TaxTMI 
TaxTMI 
2018 (8) TMI 2012
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....47 ITR 818)(Supreme Court). 2.1. On the other hand, the ld. counsel for the assessee, Shri Mehul Shah, defended the impugned order by contending that the necessary details were called for by the Ld. Assessing Officer before framing the assessment under section 143(3) of the Act. Our attention was invited to various pages of the paper book including page-15 & 17 by explaining that due enquiries were made by the Ld. Assessing Officer and accepted the returned income. It was pleaded that there was no escapement of income and it is purely a change of opinion. The crux of the argument is in support of the impugned order. Reliance was placed upon the decision from Hon'ble jurisdictional High Court in CIT vs Amitabh Bachhan (2012) 349 ITR 76 (Bom.), Aroni Commercials Ltd. vs DCIT (2014) 362 ITR 403 (Bom.) and CIT vs Kelvintor India Ltd. 320 ITR 561 (Supreme Court). 2.2. We have considered the rival submissions and perused the material available on record. In the light of the arguments advanced from both sides, now question arises whether there was a "change of opinion" by the Assessing Officer and the validity of reopening of assessment u/s 147/148 after a period of four years. ....
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....5,517/- short term capital gains of Rs. 2,82,58,860/- and income from other sources of Rs. 5,158/-. The total income of Rs. 63,40,198/- is claimed as exempt income under various sections of the IT Act. 4. After verification of the datas made available and after verification of the details filed by the assessee, the assessment is finalized and the returned income is accepted as such." 2.3. From the above, it is abundantly clear that the Ld. Assessing Officer framed the assessment under section 143(3) of the Act after verification of the details filed by the assessee accepting the returned income. In the light of our aforesaid observation, since, we have observed that an opinion was formed by the Assessing Officer that too after due deliberation, therefore, we shall analyse the validity of reopening of assessment. Considering the totality of facts, we find that reassessment proceedings will be invalid, in case, the assessment order itself records that the issue was raised and decided that too while framing the assessment u/s 143(3) of the Act. Therefore, the reassessment proceedings in this case is hit by the principle of "change of opinion" because reassessment proceedin....
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....sessee had stated incorrect and wrong material facts resulting in the assessment proceedings on the basis of facts, which are incorrect and wrong. The reasons recorded and the documents on record are of paramount importance and will have to be examined to determine whether the stand of the Revenue is correct. If a subject-matter, entry or claim/deduction is not examined by an Assessing Officer, it cannot be presumed that he must have examined the claim/deduction or the entry, and, therefore, it is a case of "change of opinion". When at the first instance, in the original assessment proceedings, no opinion is formed, the principle of "change of opinion" cannot and does not apply. There is a difference between "change of opinion" and "failure or omission" of the Assessing Officer to form an opinion on a subject-matter, entry, claim, deduction, etc. When the Assessing Officer fails to examine a subject-matter, entry, claim or deduction, he forms no opinion. It is a case of no opinion. Whether or not the Assessing Officer had applied his mind and examined the subject-matter, claim, etc., depends upon factual matrix of each case. The Assessing Officer can examine a claim or subject-matt....
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....td. v. CLB [1966] 36 Comp Cas 639 (SC) (para 56) BLB Ltd. v. Asst. CIT [2012] 343 ITR 129 (Delhi) (para 14) Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) (para 45) CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC) (paras 9, 34) CIT v. Chase Bright Steel Ltd. (No. 1) [1989] 177 ITR 124 (Bom) (para 21) CIT v. DLF Power Ltd. [2012] 345 ITR 446 (Delhi) (para 14) CIT v. Eicher Ltd. [2007] 294 ITR 310 (Delhi) (paras 10, 28) CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) [FB] (paras 2, 12, 20, 48) CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) (paras 2, 28) CIT v. Khemchand Ramdas [1938] 6 ITR 414 (PC) (para 50) CIT v. P. V. S. Beedies P. Ltd. [1999] 237 ITR 13 (SC) (para 18) CIT (Asst.) v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500 (SC) (paras 4, 12) CIT v. Sharma (H. P.) [1980] 122 ITR 675 (Delhi) (para 9) Consolidated Photo and Finvest Ltd. v. Asst.CIT [2006] 281 ITR 394 (Delhi) (paras 9, 11) Dalmia P. Ltd. v. CIT [2012] 348 ITR 469 (Delhi) (para 17) G. R. Ramachari and Co. v. CIT [1961] 41 ITR 142 (Mad) (paras 38,....
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....aforementioned position of the law, we are reproducing hereunder the relevant provision of section 147 of the Act. "147. Income escaping assessment.-If the Assessing Officer, has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return und....
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....riting ; (iii) the opinion formed is subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion. (iv) reasons recorded and/or the documents available on record must show a nexus or that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income. (v) In cases where the first proviso applies, there is an additional requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts. The Explanation to the section stipulates that mere production of books of account or other documents from which the Assessing Officer could have, with due diligence, inferred material facts, does not amount to "full and true disclosure of material facts" (the proviso is not applicable where reasons to believe for issue of notice are recorded and notice is issued within four years from the end of assessment year). 2.7. The expression "change of opinion" postulates "formation of opinion" and then a "change thereof". In the context of section 147 of the Act it implies that the Assessing Off....
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....ent order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequences of his lapses. 2.9. The Hon'ble Delhi High Court in Consolidated Photo and Finvest Ltd. [2006] 281 ITR 394 (Delhi) held as under: "In the light of the authoritative pronouncements of the Supreme Court referred to above, which are binding upon us and the observations made by the High Court of Gujarat with which we find ourselves in respectful agreement, the action initiated by the Assessing Officer for reopening the assessment cannot be said to be either incompetent or otherwise improper to call for interference by a writ court. The Assessing Officer has in the reasoned order passed by him indicated the basis on which income exigible to tax had in his opinion escaped assessment. The argument that the proposed reopening of assessment was based only upon a change of opinion has not impressed us. The assessment order did not admittedly address itself to the....
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....re is no change of opinion. (2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by the principle of "change of opinion". (3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing 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. 2.11. 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.....
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...., analysis of purchase and sale of shares, etc. Thus, it is clear that the original assessment was framed after due application of mind, consequently, it can be said the reassessment framed by the Assessing Officer in the second category is a case of "change of opinion" and cannot be reopened for the reason that the assessee, as required, has placed on record primary factual material but on the basis of legal understanding, the Assessing Officer has taken a particular legal view. 2.12. A division Bench of Hon'ble Delhi High Court in New Light Trading Co. v. CIT [2002] 256 ITR 391 (Delhi), referred to the decision of the Hon'ble Apex Court in CIT v. P. V. S. Beedies P. Ltd. [1999] 237 ITR 13 (SC) and made following observations. (page 392) : "In the case of CIT v. P. V. S. Beedies P. Ltd. [1999] 237 ITR 13 (SC), the apex court held that the audit party can point out a fact, which has been overlooked by the Income-tax Officer in the assessment. Though there cannot be any interpretation of law by the audit party, it is entitled to point out a factual error or omission in the assessment and reopening of a case on the basis of factual error or omission pointed out by the aud....
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....nstitutionality, it is trite, should be favoured. In the event it is held that by reason of section 147 if the Income-tax Officer exercises its jurisdiction for initiating a proceeding for re-assessment only upon mere change of opinion, the same may be held to be unconstitutional. We are, therefore, of the opinion that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceeding upon mere change of opinion. 2.14. The Hon'ble Apex Court thereafter referred to the subsequent decision in Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC) wherein it was observed that some of the observations made in Kalyanji Mavji (supra) were far too wide and the statute did not permit reappraisal of material considered by the Assessing Officer during the original assessment. The observations in Kalyanji Maviji (supra), relied upon by the Ld. DR, that reopening would cover a case "where income has escaped assessment due to the oversight, inadvertence or mistake" was too broadly expressed and did not lay down the correct law. It was clarified and observed at page 1004 in Indian and Eastern Newspaper Society [1979] 119 I....
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.... the High Court is binding on all authorities functioning within its jurisdiction. It is not open to the Assessing Officer to feign ignorance of the law declared by the High Court and pass orders in defiance of the law laid down by it. It is averred in the petition that the Assessing Officer was informed at the hearing held on 10-12-2013 that the assessee is preparing a petition to challenge the reopening for the assessment year 2008-09 on identical grounds as done in earlier assessment year 2007-08 which is pending in the High Court and ad interim relief has also been granted restraining the revenue from proceeding with the assessment for the assessment year 2007-08. The passing of an order on 19-12-2013 by the Assessing Officer in undue haste and thereafter contending that in view of alternative remedy the writ petition should not be entertained does not appear bona fide. This undue haste in passing the impugned order dated 19-12-2013 is an attempt to overreach the Court and to thwart the assessee's challenge to the impugned order dated 20-11-2013 pending before the High Court. [Para 6] ■ In the above circumstances, the order dated 19-12-2013 passed by the Asse....
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....e same can be disturbed by exercise of powers under sections 147 and 148 only on satisfaction of the jurisdictional requirements. Further the reasons for reopening an assessment have to be tested/examined only on the basis of the reasons recorded at the time of issuing a notice under section 148 seeking to reopen an assessment. These reasons cannot be improved upon and/or supplemented much less substituted by affidavit and/or oral submissions. ■ Moreover the reasons for reopening an assessment should be that of the Assessing Officer alone, who is issuing the notice, and he cannot act merely on the dictates of any another person in issuing the notice. Moreover the tangible material upon the basis of which the Assessing Officer comes to the reason to believe that income chargeable to tax has escaped assessment can come to him from any source. However, the reasons for the reopening have to be only of the Assessing Officer issuing the notice. At the stage of issuing notice under section 148 to reopen a concluded assessment, the satisfaction of the Assessing Officer issuing the notice is of primary importance. This satisfaction must be prima facie satisfaction of having a....
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....the Assessing Officer during the original assessment proceedings leading to an order dated 12-10-2010. It would, therefore, follow that the reopening of the assessment by impugned notice dated 28-3-2013 is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the order dated 12-10-2010. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. [Para 14] ■ It was contended by the revenue that this is not a case of change of opinion, as the reopening is based on fresh tangible material, namely, audit report furnished by the internal audit department of the revenue. Neither the reasons furnished to the assessee disclose the material obtained from the audit report of the internal audit department of the revenue as the basis for reopening assessment, nor the order dated 20-11-2013 rejecting the assessee's objection state that the ground for reopening is the tangible material disclosed by the internal audit department of the revenue. The Bombay High Court in the case of Hindustan Lever v. R.B.Wadkar [200....
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....d a reasonable belief that income chargeable to tax has escaped assessment. Accordingly, the impugned notice dated 28-3-2013 issued under section 148 as well as the impugned order dated 20-112013 passed by the Assessing Officer rejecting the assessee's objection to reopen the assessment were liable to be set aside. [Para 20] The Hon'ble High court while coming to a particular conclusion, duly considered the followed cases:- * Asian Points Ltd. v. Dy. CIT [2008] 296 ITR 90 (Bom.) (para 6); * CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 (SC) (para 11) and * Hindustan Lever v. R.B.Wadkar [2004] 268 ITR 332/137 Taxman 479 (Bom.) (para 15) followed. * CIT v. Gopal Purohit [2011] 336 ITR 287/[2010] 188 Taxman 140 (Bom.) (para 9), * CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 (SC) (para 11) 2.16. In another case in CIT vs Amitabh Bachhan (2012) 349 ITR 76 (Bom.), the Hon'ble jurisdictional High Court observed/held as under:- "This appeal by the Revenue under section 260A of the Income-tax Act, 1961 (hereinafter referred to as "the said Act") challenges the order March 19, 201....
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....er, when the Assessing Officers asked to substantiate these expenses, the claim was withdrawn by the assessee without furnishing the details regarding sources for incurring these expenses were incurred out of undisclosed source which required further verification under the provisions of section 69 of the Income-tax Act. Further, there are certain issues for verification like : (i) Applicability of section 40A(3) in respect of cash journal expenses. (ii) Personal element in respect of vehicle expenses claimed. (iii) Professional expenses claimed were exactly for the purpose of profession or not. (iv) Books of account maintained by the assessee were not examined. (v) The assessee maintained seven bank accounts, but details in respect of six bank accounts were furnished. Details in respect of S. B. A/c. No. 107456 with SBI were neither provided nor called for by the Assessing Officer which might have been maintained by the assessee for professional receipts from EEL/Star TV, etc. (vi) Receipts of dividend from Vithal Nagar Co-operative Society with reference to investment in house property. (vii) Sources of cash deposits i....
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.... for expenditure at 30 per cent. of the professional receipts in the revised return of income which was later withdrawn. In fact the reasons for reopening the assessment for the year 2002-03 itself records that the claim of 30 per cent. ad hoc expenses was withdrawn when the respondent-assessee was asked to substantiate the claim. Therefore, the same material was a subject-matter of consideration during the proceedings for assessment leading to order dated March 29, 2005. In the circumstances, there could be no basis for the Assessing Officers to form a belief that income has escaped assessment. It is a settled position of law that review under the garb of reassessment is not permissible. In the circumstances, we uphold the order of the Tribunal dated March 19, 2010. 9. In view of the above, no substantial question of law arises for consideration by this court. Appeal is dismissed. No order as to costs." 2.17. In A. L. A. Firm (supra), the Hon'ble Apex Court explained that there was no difference between the observations of the Supreme Court in Kalyanji Maviji [1976] 102 ITR 287 (SC) and Indian and Eastern Newspaper Society case [1979] 119 ITR 996 (SC), as far as propos....
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....en the assessment under section 147(b) by virtue of proposition (4) of Kalyanji Mavji. The fact that the details of sales of house properties were already in the file or that the decision subsequently come across by him was already there would not affect the position because the information that such facts or decision existed comes to him only much later. What then, is the difference between the situations envisaged in propositions (2) and (4) of Kalyanji Maviji's case [1976] 102 ITR 287 (SC). The difference, if one keeps in mind the trend of the judicial decisions, is this. Proposition (4) refers to a case where the Income- tax Officer initiates reassessment proceedings in the light of 'information' obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, for e.g., as in the two Madras decisions referred to earlier. Proposition (2) no doubt covers this situation also but it is so widely expressed as to include also cases in which the Income-tax Officer, having considered all the facts and law, arrives at a particular conclusion, but ....
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....ll within the scope of section 147(b) of the Act'." (emphasis supplied) The aforesaid observations are a complete answer to the issue that if a particular subject-matter, item, deduction or claim is not examined by the Assessing Officer, it will nevertheless be a case of "change of opinion" and the reassessment proceedings will be barred. 2.18. We are conscious of the fact that the aforesaid observations have been made in the context of section 147(b) with reference to the term "information" and conceptually there is difference in scope and ambit of reopening provisions incorporated with effect from April 1, 1989. However, it was observed by the Hon'ble Apex Court in Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) that the amended provisions are wider. What is important and relevant is that the principle of "change of opinion" was equally applicable under the unamended provisions. The Supreme Court was, therefore, conscious of the said principle, when the observations mentioned above in A. L. A. Firm [1991] 189 ITR 285 were made. 2.19. Under the amended provisions of section 147, an assessment can be reopened if the Assessing Officer has "reason to believe" that incom....
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.... operative. However, we are of the view, that mere fresh application of mind to the same set of facts or "mere change of opinion" does not confer jurisdiction to the Assessing Officer even under the post 1989 section 147 of the Act. Our view find support from the decision from Hon'ble Delhi High court in Jindal Photo Films Ltd. vs DCIT (1998) 234 ITR 170 (Del.), Garden Silk Mills Pvt. Ltd. vs DCIT (1999) 151 CTR (Guj.) 533, Govind Chhapabhai Patel vs DCIT 240 ITR 628, 630 (Guj.), Foramer vs CIT (2001) 247 ITR 436 (All.), affirmed in CIT vs Foramer Finance (2003) 264 ITR 566, 567 (SC), Ipica Laboratories vs DCIT (2001) 251 ITR 416 (Bom.), Ritu Investment Pvt. Ltd.(2012) 345 ITR 214 (Del.), Ketan B. Mehta vs ACIT (2012) 346 ITR 254 (Guj.), Ms. Praveen P. Bharucha vs DCIT (2012) 348 ITR 325 (Bom.), CIT vs Usha International Ltd. 348 ITR 485 (Del.), Agricultural Produce Market Committee vs ITO (2013) 355 ITR 348 (Guj.), B.B.C. World News Ltd. vs Asst. DIT (2014) 362 ITR 577 (Del.). Identical ratio was laid down in CIT vs Malayala Manorma Company Ltd. (2002) 253 ITR 378 (Ker.) We think this thread runs through the various provisions of the Act. But Explanation 1 to the section confines ....
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.... Court in CWT vs Imperial Tobacco Company Ltd. (1966) 61 ITR 461 has noted such divergence of opinion on the point. Hon'ble jurisdictional High Court in CIT vs Sir Mohammad Yusuf Ismail (1944) 12 ITR 8 (Bom.) held that mere change of opinion on the same facts are on question of law or mere discovery of mistake of law is not sufficient information and that in order to sustain action u/s 34 by further holding that reassessment is not permissible. The Hon'ble Apex Court in Simon Carves Ltd. (1976) 105 ITR 212 held that errorless legally correct order cannot be reopened, therefore, it is settled law that without any new information and on the basis of mere change of opinion, reopening of assessment is not permissible. As was held in CIT vs TTK Prestige ltd. (2010) 322 ITR 390 (Karn.) SLP dismissed in 2010 322 ITR (St.) 14 (SC). Reference also made to Asian Paints ltd. vs DCIT (2009) 308 ITR 195 (Bom.), Andhra Bank Ltd. vs CIT (1997) 225 ITR 447 (SC). The observations of the Supreme Court are a protection against the abuse of power; they also protect the Revenue which can, in the light of subsequent coming into light of facts or law, reopen the assessment. In the light of the aforesaid ....