplied) The aforesaid observations are a complete answer to the issue that if a particular subject-matter, item, deduction or claim is not examined by the Assessing Officer, it will nevert....
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....r sub-section (1) of section 142 or section 148 or to disclose truly and fully all material facts necessary for his assessment for that assessment year. It is also noted that the scope of newly substituted (w.e.f. 01/04/1989) section 147 has been elaborated in department circular number 549 dated 31st October, 1989, meaning thereby, on or after 01/04/1989, initiation of reassessment proceedings has to be governed by the provisions of section 147 to 151 as substituted (amended) w.e.f. 01/04/1989. Still, power u/s 147 of the Act, though very wide but no plenary. We are aware that Hon'ble Gujarat High Court in Praful Chunilal Patel: Vasant Chunilal Patel vs ACIT (1999) 236 ITR 82, 840 (Guj.) even went to the extent that action under main section 147 is possible in spite of complete disclosure of material facts. The primary condition of reasonable belief having nexus with the material on record is still operative. However, we are of the view, that mere fresh application of mind to the same set of facts or "mere change of opinion" does not confer jurisdiction to the Assessing Officer even under the post 1989 section 147 of the Act. Our view find support from the decision from Hon'ble D....
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....im to resort to section 147 of the Act. Despite being a case of full and true disclosure, tangible material coming to the possession of the Assessing Officer after he made the original assessment under section 143(3), would influence the opinion, formed or presumed to have been formed earlier, by the assessing authority; he can with justification change it, but that would not be a case of a "mere change of opinion" unguided by new facts or change in the legal position. It will be a case of the assessing authority having "reason to believe", notwithstanding that full and true particulars were furnished by the assessee which were examined, or presumed to be examined, by him. There was a divergence of opinion amongst various High Courts as to what constitute "Information" for the purposes of section 34(1)(b) of the 1922 Act (which corresponds to section 147(b) of the 1961 Act) the Hon'ble Apex Court in CWT vs Imperial Tobacco Company Ltd. (1966) 61 ITR 461 has noted such divergence of opinion on the point. Hon'ble jurisdictional High Court in CIT vs Sir Mohammad Yusuf Ismail (1944) 12 ITR 8 (Bom.) held that mere change of opinion on the same facts are on question of law or mere discov....