TaxTMI 
TaxTMI 
2017 (7) TMI 538
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 143(3) of the Income Tax Act, 1961. Pursuant to such scrutiny held, an Assessment Order was issued on 21.12.2010 for the Assessment Year in question i.e. 20082009. The Revenue issued notice under Section 148 of the Income Tax Act on 26.03.2013. 2.3 By a letter dated 25.04.2013, the petitioner sought a copy of the reasons, for which the Revenue was of the opinion that the income had escaped the assessment for the assessment year in question. 2.4 The Revenue by a communication dated 06.08.2013, supplied the petitionerassessee the reasons for reopening the assessment for the Assessment Year 2008-2009. The reasons for reopening the assessment reads as under: " Assessee company engaged in business of hotel, banquet and restaurant activity, filed its return of income for A.Y. 2008-09 on 19.01.2009 declaring total income of Rs. 14,40,91,411/, which was revised on 31.3.2009 by retaining same total income. The return was again revised on 17.2.2010 declaring total income at Rs. 13,88,33,290/The case was completed under scrutiny manner on 21.12.2010 determining total income at Rs. 15,09,03,666/- 1 On verification of the case records, it is seen that as....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The disallowance of expense against earning exempt income by the assessee was neither made in the return filed, nor was such disallowance made at the time of filing revised returns as per Goetz (India) Ltd vs. CIT [2006] 157 Taxman 1(SC). The method for determining disallowable expenses was introduced vide Rule 8D w.e.f. A.Y. 2008-09. In view of these facts, the disallowance of expenses under section 14A of the Act required to be determined in terms of Rule 8D prescribed in the Income Tax Rules. It has led to escapement of Rs. 18,45,734/- In light of the above, I am of the view that this is a fit case for 'income escaping assessment under Sec. 147 of the I.T.Act. Therefore, the undersigned has reason to believe that the income chargeable to tax for the year under consideration has escaped assessment as per the provisions of Section 147 of the I.T.Act. 2.5 On supply of such reasons for reopening of assessment, the petitionerassessee filed objections on 04.12.2013. Pursuant to the objections so filed, the department rejected the objections under a communication dated 18.12.2013. 2.6 During the pendency of the petition, notice was issued and inter....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ccording to the Revenue, the proportionate interest expense of Rs. 18,45,734/was not disallowed in accordance with Rule 8D(2)(ii) of the Income Tax Rules. According to the Revenue, such disallowances of expense against income by the assessee was neither made in the return filed nor was such disallowance made at the time of filing revised returns. According to the Revenue, therefore, this led to escapement to the extent of Rs. 18,45,734/- 4 Mr S N Divatia, learned advocate for the petitioner has contended that, once the petitioner's Income Tax Returns were assessed and scrutinized under Section 143(3) of the Income Tax Act, and that during the exercise of such scrutiny the authorities were communicated explanations and details relating to various points including the point in issue for which exercise of reopening the reassessment is undertaken, it was not open for the Revenue to reopen the assessment in exercise of powers under Section 148 of the Income Tax Act. 4.1 According to Mr Divatia, learned advocate for the petitioner, as is evident from reading the reasons supplied by the Revenue, the first two issues on which the Revenue thought it fit to reopen the assessment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....atia, learned advocate for the petitioner, drew our attention to the communication dated 14.12.2010. A calculation was offered with this communication to show that an amount of Rs. 8,70,520/was offered as administrative charges at the rate of 0.50% of the average investments for tax. Calculation were so categorically pointed out in compliance of Rule 8D(2) (ii) of the Income Tax Rules. 5 In other words, it was the contention of the learned advocate for the petitioner that once the exercise of scrutiny assessment is undertaken under Section 143(3) of the Income Tax Act and once having been satisfied with the documents presented on the questions so raised, it was not open for the Revenue to issue a Notice only on the ground of 'Change of opinion' under Section 148 of the Income Tax Act. 5.1 Mr Divatia, learned advocate for the petitioner, has also invited our attention to the Assessment Order dated 21.12.2013 issued under Section 143(3) of the Income Tax Act, wherein in paragraph 5 of the Assessment Order, the Assessing Authority has consciously dealt with the issue of exemption under Section 35D of the Income Tax Act and on the question of disallowance under Section 14A ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rs Mauna Bhatt, there was enough tangible material before the authorities to come to a conclusion or "reason to believe" that the income for the Assessment Year in question has escaped the assessment. According to Mrs Bhatt, once the exercise of reopening the assessment was undertaken under Section 148 of the Income Tax Act within a period of four years based on tangible material, it is not open for this Court in exercise of powers under Article 226 of the Constitution of India to substitute its view when the authorities have found sufficient material to come to a conclusion that the income has escaped assessment so as to warrant exercise of powers under Section 148 of the Income Tax Act. 7 It is in light of these factual aspects and the submissions made by the learned advocate for the respective parties, that we need to decide whether the Revenue had exercised the power to reopen the assessment under Section 148 of the Income Tax Act within the parameters of law. 8 As has been reproduced herein above, primarily, the reasons for reopening of the assessment or "reasons to believe", or which the authorities have thought it fit to reassess the income on the ground that the incom....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... accounts it is demonstrated that the source of investment is out of interest free funds. The Assessment Order further records that with regard to administrative expense, the assessee has offered 0.5% of the average investment as disallowance under Section 14A amounting to Rs. 8,71,250/The Assessment Order further records that considering the details, the disallowance offered by the assessee during the assessment proceedings is accepted and disallowance of Rs. 8,71,250/is made u/s.14A. 12 Perusal of the "reasons to believe" indicate that the exercise of reopening the assessment under Section 148 is on the same grounds, and therefore, it is nothing but an exercise carried out which tantamounts to 'change of opinion'. 13 What is evident from the facts on hand is that the Assessment Order itself records that after a due scrutiny and on exchange of communications inter se between the assessee and the Revenue, a satisfaction was arrived by the Revenue Authorities while passing order under Section 143(3) of the Income Tax Act. In the case of Commissioner of Income Tax, New Delhi vs. Usha International Ltd., reported in [2012] 25taxmann 200 (Delhi), the word "Change of Opinion" came....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that when an Assessment Order is framed and the claim of the assessee is examined and found to have been in compliance of the provisions, mere 'change of opinion' would not give a window to the Revenue to exercise powers under Section 148 of the Income Tax Act. The relevant paragraphs of which reads as under: " 42. Bearing in mind these conflicting interests, if we revert back to central issuein debate, it can hardly be disputed that once the Assessing Officer notices a certain claim made by the assessee in the return filed, has some doubt about eligibility of such a claim and therefore, raises queries, extracts response from the assessee, thereafter in what manner such claim should be treated in the final order of assessment, is an issue on which the assessee would have no control whatsoever. Whether the Assessing Officer allows such a claim, rejects such a claim or partially allows and partially rejects the claim, are all options available with the Assessing Officer, over which the assessee beyond trying to persuade the Assessing Officer, would have no control whatsoever. Therefore, whileframing the assessment, allowing the claim fully or partially, in what manner the as....
X X X X Extracts X X X X
X X X X Extracts X X X X
....na, Assistant Commissioner of Income Tax, (supra) more closely. This was a case wherein assessment previously framed under section 143(3) of the Act was sought to be reopened within a period of four years from the end of the relevant assessment year. The case concerned assessment year 1993-94 and therefore, the amended section 147 of the Act was applicable. On certain claims of the assessee which were not rejected by the Assessing Officer in the scrutiny assessment, the court held that in cases where the Assessing Officer has not made an assessment of any item of income chargeable to tax while passing the assessment order, it cannot be said that such income was subjected to an assessment. The court was of the opinion that in the original assessment, the Assessing Officer never really formed an opinion on a particular contentious issue. It was in this background that the Court was of the opinion that since no opinion was formed in this regard, consequently there would be no question of a mere change of opinion. The Court also expressed an opinion that in view of the explanation 2 to section 147 of the Act, power to make assessment or reassessment within four years would be attracted....