AI Drafter 
TaxTMI 
TaxTMI 
2025 (7) TMI 1298
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....the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in quashing the impugned notice dated 30.03.2021 issued u/s. 148 of the Income Tax Act, 1961 on account of change of opinion ignoring the provisions of Explanation 1 to Section 147 of the Act. ii). Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) is justified in quashing the impugned notice dated 30.03.2021 ignoring the decision of the Hon'ble Apex Court in the case of Raymond Woollen Mills Ltd (1999)236 ITR 34 (SC) and ACIT v Rajesh Jhaveri Stock Brokers P. Ltd 291 ITR 500(SC). iii). The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." 3. The brief facts of the case are that assessee is a non-deposit taking nonbanking financial company (NBFC) registered with Reserve Bank of India, primarily engaged in financing of Tata Motors' vehicles and is a captive financing arm of Tata Motors Ltd (TML) and wholly owned subsidiary of Tata Motors Ltd. During the impugned assessment year, the assessee filed the return on 01/11/2017 and declaring loss amount to Rs. 186 crores under normal provisions of ....
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....e 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 part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. 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." 4. It is respectfully submitted that even if the assessee has submitted books of accounts or other documents to the AO in the original assessment, it does not automatically mean that everything is disclosed fully and truly unless it is explicitly brought to the attention of the AO. Reliance is placed on the following judgment with respect to above: Phoolchand Bajrang Lal v. ITΤΟ (1993) 203 1TR 456 (SC) The Hon'ble Supreme Court held that even if informat....
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....'s belief that income has escaped assessment, not to evaluate the sufficiency or correctness of the material. In Raymond Woollen Mills, the Court upheld the reassessment based on the undervaluation of closing stock, finding that the recorded reasons constituted valid prima facie material. Similarly. in Rajesh Jhaveri, the incorrect claim of bad debts was deemed sufficient to trigger reassessment. Both judgments reinforce that the AO's belief must be honest and based on reasonable grounds. but the final determination of escapement is a matter for the reassessment proceedings, not judicial review at the notice stage. Hence Ld. CIT(A) erred in ignoring these two landmark decisions." 5. Alternatively, the Ld. AR filed a paper book containing documents pertaining to the factual aspects of the case and also submitted a written submission. The Ld. AR contended that the issue under consideration was duly examined during the scrutiny assessment conducted under section 143(3) of the Act. It was further submitted that a notice under section 142(1) along with a detailed questionnaire was issued in relation to the said issue. A copy of the said notice is available i....
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.... 250 of the Act dated 26 February 2025 (refer page nos. 12 to 62 of the Respondent's cross objections) has relied upon the provisions of section 147 of the Act and the meaning of "reason to believe' to hold that the impugned proceedings under section 147 of the Act are bad in law. 2 According to the learned CIT(A), for the proceedings to be valid, there should have been new set of material or facts having live linkage to escapement of income. On same material which was already submitted to the assessing officer in case of the assessment proceedings, the assessing officer cannot take a different view in the course of the proceedings under section 147 of the Act. Reference in this regard is placed on the following decisions: * Kelvinator of India Ltd. [320 ITR 561 (SC)] [refer page nos. 411 to 413 of legal paperbook] * Castrol India Ltd. [(2024) 299 Taxman 71 dated 05 March 2024 (Bombay HC)] [refer page nos. 447 to 453 of legal paperbook] 3 The learned Departmental Representative has relied on the proviso and explanation 1 to section 147 of the Act as well as the decision in case of Phoolchand Bajrang Lal ((1993) 203 ITR 456 (SC)] and Conso....
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....nt of the Delhi High Court in Honda Siel Power Products Ltd v. Dy. CIT [2011] 110 taxmann.com 2/197 Taxman 415/2012) 340 ITR 53 (Delhi) We have already referred to the judgment in Phool Chand's case (supra) wherein it was held that where the transaction of a particular assessment year is found to be a bogus transaction, the disclosures made could not be said to be all "true" and "full" Relying upon the said judgment the High Court held that merely because the transaction of convertible bonds was disclosed at the time of original assessment does not mean that there is true and full disclosure of facts. 28. We are unable to agree with this reasoning given by the High Court. The assessee as mentioned above made a disclosure about having agreed to stand guarantee for the transaction by NNPLC and it had also disclosed the factum of the issuance of convertible bonds and their redemption. The income, if any, arose because of the redemption at a discounted price. This was an event which took place subsequent to the assessment year in question though it may be income for the assessment year. As we have observed above, all relevant facts were duly within the knowledge of the ass....
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.... replying on the decisions in case of Raymond Wollen Mills Ltd. [236 ITR 34 (SC)) and Rajesh Jhaveri Stock Brokers P. Ltd. [291 ITR 500 (SC)] without appreciating that the same are not applicable to the facts of the present case. 13. In the aforementioned decisions it has been held that the assessing officer must have "reason to believe basis prima facie material that the income chargeable to tax has escaped assessment and such reason to believe would be prima facie and not a requirement that additions would invariably made in the assessment 14. In case of Rajesh Jhaveri Stock Brokers P. Ltd. [291 ITR 500 (SC)], the return was processed under section 143(1) of the Act by accepting the returned loss. Audit objections were raised regarding non-fulfilment of conditions of section 36(1)(vii) read with section 36(2) of the Act basis which the proceedings under section 147 of the Act were initiated [on the other hand, in the present case, proceedings under section 143(3) of the Act were conducted during the course of which queries on the impugned transaction were raised and reply to satisfaction of the learned assessing officer were submitted] 15. In case of Ra....
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....er 2019 has accepted the Respondent's claim (refer page nos. 186 to 203 of factual paper book) 19 Accordingly, the learned departmental representative's reliance is misplaced since no new material has come to light after the completion of the original assessment proceedings and there is change of opinion of the officer Act dated 18 December 2019 has accepted the Respondent's claim (refer page nos. 186 to 203 of factual paper book) 19 Accordingly, the learned departmental representative's reliance is misplaced since no new material has come to light after the completion of the original assessment proceedings and there is change of opinion of the officer. 20. Reliance in this regard is placed on the following decisions wherein the Department's reliance on the decision in case of Raymond Wollen Mills Ltd. (236 ITR 34 (SC)] and Rajesh Jhaveri Stock Brokers P. Ltd. [291 ITR 500 (SC)) has been distinguished and the proceedings being quashed on account of change of opinion * State Bank of India [418 ITR 485 ( Bombay HC)]: [refer page nos. 593 to 600 of legal paperbook] - Department's SLP dismissed in 447 ITR 368 [refer page nos. ....
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....s entitled to such excess amount. 27. It is humbly submitted that the Department cannot treat the receipts as genuine whilst treating the refund of excess income as non-genuine. Merely because the transaction is with a related party doesn't make the transaction as not genuine. 28. In case if the learned assessing officer was not satisfied with the reasonableness of the expenses. he could've invoked provisions of section 40A(2) of the Act which has not been done here. Therefore, holding that the refund of income is not genuine at this stage is unjust and illogical. 29. Further, it is not the case of the Respondent that it has made the claim of Rs. 400 crores basis a provision in the books of accounts. In fact, the provision has been made in AY 2015-16 and was suo-moto disallowed by the Respondent while computing it total income. The same has only been claimed in the year when the expense was actually paid to Tata Motors Limited. 30. It is humbly reiterated that all relevant documents and explanations were submitted during the course of proceedings under section 143(3) and 147 of the Act and therefore, there is no basis for the learned depa....
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....le material/fact which would form the basis for the reopening of the assessment. No new fact/material/Information has come to the notice of the AO which was not disclosed by the appellant in its retum of income and subsequently during the course of the original assessment proceedings. Since the challenge is against reopening u/s 148 based on the reasons recorded, the same are extracted as under (refer page 24 to 26 of the paper book filed by the appellant). "ANNEXURE. 1. In the above mentioned case, the assessee e-filed its return of income of A.Y.2017 18 on 01.11.2017 declaring loss of Rs. (-) 1,86,55,22,834/- under regular provision of Act and Book Loss of Rs. (-) 112,34,96,476/- under section 115JB of the act. Thereafter the assessee filed Revised Return of income on 29.03.2019 declaring loss of Rs. (-) 1,85,40,01,426/- under regular provision of Act and Book Loss of Rs. (-) 112,34,96,476/- under section 115JB of the act. The case was selected for scrutiny. Subsequently, the assessing officer passed an assessment order u/s 143(3) of the Act on 18.12.2019 declaring total loss (-) 77,97,14,560/- under regular provision of Act and Book Loss of Rs. (-) 61,98,38,376/- und....
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....me has rightly been claimed as deduction under computation 2.2. In view of the above, following facts needs to be consideration: i) That the assessee is an NBFC. The very nature of the business of the assessee is such where there is high probability of loans becoming bad and doubtful of recovery. This is why the RB has issued guidance to categorise the loan as NPA and the Income Tax has also provided a deduction for bad and doubtful debts u/s 36(1)(vii) and 36(1)(visa). ii) The Assessee had entered into the contract with the TML where it was almost certain to incur losses and that is why the TML was to provide for the Gap Funding for such losses. iii) Now the assessee submitted that it could not recover the loan and interest on such loans amounting to Rs. 481,45,80,526. Therefore, it compensated the holding company with Rs. 400,00,00,000 and this should be allowed as business expenses it further stated that it had already made a provision for this sum in AY 2015-16 iv) By just making provision for an expense, does not, per se, makes an expense allowable under the provisions of the Act. Further, the assessee being an NBFC, is covered unde....
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....ar that there is failure on the part of assessee to disclose fully and truly all material facts necessary for the assessment for the year in question within the meaning of First provision to section 147(1) of the Act. 5. In view of the above, I have reason to believe that income chargeable to tax to the tune of Rs. 425.35 Crore has escaped within the meaning of section 147 of the Act for the A. Y.2017." 8.4.2. It is the contention of the appellant that the reasons of reopening recorded by AO and supplied to the appellant begin and mention that "on perusal of records......", which clearly indicates that the appellant had made all relevant disclosures and the reopening done by AO was initiated based on the material already available on record. It is further stated in the reasons that reopening is made based on the note furnished alongwith computation of income which was already available before the Ld AO during the course of assessment proceedings as well. There is no mention of any new tangible material or fact which formed the basis for reopening the assessment. To support the above claim, the appellant has also quoted from para 2.1. of the reason recorded as unde....
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....entioned above the assessment order u/s 143(3) was passed in which no addition was made. Therefore, the re-assessment is initiated on account of "change of opinion which is bad in law. The appellant has relied upon various judicial pronouncements including the decision of Hon'ble Supreme Court in the case of CIT vs Kelvinator India Ltd (320 ITR 561). 8.4.4. I have considered the detailed written submissions filed by the appellant on the above grounds raised by the appellant against the re-opening of assessment u/s. 148, and the supporting evidences filed by the appellant in the paper book on record as submitted during the appellate proceedings. The gist of the objections raised by the appellant, as summarized above, apart from the other objections in the written submissions have also been considered. It is clear that the above issue was examined during the original assessment proceedings, as apparent from the query raised in the notice u/s. 142(1) and the detailed written submissions filed by the appellant in response to same. Even the reasons recorded show that AO has referred to the records and the revised computation of income filed by the appellant and the Note 24 ....
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....n 143(3) of the IT Act, the Assessing Officer, in the absence of any fresh material, could not have proceeded to reopen the petitioner's assessment on similar materials. Such exercise would tantamount to a review of the assessment order on a mere change of opinion. This is certainly not permissible. If such interpretation of the provisions as canvassed on behalf of the respondents is accepted, an assessment order would become vulnerable to be arbitrarily reopened, merely on the ground that the Assessing Officer on the very material intends to take a different view/opinion on the assessment order passed by him. This would lead to a regime of total uncertainty. In our opinion, this is neither the object nor the intention of the provisions of Section 147. The provision is a special power, so as to check, discern and recall concluded assessments, hence, such power cannot be exercised when it is not a case, where the assessee had not withheld any information and/or the Assessing Officer did not have any fresh tangible material. A second bite at the cherry is not what is contemplated under Section 147, on the basis of materials already available with the Assessing Officer, as the pro....
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.... liability; d) Extracts from financial statements for AY 2015-16, being the year in which the said provision was created; e) Computation of income for AY 2015-16, wherein the said provision was voluntarily disallowed by the assessee; f) Assessment order for AY 2015-16; and g) Proof of actual payment of Rs.400 crores during the relevant year. 7.1. It is also noted that the issue was discussed in detail during the personal hearing with the Ld. AO, who, upon consideration of the assessee's submissions and documents, accepted the claim and framed the assessment under section 143(3) vide order dated 18.12.2019. Significantly, the Ld. AO, in the recorded reasons for reopening, has admitted that the basis for such reopening was the very same note and revised computation of income furnished by the assessee during the original proceedings. Reference is invited to paragraph 2.1 of the reasons recorded: "2.1 It is seen from the Revised Statement of Computation of Income that the assessee has, inter alia, claimed Crystallised Claim Right Liability payment of Rs. 400,00,00,000, which was allowed in the scrutiny assessment. Vide Note 24 and Anne....
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....o section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987 Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in section 147 of the Act. However, on receipt of representations 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............" ii. Marico Ltd. [(2020) 425 ITR 177 (Bombay HC) dated 21 August 2019 "3. Briefly, the facts leading to this Petition arise as under:- (v) Thereafter, on 27 March 2019, the impugned notice was issued seeking to reopen the Assessment Year 2014-15 The impugned reopening notice has been issued within a period of four years from the end of Assessment Year 2014-15 ............................. 12. Thus we find that the reasons in support of the impugned notice is the very issue in respect of which the Assessing Officer has raised the query dated 25 September 2017, during the assessment proceedings and the Petitioner had responded to the same by its letters dated....
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....opinion" iv. Union Bank of India (ITA No. 1678/Mum/2024 dated 23 April 2025 (Mumbai ITAT)] "11. We have heard the rival submissions and perused the documents available on record. Upon examination, we find that the reasons recorded by the Ld. AO for reopening the assessment were done in a mechanical manner and only after the lapse of four years from the end of the relevant assessment year. It is a settled principle of law that reassessment cannot be initiated merely on account of a change of opinion. Furthermore, the Ld. AO has failed to establish, based on the recorded reasons, that the assessee had not made a full and true disclosure of all material facts necessary for the assessment. During the scrutiny assessment proceedings conducted under Section 143(3) of the Act, the issue in question was raised, and the assessee duly explained the same in response to a notice issued under Section 142(1) of the Act. Despite this, the Ld. AO has sought to reassess the same issue, thereby reopening the assessment proceedings on identical grounds, which constitutes a clear case of "change of opinion." 11. Upon review of the records, it is evident that in response to t....