S. P. Mani and Mohan Diary v. The Assistant Commissioner of Income-tax Central Circle I, Erode
[Citation -2019-LL-0926-61]

Citation 2019-LL-0926-61
Appellant Name S. P. Mani and Mohan Diary
Respondent Name The Assistant Commissioner of Income-tax Central Circle I, Erode
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 26/09/2019
Assessment Year 2011-12
Judgment View Judgment
Keyword Tags rectification of mistake • full and true disclosure • reassessment proceeding • reasons for reopening • escapement of income • account payee cheque • application of mind • change of opinion • tangible material • reason to believe • cash payment • new material
Bot Summary: During the course of assessment proceedings of the assessment year 2014-15, the assessee was requested to clarify on expenses of Rs.3,65,452/- incurred under the head, Asset Written Off and Rs.3,30,000/- incurred under the head, Factory Land Development Charges for the assessment year 2011-12, as no such details were filed by assessee during the assessment period of that year. Such embargo will not apply to cases where any income chargeable to tax has escaped assessment for such assessment year by reason of failure on the part of the assessee to make return under Section 139 or any response to a notice issued under 142(1) or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Insofar as the present case is concerned, a notice under section 148 of the said Act was issued to the petitioner on 22.11.2017, admittedly after four years, proposing to reopen the assessment by stating that the Assessing Officer has reason to believe that the income of the assessee in respect of assessment year 2011-12 has escaped assessment within the meaning of Section 147 of the said Act. On receipt of the above communication, assigning the reasons for reopening the assessment, the petitioner, through their communication dated 26.12.2017, objected to the reasons by specifically stating that at the time of original assessment itself all the details have been furnished with the Assessing Officer and that there was no escapement of income report, while the reassessment can be made only when there is a deliberate concealment. Perusal of the facts and circumstances of the present case would show that notice under Section 148 was admittedly issued after a period of four years from the end of the relevant assessment year, namely 2011-12 and therefore, it is for the revenue to satisfy that there is a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. In W.P.3648 of 2018 the course of assessment proceedings of the assessment year 2014-15, the assessee was asked to clarify the admissibility of the above expenses and that the assessee stated that the value of obsolete assets were written off and that the land development charges were expenditure incurred for leveling land. Two conditions are required to be satisfied before the respondent could issue notice under Section 148 of the Act, namely, he must have reason to believe that income chargeable to tax has escaped assessment and such income has escaped assessment by reason of omission or failure on the part of the assessee to disclose fully and truly material facts necessary for assessment for the year.


W.P.3648 of 2018 IN HIGH COURT OF JUDICATURE AT MADRAS Order Reserved on 16.09.2019 Order Delivered on 26.09.2019 CORAM HONOURNABLE MR.JUSTICE K.RAVICHANDRABAABU W.P.No.3648 of 2018 and W.M.P.No.4476 of 2018 M/s.S.P.Mani and Mohan Diary S4, Jeevanantham Street, Kollampalayam, Erode - 638 002 ...Petitioner Vs. Assistant Commissioner of Income tax Central Circle I Gandhiji Road, Erode - 638001 Respondent Writ Petition filed under Article 226 of Constitution of India to issue Writ of Certiorari to call for records of respondent in PAN.AAKFS133J and quash proceedings dated 22.11.2017 and consequential order disposing objection raised against issue of notice u/s 148 for AY 2011-12 dt. 04.01.2018 issued by respondent herein. 1/43 http://www.judis.nic.in W.P.3648 of 2018 For Petitioner : Ms.G.Vardhini Karthik for Mr.B.Raveendran For Respondent : Mr.A.P.Srinivas, Senior Standing Counsel for Income-tax ORDER petitioner is aggrieved against proceedings of respondent dated 22.11.2017 and consequential order disposing objections raised against issue of notice under section 148 of Income Tax Act for assessment year 2011-12 dated 04.01.2018. 2. case of petitioner in short is as follows: i) petitioner is assessee under respondent. They filed their return of income for assessment year 2011-12, admitting total income of Rs.1,72,77,830/-. case was selected for scrutiny and notice under section 143(2) dated 22.09.2012 was issued. Thereafter, order of assessment was passed on 14.03.2014, thereby disallowing 8% of their expenditure based on nature of business by making addition of Rs.35,37,000/-. Assessing Officer also disallowed 2/43 http://www.judis.nic.in W.P.3648 of 2018 expenses on milk can purchases from Profit and Loss account and allowed only 15% depreciation in Assessment Order. petitioner did not file any appeal and accepted demand and made payment of tax and interest amounting to Rs.21,35,750/-. Thus, petitioner had fully and truly co-operated with department in participating in scrutiny and assessment proceedings and also in paying tax without any delay. While so, impugned notice dated 22.11.2017 was issued under section 148 of Income Tax Act contending that Assessing Officer had reason to believe that petitioner's income for assessment year 2011-12 had escaped assessment within meaning of section 147 of Income Tax Act, 1961. petitioner, through letter dated 27.11.2017, requested respondent to treat return filed under Section 139 as one filed as revised return for purpose of reassessment under Section 147. In very same communication, petitioner also requested respondent to give reason for reopening. By communication dated 08.12.2017, respondent directed petitioner to file fresh return of income. On 26.12.2017, petitioner made e-filing of return again by seeking reasons for reopening assessment. On 19.12.2017, respondent furnished reasons. 3/43 http://www.judis.nic.in W.P.3648 of 2018 ii) materials on which reopening is done were already available at time of assessment proceedings and same were accepted by respondent. Therefore, present notice impugned based on such materials clearly amounts to change of opinion, which cannot be sustained in law. There was no allegation against petitioner as if they had failed to disclose fully and truly all material facts necessary for his assessment. In absence of allegation that escapement of income has been occasioned by failure on part of assessee to disclose fully and truly all material facts necessary for its assessment, Assessing Officer is barred from reopening assessment based on mere change of opinion. Therefore, petitioner had filed their objections on 26.12.2017 and stated that there was no escapement of income and that details were all furnished at time of assessment proceedings itself. However, respondent issued impugned order dated 04.01.2018 rejecting objections. Therefore, present writ petition. 3. respondent filed counter affidavit wherein it is stated as follows: i) assessment for year under consideration namely 2011-12 4/43 http://www.judis.nic.in W.P.3648 of 2018 was initially completed under section 143(3) of Income Tax Act, 1961 on 14.03.2014. During course of assessment proceedings of assessment year 2014-15, assessee was requested to clarify on expenses of Rs.3,65,452/- incurred under head, Asset Written Off and Rs.3,30,000/- incurred under head, Factory Land Development Charges for assessment year 2011-12, as no such details were filed by assessee during assessment period of that year. On perusal of ledger account of Land Development Charges, it was noticed that cash payment of Rs.1,50,000/- and Rs.75,000/- were made on 12.10.2010 and 17.02.2011 respectively, in violation of provisions of Section 40(A) of said Act. Such violation was not mentioned in Tax Audit Report. Asset Written Off ledger account reflects that assessee has incorrectly claimed amount as revenue expense, when in fact, same was capital loss or, at most, assessee could have continued claiming depreciation on assets. Thus, perusal of ledge accounts prima facie indicate under assessment of income. During course of assessment proceedings of year 2011-12, assessee had not filed details representing expense of Rs.3,65,452/- on account of Asset Written Off and Factory Land Development Charge of Rs.3,30,000/-. 5/43 http://www.judis.nic.in W.P.3648 of 2018 Further, cash payment incurred under head Factory Land Development Charge was not reported in Tax Audit Report. Thus, during course of assessment proceedings, assessee failed to fully and truly disclose material facts required for finalising assessment. It was only during course of verification carried out during assessment proceedings of assessment year 2014-15, these details were brought on record. Therefore, notice under section 148 was issued only on basis of new facts that had come to light subsequently and not on account of change of opinion, as alleged by petitioner. Therefore, said notice is valid and well within statutory time limit available under said Act. order dated 04.01.2018, impugned in this writ petition, is not assessment order and therefore, assessee has every opportunity to present his case before Assessing Officer during course of re-assessment proceedings. 4. learned counsel for petitioner contended as follows: i) impugned notice under Section 148 dated 22.12.2017 was issued after expiry of four years from end of assessment year 2011-12 and therefore, very notice for reopening itself is barred by limitation. Even to attract first proviso to Section 147, there must be 6/43 http://www.judis.nic.in W.P.3648 of 2018 clear cut finding about failure to disclose fully and truly all material facts. No such finding is given in impugned proceedings. On other hand, all material facts referred to as reasons for reopening are already disclosed in original return itself. Therefore, it is only change of opinion of Assessing Officer on those materials, which cannot be basis for reopening. sum of Rs.3,65,452/- towards Asset Written Off and sum of Rs.3,30,000/- towards Factory Land Development charges were already shown in Profit and Loss account filed along with return and therefore, respondent is factually not correct in stating that there is no full and true disclosure of all material facts. ii) In support of her contention learned counsel relied on recent decision of Apex Court reported in 2018(6) SCC 685 (CIT vs. Techspan India Private Limited & another) and decision made by this Court in W.P.No.1589/2017 etc. dated 13.11.2017. 5. Per contra, learned Senior Standing Counsel appearing for respondent contended as follows: i) Mere disclosure is not enough without there being further material facts in connection with such disclosure. audit report is also 7/43 http://www.judis.nic.in W.P.3648 of 2018 not clear since it is stated therein that it was not possible for auditor to verify whether payment exceeding Rs.20,000/- have been made otherwise than by account payee, cheque or bank draft, as necessary evidence is not in possession of assessee. non-disclosure of material facts was noticed during subsequent assessment proceedings of year 2014-15 and therefore, based on such tangible material, reopening is made and thus, same is sustainable. When reopening is made based on such tangible material, it is not open to petitioner to contend as if reopening is made based on change of opinion. issue raised in reopening was not discussed in original assessment order. Therefore, there is no question of saying that there is change of opinion. escaped assessment includes under assessment. issue regarding under assessment, if not properly considered at time of original assessment, is entitled to be considered by way of reopening. In other words, issue not properly considered entitles for reopening. ii) In support of his contention, learned counsel relied on following case laws. i) 1976(12) ITR 287 (SC) (Kalyanji Mavji & Co. 8/43 http://www.judis.nic.in W.P.3648 of 2018 v. Commissioner of Income-tax) ii) 1989 (46) Taxman 13 (Mad) (Virudhunagar Co-operative Milk Supply Society Ltd.v. Commissioner of Income-tax) iii) 1986 (25) Taxman 356 (SC) (Indi-Aden Sald Mfg. & Trading co.P.Ltd..v. Commissioner of Income- tax) iv) 1999 (236) ITR 34 (SC) (Raymond Woolen Mills Ltd. v. Income-tax Officer) v) 1993 (69) taxman 625 (SC) (Phool Chand Bajrang Lal v. Income-tax Officer) vi) (2016)75 taxmann.com 172 (Girilal & Co. v.Income-tax Officer,Mumbai) vii)2016 (387) ITR 122 (SC) (Girilal & Co. v.Income-tax Officer,Mumbai) viii) (2018) 409 ITR 502 (A.Sridevi v. Income- tax Officer, Non-Corporate Ward 16(1)) 6. Heard both sides and perused materials placed before this Court. 7. petitioner is aggrieved against reopening of assessment. relevant assessment year is 2011-12. order of assessment under Section 143(2) was already passed on 14.03.2014, based on return filed by petitioner and subsequent to 9/43 http://www.judis.nic.in W.P.3648 of 2018 scrutiny made, by issuing notice under Section 143(2) dated 22.09.2012. 8. Section 147 of Income Tax Act, 1961, empowers Assessing Officer to reopen assessment if he has reason to belief that any income chargeable to tax has escaped assessment. However, first proviso to Section 147 stipulates that no action shall be taken under section 147 after expiry of four years from end of relevant assessment year where assessment under Section 143(3) was passed. However, such embargo will not apply to cases where any income chargeable to tax has escaped assessment for such assessment year by reason of failure on part of assessee to make return under Section 139 or any response to notice issued under 142(1) or Section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. 9. Insofar as present case is concerned, notice under section 148 of said Act was issued to petitioner on 22.11.2017, admittedly after four years, proposing to reopen assessment by stating that Assessing Officer has reason to believe that income of assessee in respect of assessment year 2011-12 has escaped assessment within meaning of Section 147 of said Act. Thus, 10/43 http://www.judis.nic.in W.P.3648 of 2018 petitioner was called upon to file return in prescribed form of its income. petitioner sent reply on 27.11.2017 and sought for reason for reopening assessment. On 19.12.2017, revenue has assigned reasons as follows: Reasons for issue of notice under section 148 are reproduced below: "It is noticed that amount of Rs.3,65,452/- was debited to Profit and Loss account under head Asset Written Off. Also amount of Rs.3,30,000/- was debited under head Factory Land Development Charge. During course of assessment proceedings of A.Y.2014-15 assessee was also asked to clarify admissibility of above expenses. In response it was stated that value of obsolete assets were written off and that land development charges was expenditure incurred for leveling factory land. Writing off cost of obsolete asset is capital loss and therefore cannot be allowed as expense. While disallowing this amount at most assessee will be eligible for depreciation @ 15%. Thus, there is under assessment of income of atleast Rs.3,10,34/-. With respect to land development expense, on perusal of ledger account it is noticed that cash 11/43 http://www.judis.nic.in W.P.3648 of 2018 payment of Rs.1,50,.000/- was made on 12./10/10 and Rs.75,000/- on 17/2/11 i.e. assessee had violated provisions of section 40A(3) and therefore expense to tune of Rs.2,25,000/- was not allowable. tax audit report too did not have any mention of this violation. above aspects remained to be examined while finalizing assessment. I therefore, have reasons to believe that income of atleast Rs.5,35,634/- has escaped assessment." 10. On receipt of above communication, assigning reasons for reopening assessment, petitioner, through their communication dated 26.12.2017, objected to reasons by specifically stating that at time of original assessment itself all details have been furnished with Assessing Officer and that there was no escapement of income report, while reassessment can be made only when there is deliberate concealment. said objection was rejected by Revenue through impugned communication dated 04.01.2018. It is case of Revenue that audit report has not reported values of section 40(A)(3) and during course of original assessment proceedings, assessee has not furnished details of entry representing Asset Written Off and Factory Land Development 12/43 http://www.judis.nic.in W.P.3648 of 2018 charge. 11. Before we proceed further, it is better to understand scope and ambit of Section 147 which deals with reopening of assessment. Section 147 of Income Tax Act reads as follows. 147. If Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to 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 course of proceedings under this section, or recompute loss or depreciation allowance or any other allowance as case may be, for assessment year concerned (hereinafter in this section and in sections 148 to 153 referred to as relevant assessment year): Provided that where assessment under sub-section (3) of section 143 or this section has been made for relevant assessment year, no action shall be taken under this section after expiry of four years from end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of failure on part of assessee to make return under section 139 or in response to notice issued under 13/43 http://www.judis.nic.in W.P.3648 of 2018 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; Provided further..... 12. above provision of law is in force with effect from 01.04.1989 pursuant to Direct Tax Laws (Amendment) Act, 1987, which substituted above provision in place of earlier provision as existed prior to 01.04.1989. In this case, we are concerned with present provision under Section 147 as it stands with effect from 01.04.1989. Hon'ble Full Bench of Delhi High Court in Kelvinator of India Limited case, reported in (2002) 256 ITR 1, considered question in detail as to whether any change in law has been brought about on account of amendment of Section 147 with effect from 01.04.1989. In above said decision, Hon'ble Full Bench has observed as follows: 10. In Indian & Eastern Newspaper Society v. CIT MANU/SC/0328/1979 three-Judge Bench of Apex Court held that although disclosure of new facts therein may be information within meaning of afore-mentioned provisions this opinion of law would not be as 14/43 http://www.judis.nic.in W.P.3648 of 2018 regard contention on part of revenue that expression information in section 147(b) refers to realization by Income Tax Officer that he has committed error while making original assessment. Apex Court said : "that he has committed error when making original assessment. It is said that, when upon receipt of audit note Income Tax Officer discovers or realizes that mistake has been committed in original assessment, discovery of mistake would be 'information' within meaning of section 147(b). submission appears to us inconsistent with terms of section 147(b). Plainly, statutory provision envisages that Income Tax Officer must first have information in his possession, and then in consequence of such information he must have reason to believe that income has escaped assessment. realization that income has escaped assessment is covered by words 'reason to believe', and it follows from "information" received by Income Tax Officer. information is not realization, 15/43 http://www.judis.nic.in W.P.3648 of 2018 information gives birth to realization." This has been settled position in law although. However, question which requires consideration is whether any change in law has been brought about on account of amendment of section 147 with effect from 1-4-1989. 11. In Jindal Photo Films Ltd. (supra) R.C. Lahoti, J. (as His Lordship then was) observed : "The power to reopen assessment was conferred by legislature not with intention to enable Income Tax Officer to reopen final decision made against revenue in respect of questions that directly arose for decision in earlier proceedings. If that were not legal position it would result in placing unrestricted power of review in hands of assessing authorities depending on their changing moods." It was further held by Bench that: "Reverting back to case at hand, it is clear from reasons placed by assessing officer on record as also from statement made in counter-affidavit that all that Income Tax Officer has said is that he was not right in allowing deduction under section 80-I because 16/43 http://www.judis.nic.in W.P.3648 of 2018 he had allowed deductions wrongly and, Therefore, he was of opinion that income had escaped assessment. Though he has used phrase "reason to believe" in his order, admittedly, between date of orders of assessment sought to be reopened and date of forming of opinion by Income Tax Officer nothing new has happened. There is no change of law, No new material has come on record. No information has been received. It is merely fresh application of mind by same assessing officer to same set of facts. While passing original orders of assessment order dated 28-2-1994, passed by Commissioner (Appeals) was before assessing officer. That order stands till today. What assessing officer has said about order of Commissioner (Appeals) while recording reasons under section 147 he could have said even in original orders of assessment. Thus, it is case of mere change of opinion which does not provide jurisdiction to assessing officer to initiate proceedings under section 147 of Act. It is also equally well settled that if notice 17/43 http://www.judis.nic.in W.P.3648 of 2018 under section 148 has been issued without jurisdictional foundation under section 147 being available to assessing officer, notice and subsequent proceedings will be without jurisdiction, liable to be struck down in exercise of writ jurisdiction of this court. If "reason to believe" be available, writ court will not exercise its power of judicial review to go into sufficiency or adequacy of material available. However, present one is not case of testing sufficiency of material available. It is case of absence of material and hence absence of jurisdiction in assessing officer to initiate proceedings under section 147/148 of Act." Thus, court held that even under newly substituted section 147, with effect from 1-4-89, assessment could not be reopened on mere change of opinion. .... ..... 14. It is well settled principle of interpretation of statute that entire statute should be read as whole and same has to be considered thereafter chapter by chapter and then section by section and ultimately word by word. It is not 18/43 http://www.judis.nic.in W.P.3648 of 2018 in dispute that assessing officer does not have any jurisdiction to review its own order. His jurisdiction is confined only to rectification of mistake as contained in section 154 of Act. power of rectification of mistake conferred upon Income Tax Officer is circumscribed by provisions of section 154 of Act. said power can be exercised when mistake is apparent. Even mistake cannot be rectified where it may be mere possible view or where issues are debatable. Even Tribunal has limited jurisdiction under section 254(2) of Act. Thus, when assessing officer or Tribunal has considered matter in detail and view taken is possible view order cannot be changed by way of exercising jurisdiction of rectification of mistake. 15. It is well settled principle of law that what cannot be done directly cannot be done indirectly. If Income Tax Officer does not possess power of review, he cannot be permitted to achieve said object by taking recourse to initiating proceeding of reassessment or by way of rectification of mistake. In case of this nature revenue is 19/43 http://www.judis.nic.in W.P.3648 of 2018 not without remedy. Section 263 of Act empowers Commissioner to review order which is prejudicial to revenue. .... .... 21. Another aspect of matter also cannot be lost sight of. statute conferring arbitrary power may be held to be ultra vires article 14 of Constitution of India. If two interpretations are possible, interpretation which upholds constitutionality, it is trite, should be favored. In event it is held that by reason of section 147 if Income Tax Officer exercises its jurisdiction for initiating proceeding for reassessment only upon mere change of opinion, same may be held to be unconstitutional. We are, Therefore, of opinion that section 147 of Act does not postulate conferment of power upon assessing officer to initiate reassessment proceeding upon his mere change of opinion. We, however, may hasten to add that if "reason to believe" of assessing officer if founded on information which might have been received by assessing officer after completion of 20/43 http://www.judis.nic.in W.P.3648 of 2018 assessment, it may be sound foundation for exercising power under section 147 read with section 148 of Act. 22. .... 23. We also cannot accept submission of Mr. Jolly to effect that only because in assessment order, detailed reasons have not been recorded on analysis of materials on record by itself may justify assessing officer to initiate proceeding under section 147 of Act. said submission is fallacious. order of assessment can be passed either in terms of sub-section (1) of section 143 or sub- section (3) of section 143. When regular order of assessment is passed in terms of said sub- section (3) of section 143 presumption can be raised that such order has been passed on application of mind. It is well known that presumption can also be raised to effect that in terms of clause (e) of section 114 of Indian Evidence Act judicial and official acts have been regularly performed. If it be held that order which has been passed purportedly without application of mind would itself confer jurisdiction upon assessing officer to reopen 21/43 http://www.judis.nic.in W.P.3648 of 2018 proceeding without anything further, same would amount to giving premium to authority exercising quasi judicial function to take benefit of its own wrong. 13. above decision was challenged before Hon'ble Apex Court, which in turn, in decision reported in 2010(320) ITR 561 (SC) (Commissioner of Income Tax, Delhi vs. Kelvinator of India Ltd.), while affirming decision of Delhi High Court, has observed at paragraph No.4 as follows: 4. On going through changes, quoted above, made to Section 147 of Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening 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 1st April, 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 re-open assessment. Therefore, post-1st April, 1989, power to re- open 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 22/43 http://www.judis.nic.in W.P.3648 of 2018 Assessing Officer to re-open assessments on basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind conceptual difference between power to review and power to re-assess. Assessing Officer has no power to review; he has power to re-assess. But re-assessment has to be based on fulfilment of certain pre-condition and if concept of "change of opinion" is removed, as contended on behalf of Department, then, in garb of re-opening assessment, review would take place. One must treat concept of "change of opinion" as in-built test to check abuse of power by Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, 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 re-introduced said expression and deleted word "opinion" on ground that it would vest arbitrary 23/43 http://www.judis.nic.in W.P.3648 of 2018 powers in Assessing Officer. We quote herein below relevant portion of Circular No. 549 dated 31st October, 1989, which reads as follows: 7.2 Amendment made by Amending Act, 1989, to reintroduce expression `reason to believe' in Section 147.--A 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. 14. From perusal of above decision made in Kelvinator's case, it is evident that Assessing Officer has power to reopen only when there is tangible material which has come to light so as to believe that there is escapement of income from assessment. On other hand, if Assessing Officer seems to form different opinion or change of 24/43 http://www.judis.nic.in W.P.3648 of 2018 opinion on materials already available at time of assessment, such change of opinion cannot be reason for reopening under Section 147. Therefore, in this case, it is to be seen as to whether reopening is sought to be done based on any tangible material which has come to notice of Assessing Officer later, for him to believe that there is escapement of income from assessment or as to whether Assessing Officer is simply proceeding to reopen based on mere change of opinion on materials already available on record at time of original assessment itself. 15. Perusal of facts and circumstances of present case would show that notice under Section 148 was admittedly issued after period of four years from end of relevant assessment year, namely 2011-12 and therefore, it is for revenue to satisfy that there is failure on part of assessee to disclose fully and truly all material facts necessary for assessment of that assessment year. Only when revenue succeeds in establishing such failure, reopening can be sustained, as it has been made beyond period of four years. 16. reason for reopening assessment is in respect of two 25/43 http://www.judis.nic.in W.P.3648 of 2018 issues which are as follows: i) amount of Rs.3,65,452/- was debited to profit and loss account under head of asset written off. ii) amount of Rs.3,30,000/- was debited under head factory land development charges and out of such sum, sum of Rs.2,25,000/- spent on that account was in violation of Section 40A(3) of said Act. 17. First of all, it is to be seen as to whether these two figures are shown in return filed by assessee. Perusal of copy of return filed would show that profit and loss account for year ended 31.03.2011 clearly reflected Asset Written Off as Rs.3,65,452/- and Factory Land Development Charges as Rs.3,30,000/-. It is claimed by revenue that land development expense to tune of Rs.2,25,000/- was made in violation of provision of section 40A(3) of said Act and therefore, same is not allowable. So, on that ground also reopening is sought to be done. I do not think that above reason is based on new material which has come to light subsequently, warranting reopening. On other hand, Auditor Report submitted in Form No.3CD with return filed by assessee, 26/43 http://www.judis.nic.in W.P.3648 of 2018 clearly indicates at Serial No.17(h)(B) therein that it was not possible for Auditor to verify whether payment exceeding Rs.20,000/- have been made otherwise than by account payee cheque or bank draft as necessary evidence is not in possession of assessee. above statement was made by Auditor while answering column "amount inadmissible under section 40A(3)". Therefore, it is evident that even in respect of above issue raised by revenue for reopening, above statement of auditor is already available on record and therefore, if at all Assessing Officer wants to reopen on such issue, he should have exercised such power within period of four years as contemplated under section 147 but he has not done so. Therefore, it is evident that these details were very much available before Assessing Officer, even at time of original assessment. Based on such return filed by petitioner, order of assessment was passed under section 143(3) of Income Tax Act. Now, Assessing Officer wants to reopen assessment based on amount of Rs.3,65,452/- debited to profit and loss account under head, Asset Written Off and amount of Rs.3,30,000/- debited under head, Factory Land Development Charges. It is claim of Assessing Officer that during 27/43 http://www.judis.nic.in W.P.3648 of 2018 course of assessment proceedings of assessment year 2014-15, assessee was asked to clarify admissibility of above expenses and that assessee stated that value of obsolete assets were written off and that land development charges were expenditure incurred for leveling land. Thus, it is claimed by Assessing Officer that Written off cost of obsolete asset is capital loss and cannot be allowed as expenses. It is further claimed by revenue that in respect of development expenses, on perusal of ledger account, it was noticed that cash payments made were in violation of Section 40A(3) and thus same is not allowable. I have already discussed supra that even in respect of issue raised in relation to alleged violation of Section 40A(3), materials were already available on record. Therefore, above reasons of Revenue would undoubtedly indicate that Assessing Officer has changed his opinion in respect of relevant entries under Profit and Loss Account, namely Asset Written Off and Factory Land Development Charges, which cannot be basis for reopening assessment. When assessee had shown those two heads under Profit and Loss account filed along with return, it cannot be said that there is failure on part of assessee to disclose fully 28/43 http://www.judis.nic.in W.P.3648 of 2018 and truly all material facts. Nothing prevented assessing officer to seek for clarification, if any, in respect of above said two heads before making assessment under Section 143(3), if he has any doubt on those two heads. 18. On other hand, Assessing Officer has accepted return filed by petitioner even in respect of those two heads and passed order of assessment. Consequently, he is not entitled to reopen assessment based on such mere change of opinion. At this juncture, it is relevant to note that no fresh material, tangible in nature, has come to light before Assessing Officer. On other hand, he wants to change his conclusion in relation to those two heads based on materials already available. Undoubtedly, such attempt is only change of opinion and nothing else. In this connection, recent decision of Apex Court reported in 2018(6) SCC 685 (CIT vs. Techspan India Private Limited & another) is relevant to be quoted, wherein at paragraph Nos. 14 to 17, it has been observed as follows: 14. language of Section 147 makes it clear that assessing officer certainly has power to re-assess any income which escaped assessment for any assessment 29/43 http://www.judis.nic.in W.P.3648 of 2018 year subject to provisions of Sections 148 to 153. However, use of this power is conditional upon fact that assessing officer has some reason to believe that income has escaped assessment. use of words 'reason to believe' in Section 147 has to be interpreted schematically as liberal interpretation of word would have consequence of conferring arbitrary powers on assessing officer who may even initiate such re- assessment proceedings merely on his change of opinion on basis of same facts and circumstances which has already been considered by him during original assessment proceedings. Such could not be intention of legislature. said provision was incorporated in scheme of IT Act so as to empower Assessing Authorities to re-assess any income on ground which was not brought on record during original proceedings and escaped his knowledge; and said fact would have material bearing on outcome of relevant assessment order. 15. Section 147 of IT Act does not allow re- assessment of income merely because of fact that assessing officer has change of opinion with regard to interpretation of law differently on facts that were well within his knowledge even at time of assessment. Doing so would have effect of giving assessing 30/43 http://www.judis.nic.in W.P.3648 of 2018 officer power of review and Section 147 confers power to re-assess and not power to review. 16. To check whether it is case of change of opinion or not one has to see its meaning in literal as well as legal terms. word change of opinion implies formulation of opinion and then change thereof. In terms of assessment proceedings, it means formulation of belief by assessing officer resulting from what he thinks on particular question. It is result of understanding, experience and reflection. 17. It is well settled and held by this Court in catena of judgments and it would be sufficient to refer Commissioner of Income Tax, Delhi v. Kelvinator of India Ltd. MANU/SC/0047/2010 : (2010) 320 ITR 561 (SC) wherein this Court has held as under: "5....where Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give schematic interpretation to words "reason to believe"..... Section 147 would give arbitrary powers to Assessing Officer to re-open assessments on 31/43 http://www.judis.nic.in W.P.3648 of 2018 basis of "mere change of opinion", which cannot be per se reason to re-open. 6. We must also keep in mind conceptual difference between power to review and power to re-assess. Assessing Officer has no power to review; he has power to re- assess. But re-assessment has to be based on fulfillment of certain pre-condition and if concept of "change of opinion" is removed, as contended on behalf of Department, then, in garb of re-opening 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 1st April, 1989, Assessing Officer has power to re- open, 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. 19. Further, in unreported decision of this Court made in W.P.No.1589/2017 etc. dated 13.11.2017, learned single Judge has observed at paragraph Nos.15 and 16 as follows: 32/43 http://www.judis.nic.in W.P.3648 of 2018 15. Having steered clear of legal position, we need to apply same to facts of present case. Two conditions are required to be satisfied before respondent could issue notice under Section 148 of Act, namely, (1) he must have reason to believe that income chargeable to tax has escaped assessment and (2) such income has escaped assessment by reason of omission or failure on part of assessee to disclose fully and truly material facts necessary for assessment for year. settled legal position is that both these conditions must co-exist in order to confer jurisdiction on respondent. Further, respondent should record his reasons before initiating proceedings under Section 148(2) of Act; before issuing notice after expiry of four years from end of relevant assessment year. assessee is expected to make true and full disclosure of primary facts. It is thereafter for respondent to draw inference from those primary facts. If on further examination either by same officer or by successor, 33/43 http://www.judis.nic.in W.P.3648 of 2018 inference arrived at appears to be erroneous, mere change of opinion would not be justification to reopen assessment. 16.In instant case, petitioner's assessment for subject assessment year was taken up for scrutiny. All primary facts were available with Assessing Officer. Assessing Officer completed scrutiny assessment vide order dated 30.12.2011. After expiry of four years, impugned notice dated 31.03.2016 was issued. petitioner requested for copy of reasons for reopening vide representation dated 13.04.2016. respondent by communication dated 19.04.2016 furnished reasons for reopening. On perusal of reasons, I find that respondent on verification of assessment records and order sheet entries inferred that Assessing Officer on scrutiny had failed to examine and deliberate on correctness of income reported under head agricultural income. Further, respondent would state that even though assessee had derived predominant portion 34/43 http://www.judis.nic.in W.P.3648 of 2018 of agricultural income from sale of coffee seeds, aspect as to whether income so derived is completely exempt or is it case falling under Rule 7B was also omitted to be verified. Added to this, Assessing Officer was inspired by direction issued by ITAT in case of one TC Abraham. Thus, on mere reading on reasons for reopening clearly show that there is no allegation against petitioner that there has been omission or failure on part of assessee to disclose fully and truly all material facts necessary for assessment for that year. so called reason to believe that income chargeable to tax has escaped assessment is on ground that Assessing Officer at time of scrutiny assessment did not examine as to whether entire agricultural income was completely exempted or not. This can hardly be reason to believe that income chargeable to tax has escaped assessment as it is clear case of change of opinion by respondent. As pointed out in case of Calcutta Discount Company Limited, obligation on part of assessee does not extend beyond fully and 35/43 http://www.judis.nic.in W.P.3648 of 2018 truly disclosing all primary facts. It is for Assessing Officer to take inference on facts and law based on such disclosure. If according to respondent, his predecessor did not come to proper inference on facts disclosed, it is no ground to reopen assessment, as if permitted and it would amount to clear case of change of opinion. In light of above discussion, first issue framed for consideration is answered in favour of petitioner and against revenue. 20. In this case, it is relevant to note that neither notice issued under section 148 nor proceedings stating reasons for reopening assessment, has alleged anywhere that assessee has failed to disclose fully and truly any material facts necessary for assessment. On other hand, perusal of reasons stated for reopening would only show that Assessing Officer wanted to change his opinion already arrived on materials available on record. decisions relied on by learned standing counsel for respondent which were rendered prior to 1989 Amendment, in my considered view, neither can be applied to facts and circumstances of present case 36/43 http://www.judis.nic.in W.P.3648 of 2018 nor would help revenue in any manner, in view of fact that in subsequent decision rendered in Kelvinator's case (CIT v. Kelvinator of India Ltd.) reported in 2010(320) ITR 561, law is now well settled by Apex Court. recent decision of Apex Court referred to supra reported in 2018(6) SCC 685 (CIT vs. Techspan India Private Limited & another) also referred to decision made in Kelvinator's case. Therefore, law laid down by Apex Court in Kelvinator's case is squarely applicable to facts and circumstances of present case and thus, reopening is bad as same is not permissible, based on change of opinion. Consequently, revenue cannot escape from clutches of limitation. Such being position, reopening notice issued after period of four years is undoubtedly, barred by limitation. 21. No doubt, it is contended by learned counsel for Revenue that issue raised for reopening was not discussed in original assessment order and therefore, it cannot be said that reopening is made based on change of opinion. I am unable to appreciate above contention for following reasons: There is no dispute to fact that reasons for reopening were based on two heads namely, "Asset Written Off and Factory Land 37/43 http://www.judis.nic.in W.P.3648 of 2018 Development Charges". It is not case of Revenue that amount referable to those two heads were not at all shown in profit and loss account. On other hand, as already stated supra, assessee along with return enclosed trading profit and loss account wherein above two heads were specifically shown with referable quantum of amount. Therefore, it is evident that materials relevant to subject matter in issue for reopening, are already on record before Assessing Officer. After perusing return filed along with its enclosures, Assessing Officer completed assessment. Therefore, there is every reasonable presumption that Assessing Officer has accepted materials filed with returns except to extent where he differed and stated so in his assessment order. If issue is not specifically raised in assessment order, it cannot be automatically presumed that such issue was not at all considered in original assessment order. Consequently, if Assessing Officer chooses to reopen assessment based on such available materials, it would certainly amount to change of opinion only and cannot be called as issue not raised or discussed, as contended by learned counsel for Revenue. 22. At this juncture, it is to be noted that question as to 38/43 http://www.judis.nic.in W.P.3648 of 2018 whether reasons for reopening assessment would amount to change of opinion or not is to be considered and decided on facts and circumstances of each case and therefore, view expressed in one case based on facts and circumstances of that particular case cannot be applied to another case to contend in either way, unless facts and circumstances of both cases are one and same. In other words, question of change of opinion has to be considered and decided on case to case basis. 23. Learned counsel for Revenue relied on (2016) 75 taxmann.com 172 (SC) (Girilal &Co. Vs. ITO) to contend that if assessee has not correctly disclosed actual material details, Assessing Officer is entitled to reopen assessment. Perusal of said case would show that same is factually distinguishable. In that case, assessee was not correct in disclosing actual size of plot and hence, he was not entitled for deduction. It was also noticed therein that information regarding actual size of plot used for construction therein was not available in return of income. facts of present case would show that assessee has specifically referred specific amount under above two heads namely "asset written off and 39/43 http://www.judis.nic.in W.P.3648 of 2018 factory land development charges" in return filed by them. Therefore, I am of view that Revenue is not right in contending that assessee had not correctly disclosed material details. Even otherwise, as I pointed out earlier, neither show cause notice nor proceedings stating reasons for reopening indicate anywhere that assessee failed to disclose truly and fully material details. Therefore, learned counsel for Revenue is not justified in relying above decision of Apex Court. 24. other decisions relied on by Revenue reported in 2018 409 ITR 502 (A.Sridevi Vs. Income-tax Officer) is in support of contention that when no opinion was formed during assessment proceedings, it cannot be termed now as change of opinion. It is true that Division Bench of this Court at paragraph No.21 has observed that reopening of assessment therein is just and proper and no opinion was formed during assessment proceedings in which to be termed as 'change of opinion' more so, when assessee has failed to disclose fully and truly all materials necessary for its assessment. However, it is to be noted that in order to arrive at such conclusion, Division Bench has made observation at paragraph No.20 that 40/43 http://www.judis.nic.in W.P.3648 of 2018 assessee therein has not filed balance sheet or statement of affairs as noted by Assessing Officer. Therefore, it is evident that facts and circumstances of case in hand and case before Division Bench are totally different and distinguishable. Hence, Revenue is not correct in relying upon above decision as well. In any event, when admittedly, assessee has placed on record before Assessing Officer through their return with enclosures about Asset Written Off and Factory Land Development charges, it cannot be said that there is failure to disclose material facts fully and truly. 25. In view of facts and circumstances of present case and findings rendered supra, this Court is of view that impugned reopening of assessment is bad in law as same does not meet and satisfy statutory requirement contemplated under Section 147 of Income Tax Act. Accordingly, Writ Petition is allowed and impugned orders are set aside. No costs. Consequently, connected miscellaneous petitions is closed. 26.09.2019 Speaking : Yes / No Index : Yes / No vsi 41/43 http://www.judis.nic.in W.P.3648 of 2018 To Assistant Commissioner of Income Tax, Central Circle-I, Gandhiji Road, Erode - 638 001. K.RAVICHANDRABAABU,J. vsi Pre-delivery order in W.P.No.3648 of 2018 42/43 http://www.judis.nic.in S. P. Mani and Mohan Diary v. Assistant Commissioner of Income-tax Central Circle I, Erode
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