TMI Blog2018 (12) TMI 968X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Member For the Assessee : Shri J.D. Mistri And Shri S.I. Mogu For the Revenue : Shri Nitin Waghmode-DR ORDER PER JOGINDER SINGH (JUDICIAL MEMBER) The assessee is aggrieved by the impugned order dated 04/03/2014 of the Ld. First Appellate Authority, Mumbai. The first ground raised by the assessee pertains to confirming the action of the Ld. Assessing Officer holding that reopening of assessment under section 147/148 of the Income Tax Act, 1961 (hereinafter the Act) as valid, without appreciating the fact that details were already made available to the ld. Assessing Officer and thus the order was passed merely on Change of Opinion on the same facts. 2. During hearing, the ld. Sr. Advocate, Shri J. D. Mistri and Shri S.I. Mogu, ld. counsel for the assessee, invited our attention to the notice issued to the assessee for reopening the assessment (page-49 of the paper book) by claiming that there was no new tangible material with the Assessing Officer and the assessment framed under section 143(3) of the Act was reopened merely on the basis of change of opinion. Our attention was further invited to pages 6, 21, 24, 30, 31 and 33 of the paper book. Relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the 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 amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether reopening was done merely on the basis of change of opinion , as has been claimed by the assessee. We have perused the record and found that the original assessment was framed under section 143(3) on 19/11/2010, assessing the total taxable income at ₹ 2,30,72,774/-. Subsequently, on perusal of record, it was found by the ld. Assessing Officer that taxable income, in view of incorrect claim of deduction under section 35DDA of the Act, had escaped assessment, consequently, proceedings under section 147/148 of the Act were initiated after recording the reasons and therefore notice under section 148 of the Act was issued on 01/03/2012 after obtaining approval of Additional DIT(E), Range-II, Mumbai and the notice was duly served upon the assessee. The assessee in its income and expenditure account debited an amount of ₹ 3,53,71,733/- towards salary which includes an amount of ₹ 1,74,51,505/- paid as voluntary retirement scheme (VRS). The ld. Assessing Officer considered section 35DDA(1) of the Act which is as under:- 35DDA. (1) Where an assessee incurs any expenditure in any previous year by way of payment of any sum to an employee in connection with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to in sub-section (3), in the case of a firm or proprietary concern referred to in subsection (4) and in the case of a company referred to in sub ITA. section (4A) of this section, for the previous year in which amalgamation, demerger or succession, as the case may be, takes place. (6) No deduction shall be allowed in respect of the expenditure mentioned in sub-section (1) under any other provision of this Act. 2.4. If the aforesaid provision of section 35DDA of the Act which deals with amortization of expenditure incurred under VRS, it says where an assessee incurs any expenditure in any previous year by way of payment of any sum to any employee (in connection with his voluntary retirement) in accordance with any scheme or schemes or voluntarily retirement, one fifth of the amount so paid shall be deducted in computing the profit and gains of the business for that previous year and the balance shall be deducted in equal installments for each of the four immediately succeeding previous years. Section 35DDA was inserted by the Finance Act, 2001 (with effect from 01/04/2001 and scope and effect of such insertion was elaborated in the Department Circular No.14 of 2001. F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inion . The expression change of opinion postulates formation of opinion and then a change thereof. In the context of assessment proceedings, it means formation of belief by an Assessing Officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection. A distinction must be drawn between erroneous application/ interpretation/ understanding of law and cases where fresh or new factual information comes 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 or not made available by the assessee, during assessment proceedings, 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 requi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovision. Nine situations by way of illustrations are stated. These are by way of example or guidelines. As a permissive provision it enables to judge to support his judgment but there is no scope of presumption when facts are known. Presumption of facts under section 114 is rebuttable. The presumption raised under illustration (e) to section 114 of the Act means that when an official act is proved to have been done, it will be presumed to have been regularly done but it does not raise any presumption that an act was done for which there is no evidence or proof. (i) Assessments cannot be validly reopened under section 147 of the Act even within four years, if an assessee had furnished full and true particulars at the time of original assessment with reference to the income alleged to have escaped assessment, if the original assessment was made under section 143(3). So long as the assessee has furnished full and true particulars at that time of original assessment and so long as the assessment order is framed under section 143(3) of the Act, it matters little that the Assessing Officer did not ask any question or query with respect to one entry or note but had raised queries and q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 SCC 265 (para 30) Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC) (paras 9, 33, 34, 35) KLM Royal Dutch Airlines v. Asst. Director of I. T. [2007] 292 ITR 49 (Delhi) (para 12) Kunhayammed v. State of Kerala [2000] 245 ITR 360 (SC) (para 31) Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC) (para 34) Muthukrishna Reddiar v. CIT [1973] 90 ITR 503 (Ker) (para 9) New Light Trading Co. v. CIT [2002] 256 ITR 391 (Delhi) (para 18) Praful Chunilal Patel v. Makwana (M. J.)/Asst. CIT [1999] 236 ITR 832 (Guj) (para 21) Snowcem India Ltd. v. Deputy CIT [2009] 313 ITR 170 (Bom) (para 31) Sri Krishna P. Ltd. v. ITO [1996] 221 ITR 538 (SC) (paras 56, 58) Suresh Budharmal Kalani v. State of Maharashtra [1998] 7 SCC 337 (para 29) Union of India v. Suresh C. Baskey [1996] AIR 1996 SC 849 (para 20) United Mercantile Co. Ltd. v. CIT [1967] 64 ITR 218 (Ker) (para 9) (i) What is meant by the term 'change of opinion' ? (ii) Whether assessment proceedings can be validly reopened under section 147 of the Act, even within four years, if an assessee has furnished full and true particulars at the time of or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... different view. The word opinion is derived from the latin word opinari which means to believe , to think . The word opinion as per the Black's 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 (third 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 result of reading, experience and reflection . 2.9. In the context of assessment proceedings, it means formation of belief by an Assessing Officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection to use the words in Law Lexicon by P. Ramanatha Aiyar. The question of change of opinion arise when an Assessing Officer forms an opinion and decides not to make an addition or holds that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts now sought to be examined, it must be presumed that those aspects were present to the mind of the Assessing Officer and had been held in favour of the assessee is too far-fetched a proposition to merit acceptance. There may indeed be a presumption that the assessment proceedings have been regularly conducted, but there can be no presumption that even when the order of assessment is silent, all possible angles and aspects of a controversy had been examined and determined by the Assessing Officer. It is trite that a matter in issue can be validly determined only upon application of mind by the authority determining the same. Application of mind is, in turn, best demonstrated by disclosure of mind, which is best done by giving reasons for the view which the authority is taking. In cases where the order passed by a statutory authority is silent as to the reasons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening completed assessments would be applicable only to situations where the Assessing Officer has applied his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to claim excess deduction under section 36(1)( viii ). The reasons only provide a conclusion and give no material particulars of information obtained during the course of assessment proceedings for the assessment year 1998-99. Therefore the reasons recorded do not indicate any tangible material which has led to a reasonable belief that income has escaped assessment. Further case of the Department is that expenses attributable to non-fund based activity should be 10 per cent and not 20.1 per cent as claimed by the respondent. Consequently the expenses attributable to fund based activity would be 90 per cent and not 79.99 per cent resulting in less profit from fund based activity (long term finance). The assessee had allocated its expenditure between fund based and nonfund based activity on the basis of the ratio of the income earned between fund and non-fund based activity. Therefore there was some basis for distributing the expenses. Neither the reasons nor the order of the Assessing officer indicate the basis on which 10% of expenditure is alone attributable to non-fund activity. This again establishes absence of any tangible material obtained during proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges, there was no specific discussion in the course of order. [Para 17] Consequently and in this background the mere fact that the Assessing Officer for Assessment Year 2007-08 had come to a different conclusion would not justify the reopening of the assessment for Assessment Year 2006-07. [Para 18] 2.13. The Hon'ble jurisdictional High Court in NDT Systems Anothers vs Income Tax Officer (2014) 363 ITR 603(Bom.) held as under:- This petition under article 226 of the Constitution of India seeks to quash a notice dated March 20, 2012, issued under section 148 of the Income-tax Act, 1961 ( the Act ). The impugned notice seeks to reopen the assessment for the assessment year 2007-08 on the ground that the Assessing Officer has reasons to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the Act. 2. At the request of the advocates for the petitioner and the respondent the 3. Brief facts leading to this petition are as follows : (a) At all times relevant to this petition, the petitioner firm was engaged in nondestructive testing business which includes testing of the blasting contents of the plant and machin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a total income of ₹ 12.05 lakhs. (d) On March 28, 2012, the Assessing Officer issued the impugned notice under section 148 of the Act to the petitioner. By the impugned notice the petitioner was informed by the Assessing Officer that he proposes to reassess the petitioner for the assessment year 2007-08, as he has reason to believe that the income assessable to tax has escaped assessment. In response to the above, the petitioner sought a copy of reasons recorded for issuing the impugned notice under section 148 of the Act. (e) On July 23, 2012, the Assessing Officer communicated the reasons for reopening the assessment for the assessment year 2007-08 to the petitioner as under: Reasons for issue of notice under section 148 of the Income-tax Act, 1961 : The assessee-firm filed its return of income for the assessment year 2007-08 declaring a total income at ₹ 7,06,948. The assessee received testing charges of ₹ 2.49 crores on which expenses on account of radiography and labour charges were claimed. The case was selected for scrutiny and assessment was completed under section 143(3) on December 11, 2009, assessing the total income at ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by you and as per the IDS certificates issued by you from the following parties, in the financial year 2006-07 relevant to the assessment year 2007-08 ; S.No. Deductor's name Difference Amt. in Rs. 1. Hindalco Industries Ltd. 62,835.00 2. IFFCO, Allahabad 70,328.00 3. Onshore Const. Co. Pvt. Ltd. 1,51,943.00 4. Perron Engg. Const. Ltd. 25,416.00 5. Power Mech Projects P. Ltd. 22,189.00 6. Reliance Industries, Jamnagar 5,36,577.00 7. Tulasidharan Bhaskaran Metal Crafts, Surat 7,31,493.00 8. UB Engg. Ltd. Pune, 5,26,647.00 9. United Construction Co. 33,743.00 (b) The total difference of ₹ 21,61,168 had led to underassessment of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order allowing the expenses on account of radiography and labour charges holding them to be contract payments for the deduction of source. Ms. Aasifa Khan, counsel appearing for the petitioner in support of the petition submits as under : (a) even where the impugned notice dated March 28, 2012, under section 148 of the Act has been issued within a period of four years from the end of the relevant assessment years the jurisdiction to reopen an assessment cannot be exercised merely on account of change of opinion ; (b) all material facts with regard to the assessment year 2007-08 had been disclosed by the petitioner to the Assessing Officer during the original assessment proceedings leading to assessment order under section 143(3) of the Act dated December 11, 2009. There is no new material fact which has come to the notice of the Assessing Officer that could lead to his reasonable belief that income has escaped assessment. In fact, the reasons provided only indicate a different opinion on the same facts duly considered in the assessment order dated December 11, 2003, passed under section 143(3) of the Act ; (c) the reasons for reopening as communicated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use all the pleas of the petitioner with regard to the inapplicability of section 194C of the Act would be examined during the reassessment proceeding. 5. In view of the above, Mr. Pinto submits that the petition be dismissed. We have considered the submissions. We find that the notice dated March 20, 2012, under section 148 of the Act has been issued within a period of four years from the end of the relevant assessment year, i.e., 2007-08. In such circumstances, the proviso to section 147 of the Act is clearly not applicable. Therefore, it is not necessary for the Revenue to prima facie establish that there has been a failure on the part of the petitioner to disclose fully and truly all material facts necessary for assessment, while issuing a notice reopening a completed assessment. However, even in case of reopening of assessment within a period of four years from the end of the relevant assessment year the Assessing Officer has to have reason to believe that income chargeable to tax has escaped assessment on the basis of tangible material. The words reason to believe has been construed by the Supreme Court in the matter of CIT v. Kelvinator of India Ltd. [2010] 320 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igation on the part of the assessee is only to make a full disclosure of primary facts and the inferences to be drawn therefrom and the application of law thereon is the job of the Assessing Officer. The petitioner has disclosed all primary facts and on consideration of those facts as reflected in the assessment order dated December 11, 2003, the amount of income has been computed after holding that IDS has to be deducted under section 194C of the Act. 8. Therefore, the impugned notice and the reasons in support thereof clearly indicates that it has been issued merely on the basis of change of opinion and would amount to a review of the assessment order dated December 11, 2003. Further, the reasons for reopening as communicated by the petitioner is not on the basis of any tangible material but merely on verification of the material and primary facts already on record that the Assessing Officer has duly considered while passing the order dated December 11, 2003, for the assessment year 2007-08. There is no fresh tangible material which would warrant taking a view different from the one taken during the regular assessment proceedings. In fact even the order dated October 15, 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 148 of the Act is quashed and set aside. 11. The petition allowed. No order as to costs. 2.14. From the foregoing discussion, the clear position emerges as under: (1) Reassessment proceedings can be validly initiated in case return of income is processed under section 143(1) and no scrutiny assessment is undertaken. In such cases there is no change of opinion. (2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by the principle of change of opinion . (3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which throw light on the issue. If the aforesaid judicial pronouncements are kept in juxtaposition with the facts of the present appeal, admittedly, the assessee furnished audited financial statement for the year ending 31/03/2008, computation of total income and other relevant material for making its claim. It is not the case that any new tangible material came to the notice of the Ld. Assessing Officer at the later stage. Rather, it is a case, where the Ld. Assessing Officer incorrectly applied the provision of the Act, therefore, on the same set of facts/claim, merely on the basis of change of Opinion , the completed assessment under section 143(3) of the Act is not permissible. It is noteworthy that at the relevant time, the assessee was entitled to benefit of section 12A of the Act, therefore, from this angle also, the Ld. Assessing Officer was not within the legal parameters to reopen the completed assessment. Thus, so far as, reopening is concerned, we are of the view that it was wrongly reopened, consequently, this ground of the assessee is allowed. Finally, the appeal of the assessee is allowed. This Order was pronounced in the open court in the presence of ld. repr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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