AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 1360
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....elation to the commercial building Kaledonia for AY 2013-14. Reassessment was without jurisdiction 3. That the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre erred in law and on the facts and circumstances of the case in not appreciating that the issue of building maintenance charges was discussed in detailed by the Appellant's assessing officer (AO) during the assessment proceedings and thus, reopening the assessment on this ground is merely a change in opinion. 4. That the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre erred in law and on the facts and circumstances of the case in not appreciating the Appellant's objections to the reopening of the assessment that there was no failure on part of the Appellant to disclose all material facts necessary fully and truly for its assessment for AY 2013-14 and thus the reassessment was without jurisdiction. The issue of deduction claimed on account of building maintenance charges has been decided in favour of the Appellant in the immediately succeeding AY 5. That the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre er....
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....and management of the company was handled by the promoters of the HDIL group i.e. Mr. Rakesh wadhawan and Shri Sarang Wadhawan through their representative and they had complete control over the documents and tax e-filing portal of the assessee. It is further stated that when misappropriation of funds carried out by them came to public knowledge, the foreign investor took management control of the company only form AY 2018-19. For the assessment year under consideration, the assessee company filed its regular return of income on 30.09.2013 declaring a total income of Rs. 2,25,79,333/-. The return of income filed by the assessee was selected for scrutiny assessment. The Assessing Officer completed the scrutiny assessment u/s 143(3) of the Income-tax Act, 1961 (in short 'the Act') on 30.09.2016, assessing total income at Rs. 41,87,12,490/-. Against the said assessment order, the assessee filed appeal before the Ld. First Appellate Authority on 15.06.2016, which is currently pending as informed by the Ld. counsel for the assessee in the written submission filed before us. 2.1 Subsequently, the Assessing Officer recorded reasons to believe that income escaped assessment and accordin....
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....come chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year): 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 part of the assessee to disclose fully and truly all material facts necessary for his assessment for that assessment year." 5.1 On perusal of the above proviso, it is clear that reopening of an assessment for failure on the part of the assessee for not disc....
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.... charges was called for in prescribed format which was provided by the assessee in reply submitted on 17.02.2016 before the Assessing Officer, a copy which is available on Paper Book pages 21 to 27. In view of the above contentions, the Ld. counsel for the assessee submitted that the issue of the 'building maintenance expenses' was already examined by the Assessing Officer and no addition was made in the assessment order passed u/s 143(3) of the Act and therefore, now the Assessing Officer has reopened the assessment without any tangible material, based on the same information/material which was available before him during the regular assessment proceedings. Therefore, the Assessing Officer is seeking to reopen the assessment for the year under consideration only on account of building maintenance charges merely due to 'change of the opinion' on same set of facts, which is not permitted in law. The Ld. counsel referred to the decision of the Co-ordinate Bench of the Tribunal in the case ITO 1(2)(3), MUMBAI VS. M PALLONJI ENERPRISES P. LTD, MUMBAI in ITA No. 1907/Mum/2017, wherein the Tribunal held that if the Assessing Officer raised specific queries in relation to expense and the ....
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....the specific issue was duly examined in the original assessment proceedings whereas in the instant case the issue of building maintenance expenses in relation to commercial buildings/flats which were though in the return of income were treated by the assessee as investment but in assessment proceedings, the assessee admitted the same to be stock-in-trade of the assessee. Accordingly, he submitted that order of the lower authorities must be sustained. 6. We have heard rival submission of the parties and perused the relevant material on record. The Co-ordinate Bench of the Tribunal in the case of M PALLONJI ENERPRISES P. LTD (supra) has discussed the issue of 'change of opinion' and held that unless there is a new tangible material or a trigger to reopen the assessment then even within four years from the end of the relevant assessment year, assessment cannot be reopened. The relevant finding of the Tribunal (supra) is reproduced as under: "8. We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The issue in dispute before us is whether the reasons recorded by the Assessing Officer to believe that income escape....
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....8 IT 485 (Delhi High Court). In view of the above facts and the judicial decision of the Hon'ble Bombay High Court, I have reason to believe that income, in the garb of share application money/share premium received in this case has escaped assessments in terms of provisions of section 147 of the I.T. Act. Necessary approval reopening the assessee' case has been obtained from the Addl. CIT, Range-1(2), Mumbai before issue of notice u/s 148 of the I.T. Act. Issue notice u/s 148 of the Act of the assessee." 8.1 On perusal of the above reasons recorded, it is evident that there was no new tangible material before the Assessing Officer to invoke a trigger for making belief that income escaped assessment. The Assessing Officer has himself mentioned that for reopening the assessment within four years from the end of the relevant assessment year, there should be some tangible material to do so. For reopening the assessment there has to be some trigger by way of a fresh material or information, which make the Assessing Officer to relook into the completed assessment. It cannot be a situation where an Assessing Officer suddenly wake up a fine morning and say that ....
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....w. The Hon'ble Bombay High Court in the case of State Bank of India vs. ACIT (2018) 96 taxmann.com 77 (Bom) after considering the judgment in Export Credit Guarantee Corporation vs. Add CIT (supra) held that reopening within four years on change of opinion and without fresh material is bad in law. In the case of PCIT Vs Motilal Todi (ITXA 1287 of 2016 dated 28/01/2019) relied upon by the assessee, the Hon'ble Bombay High Court quashed the reopening on the ground that there was no new material despite the case being reopened within four years from the end of the relevant assessment year. Further we know that Hon'ble Supreme Court in the case of Kelvinator of India Ltd (2010) 320 ITR 561 held the concept of change opinion is an inbuilt test check on abuse of power of the Assessing Officer. The relevant finding of the Hon'ble Supreme Court is reproduced as under: "Income escaping assessment. 147. If- [a] the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessar....
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....der above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. 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 re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. 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 re-assess. But reassessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place. One must tre....
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....sue is absence of tangible material which could trigger process of reason to believe. The Hon'ble Bombay High Court in the case of Export Credit Guarantee Corporation of India Ltd (supra) held as under: "8. To hold that the Assessing Officer must be deemed to have accepted what he has plainly overlooked or ignored in the assessment order would be to stretch the interpretation of Section 147 to a point where the provision would cease to have meaning and content. Such an exercise of excision by judicial interpretation is impermissible. When an assessment is sought to be reopened within a period of four years of the end of the relevant assessment year. the test to be applied is whether there is tangible material to do so. What is tangible is something which is not illusory, hypothetical or a matter of conjecture. Something which is tangible need not be something which is new. An Assessing Officer who has plainly ignored relevant material in arriving at an assessment acts contrary to law. If there is an escapement of income in consequence, the jurisdictional requirement of Section 147 would be fulfilled on the formation of a reason to believe that income has escaped assessment....
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....unction to take benefit of its own wrong. It was held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion. On appeal by the department to the Supreme Court in 320 ITR 561(SC), dismissing the appeal, held as under: " On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that ...4/- www.taxguru.in - 4 - where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. 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 a....
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....147, however, remain the same." For the afore-stated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs." 9.7 In our opinion, after completion of the assessment u/s 143(3) of the Act, for reopening of the assessment, there has to be some trigger by way of either information received from the external source or from the internal source and without such trigger reopening of the assessment merely to relook into the assessment on the issues, which had been considered during the regular assessment proceedings, will amount to review of the assessment order by the Assessing Officer, which is not permitted in law under the provisions of section 147 of the Act. The Assessing Officer can only reassess the assessment wherever income escaped assessment, and not the review the order passed by him. In view of the above discussion and respectfully following the decision of the Hon'ble Bombay High Court in the case of HDFC Bank Ltd. (supra) and Castrol India Ltd. (supra), we set aside the finding of the Ld. CIT(A) on the issue of validity of the reassessment and we quash the reassessment proceedings. The ground No. ....
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....Explanation-2 of section 147 of the Income-tax Act, 1961 and is also covered by the Explanation 1 to section 147 of the Act. 4. It is pertinent to mention here that building maintenance charges of Rs. 3,42,97,676/- chargeable to tax has been under assessed. In view of the above, provisions of clause (c) of Explanation-2 of section 147 and also Explanation 1 to section 147 of the Act is applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. 5. In this case a return of income was filed for the year under consideration and regular assessment u/s. 143(3) was made on 30.03.2016. Since, 4 years from the end of the relevant year has not expired in this case, the only requirement to initiate proceedings u/s. 147 of the Act is reason to believe which has been recorded above (refer paragraph 2 & 4). 5.1. It is pertinent to mention here that in this case an assessment was made as stipulated u/s. 2(40) of the Act. However, as discussed in reason to believe in this case income chargeable to tax has been under assessed by an amount of Rs. 3,42,97,676/-." 6.3 On perusa....
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....there must be some material or information in possession of the Assessing Officer to believe that assessee has either under stated his income or claimed loss or deduction as allowance. The Hon'ble Supreme Court in the case of Ganga Saran & Sons (P.) Ltd v. ITO [1981] 130 ITR 1 (SC) has held that AO must have reasons to believe that income chargeable to tax as escaped income. In the word 'reasons to believe' are stronger than word 'is satisfied'. The Hon'ble Supreme Court in the case of Raymond Woollen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC) held that in determining whether commencement of the reassessment proceedings was valid it has only to be seen whether there was prima facie some material on the basis of which the Department could reopen the case. In the case of Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456 (SC) held that there must exist reasons for holding believe for escapement of income although the question whether reasons adequate or sufficient is not for the courts to decide. Further the Hon'ble Delhi High Court in the case of SMCC Construction v. ACIT [2014] 220 Taxman 354 (Delhi) held that where the reasons to believe recorded does not referred to any material cam....