TMI Blog2004 (6) TMI 264X X X X Extracts X X X X X X X X Extracts X X X X ..... change of opinion by the Asstt. CIT. 6. The learned CIT(A) has erred in law and on facts in confirming the addition of Rs. 1,27,000 to the income of the appellant. 7. The learned CIT(A) has erred in confirming an addition of Rs. 27,000 being deemed interest @ 18 per cent on interest-free loan of Rs. 1,50,000 given by the appellant. 8. The learned CIT(A) has passed a brief and cryptic order without considering the detailed submissions made and various case law relied upon by the appellant during the assessment as well as the appellate proceedings. 9. The appellant may kindly be permitted to raise any further ground(s) of appeal at the time of hearing before Your Honour." I have heard the learned counsel for the assessee as well as the learned Departmental Representative. 2. The facts relating to the issue involved in this appeal and as have been revealed from the records are that the assessee, who was carrying on the business of contractor had furnished his return of income for asst. yr. 1996-97 declaring an income of Rs. 73,860 on 18th Feb., 1997, which was processed under s. 143(1)(a) of the Act on 21st March, 1997. Later on, the AO, probably on the basis of some audit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary for the asst. yr. 1996-97." assessee objected to the validity of proceedings under s. 147 of the Act as per his letters dt. 11th Feb., 2003 and 7th March, 2003. 3. In these replies, the assessee had objected to the validity of proceedings under s. 147 of the Act and had also submitted that on merits also there is no escapement of any income, as alleged by the AO, because the assessee had got the work done from a sub-contractor as per written agreement dt. 25th July, 1995, a copy of which was also filed. The assessee further submitted that since it had paid an amount of Rs. 1,27,000 to the sub-contractor, the net payments shown by the assessee at Rs. 14,496 were correct payments. The AO, however, rejected assessee's all objections and completed the assessment after making an addition of Rs. 1,27,000. The AO made another addition of Rs. 27,000 on account of notional interest income on loans and advances amounting to Rs. 1,50,000; interest under s. 234B/C was also charged. The assessee went in appeal before the CIT(A) and objected to the assessment, both on legal grounds as well as on merit, and reiterated the submissions made before the AO. The CIT(A) confirmed the valid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nitiate proceedings under s. 147 only due to change in opinion, which was not permissible in law. Reliance was placed on the following decisions: (i) United Electrical Co. (P) Ltd. vs. CIT (2002) 178 CTR (Del) 192 : (2002) 258 ITR 317 (SC) (ii) CIT vs. Kelvinator India (2002) 174 CTR (Del)(FB) 617 : (2002) 256 ITR 1 (Del)(FB). The learned counsel further submitted that even otherwise, the information in possession must be specific and the reopening of the assessment is not permissible simply on the basis of suspicion. According to him, so far as the assessee's case is concerned, by the time the AO initiated proceedings under s. 147 of the Act, the AO had no specific material that income had escaped assessment. According to the learned counsel, it was only AO's suspicion and since it is settled law that reopening cannot be justified on the basis of suspicion or for making of rowing enquiries, the same may be declared bad in law. The learned counsel further submitted that it has been held by the Hon'ble Supreme Court in the case reported in (2000) 159 CTR (SC) 114 : (2000) 242 ITR 381 (SC) at p. 391, that assessee cannot be subjected to two types of proceedings and, therefore, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment remains pending and support is sought from the decision relied on by the learned counsel for the assessee and recorded in the foregoing part of this order. 7. Even otherwise, I am of the opinion that the AO haying proceeded to tax the alleged income of Rs. 1,27,000 by exercising his powers under s. 154 of the Act, had no jurisdiction to tax the same income by initiating proceedings under s. 147 of the Act, irrespective of the fact as to whether proceedings under s. 264 had been pending or had been concluded. It is so because if the proceedings under s. 147 were initiated during the pendency of proceedings under s. 154 of the Act, then the same were illegal, and bad in law, as has been held above, and in case the proceedings under s. 154 had been concluded, then it was only due to change in opinion, and this conclusion is supported by the decisions in the following cases: (i) VXL India Ltd. vs. Asstt. CIT (1995) 127 CTR (Guj) 204 : (1995) 215 ITR 295 (Guj) (ii) Birla VXL vs. Asstt. CIT (1996) 130 CTR (Guj) 281 : (1996) 217 ITR 1 (Guj) (iii) CIT vs. EDI Parry Ltd. (1995) 216 ITR 489 (Mad). In the cases of VXL India Ltd. and Birla VXL Ltd., the Hon'ble High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... took up proceedings allegedly for rectification of mistake apparent from the record under s. 154 of the Act and, therefore, rectified the original assessments. The assessments framed in consequence upon the notices issued under s. 147(b) were cancelled. The assessee challenged the orders of rectification and it was in this context the Hon'ble High Court of Madras quashed the rectification order and the observations of the Hon'ble High Court at page No. 489 of the Report read as under: "The provisions for rectification of error apparent on the record and for taking proceedings regarding escapement are common features in the tax laws and they are to be involved in different circumstances. The ITO can have recourse to one or the other, but he must have recourse to the appropriate provisions having regard to the facts and circumstances in each case. In cases where the two appear to overlap, the ITO must choose one in preference to the other and proceed. He should not take one as the appropriate proceedings and give it up at a later stage to have recourse to the other, since such proceedings are quasi-judicial and adjudication after notice is intended for the same purpose. In such a c ..... 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