TMI Blog2012 (2) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... , on which these appeals were admitted, are involved in these appeals, hence they are being disposed of by a common judgment:- "1. Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in reversing the order of the CIT(A) and thereby wrongly concurring with the action of the A.O. in confirming the issuance of notice u/s 148 of the Income Tax Act, 1961 to a duly completed assessment u/s 143(1) of the Income Tax Act, 1961 wherein no notice u/s 143(2) having been issued within the statutory period of twelve months and the assessment having attained finality especially when the order was without any cogent reason to believe and without any new material on record and thus a change of opinion which is illegal and arbitrary there being no new material brought on record by the A.O. 2. Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in reversing the order of the CIT(A) on the basis of audit objection which is illegal and arbitrary and thereby wrongly concurring with the action of the A.O. in confirming the issuance of notice u/s 148 of the Income Tax Act, 1961 to a duly comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Thus net expenses amounting to Rs. 24,25,489/- pertaining to all the units of the firm including the unit eligible for deduction were claimed. According to the Assessing Officer, for the purpose of claiming deduction under Section 80-IA of the Act, proportionate expenses out of total expenses incurred by the assessee in the relevant year should have been deducted and deductions should have been claimed on the resultant figure of the profit. Pursuant to the notice, assessee filed fresh returns disclosing the very same income which stood disclosed in the original return. Vide order dated 5.3.2004 (Annexure A/3, pg. 63) the Assessing Officer, by reassessing the income apportioned the deductable common expenses in the ratio of turn over of different units and worked out deductable expenses relatable to the oil unit, holding that assessment of the relevant amount in the relevant year as claimed by the appellant was excess and had escaped assessment on account of claiming excessive deduction under Section 80-IA of the Act. Thus on the original figure of profit amounting to Rs. 31,60,940/- being the net income on which deduction of Rs. 10,43,208/- to the extent of 25% as claimed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1998-99 A/10 137 27.6.2002 Notice under Section 148 of the Act 1998-99 A/9 135 27.6.2002 Reasons for initiating proceedings u/s 147 of the Act 1998-99 A/3 64 5.3.2004 Assessment Order passed by Assistant Commissioner of Income Tax, Palampur, u/s 143(3) of the Act 1998-99 A/2 49 5.8.2004 Order of CIT (Appeals), in Appeal No. IT/32/04-05/PLP 1998-99 A/1 46 12.12.2006 ITAT, Chandigarh, in ITA Nos. 1227 1228/ Chandi/ 2004 1997-98 1998-99 ITA No. 20 of 2007 Annexure Page No. Date Brief description of document Assessment Year A/5 125 - Intimation under Section 143(1)(a) of the Act 2000-2001 A/10 140 26.6.2002 Notice under Section 148 of the Act 2000-2001 A/9 137 26.6.2002 Reasons for initiating proceedings u/s 147 of the Act 2000-2001 A/3 65 5.3.2004 Assessment order passed by Assistant Commissioner of Income Tax, Palampur, u/s 143(3) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd that the assessee had claimed deduction under Section 80IA in excess to what was permissible under law. While maintaining separate books of accounts in respect of Oil Units, Damtal (H.P), the assessee had not taken into account the common administrative expenses in working out the profit of the different units situated within and outside the State of Himachal Pradesh. This re-opening of assessment was objected to by the assessee. The Assessing Office vide orders dated 16.2.2004 re-opened the assessment under Section 147 and income of the assessee was re-assessed from Rs. 7,66,330/- to Rs. 12,09,010/-. Aggrieved thereof, assessee filed an appeal before the Commissioner of Income Tax (Appeals), who held re-opening of the assessment as invalid and the same was accordingly quashed. Revenue unsuccessfully challenged the same by filing an appeal before the ITAT, Chandigarh Bench. Order passed by the CIT(A) was affirmed not only on the ground that action of the Assessment Officer was beyond the period of limitation i.e. 4 years, but also on merits on the ground that there was no omission or failure on the part of the assessee to disclose fully and truly all material facts necessary f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 148 of the Act do not disclose any new fact or information which had come to the notice/knowledge of the Assessing Officer. The only reason assigned is that common expenses belonging to all the units of the assessing firm including the manufacturing unit had been claimed as deduction whereas only proportionate expenses out of the total expenses of Rs. 24,25,489/- should have been deducted and deduction should have been claimed on the resultant figure of the profits. Apportioning the net expenses in the ratio of turnover of different units was the only fair method. It is also not in dispute that there was no omission or failure on the part of assessee to fully and truthfully disclose facts claiming deduction for assessment. Therefore, all necessary facts were before the Assessing Officer at the time of finalization of the returns filed in accordance with the provisions of Section 143-IA of the Act. It is also not in dispute that no notice under Section 143(2) was ever issued to the Assessee. 13. Section 147 as applicable after 1.4.1989 reads as under:- "147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v ) excessive loss or depreciation allowance or any other allowance under this Act has been computed." [Emphasis supplied] 14. In fact while dealing with the provisions of Sections 147 and 148 of the Act, i.e. prior to 1.4.1989, in Phool Chand Bajrang Lal v. ITO [1993] 203 ITR 456/69 Taxman 627 (SC), after reviewing judicial precedents on the subject, their Lordships of the Supreme Court laid down the following proposition: "From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen assessment under S. 147(a) read with S. 148 of the Income-tax Act, 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforementioned judgments have been relied upon by this Court in Bal Ram Jakhar v. CIT (2001) 250 ITR 393 and Bhajan Lal v. CIT (2001) 250 ITR 399 (P H) and the writ petitions filed for quashing the notices issued under section 148 were dismissed as premature. If the reasons assigned by respondent No. 1 for issuing the notice under Section 148 of the Act are considered in the light of the law laid down by the Supreme Court, it is not possible to hold that he did not have any material before him for entertaining a belief that the income of the petitioner had escaped assessment." [Emphasis supplied] 15. However, subsequently Apex Court had an occasion to deal with the amended provisions in Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. [2007] 291 ITR 500/161 Taxman 316 (SC), wherein the Court was dealing with the case where return filed by the assessee was processed under Section 143(1) of the Act, accepting the loss declared by the respondent. Notice under Section 148 of the Act was issued on the ground that claim of bad debts as expenditure was not acceptable. Assessee filed a return declaring the loss to be the same vehicle as was declared in the original r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147 . The case at hand is covered by the main provision and not the proviso." [Emphasis supplied] 16. This squarely answers the first contention raised by Mr. Mukhi. It would be open for the Revenue to issue notice u/s 147/148 even if notice u/s 143(2) was never issued or for that matter even if assessment u/s 143(3) had taken place. 17. But the question really is as to whether in the given facts Revenue can be allowed to do so. The answer to the same is in the decisions rendered by various Courts as noticed hereinbelow. 18. In CIT v. J.K. Charitable Trust [2009] 1 SCC 196, the Apex Court held that if the fact situation changes in subsequent years, Revenue can prefer an appeal notwithstanding the fact that for previous years no appeal was preferred. Non-filing of appeal on the ground of revenue neutral by itsel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the High Court related to a valuation and a liability to a tax in a previous year, and no doubt as regards that year the decision could not be disputed. The present case relates to a new situation, namely, the valuation for a different year and the liability for that year. It is not eadem question, and therefore, the principle of res judicata cannot apply. " [Emphasis supplied] 20. In Udayan Chinubhai v. Commissioner of Income Tax, Gujarat , (1967) 1 SCR 913, this Court stated; "12 ..It is true that an assessment year under the Income Tax Act is a self-contained assessment period and a decision in the assessment year does not ordinarily operate as res judicata in respect of the matter decided in any subsequent year, for the assessing officer is not a Court and he is not precluded from arriving at a conclusion inconsistent with his conclusion in another year. It is open to the Income Tax Officer, therefore, to depart from his decision in subsequent year, since the assessment is final and conclusive between the parties only in relation to the assessment for the particular year for which it is made. A decision reached in one year would be a cogent factor in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue with regard to returns filed pertaining to the assessment years 1984-85 onwards till the assessment year 1989-90 pertaining to which Revenue was seeking to re-assess the income. This was not allowed. 26. In CIT v. A.R.J. Security Printers [2003] 264 ITR 276/131 Taxman 297 (Delhi), High Court of Delhi had occasion to deal with a case pertaining to assessment years 1995-96 and 1997-98. The assessments were reopened notwithstanding the view that with regard to prior assessments pertaining to the period 1992-93 onwards, similar view was sought to be taken by the Assessing Officer for the years in question. Thus action of the Assessing Officer to reopen the assessments for the years in question was held to be bad in law. 27. In Arihant Builders, Developers Investors (P.) Ltd. v. ITAT [2005] 277 ITR 239/144 Taxman 121 (MP), the High Court of Madhya Pradesh had an occasion to deal with the case where the Assessing Officer had taken a view contrary to the one taken in the assessment proceedings pertaining to earlier years, which stood conclusively affirmed by the appellate Authority. Thus action of the Assessing Officer in not following the view taken by the Appellate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, in his opinion, incorrect." 32. In CIT v. Kelvinator of India Ltd. [2010] 187 Taxman 312 (SC), the Court has held that: "One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is 'tangible material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in Section 147 of the Act. However, on receipt of representations from the Companies against omission of the words 'reason to believe', Parliament re-introduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer." 33. In Berger Paints India Ltd. v. CIT [2004] 266 ITR 99/135 Taxman 586 (SC), the Apex Court had an occasion to deal with the case where question of law stood si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... true evaluation of the law in its bearing on the assessment must be made directly and solely by the Income-tax Officer. 14. Now, in the case before us, the Income-tax Officer had, when he made the original assessment, considered the provisions of Sections 9 and 10. Any different view taken by him afterwards on application of those provisions would amount to a change of opinion on material already considered by him. The Revenue contends that it is open to him to do so, and on that basis to reopen the assessment under Section 147(b). Reliance is placed on Kalyanji Mavji Co. v. Commr. of Income-tax , (1976) 102 ITR 287 (SC), where a Bench of two learned Judges of this Court observed that a case where income had escaped assessment due to the "oversight, inadvertence or mistake" of the Income-tax Officer must fall within Section 34(1)(b) of the Indian Income-tax Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants insofar as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the Income-tax Officer discovers that he has committed an error in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ognition granted to this charitable trust had expired on September 22, 1972, was not noticed by the Income-tax Officer. This is not a case of information on a question of law. The dispute as to whether reopening is permissible after the audit party expresses an opinion on question of law is not being considered by a larger Bench of this court. There can be no dispute that the audit party is entitled to point out a factual error or omission in the assessment. Reopening of the case on the basis of a factual error pointed out by the audit party is permissible under law. In view of that we hold that reopening of the case under Section 147(b) in the facts of this case was on the basis of factual information given by the internal audit party and was valid in law. The judgment under appeal is set aside to this extent." 36. The decision rendered by the three Judge Bench in Indian Eastern Newspaper Society ( supra ) was not brought to the notice of the two Judge Bench which decided P.V.S. Beedies ( supra ). That apart, decision is clearly distinguishable on facts. The audit party had merely pointed out a fact which had been overlooked by the Assessing Officer. On facts, it was fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or justification before the Revenue to have known or presumed that income had escaped assessment. In our considered view Assessing Officer had no reason to believe that income, profit or gains chargeable to income had escaped assessment. It is quite likely that two views on same set of facts are possible, but once having formed an opinion it would be impermissible for the Assessing Officer, after carrying out assessments on merits, with regard to previous years, to form a different opinion. 41. True, it is that neither principle of res judicata nor principle of estoppel would apply to the proceedings with regard to separate assessments of Assessment years but then principle of consistency and continuity has to be maintained at all times. For promoting the industry certain benefits were accorded, which in our considered view have to be liberally construed. 42. It cannot be said that Tribunal has simply remanded the matter to the Assessing Officer for adjudication of the case on merits. Significantly order dated 25.5.2006 in ITA No. 1072/Chandi/2004, pertaining to the Assessment Year 1996-97, passed by the ITAT, Chandigarh, was brought to the notice of the Presiding officer I ..... 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