TMI Blog2013 (5) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... re-opening of the assessment in the present case on the basis of the subsequent decision cannot be said to be a mere change of opinion. Contention of the Petitioner that the succeeding AO could not have issued the notice dated 1 October 2012 u/s 148, as it was his predecessor who has recorded the reasons for reopening is completely misconceived. The reasons recorded for re-opening and the notice dated 1 June 2012 which has been issued u/s 148 for reopening are as a matter of fact by the same AO. The notice dated 1 October 2012 issued by the succeeding AO was merely a notice fixing the hearing. Section 129 envisages such a situation and lays down that whenever in respect of any proceeding under the Act an income-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor - reopening was valid - against assessee. - Writ Petition (L) No. 419 of 2013 - - - Dated:- 7-5-2013 - DR. D. Y. Chandrachud And A. A. Sayed,JJ. For the Petitioner : Dr. K. Shivram with Mr. R. K. Hakani For the Res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Bench reversed the decision in A.Y. 2005-06 and held that the commission of Rs.1.20 crores to the three working directors was in lieu of dividend and the same is not allowable as deduction under section 36(1)(ii). The Special Bench confirmed the treatment of the said commission u/s. 36(1)(ii) and stated that the provision of section 37(1) are not applicable in the said case. Since, the order u/s. 143(3) for the year under consideration was passed relying on the ITAT order which has now been reversed, the said assessment order needs to be reviewed in order to assess the amount of Rs.1,50,00,000/- paid as commission which had initially escaped assessment. Herein, the judgment of the Hon'ble Cochin Tribunal in the case of CIT vs Nedungadi Bank Ltd. (85 ITD 1) is relied upon to validate the reopening of assessment for the year under consideration. In the said case the Hon'ble Tribunal had held that the revenue authorities are empowered to reopen a completed assessment on the basis of subsequent decision of higher court. 5. The Petitioner communicated to the first Respondent that the original return be treated as return filed pursuant to notice under Section 148 and also objec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own case for AY 2006-07 reversed the earlier order of the Tribunal and held that the commission of Rs.1.20 crores to the three working Directors was in lieu of dividend and the same was not allowable as deduction under Section 36(1)(ii) and further held that the provisions of Section 37(1) are not applicable in the facts of the said case. The Assessing Officer has applied his mind and has stated in the reasons recorded for re-opening the assessment that an amount of Rs.1.50 crores paid as commission has escaped assessment; (II) The notice dated 1 October 2012 issued by the succeeding Assessing Officer was not a notice under Section 148 and it merely fixed the date of hearing. The predecessor of the Assessing Officer was transferred in normal course of routine annual transfer policy and the succeeding Assessing Officer took over the charge on 4 June, 2012. Section 129 of the IT Act provides that in such cases the succeeding Officer may continue the proceeding from the stage at which the proceeding was left by his predecessor. The learned Counsel placed reliance upon the following judgments: (i) Maharaj Kumar Kamal Singh v. Commissioner of Income-tax [1959] 35 ITR 1 (SC); (ii) A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , AO has power to reopen, 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 s. 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 s.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 AO". 9. Thus, within a period of four years, the Assessing Officer cannot reopen an assessment merely on the basis of a change of opinion. But when he has tangible material to come to the conclusion that there is an escapement of income from assessment, the power to re-open can be exercised. The expression reason to believe in Section 147 has been construed in the judgment of the Supreme Court in Assistant CIT v. Rajesh Jhaveri Stock Brokers (P.) Ltd. wherein it was held as under:- "Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in doing so, he obviously missed to take note of the law laid down in G.R.Ramachari and Co. (1961) 41 ITR 142 (Mad) which, there is nothing to show, had been brought to his notice. When he subsequently became aware of the decision, he initiated proceedings under section 147(b). The material which constituted information and on the basis of which the assessment was are opened was the decision in G.R. Ramachari and Co. (1961) 41 ITR 142 (Mad). This material was not considered at the time of the original assessment. Though it was a decision of 1961 and the Income-tax Officer could have known of it had he been diligent, the obvious fact is that he was not aware of the existence of that decision then and, when he came to know about it, he rightly initiated proceedings for reassessment. 12. The assessment in the instant case was re-opened on the ground that the Special Bench of the Tribunal in the assessee's own case for AY 2006-07 had reversed the earlier decision of the Tribunal in the assessee's case for AY 2005-06 whereby the Special Bench held that the commission of Rs.1.20 crores to the three Directors was in lieu of dividend and the same was not allowable as deduction under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as a matter of fact by the same Assessing Officer. The notice dated 1 October 2012 issued by the succeeding Assessing Officer was merely a notice fixing the hearing. Section 129 of the Income-tax Act envisages such a situation and lays down that whenever in respect of any proceeding under the Act an income-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor. In Hynoup Food and Oil Industries Ltd. (supra) relied upon on behalf of the Petitioner, the Division Bench of the Gujarat High Court was dealing with a case where the Assessing Officer who had recorded reasons for re-assessment and the Assessing Officer who issued the notice under Section 148 were different. It is in these circumstances that the Division Bench held that the succeeding Assessing Officer cannot issue notice under Section 148 on the basis of reasons recorded by his predecessor. The facts of that case were, therefore, clearly different. 15. For the reasons mentioned above, we conclude that the assessment which is sought to b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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