TaxTMI 
TaxTMI 
2005 (3) TMI 388
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....year 1993-94 onwards. Assessee had also started its lottery business from Pune under the name and style of Ravi Ajmera, Pune. The assessee being individual is residing at Jaipur and controlling the business in Jaipur and Pune through its headquarter and controlling office at Jaipur. The nature of lottery business carried on by the assessee in assessment years 1994-95 and 1995-96 in the name of Manish Lottery Agencies, Jaipur was as a stockist/dealer/distributor/wholesaler. As a result of ban for the lottery business in Rajasthan, the assessee did not carry on the said business from 28-3-1995 onwards at Jaipur. The business in the name of Ravi Ajmera, Delhi and Ravi Ajmera, Pune is in the nature of sole distributor/super stockist/organizer. Assessee had filed the returns of income for the respective assessment years. For the assessment year 1995-96, return of income was filed on 31-10-1995 declaring income of Rs. 2,44,85,735/-. This return was revised on 12-4-1996 declaring income of Rs. 2,44,65,460/-. Assessment was completed by the Assessing Officer under section 143(3) on 23-3-1998 at income of Rs. 2,46,12,260/-. Subsequently, the Assessing Officer has issued notice under section....
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....he CIT(A). 6. For the assessment year 1997-98, assessee had filed the return of income on 29-10-1997 declaring income of Rs. 1,17,610/-. Assessment under section 143(3) was completed at income of Rs. 2,40,133/-. The Assessing Officer issued a notice under section 148 on 6-6-2001 by recording the following reasons:- Assessee has shown advance sales of Rs. 1,91,84,860/- in the liability side of M/s. Ravi Ajmera, Delhi. Similarly, in the balance sheet of M/s. Ravi Ajmera, Pune, advance sales of Rs. 80,72,730/- in the liability side and advance purchases of Rs. 81,60,812/- in the asset side of the balance sheet has been shown. The sustaining an addition of advance sales/advance purchases have not been reflected in the profit and loss account of the respective concerns. Therefore, profit shown has not been shown by the assessee during the year under consideration. The Assessing Officer completed the reassessment at Rs. 3,09,69,730/- by estimating the net profit at 3 per cent on turnover after invoking the provisions of section 145(3). 7. On appeal, the CIT(A) has reduced the addition to Rs. 70,56,300/-. It may be pertinent to mention that the CIT(A) has sustained the a....
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....laced on the following decisions:- (i) CIT v. Foramer France [2003] 264 ITR 566 (ii) CIT v. Rajasthan Patrika Ltd. [2002] 258 ITR 300 (Raj.) (iii) Marudhar Hotels (P.) Ltd, v. Dy. CIT [2003] 259 ITR 509 (iv) Raj Kumar Bapana v. UOI [2001] 251 ITR 802 (Raj.) (v) CIT v. A.R. Enterprises [2002] WLC 51 (Raj.) (vi) Praful Chunilal Patel v. M.J. Makwana, Asstt. CIT [1999] 236 ITR 832 (Guj.) (vii) Krishna Metal Industries v. H.M. Algotar, Asstt. CIT [1997] 225 ITR 853, 856 (Guj.) and (viii) VXL India Ltd. v. Asstt. CIT [1995] 215 ITR 295 (Guj.). 10. The ld. Counsel for the assessee pointed out that for the assessment year 1995-96, a notice under section 148 could be issued by 31-3-2000 if there was escapement of income for any reasons specified under section 147. Since notice under section 148 was issued on 22-3-2002 for the assessment year 1995-96, the conditions provided under proviso to section 147 were to be satisfied for the validity of the notice issue under section 148. It was contended that since there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for as....
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....profit in respect of the turnover disclosed by the assessee as well as in respect of the advance sales. The CIT(A) has reduced the net profit rate substantially which is not justified. 13. We have given our careful consideration to the rival contentions. In order to appreciate the rival contentions, it would be useful to refer to the provisions of section 147 as applicable from 1-4-1989. The section reads as under:- "147. 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 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 (hereinafter 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,....
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.... For the assessment year 1996-97, no assessment was made under section 143(3). The Assessing Officer has discovered that assessee had understated the income insofar as the advance sales and purchases had not been taken into account in determining the profits relating to the previous year. Since no assessment was made under section 143(3), proviso to section 147(1) is not applicable for the assessment year 1996-97. It is, therefore, evident that notice under section 148 for the assessment year 1996-97 was validly issued for the reasons recorded by the Assessing Officer, which have been reproduced elsewhere in this order. 14. For the assessment years 1995-96 and 1997-98, assessments were made under section 143(3). The Assessing Officer had made assessments after due scrutiny. The assessee had reflected advance sales in the balance sheet and the Assessing Officer had not disturbed the trading results of the assessee after due scrutiny. Since the period of four years had expired, it was not open to the Assessing Officer to issue notice under section 148 unless the income chargeable to tax had escaped assessment by reason of failure on the part of the assessee to make a return under ....
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.... the Direct Tax Laws (Amendment) Act, 1989, with effect from 1-4-1989, as also of sections 148 to 152 have been elaborated in Circular No. 549, dated 31-10-1989. A perusal of clause 7.2 of the said circular makes it clear that the amendments had been carried out only with a view to allay fears that the omission of the expression "reason to believe" from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on a mere change of opinion. It is, therefore, evident that even according to the Central Board of Direct Taxes a mere change of opinion cannot form the basis for reopening a completed assessment. A statute conferring an arbitrary power may be held to be ultra vires article 14 of the Constitution of India. If two interpretations are possible, the interpretation which upholds constitutionality should be favoured. In the event it is held that by reason of section 147 the Income-tax Officer may exercise his jurisdiction for initiating a proceeding for reassessment only upon a mere change of opinion, the same may be held to be unconstitutional. An order of assessment can be passed either in terms of sub-section (1) of section 14....
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....nts for those assessment years, were without jurisdiction as they were barred by limitation in view of proviso to section 147, as amended by the Direct Tax Laws (Amendment) Act, 1987, as that was the provision that was applicable on 20-11-1998, when the reassessment notices were issued, and admittedly there was no failure on the part of the assessee to disclose fully and truly all material facts for assessment; (v) on the facts, the notices were bad as they were only on the basis of a change of opinion and the law that an assessment could not be reopened on a change of opinion was the same before and after amendment by the Direct Tax Laws (Amendment) Act, 1987, of section 147; and (vi) as the notices were without jurisdiction, the assessee should; not be relegated to the alternative remedy, the Department preferred appeals to the Supreme Court. The Supreme Court saw no reason to differ and dismissed the appeals." 17. From the aforementioned decisions, it becomes abundantly clearly that reopening of assessment is not permissible on change of opinion even under the amended provisions of section 147. Moreover, when the assessment is reopened after the expiry of four years from the ....
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....see as returned was not acceptable. Since there was no definite material available on record to establish that income of the assessee had escaped assessment, it was not permissible for the Assessing Officer to reopen the assessment for making fishing inquiries. The decision of the Punjab & Haryana High Court in the case of Vipan Khanna v. CIT [2002] 255 ITR 220, is relevant for the purpose of determination of the issue in hand. In the said case, their Lordships held as under:- "According to the law laid down by the Supreme Court in CIT v. Sun Engineering Works (P.) Ltd [1992] 198 ITR 297, when proceedings under section 147 of the Act are initiated, the proceedings are open only qua items of under assessment. The finality of assessment proceedings on other issues remains undisturbed. It makes no difference whether the assessment proceedings have become final on account of framing of an assessment under section 143(3) of the Act or on account of non-issue of a notice under section 143(2) of the Act within the stipulated period. The amendments made in sections 143 and 147 of the Act with effect from April 1, 1989, do not in any manner negate this proposition of law as enuncia....