AI Drafter 
TaxTMI 
TaxTMI 
2024 (5) TMI 1317
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....) passed by the Income Tax Appellate Tribunal, "A" Bench, Kolkata. 3. This Court admitted the appeal on the following substantial question of law : "Whether finding of the Tribunal that the assessment involved in this appeal was reopened by the Assessing Officer merely on the basis of change of opinion was perverse or not, having regard to the factual background of the case and in particular the reasons for which the assessment was reopened ?" Facts : 4. Briefly stated facts of the present case are that the original assessment order under Section 143(3) of the Act, 1961 for the Assessment Year 2005-06 was passed by the Assessing Officer which is reproduced below: "1. The assessee company submitted its return of income on 16.11.2004 declaring total income at NIL which was duly processed U/s. 143 (1). The case was selected for scrutiny as per guidelines of C.B.D.T. and notice u/s. 143 (2) was issued on 21.04.2006. Notice u/s. 142 (1) was issued and served upon the assessee on 14.06.2007. The case was represented by Shri Gopal Chandra Biswas, Manager-Finance and a/r of the assessee company. 2. Assessee has debited an amount of Rs. ....
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....ts by its order dated 27.11.2012 and the point taken by the respondent assessee challenging the jurisdiction for reassessment on the ground of "change of opinion" was rejected. 6. Aggrieved with the aforesaid order of CIT(A), the revenue filed the aforenoted appeal before the ITAT and the respondent assessee filed the afore-noted cross-objection. The ITAT allowed the cross-objection of the respondent assessee and dismissed the appeal of the revenue on account of lack of jurisdiction due to "change of opinion" by the assessing officer for initiating proceedings under Section 147 of the Act, 1961. The ITAT further observed in the impugned order that since cross-objection has been disposed of on the preliminary issue of jurisdiction, therefore, the appeal of the revenue relating to additions/disallowance made in the reassessment order, has become infructuous. Aggrieved with the order of the ITAT, the revenue has filed the present appeal. Submissions 7. Learned counsel for the revenue submits that as per the original assessment order, the respondent assessee has disclosed a net profit of Rs.58,77,595/-, to which, a sum of Rs.18,74,034/- was added on account of disallowance on ....
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....rposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956): Provided that while preparing the annual accounts including profit and loss account,- (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such accounts including profit and loss account and laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956): Provided further that where the company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under this Act,- (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the dep....
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....is credited to the profit and loss account; or [(iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation.-For the purposes of this clause,- (a) the loss shall not include depreciation; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or] (iv) the amount of profits eligible for deduction under section 80HHC, computed under clause (a) or clause (b) or clause (c) of sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or (v) the amount of profits eligible for deduction under section 80HHE computed under sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or (vi) the amount of profits eligible for deduction under section 80HHF computed under sub-section (3) of that section, and subject to the conditions specified in that section; or (vii) the amount of profits of sick industrial company for the assessment year commencing o....
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....nd loss account for the relevant previous year prepared under subsection (2) which shall be increased by the amounts referable in clauses (a) to (f) if debited in the profit and loss account and the book profit shall be reduced by the amounts falling under clauses (i) to (vii) to the aforesaid Explanation. 13. It is evident from bare reading of the original assessment order passed by the assessing officer under Section 143(3) of the Act, 1961 that there was a book profit of Rs.58,67,595/- but the assessing officer has not considered it at all for computation of tax under Section 115JB of the Act, 1961. In other words, there is absolutely no whisper in the assessment order with regard to the tax liability of the respondent assessee under Section 115JB of the Act, 1961 on the admitted facts of the case, resulting in complete non-application of mind and total absence of formation of any opinion with regard to the tax liability of the respondent assessee under Section 115JB of the Act, 1961. 14. Under the circumstances, the assessing officer issued notice to the respondent assessee under Section 147 of the Act, 1961 after recording four reasons for reopening of assessment, which ....
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....pened by the Assessing Officer on the basis of new facts discovered from the assessment records and it was held by the Hon'ble Calcutta High Court that the assessment was reopened by the Assessing Officer merely on the basis of change of opinion, which was not permissible in law. 9. In the case of C1T vs. Kelvinator of India Limited (supra), cited by the ld. counsel for the assessee, it was held by the Hon'ble Supreme Court that after the amendment made w.e.f. 1st April, 1989, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on a mere change of opinion. It was held that the concept of "change of opinion" must be treated as an in-built test to check the abuse of power and hence the Assessing Officer even after the amendments made in the relevant provisions from April 1, 1989 has the power to reopen an assessment provided there is tangible material to come to the conclusion that there was escapement of income from assessment. Applying the ratio laid down by the Hon'ble Supreme Court in the case of Kelvinator of India Limited [supra] and by the Hon....
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....na fide and must be that of an honest and reasonable person based upon reasonable grounds and that the Income Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. His vague feeling that there might have been some escapement of income from assessment is not sufficient. The reasons for the formation of the belief must be based on tangile material and must be based on a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular assessment year. In other words, such material on which the assessing Authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. If the grounds for formation of "reason to believe" are of an extraneous character, the same would not warrant initiation of proceedings under Section 147 of the Act, 1961. (c) If, there are, in fact, some reasonable grounds for the assessing authority to bel....