TMI Blog2005 (6) TMI 256X X X X Extracts X X X X X X X X Extracts X X X X ..... reopening of the assessment and hence the reopening is only consequent to change of opinion of the AO. The CIT(A) ought to have followed the decision of the Delhi High Court in Jindal Photo Films Ltd. VS. Dy. CIT Anr. (1999) 154 CTR (Del) 355 : (1998) 234 ITR 170 (Del). 3. Notwithstanding what is stated above, your appellant submits that the assessee had the right to adopt the method of accounting provided under s. 145 of the IT Act which was exercised." 3. First we will deal with the issue of jurisdiction as to whether the reopening under s. 147/148 is valid and as to whether the AO has brought on record any new material or new information warranting a reopening of the assessment and as to whether the reopening is only consequent to change of opinion of the AO. 4. The facts of the case are that the original return was filed by the assessee on 5th Oct., 1987 and the assessment was completed under s. 143(3) of the Act on 15th March, 1989. Subsequent to the original assessment, it was noticed by the AO that the assessee has failed to show an income of Rs. 19,57,500 on account of interest on the balance of purchase consideration payable by its wholly-owned subsidiary company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis. The AO has rejected the claim of the assessee that it is entitled to follow hybrid system of account under s. 145 of the Act for interest income. The AO has also rejected the contention of the assessee that the very basis of proceedings under s. 147 of the Act which is an audit objection based on the opinion of the audit party, are not valid. Aggrieved, the assessee preferred an appeal before the CIT(A). The CIT(A), on merits, found that the transaction was between the holding company and its subsidiary company and the fact that it claimed the expenditure on mercantile basis whereas when it comes to accounting for the income on account of interest, the assessee has changed the system of accounting from mercantile system to receipt basis. He found that the assessee was following mercantile system of accounting and having chosen to employ regularly that system, i.e., mercantile system, it is not open to the assessee unilaterally change the same at any time to follow in respect of a particular transaction and dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the Tribunal. 5. We have heard both the sides and gone through the case records as well ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt has given its sanction to the scheme of arrangement vide order dt. 19th Dec., 1986. The assessee in its return of income filed a statement of accounts and notes on accounts, wherein it is clearly admitted that it will account for the interest on the balance of purchase consideration on the basis of receipt in the previous year. These notes on accounts were available with the AO while framing the assessment under s. 143(3) of the Act, i.e., original assessment which was completed on 15th March, 1989. The interest income was not declared in the original return for taxation due to the reason that the board of directors have decided to treat the same on receipt basis even though other transactions are accounted for on mercantile system of accounting. Now, the question arises as to whether reopening of assessment in the above mentioned facts is valid or not and even though the assessee is following mercantile system of accounting as to whether the assessee is entitled to follow hybrid system of accounting or not under s. 145 of the Act in regard to one source of income particularly after giving notes on accounts in the statement of accounts of the relevant assessment year. The learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s fee for technical services and not as business income as assessed in the original assessments for those assessment years, were without the jurisdiction as they were barred by limitation in view of the proviso to s. 147, as amended by the Direct Tax Laws (Amendment) Act, 1987, as that was the provision that was applicable at the time of issuance of notice under s. 148 of the Act. In the present case also, the reassessment notice under s. 148/147 of the Act was issued almost after nine years and the same set of facts were available at the time of original assessment with the AG. The original assessment was completed under s. 143(3) of the Act on 15th March, 1989 and the reassessment notice was issued on 3rd Jan., 1997. 8. The Full Bench of the Hon'ble Delhi High Court in the case of CIT vs. Kalvinator of India Ltd. (2002) 174 CTR (Del)(FB) 617 : (2002) 256 ITR 1 (Del)(FB), which is relied on by the assessee's counsel, has deliberated that where reassessments were made, mere change of opinion was not held to be a ground for reassessment. It is further held that even the amendment of s. 147 of the Act by the Direct Lax Laws (Amendment) Act, 1987, w.e.f. 1st April 1989 does not alte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what extent it IS open to the authorities concerned to take a different view in the subsequent assessment years because, it was not even disputed that they are not debarred per se from taking a different view even if the circumstance and material brought to their notice subsequently point to a conclusion otherwise. But these principles may well be applicable if the assessments were being made for the first time. The infirmity in the action of the respondent springs from the fact that the respondent seeks to reopen these assessments which have already been concluded and that can only be permitted if the conditions precedent exist. It is the petitioner's case that those conditions do not exist. It is well-settled that the ITO can only issue a notice under s. 148 if the prerequisite conditions of s. 147(a) are available and the Court is not precluded from examining whether the jurisdictional facts which confer jurisdiction do exist. Now, one of the essential preconditions is that the income chargeable to tax should have escaped assessment and such escapement should have been occasioned by the omission or failure on the part of the assessee to disclose fully and truly all material fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowing the loss in 1967-68, but which was reversed in appeal and decided against the Revenue. But all that this comes to is that the ITO wishes to take a different view of the matter from that taken earlier. Now whatever may be the position about the jurisdiction of the ITO to take a different view of the matter on the same point for the subsequent years, because of the inapplicability of principle of estoppel in tax matters, different considerations apply about the jurisdiction when reopening old assessments. It is well-settled that escapement of income from assessment either due to a particular view of law or facts taken by the ITO or due to a mistake otherwise on the part of the ITO is not an escapement relevant to s. 147(a) as such escapement is not on account of the omission or failure of the assessee to discharge his obligation under s. 147(a). Nowhere in the reasons given by the ITO is there any suggestion of any overt or covert act in concealing or keeping back the fact, on the basis of which loss on exchange was being claimed. That this information was being supplied by the assessee and even discussed by the ITO and formed part of assessment order for all these years a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... als were available with the AO while framing the original assessment. Therefore, the ratio of the decisions relied on by the learned Departmental Representative is not applicable to the present case as the facts are distinguishable. 12. Now, the question arises as to what facts are material and necessary for assessment which differ from case to case. In every assessment proceedings, the AO for the purpose of computing or determining the tax due from the assessee requires to note the facts which help him in coming to the correct conclusion to arrive at an income. If there were, in fact, some reasonable grounds for thinking that there had been any non-disclosure in primary facts which could have a material bearing in the question of assessment or underassessment that will give sufficient reasons for invoking the jurisdiction under s. 147(a) of the Act to the AO. There can be no doubt that it is the duty of the assessee to disclose all primary facts relevant to the issue to be decided by the AO. The assessee is bound to disclose such material facts which are material for its assessment for the relevant assessment year and not those facts which are wholly extraneous for the purpose o ..... 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