TMI Blog2010 (2) TMI 974X X X X Extracts X X X X X X X X Extracts X X X X ..... hearing." The relevant facts relating to the issue raised in the above grounds of appeal may be stated, in brief, as under : In this case, the assessee filed its return of income on October 29, 2002 declaring total income at Rs. nil. The return of income was initially processed under section 143(1) on February 26, 2003. Subsequently, the case was selected for scrutiny. Notice under section 143(2) was issued on October 13, 2003 and served upon the assessee. Thereafter, the assessment was completed by the Assessing Officer under section 143(3) on September 30, 2004 determining the total income at Rs. nil. Later on, the Assessing Officer observed that although there was no manufacturing activity during the previous year, the assessee had still claimed depreciation on plants and machinery, factory building, dies and moulds, etc. The Assessing Officer also observed that the assessee also claimed expenses on power and fuel, wages and job charges and raw material, even though there was no production during the year. The Assessing Officer, therefore, entertained a reason to believe that income had escaped assessment within the meaning of Explanation 2(c)(i) and (iv) of section 147 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers as compensation for maintaining manufacturing facilities. Though the said amount received by way of reimbursement was taxed in entirety, yet the Assessing Officer disallowed the expenditure so claimed in its return of income. It was then contended before the learned Commissioner of Income-tax (Appeals) by the assessee that all these aspects were duly examined at the time of making original assessment by the Assessing Officer, and no new fact had come to light thereafter, on the basis of which the reopening of the assessment under section 147 could be done. It was further submitted by the assessee before the learned Commissioner of Income-tax (Appeals) that the assessee filed its objections against the reopening which had been disposed of by the Assessing Officer vide his order dated November 7, 2007. The assessee pointed out that the original assessment was completed under section 143(3) vide order dated September 30, 2004 after the Assessing Officer issued detailed questionnaire through his letter dated June 1, 2004. In the said questionnaire issued by the Assessing Officer, the Assessing Officer enquired about the nature of the business activity and also had asked the detai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rein data on consumption of raw material, payment to auditors, production data on sport/ casual shoes/sleepers and sales has been provided. Though there is not production during the year under consideration but still the appellant has shown sales amounting to Rs. 4,70,570 and job work income amounting to Rs. 20,400. No new purchases have been made but the opening stock is shown at Rs. 30,01,843.87 and closing stock at Rs. 9,04,364.00 and all these figures are clearly discernible from the data available on the return of income. If these facts are available on record and the Assessing Officer had passed the original assessment order after scrutiny, then I am of the considered opinion that reopening has been resorted to by the officer on account of change of opinion. I have also gone through the recent judgment of the jurisdictional High Court in the case of Jai Hotels Co. Ltd. v. Asst. DIT [2009] 24 DTR 37 (Delhi) which is dated May 25, 2009 where the assessment years involved were the assessment years 2001-02 to 2003-04 which means that the decision had been rendered in the context of the scope of amended section 147 (introduced with effect from April 1, 1989). While delivering the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o and Finvest Ltd. v. Asst. CIT [2006] 281 ITR 394 (Delhi) where the hon'ble Delhi High Court has hold that mere production of books of account or other evidence from which the Assessing Officer could have, with due diligence, discovered the material evidence does not necessarily amount to a disclosure within the meaning of the proviso to section 147 of the Income-tax Act, 1961. He further submitted that the hon'ble Delhi High Court in the above referred case went further to hold that the principle that a mere change of opinion could not be a basis for reopening completed assessments would be applicable only to situations where the Assessing Officer had applied his mind and taken conscious decision on a particular matter in issue, and it would have no application where the order of assessment did not address itself to the aspect which was the basis for reopening of the assessment. He, therefore, submitted that the reopening of the assessment made by the Assessing Officer under section 147 of the Act was justified inasmuch as the reopening was based on material available before the Assessing Officer to take a view that income had escaped assessment within the meaning of section 147 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment under section 147 of the Act. Learned counsel for the assessee also relied upon the decisions of the hon'ble High Court of Delhi in the case of Satnam Overseas Ltd. v. Addl. CIT reported in [2010] 329 ITR 237 (Delhi) ; [2010] 33 DTR (Delhi) 81. We have considered rival contentions of both parties and have carefully gone through the orders of the authorities below. We have deliberated on the relevant provisions of law contained in that behalf and the decided cases cited at the bar. It is not in dispute that originally, an assessment was completed by the Assessing Officer under section 143(3) of the Act. During the course of the assessment proceedings, certain queries were raised by the Assessing Officer, which were duly replied to by the assessee and, thereafter, the Assessing Officer completed the assessment under section 143(3) of the Act. The Assessing Officer, thereafter, issued a notice under section 148 on September 18, 2006 by entertaining a belief that though there was no manufacturing activity during the previous year, the assessee had even claimed depreciation on plant and machinery, etc., and has also claimed expenses on power and fuel, wages and job char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer had applied his mind and taken a conscious decision on a particular matter in issue. It would have no application where the order of assessment did not address itself to the aspect which was the basis for reopening of the assessment. Therefore, it was inconsequential whether or not the material necessary for taking a decision was available to the Assessing Officer either generally or in the form of a reply to the questionnaire served upon the assessee. What is important was whether the Assessing Officer had, based on the material available to him taken a view. Since, he had not done so, the reassessment could not be challenged on the ground that it was based on a change of opinion." However, the aforesaid decision of the hon'ble Delhi High Court in the case of Consolidated Photo and Finvest Ltd. v. Asst. CIT [2006] 281 ITR 394 (Delhi) has been held to be rendered per incuriam as so observed by the hon'ble Delhi High Court in the case of KLM Royal Dutch Airlines v. Asst. DIT [2007] 292 ITR 49 (Delhi) where the hon'ble Delhi High Court has held that the decision of the Division Bench in the case of Consolidated Photo and Finvest Ltd. v. Asst. CIT is irreconcilable with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the sales in the year then the value of the sales would be at a higher figure than that as declared by the assessee. Clearly, there is no new material which is alleged to have come to the notice of the Assessing Officer which has caused him to seek reopening of the assessment. Admittedly, the reasons given for seeking reopening of the assessment contains the expression 'perusal of the case record reveals' clearly showing that it is on the basis of the same assessment record as was filed by the assessee, during the relevant assessment years and also scrutinised by the Assessing Officer before passing the orders under section 143(3) is the basis for seeking reopening of the assessment. Further the new logic, rationale and opinion which has been formed by the Assessing Officer for seeking reopening of the assessment is nothing but a change of opinion and a new approach to the existing facts and material which the Assessing Officer could well have done during the regular assessment proceedings of the relevant assessment years. Not only this, the rationale/logic/reasons given that sale price of stocks during the entire assessment year would remain constant is something which indeed conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did not express this in the assessment order, that by itself would not give him a ground to conclude that income had escaped assessment and, therefore, the assessment needed to be reopened. The hon'ble court further observed that the assessee has no control over the way an assessment order is drafted. Generally, issues which are accepted by the Assessing Officer did not find mention in the assessment order and only such points are taken not of on which the assessee's explanation are rejected and additions/disallowances are made. The court further observed that it would not be correct on the court's part to overlook the decision of the Full Bench in the case of CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) and rely upon the decisions of the Division Bench in Consolidated Photo and Finvest Ltd. v. Asst. CIT [2006] 281 ITR 394 (Delhi). At this stage, it is pertinent to note that the Full Bench decision of the hon'ble Delhi High Court in the case of Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) and the decision of the hon'ble Delhi High Court in the case of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntly in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).' After the Amending Act, 1989, section 147 reads as under : '147. Income escaping assessment.-If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the 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 the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year).' On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " from section 147 and their substitution by the "opinion" of the Assessing Officer. It was pointed out that the meaning of the expression, "reason to believe" had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression "has reason to believe" in place of the words "for reasons to be recorded by him in writing, is of the opinion". Other provisions of the new section 147, however, remain the same.' For the aforestated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs." From the aforesaid decision of the hon'ble Supreme Court, it is, thus, clear that the reopening of the assessment on the basis of mere change of opinion cannot be permitted and we must keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review and, thus, the Assessing Officer has no power to reopen the assessment on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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