TMI Blog2021 (10) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessee - there was conscious application of mind by the AO to the said materials. Therefore, the inevitable conclusion as far as the present case is concerned is that the reason to believe of Opposite Party No.1 that income for the AY in question had escaped assessment is based on a mere change of opinion The threshold set by the Supreme Court of India in Kelvinator of India Limited [ 2010 (1) TMI 11 - SUPREME COURT] to justify the reopening of the assessment has not been met in the present case. Consequently, the Court is unable to sustain the reopening of the assessment. Accordingly, for the aforementioned reasons, the impugned notice and all proceedings of the Department pursuant thereto stand hereby quashed. - Decided in favour of assessee. - W.P.(C) No.14603 of 2014 - - - Dated:- 26-10-2021 - CHIEF JUSTICE S. MURALIDHAR AND JUSTICE B. P. ROUTRAY Petitioner Mr. Pranaya Kumar Harichandan, Advocate Opposite Parties Mr. T.K. Satapathy, Senior Standing Counsel JUDGMENT Dr. S. Muralidhar, CJ. 1. The challenge in this writ petition is to a notice dated 16th September 2013 issued by the Deputy Commissioner of Income Tax, Berhampur Circle, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14, Opposite Party No.1 supplied the following reasons for reopening of the assessment: On perusal of Profit Loss account, it is seen that the assessee has claimed deduction of ₹ 48,183/- on account of loss on sale of assets. As per the provisions of Income Tax Act, 1961, any loss incurred on sale of assets can be set off against the short term as well as the long-term capital gains. Since, the loss occurred on sale of assets is not a revenue expenditure, the same is not deductible from the business income. In the balance sheet, the assessee has claimed ₹ 7,16,930/- as assets under the heads Taxes and Duties which includes income tax arrears, Sales tax demand and income tax demand of ₹ 1,70,000/-, ₹ 50,000/- and ₹ 90,000/- respectively. The assessee has claimed these amounts as assets which is not allowable as assets as these demands are liabilities in nature and required to be shown in liabilities side of the balance sheet. 7. Thereafter, the present petition was filed in response to which no counter affidavit has been filed till date by the Department. However, Mr. T.K. Satapathy, learned Senior Standing Counsel for the Department has f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 expression and deleted the word opinion on the ground that it would vest arbitrary powers in the Assessing Officer. We quote herein below the relevant portion of Circular No.549 dated 31st October, 1989, which reads as follows: 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 reason to believe' from Section 147 and their substitution by the opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that even when the order of assessment did not record any explicit opinion on the aspects 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 favor of the assessed 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 Page 436 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 computed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowing the settled trend of judicial opinion and the law laid down by their Lordships of the Supreme Court time and again different High Courts of the country have taken the view that if an expenditure or a deduction was wrongly allowed while computing the taxable income of the Assesses, the same could not be brought to tax by reopening the assessment merely on account of subsequently the assessing officer forming an opinion that earlier he had erred in allowing the expenditure or the deduction. Though he has used the phrase reason to believe in his order, admittedly, between the date of orders of assessment sought to be reopened and the date of forming of opinion by the ITO nothing new has happened. There is no change of law. No new material has come on record. No information has been received. It is merely a fresh application of mind by the same assessing officer to the same set of facts. 15. Likewise, the Bombay High Court in ICICI Securities Ltd. v. Asstt. Commissioner of Income Tax 3 (2), Mumbai in Writ Petition No.1919 of 2006 disposed of on 22nd August 2006 has held as under: In the facts of the present case, there is nothing new which has come t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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