TMI Blog2014 (10) TMI 459X X X X Extracts X X X X X X X X Extracts X X X X ..... ties in the original assessment order, which are referred to now in the reasons for reopening of assessment for the year under consideration - The assessee filed explanation and evidences before the AO at original assessment stage explaining the investment in the properties - Whatever addition was made by the AO at original stage on the identical facts have been deleted by the CIT(A) as well as confirmed by the Tribunal. The propriety demands that the AO should not have resorted to proceedings to reopen assessment on identical facts - All facts were all along were within the knowledge of the AO at original assessment stage, therefore, re-appreciation of evidence at subsequent re-assessment proceedings is not permitted on mere change of opinion by subsequent AO - The re-assessment proceedings have been initiated again on similar issue and totally on identical facts regarding investment in property which have already been considered in the original assessment proceedings - It is a case of change of opinion and such a change of opinion for reopening of section 147 is not permitted under law - The AO in the re-assessment order himself has mentioned that addition is made on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roperty business at ₹ 13,11,200 and unexplained investment in property at ₹ 15,00,000 totaling to ₹ 28,11,200/-. But the then ld. CIT(A) deleted this addition in his order dated 20.05.2009 and this decision of the then ld. CIT(A)-I has been further confirmed by the Hon ble ITAT Agra vide its order dated 21st April, 2011. Meanwhile, the assessment proceeding of the assessee (appellant) has been reopened u/s.147 after recording reason to believe on 10.09.2009 and the same is reproduced as under: A search was conducted at the premises of the assessee on 16.09.2004 in which several books of account, documents etc. was seized including Annexure A-1. Annexure A-1 is a binded ledger which contains details of expenditure made by the assessee in various properties. In this book, property wise ledger account has been maintained and amount and dates of making payments in respect of each property is clearly mentioned. Such details contain payment made towards purchase of land, stamp, dalali expenses, registration expenses and construction expenses. The details of expenditure made as per entries in this ledger are as under: Payment/expenditure made during F.Y. 2003-04 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 30 Advance for Rahul Cash ₹ 8,61,000 06.04.2004 to Vihar 05.08.2004 31 Land at Vaibhav Rs.34,80,000 10.04.2004 to Kunj, Dayalbagh, 27.04.2004 Agra Total Rs.58,25,000 The photocopies of relevant pages of Annexure A-1 are enclosed for ready reference. No such payments/expenditure as mentioned above are shown by assessee in her returns for relevant years. Thus, the quantum of undiscl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of failure on the part of the assessee to disclose truly and fully all material facts relating to assessments, income of ₹ 37,92,600/- for A.Y. 2004-05 and ₹ 45,14,000/- for A.Y. 2005-06 have escaped from assessment. Therefore, I am satisfied that it is a fit case for issue of notice u/s.148 for A.Y. 2004-05 and 2005-06 to reassess the above income. 2.1 In the above reason, the AO has mainly given his satisfaction about non taxation of unexplained expenditure found recorded in the seized document A-1 page no.8, 20, 21, 30 31 of Annexure A-1 by the AO in the original assessment order, even after considering this seized document and instead of making the addition for unexplained expenditure for investment in properties, the addition of ₹ 15,00,000/- was made on account of unexplained expenditure / investment in property and addition of ₹ 13,11,000/- on account of extra profit from contract business. In the opinion of the AO who has reopened this assessment proceeding under appeal, in the original assessment order, no specific finding has been given that the expenditure of ₹ 96,17,600/- was explained or any explanation in this regard was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Patholi to 20.10.2004 30 Advance for Cash ₹ 8,61,000 06.04.2004 Rahul Vihar to 05.08.2004 31 Land at Rs.34,80,000 10.04.2004 Vaibhav Kunj, to 27.04.2004 Dayalbagh, Agra Total Rs.58,25,000 As per ledger Annexure A-1 Page 8,30 31 an investment of ₹ 58,25,000/- was made during A.Y. 2005-06. In this connection, assessee filed a letter dated 07.12.2010 the relevant portion of the letter is as under: That re-assessment proceeding have been initiate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t give correct picture to explain investments made in above properties. Precisely, on examination of records including seized material, no evidence or explanation to justify the source of expenditure of ₹ 8,25,000/- is found. Thus, at the most addition of ₹ 28,11,000 (15,00,000 + 13,11,200) was made on a/c of unexplained expenditure / investment as against total unexplained expenditure / investment of ₹ 58,25,000/- made during A.Y. 2005-06 in above properties. In view of the above discussion, it is clear that amount of at least ₹ 30,13,800/- [58,25,000 (-) 28,11,200 already considered vide order dated 29.12.2006] for A.Y. 2005-06 being unexplained expenditure / investment in properties as mentioned above, have escaped from assessment and such unexplained expenditure is income of assessee under the provisions of sec.69C of the IT Act, 1961 and added back to the income of the assessee. 2.2 As per the above discussion made in the assessment order, the AO has made addition of ₹ 30,13,800 after taking into account the additions of ₹ 15 lac and ₹ 13,11,200/- totaling to ₹ 28,11,200/- already made in the original assessment order a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ained investment in jewellery. The assessee preferred appealagainst the original assessment order dated 29.12.2006 before the ld. CIT(A) and the ld. CIT(A)-II, Agra was pleased to allow the appeal of the assessee vide order dated 20.05.2009. The department preferred appeal before the ITAT, Agra Bench against this order of the ld. CIT(A) and the Tribunal dismissed the departmental appeal vide order dated 21.04.2011. It was, therefore, explained that re-assessment proceedings have been initiated again on the similar issue and on identical facts which have already been considered in the original assessment proceedings. It is a clear case of change of opinion and no new material has been brought on record to justify the additions. The facts were all within the knowledge of the AO. The assessee relied upon certain decisions in support of her contention. The remand report from the AO was called for which is reproduced in the appellate order. Rejoinder was also filed by the assessee. The ld. CIT(A), considering the facts of the case in the light of all the material and evidences on record, annulled the re-assessment proceedings because the same were invalid and have been done on mere chan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he formation of the belief. Our view gets support from the changes made to section 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 section 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 Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549 , dated 31-10-1989, which reads as follows : 7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression reason to believe in section 147. A number of representations were received against the omission of the words reason to believe from section 147 and their substitution by the opinion of the Assessing Officer. It was pointed out that the meaning of the expression, reason to believe had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 'Change of opinion' The expression 'change of opinion' postulates formation of opinion and then a change thereof. In the context of section 147 it implies that the Assessing Officer should have formed an opinion at the first instance, i.e., in the proceedings under section 143(3) and now by initiation of the reassessment proceeding, the Assessing Officer proposes or wants to take a different view. [Para 6] The word 'opinion' is derived from the latin word 'opinari' which means 'to believe', 'to think'. The word 'opinion' as per the Blacks Law Dictionary means a statement by a Judge or a Court of a decision reached by him incorporating cause tried or argued before them, expounding the law as applied to the case and, detailing the reasons upon which the judgment is based. Advanced Law Lexicon by P. Ramanatha Aiyar (3rd Edition) explains the term 'opinion' to mean 'something more than mere retaining of gossip or hearsay; it means judgment or belief, that is, a belief or a conviction resulting from what one thinks on a particular question .. An opinion is a conviction based on testimony .. they are as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es to the knowledge of the Assessing Officer subsequent to the passing of the assessment order. If new facts, material or information comes to the knowledge of the Assessing Officer, which was not on record and available at the time of the assessment order, the principle of 'change of opinion' will not apply. The reason is that 'opinion' is formed on facts. 'Opinion' formed or based on wrong and incorrect facts or which are belied and untrue do not get protection and cover under the principle of 'change of opinion'. Factual information or material which was incorrect or was not available with the Assessing Officer at the time of original assessment would justify initiation of reassessment proceedings. The requirement in such cases is that the information or material available should relate to material facts. The expression 'material facts' means those facts which if taken into account would have an adverse affect on the assessee by a higher assessment of income than the one actually made. They should be proximate and not have remote bearing on the assessment. The omission to disclose may be deliberate or inadvertent. The question of concealme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich the Assessing Officer could have with due diligence inferred facts does not amount to full and true disclosure. Thus in cases of reopening after 4 years as per the proviso, conduct of the assessee and disclosures made by him are relevant. However, when the proviso is not applicable, the said precondition is not applicable. This additional requirement is not to be satisfied when re-assessment proceedings are initiated within four years of the end of the assessment year. The sequitor is that when the proviso does not apply, the re-assessment proceedings cannot be declared invalid on the ground that the full and true disclosure of material facts was made. In such cases, re-assessment proceedings can be declared invalid when there is a change of opinion. As a matter of abundant caution it is clarified that failure to state true and correct facts can vitiate and make the principle of change of opinion inapplicable. This does not require reference to and the proviso is not invoked. The difference is this; when proviso applies the condition stated therein must be satisfied and in other cases it is not a prerequisite or condition precedent but the defence/plea of change of opinion sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Kelvinator of India Ltd. [2010] 187 Taxman 312 had examined the question whether 'change of opinion' can justify reopening of assessing. The Supreme Court has not stated or made any observation with reference to section 114 of the Evidence Act. The doctrine of merger, if applied, would require that one will accept and apply the reasoning and ratio given by the Supreme Court. By applying the 'doctrine of merger' it cannot be held that the reasoning or the ratio given by the Supreme Court is the reasoning given by the High Court. The Supreme Court in the present case has given detailed reasons and ratio why 'change of opinion' cannot be a ground to reopen assessment. The said reasoning or ratio are the binding precedent. [Para 31] If a particular subject matter, item, deduction or claim is not examined by the Assessing Officer, it will nevertheless be a case of change of opinion and the reassessment proceedings will be barred. [Para 36] What is important and relevant is that the principle of 'change of opinion' was equally applicable under the unamended provisions. [Para 37] There may be cases where the Assessing Officer does not and m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment, though he had not recorded his reasons. The Hon ble Court has further clarified that in these two situations, the revenue is not without remedy and in case, the assessment order is erroneous and prejudicial to the interest of revenue, they are entitled to and can invoke the power u/s.263. Therefore, in view of the above two decisions, one by Hon ble Supreme Court in case of CIT vs. Kelvinator India (supra)(relied upon by the ld. AR) and another decision of Hon ble Delhi High Court in case of Usha International Ltd.(supra)(relied upon by the AO), it would depend on the facts of each case whether, there is change of opinion while reopening of the assessment proceeding or not. However, in both the decisions, it is very clear that re-assessment proceeding initiated merely on the basis of change of opinion is invalid. In the decision of CIT vs. Usha International Ltd. (supra), the Hon ble Delhi High Court has discussed about the expression change of opinion and it has been held that question of change of opinion arises when the AO forms an opinion and decide not to make addition or holds that the assessee is correct and accept his position or stand. In order to examine, whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the course of reopening of the assessment proceeding, the AO computed the total investment in property at ₹ 58,25,000/- and out of that amount, he has made addition of ₹ 30,13,800/- after deducting the above mentioned estimated addition of ₹ 28,11,200/- made in the original assessment order. After examining the decision of the AO in the original assessment order as well as in the re-assessment order passed u/s.147 read with section 143(3), it is very clear that the first AO has applied his mind while completing the original assessment and after examination of the seized documents in which investment in property was recorded, he arrived to the conclusion for making addition of only ₹ 28,11,200/- instead of the total amount of investment recorded in the seized document and, therefore, the second AO in the reassessment order, has made addition, only on account of balance amount. Therefore, it can be said that the first AO in the original assessment has formed his opinion about making the addition of only ₹ 28,11,200/- after computing the profit earned by the assessee(appellant) on undisclosed receipts and also making an addition of ₹ 15 lac to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /s.147 is a clear case of change of opinion as no new material has come on record and no fresh information has been received by the AO because the reopening was done on the basis of a seized document Annexure A-1 which has already been considered by the AO in the original assessment order vide order dated 29.12.2006 and hence, such reopening u/s.147 is invalid. As the reopening of assessment proceeding for passing the impugned order passed u/s.147 read with section 143(3) has itself been found to be invalid, consequent notice issued u/s.148 is also invalid and the subsequent assessment order passed u/s.143(3) is void ab initio and deserves to be quashed. Therefore, the impugned assessment order passed u/s.147 / 143(3) dated 10.12.2010 is annulled. 13. As the reopening of assessment proceeding u/s.147 has been found to be invalid and the consequent assessment order passed u/s.147 read with section 143(3) has been annulled, I have not decided the grounds taken on the merit of addition because the adjudication on the merit of addition would be only on academic nature. 14. In the result, appeal is allowed. 3. The ld. DR relied upon the order of the AO and submitted that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Berger Paints India Ltd., 245 ITR 648 held when any particular issue has been considered by the ITO and CIT(A) and when there is no failure to disclose the facts, the reassessment proceedings are not valid. Hon'ble Supreme Court in the case of CIT vs. Foraner France, 264 ITR 566 held reassessment not on basis of mere change of opinion law same before and after amendment by direct tax laws. Hon'ble Supreme Court in the case of Indian Oil Corporation, 159 ITR 956 held that no case u/s 148 is made out when the facts were known all along with to the revenue while making the original assessment. Hon'ble Supreme Court in the case of Associated Stone Industry Ltd., 224 ITR 560 held that the assessee shall have to disclose only the primary facts. Considering the above legal propositions decided in the above cases, it is clear that AO is not justified in reopening the assessment on mere change of opinion. It is admitted fact that Annexure A1 was considered at the original assessment stage and on that basis, the AO made addition on account of unexplained investment in property in a sum of ₹ 15,00,000/- (total addition ₹ 28,11,200/-). The AO has referred to t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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