TaxTMI 
TaxTMI 
2022 (1) TMI 652
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....f banking through among the members, it is governed by the Reserve Bank Act. 3. The appellant originally filed its return of income declaring 'nil' income on 27.10.2004 after claiming an exemption under Section 80P(2) of the Act. The same was processed under Section 143(1) of the Act. Subsequently, the case was selected for scrutiny and order under Section 143(3) of the Act was passed accepting the return of income at 'nil'. Thereafter, the assessing officer issued a notice under Section 148 of the Act dated 06.03.2009 and the assessment under Section 143(3) r/w Section 147 of the Act was concluded on 31.12.2009 by determining the total income of the appellant at Rs. 44,53,500/- as against the 'nil' income filed by the appellant. Being aggrieved, the assessee/appellant preferred an appeal before the Commissioner of Income Tax (Appeals)-III, Bengaluru, who partly allowed the appeal. However, being aggrieved by the order of the Commissioner of Income Tax (Appeals) to the extent it was against the appellant, the appellant preferred an appeal before the Tribunal and the same came to be dismissed. Hence, this appeal by the appellant/assessee. 4. This appeal was admitted by this Co....
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....s to answer the substantial questions of law in favour of the assessee and against the revenue. 6. Learned counsel appearing for the Revenue would argue that valid reasons have been recorded by the assessing officer for reopening the assessment proceedings under Section 147/148 of the Act; no flaw could be found in the said reasons; hence, the same cannot be held to be without jurisdiction. Learned counsel placing reliance on the judgment of the Hon'ble Apex Court in the case of Kalyanji Mavji & Co., v. Commissioner of Income-tax, reported in (1976) 102 ITR 287 (SC) and in the case of Indian & Eastern Newspaper Society v. Commissioner of Income-tax, reported in (1979) 2 Taxman 197(SC) as well as in the case of Income Tax Officer v. Techspan India (P) Ltd., reported in (2018) 92 taxmann.com 361(SC) submitted that to ascertain whether reopening is on change in opinion, it is required to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If no such analysis is made in the assessment order, it may be difficult to attribute to the assessin....
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....king only is also relevant. The relevant observations from the Privy Council are as under: "Enhanced values obtained from realizations or conversion of securities may be assessable where what is done is not merely a realization or change of investment, but an act done in what is truly the carrying on, or carrying out, of a business. In the ordinary case of a Bank, the business consists in its essence of dealing with money and credit. Numerous depositors place their money with the bank often receiving a small rate of interest on it. A number of borrowers receive loans of a large part of these deposited funds at somewhat higher rate of interest. But the banker has always to keep enough cash or easily realizable securities to meet any probable demand by the depositors. No doubt there will generally be loans to persons of undoubted solvency which can quickly be called in, but it may be very undesirable to use this second line of defence. If some of the securities of the bank are realized in order to meet withdrawals by depositors, this is a normal step in carrying on the banking business, or in other words, that it is an act done in what is truly the carrying on of the banking....
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....year, he may, subject to the provisions of Sections 148 to153, 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 recompute 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)." After the Amending Act, 1989, Section 147 reads as under: "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 recompute 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 rele....
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.... v. Usha International Ltd., reported in (2012) 348 ITR 485, had considered the following substantial questions of law. "(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 year, 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?" Analyzing the Judgments of the Hon'ble Apex Court in extenso, observed thus: "(1) Reassessment proceedings can be validly initiated in case return of income is pr....
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.... the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income-tax Officer subsequent to the original assessment. If the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for the reassessment. Where, however, the Incometax Officer had not considered the material and subsequently come by the material from the record itself, then such a case would fall within the scope of Section 147(b) of the Act. (emphasis supplied) The aforesaid observations are complete answer to the submission 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. 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 incorp....
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....gs for reassessment. In view of the above observations we must add one caveat. There may be cases where the Assessing Officer does not and may not raise any written query but still the Assessing Officer in the first round/ original proceedings may have examined the subject matter, claim etc, because the aspect or question may be too apparent and obvious. To hold that the assessing officer in the first round did not examine the question or subject matter and form an opinion, would be contrary and opposed to normal human conduct. Such cases have to be examined individually. Some matters may require examination of the assessment order or queries raised by the Assessing Officer and answers given by the assessee but in others cases, a deeper scrutiny or examination may be necessary. The stand of the Revenue and the assessee would be relevant. Several aspects including papers filed and submitted with the return and during the original proceedings are relevant and material. Sometimes application of mind and formation of opinion can be ascertained and gathered even when no specific question or query in writing had been raised by the Assessing Officer. The aspects and questi....
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....to believe that the deduction claimed by the assessee under Section 80P(2) of the Act to the tune of Rs. 44,53,500/- being the profit on sale of securities was not allowable, as the same has to be charged under the head "Capital Gain" and is not a gain from the banking business. 15. This would clearly establish that there was no independent application of mind by the Assessing Officer. Indeed the assessing officer objected to the audit objection in giving a reply to the same. On the other hand, the assessing officer was of the firm opinion that the assessment concluded under Section 143(3) of the Act was passed in consonance with various judicial pronouncements and there is no escapement of income. 16. In the case of P.C.Patel & Co. v. Dy.CIT, reported in (2015) 379 ITR 151, the Division Bench of the Gujarat High Court has held that any reassessment proceedings initiated at the instance of audit party objection, without the assessing officer himself has reason to believe that the income chargeable to tax having escaped the assessment, must fail. This is the view expressed by the Coordinate Bench of this Court in the case of Commissioner of Income-tax v. GMR Holdings (P....