Reserved Judgment IN HIGH COURT OF UTTARAKHAND AT NAINITAL Writ Petition (M/S) No.2246 of 2010 Tidewater Marine International Inc. . Petitioner Versus Dy. Director of Income Tax & another Respondents Mr. P.R. Mullick, Adv. for petitioner. Mr. H.M. Bhatia, Standing Counsel, for Income Tax. Reserved on: 31.10.2017 Delivered on: 17.11.2017 Hon ble Rajiv Sharma , J. Petitioner is company incorporated in Panama and engaged in business of providing services and facilities in connection with exploration and extraction of production of mineral oils. 2. notice dated 31.3.2010 was issued by respondent no.1 u/s 148 of Income Tax Act (hereinafter referred to as Act ). Petitioner vide letter dated 03.05.2010 requested that return of income as originally filed for Assessment Year 2005-06 may be treated as return filed in pursuance of notice u/s 148 of Act. reasons were assigned by respondent no.2 for reopening of assessment vide Annexure No.5. Petitioner filed objections against same on 12.10.2010. 3. respondent no.2 has given finding that during course of assessment proceedings for financial year 2007-08, it was noticed that assessee was providing support vessels which were used for 2 logistic purposes. case of assessee was completely different from cases covered u/s 44BB of Act where equipment was used for exploration of mineral oils. income earned by assessee was covered u/s 9(1)(vi) of Act and not u/s 44BB of Act. objections raised by petitioner were rejected by respondent no.2 on 9.12.2010. 4. In present case, notice u/s 148 has been issued not on basis of change of opinion but on basis of tangible material available on record. According to petitioner, it was providing facilities and services in connection with exploration and extraction of mineral oils. However, it transpired that assessee was providing support vessels which were used for logistic purposes. Assessing Officer has overlooked this matter while passing assessment order. sufficiency or correction of material was not to be considered at stage of issuance of notice. Assessing Officer has not formed any opinion on issue whether receipts of assessee being in nature of royalties received from second stage contractors would not fall in purview of Section 44BB of Act. 5. Their Lordships of Hon. Supreme Court in (2010) 2 SCC 723 in matter of Commissioner of Income Tax Delhi v. Kelvinator of India Ltd. have held that after amendment of 1989, A.O. can reopen assessment provided he has reason to believe that income has escaped assessment based on tangible material. It was further held that mere change of opinion does not empower A.O. to review assessment in garb of reassessment. Their Lordships have held as under: - 3 5. On going through changes, quoted above, made to Section 147 of Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfilment of said conditions alone conferred jurisdiction on assessing officer to make back assessment, but in Section 147 of Act (with effect from 1-4-1989), they are given go-by and only one condition has remained viz. that where assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen assessment. Therefore, post-1-4-1989, power to reopen is much wider. However, one needs to give schematic interpretation to words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to assessing officer to reopen assessments on basis of mere change of opinion , which cannot be per se reason to reopen. 6. We must also keep in mind conceptual difference between power to review and power to reassess. assessing officer has no power to review; he has power to reassess. But reassessment has to be based on fulfilment of certain precondition and if concept of change of opinion is removed, as contended on behalf of Department, then, in garb of reopening assessment, review would take place. 7. One must treat concept of change of opinion as in-built test to check abuse of power by assessing officer. Hence, after 1-4-1989, assessing officer has power to reopen, provided there is tangible material to come to conclusion that there is escapement of income from assessment. Reasons must have live link with formation of belief. Our view gets support from changes made to Section 147 of Act, as quoted hereinabove. Under Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted words reason to believe but also inserted word opinion in Section 147 of Act. However, on receipt of representations from companies against omission of words reason to believe , Parliament reintroduced said expression and deleted word opinion on ground that it would vest arbitrary powers in assessing officer. 8. We quote hereinbelow relevant portion of Circular No. 549 dated 31-10-1989, which reads as follows: 7.2. Amendment made by Amending Act, 1989, to reintroduce expression reason to believe in Section 147. number of representations were received against omission of words reason to believe from Section 147 and their substitution by opinion of Assessing Officer. It was pointed out that meaning of expression, reason to believe had been explained in number of court rulings in past and was well settled and its omission from Section 147 would give arbitrary powers to Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, Amending Act, 1989, has again amended Section 147 to reintroduce expression has reason to believe in place of words for reasons to be recorded by him in writing, is of opinion . Other provisions of new Section 147, however, remain same. 6. Similarly, Division Bench of Delhi High Court in (2006) 281 ITR 394 (Delhi) in matter of Consolidated Photo & Finvest Ltd. V. Asst. CIT (Delhi) has held that Proviso to Section 147 envisages action in ordinary course within period of four years from end of relevant assessment year. That limitation does not, however, apply to cases where income 4 chargeable to tax has escaped assessment on account, inter alia, of failure of assessed to disclose fully and truly all material facts. argument that production of account books and other documentary evidence relevant for assessment must imply full and true disclosure of all material facts must be rejected out of hand in light of provisions of Explanation (1). Division Bench further held that there may be presumption that assessment proceedings have been regularly conducted, but there can be no presumption that even when order of assessment was silent, all possible angles and aspects of controversy had been examined and determined by Assessing Officer. principle that mere change of opinion cannot be basis for reopening computed assessments would be applicable only to situations where assessing officer has applied his mind and taken conscious decision on particular matter in issue. It would have no application where order of assessment does not address itself to aspect which was basis for reopening of assessment. Their Lordships in paragraph no.19 have held as under:- 19. In light of authoritative pronouncements of Supreme Court referred to above, which are binding upon us and observations made by High Court of Gujarat with which we find ourselves in respectful agreement, action initiated by assessing officer for reopening assessment cannot be said to be either incompetent or otherwise improper to call for interference by writ court. Assessing Officer has in reasoned order passed by him indicated basis on which income exigible to tax had in his opinion escaped assessment. argument that proposed reopening of assessment was based only upon change of opinion has not impressed us. assessment order did not admittedly address itself to question which assessing officer proposes to examine in course of re-assessment proceedings. submission of Mr. Vohra that even when order of assessment did not record any explicit opinion on aspects now sought to be examined, it must be presumed that those aspects were present to mind of assessing officer and had been held in favor of assessed is too far fetched proposition to merit acceptance. There may indeed be presumption that assessment proceedings have been regularly conducted, but there can be no presumption that even when order of assessment is Page 436 silent, all possible angles and aspects of controversy had been examined and determined by assessing officer. It is trite that matter in issue can be validly 5 determined only upon application of mind by authority determining same. Application of mind is, in turn, best demonstrated by disclosure of mind, which is best done by giving reasons for view which authority is taking. In cases where order passed by statutory authority is silent as to reasons for conclusion it has drawn, it can well be said that authority has not applied its mind to issue before it nor formed any opinion. principle that mere change of opinion cannot be basis for reopening computed assessments would be applicable only to situations where assessing officer has applied his mind and taken conscious decision on particular matter in issue. It will have no application where order of assessment does not address itself to aspect which is basis for reopening of assessment, as is position in present case. It is in that view inconsequential whether or not material necessary for taking decision was available to assessing officer either generally or in form of reply to questionnaire served upon assessed. What is important is whether assessing officer had based on material available to him taken view. If he had not done so, proposed reopening cannot be assailed on ground that same is based only on change of opinion. 7. It is thus, not change of opinion but reassessment has been ordered on basis of tangible material placed on record necessitating reassessment. Sufficient reasons have been assigned for reopening of assessment. objections raised by petitioner company have been specifically dealt with by respondent no.2. Impugned order passed by respondent no.2 is detailed and reasoned and in conformity with law laid down by their Lordships in judgments cited hereinabove. 8. Accordingly, there is no merit in this petition and same is hereby dismissed. (Rajiv Sharma, J.) Rdang Tidewater Marine International Inc. v. Dy. Director of Income-tax & another