TMI Blog2021 (2) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 - 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. As decided in M/S. KELVINATOR OF INDIA LIMITED [ 2010 (1) TMI 11 - SUPREME COURT] when a power under Section 147 is to be exercised, concept of change of opinion must be treated as an inbuilt test to check abuse of power of the Assessing Officer. Further, it is held that after 1st April 1989, the Assessing Officer has power to reopen provided there is a tangible material to come to the conclusion that there is escapement of income from assessment. The Apex Court held that mere change of opinion on consideration of the same material is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as under: 1. Whether the Division Bench judgment in the case of Commissioner of Income Tax Vs Rinku Chakraborthy (2011) 242 ITR 425 lays down good law? 2. Whether the judgment in the Rinku Chakraborthy (supra) is per incurium 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 purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ped assessment for the Assessment Year 2009-10. 6. The appellant replied to the notice under Section 148 of the said Act and objected to the reasons recorded by its reply dated 9th May 2014. It was submitted in the reply that the reasons recorded for reopening 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany (supra) was not correct. However, after finding that there was a conflict between the view taken by two coordinate Division Benches in the cases of Hewlett- Packard (supra) and Rinku Chakraborthy (supra) respectively, the Division Bench referred the above 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 Eas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestions formulated by a Division Bench of this Court. The first two questions revolve around the issue whether the Division Bench of this Court in the case of Rinku Chakraborthy (supra) has laid down the correct law. We must, therefore, refer to the decision in the 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 woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 tax has escaped assessment due to oversight, inadvertence or a mistake committed by the Income Tax Officer. This is obviously based on the principle 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 fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect, lay down the correct law. (Underlines supplied) 15. Hence, Apex Court expressly held that the law laid down by a Bench of two Hon'ble Judges of the Apex Court in the case of Kalyanji Mavji and Company (supra) was not correct. The Apex Court after noticing the view taken in its earlier decision in the case 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition 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 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 , Parl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra), on this aspect does not lay down the correct law. The decision in the case of Rinku Chakraborthy (supra) is based solely on the decision of the Apex Court in the case of Kalyanji Mavji and Company (supra) and in particular what is held in Clause (2) of paragraph 13. The said part is held as not a good law by a subsequent decision of the Apex Court in the case of 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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