TMI Blog2015 (1) TMI 831X X X X Extracts X X X X X X X X Extracts X X X X ..... of impermissible change of opinion. The order whereby the proceedings have been re-opened for assessment under Section 147/148 of Income Tax Act, thus, is found to suffer from jurisdictional error. Consequently, the proceedings taken out in its wake cannot sustain. - Decided in favour of assessee. - ITA 86/2014 - - - Dated:- 19-1-2015 - S. Ravindra Bhat And R. K. Gauba,JJ. For the Appellant : Mr. Nageshwar Rao, Ms. Sayaree Basu Mallik and Mr. Shailesh Kumar, Advs. For the Respondent : Mr.Rohit Madan, Mr.Ruchir Bhatia, Mr.Akash Vajpai and Mr.P.Roychaudhuri, Advs. ORDER Mr. Justice R. K. Gauba 1. This appeal by the assessee seeks to assail the order dated 27.05.2013 passed by Income Tax Appellate Tribunal (ITAT) in appeal registered as ITA No. 2141/Del/2012 and for quashing of the re-assessment order passed by the respondent (the assessing authority) under Section 147 of the Income Tax Act. By the impugned order, the ITAT set aside the order passed by the Commissioner Income Tax (Appeals) [CIT(A)] on 15.02.2012 whereby the assessment order made on 02.12.2010 by Assistant Commissioner, Income Tax Circle 10(1), New Delhi for the assessment year (AY) 2003-2004 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such conclusions, the first appellate authority, inter alia, referred to dictum in CIT v. Kelvinator India Limited 320 ITR 561 (SC). 5. The ITAT in the appeal by the Revenue, however, found that the first appellate authority had failed to give an opportunity to the AO for responding to the objections of the assessee in the first appeal and had also not given any specific finding after investigating the fact as to whether there had been failure on the part of the assessee to make the return under Section 139 or in response to notice under Section 142(1) or Section 148 or for that matter as to whether there had been a failure on the part of the assessee to disclose fully and truly material facts necessary for the assessment of this case. 6. The ITAT, thus, set aside the order of CIT(A) and restored the matter to the said forum for re-adjudication after giving appropriate and reasonable opportunity to both parties. 7. The pleadings and the submissions made in the course of hearing indicate that the appellant assessee on 08.11.2013 has moved an application before the ITAT invoking Section 254(2) of the Income Tax Act seeking rectification of the order dated 27.05.2013 reiterat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn submitted under Section 139, or material furnished in response to notice under Section 142. 13. The assessing authority is vested with power to subject a case to be taken for scrutiny under Section 143(2) and (3) of Income Tax Act. Generally, if he considers it necessary or expedient to do so, to ensure that the assessee has not understated the income or has underpaid the tax in any manner and, particularly, in cases where he has reasons to believe that any claim of loss, exemption, deduction, allowance or relief made in the return is inadmissible. For cases taken up under the scrutiny clause, the Assessing Officer is required to issue a notice calling for such information and documents as are considered necessary. 14. In cases of failure to make the return under Section 139, or in compliance with the notice under Section 142, or the notice under Section 143(2) on the part of the assessee, the AO is vested with the jurisdiction to make best judgment assessment (Section 144) of the total income or loss accruing to, or incurred by, the assessee and for determining the sum payable as income tax thereupon, after taking into account the relevant material gathered by such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but- (i) income chargeable to tax has been underassessed ; o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to re-open the assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. (emphasis supplied) 17. The expression reasons to believe appearing in Section 147 of the Income Tax Act has been a subject matter of interpretation in a number of cases decided by this court including in Haryana Acrylic Manufacturing Company v. The Commissioner of Income-tax IV and Anr. (2009) 308 ITR 38, Jindal Photo Films Ltd. v. Commissioner Income Tax (1998) 234 ITR 170 and CIT v. Kelvinator (2002) 256 ITR 1 (Del) (Full Bench). 18. In Jindal Photo Films Ltd. v. Commissioner Income Tax (supra), this court observed as under:- It is also equally well settled that if a notice under section 148 has been issued without the jurisdictional foundation under section 147 being available to the Assessing Officer, the notice and the subsequent proceedings will be without jurisdiction, liable to be struck down in exercise of wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. (emphasis supplied) 20. The first proviso to Section 147 quoted earlier makes it abundantly clear that no action thereunder is ordinarily permissible in cases where assessment for the relevant assessment year has already been made under Section 143(3), after expiry of four years from the end of the relevant assessment year. But, it is clear that this limitation would apply only if there has been a scrutiny assessment and not otherwise. There is, however, an exception available even to the four year rule wherein such re-opening of the assessment proceedings is permitted if any income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for the assessment year in question. Noticeably, the re-opening of the assessment after expiry of four years is permitted only if there has been a default on the part of the assessee to disclose. To put it conversely, the law does not provide for re-opening of the assessment, through ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee has escaped the assessment as per the section 147 of the IT Act. Issued Notice u/s 148. The approval of Commissioner of Income Tax, Delhi-IV, has been obtained on 19.02.2010. 24. It is clear from bare reading of the aforementioned satisfaction note recorded by the assessing authority for re-opening the assessment five years after the assessment had been completed under Section 143(3) (on 30.11.2005) that the only indication set out as to the grounds which had triggered such action is through the words after going through the records . The assessing authority would not elaborate as to which records had been adverted to and what was the event which had occurred that had impelled such perusal of the records for a fresh view to be taken. Noticeably, the Assessing Officer while recording his satisfaction by note dated 19.03.2010 that a case had been made out for the income to be re-assessed would not attribute any act of commission or omission on the part of the assessee so as to constitute a failure to discuss fully and truly of the material facts. Indeed, the assessing authority expressed that reasons to believe existed that a part of the income had escaped assessment. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferences from the same very material that had been scrutinized in the original assessment proceedings. The case at hand is concededly not covered by other exceptions as indicated by second and third proviso or explanation to Section 147 quoted earlier. 28. The re-opening of the assessment in the case at hand through notice under Section 148 of Income Tax Act issued on 22.03.2010 fails to pass the muster on both the tests. The satisfaction note does not disclose the foundation of reasons to believe as it vaguely refers to the perusal of the records without specifying the fresh tangible material that had come to light giving rise to a need for such action. Since the assessment had earlier been concluded under Section 143(3) by order dated 21.09.2007, the restrictions on the exercise of the power of re-assessment as contained in the first proviso to Section 147 would inhibit further action in absence of material showing default by the assessee to fully or truly disclose. 29. In the above facts and circumstances, we concur with the view taken by the CIT(A) that it is a case of impermissible change of opinion. The order whereby the proceedings have been re-opened for assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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