TMI Blog2013 (7) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... t there being anything additional on record any attempt on the part of the AO to disallow expenditure by reopening the assessment would be based on mere change of opinion and thus not permissible in law – order of the AO quashed - decided in the favour of assessee. - SPECIAL CIVIL APPLICATION No. 204 of 2012 - - - Dated:- 8-10-2012 - MR. AKIL KURESHI AND MS. HARSHA DEVANI, JJ. For the Petitioner: MR MANISH J SHAH For the Respondent: MS PAURAMI B SHETH Akil Kureshi J.- 1) Rule. Learned counsel, Ms. Paurami B. Sheth, waives service of notice of rule on behalf of the respondent. 2) The petition is taken up for final disposal forthwith. 3) The petitioner is a partnership firm and is regularly assessed to tax. The petitioner has challenged a notice dated April 19, 2010, issued by the respondent-Assessing Officer under section 148 of the Income-tax Act, 1961 (hereinafter to be referred to as "the Act"), seeking to reopen the assessment of the petitioner for the assessment year 2006-07. 4) For the assessment year 2006-07, the petitioner filed the return of income on July 26, 2006, declaring total income of Rs. 25,30,915 along with audited accounts. In the profit a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same was allowed in the scrutiny assessment as expenditure while computing the taxable income of the assessee. As the expenses, i.e., maintenance contribution was not directly related to the business of the developer, the same requires to be disallowed and added back to the income. In view of this fact, I have reason to believe that the income chargeable to tax has escaped assessment within the meaning of section 147 of the Income-tax Act." 8) Now, armed with the reasons for reopening, the petitioner made a further detailed representation to the respondent-Assessing Officer on August 10, 2011. In such communication, he pointed out that the entire aspect of the expenditure of Rs. 7,50,771 was examined by the Assessing Officer in the original assessment. Therefore, any reopening even within a period of four years from the end of the relevant assessment year, would not be permissible. He placed reliance on several decisions of the High Courts as well as the Supreme Court. 9) The Assessing Officer did not dispose of such objections. He proceeded to frame the final assessment under his order dated November 30, 2011. In the course of finalising the assessment, he dealt with the obj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nalty notice under section 271(1)(c) read with section 274 of the Act for furnishing inaccurate particulars of income." 10) Learned counsel Mr. Manish J. Shah for the petitioner contended that the Assessing Officer had no jurisdiction to reopen the assessment. The notice itself was not valid since the reasons recorded did not establish that any income chargeable to tax had escaped assessment. Counsel further submitted that the entire aspect of the expenditure of Rs. 7,50,771 was examined by the Assessing Officer during the scrutiny. After a detailed examination, the expenditure was allowed. No additions were made. Such assessment could not be reopened on a mere change of opinion. The notice which was issued even within four years from the end of the relevant assessment year, thus lacked validity. 11) Learned counsel, Ms. Paurami B. Sheth, for the Revenue raised a preliminary contention that the assessment order having already been passed, the assessee be relegated to appellate remedy. She submitted that all contentions including with respect to the validity of the notice for reopening can be examined by the appellate authority. Counsel for the Revenue further submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, one such notice being dated September 17, 2008, in which, he raised as many as twenty eight queries. One of them being the following : "23. Complete details of various items credited/debited to profit and loss account, like construction income/fees, major purchases, site/ labour expenses, AUDA expenses, electricity expenses, interest expenses, etc." 14) In response to such notice, the petitioner supplied various details under a communication dated October 16, 2008. With respect to business expenses, the assessee stated as under : "Copy of selected business expense accounts and its justification : 1. Interest on borrowed funds 2. Consultation fees 3. Maintenance contribution 4. Office rent expense 5. Legal expense 6. Architect fees 7. Brokerage expense." 15) He further elaborated the nature of expenditure of Rs. 7,50,771 by pointing out that the assessee had received various maintenance deposits from three different societies and agreed to retain such amount without interest and in turn to bear part of the maintenance expenses incurred by the societies. His explanation read as under : "4.4 Maintenance contribution : We have collected the maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he part of the Assessing Officer would be based only on a change of opinion. Reopening even within four years would not be permissible. The apex court in the case of CIT v. Kelvinator of India Ltd. reported in [2010] 320 ITR 561 (SC) held and observed as under : "On going through the changes, quoted above, made to section 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 Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from April 1, 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer 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 believe' failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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