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TMI Blog2016 (1) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... ecific issues were taken up in the course of scrutiny proceedings. One of them related to income from purported sale of land. The assessee had declared an income of Rs. 14,31,19,916/- as Short Term Capital Gain on sale of land. Since Fixed Assets Schedule of the company for the relevant previous year did not show any land having been disposed of and since the depreciation statement of the assessee prepared for income tax purposes also showed a particular value at the beginning and at the end of the relevant year, the Assessing Officer concluded in para 5 of the Order of Assessment dated 31.12.2010 that the assessee had income from undisclosed sources assessable under Section 69A. Consequently, the Assessing Officer treated the entire receipt of sale consideration of Rs. 31,07,20,000/- derived by the assessee from undisclosed sources assessable under Section 69A. 5. Subsequently, the Assessing Officer passed a rectification order on 6.9.2011 under Section 154 of the Act. This order was for the purpose of adjustment of losses under the head Unabsorbed Depreciation and Business Loss of Earlier Years. 6. More than two years after the order passed under Section 154 and more then three ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led. Therefore, the learned Judge held that the reopening of assessment was within the period of 4 years prescribed under Section 147. In the light of such a conclusion, the learned Judge held that the appellant should canvass the correctness of the order of assessment only before the First Appellate Authority in regular appeal. Aggrieved by the said common order of the learned Judge, the appellant is before us. 11. At the outset, even Mr.T.Promodkumar Chopda, learned Standing Counsel for the department, does not support the conclusion reached by the learned Judge that the reopening of assessment should be taken to be within the period of 4 years, in view of the fact that a petition for rectification under Section 154 was filed on 25.1.2011. This is due to the fact that the Proviso to Section 147 makes it very clear that where an assessment under Section 143(3) has been made for the relevant assessment year, no action shall be taken under this section after the expiry of 4 years from the end of the relevant assessment year. The only exception to this Rule of Limitation is that if any income chargeable to tax has escaped assessment by reason of the failure on the part of the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a letter seeking time to file further objections. Therefore, the learned counsel contends that there was a gross violation of principles natural justice. 18. On the first contention, we do not think that we need to spend more time. The Supreme Court made it clear in Commissioner of Income Tax v. Kelvinator of India Limited [(2010) 320 ITR 561 (SC)], that though the power to reopen assessment, after the Direct Tax Laws (Amendment) Act 1987, is much wider, one needs to give schematic interpretation to the words "reason to believe", failing which, Section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion". The Court emphasised that the Assessing Officer has no power of review and that there is a conceptual difference between the power of review and power to reassess. One must treat, according to the Supreme Court, the concept of "change of opinion" as an inbuilt test to check abuse of power by the Assessing Officer. 19. The reliance placed by Mr.T.Pramodkumar Chopda, learned Standing Counsel for the Department on the decision of the Supreme Court in Reymonds Woollen Mills Limited v. Income Tax Officer [(1999) 236 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... actually four different reasons for the reopening of assessment. Hence, it is contended that even if the issue relating to income from undisclosed sources assessable under Section 69A is taken to have been already covered by the scrutiny assessment order, the other issues raised in the show cause notice would still remain. 24. But unfortunately for the Department, we cannot now allow the Department to enlarge the scope of the enquiry under Section 147. As per the communication dated 8.12.2014, which we have extracted in para 7 above, there was only one reason stated for reopening of the assessment. The Department will have to stand or fall only on the reasons stated therein, for justifying the reopening of assessment. 25. However, drawing our attention to Explanation 3 under Section 147, it is contended by Mr.T.Pramodkumar Chopda, learned Standing Counsel for the Department that the reassessment sought to be made under Section 148, need not be confined to the reasons stated in the proceedings under Section 148(2). In support of this contention, the learned Standing Counsel placed reliance upon a decision of the Punjab and Haryana High Court in Majinder Singh Kang v. Commissioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of the proceedings that some other additions were also liable to be made. Therefore, the said case is of no assistance to the Revenue. 29. Even the decision in Commissioner of Income Tax v. Mehak Finvest (P) Ltd. [(2014) 52 Taxmann.com 51] of the Punjab and Haryana High Court cannot go to the rescue of the Revenue. In that case, the Assessing Officer reopened the assessment, upon receipt of information that various finance companies managed and controlled by Chartered Accountants were involved in providing accommodation entries to the assessee company. Therefore, the validity of the reopening of assessment was not in doubt. After reopening, the Assessing Officer also found that there was an unexplained income in the form of share application money. Therefore, it was added. This was upheld by the Punjab and Haryana High Court. Hence, the said decision is of no avail to the Revenue. 30. As we have indicated earlier, cases where the reopening is found to be within the parameters of the prescription contained in Sections 147 and 148, the additions made subsequently in the course of the proceedings, have always been upheld by Courts. But, where the reopening of assessment cannot sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re found to be not within the prohibited degree or found not to be a mere change of opinion, or found not to be amenable to attack on any other ground under Section 147, then, proceedings for reassessment would commence. After commencement, all other issues including those not covered in the original notice will also be amenable to scrutiny by the Assessing Officer. Hence the contention based upon Explanation 3 to 147 is rejected. 33. That takes us to the next question as to whether this case would fall under the category of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. 34. This question becomes one of importance in view of the admitted position and in view of our finding that the reopening has obviously taken place after the expiry of four years from the end of the relevant assessment year. Under the proviso to Section 147, there must be a failure on the part of the assessee to disclose fully and truly all material facts, to justify reopening of assessment after the expiry of four years. 35. In the case on hand, paragraph 5 of the order of scrutiny assessment dated 31.12.2010 and the order passed under Section 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "21. The duty of an assessee is limited to fully and truly disclose all the material facts. The assessee is not required thereafter to prepare a draft assessment order. If the details placed by the assessee before the AO was in conformity with the requirements of all applicable laws and known accounting principles, and materials details had been exhibited before the AO, it is for the AO to reach such conclusions as he considered was warranted from such data and any failure on his part to do so cannot be regarded as assessee's failure to furnish the material facts truly and fully. Any lack of comprehension on the part of the AO in understanding the details placed before him cannot be confer a justification for reopening the assessment, long after the period of four years had expired. On the facts of this case, it is clear that the escapement of income if any on this account is not on account of any failure on the assessee's part to disclose the material facts fully and truly. The notice issued by the AO in exercise of his power under s.147, therefore, cannot be sustained." 39. Similarly, in Assistant Commissioner of Income Tax v. ICICI Securities Primary Dealership Limi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hand, the Assessing Officer indicated in para 5 of the scrutiny assessment order, not only the disclosure but also his application of mind to the same. 44. The decision of the Delhi High Court in Dalmia (P) Ltd. Vs. C.I.T. [2011 (14) Taxmann.com 106], relied upon by the learned Standing Counsel for the Department, would not also advance the case of the Department. This is for the reason that in that case, the re-assessment proceedings were initiated on the basis of audit note and the Assessing Officer called for complete details and confirmations from sundry creditors. The assessee was able to provide confirmation only for part of the amount. But, the assessee contended that in the original proceedings, the Assessing Officer had taken a conscious and deliberate decision to add one particular portion of the amount, for which, confirmation was called for. Therefore, the assessee relied upon the decision in Kelvinator. But, the Delhi High Court held that in the questionnaire issued by the Assessing Officer at the time of the original assessment proceedings, the assessee was asked to submit a list of sundry creditors with their names and addresses and that the said demand was only pa ..... 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