TMI Blog2010 (2) TMI 946X X X X Extracts X X X X X X X X Extracts X X X X ..... had filed the return of income on 20-12-1999 declaring book profit at Rs. 8,51,53,020 under section 115JA of the Act. The assessment was completed under section 143(3) on 26-3-2002 at total income of Rs. 1,08,99,76,180. In appeal, the income was reduced to Rs. 11,82,01,943. Thereafter, the assessment was re-opened under section 147 by issuing a notice under section 148 on 17-3-2005 for the reason that the assessee had declared income from property as profits and gains of business. In assessment year 2001-02, the income from the property was assessed under the head "Income from house property" leading to denial of the claim of depreciation on the building. This action was confirmed by the ld. CIT(Appeals). Therefore, income chargeable to tax amounting to Rs. 9,84,841 escaped assessment for this year. Accordingly, the notice was issued. The assessment was also completed, accordingly, at Rs. 11,93,08,280. The ld. CIT(Appeals) confirmed the reopening of the assessment as well as bringing the rental income to tax under the head "Income from house property". 2.2 The ld. counsel drew our attention to page 28 of the paper book which shows that an amount of Rs. 2,32,25,176 was added to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... where an assessment is made under sub-section (3) of section 143, no action shall be taken under this section after expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Thus, on reading the provision as a whole in the context of the facts of this case, it becomes clear that the Assessing Officer can assume jurisdiction if two pre-conditions are satisfied, namely, ( i ) he has reason to believe that any income chargeable to tax has escaped assessment; and ( ii ) such escapement has taken place by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. In order to clarify that these pre-conditions are applicable, it may be mentioned that original assessment was completed under section 143(3) on 26-3-2002 and four years from the end of the assessment year expired on 31-3-2004. Thus, notice under section 148 issued on 17-3-2005 was beyond this date. 2.5 As has been mentioned earlier, two pre-conditions have to be satisf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee can be fastened with the duty to disclose only such facts which were in existence at the relevant point of time. The order of the Municipal Corporation of Delhi was not available at the time of original assessment. Since the case falls under proviso to section 147, the question of non-disclosure of material facts would become relevant. There was no deliberate concealment of facts by the assessee. The assessment was reopened on the basis of subsequent information received from the Corporation. It was held that the requisite pre-condition stipulated in section 147 was not fulfilled. We may also refer to the decision of Hon ble Delhi High Court in the case of CIT v. Indian Farmers Fertilizer Co-operative Ltd. [2008] 171 Taxman 379 , in which the assessment was reopened on the basis of order passed by the Tribunal. There was no allegation in the reasons that the assessee failed to disclose fully or truly all material facts necessary for the assessment. The Hon ble Court held that the question was purely a question of fact and there was no perversity in the conclusion arrived at by the Tribunal. Thus, from the decisions aforesaid it is clear that the recorded reasons sho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance was placed on the decision of Hon ble Delhi High Court in the case of Shipra Srivastava v. Asstt. CIT [2009] 319 ITR 221. In this very connection, reliance was also placed on the decision of Hon ble Delhi High Court in the case of CIT v. Goetze India Ltd. [IT Appeal No. 239 of 2008 (Delhi) dated 20-1-2010], a copy of which was placed in the paper book No. 2 on pages 24 to 27. Thus, it was argued that in spite of the amendment in section 147, effective from 1-4-1989, the concept of "change of opinion" has not been displaced and proceedings of assessment taken under section 147 on change of opinion are bad in law. 5.2 In reply, the ld. DR relied on the decision of Hon ble Supreme Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500, in which it was held that the formation of belief was within the subjective satisfaction of the Assessing Officer and, therefore, the concept of "change of opinion" was not applicable under the amended provision. He referred to the decision of the Apex Court in the case of Kalyanji Mavji Co. v. CIT [1976] 102 ITR 287, dealing with the re-opening of the assessment under section 34(1)( b ) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les, it is entitled to examine the accounts and ascertain whether rules and procedures have been followed, but it cannot substitute itself for the revenue authorities who are to perform statutory duties. It does not possess the power to pronounce law although it may draw the attention of the ITO towards it. Therefore, the opinion of the audit party in regard to law cannot be information to lead to "reason to believe" by giving it the colour and significance of law. He also referred to the decision of Full Bench of Hon ble Delhi High Court in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 , in which it was mentioned that an order of assessment can be made under sub-section (1) or sub-section (3) of section 143. When the order is passed under section 143(3), a presumption is raised that there has been due application of mind. If it is to be held that the order has not been passed after due application of mind, it would confer jurisdiction on the Assessing Officer thereby placing a premium on his negligence. Therefore, in such a situation he cannot be allowed to initiate re-assess- ment proceedings merely on change of opinion. It was argued that the decision of Hon b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the assessment year 1999-2000. It has been found that the assessee-company is showing rental income of Rs. 2.43 lakhs from a building on which it has claimed depreciation of Rs. 11,67,091 as per Income-tax Act. On examination of details of rental income and building on which assessee is claiming depreciation, it has been found that building on which depreciation claimed by the assessee is located at F-91, first floor, Spencer Plaza, 769, Anna Salai, Chennai. This property was acquired by the assessee company in 1999 and given on lease to the holding company @ Rs. 50,000 p.m. and total rent from this property during the year comes to Rs. 6,00,000 which has been shown by the assessee company as income from business. In the return of income filed by the assessee rental income is shown as business income and this stand of the department has already been confirmed by the ld. CIT(A)." 5.5 The relevant law applicable in the case of Indian Eastern Newspaper Society ( supra ) has been extracted by the Hon ble Court on page 1000, which reads as under: "147. If ( a )the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 147 earlier and proviso to section 147 now for the simple reason that there is no allegation of omission or failure on the part of the assessee and regular assessment has not been made under section 143(3). The law contained in section 147( b ) earlier and section 147 now are similar except that the present law dispenses with the requirement of "information". Both the provisions contain the expression "reason to believe". None of the provision contains any mention about the expression "change of opinion", which prima facie appears to be applicable only when there has been an allegation that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment in a case where assessment was made under section 143(3). As mentioned earlier, the earlier law contains additional condition of "information". The provision contained in section 34(1)( b ) of 1922 Act was similar in contents to the provision contained in section 147( b ) of the 1961 Act. Therefore, if this case can stand the test laid down in Kalyanji Mavji Co. s case ( supra ) and Indian Eastern Newspaper Society s case ( supra ), there will be no reason to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed was not wholly utilized for the purpose of business but also diverted to the partners. On comparison of the facts of these cases, it will be seen that the information was derived by analysis of the existing facts in a subsequent year in the case of Kalyanji Mavji Co. ( supra ). However, in this case information of law has been received from an authority competent under the Act to pronounce law, namely, the CIT(Appeals) in the immediately succeeding year. In the case of Indian Eastern Newspaper Society ( supra ), the Hon ble Court mentioned that the information could be of fact or of law. However, when it is an information of law, it must emanate from a formal source, competent to pronounce the state of law. The audit party is not such a formal source. However, it is clear to us that the CIT(Appeals) is an authority under the Income-tax Act, which is entrusted with the work of determining facts and position of law in dispute before him. Such quasi-judicial authority had pronounced that the income by way of rent was required to be taxed under the head "Income from house property". The Assessing Officer, based upon this information, initiated assessment proceedings under se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s occupying accommodation provided by the employer-hospital and the interest paid on borrowed capital for acquisition of the property was wrongly allowed. The Hon ble Court pointed out that the assessee was not staying in Delhi as she was employed elsewhere because of which her property remained vacant and, therefore, its annual value was to be taken at nil. Therefore, there is absence of "reason to believe" as there was no application of mind by the Assessing Officer to arrive at his conclusion. Firstly, no material was referred to for coming to the conclusion and it was not a case where material facts had been suppressed by the assessee. Thus, the case was decided essentially on the ground that no informed person could have formed reason to believe that the income escaped assessment. The use of words "the reasons do not refer to any material which has come to the notice of the officer subsequent to finalisation of assessment under section 143(1)" is incidental to the whole case because even at the time of assessment there were no such fact which could have led to disallowance of the interest wholly or partly. However, in the instant case, the Assessing Officer initiated assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mavji Co. ( supra ), if there are other reasons, one may not go into the question of "change of opinion". We are at pains to state here that there is also no question of "change of opinion" as no assessment was made under section 143(3) in this case. In the case of Havells India Ltd. ( supra ), the facts are that the return of income for assessment year 2003-04 was filed on 19-11-2003. Later on, the return was revised on 30-10-2004, which was processed under section 143(1). The assessment was reopened on the ground that on perusal of assessment record, it was found that the assessee claimed additional depreciation of Rs. 28,24,676, which was allowed in the course of processing the return. The assessee was required to file audit report for making such a claim along with the original return of income, which in this case was done along with the revised return. The Hon ble Court mentioned that the audit report filed along with the revised return had to be considered as it could be filed along with the revised return also. It was held that the requisite documents were filed along with the revised return, which in turn was filed in time. Thus, there was no reason for reopening the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not applicable. 5.7 We have considered all other decisions cited by the rival parties, but all the decisions are not mentioned in this order for the reason that it will amount to repeating the same ratio again and again. However, in a nutshell, we are of the view that if there are other reasons for reopening the assessment, the question of "change of opinion" may recede into oblivion insofar as the main provision is concerned. Accordingly, it is held that the Assessing Officer was justified in assuming jurisdiction under section 147. 6. Coming to the merits, it is an accepted fact that the assessee has let out the commercial asset acquired by it in the immediately preceding year and the rent has been derived qua owner. The assessee sought to rely on the decision of "A" Bench of Kolkata Tribunal in the case of PFH Mall Retail Management Ltd. v. ITO [2007] 16 SOT 83. That assessee was systematically providing other services, facilities and amenities, mentioned in paragraph 4.1 of the order. It was held that the rent received amounted to the business income of the assessee. On the other hand, the ld. DR relied on the decision of Hon ble Karnataka High Court in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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