TaxTMI 
TaxTMI 
2021 (2) TMI 427
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....eks to challenge the legality and validity of the notice issued by the respondent under Section 148 of the Income Tax Act, 1961 (for short "the Act, 1961") proposing to reopen the assessment for the year 2012-13 under Section 147 of the Act, 1961. It appears that the writ applicant filed his original return of income on 19th September, 2012, declaring total income at Rs. 4,81,02,130/-. The case was selected for scrutiny and an order under Section 143(3) of the Act was passed on 26th February, 2015, determining the total income at Rs. 4,81,02,130/-. Thereafter, an order under Section 154 of the Act was passed dated 25th May, 2018, determining the total income of Rs. 4,81,18,350/-. In the original return of income, the TDS deducted by some of the parties was not included in the income and was also not claimed as TDS. In such circumstances, the amount of Rs. 16,270/- was added to the total income of the assessee and the TDS of the same was also given under the order passed under Section 154 and, ultimately, the income was determined at Rs. 4,81,18,350/-. 3. The reasons for reopening furnished to the writ applicant are as under; "The assessee has filed original return of in....
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....t and as opinion was formed that no disallowance u/s.14A was called for. It is therefore submitted that an opinion once formed is not open to change and therefore the notice u/s. 148 is bad and must be dropped. It is submitted that vide letter dated 2.07.2014 the then assessing officer had called various details including the details about the income claimed exempt and the expenses incurred for earning such exempt income. Vide letter dated 19.08.2014, I had replied to the same giving details of the exempt income earned and also stated that no expenditure was incurred to earn such income. Further, pursuant to personal hearing a specific submission was made regarding non-applicability of section 14A r.w.r. 8D vide letter dated 11.09.2014. It is submitted that the issue was scrutinized in detail at the time of original assessment and therefore by issue of notice u/s. 148 an opinion that was originally formed is sought to be change which is not permissible in law. It is therefore submitted that the notice is bad and be dropped. The law on this point is explained by the Supreme Court in Kelvinator of India Ltd. (2010) 320 ITR 561(SC). I annex herewith the copy of letter dated 25.07.2014....
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.... "I state that I have received tax free income from Shares/ mutual fund and Bond. You have asked me to clarify why no disallowance with respect to expenses has been made under section 14A of the Income Tax Act read with Rule 8D of Income Tax Rules. In this regard I would like to state that no disallowance is required because of following reasons. On facts Section 14A and rule 8D are not applicable in any case as I have incurred almost no expenditure to earn the exempt income. Further, large part of the income is received through ECS hence no expenditure is incurred to earn such income at all. On Law: Pleader refer rule 8D. Relevant para is produced hereunder for reference. "(1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year is not satisfied with- (a) the correctness of the claim of expenditure made by the assessee, or (b) the claim made by the assessee that no expenditure has been incurred. In relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordan....
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....een considered. However, the same is not found acceptable on following grounds; a) Regarding the contention of the assessee that he has disclosed all details and facts with documentary evidence is not acceptable. In this connection, it is stated that in the original assessment order, the Assessing Officer has not formed any opinion regarding disallowance u/s. 14A r.w.r 8D. Therefore, when no opinion has been formed by the Assessing Officer, the question of change of opinion does not arise. b) Regarding disclosure of all material facts necessary for the assessment, it is stated that in view of the facts, this case has been re-opened only after following the due procedure prescribed in the IT Act and was based on the tangible material leading to the conclusion that there was escapement of income from assessment. It may also be pointed out that mere furnishing of details about income does not mean that all material facts have been fully and truly disclosed. In the case of Indo-Aden Salt Manufacturing and Trading Co.(P) Ltd. vs. Commissioner of Income Tax 159 ITR 624 (SC), the Hon'ble Supreme Court has held that even if the assessee had supplied details but if it ....
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....essment is valid as per law. 5. In view of the above discussion and the judicial pronouncements in Revenue's favour, the objections raised by the assessee against reopening of assessment cannot be entertained as the same are without any basis. It may be seen that while reopening the assessment, proper procedure as per income tax law has been followed by the Assessing Officer. The case has been reopened well within the time limit prescribed as per the provisions of the Income Tax Act, 1961 and also on account of the fact that there was reason to believe that the income chargeable to tax has escaped assessment. 6. In view of the above facts, it becomes evident that this case has been reopened only after following the due procedures prescribed in the IT Act and was based on the tangible material leading to the conclusion that there was escapement of income from assessment. It may also be pointed out that mere furnishing of details about income does not mean that all material facts have been fully and truly disclosed. In the case of Indo-Aden Salt Manufacturing and Trading Co. (P) Ltd. vs. Commissioner of Income Tax 159 ITR 624 (SC), the Hon'ble Supreme Court ....
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....nge of opinion. Mere change of opinion would not constitute a sufficient ground to reopen the assessment proceedings and that too beyond the period of four years in a case of scrutiny assessment under Section 143(3) of the Act. Mr. Soparkar submitted that during the course of the original assessment proceedings, the Assessing Officer, vide his letter dated 25th July, 2014, had called for various details including the details about the income claimed exempt and the expenses incurred for earning such exempt income. He pointed out that vide letter dated 19th August, 2014, the writ applicant had replied to the same, furnishing details of the exempt income earned and had also clarified that no expenditure was incurred to earn such income. He further submits that in the course of the personal hearing, a specific submission was made regarding the non-availability of Section 14A read with Rule 8D. He would argue that the issue regarding the non-applicability of Section 14A read with Rule 8D was scrutinized in detail at the time of the original assessment. In such circumstances, according to Mr. Soparkar, it could be said that the Assessing Officer consciously took a particular decision and....
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.... the escapement of income was noticed relying upon some tangible material. 14. Mr. Bhatt invited the attention of this Court to few relevant averments made in the affidavit-in-reply filed on behalf of the Revenue. We quote the relevant averments relied upon by Mr. Bhatt; "3.2 With reference to para 2.3, it is submitted that the contention of the petitioner is not correct. Regarding disclosure of all material facts necessary for the assessment, it is submitted that mere furnishing of details about income does not mean that all material facts have been fully and truly disclosed. In the case of Indo-Aden Salt Manufacturing and Trading Co. (P) Ltd. Vs. Commissioner of Income-tax 159 ITR 624 (SC), the Hon'ble Supreme Court has held that even if the assessee had supplied details but if it had not disclosed true facts which the ITO could have found by further probing, the reopening of the assessment was valid. In the case of Olwin Tiles (India) Pvt. Ltd. Vs. DCIT in ITA No.17303, 18388 & 18389 of 2015, Hon'ble Gujarat High Court vide its order dated Sth January 2016 has held that once the reasons are recorded properly, the proceedings initiated u/s.147 of the Act are valid....
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....ing of the assessment was valid as per law. 3.5 With reference to para 3.2, it is submitted that the above contention of the assessee is not acceptable. It is submitted that the assessment was reopened only after following the due procedure described under the Income tax Act and was based on tangible materials leading to the conclusion that income chargeable to tax has escaped assessment Further, it is submitted that mere furnishing of details about income does not means that all material facts have been fully and truly disclosed. Further, during the course of original assessment proceedings the Assessing Officer has not formed any opinion regarding issue of disallowance of expenses related to exempt income u/s.14A. Therefore, the question of change of opinion does not arise. 3.6 With reference to para 3.3 and 3.4, it is submitted that contention of the assessee is not correct. It is submitted that the assessment was reopened on the basis of tangible materials leading to the conclusion that there was escapement of income from the assessment. It may also be pointed out that mere furnishing of details about income does not mean that all material facts have been full....
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....izance of the information given by the Revenue Audit Party and thereafter to facts pointed out by the Audit has been verified and after applying her mind found that the mistake pointed out was correct. Therefore, after following due procedure the assessment was reopened. Therefore the reopening of the assessment is valid as per law. With reference to to para 3.6, it is submitted that the contention of the petitioner is that he has not incurred any expenses for earning tax free income is not correct The assessee has claimed exempt income of dividend of Rs. 2743265/- and also claimed administrative and other expenses in Profit & Loss account. However, the assessee failed to make disallowance of expenditure related to the exempt income u/s.14A r.w.r. 8D(2)(iii). The disallowance was worked out under Rule 8D(2)(iii) at Rs. 8,20,952 - being 0.5% of average investment as per Balance Sheet as on 31.03.2011 and 31.03.2012. Therefore, the provision of Rule-8D(2)(iii) is applicable to the petitioner case. Hence, the disallowance under rule-8D(2)(ili) has been correctly worked out. 3.9 With reference to para 4, it is submitted that the contention of the petitioner is not cor....
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....he purpose of reopening which is otherwise not permissible in law on mere change of opinion. It cannot be said that there was any failure on the part of the assessee to fully and truly disclose all the material facts. This writ application, in our opinion, could be said to be squarely covered by the decision of the Supreme Court rendered in the case of CIT vs. Kelvinator India, reported in (2010) 2 SCC 723, wherein the Supreme Court observed as under; "5. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the assessing officer to make a back assessment, but in Section 147 of the Act (with effect from 1-4- 1989), they are given a go-by and only one condition has remained viz. that where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-14- 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing ....