TaxTMI 
TaxTMI 
2026 (9) TMI 1810
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.... of 1961 was issued to respondent, to which reply was submitted. Thereafter, the Assessing Officer passed an order on 28.12.2011, assessing the income chargeable to tax for the assessment year 2009-2010. Subsequently, the Assessing Officer (AO) noticed that deduction and disallowance under certain heads were wrongly allowed to the assessee and therefore, taking aid of Section 147 of the Act of 1961, reopened the assessment for the year 2009-10 after obtaining sanction under Section 151 (1) of the Act of 1961. Thereafter, following due process of law, vide order dated 13.2.2015, the AO enhanced the taxable income of respondent from Rs.9655.13 Lakhs to Rs.23890.05 Lakhs with book profit of Rs.193131.85 Lakhs. 3. The assessee thereupon preferred an appeal before the CIT (Appeals) against the order dated 13.2.2015. The CIT (Appeals) dismissed the appeal and sustained the order passed by the AO. The assessee then approached the Tribunal. The Tribunal after considering the relevant provisions of the Act of 1961, the principles laid down by Hon'ble Supreme Court and the High Courts in various decisions, has arrived at a conclusion that reopening of the concluded assessment of the asses....
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....61. Hence, action of respondent assessee in claiming depreciation, which is otherwise not allowable, amounts to failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment. 6. In view of the facts as narrated above, present cannot be said to be a case of 'mere change of opinion' because there was no opinion formed in the first instance, rather it is the case of satisfaction of income escaping assessment. In support of his contention, he placed reliance on the decision in case of Phool Chand Bajrang Lal & another vs ITO, reported in (1993) 203 ITR 456 (SC). 7. Per contra, learned counsel appearing on behalf of respondent assessee opposed the submissions made on behalf of the appellant-Department and supported the order passed by the Tribunal. He contended that at the time of original assessment, respondent assessee had disclosed all material facts regarding claim for depreciation on DAM, additional depreciation under Section 32 (ii)(a) of the Act of 1961, disallowance under Section 14A of the Act of 1961, earned interest and other income during pre-production period. In the reasons recorded for reopening the assess....
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....respondent was selected for scrutiny and notice under Section 143 (2) of the Act of 1961 was issued. Respondent assessee participated in the enquiry and submitted the details called for. On providing necessary details, clarification and information to the AO, the assessment order under Section 143(1) of the Act of 1961 was passed on 28.12.2011 on a total income of Rs. 19,19,78,85663/-, after making various disallowances. Respondent challenged the assessment order by filing an appeal before the CIT (Appeals), who vide order dated 31.3.2014 partly allowed the appeal and determined total income of assessee at Rs. 96,55,13,861/-. Subsequently, on 05.07.2013 a notice under Section 148 of the Act of 1961 was issued by the AO to respondent assessee through registered post directing to file its return of income in the prescribed form for the said assessment year 2009-10 stating that he had reasons to believe that the respondent's income chargeable to tax for the assessment year 2009-10 had escaped assessment and that he proposed to reassess the income. Respondent submitted reply requesting to treat the return filed under Section 139(1) of the Act of 1961 on 30.9.2009 as return filed in com....
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....oregoing proviso". 12. Reading of Section 147 of the Act of 1961 makes it clear that if the assessing officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of Section 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 Section 147 or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned. Proviso to Section 147 lays down that where an assessment under Section 143(3) or 147 has been made for the relevant assessment year, no action can be taken under Section 147 after expiry of four years from the end of 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 Section 142(1) or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. In sub....
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....s after the assessment has been completed. The provisions of the Act in this respect depart from the normal rule that there should be, subject to right of appeal and revision, finality about orders made in judicial and quasi-judicial proceedings. It is, therefore, essential that before such action is taken the requirements of the law should be satisfied. The live link or close nexus which should be there between the material before the Income Tax Officer in the present case and the belief which he was to form regarding the escapement of the income of the assessee from assessment because of the latter's failure or omission to disclose fully and truly all material facts was missing in the case " 14. In case of Phool Chand Bajrang Lal and another V. Income Tax Officer and another, reported in (1993) 4 SCC 77 Hon'ble Supreme Court has held as under:- "25. ....... It would be immaterial whether the Income Tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if on the basis of subsequent information, the Income Tax Officer arrives at a conclusion, after sat....
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....all the relevant materials were supplied/furnished by the respondent and only thereafter the AO framed the assessment. 17. Learned Tribunal in the order impugned has reproduced the reasons which led the AO to believe that income chargeable to tax escaped assessment during assessment year 2009-2010, warranting initiation of reassessment proceeding under Section 147 of the Act of 1961 and the same reads as under:- "(i) Excess allowance of depreciation:- Assessee has claimed 100 percent deprecation on dam of Rs. 8,50,32,403/-. In the depreciation rate schedule of IT Act there is no provision of depreciation on dam. Thus depreciation of Rs. 8,50,32,403/- has been allowed excessively. (ii) Disallowance u/s.14A:- Assessee had made substantial investment in shares and securities income from which does not form part of total income. However no expenditure in accordance with section 14A of the Act was disallowed in this respect. The disallowance on this account comes to Rs. 11.53 crores. The same was remained to be added in the income of the assessee. (iii) Allowance of additional depreciation:- Assessee has claimed additional depreciation of Rs. 377.81 crore u....
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....art of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction. The important words under section 147(a) are "has reason to believe" and these words are stronger than the words "is satisfied". The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147(a). It there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that....
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...."6. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment 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. 7. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief." 22. In case of State of Uttar Pradesh and Ors. v. Aryaverth Chawl Udyoug and Ors. Reported in 2014 SCC OnLine SC 1205 Hon'ble Supreme Court has observed that discovery of an inadvertent mistake or non-application of mind during the assessment would not be a justifiable ground to initiate reassessment proceedings, has observed thus:- "27. This court has consistently held that suc....
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....nd not the power to review. 24. In case of Radha Krishna Industries vs State of H.P., reported in (2021) 6 SCC 771, Hon'ble Supreme Court, referring to its earlier decision in the matter of Kelvinator of India Ltd. (supra), has held that the power to reopen an assessment must be conditioned on the existence of "tangible material" and that "reasons must have a live link with the formation of the belief". 25. Recently, in case of Sanand Properties Pvt. Ltd. vs Joint Commissioner of Income-tax and others, reported in 2026 SCC Online SC 851, which has also been relied upon by learned counsel for appellant herein, Hon'ble Supreme Court has observed thus:- "68. In the light of the above rival contentions, it is crucial for us to ascertain whether the "tangible material" that the Revenue sought to rely upon had already been considered, appreciated and accepted by the Revenue in the original assessment orders. If such "tangible material" had already been relied upon by the Assessing Officer to form an opinion in the original assessment orders, then relying upon the same for the purpose of reopening assessment would amount to review instead of reassessment, and that would not....
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.... 14A of the Act of 1961 was disallowed; an amount of Rs.377.81 Crore towards additional deprecation was allowed and a sum of Rs. 3.47 Corore towards earned interest and other income during preproduction period remained to be added in the income of assessee. 29. From the reasons recorded by the AO itself it is clear that the reasons to believe are based on information and details which were available to the AO at the time of the original assessment proceedings, i.e., assessment records, and not on any tangible material that has come to the notice of the AO after passing original assessment order to conclude that there was an escapement of assessment. The reasons so recorded by the assessing officer show that reassessment proceedings has been initiated in view of the fact that the AO while passing the original assessment order, had allowed such deductions/depreciation which according to the successor AO, who initiated such reassessment proceedings, have resulted in escapement of income chargeable to tax from being assessed in the original assessment. This shows that the AO has drawn an inference on the basis of material already existing on the records of the original assessment pr....