TMI Blog2012 (7) TMI 521X X X X Extracts X X X X X X X X Extracts X X X X ..... to only 10%. Thus, the basis of the order is completely different from the reasons recorded for reopening the assessment which is clearly not permissible - the Tribunal was correct in taking the view that the reopening of assessment by notice u/s 148 is not sustainable in law - case is based on merely change in opinion on the material which was already on record and considered - in favour of assessee. - ITA No.1237 of 2011 - - - Dated:- 9-7-2012 - S J Vazifdar and M S Sanklecha, JJ. For Appellant: Mr Vimal Gupta For Respondents: Ms Aarti Vissanji S J Mehta JUDGEMENT Per: M S Sanklecha: This appeal by the revenue under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the said Act) is directed against the order dated 27/8/2010 of the Income Tax Appellate Tribunal (hereinafter referred to as the Tribunal ) relating to assessment year 1996-97. 2) Being aggrieved by the Order dated 27/8/2010 the appellant has raised the following substantial question of law for consideration by this Court: Whether on the facts and in the circumstances of the case and in law the Tribunal was right in holding that the notice for reopening of assessment iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice under Section 148 of the said Act was issued on 20/3/2001 seeking to reopen the assessment for the Assessment Year 1996-97. The reasons recorded for reopening the assessment for the Assessment Year 1996-97 were as under: In the course of assessment proceedings for AY 1998-99, the issue has been examined on the basis of details obtained from the assessee. After going though the details, it is seen that the assessee has been claiming deduction u/s.36(1)(viii) on its income which included non fund based income and income from short terms finance. As such information was not furnished for A.Y. 1996-97, the same could not be examined and proper deduction u/s. 36(1)(viii) was not computed. Consequently, the assessee was allowed excess deduction u/s.36 (1)(viii) to which I(sic) was not entitled to. In view of the above, I have reason to believe that the income chargeable to tax has escaped assessment within the meaning of Sec. 147. The assessment is required to be reopened by issuing notice u/s. 148 . e) Consequent to the above, the Assessing Officer on 26/3/2002 reassessed the respondent and computed the assessee s total income at Rs.264 Crores. However, while so determining t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g leading to the order dated 19/3/1999 as well as the first reopening proceeding leading to the order dated 22/2/2000 the Assessing Officer had not considered the issue of the expenditure claimed in respect of non fund income at 20.01% and consequently the present proceeding cannot be considered to be on account of a mere change of opinion; iii) The fact that excess expenditure was claimed for deduction from the income attributable to non fund activity came to the department s knowledge only during the course of assessment proceeding for the assessment year 1998-99. Therefore there was tangible material available only during the Assessment Year 1998-99 which led to the reasonable belief that income had escaped assessment for the Assessment year 1996- 97. iv) The Tribunal erred in holding that reasons for reopening the assessment under Section 148 of the said Act were different from the reasons for passing the reassessment order dated 26/3/2001; and v) The Tribunal did not deal with the decisions of the Supreme Court in Kalyanji Mavji Co. v. Commissioner of Income Tax, West Bengal 102 ITR 287 and A.L.A. Firm v CIT 186 ITR 285 ; 6) Per contra Ms. Aarati Vissanji, Advocat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessing officer to reopen the assessment is not subject to the limitation provided in the proviso to Section 147 of the said Act namely failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. Consequently, even where an assessee has disclosed all facts fully and truly for the purpose of assessment, the Assessing Officer would still have jurisdiction to reopen the assessment, if he has reason to believe that income chargeable to tax has escaped assessment. However, this reason to believe that any income chargeable to tax has escaped assessment even within a period of four years from the end of the relevant assessment year, has to arise not on account of a mere change of opinion but on the basis of some tangible material. This is particularly so as the Income Tax Officer has not been conferred with a power to review his assessment. As observed by the Supreme Court in the matter of CIT v. Kelvinator of India Ltd. 320 ITR Page 561 . However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to reopen ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer while reassessing the respondent for Assessment year 1996-97 consequent to reopening. In the above order dated 26/3/2002 it is revealed that the case of the Department is that expenses attributable to non fund based activity should be 10% and not 20.1% as claimed by the respondent. Consequently the expenses attributable to fund based activity would be 90% and not 79.99% resulting in less profit from fund based activity (long term finance). The respondent had allocated its expenditure between fund based and non fund based activity on the basis of the ratio of the income earned between fund and non fund based activity. Therefore there was some basis for distributing the expenses. Neither the reasons nor the order of the Assessing officer dated 26/3/2002 indicate the basis on which 10% of expenditure is alone attributable to non fund activity. Therefore this again establishes absence of any tangible material obtained during proceeding for Assessment Year 1998-99 to form a reasonable belief that income has escaped assessment. In the circumstances the exercise of powers under Section 148 of the said Act is unwarranted. 9) To overcome the above hurdle, Mr. Gupta submitted tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without anything further, the same would amount to giving premium to an authority exercising quasi judicial function to take benefit of its own wrong. Besides the above, the reasons for reopening the assessment in this case is the material obtained during the subsequent assessment proceedings for the assessment year 1998-99 and not the material already on record. Therefore the revenue cannot now urge a new ground to support the reopening of an assessment for the assessment year 1996-97. 11) Mr. Gupta also placed reliance upon the decision of the Apex Court in the matter of Kalyanji Mouji (supra) and states that the Tribunal has not dealt with the above case law. In the above case while dealing with Section 34(1)(b) of the Income Tax Act, 1922 the court laid down the following parameters for the purposes for reopening of assessments. On a combined review of the decisions of this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt was sought to be reopened. In the aforesaid facts the court questioned the conclusion of proposition No.2 of Kalyanji Mavji (supra). However so far as proposition No.4 is concerned the court observed that it would apply and proceeded to hold that: Even making allowance for this limitation placed on the observations in Kalyanji Mavji (1976) 102 ITR 287 (SC) the position as summarised by the High Court in the following words represents, in our view,the correct position in law (at Page 629 of 102 ITR). The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income Tax Officer subsequent to the original assessment. If the Income tax Officer had considered and formed an opinion on the said material in the original assessment itself then he would be powerless to to start the proceedings for the reassessment. Where, however, the Income tax Officer had not considered the material and sequently came by the material from the record itself, then such as case would fall within the sco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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