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TMI Blog2012 (4) TMI 455X X X X Extracts X X X X X X X X Extracts X X X X ..... en up for scrutiny by issue of notice dated 28th October, 2002 under Section 143(2) of the Act. The assessment order under Section 143(3) was passed on 30th January, 2004, computing the total income at Rs.7,02,73,350/-, as against the declared income of Rs.6,92,16,132/-. 4. Vide reasons recorded on 30th May, 2005, the assessment was reopened under Section 147 of the Act by issue of notice dated 30th May, 2005, under Section 148 of the Act. 5. The reasons recorded read:- "It is from the Notes of accounts that the assessee has received a sum of Rs.173 lakhs as consideration for the transfer of exclusive distribution rights of AC and water cooler. The amount was credited by assessee to the capital reserve account /c and was not treated as income for the year. The amount was chargeable under the head Capital gains being transfer of distribution rights. The Assessing Officer while completing the assessment has also not added the amount of capital gains and taxed accordingly. In view of the above, I have reason to believe that amount of Rs.173 lakhs being capital gains has escaped assessment. Notice under Section 148 issued." 6. It appears that the reasons were recorded by the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the decision of Full Bench of this Court in CIT vs. Kelvinator of India Ltd., (2002) 256 ITR 1, which has been affirmed by Supreme Court in CIT vs. Kelvinator of India Ltd., (2010) 2 SCC 723, is applicable. 8. Section 147 of the Act 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): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on into writing; (iii) The opinion formed is subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion. (iv) Reasons recorded and/or the documents available on record must show a nexus or that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income. (v) In cases where the first proviso applies, there is an additional requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts. Explanation to the Section stipulates that mere production of books of accounts or other documents from which the Assessing Officer could have, with due diligence, inferred material facts, does not amount to "full and true disclosure of material facts". 10. For the present case, however, the proviso is not applicable as the "reason to believe" for issue of notice were recorded and notice was issued within four years from the end of assessment year. Therefore, we are not required to examine whether the condition stipulated in the proviso is satisfied in the present case. 11. The tribunal in the impugned or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Income-tax Officer, but it is another thing to say that such information can be derived by the material which had been supplied by the asses- see himself. 23. We also cannot accept the submission of Mr. Jolly to the effect that only because in the assessment order, detailed reasons have not been recorded an analysis of the materials on the record by itself may justify the Assessing Officer to initiate a proceeding under section 147 of the Act. The said sub- mission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding with out anything further, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.27 lacs for the transfer of Assets, a sum of Rs.13.32 lacs has been credited to respective assets Account and the balance Rs.14.68 lacs of Profits and Loss Account." 14. In paragraph 11 of the impugned order quoted above the tribunal has stated that in the original assessment proceedings, no query was raised by the Assessing Officer with regard to the impugned receipt of Rs.173 lacs and this was held to be a lapse and failure on the part of the Assessing Officer but it has been observed that it cannot be a ground to reopen the proceedings. Lapse on the part of the Assessing Officer cannot be a justification/cause to reopen assessment. This is a significant finding and the effect thereof has to be examined in the context of the plea of "change of opinion". We may, in this connection, also note the stand of the Revenue before us and what was recorded in the reassessment order by the Assessing Officer. The relevant portion of thereof reads as under:- "In this case, since the assessee has relinquish its distribution right which it was earlier holding to M/s Dalkin Shriram Air conditioning Private Limited in consideration of money and under section 2(47), the word transfer include ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tax by Rs.39,09,800/- @ 20% + 13% SC - being tax on capital gains." Under the earlier provisions assessment would be reopened on basis of subsequent information. However, the Supreme Court in Indian & Eastern Newspaper Society Vs. Commissioner of Income Tax, (1979) 119 ITR 996 (SC), had held that audit objection on a point/opinion of law does not constitute "information" for reopening. It is submitted by the assessee that the object behind the principle of finality and the doctrine of change of opinion is that assessment should not be disturbed when there is no fault of the assessee. Thus, when an assessee is not to be blamed and has furnished full and true particulars, reopening is abuse of said power. Further once a note or specific entry is mentioned in the return/documents enclosed with the return of income, then it is for the Assessing Officer to complete the assessment after looking into and examining all the material placed before him. It can be presumed that he has examined all aspects. It would be farfetched and wrong to state that the Assessing Officer did not examine the question of taxability of Rs.173 lacs. Moreover, in the present case, the Assessing Officer was re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nion of the audit party on a legal issue cannot be ground/reason to reopen. It is, accordingly, stated that notice under Section 147/148 cannot be issued even within a period of four years and is valid only if the following three conditions are satisfied:- (i) Full and true particulars have not been filed at the time of original assessment. (ii) Original assessment order does not show application of mind, and (iii) The Assessing Officer had not raised queries to show application of mind. The queries need not specifically relate to point in issue, but can relate to other aspects. In such cases, the observations of the Full Bench of the Delhi High Court in the case of Kelvinator will apply. 19. On the other hand, the Revenue has submitted that change of opinion necessarily postulates and requires application of mind and formation of opinion at the first instance in the original proceedings. If the Assessing Officer by mistake or lapse does not examine a particular entry or a note in the return and overlooks it, there is no application of mind and thus it is not a case of mere change of opinion. Reliance is placed on the decision in the case of ACIT vs. Rajesh Jhaveri Stock Brokers P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s within the ambit of the proviso to Section 147. The case at hand is covered by the main provision and not the proviso." 20. With effect from 1st April, 1989, the provisions of Section 147 underwent substantial changes. It is agreed that the provisions have been widened, but still do not include mere change of opinion. The cases wherein Assessing Officer has specifically examined the material and referred to the same in the assessment order, pose no difficulty. Delhi High Court in the case of CIT vs. Eicher Ltd. (2007) 294 ITR 310 (Del.) has observed that if the entire material has been placed by the assessee before the Assessing Officer during the original assessment and the Assessing Officer had applied his mind and accepted the view canvassed by the assessee, then merely because this is not expressly stated in the assessment order, is not a ground to conclude or hold that there was no application of mind. Such cases also fall under "change of opinion". It has been held that merely because the Assessing Officer has not specifically referred to the material on record in the assessment order but has accepted the stand of the assessee without making reference in the assessment ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upreme Court in their decision CIT vs. Kelvinator of India Ltd. (supra) has not specifically referred to Section 114 of the Evidence Act and has also not specifically disapproved or approved the observations of the Full Bench of Delhi High Court with reference to the said Section. The Supreme Court in Indian & Eastern Newspaper Society (supra) had examined their earlier decision in Kalyanji Mavji & Co. Vs. CIT (1976) 102 ITR 287 (SC) and observed as under:- "It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the ITO discovers that he has committed an error in consequence of which income has escaped assessment, it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power." 24. Referring to these decisions, another three Judges Bench of the Supreme Court in ALA Firm Vs. CIT (1991) 189 ITR 285 (SC) observed:- " We have pointed out earlier that Kalyanji Mavji [1976] 102 ITR 287 (SC) outl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already in the file or that the decision subsequently come across by him was already there, would not affect the position because the information that such facts or decision existed, comes to him only much later. What then, is the difference between the situations envisaged in propositions (2) and (4) of Kalyanji Mavji [1976] 102 ITR 287 (SC). The difference, if one keeps in mind the trend of the judicial decisions, is this. Proposition (4) refers to a case where the Income-tax Officer initiates reassessment proceedings in the light of "information" obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, e.g., as in the two Madras decisions referred to earlier. Proposition (2) no doubt covers this situation also but it is so widely expressed as to include also cases in which the Income-tax Officer having considered all the facts and law, arrives at a particular conclusion, but reinitiates proceedings because, on a reappraisal of the same material which had been considered earlier and in the light of the same legal aspects to which his attention had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee, it is emphasised (a) that the amount of surplus is a very substantial amount, (b) that full details of the manner in which it had resulted had been disclosed, (c) that the profit and loss account, the profit and loss adjustment account and statement made before the Income-tax Officer had brought into focus the question of taxability of the surplus, and (d) that the decision in G. R. Ramachari's case [1961] 41 ITR 142 (Mad), had been reported by April 10, 1962. No Income-tax Officer can be presumed to have completed the assessment without looking at all of this material and the said decision. No doubt, some doubt had been thrown as to whether a statement had been given at the time of original assessment that the amount of surplus was not taxable as income or as a capital gain but the case has proceeded on the footing that such a statement was there before the officer. This, therefore, is nothing but a case of "change of opinion". On the other hand, the authorities and the Tribunal have drawn attention to the fact that the return, the section 143(2) notice and assessment were all on the same day and counsel for the Revenue urged that, obviously, in his haste, the Inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be referred to a larger Bench for elucidation and examination. This is necessary as we have to examine the decision and observations made by the Full Bench of this Court in Kelvinator (supra):- "(i) What is meant by the term "change of opinion? (ii) Whether assessment proceedings can be validly reopened under Section 147 of the Act, even within four year, if an assessee has furnished full and true particulars at the time of original assessment with reference to income alleged to have escaped assessment and whether and when in such cases reopening is valid or invalid on the ground of change of opinion? (iii) Whether the bar or prohibition under the principle "change of opinion" will apply even when the Assessing Officer has not asked any question or query with respect to an entry/note, but there is evidence and material to show that the Assessing Officer had raised queries and questions on other aspects? (iv) Whether and in what circumstances Section 114 (e) of the Evidence Act can be applied and it can be held that it is a case of change of opinion?" 26. This order will be placed on the administrative side before Hon'ble the Acting Chief Justice for constitution of a large ..... X X X X Extracts X X X X X X X X Extracts X X X X
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