TaxTMI 
TaxTMI 
2024 (3) TMI 723
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....he revenue has assailed the impugned order on the following grounds of appeal: "1. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A)/NFAC was justified in quashing the assessment order passed u/s. 148/143(3) of the Act wherein addition on account of wrong claim of deduction u/s. 80IA of the Income Tax Act, 1961 were made? 2. Whether the facts and circumstances of the case Ld. CIT(A)/NFAC was justified in quashing the assessment order passed u/s. 148/143(3) of the Act wherein disallowance on depreciation claimed on bio gas plant were made? 3. Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in quashing the re-assessment order by stating it as a mere change of opinion when the re-assessment proceedings was based on the wrong claim of deduction u/s - 80IA of the Act and depreciation claimed wrongly on bio-gas plant , whereas Hon'ble High Court of Delhi in the case of Chetan Sabharwal vs. ACIT [2019] 110 taxmann.com 57 (Delhi) has held that where original assessment orders were silent on aspect on which re-opening had been ordered, it could not be said that reason to believe constituted a &#....
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....Rs.1,04,01,562/- 2. Disallowance on account of depreciation claimed in the original return on biogas plant (the depreciation was not claimed in the return filed in response to the notice u/s. 148 of the Act) Rs. 21,98,105/- 7. Aggrieved the assessee carried the matter before the CIT(Appeals) who allowed the appeal of the assessee by observing as under: " FINDING 7.1 The submissions of the appellant are considered carefully in the light of facts of the case. In this case pertaining to A.Y. 2010-11, original assessment order u/s 143(3) was passed on 17.04.2012. The notice u/s 148 proposing reassessment is dated 31.03.2016. Therefore, the assessment has been re- opened after the expiry of four years form the end of the assessment year in a case where scrutiny assessment u/s 143(3) had also been carried out. Such a case would be covered by 1st proviso to section 147 which casts a duty on the assessing officer to establish that escapement of income is on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. 7.2 The relevant extracts of the reasons recorded by the AO while reopeni....
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.... 7.4 In response, the appellant filed a detailed reply to the queries vide his letter dated nil, which has been submitted by the appellant as a part of the paper book in the present appellate proceedings. Apparently, the AO was satisfied with the reply of the appellant, and he went on to complete the assessment vide his order dated 17.04.2012 without taking any adverse view on the claim of deduction u/s 80IA. Similarly, he did not form any adverse view on depreciation claimed on bio gas plant. 7.5 It is in this background, the validity of reopening of assessment is examined. Admittedly, the reopening has been done after the expiry of four years from the relevant assessment year, and as such, first proviso to section 147 is applicable. The first proviso to section 147 of the Act states that: 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 ....
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....n a recent decision in the case of Shahlon Silk Industries Pvt Ltd Vs ACIT (Special Civil Application No. 20436 of 2018) (2023), Gujarat High Court has also held that reopening of an assessment on a mere change of opinion is not permissible and is liable to be quashed. 7.10 It is apparent from the facts of this case that there is change of opinion by the Assessing Officer to reopen the assessment for the Assessment Year 2010-2011. During the original assessment proceedings, the AO raised a query about the issue in question which was duly responded to by the appellant. After that, no addition was made by the AO on such issue. Later on, while recording the reasons for reopening the assessment, AO made no reference to any new information being available with him which was not in his possession during the first round of assessment. Under such circumstances, the Assessing Officer cannot have any jurisdiction to issue the notice under section 148 of the Act, 1961 for reopening the assessment for the year under consideration, more particularly when the assessment is sought to be reopened beyond a period of four years as held by the Supreme Court in case of Commissioner of Income ....
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....ons 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 herein below the relevant Portion of Circular No.549 dated 31st October, 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, 'reasons to believe' had been explained in a number of court rulings in the past and was well settled ang 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, hag 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' Other provisions of the new section 147 how....
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....sed on a mere "change of opinion" of the successor A.O. Also, it was submitted by him that as the A.O while framing the original assessment had looked into the assessee's claim for depreciation and partly disallowed the same to the extent relatable to that claimed by the assessee on motor cars, therefore, reopening of the assessee's case on the ground that depreciation on bio gas plant was liable to be disallowed as the said asset was not required to earn carbon credit was also based on a mere "change of opinion", which, thus, was not permissible as per the mandate of law. The Ld. AR in support of his contention that mere "change of opinion" cannot form the basis for reopening of a concluded assessment had relied on the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India (2010) 320 ITR 561 (SC). 11. Alternatively, the Ld. AR submitted that as the assessment in the case of the assessee was originally framed by the A.O. vide his order passed u/s. 143(3) dated 17.04.2012, therefore, as per the "1st proviso" to Section 147 of the Act in the absence of any failure on the part of the assessee to disclose fully and truly all material facts neces....
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....his predecessor. For the sake of clarity, the "reasons to believe" that had formed the very basis for reopening the concluded assessment in the case of the assessee are culled out as under: "The assessee filed return of income on 01.10.2010 declaring total income of Rs. 2,53,80,620/-. The assessment order u/s. 143(3) was passed in re case on 17.04.2012 determining total income of Rs. 2,56,01,930/- with addition of Rs. 1,00,000/- on account of disallowance out of Vehicle exp., Rs. 36,790/- out of depreciation, Rs. 15,000/- out of General exp., Rs. 36,840/- out of telephone exp., Rs. 20,000/- out of traveling/ con. and Rs. 12,680/- in Power Dvn. The assessee is an individual deriving income from manufacturing starch, glucose, dextrin, dextrose Monohydrate etc. and power generation. The assessee generated power in three different units namely Razaram Maize 7ffrAuct (power generation), Razaram Maize Product (Wind power), Razaram Maze Product (green power). In due course of verification, it was found that the assessee has claimed deduction u/s. 80IA on Razaram Maize Product (green power) on carbon credit income, though has not shown any power generation. The carbon cre....
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....he successor A.O. The Ld. Departmental Representative ("DR", for short) on being confronted with the aforesaid factual position could not rebut the same. 17. Because the case of the assessee had been reopened with the purpose to re-appreciate the facts that were already available on record and not based on any fresh material/document coming into the possession of the A.O after the culmination of the original assessment by his predecessor vide order u/s. 143(3) dated 17.04.2012, which would reveal that any income of the assessee chargeable to tax had escaped assessment, we find substance in the claim of the Ld. AR that the A.O. had traversed beyond the scope of his jurisdiction and had wrongly reopened the concluded assessment of the assessee under Sec. 147 of the Act. We are unable to comprehend what new "material" or "information" had come up before the A.O., which justified the reopening of the concluded assessment of the assessee. We are afraid that re-appreciation of the facts already available on record before the A.O. while framing the original assessment is not permissible u/s 147 of the Act. Our aforesaid view is fortified by the judgment of the Hon'ble High Court of....
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....lure to apply his mind to the material which, according to him, is relevant and which was available on record. We find that this situation has been considered by the Full Bench of the Delhi High Court in its judgment in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 and the Full Bench has observed thus (page 19) : "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 judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi- judicial function to take benefit of its own....
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....t based on a "change of opinion", which is not allowed as per the mandate of law, had thereafter been approved by the Hon'ble Apex Court in CIT Vs. Kelvinator of India (2010) 320 ITR 561 (SC). The observations of the "Full bench" of the Hon'ble High Court of Delhi in CIT Vs. Kelvinator of India (2002) 256 ITR 1 (Del), which thereafter had been approved by the Hon'ble Apex Court in 320 ITR 561, are culled out as under (relevant extract): "10. It is further to be seen that the legislature has not conferred power on the AO to review its own order. Therefore, the power under s. 147 cannot be used to review the order. In the present case, though the AO has used the phrase "reason to believe", admittedly between the date of the order of assessment sought to be reopened and the date of formation of opinion by the AO, nothing new has happened, therefore, no new material has come on record, no new information has been received; it is merely a fresh application of mind by the same AO to the same set of facts and the reason that has been given is that the some material which was available on record while assessment order was made was inadvertently excluded from consideration. This wi....
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....f by the first appellate authority. 20. Alternatively, we concur with the claim of the Ld. AR that the reopening of the concluded assessment of the assessee is also hit by the "1st proviso" to Sec. 147 of the Act. Admittedly, the original assessment was framed in the case of the assessee for the year under consideration, i.e., A.Y 2010-11 vide order passed under Sec. 143(3) of the Act, dated 17.04.2012. The concluded assessment of the assessee was thereafter reopened vide notice issued under Sec. 148 of the Act, dated 31.03.2016. It is the claim of the ld. A.R. that the A.O. had exceeded his jurisdiction and framed the reassessment order under Sec. 143(3) r.w.s 147, dated 25.12.2017, inter alia, for the reason that the same had been passed in violation of the mandate of the "1st proviso" of Sec. 147 of the Act. Admittedly, as stated by the Ld. A.R and, rightly so, in a case where an assessment had earlier been made under Section 143(3) of the Act, and action thereafter is sought to be taken for the reopening of the case u/s. 147 after the expiry of four years from the end of the relevant assessment year, then, it would be necessary that the twin conditions contemplated in the st....
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....e drawn from the facts before him. It was observed by the Hon'ble Apex Court that the extended period of limitation for initiating proceedings under the "1st proviso" of Section 147 of the Act would only get triggered where the assessee had failed to disclose fully and truly all material facts necessary for his assessment. Now, in the case before us, we are unable to comprehend what facts the assessee had failed to disclose which would have otherwise justified bringing his case within the realm of the extended period contemplated in the "1st proviso" of section 147 of the Act. As the assessee had disclosed fully and truly all the material facts as were necessary for his assessment for the year under consideration, i.e., AY 2010-11; therefore, it could by no means be held to be in default to bring it within the sweep of "1st proviso" of Section 147 of the Act. 23. Analyzing the scope of the "1st proviso" to Sec. 147 of the Act, which contemplates that where assessment in the assessee's case had been framed u/s 143(3) of the Act, then no action under Sec. 147 shall be taken in his case after the expiry of four years from the end of the relevant assessment year unless any incom....
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....ons by various judgments of High Court and Supreme Court held to be mandatory pre- requirement. In view of such settled law, it is not necessary to refer to any judgment. Revenue is unable to bring to our notice any aspect or element which did not form part of the record and on the basis of which from the reasons recorded, it can be culled out that the Assessing Officer had formed a belief that income chargeable to tax had escaped assessment. In clear terms therefore, there was no failure on the part of the assessee to disclose truly and fully all material facts. 7. Counsel for the revenue however submitted that one of the issues raised by the Assessing Officer is that the activity carried on by the assessee does not amount to manufacturing activity. In the present petition, it is not necessary for us to comment on this aspect of the matter. What is important however is such belief also the Assessing Officer has formed on the basis of material already on record. Looked from any angle, the Assessing Officer cannot justify issuing the notice of reopening of assessment beyond the period of four years from the end of relevant assessment year. 8. Under the circumstance....
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....ction u/s. 80IA of the Income Tax Act, 1961 were made? 2. Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in quashing the re-assessment order by stating it as a mere change of opinion when the re-assessment proceedings was based on the wrong claim of deduction u/s - 80IA of the Act and depreciation claimed wrongly on bio-gas plant , whereas Hon'ble High Court of Delhi in the case of Chetan Sabharwal vs. ACIT [2019] 110 taxmann.com 57 (Delhi) has held that where original assessment orders were silent on aspect on which re-opening had been ordered, it could not be said that reason to believe constituted a 'change of opinion'? 3. Any other ground which may be adduced at the time of hearing." 28. Succinctly stated, the assessee had e-filed his return of income for A.Y.2012- 13 on 28.09.2012, declaring an income of Rs. 1,63,40,630/-. The original assessment was framed by the A.O. vide order u/s. 143(3) dated 03.03.2015, wherein total income of the assessee was determined at Rs. 1,75,65,560/-. Thereafter, the case of the assessee was reopened by the A.O u/s. 147 of the Act. The "reasons to believe" based on which the conclu....
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....p; 3.3.2017 (R.K. Sharma) Assistant Commissioner of Income Tax-2(1), Bhilai" On a careful perusal of the aforesaid "reasons to believe", it transpires that the concluded assessment in the case of the assessee was reopened by the A.O for two- fold reasons, viz. (i) that the A.O while framing the original assessment, had failed to properly verify the assessee's claim for deduction u/s. 80IA of the Act; and (ii) that as the assessee had during the assessment year 2011-12 suffered a loss in his power generation of Rs. 1,33,34,231/-, therefore, as per sub-section (5) of Section 80IA of the Act, the earlier year losses were to be first adjusted and then only the balance amount was to be allowed as deduction under the said statutory provision. Accordingly, the A.O. based on his aforesaid observation was of the view that his predecessor while framing the original assessment had wrongly allowed the assessee's claim for deduction u/s. 80IA of the Act to the extent of Rs. 1,07,62,181/-. 29. Thereafter, the A.O. vide his order passed u/ss. 143(3)/147 of the Act, dated23.12.2017 disallowed the asse....
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....s held that: "...Petitioner is impugning notice dated 30-3-2013 issued under section 148 of the Income-tax, 1961 (hereinafter to be referred to as the 'said Act') on the ground that the petitioner's income in respect of which it was assessable to tax for the Assessment Year 2008-2009, has escaped assessment within the meaning of section 147 of the said Act. Petitioner has been provided reasons for re-opening with letter dated 26-4-2013. We have perused the reasons recorded and we are satisfied that it is a clear case of change of opinion. It is settled law that reopening cannot be based on change of opinion. ..." 7.10 Similar decision has been rendered by the hon'ble Delhi High Court (Full Bench) in the case of CIT, Delhi-VI v Usha International Ltd. (348 ITR 485) in which it was held that: Expression 'Change of opinion' The expression 'change of opinion' postulates formation of opinion and then a change thereof. In the context of section 147 it implies that the Assessing Officer should have formed an opinion at the first instance, i.e., in the proceedings under section 143(3) and now by initiation of the reassessm....
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....d formed an opinion in the original assessment, though he had not recorded his reasons. [Para 13] • In the second and third situation, the revenue is not without remedy. In case the assessment order is erroneous and prejudicial to the interest of the revenue, they are entitled to and can invoke power under section 263. [Para 14] • 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 to section 263 is available and should be resorted to. But initiation of reassessment proceedings will be invalid on the ground of change of opinion [ Para 15] 7.11 It is apparent from the facts of this case that there is change of opinion by the Assessing Officer to reopen the assessment for the Assessment Year 2012-2013. During the original assessment proceedings, the AO raised a query about the issue in question which was duly responded to by the appellant. After that, no addition was made by the AO on such issue. Later on, while recording the reasons at the time of reopening the assessment, the AO made no reference to any new information being available wit....