TaxTMI 
TaxTMI 
2020 (1) TMI 123
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....as erred in upholding the action of ld. AO in reopening the case of the assessee company U/s 147 of the Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted quashing the entire order passed by the ld. AO, in the reassessment proceedings." 2. Briefly the facts of the case are that the assessee company filed its return of income on 28.09.2013 for A.Y. 2013-14. In its return of income, the assessee company declared NIL income under regular provisions of the Act as well as declared NIL book profits under the provisions of Section 115JB of the Act. The original assessment was completed U/s 143(3) of the Act vide order dated 29.02.2016 wherein the returned income of the assessee was accepted. Thereafter, notice U/s 148 of the Act was issued on 28.02.2017 after seeking approval of the appropriate authority U/s 151 of the Act. In response, the assessee e-filed its return of income on 14.04.2017 declaring NIL income and also sought reasons for the reopening the assessment vide its letter dated 24.04.2017. Subsequently the case was transferred vide order dated 02.05.2017 by the Pr. CIT (Centra....
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.... as Revenue's appeal is concerned, the matter has been decided by the Coordinate Bench in favour of the Revenue for subsequent year i.e, A.Y. 2014-15 vide order in ITA No. 390/JP/2019 dated 13.12.2018. It was further submitted that the order of the Coordinate Bench has since been affirmed by the Hon'ble Rajasthan High Court in DB. Appeal No. 53/2019 dated 19.07.2019. It was accordingly submitted that on merits, the matter has been decided in favour of the Revenue and therefore, in absence of any change in the facts and circumstances of the case, order so passed by the Coordinate Bench for the A.Y 2014-15 as affirmed by the Hon'ble Rajasthan High Court should be followed in the instant case. 6. The ld. AR fairly submitted that on merits, the matter is covered in favour of the Revenue and against the assessee by the earlier decision by the Coordinate Bench for A.Y 2014-15 which has also been affirmed by the Hon'ble Rajasthan High Court. 7. Having heard both the parties and going through the relevant material on record, we find that similar issue regarding exclusion of gains on sale of agriculture land for the purposes of computing the book profits u/s 115JB has been dealt with by t....
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....ated 19.12.2019 in this regard. 10. During the course of hearing, the ld. AR submitted that the assessee company, while filing its return of income, disclosed Rs. 13,98,46,990, as income earned from sale of Agriculture Land. Also, for the purpose of calculating MAT, such income being exempt, was reduced from the Book Profits. The above factual aspects clearly emerged from the following documents, also submitted to the ld. AO, during the course of original assessment proceedings:- I. Audited Financials of the assessee company for the relevant previous year. II. Form 29B furnished by the assessee company duly signed by its Chartered Accountant. III. Income Tax Return Form consisting of the schedules pertaining to Profit and Loss Account and Calculation of Book Profits in accordance with 115JB, for the purpose of MAT. 11. The ld. AR further submitted that the AO vide notice issued u/s 142(1) dated 04.01.2016 raised queries with respect to the income of Rs. 13,98,46,990 earned by the assessee company from sale of Agriculture Land. In this regard, detailed submissions highlighting the above factual aspects and also the resultant tax treatment adopted by the assessee company were ma....
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.... furnished along with return of income or during the course of assessment proceedings u/s 143(3). There was no new tangible material before the AO as there is no reference to any undisclosed fact or any fresh material or evidence. Thus, the entire reopening was based on change of opinion and, therefore is illegal and void. 13. It was further submitted that even in the order passed by the AO, disposing off the objections raised by the assessee company, against the reasons recorded, the AO has confused himself with the revisionary power provide u/s 263 vis-à-vis power to re-assess the case of the assessee u/s 148. The AO has power to re-open the case of the assessee company u/s 148 and re-assess the income based on new tangible material brought on the record subsequent to the original assessment proceedings. The AO u/s 148 has no power to review or revise his own order originally passed u/s 143(3) of the Act. The power of revision enshrined under section 263 are different and not available to ld. AO himself. 14. It was further submitted that even ld. CIT(A) has not given any finding that the present reassessment proceedings is based on any new tangible material, having come ....
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....the Act and as far as the computation of book profit U/s 115JB of the Act is concerned, the same is not discernable from the order of the Assessing Officer. It was submitted that where the Assessing Officer has not examined the matter relating to computation of book profits U/s 115JB of the Act at first place and there is no question of change of opinion by the Assessing Officer. Further, referring to the notice U/s 142(1) dated 04.11.2016 which has been relied upon by the ld. AR, the ld. CIT DR submitted that in the said notice also, the information which has been called for by the Assessing Officer is referring the Girdawari report and the distance of the agricultural land from the outside of any municipal corporation in context of normal provisions and not in the context of exclusion of income on sale agricultural land from the computation of book profit for the purposes of levy of MAT. It was accordingly submitted where the Assessing Officer has not examined the matter relating to exemption of income on sale of agricultural land from the computation of book profit U/s 115JB, there is no question of change of opinion. It was further submitted that the contention of the ld. AR re....
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....-, which was credited in P&L account as "Capital Gain from sale of Agricultural Land". The claim of the assessee was allowed by the AO. (d) In case of certain companies, tax is reduced to be paid on "book Profit" as per provisions of Section 115JB. In such cases "book profits" is required to be computed strictly in accordance to the provisions of Section 115JB . The "book profit" is defined under Explanation -1 below sub-section (2) of Section 115JB. Accordingly, "book profit" computed under sub-section (2) is increased by certain items debited in P&L account and reduced by certain items credited in P&L account. These items are enlisted under the said Explanation. The assessee has reduced an amount of Rs. 13,98,46,990/- credited in P&L account as "capital gain from sale of agricultural land" claiming that it is agricultural income and provision of section 10(1) applied to it. The term 'agricultural income' is defined u/s 2(1A) as under:- 2(1A) agricultural income means- (a) any rent or revenue derived from land which is satiated in India and is used for agricultural purposes. In view of the definition of "agricultural income" given u/s 2(1A), the amount of Rs. 13,98,46,99....
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....gricultural Land". The claim of the assessee was allowed by the AO." Therefore, the fact that there was gain on sale of agriculture land amounting to Rs. 13,98,46,990, the fact that the such gains were credited by the assessee company in its profit/loss account and the fact that the assessee company has reduced such gains on sale of agricultural land so credited in the profit/loss account while computing 'book profit' u/s 115JB were available on record at the time of original assessment proceedings and the Assessing officer was duly ceased of such factual position and claim of the assessee company and basis examination thereof, the claim of the assessee company was allowed by the Assessing officer while completing the original assessment proceedings under section 143(3) of the Act. This is a factual position which is clearly emerging from the reasons so recorded by the Assessing officer and we therefore donot have to go any further to establish the fact that there is no new material brought on record by the Assessing subsequent to completion of original proceedings u/s 143(3) and the matter was duly examined during the original assessment proceedings and it is therefore clearly a c....
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....esentations from the Companies against 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 hereinbelow the relevant portion of Circular No. 549 , dated 31-10-1989, 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'....
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.... with such type of cases where the ld CIT can step-in and correct the Assessing officer. In the instant case, the original assessment proceedings were completed vide order u/s 143(3) dated 29.02.2016 and therefore, the provisions of section 263 could have been invoked by the ld CIT by 31.03.2018. However, instead of invoking the revisionary jurisdiction u/s 263 by ld. CIT, the Assessing officer has assumed the jurisdiction u/s 147 of the Act by issuance of notice dated 28.02.2017. Interestingly, for such assumption of jurisdiction, the ld CIT has accorded the approval u/s 151 of the Act. It is therefore a case where matter was referred to the ld CIT for seeking his approval and the ld CIT instead of holding that the matter falls under section 263 and not under section 148 has given the approval u/s 151 of the Act which shows non-application of mind and mechanical grant of approval. Therefore, in the instant case, the assumption of jurisdiction u/s 147 by issuance of notice u/s 148 cannot be sustained and held as invalid in eyes of law. We therefore find force in the contention of the ld AR that there is a distinction between power to review and power to reassess and the AO doesn't....
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....y or erroneously applies law or comes to a wrong conclusion and income chargeable to tax has escaped assessment, resort to Section 263 of the Act is available and should be resorted to. But initiation of reassessment proceedings will be invalid on the ground of change of opinion. 16. Here we must draw a distinction 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 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 inform....