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TMI Blog2021 (2) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... in view of the fact that it relies upon the judgment of the Apex Court in the case of Kalyani Mavi & Co. Vs Commissioner of income Tax 1976 CTR 85, which has been specifically overruled by the Apex Court in the case of Indian & Eastern Newspaper Society Vs Commissioner of Income Tax (1979) 110 ITR 996? 3. Whether 'reason to believe' in the context of Section 147 of the Income Tax Act can be based on mere 'change of opinion' of the Assessing Officer?" 2. By an order dated 31st October 2017, the then Chief Justice placed the Appeal before a Full Bench. The constitution of Full Bench underwent change from time to time. The reference was heard on 8th January 2021. 3. Though, the scope of adjudication is limited to decide three questions of law framed by the Division Bench and this Bench is not really concerned with the merits of the case, it is necessary to make a brief reference to the facts of the case only for the purpose of understanding how the controversy arises. 4. The appellant manufacturers and sells computer hardware and other related products. The appellant provides warranty services to the customers and the price of the standard warranty period is co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the assessment for the Assessment Year 2009-10 are based on mere change of opinion and hence, cannot be termed as valid reasons. It was submitted that as the Assessing Officer has taken a different view for different Assessment Years, it amounts to merely a change of opinion. The Joint Commissioner of Income Tax by a letter dated 24th February 2015 rejected the objections raised by the appellant and directed the appellant to appear for the reassessment proceedings for the Assessment Year 2009-10. Being aggrieved by the said notice under Section 148 and the rejection of preliminary objections raised by the petitioners to the said notice, a writ petition was filed before the learned Single Judge. By the Judgment and order which is impugned in the present Appeal, the learned Single Judge rejected the petition on the ground that there was no error in initiation of the proceedings under Section 148 of the said Act. 7. By the judgment and order dated 2nd September 2015, by which the reference was made to the larger Bench, the Division Bench found that while passing the Assessment Order for the Assessment Year 2009-10, the Assessing Officer actually considered the accounting system fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove quoted questions for decision of a larger Bench. 9. We have heard the submissions of the learned Senior Counsel Mr. Percy Pardiwalla for appellant-assessee and the learned counsel Shri K.V. Aravind for the respondents - revenue. 10. Following is the gist of submissions made by Shri Padiwalla: (a) In the case Rinku Chakraborthy (supra), the Division Bench concluded that where an Assessing Officer erroneously fails to tax a part of the assessable income, there is an income escaping assessment and, accordingly, the Assessing Officer has jurisdiction under Section 147 to reopen the assessment. In doing so, it relied on the observations of the Apex Court in the case of Kalyanji Mavji and Company (supra). He submitted that the observations made in the case of Kalyanji Mavji and Company (supra) are no longer good law in their entirety, in the light of the subsequent decision of the Apex Court in the case of Indian and Eastern Newspaper Society (supra), where the Apex Court held that those particular observations in Kalyanji Mavji and Company (supra) did not lay down the correct position of law. In the light of the observations of the Apex Court in the case of Indian and Eastern Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of Rinku Chakraborthy (supra). This was a case where the Tribunal had interfered with proceedings initiated in accordance with Section 147 of the said Act. The Tribunal held that reopening of an assessment on the basis of a mere change of opinion was not justified. The submission before the High Court was that it was not a case of change of opinion by the Assessing Officer, but it was a case of an income escaping the assessment. In paragraph 17 of the said decision, the Division Bench held thus: "17. It is in this background, it is necessary to look into the judgment of the Apex Court, where the scope of reassessment has been explained. The leading case on the point is Kalyanji Mavji & Co. v. CIT, 1976 CTR (SC) 85 : (1976) 102 ITR 287 (SC). The Supreme Court dealing with s. 34(1)(b) of 1922 Act, has held as under: "On a combined review of the decisions of this Court the following tests and principles would apply to determine the applicability of s. 34(1)(b) to the following categories of cases: (1) where the information is as to the true and correct state of the law derived from relevant judicial decisions; (2) where in the original assessment the income liable to ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iple that the tax- payer would not be allowed to take advantage of an oversight or mistake committed by the taxing authority; (3) Where the information is derived from an external source of any kind. Such external source would include discovery of new and important matters or knowledge of fresh facts which were not present at the time of the original assessment; (4) Where the information may be obtained even from the record of the original assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law." If these conditions are satisfied then the Income Tax Officer would have complete jurisdiction to reopen the original assessment. It is obvious that where the Income Tax Officer gets no subsequent information, but merely proceeds to reopen the original assessment without any fresh facts or materials or without any enquiry into the materials which form part of the original assessment, Section 34(1)(b) would have no application." (Underlines supplied) 14. In the case of M/s. Indian and Eastern Newspaper Society (supra), one of the issues which arose for consideration was whether reassessment is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Kalyanji Mavji and Company (supra) expressly held that an error discovered on reconsideration of the same material does not give the Income Tax Officer the power to reopen a concluded assessment. 16. At this stage, we may make a useful reference to a subsequent decision of the Apex Court in the case of CIT v. Kelvinator of India Limited (supra). It is a decision of the Bench of three Hon'ble Judges. In paragraphs 3.1 and 3.2 of the said decision, the Apex Court has quoted Section 147 which existed prior to 1st April 1989 and after 1st April 1989. Paragraphs 3.1 and 3.2 of the said decision read thus: "3.1 After enactment of Direct Tax Laws (Amendment) Act, 1987, i.e., prior to 1-4-1989, section 147 of the Act, reads as under: "147. Income escaping assessment.- If the Assessing Officer, for reasons to be recorded by him in writing, is of the opinion that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the assessing officer. "7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in section 147. - A number of representations were received against the omission of the words 'reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f M/s. Indian and Eastern Newspaper Society (supra). 19. Therefore, in the light of law laid down in the case of M/s. Indian and Eastern Newspaper Society (supra), the first question will have to be answered in the negative by holding that the decision in the case of Rinku Chakraborthy does not lay down correct position law to the extent to which it follows what is held in clause (2) of paragraph 13 of the decision of the Apex Court in the case of Kalyanji Mavji and Company (supra). The second question will have to be answered in the affirmative. In view of the consistent decisions of the Apex Court holding that "reason to believe" in the context of Section 147 of the Income Tax cannot be based on mere change of opinion of the Assessing Officer, the third question will have to be answered in the negative. In fact, in view of settled law, framing of question No.3 was not warranted at all. 20. We make it clear that we have not made any adjudication on the controversy on the merits of Writ Appeal and now the Appeal will have to be placed before concerned Division Bench for deciding the same on merits in the light of what we have held above. The questions whether a case for reopening ..... X X X X Extracts X X X X X X X X Extracts X X X X
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