TMI Blog2010 (2) TMI 269X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the notice dated Nov. 26, 2008 in pursuance of which the assessee filed a detailed representation elucidating the relevant particular of the business of the assessee. The Assessing Officer did have tangible material to reopen the assessment under section 147. The notice of reassessment was valid. Dismissed the petition. - 8721 OF 2009 - - - Dated:- 17-2-2010 - DR. D.Y.CHANDRACHUD AND J.P.DEVADHAR, JJ. Mr. Percy J. Pardiwala, senior Advocate with Prakash Shah Sumeet Raghani i/b. PDS Legal for petitioner Mr. Vimal Gupta for respondents. JUDGMENT DR. D.Y. CHANDRACHUD, J.- Rule, by consent and on the request of Counsel made returnable forthwith. Counsel for the respondents waives service. With the consent of counsel, the petition is taken up for final hearing. 2) The petitioner is engaged inter alia in the business of providing audiovisual television Software ('content'), films, events and other like activities. Subscription income is received from distribution of channels. The petitioner also receives income from advertisements, sales and agency fees from marketing of airtime. As a content provider, the petitioner develops the content in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aler's incentives. Consequently, selling and distribution charges amounting in all to Rs.26.01 crores had been debited. During the course of scrutiny assessment, since the assessee had not made any specific representation in that regard, the Assessing Officer had no occasion to take any opinion on whether a disallowance was called for. The Assessing Officer recorded that expenses amounting to 81.25% of the aforesaid sum debited need to be disallowed in accordance with the findings of the Assessing Officer for assessment year 2005-06. On this basis, he formed a reason to believe, that taxable income of the assessee had escaped assessment and reopened the assessment under Section 147. 5) Learned counsel appearing on behalf of the petitioner in support of the challenge to the validity of the notice under Section 148, submitted that during the course of scrutiny assessment, a query was raised by the Assessing Officer on 7th September, 2006 by which the petitioner was called upon to disclose the nature of the business and details of expenses debited inter alia towards market research. In pursuance thereto, the petitioner submitted a reply on 22nd November, 2006 explaining the nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income has been made the subject of excessive relief under the Act; or (iv) excessive loss or depreciation allowance or any other allowance under the Act has been computed. Where the Assessing Officer purports to exercise power under Section 147 within a period of four years of the end of the relevant assessment year, the condition precedent to the exercise of the power, is the existence of a reason to believe that any income chargeable to tax has escaped assessment. The expression 'reason to believe' must obviously be that of a prudent person and it is on the basis of the reasons recorded by the Assessing Officer that the question as to whether there was a reason to believe that income has escaped assessment, has to be determined. At the same time, the sufficiency of the reasons for reopening an assessment does not fall for determination, at the stage of a reopening of assessment. When the Court is concerned with a challenge to a notice under section 148, the issue is not as to whether it can be conclusively demonstrated that income had escaped assessment, but whether as a matter of fact, there was a reason to believe that this was so, to justify a recourse to the power under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer to lead to the formation of a belief that income chargeable to tax had escaped assessment. In Srikrishna Pvt. Ltd. V/s. Income Tax Officer {221 ITR 538}, in his return of income filed for assessment year 1959-60, the Assessee had shown certain Hundi loans which were stated to have been taken from a number of persons. The Assessing Officer accepted the averment and made an assessment. During assessment proceedings for the successive year, 1960-61, the assessee again showed Hundi loans in a sum exceeding Rs.17 lacs. The Assessing Officer made an inquiry and found that many of the loans were bogus and that some of the alleged loans were by erstwhile directors and shareholders of the assessee. Loans of approximately Rs. 11.15 lacs were not established to be genuine and the amount was added back as income from undisclosed sources. On that basis, notice was issued under Section 148 seeking to reassess the income for assessment year 1959-60. A Single Judge of the Calcutta High Court allowed the petition filed by the assessee and quashed the validity of the notice, but on appeal, the Division Bench set aside the judgment of the Single Judge. The Supreme Court confirmed the ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hed position in law that an assessment can be reopened on the basis of information contained in an assessment of a subsequent year. In that case, the question was whether reopening of assessment for assessment year 1992-93 was justified. In the assessment order for assessment year 1993-94, the Assessing Officer held that the sale of shares in pursuance to an agreement dated 3rd January, 1992 took place on the same day and capital gains in respect thereof were leviable for assessment year 1992-93. The issue regarding capital gains arising from the sale of shares pursuant to the agreement was however neither raised nor discussed in the assessment order for assessment year 1992-93. Consequently reopening of assessment based on assessment year 1993-94, wherein it was held that a relationship of a 100 per cent holding subsidiary company was acquired only with the intention of evading capital gains could not be faulted. 9) In the judgment of a Division Bench of this Court in Siemens Information System Ltd. V/s. Assistant Commissioner of Income Tax Ors.{(2007) 295 I.T.R. 333 (Bom.)}, an assessment was sought to be reopened for assessment year 2001-02 on the basis of an assessment orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngible material and not merely a change of opinion can entitle the Assessing Officer to take recourse to the power to reopen assessment. The emphasis is on 'mere' in the phrase 'mere change of opinion'. A mere change of opinion is not enough. A change of opinion, in other words, is permissible, provided it is grounded on additional or tangible material. In the absence of any other fresh material, a change of opinion would amount to an exercise of a power akin to a review or re-appreciation and would be no more that what is described as a mere change of opinion. 10) In this background, the facts of the present case would have to be considered. During the course of proceedings for assessment year 2004-05, a query was addressed by the Assessing Officer on 7th September, 2006 inter alia requiring the assessee to make a disclosure of the nature of its business and details of the expenses towards market research. On 15th November, 2006, the assessee was directed to furnish a justification and details of expenditure towards advertisements and sales promotion expenses. The assessee furnished the break-up of the expenses incurred towards advertisements and sales promotion and an order of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the merits of the claim of the assessee in regard to whether the expenditure that was incurred was wholly and exclusively for the purpose of the business of the assessee. What is material is that on the basis of a detailed inquiry which took place during the course of assessment year 2005-06, the claim of the assessee of deduction of the entire expenses was not accepted and disallowance was made to the extent of expenditure incurred over and above 18.75%. The Assessing Officer did so on the basis of fresh material which came before him in view of the notice dated 26th November, 2008 in pursuance to which the assessee filed a detailed representation elucidating the relevant particulars of the business of the assessee and the reasons for the expenditure. Whether the Assessing Officer was justified in the decision which he took for assessment year 2005-06 is again not a matter to be considered at this stage of the proceedings. The point is that on the basis of the additional material which was available on record, the Assessing officer issued a notice for reopening the assessment for assessment year 2004-05. In our considered view, the Assessing officer did have tangible material to r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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