TaxTMI 
TaxTMI 
2018 (12) TMI 968
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....age-49 of the paper book) by claiming that there was no new tangible material with the Assessing Officer and the assessment framed under section 143(3) of the Act was reopened merely on the basis of change of opinion. Our attention was further invited to pages 6, 21, 24, 30, 31 and 33 of the paper book. Reliance was placed upon the decision in CIT vs Kelvinator of India Ltd. (2010) 320 ITR 561 (Supreme Court), CIT vs ICICI Bank Ltd. [2012] 349 ITR 482(Bom.) NYK Line (India) Ltd. [2012] 346 ITR 361(Bom) and NDT Systems and Another vs Income Tax Officer & Ors. [2014] 363 ITR 603(Bom.). 2.1. On the other hand, Shri Nitin Waghmode, ld. DR, defended the reopening of assessment by placing reliance upon the decision in the case of Dr. Amin's Pathology Laboratory vs. Joint. Commissioner of Incometax (No. 1) (2001) 252 ITR 673(BOM). It was argued that the issue before the Ld. Assessing Officer was whether the exemption under section 11 of the Act was allowable or not, thus, there is no change of opinion by the Ld. Assessing Officer and reasons were duly recorded and the same were accepted by the assessee. The claim of business income was disallowed and order was passed in 2016, which was....
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....owing 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 ; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; ....
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....n amount of Rs. 3,53,71,733/- towards salary which includes an amount of Rs. 1,74,51,505/- paid as voluntary retirement scheme (VRS). The ld. Assessing Officer considered section 35DDA(1) of the Act which is as under:- "35DDA. (1) Where an assessee incurs any expenditure in any previous year by way of payment of any sum to an employee in connection with his voluntary retirement, in accordance with any scheme or schemes of voluntary retirement, one-fifth of the amount so paid shall be deducted in computing the profits and gains of the business for that previous year, and the balance shall be deducted in equal instalments for each of the four immediately succeeding previous years. (2) Where the assessee, being an Indian company, is entitled to the deduction under sub-section (1) and the undertaking of such Indian company entitled to the deduction under sub-section (1) is transferred, before the expiry of the period specified in that sub-section, to another Indian company in a scheme of amalgamation, the provisions of this section shall, as far as may be, apply to the amalgamated company as they would have applied to the amalgamating company if the amalgamation had n....
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....shall be deducted in computing the profit and gains of the business for that previous year and the balance shall be deducted in equal installments for each of the four immediately succeeding previous years. Section 35DDA was inserted by the Finance Act, 2001 (with effect from 01/04/2001 and scope and effect of such insertion was elaborated in the Department Circular No.14 of 2001. Further, the scope and the effect have been elaborated in Departmental Circular No.8 of 2002 dated 27/08/2002. It is further noted that by Finance Act, 2005, some amendment was effected, which has been elaborated in Departmental Circular No.3 of 2006, as per which the employer was allowed entire expenditure incurred on implementing VRS and such scheme is in accordance with the guidelines prescribed under clause (10C) of section 10, then 1/5th of the amount so paid is deducted in computing the profit & gains of the business for that previous year and the balance is deducted in equal installments in each of four succeeding previous years. The existing provision of section 35DDA do not provide for deduction of the entire amount paid in more than one installment. The Finance Act, 2005, has, therefore, amen....
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....pinion" 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. They should be proximate and not have a remote bearing on the assessment. The omission to disclose may be deliberate or inadvertent. The question of concealment is not relevant and is not a precondition which confers jurisdiction to reopen the assessment. Correct material facts can be ascertained from the assessment records also and it is not necessary that the same 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 t....
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....sessment, 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 the assessment order is framed under section 143(3) of the Act, it matters little that the Assessing Officer did not ask any question or query with respect to one entry or note but had raised queries and questions on other aspects. (ii) Section 114(e) of the Act can be applied to an assessment order framed under section 143(3) of the Act, provided there has been a full and true disclosure of all material and primary facts at the time of original assessment. In such a case if the assessment is reopened in respect of a matter covered by the disclosure, it would amount to change of opinion. The ratio laid down in the following cases usefully throw lights on the issue in hand:- A. L. A. Firm v. CIT [1976] 102 ITR 622 (Mad) (para 9) A. L. A. Firm v. CIT [1991] 189 ITR 285 (SC) (paras 32, 60, 61) Anandji Haridas and Co. P. Ltd. v. Kushare (S. P.), STO [1968] 21 STC 326 (SC) (para 35) Bankipur Club Ltd. v. CIT [1971] 82 ITR 831 (SC) (para 34) Barium Chemicals Lt....
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.... 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. v. CIT [1967] 64 ITR 218 (Ker) (para 9) "(i) What is meant by the term 'change of opinion' ? (ii) Whether assessment proceedings can be validly reopened under section 147 of the Act, even within four years, if an assessee has furnished full and true particulars at the time of original assessment with reference to income alleged to have escaped assessment and whether and when in such cases reopening is valid or invalid on the ground of change of opinion ? (iii) Whether the bar or prohibition under the principle 'change of opinion' will apply even when the Assessing Officer has not asked any question or query with respect to an entry/note, but there is evidence and material to show that the Assessing Officer had raised queries and questions on other aspects ? (iv) Whether and in what circumstances section 114(e) of the Evidence Act can be applied and it can be held that it is a case of change of opinion ?" 2.7. For reopening an....
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....rticular question . . . An opinion is a conviction based on testimony . . . they are as a result of reading, experience and reflection". 2.9. 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 his position or stand. In Hari Iron Trading Co. v. CIT [2003] 263 ITR 437 (P&H), a Division Bench of the Hon'ble Punjab and Haryana High Court observed that an assessee has no control over the way an assessment order is drafted. It was observed that, generally, the issues which are accepted by the Assessing Officer do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/disallowances are made. Applying the principles laid down by the Full Bench of this court as well as the observations of the Punjab and Haryana High Cour....
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....ion 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 particular matter in issue. It will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of the assessment, as is the position in the present case. It is in that view inconsequential whether or not the material necessary for taking a decision was available to the Assessing Officer either generally or in the form of a reply to the questionnaire served upon the assessee. What is important is whether the Assessing Officer had based on the material available to him taken a view. If he had not done so, the proposed reopening cannot b....
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....99 per cent resulting in less profit from fund based activity (long term finance). * The assessee had allocated its expenditure between fund based and nonfund based activity on the basis of the ratio of the income earned between fund and non-fund based activity. Therefore there was some basis for distributing the expenses. Neither the reasons nor the order of the Assessing officer indicate the basis on which 10% of expenditure is alone attributable to non-fund activity. * This again establishes absence of any tangible material obtained during proceeding for assessment year 1998-99 to form a reasonable belief that income has escaped assessment. In the circumstances the exercise of powers under section 148 is unwarranted. [Para 8] * Further, the Assessing Officer while reassessing the assessee has in fact taken a ground different from the grounds in the reasons recorded for reopening the assessment under section 148. The reasons furnished for reopening the assessment alleged that non-fund income had been shown in fund based income so as to avail of a higher deduction. * However, the basis of the reassessment order was that 20.1 per cent out of the gross exp....
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....ct, 1961 ("the Act"). The impugned notice seeks to reopen the assessment for the assessment year 2007-08 on the ground that the Assessing Officer has reasons to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act. 2. At the request of the advocates for the petitioner and the respondent the 3. Brief facts leading to this petition are as follows : (a) At all times relevant to this petition, the petitioner firm was engaged in nondestructive testing business which includes testing of the blasting contents of the plant and machinery along with building which are being installed by its clients. This activity of testing was mainly supervised and controlled by the guidelines issued by the Bhabha Atomic Research Centre (BARC) as it involves the use of radio active material. (b) On October 21, 2007, the petitioner filed its return of income for the assessment year 2007-08 declaring a total income of Rs. 7.06 lakhs. Thereafter, notice under section 143(2) of the Act was issued to the petitioner by the Assessing Officer. During the course of assessment proceedings the Assessing Officer found that the labo....
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....fficer communicated the reasons for reopening the assessment for the assessment year 2007-08 to the petitioner as under: "Reasons for issue of notice under section 148 of the Income-tax Act, 1961 : The assessee-firm filed its return of income for the assessment year 2007-08 declaring a total income at Rs. 7,06,948. The assessee received testing charges of Rs. 2.49 crores on which expenses on account of radiography and labour charges were claimed. The case was selected for scrutiny and assessment was completed under section 143(3) on December 11, 2009, assessing the total income at Rs. 12,05,020 after disallowing the contract payments made in excess of Rs. 50,000 during the year. On verification, it is noticed that the payments towards radiography charges and labour charges, are in the nature of contract payments and disallowed these expenses as per the provisions of section 40(a)(ia), vide order dated December 11, 2000, and the items considered for disallowance are payments made in excess of Rs. 50,000 in the relevant financial year. These payments would actually fall under the head 'fees for professional or technical services' and, accordingly, a....
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..... Pune, 5,26,647.00 9. United Construction Co. 33,743.00 (b) The total difference of Rs. 21,61,168 had led to underassessment of income. (c) The payments made under the head radiography charges and labour charges aggregating to Rs. 17,23,647 and 77,69,630 were made to various persons like Sr. Technician, Asstt. R. T. Technician, Jr. Technician, Sr. Asstt. Radiologist, etc., as is evident from the chart of such payments submitted by you in the earlier assessment proceedings. Thus, all such payments, unambiguously, fall in the category of payments made for receiving technical services, attracting the provisions of section 194J and section 194C. Thus, for the purposes of Chapter XVII-B, the threshold limit of Rs. 20,000 would be applicable instead of Rs. 50,000. (d) As no TDS was deducted from the payments which exceeded the threshold limit of Rs. 20,000 the expenses were liable for disallowance under section 40(a)(ia) of the Income-tax Act. (e) At no stage of the earlier assessment proceedings you established the fact that the payees were not qualified professional. Even in the present proceedings you have failed to establish the same w....
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.... same facts duly considered in the assessment order dated December 11, 2003, passed under section 143(3) of the Act ; (c) the reasons for reopening as communicated to the petitioner does not indicate as one of the reasons that amount of Rs. 21.61 lakhs being the difference between the amount received by the petitioner and the tax deduction at source certificate issued by the payer. However, the aforesaid ground is indicated as a reason for rejecting the objection to reopening the assessment for the assessment year 2007-08 under section 148 of the Act. This according to her is clearly not permissible ; and (d) the impugned notice has been issued by the Assessing Officer at the instance of the internal audit report and not on independent application of mind on the part of the Assessing Officer. In support she invites our attention to the affidavit-in-reply and in particular letter dated March 14, 2012, addressed by the Assessing Officer to the Joint Commissioner for approval to reopen assessment. In the aforesaid letter seeking sanction to reopen assessment, mention is made of objection raised by the internal audit department. This is clearly not permissibl....
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....to tax has escaped assessment on the basis of tangible material. The words "reason to believe" has been construed by the Supreme Court in the matter of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 ; wherein the court has observed: "However one needs to give schematic interpretation to the words 'reason to believe' failing which we are afraid section 147 would give arbitrary powers to the Assessing Officer to reopen assessment on the basis of 'mere change of opinion' which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review ; he has power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of 'change of opinion' is removed as contended by the department then in the garb of reopening the assessment review would take place." 6. The aforesaid observations of the apex court make it clear that sanctity must be attached to the assessment orders and it cannot be disturbed merely on account of change of opinion This sanctity to assessment orders is not ....
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....the assessment year 2007-08. There is no fresh tangible material which would warrant taking a view different from the one taken during the regular assessment proceedings. In fact even the order dated October 15, 2012 disposing of the objections clearly records that radiography charges and labour charges were made to various persons like senior technicians, senior radiographer and Jr. technicians, etc., from the chart submitted in the regular assessment proceeding leading to order dated December 11, 2009. Therefore, it is very clear that the impugned notice for reassessing the assessment year 2007-08 has been issued merely on change of opinion and in fact seeks to review the assessment which is already completed. 9. One more aspect of the matter must be adverted to and that is in the order dated October 15, 2012, rejecting the objections filed by the petitioner with regard to reassessment proceedings for the assessment year 2007-08 a completely new ground has been added. In its order dated October 15, 2012, the additional ground to reopen assessment is the lack of co-relation between the payment received by the petitioner and the TDS certificate issued by the persons making....
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....ssessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons. 2.15. Thus, where an Assessing Officer incorrectly or erroneously applies law or comes to a wrong conclusion and income chargeable to tax has escaped assessment, resort may be made through section 263 of the Act. But initiation of reassessment proceedings will be invalid on the ground of change of opinion. Here a distinction has to 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 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 ....