TaxTMI 
TaxTMI 
2025 (1) TMI 181
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.... in all appeals and C.Os. For brevity, grounds taken by the Revenue in appeal of AY 2013-14 are extracted here under: ITA No. 2731/Del/2024, AY 2013-14: "1. Ld. CIT(A) has erred in deleting the disallowance of bogus purchases of Rs. 2,33,81,685/- made by the assessee which were not substantiated by documentary proof by the assessee. 2. Ld. CIT(A) has erred in deleting the addition of Rs. 18,72,63,613/- of profit earned on suppressed sales out of variation in stock. 3. Ld. CIT(A) has erred in deleting the addition of Rs. 2,12,82,436/- out of excessive expenditure on stores and spares." 3.1 Grounds of C.0. No.70/Del/2024 read as under: 1. That the order dated 21.12.2023 passed under section 250 of the Income Tax Act, 1961 (hereinafter, the "Act") by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi is against law and facts on the file as much as he was not justified to hold that the ground challenging the initiation of proceedings u/s 148 has no merit by ignoring the fact that i. Information on the basis of which satisfaction was recorded that there is reason to believe that income amountin....
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....Act and even during the reassessment proceedings. It was specifically admitted that no addition had been made on the reasoning on which reassessment proceedings were initiated in these years. However, the additions on entirely different issues/grounds were made in instant cases. 5.1 The Ld. AR argued that the AO had to assess or reassess or recompute income on the issues which formed belief of escapement of income from assessment and only if he did so, he could travel beyond the reasoning recorded for reopening the case, otherwise not. It was argued that if the AO held that income, for which he had initially formed a reason to believe that it had escaped assessment, had, as a matter of fact, not escaped assessment, it was not open to the AO to assess some other income. To buttress the above contention, the Ld. AR placed reliance on the following decisions: - (i) Yashoda ShivappaNagangoudar [(2022) 138 taxmann.com 296 (Bombay); (ii) Jet Airways (1) Ltd [(2011) 331 ITR 236 (Bombay); (iii) Atlas Cycle Industries [(1989) 180 ITR 319 (P & H); (iv) Ranbaxy Laboratories Ltd. (2011) 336 ITR 136 (Delhi); (v) Mohmed Juned Dadani [(2014) 355 ITR....
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....eable to tax had escaped assessment, once the assessment itself is reopened it would not be confined to those subjects only. This would, however, be subject only to one additional rider and that being if, in the course of reassessment, the AO ultimately comes to conclude that no additions or modifications are warranted under those heads, it would not be entitled to make any additions in respect of other items forming part of the original return. 26. This position in law also finds resonance in the judgment of the Punjab and Haryana High Court in Majinder Singh Kang Versus Commissioner of Income-tax and Another11 and where it was observed:- "8. Learned counsel for the assessee submitted that the Assessing Officer had reopened the assessment by issuing notice under section 148 of the Act on the ground that the income from salary, perquisites and unexplained cash deposits in various accounts along with interest thereon had escaped assessment. The counsel urged that the Assessing Officer, however, while passing the reassessment order had sought to make addition of another amount without any addition having been made on the ground on the basis of which reassessment had....
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....r being placed for the consideration of a larger Bench. This becomes evident from a reading of paragraphs 13, 14 and 15 of the report and which are extracted hereinbelow:- "13. This Court specifically is of the opinion that the Karnataka High Court's view in the case of N. Govindaraju (supra) is a more accurate one. In this Court's view the emphasis placed in Jet Airways's case (supra) on "and also" undermines the essential Order dated 22.01.2018 in ITA 727/2017 objective of Section 147 of the Act and unduly restricts and narrows it. The circumstance clarifies existence of an additional power to bring to tax other sums. This per se would not mean that the sums or amounts sought to be brought to tax in a reassessment notice (which are ultimately not the subject of the final reassessment orders), act as a limitation. 14. Having regard to the facts, this Court is of the opinion that since there is some doubt as to the accuracy of the interpretation in the case of Ranbaxy Laboratories Limited (supra) and which was subsequently followed in the case of Monarch Educational Society (supra), the appropriate course would be to refer the issue to a larger Bench. ....
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....enabling the AO to attempt to either deviate from the reasons originally recorded for initiating action under Section 147/148 of the Act nor can those Explanations be read as empowering the AO to improve upon, supplement or supplant the reasons which formed the bedrock for initiation of action under the aforenoted provisions. 33. The writ petitions are accordingly allowed and the impugned notices and orders in each of the above-captioned writ petitions are quashed. The impugned orders under Section 148A(d) dated 31.07.2022 [W.P.(C) 3807/2023], 23.07.2022 [W.P.(C) 3804/2023], and 29.07.2022 [W.P. (C) 3808/2023], respectively as well as the notices under Section 148 dated 31.07.2022 [W.P.(C) 3807/2023], 23.07.2022 [W.P.(C) 3804/2023], and 29.07.2022 [W.P.(C) 3808/2023], respectively are hereby quashed." Banyan Real Estate Fund Mauritius [WP(C) 10485/2023] "28. Before concluding, and in our considered opinion, the impugned action is liable to be faulted since it clearly suffers from the following foundational illegality. As was rightly contended by Mr. Singh, the reasons which weigh upon an Assessing Officer proposing to reopen an assessment and form the bed....
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....of the proceedings initiated upon a 2024:DHC:5474-DB notice under section 148 of the said Act would have to be judged from the stand point of the reasons which existed at the point of time when the section 148 notice was issued. The additional reasons cannot be provided or recorded subsequent to the issuance of notice under section 148. It is, of course, open to the Assessing Officer, if some other information comes within his knowledge to issue another notice under section 148 for different reasons. But that is not the case here. On the basis of the very same notice issued under section 148, the Assessing Officer has recorded additional reasons subsequent to the issuance of notice and this is impermissible in law." 7. It becomes pertinent to observe that the validity of the proceedings initiated upon a notice under Section 148 of the Act would have to be adjudged from the stand point of the reasons which formed the basis for the formation of opinion with respect to escapement of income. That opinion cannot be one of changing hues or sought to be shored upon fresh reasoning or a felt need to make further enquiries or undertake an exercise of verification. Ultimately, the C....
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....e basis of a mere change of opinion nor is it in the nature of a review. The Supreme Court has laid down the test of whether there is tangible material on the basis of which the Assessing Officer has come to the conclusion that there is an escapement of income. The Supreme Court held thus (page 564): "However, one needs to give a schematic interpretation to the words 'reason to believe' failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. 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. One must treat the concept of 'change of opinion' as an inbuilt test to check abuse of power by the Assessing Officer. Hence, after April 1, 1989,....
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.... section 148 has to be determined on the basis of the reasons which are disclosed to the assessee. Those reasons constitute the foundation of the action initiated by the Assessing Officer of reopening the assessment. Those reasons cannot be supplemented or improved upon subsequently. While disposing of the objections of the assessee, the Assessing Officer has purported to state that the assessee had filed only sketchy details in its return filed in the electronic form. As we have noted earlier, the relevant provisions expressly make it clear that no document or report can be filed with the return of income in the electronic form. The assessee has an opportunity to do so during the course of the assessment proceedings if a notice is issued under section 143(2). The Assessing Officer was, in our view, not entitled, when he disposed of the objections to travel beyond the ambit of the reasons which were disclosed to the assessee. For all these reasons, we are of the view that the exercise of the jurisdiction under section 147 and section 148 in the present case is without any tangible material. The notice of reopening does not meet the requirements as elucidated in the judgment of the ....
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....of opinion that reassessment was warranted. In fact the petitioner was not even made aware of the view which the AO was inclined to take in this regard. The AO then sought to salvage the reopening by requiring the petitioner to furnish further particulars with respect to the allotment of shares in terms of the Scheme of Arrangement. Suffice it to note that the original SCN not only failed to refer to this Scheme, a reading thereof leaves us with the definite impression that the AO was perhaps not even aware of those developments. We are thus constrained to hold that the impugned action when tested in light of the above and the legal principles which stand enunciated in respect of the authority to reassess cannot sustain. 32. We accordingly allow the writ petition and quash the impugned order under Section 148A(d) of the Act dated 27 April 2023 and impugned notice under Section 148 of the Act dated 27 April 2023. For reasons aforenoted, we also set aside the original SCN under Section 148A(b) dated 24 March 2023. We, however, accord liberty to the respondents to initiate proceedings afresh if otherwise permissible in law." 5.3 The Ld. AR argued that the AO had mechanical....
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.... review or change his opinion on a matter which had already been deliberated upon and examined, in particular, when an assessment had been completed after scrutiny of books/records and examination of books of accounts under section 143(3) of the Act. In support of the argument, the Ld. AR placed reliance on the following decisions: - (i) Kelvinator of India Ltd [(2010) 320 ITR 561 (SC)] (ii) Usha International Ltd. [(2012) 348 ITR 485 (Delhi)] (iii) Marico Ltd.[(2020) 425 ITR 177(Bom)] SLP dismissed by the Supreme Court [(2020) 117 Taxmann.com 244 (SC)] (iv) Orient News Prints Ltd. [(2017) 393 ITR 527 (Guj)]. 6. On the other hand, the Ld. Commissioner of Income Tax- Departmental Representative (hereinafter 'CIT-DR') drew our attention to the Explanation of Section 147 of the Act and submitted that the AO had all the powers to examine and to make any addition even other than the reasoning recorded for reopening the assessment. In this regard, the Ld. CIT-DR, placing reliance on the decisions of the Hon'ble Punjab & Haryana High Court in the cases of Mehak Finvest Pvt. Ltd., 367 ITR 769 (SLP file against this order was dismissed by the Hon'ble S....