TaxTMI 
TaxTMI 
2018 (4) TMI 1179
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and in respect to the circumstances of thee case, the ld. CIT(A) erred in confirming the assessment order passed u/s. 143(3)/147 of the IT Act, 1961 by the ld. AO as proper and valid without considering the facts of the case as well as the law, without considering the submissions made by the appellant. 3) That on the facts and in the circumstances of the case, the ld. CIT(A) failed to appreciate and consider the facts of the case and erred in not annulling the am order passed by the AO u/s 143(3)/147. 4) That on the facts and in the circumstances of the case, the ld. CIT(A) erred in sustaining the addition of Rs. 18,38,241/- on account of capital gains. 5) That on the facts and in respect to he circumstances of the case, the ld. CIT(A) erred in not allowing the entire addition of Rs. 18,38,241/- as exempted u/s. 19(38) on account of Long Term Capital Gains. 6) Leave to urge such other ground or grounds before or at the time of hearing of appeal". 2.1 The assessee vide letter dated NIL has filed additional grounds of appeal as detailed below:- "7. That the Ld. CIT(A)-XXXIII, Kolkata in upholding the ord4re passed by the Ld. AO u/s 147/143(3) of the Income Tax Act, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nds of appeal and the grounds numbers 1, 2 & 3 raised by the assessee along with the memo of appeal in Form No. 36. 5. The assessee has challenged the validity of the reassessment proceedings initiated u/s 147 of the Act. 6. Briefly stated facts are that the assessee is an individual and deriving his income from rent, from partnership firm and other sources. The assessee filed his return of income on 17.10.2007 at a total income of Rs. 1,04,13,450/- only. Subsequently the return was selected under scrutiny and assessment was framed u/s 143(3) of the Income Tax Act, 1961 vide order dated 30/11/2009 at Rs. 1,05,02,850/- after making certain additions/disallowances to the total income of the assessee. Later on a notice u/s 154 of the Act was issued dated 20.04.2010 by the AO for the rectification of mistake apparent from the record in the assessment order passed by him under section 143(3) of the Act. The AO alleged that the assessee has claimed exemption on the long term capital gain income on account of sale of shares under section 10(38) of the Act though the assessee has not paid STT on the sale of such shares. The assessee in compliance thereto submitted that there is no such....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in this case. The Gujarat High Court in the case of Damodar H. Shah (supra) has not simply held as quoted by the assessee but the High Court has explained in detail that the provision of section 154 and 147 of the Act and operate in different domains. This is clear from the following extract of the order of the High Court:- '8.1 the expression 'mistake apparent from the record' occurring in section 154 would mean, in the context of the provision, that it should be evident on a reasonable reading of the record to show that there has been committed by the Assessing Officer a mistake in the order which needs to be rectified. The expression 'from the record' entails reading of the record and not a cursory look at its bulk. The word 'apparent' does not dilute the need to read the record for ascertaining whether there is a mistake on its plain reading. If the record so read is not at all capable of being construed in a different manner and the mistake is demonstrated on its plain reading, it would be a mistake which is apparent, i.e. evident or obvious from the record and ought to be rectified under section 154. If, however, on reading the record it cannot be said that the view taken....
X X X X Extracts X X X X
X X X X Extracts X X X X
....him which is obvious or evident from the existing record and, according to him, there is no need to reopen the am for any additional material, information, investigation or scrutiny, he may resort to section 154 and rectify it by amending the assessment order as per section 154(3). In fact, section 154 would cover all cases of mistakes apparent from the record, which could be rectified by the concerned authorities. Mistake apparent from the record which has the effect of enhancing assessment ought to be rectified by resorting to this special and speedy procedure when in the view of the Assessing Officer it is unnecessary to resort to reopening of the assessment. In the field of chargeable income escaping assessment, however, section 147 is very widely worded and would include even escapement due to any mistake in the assessment order. But, when even, according to the Assessing Officer himself, there is a mistake apparent from the record as it exists, committed in the order of assessment, which is rectifiable on the basis of the existing record under section 154 being a special provision made for the purpose, and that there is no need to resort to reopening of the assessment as cont....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom the record, there would be no occasion to amend the assessment order. Where the rectification could not be done on the ground that there were two views possible or that there was discretion lawfully exercised, then the same will also be true when the Assessing Officer starts the proceeding under section 147 on the same material, because, that power cannot be invoked when there is only a mere change of opinion and in cases where in the proceedings under section 154 it is found that what was thought to be a mistake was not a mistake because that view was warranted or permissible from the existing record, then the same finding will bind the Assessing Officer when trying to exercise powers under section 147. In such a case, it would be incumbent on the part of the Assessing Officer who has chosen to resort to section 154 to demonstrate why he is now for the same purpose resorting to section 147. There has to be some compelling reason in such a case for him still to believe that the income that was the subject-matter of rectification has escaped assessment though that was not due to any obvious mistake borne out from the existing record, which could be rectified under section 154. T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....take was issued under section 154 and a reply dated 20.11.2004 was filed by the petitioner-assessee. Thereafter, nothing was heard from the Assessing Officer and presumably no order under section 154 of the Act was passed. It was submitted that as a legal proposition; that once a notice under section 154 of the Act is issued, proceedings under section 147 of the Act on the same ground or reasons cannot be taken. It is not possible to accept the said proposition in broad terms as propounded or as one having universal application. Scope and ambit of sections 154 and 147/148 of the Act are different. Under section 154 of the Act, the Assessing Officer can only rectify mistakes and errors. Section154 is not a substitute for section 147/148. In a given case, resort to provisions of section 154 of the Act may be an appropriate remedy but in other cases resort to section 147/148 may be required. The question; whether reopening is justified when both provisions 154 and 147/148 of the Act are attracted, is not urged and argued by the petitioner. It is not the case of the petitioner that section 154 of the Act is applicable and can be invoked to make addition on ground No.2. 19. Decision of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....issued, then notice under section 147/148 is barred or prohibited. Per se and ex facie the language of section 147 shows that the pre-requisites of the said provision are not controlled, curbed and regulated with the requirement of mistake which is apparent from the record. 22. In the present case, the assessee in response to the notice under section 154 of the Act had objected to the rectification proceedings. It was submitted that rectification proceedings under section 154 of the Act were not justified and without jurisdiction as there was no mistake or error apparent from the record. W have examined the second ground. The Assessing Officer could not have resorted to section 154 proceedings to disallow expenditure under section 14A of the Act. This was not possible in section 154 proceedings as it was not an error or mistake apparent from the record. The writ petition stands accordingly dismissed, with no order as to costs "(emphasis supplied) The above decision of the Delhi High Court has since been affirmed by the Supreme Court of India in the case titled as Honda Siel Power Products Ltd. v. DCIT [2012] 340 ITR and the brief order reads as under:- ÓRDER 1. In ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e assessee in a particular A.Y. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer, when he recorded reason. A mere change of opinion cannot constitute a reason to believe. In light of the above the appellant would like to reiterate that his case was originally assessed u/s 143(3) of the Act vide order dated 30/11/2009 (copy enclosed at pages 11 to 13 of the paper book) at a total income of Rs. 1,05,02,850/-, after making addition of Rs. 20,400/- on account of fair rent and Rs. 69,000/- on account of appellant's share of rent in property rented out. Before passing the Assessment Order u/s 143(3) of the Act the AO had examined the appellant's claim of exempt LTCG U/S 10(38) of the Act by issuing notice u/s 142(1) of the Act along with a questionnaire (copy enclosed at pages 07 to 09 of the paper book) enquiring about the appellant's claim of exempt LTCG u/s 10(38) of the Income Tax Act, 1961 along with enquiring about the other claims. The appellant in response to the Ld. AO's query replied vide letters dated 18/11/2009 and 23/10/2009 (copies at pages 10 and 10A of the paper book) by submitt....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Therefore the order passed by the Ld. AO u/s 147/143(3) of the Income Tax Act, 1961 on a change of opinion and further upheld by the Ld. CIT(A) is bad in law and should be struck down. On the other hand the Ld DR submitted that LTCG income was shown by the assessee but no verification was carried out by the AO during the assessment proceedings under section 143(3) of the Act. Therefore the notice u/s 148 dated 22.08.2010 was issued upon the assessee. There is no date mention on the reasons recorded by the AO for initiating the proceedings under section 147 of the Act. The AO dropped the proceedings u/s 154 of the Act considering the fact that the issue in hand cannot be covered under the provisions of section 154 of the Act. But there is no bar for initiating the proceedings under section 147 of the Act in the cases where the proceedings u/s 154 of the Act had been initiated and subsequently dropped. The ld. DR vehemently supported the order of authorities below. 9. We have heard the rival contentions and perused the materials available on record. At this juncture we find important to reproduce the reasons recorded by the AO for reopening the case u/s 147 of the Act which re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....produced below. 1. Salary 30,60,000/- 2. Interest on capital 42,76,592/- 3. Interest from O/sources 6,7,347/- 4. Royalty 23,33,334/- 5. House property 2,21,970/- 6. Long term C.G. (exempted) (22,78,940/-) 7. Share profit fro firm (exempted) (33,30,028/-) 8. Short term C.G. 57,941/- The relevant extract of the reply placed on page 10A of the paper book is reproduced below. "the calculation of capital gains is enclosed." We also note that the assessee has furnished the details of the investment in the form of some chart as evident from the order sheet entry of the AO relating to assessment proceedings under section 143(3) of the Act which are placed on pages 24 to 27 of the paper book. 9.1 We also find that the assessee has duly disclosed its exempted income in its computation of income which is placed on pages 20 to 23 of the paper book. As such we note that the AO initiated the proceedings u/s 147 of the Act on the basis of the materials which were available before him during the assessment proceedings under section 143(3) of the Act. From the above facts, we find that the AO at the time of original assessment had in his possession all the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2010) 324 ITR 234 (Del.), in the said case, it was held as under: "The assessing officer has been given power to reassess under section 147 upon certain conditions being satisfied, and the assessing officer does not have power to review. If such a change of opinion were to be permitted as a ground of reassessment then it would amount to granting a licence to the assessing officer to review his decision, which he does not have under the provision of section 147." (3) Asteroids Trading & Investment P. Ltd. vs DClT (2009) 308 lTR 190 (Bom), in the said case, it was held that since no new material brought on record, reassessment on change of opinion of officer not valid. (4) Asian Paints Ltd. vs. DCIT (2008) 308 ITR 195 (Bom), in this case, the Hon'ble High Court observed that mere change of opinion of A.O. not ground for reassessment. (5) ICICI Prudential Life Insurance Co. Ltd. (2010) 325 ITR 471 (Bom), in the said case, the Hon'ble Bombay High Court held that re-opening of assessment on the same ground in the absence of any tangible material was based on mere change of opinion and therefore is not sustainable. Based on the ratio of judgment decided in the aforesaid ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aterial that the Assessing Officer came across so as to have treasons to believe that the income had escaped assessment. " We also note that the AO initiated the proceedings u/s 147 of the Act after taking the approval from the Ld CIT for issuing notice u/s 148 of the Act. The permission was obtained by the AO on 16-08-2010 for initiating the proceedings u/s 147 of the Act whereas the proceedings u/s 154 of the Act were dropped on 18-08-2010. From the above, it is implied that proceedings were initiated and pending by the AO on the same issue simultaneously u/s 147 and 154 of the Act which is not permitted in the eyes of law. In this regard we find support and guidance from the judgement of Honourable jurisdictional High Court in the case of Berger Paints India Ltd versus ACIT reported in 322 ITR 369(Cal). The relevant extract of the order is reproduced below. "If the Assessing Officer is of the view that income has escaped assessment by reason of a mistake apparent from records, and takes recourse to section 154, but finds later, that there is no apparent mistake, then he cannot, in the absence of any other ground on the basis of which he still has reason to believe that the in....