AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 89
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.... of business by making an addition of Rs. 35,37,000/-. The Assessing Officer also disallowed the expenses on the milk can purchases from Profit and Loss account and allowed only 15% depreciation in the Assessment Order. The petitioner did not file any appeal and accepted the demand and made the payment of tax and interest amounting to Rs. 21,35,750/-. Thus, the petitioner had fully and truly co-operated with the department in participating in scrutiny and assessment proceedings and also in paying the tax without any delay. While so, the impugned notice dated 22.11.2017 was issued under section 148 of the Income Tax Act contending that the Assessing Officer had reason to believe that the petitioner's income for the assessment year 2011-12 had escaped assessment within the meaning of section 147 of the Income Tax Act, 1961. The petitioner, through letter dated 27.11.2017, requested the respondent to treat the return filed under Section 139 as the one filed as revised return for the purpose of reassessment under Section 147. In the very same communication, the petitioner also requested the respondent to give reason for reopening. By communication dated 08.12.2017, the respondent d....
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....ould have continued claiming depreciation on the assets. Thus, perusal of the ledge accounts prima facie indicate under assessment of income. During the course of assessment proceedings of the year 2011-12, the assessee had not filed the details representing the expense of Rs. 3,65,452/- on account of Asset Written Off and the Factory Land Development Charge of Rs. 3,30,000/-. Further, cash payment incurred under the head Factory Land Development Charge was not reported in the Tax Audit Report. Thus, during the course of assessment proceedings, the assessee failed to fully and truly disclose the material facts required for finalising the assessment. It was only during the course of verification carried out during the assessment proceedings of the assessment year 2014-15, these details were brought on record. Therefore, notice under section 148 was issued only on the basis of new facts that had come to light subsequently and not on account of change of opinion, as alleged by the petitioner. Therefore, the said notice is valid and well within the statutory time limit available under the said Act. The order dated 04.01.2018, impugned in this writ petition, is not an assessment ord....
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....eopening was not discussed in the original assessment order. Therefore, there is no question of saying that there is a change of opinion. An escaped assessment includes under assessment. The issue regarding under assessment, if not properly considered at the time of original assessment, is entitled to be considered by way of reopening. In other words, an issue not properly considered entitles for reopening. ii) In support of his contention, the learned counsel relied on the following case laws. i) 1976(12) ITR 287 (SC) (Kalyanji Mavji & Co. v. Commissioner of Income-tax) ii) 1989 (46) Taxman 13 (Mad) (Virudhunagar Co-operative Milk Supply Society Ltd.v. Commissioner of Income-tax) iii) 1986 (25) Taxman 356 (SC) (Indi-Aden Sald Mfg. & Trading co.P.Ltd..v. Commissioner of Incometax) iv) 1999 (236) ITR 34 (SC) (Raymond Woolen Mills Ltd. v. Income-tax Officer) v) 1993 (69) taxman 625 (SC) (Phool Chand Bajrang Lal v. Income-tax Officer) vi) (2016)75 taxmann.com 172 (Girilal & Co. v.Income-tax Officer,Mumbai) vii)2016 (387) ITR 122 (SC) (Girilal & Co. v.Income-tax Officer,Mumbai) viii) (2018) 409 ITR 502 (A.Sridevi v. Incometax Officer, Non-Corporate Ward 16(1)) 6. Hea....
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....eveling the factory land. Writing off cost of obsolete asset is a capital loss and therefore cannot be allowed as an expense. While disallowing this amount at the most assessee will be eligible for depreciation @ 15%. Thus, there is under assessment of income of atleast Rs. 3,10,34/-. With respect to land development expense, on perusal of the ledger account it is noticed that cash payment of Rs. 1,50,.000/- was made on 12./10/10 and Rs. 75,000/- on 17/2/11 i.e. assessee had violated the provisions of section 40A(3) and therefore expense to the tune of Rs. 2,25,000/- was not allowable. The tax audit report too did not have any mention of this violation. The above aspects remained to be examined while finalizing the assessment. I therefore, have reasons to believe that income of atleast Rs. 5,35,634/- has escaped assessment." 10. On receipt of the above communication, assigning the reasons for reopening the assessment, the petitioner, through their communication dated 26.12.2017, objected to the reasons by specifically stating that at the time of original assessment itself all the details have been furnished with the Assessing Officer and that there was no escapement of incom....
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...., considered the question in detail as to whether any change in law has been brought about on account of amendment of Section 147 with effect from 01.04.1989. In the above said decision, the Hon'ble Full Bench has observed as follows: 10. In Indian & Eastern Newspaper Society v. CIT MANU/SC/0328/1979 three-Judge Bench of the Apex Court held that although disclosure of a new facts therein may be an information within the meaning of the afore-mentioned provisions this opinion of law would not be as regard a contention on the part of the revenue that the expression information in section 147(b) refers to realization by the Income Tax Officer that he has committed an error while making original assessment. The Apex Court said : "that he has committed an error when making the original assessment. It is said that, when upon receipt of the audit note the Income Tax Officer discovers or realizes that a mistake has been committed in the original assessment, the discovery of the mistake would be 'information' within the meaning of section 147(b). The submission appears to us inconsistent with the terms of section 147(b). Plainly, the statutory provision envisages that the I....
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....al orders of assessment. Thus, it is a case of mere change of opinion which does not provide jurisdiction to the assessing officer to initiate proceedings under section 147 of the Act. It is also equally well settled that if a notice under section 148 has been issued without the jurisdictional foundation under section 147 being available to the assessing officer, the notice and the subsequent proceedings will be without jurisdiction, liable to be struck down in exercise of writ jurisdiction of this court. If "reason to believe" be available, the writ court will not exercise its power of judicial review to go into the sufficiency or adequacy of the material available. However, the present one is not a case of testing the sufficiency of material available. It is a case of absence of material and hence the absence of jurisdiction in the assessing officer to initiate the proceedings under section 147/148 of the Act." Thus, the court held that even under the newly substituted section 147, with effect from 1-4-89, an assessment could not be reopened on a mere change of opinion. .... ..... 14. It is well settled principle of interpretation of statute that entire statute should be ....
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....exercising the power under section 147 read with section 148 of the Act. 22. .... 23. We also cannot accept submission of Mr. Jolly to the effect that only because in the assessment order, detailed reasons have not been recorded on analysis of the materials on the record by itself may justify the assessing officer to initiate a proceeding under section 147 of the Act. The said submission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or subsection (3) of section 143. When a regular order of assessment is passed in terms of the said subsection (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act the judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the assessing officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi judicial ....
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....nst omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer. We quote herein below the relevant portion of Circular No. 549 dated 31st October, 1989, which reads as follows: 7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression `reason to believe' in Section 147.--A number of representations were received against the omission of the words `reason to believe' from Section 147 and their substitution by the `opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, `reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from Section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended Section 147 to reintroduce the expression `has reason to believe' in place of the words `for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new Section 147, however, rema....
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....in violation of provision of section 40A(3) of the said Act and therefore, the same is not allowable. So, on that ground also the reopening is sought to be done. I do not think that the above reason is based on a new material which has come to light subsequently, warranting reopening. On the other hand, the Auditor Report submitted in Form No.3CD with the return filed by the assessee, clearly indicates at Serial No.17(h)(B) therein that it was not possible for the Auditor to verify whether the payment exceeding Rs. 20,000/- have been made otherwise than by account payee cheque or bank draft as the necessary evidence is not in the possession of the assessee. The above statement was made by the Auditor while answering column "amount inadmissible under section 40A(3)". Therefore, it is evident that even in respect of the above issue raised by the revenue for reopening, the above statement of the auditor is already available on record and therefore, if at all the Assessing Officer wants to reopen on such issue, he should have exercised such power within the period of four years as contemplated under section 147 but he has not done so. Therefore, it is evident that these details were ve....
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.... note that no fresh material, tangible in nature, has come to light before the Assessing Officer. On the other hand, he wants to change his conclusion in relation to those two heads based on the materials already available. Undoubtedly, such attempt is only a change of opinion and nothing else. In this connection, the recent decision of the Apex Court reported in 2018(6) SCC 685 (CIT vs. Techspan India Private Limited & another) is relevant to be quoted, wherein at paragraph Nos. 14 to 17, it has been observed as follows: 14. The language of Section 147 makes it clear that the assessing officer certainly has the power to re-assess any income which escaped assessment for any assessment year subject to the provisions of Sections 148 to 153. However, the use of this power is conditional upon the fact that the assessing officer has some reason to believe that the income has escaped assessment. The use of the words 'reason to believe' in Section 147 has to be interpreted schematically as the liberal interpretation of the word would have the consequence of conferring arbitrary powers on the assessing officer who may even initiate such re-assessment proceedings merely on his c....
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....of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. 7. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. 19. Further, in an unreported decision of this Court made in W.P.No.1589/2017 etc. dated 13.11.2017, the learned single Judge has observed at paragraph Nos.15 and 16 as follows: 15. Having steered clear of the legal position, we need to apply the same to the facts of the present case. Two conditions are required to be satisfied before the respondent could issue notice under Section 148 of the Act, namely, (1) he must have reason to believe that income chargeable to tax has escaped assessment and (2) such income has escaped assessment by reason of omission or failure on the part of the assessee to disclose fully and truly material facts necessary for assessment for ....
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.... as to whether the entire agricultural income was completely exempted or not. This can hardly be a reason to believe that income chargeable to tax has escaped assessment as it is a clear case of change of opinion by the respondent. As pointed out in the case of Calcutta Discount Company Limited, the obligation on the part of the assessee does not extend beyond fully and truly disclosing all primary facts. It is for the Assessing Officer to take an inference on facts and law based on such disclosure. If according to the respondent, his predecessor did not come to a proper inference on the facts disclosed, it is no ground to reopen the assessment, as if permitted and it would amount to a clear case of change of opinion. In the light of the above discussion, the first issue framed for consideration is answered in favour of the petitioner and against the revenue. 20. In this case, it is relevant to note that neither the notice issued under section 148 nor the proceedings stating the reasons for reopening the assessment, has alleged anywhere that the assessee has failed to disclose fully and truly any material facts necessary for assessment. On the other hand, perusal of the reasons st....
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....erials filed with returns except to the extent where he differed and stated so in his assessment order. If the issue is not specifically raised in the assessment order, it cannot be automatically presumed that such issue was not at all considered in the original assessment order. Consequently, if the Assessing Officer chooses to reopen the assessment based on such available materials, it would certainly amount to change of opinion only and cannot be called as an issue not raised or discussed, as contended by the learned counsel for the Revenue. 22. At this juncture, it is to be noted that the question as to whether the reasons for reopening the assessment would amount to change of opinion or not is to be considered and decided on the facts and circumstances of each case and therefore, the view expressed in one case based on the facts and circumstances of that particular case cannot be applied to another case to contend in either way, unless the facts and circumstances of both cases are one and the same. In other words, the question of change of opinion has to be considered and decided on case to case basis. 23. Learned counsel for the Revenue relied on (2016) 75 taxmann.com 172 ....