TaxTMI 
TaxTMI 
2024 (5) TMI 321
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Assessment Year ["AY"] 2011-12, declaring its income as nil. The ITR of the petitioner was selected for scrutiny which consequently, led to the initiation of assessment proceedings. 3. On 8 January 2014, after considering the reply submitted by the petitioner in the letter dated 5 September 2013, an assessment order under Section 143(3) of the Act was passed, determining the total income of the petitioner to be Rs.1,34,74,370/- for the concerned AY. However, the said computation was subsequently amended vide order under Section 154 of the Act, assessing the total income of the petitioner to be nil. 4. Thereafter, a notice under Section 148 of the Act was issued to the petitioner for the reassessment of its income based on the information received from the office of CCIT(Central), New Delhi on the premise that during the concerned AY, the petitioner had made cash purchases from M/s Uflex Ltd. and M/s Montage Enterprises P. Ltd. amounting to Rs.1,88,23,448/-, attracting Section 40A(3) of the Act. However, upon examination of the books of account and replies submitted by the petitioner, an order under Section 147/143(3) was passed by the respondents on 10 December 2015, reassess....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed counsel appearing on behalf of the petitioner submitted that the reassessment proceedings initiated by the respondents are completely without jurisdiction inasmuch as the impugned notice under Section 148 of the Act and the subsequent letter have been issued beyond the statutorily prescribed period of four years from the end of relevant AY. He submitted that the ground on which the assessment proceedings are being reopened i.e., the fact of the waiver of the loan amount, was already disclosed by the petitioner during the course of proceedings, which is also evident from the letter dated 5 September 2013, sent by the petitioner to the respondents. 9. While drawing our attention to the balance sheet which has also been reproduced by respondent no.1 in the reasons to believe, he submitted that the issue in consideration was specifically examined by respondent no.1 and based upon the same, an opinion was formed. According to him, the fact of waiver of loan as per the BIFR scheme also finds mention in the assessment order passed by the AO. He, therefore, contends that since the petitioner has already disclosed fully and truly all the material facts for the assessment, the present pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iated merely on the basis of change of opinion. According to him, the income escaping assessment due to the failure on the part of the petitioner to add back the remission of liability is a new fact which paves the way for exercising powers under Section 147 of the Act. 15. He placed reliance on paragraph nos.24 and 25 of the decision in the case of Usha International Ltd. (supra) to submit that the principle of change of opinion shall not apply where the opinion itself has not been formed. 16. We have heard the learned counsels appearing on behalf of the parties and perused the record. 17. It is the scope and extent of the authority of reassessment under Section 147 of the Act, vested in the AO, which forms the subject matter of the present lis and thus, requires our consideration to determine whether the initiation of reassessment proceedings would sustain in the given facts and circumstances. 18. Before adverting to the merits of the case, we find it appropriate to briefly traverse through Section 147 of the Act to understand the nature, scope and intent behind the enactment of the said provision. For the sake of clarity, the relevant portion of Section 147 of the Act, as it....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rse of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of Section 148. ***" 19. It is seen that the aforesaid provision i.e., Section 147 of the Act empowers the AO to assess or reassess any income which has escaped assessment. However, the said authority is circumscribed with a predominant condition that the AO must be in possession of reasons to believe that any income chargeable to tax has escaped assessment for the relevant AY. Further, the first proviso to Section 147 of the Act stipulates that where the assessment has been done under Section 143(3) or Section 147 of the Act, no action shall be taken after the expiry of four years unless there exists inter alia, a failure of the assessee to fully and truly disclose all the necessary facts necessary for assessment of the concerned AY. 20. Thus, the respondents have laid down their challenge to the relief sought by the petitioner on the ground of lack of true and full disclosure, more specifically on the latter part, during the original assessment proceedings. In order to ascertain the meaning of full disclosure in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the part of the assessee. The latter confers jurisdiction to reopen the assessment." 23. Therefore, what needs to be examined in the given facts and circumstances is whether there was a mere production of books and accounts by the petitioner before the AO during the original assessment or the same was supplemented with certain other efforts which would lead to a sequitur that there existed a sufficient opportunity with the AO to form an opinion on the concerned subject matter. 24. It is pertinent to take note of the assessment order dated 8 January 2014, which unequivocally records that during the course of assessment proceedings, the petitioner had submitted that waiver of loan of Rs 25.16 crore taken from various banks is capital in nature and is not liable to be added back. The AO had further commented upon the said submission by asserting that the petitioner had taken a dual stand with respect to waiver of loans and in fact, concluded that the said stand does not support the legal view on the issue. The relevant extract of the assessment order reads as under:- "4.3. The assessee has also relied on some other judicial decisions. The submission of the assessee were duly cons....
X X X X Extracts X X X X
X X X X Extracts X X X X
....om various bank were categorized Non Performing Assets (NPA) by the banks in the years 2003-04 & 2004-05. No interest was being provided by the assessee company in its books of accounts on the loans from the year 2003-04 & 2005- 05. To revive the company and save its business from closing down, the assessee was actively pursuing with its bankers for waiver of its loan liability. Total loan of Rs. 32.31 crores of State Bank of India was settled at Rs. 7.15 crores which was taken over by Asset Care and Reconstruction Enterprises thereby getting a remission of liability in a sum of Rs. 25.16 crores. Total one time settlement charges/finance charges/processing charges in a sum of Rs.40,63,613/- was paid to State Bank of India for settlement of its Loan. Total amount of Rs. 8,70,150/- was paid to Asset Care as processing charges consequent on their agreeing to take over the loan from SBI. Likewise one time loan settlement charges / processing charges in a total sum of Rs. 24,50,000/- were paid to IDBI for settlement of their loans. Total finance charges of Rs. 1,13,74,379/- also includes a sum of Rs. 39,83,079/- paid to ING Vysya Bank towards interest and bank charges on its loan. We ar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s not a prerequisite or condition precedent but the defence/plea of change of opinion shall not be available and will be rejected. 25. Thus, 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 the 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. 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." 28. However, a deeper analysis of the decision in Usha International Ltd. (supra) would signify that the aforesaid two paragraphs cannot be treated as a standalone enunciation of the law, rather, the same must be understood in the context of the caveat set out in paragraph no.39 of the said decision. The said decision also holds that the AO would be said to have formed an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....parent 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 questions examined during the course of assessment proceedings itself may indicate that the Assessing Officer must have applied his mind on the entry, claim or deduction, etc. It may be apparent and obvious to hold that the Assessing Officer would not have gone into the said question or applied his mind. However, this would depend upon the facts and circums....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e in paragraph 13(3) clearly establish the principle that once a query is raised and answered, the AO would have formed an opinion, notwithstanding the fact that no reasons are recorded in the assessment order. In such circumstances, the reassessment proceedings, if initiated, would be construed as being invalid in law. This principle is founded on the rationale that the assessee has no control over the manner in which the AO chooses to frame the assessment order. One needs to remember that the AO wears two hats, that of an inquisitor and adjudicator." [Emphasis supplied] 30. Applying the principles laid down in Usha International Ltd. (supra) in the instant case, it is clearly seen that not only the aspects relating to the issue at hand had been fully disclosed by the petitioner before the AO but by recording the submissions and comments in the assessment order, it can be reasonably inferred that the AO has formed an opinion on the said issues. Thus, allowing the reassessment proceedings to continue in the present case would be contrary to the mandate expounded in Usha International Ltd. (supra). 31. In the case of Calcutta Discount Co. Ltd. v. ITO [1960 SCC OnLine SC 10], wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....essary for his assessment for that year. Both these conditions must coexist in order to confer jurisdiction on the Income Tax Officer. It is also imperative for the Income Tax Officer to record his reasons before initiating proceedings as required by Section 148(2). Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income Tax Officer that it is a fit case for the issue of such notice. We may add that the duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income Tax Officer of the account books or other evidence from which material evidence could with due diligence have been discovered by the Income Tax Officer will not necessarily amount to disclosure contemplated by law. The duty of the assessee in any case does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income Tax Officer to draw the correct inference from the primary facts. It is no responsibility of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eassess an income chargeable to tax which has escaped assessment is strikingly different from the authority to review the decision taken during the original proceedings. While the former is permissible in light of the pith and substance enshrined in Section 147 of the Act, allowing the latter would be a violence with the mandate of the said Section. Reliance can be placed upon the decision in the case of CIT v. Kelvinator of India Ltd. [2010 SCC OnLine SC 195], paragraph no.6 of which reads as under:- "6. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place." 36. A similar view was taken by this Court in the case of CIT v. Techspan India (P) Ltd. [2018 SCC OnLine SC 435], wherein, it was held as under:- "15. Section 147 of the IT Act does not allow the reassessment of an income merely because of the fact that the assessing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ourt in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 ; Kantamani Venkata Narayana and Sons v. First Addl. ITO [1967] 63 ITR 638 ; Malegaon Electricity Co. P. Ltd. v. CIT [1970] 78 ITR 466 and ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 and the decisions of the High Court of Gujarat in Praful Chunilal Patel v. M. J. Makwana, Asst. CIT [1999] 236 ITR 832 and Gruh Finance Ltd. v. Joint CIT (Assessment) [2000] 243 ITR 482, this court observed (page 406) : "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 question which the Assessing Officer proposes to examine in the course of reassessment proceedings. The submission of Mr. Vohra that even when the order of assessment did not record any explicit opinion on the aspects now sought to be examined, it must be presumed that those aspects were present to the mind of the Assessing Officer and had been held in favour of the assessee is too far-fetched a p....