TMI Blog2010 (1) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... n change of opinion, which is not sustainable in law, assessment order set aside. - ITA No. 6025/Mum/2008, - - - Dated:- 11-1-2010 - R.S. Syal, Asha Vijayaraghavan, JJ. P.J. Pardiwala for the Appellant S.K. Pahwa for the Respondent ORDER R.S. Syal, Accountant Member:- 1. This appeal by the assessee emanates from the order passed by the Commissioner of Income-tax (Appeals) on 23.7.2008 in relation to the assessment year 2001-2002. 2. The assessee has assailed the validity of the initiation of reassessment proceedings vide first ground. The factual matrix of the case is that original assessment in this case was completed u/s.143(3) on 28.1.2004 determining total income at Rs.319.50 crores. Assessment was reopened u/s.147 and notice u/s.148 was issued on 30.3.2006, which was served on the assessee on 31.3.2006. Following reasons were recorded by the Assessing Officer for the initiation of reassessment proceedings, which have been reproduced in the assessment order:- "2. It is seen that the assessee has claimed a sum of Rs.14,65,08,264 being interest pertaining capital work in progress as revenue expenditure as per the statement below:- An amount of Rs.14,65, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he sec.37(1) clearly provides for a claim only if the same is not capital expenditure. The assessee itself has clearly identified the same as capital expenditure and therefore, the claim of the assessee u/s.37(1) is incorrect and not allowed. 5. The assessee has also failed to capitalize the head office expenses in relation to the capital work in progress of the assessee as the head office does monitoring of all the jobs and operations conducted by the assessee and therefore the head office is bound to have contribution towards the capital work in progress and the proportionate expenses should have been allocated towards capital work in progress and disallowed as revenue expenditure accordingly. Therefore the assessee has claimed excess revenue expenditure of Rs.16,85,30,166/- and also the proportionate head office expenses which should have been capitalized in relation to the capital work in progress of the assessee for the relevant year. 6. The assessee has further claimed an amount of Rs.14,65,08,264/- as interest on borrowing which was charged to capital work in progress in relation to expansion of projects. The above is not revenue expenditure claimed by the assessee in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6(1)(iii) and in support of this view, the assessee relied on 103 ITR 715 (Gujarat) and 120 ITR 211 (Madras). Similarly in respect of the other sum of Rs.16.85 crores, which was in the nature of routine administrative expenses incurred on day to day functioning of the company and not establishing a new line of business, were claimed as deductible u/s.37(1). In support of this deduction, the assessee relied on 103 ITR 715 (Gujarat), 120 ITR 211 (Madras) and 169 ITR 499 (Rajasthan). It was submitted that the Assessing Officer raised query with reference to these two items vide his notice dated 21.4.2003 through Sr.nos. 6 and 7. The assessee responded to the notice of the Assessing Officer vide its reply dated 24.3.2003, a copy of which is available at pages 82 onwards of the paper book. Further clarification was required by the Assessing Officer which was given by the assessee through its reply dated 16.12.2003, a copy of which is available at page 78 of the paper book. The learned Counsel submitted that the Assessing Officer, on perusal of the details filed and reply given completed the original assessment without making any addition on these two counts. The ld. counsel stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the A.O. could not initiate proceedings u/s.148. This judgment has been rendered in relation to assessment year 2003-2004 i.e. after the amendment carried out to section 147 increasing the scope of reassessment. Similar view has been reiterated by the Hon'ble jurisdictional High Court in the case of Asian Paints Ltd. vs. DCIT [(2009) 308 ITR 195 (Bom)]. Thus it is clear that the A.O. is not empowered to initiate the reassessment proceedings on the basis of mere change of his opinion. 7. The pertinent question which falls for our determination is as to whether the Assessing Officer, in the present circumstances, could be said to have formed his initial opinion in the original assessment, which could be subjected to change subsequently. The learned Departmental Representative has forcefully argued that in the absence of any discussion in the original assessment order on these items, it was a clear case of non-application of mind by the A.O. and hence the provisions of section 147 were rightly invoked. We have gone through the original assessment order passed u/s.143(3) and noted that there is, in fact, no discussion on these two items. In other words the claim of the assessee abo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Like that there may be other situations of non-formation of opinion when the details are filed by the assessee during the course of assessment proceedings. In contrast, where the facts of the case amply justify the conclusion that the AO properly applied his mind to the material placed before him, it may not validate the initiation of reassessment proceedings, even though there is no discussion in the assessment order on that aspect. One of the situations covered in this category of cases may be where the AO raises query, which is replied and thereafter further clarifications are required and thereafter the claim of the assessee is accepted. It is again an illustrative situation and there may be other situations as well justifying application of mind when the matter is not discussed in the body of the assessment order. Therefore, it emerges that there is no hard and fast rule to determine the question of the AO forming his opinion or not. It will depend upon the facts of each case. But one thing is certain that mere non-discussion of an issue in the assessment order does not conclusively mean that the AO did not form his opinion over that. If the contention of the ld. DR on thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on called for by the assessing authority was complied with. It cannot be said to be a case in which some detail furnished by the assessee in due course remained hidden and escaped the attention of the AO. In the instant case we find that the Assessing Officer had properly applied his mind qua deductibility of interest of Rs.14.65 crores and administrative expenses of Rs.16.85 crores in the original assessment order passed u/s.143(3) on 28.1.2004. In the absence of any further material coming to the possession of the Assessing Officer indicating the fallacy in the assessee's claim, the Assessing Officer could not have assumed jurisdiction u/s.147 to re-examine such deductions already allowed in the original assessment. We, therefore, hold that the reassessment done by the A.O. in this case was based on change of opinion, which is not sustainable in law. Accordingly the assessment order and the impugned order are set aside. Ground no.1 is, therefore, allowed. 9. In view of our decision on ground no.1 quashing the initiation of reassessment proceedings, there is no need to adjudicate upon the other grounds raised by the assessee, on merits. 10. In the result, the appeal is allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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