TMI Blog2020 (1) TMI 123X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs were completed vide order u/s 143(3) dated 29.02.2016 and therefore, the provisions of section 263 could have been invoked by the ld CIT by 31.03.2018. However, instead of invoking the revisionary jurisdiction u/s 263 by ld. CIT, the Assessing officer has assumed the jurisdiction u/s 147 of the Act by issuance of notice dated 28.02.2017. Interestingly, for such assumption of jurisdiction, the ld CIT has accorded the approval u/s 151 of the Act. It is therefore a case where matter was referred to the ld CIT for seeking his approval and the ld CIT instead of holding that the matter falls under section 263 and not under section 148 has given the approval u/s 151 of the Act which shows non-application of mind and mechanical grant of approval. Therefore, in the instant case, the assumption of jurisdiction u/s 147 by issuance of notice u/s 148 cannot be sustained and held as invalid in eyes of law. We therefore find force in the contention of the ld AR that there is a distinction between power to review and power to reassess and the AO doesn t have power to review his own order and such power is enshrined under section 263 of the Act and bestowed on the ld CIT which cannot be cede ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of deduction of ₹ 13,98,46,990/- on account of gain on sale of agriculture land (rural) out of book profit , without appreciating the material facts of the case. C.O No. 16/JP/2019 (Assessee s appeal) In the facts and circumstances of the case and in law, ld. CIT(A) has erred in upholding the action of ld. AO in reopening the case of the assessee company U/s 147 of the Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted quashing the entire order passed by the ld. AO, in the reassessment proceedings. 2. Briefly the facts of the case are that the assessee company filed its return of income on 28.09.2013 for A.Y. 2013-14. In its return of income, the assessee company declared NIL income under regular provisions of the Act as well as declared NIL book profits under the provisions of Section 115JB of the Act. The original assessment was completed U/s 143(3) of the Act vide order dated 29.02.2016 wherein the returned income of the assessee was accepted. Thereafter, notice U/s 148 of the Act was issued on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Revenue. Therefore, in the present set of appeals, the Revenue is in appeal against the exclusion of profits on sale of agriculture land while computing the book profits U/s 115JB of the Act and the assessee in its cross appeal is against the findings of the ld. CIT(A) where he has sustained the reopening of the assessment u/s 147 of the Act. 5. At the outset, the ld. CIT/DR submitted that as far as Revenue s appeal is concerned, the matter has been decided by the Coordinate Bench in favour of the Revenue for subsequent year i.e, A.Y. 2014-15 vide order in ITA No. 390/JP/2019 dated 13.12.2018. It was further submitted that the order of the Coordinate Bench has since been affirmed by the Hon ble Rajasthan High Court in DB. Appeal No. 53/2019 dated 19.07.2019. It was accordingly submitted that on merits, the matter has been decided in favour of the Revenue and therefore, in absence of any change in the facts and circumstances of the case, order so passed by the Coordinate Bench for the A.Y 2014-15 as affirmed by the Hon ble Rajasthan High Court should be followed in the instant case. 6. The ld. AR fairly submitted that on merits, the matter is covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already been passed by the Assessing officer and the ld AR on behalf of the assessee company has stated at the Bar that it shall be withdrawing its writ petition filed before the Hon ble Rajasthan High Court, both the parties were allowed to canvass their arguments. The assessee company was also directed to file a copy of formal application as soon as the same was filed before the Registrar, Hon ble Rajasthan High Court withdrawing its writ petition and the Registry has since received a letter dated 19.12.2019 in this regard. 10. During the course of hearing, the ld. AR submitted that the assessee company, while filing its return of income, disclosed ₹ 13,98,46,990, as income earned from sale of Agriculture Land. Also, for the purpose of calculating MAT, such income being exempt, was reduced from the Book Profits. The above factual aspects clearly emerged from the following documents, also submitted to the ld. AO, during the course of original assessment proceedings:- I. Audited Financials of the assessee company for the relevant previous year. II. Form 29B furnished by the assessee company duly signed by its Chartered Accountant. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt proceedings. IV. The AO, in the reassessment proceedings, based on the same set of facts and documents on record changed his earlier opinion. For reassessment, the AO was of the view that the sale of agriculture land is not agriculture income and thus should not have been reduced from the calculation of Book Profits, for the purpose of MAT. This opinion was contrary to his earlier stand taken in the original assessment proceedings. V. No new tangible material was available with ld. AO while reopening the case of assessee company. 12. It was accordingly submitted that the reasons were based on the documents which were already furnished along with return of income or during the course of assessment proceedings u/s 143(3). There was no new tangible material before the AO as there is no reference to any undisclosed fact or any fresh material or evidence. Thus, the entire reopening was based on change of opinion and, therefore is illegal and void. 13. It was further submitted that even in the order passed by the AO, disposing off the objections raised by the assessee company, against the reasons recorded, the AO has confused ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed hereinbefore, were submitted before the ld. AO in the original assessment proceedings. Ld. AO even issued a detailed query letter (letter dated 04.01.2016), wherein, the required details were sought by the assessee company. To this effect, detailed submissions were made by the assessee company only after which order was passed by ld. AO in the original assessment proceedings, under section 143(3). In view of the above, it was submitted that the entire re-assessment proceedings are illegal, bad in law and deserves to be quashed ab-initio. 17. Per contra, the ld. CIT DR referring to the original assessment order passed U/s 143(3) of the Act submitted that the Assessing Officer has computed the income under the normal provisions of the Act and as far as the computation of book profit U/s 115JB of the Act is concerned, the same is not discernable from the order of the Assessing Officer. It was submitted that where the Assessing Officer has not examined the matter relating to computation of book profits U/s 115JB of the Act at first place and there is no question of change of opinion by the Assessing Officer. Further, referring to the notice U/s 142(1) dated 04.11.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and open his mind through the reasons recorded by him and he has to speak through the reasons. In the present case, the reasons recorded by the Assessing officer before issuance of notice u/s 148 read as under: 1. Reasons for the belief that income has escaped assessment: (a) The assessee filed its return of income declaring total income of NIL which was assessed at NIL vide order u/s 143(3) dated 29.02.2016. (b) during the period under consideration, the assessee has earned agricultural income of ₹ 25,500/-, dividend income of ₹ 3,42,988/- and profit on sale of agricultural land of ₹ 13,98,46,990/-. No other business activities were carried out. (c) While computing book profit u/s 115JB, the assessee has reduced the amount of ₹ 13,98,46,990/-, which was credited in P L account as Capital Gain from sale of Agricultural Land . The claim of the assessee was allowed by the AO. (d) In case of certain companies, tax is reduced to be paid on book Profit as per provisions of Section 115JB. In such cases book profits is required to be computed strictly in accordance to the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r gain results from such a sale, it is chargeable, not because it is revenue, but because the statute specifically charges the capital gain by including it as income. (f) the assessee has failed to include above receipts of ₹ 13,98,46,990/-in its book profit computed u/s 115JB and also failed to disclose fully and truly all material facts necessary for its assessment. Therefore, I have the reasons to believe that, the above income of ₹ 13,98,46,990/-, which is chargeable to tax, has escaped assessment. 19. On perusal of the reasons so recorded by the Assessing officer, it is noted that original assessment proceedings were completed u/s 143(3) vide order dated 29.02.2016 wherein the returned income declaring total income at NIL was accepted. Further, in point no. (c) of the reasons so recorded, the Assessing officer has stated that While computing book profit u/s 115JB, the assessee has reduced the amount of ₹ 13,98,46,990/-, which was credited in P L account as Capital Gain from sale of Agricultural Land . The claim of the assessee was allowed by the AO. Therefore, the fact that there was gain on sale of agriculture land am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment 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 re-opening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989 , Assessing Officer 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 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 expre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort, reliance has also been placed on two decisions of the Hon ble Kerala High Court reported in the year 1997 and 1987 respectively. These provisions were very much on the statue books at the time of original assessment proceedings and even the judicial pronouncements were available very much at time of completion of original proceedings and the Assessing officer had taken a view in the matter and the Assessing officer through the reasons so recorded is basically saying that such a view was erroneous and wrong interpretation of provisions of law. The issue therefore involves erroneous application/interpretation of provisions of section 10(1) and section 2(1A) of the Act for the purposes of computation of book profits u/s 115JB of the Act by the Assessing officer while completing the original assessment proceedings. In such a situation, where the Assessing officer has incorrectly or erroneously applied law and income chargeable to tax has escaped assessment, the Revenue is not without remedy and resort to provisions of section 263 could have been made by the ld CIT. In fact, the revisionary jurisdiction u/s 263 is meant to deal with such type of cases where the ld CIT can step-in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing 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, though he had not recorded his reasons. 14. In the second and third situation, the Revenue is not without remedy. In case the assessment order is erroneous and prejudicial to the interest of the Revenue, they are entitled to and can invoke power under Section 263 of the Act. This aspect and position has been highlighted in CIT v. DLF Power Ltd. [2012] 17 taxmann.com 269 (Delhi) and BLB Ltd. v. Asstt. CIT [2012] 206 Taxman 37/ 19 taxmann.com 115 (Delhi) (Mag.). In the last decision it has been observed: 13. Revenue had the option, but did not take recourse to Section 263 of the Act, inspite of audit objection. Supervisory and revisionary power under Section 263 of the Act is available, if an order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. An erroneous order contrary to law that has caused prejudiced can be correct, when jurisdiction under Section 263 is invoked. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3), a presumption could be raised that the order was passed after application of mind. Reference was made to clause (e) to Section 114 of the Indian Evidence Act, 1872. The contention if accepted would give premium to the authority exercising quasi-judicial function to take benefit of its own wrong i.e. failure to discuss or record reasons in the assessment order. The aforesaid observations have been made in the context and for explaining the principle of change of opinion . The said principle would apply even when there is no discussion in the assessment order but where the Assessing Officer had applied his mind. A wrong decision, wrong understanding of law or failure to draw proper inferences from the material facts already on record and examined, cannot be rectified or corrected by recourse to reassessment proceedings. Assessee is required to disclose full and true material facts and need not explain and interpret law. Legal inference has to be drawn by the Assessing Officer from the facts disclosed. It is for the Assessing Officer to understand and apply the law. In such cases resort to reassessment proceedings is not permissible but in a given case where ..... X X X X Extracts X X X X X X X X Extracts X X X X
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