TMI Blog2011 (1) TMI 1160X X X X Extracts X X X X X X X X Extracts X X X X ..... holding that the reopening of the assessment was incorrect and consequently setting aside the reassessment order. 2. Since identical issues are involved in all these appeals, they are taken up for consideration together and disposed of by this common order as has been done by the Tribunal as well as other authorities. 3. The respondent-assessees are directors in M/s DTDC Ltd., each holding more than 10 per cent of share in the said company during the previous year relevant to the asst. yr. 1995-96. The assessees did not file their returns of income for the asst. yr. 1995-96. Proceedings were initiated under s. 158BC after a search was conducted, as the AO was satisfied that these assessees were served with notice requiring them to furnish the returns under cl. (i) of sub-s. (1) of s. 142, setting forth their total income including undisclosed income for the block period. It is in pursuance of said notice, the assessees filed their returns. The said returns were assessed and assessment orders came to be passed. Consequently, the assessees paid the tax, which was found due by them. 4. On a perusal of the return of income filed by M/s DTDC Ltd., pertaining to the asst. yr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n appeal before the Tribunal. The Tribunal held that, when the AO in his letter dt. 5th Aug., 1999, during the course of block proceedings did wish to treat the amount as a deemed dividend and having dropped it, he would not be competent to take up the same issue in the reopening of the assessment proceedings under s. 147. Reopening of an assessment by a mere change of opinion would not be justified. Therefore, the Tribunal allowed the appeal and held that the reopening of the assessment was incorrect and accordingly, the order of reassessment passed was set aside. 7. Aggrieved by the same, the Revenue is in appeal. 8. The learned counsel for the appellants assailing the impugned order contended as under:- (a) There is no bar under the Act for initiation of proceedings under s. 147, after the block assessment is done. (b) It is not a case of change of opinion by the AO. It is a case of income escaping assessment. Therefore, the case squarely falls under s. 147 and the order passed by the AO is legal and valid. (c) Admittedly, these assessees are directors in the company holding more than 10 per cent of the shares and therefore, any amount including the loan give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eve that any income chargeable to tax has escaped assessment for any assessment year, which comes to his notice subsequently in the course of the proceedings, he may, subject to the provisions of s. 148 to s. 153, assess or reassess such income. From the language employed in the said section, it is clear that no distinction is made between an assessment done, under Chapter XIV-B or under Chapter XIV. In other words, s. 147 is attracted to an assessment made under the Act and in such an assessment, if the income chargeable to tax has escaped assessment for any assessment year, the AO is vested with the power to assess or reassess such income. There is no prohibition under the Act for reopening of an assessment done under Chapter XIV-B. Therefore, we do not find any substance in the contention of the assessees that the proceedings under s. 147 are not attracted to cases of assessment under Chapter XIV-B. Therefore the first substantial question of law is answered in favour of the Revenue and against the assessees. Point No. 2:- 14. The contention of the assessees is that, when proceedings were initiated under Chapter XIV-B of the Act, in the course of the said proceedings, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision has held that even though the present section does not contain those specific words, while exercising the power under s. 147 of the Act, the AO has to keep in mind the said principle, namely, merely because he has changed his opinion, he cannot reopen an already concluded assessment. In support of his contention, he relied on the judgment of the apex Court in the case of CIT vs. Kelvinator of India Ltd. (2010) 228 CTR (SC) 488 : (2010) 34 DTR (SC) 49 : (2010) 2 SCC 723, where it has been held as under:- "On going through the changes, quoted above, made to s. 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the AOs to make a back assessment but in s. 147 of the Act (w.e.f. 1st April, 1989), they are given a go-by and only one condition has remained viz., that where the AO has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989 power to reopen is much wider. However, one needs to give a schematic interpretation to the words 'reason to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation is as to the true and correct state of the law derived from relevant judicial decisions; (2) where in the original assessment the income liable to tax has escaped assessment due to oversight, inadvertence or a mistake committed by the ITO. This is obviously based on the principle that the taxpayer would not be allowed to lake advantage of an oversight or mistake committed by the taxing authority; (3) where the information is derived from an external source of any kind. Such external source would include discovery of new and important matters or knowledge of fresh facts which were not present at the time of the original assessment; (4) where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law. If these conditions are satisfied then the ITO would have complete jurisdiction to reopen the original assessment. It is obvious that where the ITO gets no subsequent information, but merely proceeds to reopen the original assessment without any fresh facts or materials or without any enquiry into the mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of his predecessor-in-office might not justify action under s. 34(1)(b) but income which escapes assessment as a result of the lack of vigilance of the ITO or due to inadvertence or negligence or due to perfunctory performance of his duties without due care and caution could well be within the ambit of s. 34(1)(b) provided the requirements of that section are satisfied. In other words, even if the assessee has placed the entire facts which would enable the ITO, to make a proper assessment of his income but he fails to do so for the various reasons stated earlier he can, as soon as he realizes his mistake, issue a notice under s. 34(1)(b) after completing the assessment." 20. From the aforesaid judgments it is clear that, though the word 'opinion' is deleted and is now substituted by the words 'reason to believe', the concept of change of opinion is not obliterated w.e.f. 1st April, 1989 after substitution of s. 147 of the IT Act, 1961 by the Direct Tax Laws (Amendment) Act, 1987. However, where in the original assessment the income liable to tax has escaped assessment due to oversight and in advertance or a mistake committed by the ITO, the ITO has the jurisdiction to reopen th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company to such directors constitutes deemed dividend and is liable to tax. In fact these directors had not filed returns. They filed returns only after the proceedings were initiated under s. 147. Though they disclosed this income in the said return, the AO did not apply his mind properly to the said income and therefore, by a mistake or by oversight, he failed to assess the said amount and impose any tax. Under law, the assessee is liable to pay tax if the said payment is made out of the accumulated profit of the company. Therefore, in the facts of the case, we are satisfied that the AO was justified in initiating proceedings under s. 147 of the Act for reopening the assessment to bring to tax income that has escaped assessment. Therefore, the second substantial question of law is answered in favour of the Revenue and against the assessee. 23. The payment of tax on deemed dividend would arise if the payment is made out of the accumulated profit of the company. The assessee contends the accumulated profit of the company as on 1st April, 2004 was only Rs. 6,32,414 and therefore the payment of Rs. 39,60,000 cannot be construed as payment of a loan out of the accumulated prof ..... X X X X Extracts X X X X X X X X Extracts X X X X
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