TMI Blog2013 (1) TMI 824X X X X Extracts X X X X X X X X Extracts X X X X ..... 385.25 crores to tax under Section 44 read with the First Schedule to the Act. An order of assessment was made on 17 November 2008 under Section 143(3) by which the total income was determined at ₹ 386.08 crores after making certain disallowances. 3. A notice was issued on 24 March 2011 to the Petitioner seeking to reopen the assessment for A.Y. 2006-07. The reasons on the basis of which the assessment has been sought to be reopened are, summarised briefly as follows: (i) Paragraph 7.1 of Schedule 17 of the Notes forming part of the accounts shows that the assessee did not offer to tax an unapportioned claim recovery of ₹ 27.24 crores representing the amount received from foreign countries as recoveries against claims paid and liability due to non-ascertainment of dues of other parties in respect of claims paid. The Assessing Officer has stated that as the assessee is a resident, all income relevant to the previous year was required to be brought to tax in accordance with Section 5(1) including the unapportioned recovery. However, in the assessment which was finalized under Section 143(3), the amount has not been brought to tax. There has been an under-assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -J to the Tax Audit Report shows that the total prior period expenses incurred during the year is ₹ 1.73 crores. After adjusting the prior period income of ₹ 72.72 lakhs, an amount of ₹ 1 crore was debited to the Profit and Loss Account. The expenditure of ₹ 1.73 crores does not relate to the relevant previous year and should have, hence, been added to the total income. This has resulted into an escapement of income. In the circumstances, the Assessing Officer has stated that he has reason to believe that income to the extent of ₹ 54.66 crores escaped assessment resulting in a short levy of tax. 4. The assessee by a letter dated 18 November 2011 objected to the notice proposing to reopen the assessment for A.Y. 2006-07. The Assessing Officer by his order dated 22 November 2011 disposed of the objections. 5. Counsel appearing on behalf of the Assessee submitted that (i) There was complete disclosure on the part of the assessee of material facts during the course of the assessment and there is an absence of fresh or tangible material on the basis of which the assessment can be reopened. The fact that the Assessing Officer has relied upon the Not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a capital nature; and (viii) As regards Ground (v), similar to credit amounting to ₹ 1.73 crores, the expenses of ₹ 72.72 lakhs had also been incurred by the assessee. That expenditure, though it related to an earlier period, had crystallized in the previous year ending on 31 March 2006 and hence, only the net amount of ₹ 1 crore was correctly added back while filing the return of income for Assessment Year 2006-07. 6. On the other hand Counsel appearing on behalf of the Revenue urges that (i) The assessment is sought to be reopened within a period of four years. Hence, in view of the judgment of the Supreme Court in CIT v. Kelvinator India Ltd. [2010] 320 ITR 561/187 Taxman 312 (SC), the Assessing Officer is acting within jurisdiction when he proposes to reopen the assessment on the basis of tangible material; (ii) In the present case, during the course of the assessment proceedings, no query was raised by the Assessing Officer in respect of any of the five points with reference to which the assessment is sought to be reopened. None of those issues has been referred to in the order of Assessing Officer. Hence, this is not a case where the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atic interpretation to the words reason to believe falling which, we are afraid, s. 147 would give arbitrary powers to the AO to reopen assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of change of opinion as an inbuilt test to check abuse of power by the AO. Hence, after 1st April, 1989, 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 opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of belief by the Assessing Officer is within the realm of subjective satisfaction. 8. To hold that the Assessing Officer must be deemed to have accepted what he has plainly overlooked or ignored in the assessment order would be to stretch the interpretation of Section 147 to a point where the provision would cease to have meaning and content. Such an exercise of excision by judicial interpretation is impermissible. When an assessment is sought to be reopened within a period of four years of the end of the relevant assessment year, the test to be applied is whether there is tangible material to do so. What is tangible is something which is not illusory, hypothetical or a matter of conjecture. Something which is tangible need not be something which is new. An Assessing Officer who has plainly ignored relevant material in arriving at an assessment acts contrary to law. If there is an escapement of income in consequence, the jurisdictional requirement of Section 147 would be fulfilled on the formation of a reason to believe that income has escaped assessment. The reopening of the assessment within a period of four years is in these circumstances within jurisdiction. 9. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idently the Assessing Officer had not considered paragraph 6.1 of the Notes forming part of the accounts. At this stage, it would be necessary for the Court to record that we have not been called upon to decide as to whether any addition to the income would have to be made on that ground since that is a matter which has to be decided after the assessment is reopened. All that is relevant at this stage is whether there is reason to believe on the part of the Assessing Officer that income had escaped assessment. The answer is in the affirmative. It would not be appropriate for this Court to preempt an enquiry whatsoever by the Assessing Officer, once a tangible basis has been disclosed for reopening the assessment. Similarly, in respect of the revision of pay scales, the Assessing Officer has sought to reopen the assessment on the ground that the liability had not crystallized before the balance-sheet date. Here again, it is apparent that there has been no application of mind to the relevant facts by the Assessing Officer during the course of the assessment proceedings. As regards the first ground, on the basis of which the assessment is sought to be reopened, it has been 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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