TaxTMI 
TaxTMI 
2022 (4) TMI 1183
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appeals erred in acknowledging the fact that the assessing officer is not justified in reopening the file u/s. 148 of the Income Tax Act 1961 just to review its own order passed the time of regular scrutiny c. The learned Commissioner appeals erred in acknowledging the fact that the assessing officer is not justified in opening the file of the assessee u/s. 148 of the Income Tax Act based on a High Court judgment d. The learned Commissioner appeals is not justified in ignoring the income tax return filed audited books of accounts produced and supporting documents at the time of regular scrutiny assessment for the AY 13-14. e. The learned Commissioner appeals wherein knowledge in the fact that an investment was made with unrelated and independent people and does not fall for the inclusion of number of residential house property for the deduction u/s. 54F of the Income Tax Act 1961. f. The learned Commissioner appeals erred in calculation of the interest u/s. 234B at the time of passing the impugned assessment order g. The learned Commissioner appeals has not considered the valid explanation given by your appellant in this regard 3. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d the learned AR placed reliance on CIT vs Corporation Bank Ltd (2002) 254 ITR 791 (SC). The learned AR also submitted the details submitted before the AO during the course of regular assessment. 6. The learned DR submitted that the nature and character of the asset sold during the assessment year 2015-16 was never verified by the AO and had he done it with due diligence the ownership of two assets of two residential assets at the time of sale of the capital asset in assessment 2012-13 would have surfaced whereby the assessee would not have got the exemption u/s.54F. The Learned DR in this regard placed reliance on the decision of the Supreme Court in the case of Ess Ess Kay Engineering Co. P. Ltd. vs CIT (2001) 247 ITR 818 SC. 7. We have heard the rival submissions and perused the materials on record. We notice that the AO during the course of original assessment u/s.143(3) of the Act, had called for various details including the statement of income, Balance sheet and Profit & Loss account, property details, rental agreements etc. which the assessee has been sharing on from time to time. These details that have been called for are for assessment years 2012-13 and 2011-12 als....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ly in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....O's 'reason to believe' that any 'income has escaped assessment' where the original assessment is completed accepting the return of income filed by the assessee. The Hon'ble Delhi High Court in the case of CIT, Delhi vs M/S. Kelvinator Of India Ltd, 256 ITR 1 has considered a similar issue where the court has held that 18. From a bare perusal of the provisions contained in Section 147 of the said Act, as it stood up to 31st March 1989, it is evident that to confer jurisdiction u/s. 147 of the Act two conditions were required to be satisfied viz.; (i) the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment; and (2) he must also have a reason to believe that such escapement occurred by reason of either; (a) omission or failure on the part of the assessed to make a return of his income u/s. 139 or (b) omission or failure on the part of the assessed to disclose fully and truly all material facts necessary for his assessment for that year. The afore-mentioned requirements of law must be held to be conditions precedent for invoking jurisdiction of the Assessing Officer to re-open the assessment u/s. 147 of the said Act. It is trite ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fore the Income-tax Officer has jurisdiction to start proceedings after the expiry of 4 years. The argument that the court ought not to investigate the existence of one of these conditions, viz., that the Income-tax Officer has reason to believe that under-assessment has resulted from nondisclosure of material facts, cannot therefore be accepted." 22. In Indian & Eastern Newspaper Society v. C.I.T. (S.C.) reported in (1979) 119 ITR 996 three Judges Bench of the Apex Court held that although disclosure of a new fact 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 ITO 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 ITO 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 in....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... order of the Commissioner of Income-tax (Appeals) while recording reasons u/s. 147 he could have said even in the original 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 u/s. 147 of the Act. It is also equally well settled that if a notice u/s. 148 has been issued without the jurisdictional foundation u/s. 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 u/s. 147/148 of the Act." 25. Thus, the Court held that even under the newly substituted Section 147, with effect from 1st April 1989, an assessment could not be re-opened on a mere change of opin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s where the Assessing Officer has not made an assessment of any item of income chargeable to tax while passing the assessment order in the relevant assessment year, it cannot be said that such income was subjected to an assessment. In the assessment proceedings, the Assessing Officer would ascertain on consideration of all relevant circumstances the amount of tax chargeable to a given taxpayer. The word "assessment" would mean the ascertainment of the amount of taxable income and of the tax payable thereon. In other words, where there is no ascertaining of the amount of taxable income and the tax payable thereon, it can never be said that such income was assessed. Merely because during the assessment proceedings the relevant material was on record or could have been with due diligence discerned by the Assessing Officer for the purpose of assessing a particular item of income chargeable to tax, it cannot be inferred that the Assessing Officer must necessarily have deliberated over it and taken it out while ascertaining the taxable income or that he had formed any opinion in respect thereof. If looking back it appears to the Assessing Officer (albeit within four years of the end of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t empowers the Commissioner to review an order which is prejudicial to the Revenue. 31. In Bawa Abhai Singh's case (supra) a Division Bench of this Court of which one of us (D.K. Jain, J.) is a Member, clearly held: "The crucial expression is "reason to believe". The expression predicates that the Assessing Officer must hold a belief ... by the existence of reasons for holding such a belief. In other words, it contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons inducing the belief. Such a belief may not be based merely on reasons but it must be founded on information. As was observed in Ganga Saran and Sons P. Ltd. v. ITO (1981) 130 ITR 1 (SC), the expression "reason to believe" is stronger than the expression "is satisfied". The belief entertained by the Assessing Officer should not be irrational and arbitrary. To put it differently, it must be reasonable and must be based on reasons which are material. in S.Narayanappa v. CIT (1967) 63 ITR 219, it was noted by the apex court that the expression "reason to believe" in Section 147 does not mean purely a subjective satisfaction on the part of the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessment in respect of an income which has escaped assessment. Viewed in that angle the power to reopen assessment is much wider under the amended provision and can be exercised even after the assessed has disclosed fully and truly all the material facts. To similar view were the conclusions of this court in Rakesh Aggarwal v. Asst. CIT (1997) 225 ITR 496. It is to be noted at this juncture that the twin conditions must be fulfillled if the case is one which is covered by the proviso to Section 147 operative with effect from April v, 1989." (emphasis supplied by us). 32. It is evident from the afore-extracted position of the decision that it is not an authority for the proposition that a mere change in the opinion would also confer jurisdiction upon the Assessing Officer to initiate a proceeding u/s. 147 of the Act as was contended by Mr. Jolly. 33. A decision as is well known, is an authority for the proposition that it decides and not what can logically be deduced there from. A point not raised nor argued at the bar cannot be said to be the ration of the decision. 34. Another aspect of the matter cannot be also lost sight of. The Board has power to iss....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ement commission to exercise the power of an income-tax authority under the Act. We must clarify here that while exercising the power derived under the circulars of the board, the commission does not act as a subordinate to the board but will be enforcing the relaxed provisions of the circulars for the benefit of the assessed in the process of settlement." 35. The Board in exercise of its jurisdiction under the aforementioned provisions had issued the Circular on 31st October 1989. The said Circular admittedly is binding on the Revenue. The Authority, therefore, could not have taken a view, which would run counter to the mandate of the said Circular. Clause 7.2 as referred to hereinbefore is important. 36. From a perusal of Clause 7.2 of the said Circular it would appear that in no uncertain terms it was stated as to under what circumstances the amendments had been carried out i.e. only with a view to allay the fears that the omission of the expression "reason to believe" from Section 147 would give arbitrary powers to the Assessing Officer to reopen past assessment on mere change of opinion. 37. It is, therefore, evident that even according to the CBDT a....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e material which had been supplied by the assessed himself. 43. 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 u/s. 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 Sub-section (3) of Section 143. When a regular order of assessment is passed in terms of the said Sub-section (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 anything further, the same would amount to giving premium to an authority exercising quasi judicial function to take benefit of its own wrong. 45. For the reasons afore-mentioned we are of the opinion that answer to the question r....