TMI Blog2021 (12) TMI 1215X X X X Extracts X X X X X X X X Extracts X X X X ..... ority, or any findings are given in the assessment order, which would be sufficient for the purpose of reopening of assessment and once such reopening is made based on tangible materials, then the assessee has to defend his case by furnishing further particulars or explanations or documents during the course of reopening proceedings. High Court cannot form any opinion in respect of such findings to be made. Only endeavour of the High Court is to ensure that, whether the conditions stipulated and the process adopted for the purpose of reopening of assessment in consonance with the provisions of the Act and in accordance with the Directives of the Hon ble Supreme Court of India in the case of GKN Driveshafts [ 2002 (11) TMI 7 - SUPREME COURT] are not. If the conditions are fulfilled, then it is for the assessee to defend their case in the manner known to law. The reasons furnished in the case of the petitioner would be sufficient for the purpose of reopening of assessment as the case of the petitioner is initiated beyond a period of four years and therefore, the petitioner is bound to participate in the reopening proceedings for the purpose of defending their case by avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Thus, the writ petitioner is constrained to move the present writ petition. 5. The learned Senior counsel appearing on behalf of the writ petitioner broadly raised several grounds for assailing the reopening proceedings. It is contended that 'reasons to believe' had been recorded prior to issuance of notice. There is no failure on the part of the petitioner to produce the materials fully and truly. Thus, the requirement contemplated under Section 147 that the Assessing Officer must have 'reason to believe' is not satisfied. It is contended that the Explanation 1 to Section 147 of the Act has no application in the case of the writ petitioner. Thus, the reopening is mere change of opinion. In support of the of the said contentions, the learned Senior Counsel made the following submissions: (a) The petitioner states that the 'reasons to believe' are not preliminary, but are subject to judicial review. In support, the petitioner seeks to rely on the judgment of the Hon'ble High Court of Delhi in the case of Asoke Kumar Sen Vs. ITO reported in 132 ITR 707 . This judgment has been rendered on a Writ Petition filed by the petitioner, wherein their ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son no longer flutters in the pages of our books and need no longer haunt the law. It was laid to rest by Lord Radcliffe in Nakkuda Ali v. Jayaratne [1951] AC 66, 75 (HL) and no one has sought to revive it. It is now beyond recall. The Supreme Court in a long line of decisions has held that the matter is justiciable. [See ITO v. Madnani Engineering Works[1979] 118 ITR 1 SC.] (Emphasis Supplied) (b) It would be seen from the aforesaid judgment that the Apex Court in its judgment reported in 118 ITR 1 has held that existence of reason to belief on part of the ITO is a justiciable issue. The same opinion had also been expressed by the Constitution Bench of the Apex Court in the case of Calcutta Discount Co. Ltd. , Vs. ITO, reported in 41 ITR 191. (c) The petitioner thus prays that if the reasons recorded are perused for the sake of convenience which are extracted hereinabove, it would be seen that; (i) There is no allegation that the petitioner had failed to disclose fully and truly all material facts. Indeed, it is an admitted fact, on the contrary that the facts stated in the purported note of satisfaction is from the return of income filed by the petitioner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the end of the year in question.(Emphasis supplied) (e) It is the submission of the petitioner that if the aforesaid tests as laid down by the Hon'ble Supreme Court (which holds good till date) when is applied, would show that the assumption of jurisdiction by the respondent to issue the notice and initiate the proceedings is outside the scope of the provisions of Section 147 of the Act. It had been held as above that before assuming jurisdiction both the conditions are to be satisfied namely:(i) there had to be omission or failure to disclose fully and truly all material facts; and (ii) that the AO is having a reason to believe. In the instant case both the conditions are not satisfied. Indeed even the reasons had not been recorded and also there had been no failure to disclose fully and truly all material facts. Further, there is not even an allegation to that effect as is also otherwise apparent from Profit Loss Account, which had been also considered and examined before framing the assessment. In fact, without prejudice, even the reasons recorded and supplied to the petitioner shows that such reasons are merely based on change of opinion. The petitioner further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t disclosed that the sale of shares had been of the nature of a trading sale, made in pursuance of an intention to make a business profit, and not of the nature of a change of investment, made in pursuance of an intention to put certain capital assets into another form. If that be so, it is equally clear that the Income-tax Officer who, by the way, was a successor to the officers who had made the original assessments, was not merely changing his opinion as to facts previously known, but was taking notice of a new fact. (Emphasis supplied) The petitioner submitted that Section 34 of Income Tax Act, 1922, which is pari-materia to section 147 of the Income Tax Act only provides special jurisdiction. In the Income Tax Act, there is no concept of any other assessment other than the assessment or reassessment and that too on specified pre-requisite of Section 147 of the Act. (f) The petitioner is citing below the following judgments, wherein the scope of the provisions of Explanation (1) to section 147 has been explained. It has been held that if there is no failure to disclose fully and truly all material facts, whatever may be the circumstances, the Assessing Officer is not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Kalyanji Mavji Co. v. CIT [(1976) 1 SCC 985 : 1976 SCC (Tax) 111 : (1976) 102 ITR 287] where a Bench of two learned Judges of this Court observed that a case where income had escaped assessment due to the oversight, inadvertence or mistake of the Income Tax Officer must fall within Section 34(1)(b) of the Indian Income Tax Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants insofar as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the Income Tax Officer discovers that he has committed an error in consequence of which income has escaped assessment it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this Court in Maharaj Kumar Kamal Singh v. CIT [AIR 1959 SC 257 : (1959) 35 ITR 1 :1959 Supp 1 SCR 10] , CIT v. Raman Co. [AIR 1968 SC 49 : (1968) 1 SCR 10 : (1968) 67 ITR 11] and Bankipur Club Ltd. v. CIT [(1972) 4 SCC 386 : 1974 SCC (Tax) 76 : (1971) 82 ITR 831] , and we do not believe that -the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notices issued are required to be quashed. Similar result would follow in respect of notices under the Surtax Act. v. Additional Commissioner of Income-Tax vs. Ganeshilal Lal Chand [1985] 154 ITR 274 [Rajasthan] We have heard Mr. Surolia on behalf of the Department and Mr. Ranka on behalf of the assessee. We have perused the reasons recorded by the ITO for reopening the assessment. In our view, the ITO failed to give any reason that there was any failure or omission of the assessee to disclose fully and truly all the material facts at the time of making the original assessment. In the absence of such finding recorded by the ITO, he had no jurisdiction to reopen the assessment under s. 147(a) of the Act. It is well settled that even if there was any oversight or mistake or inadvertence in making the original assessment, it does not empower any ITO to reopen the assessment under s. 147(a) of the Act. A catena of decisions have been cited by Mr. Ranka in support of the view taken above. They are: (1) Chhugamal Rajpal v. S.P. Chaliha[1971] 79 ITR 603 (SC), (2) CIT v. Burlop Dealers Ltd.[1971] 79 ITR 609 (SC), (3) Sheo Nath Singh v. AAC of IT[1971] 82 I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because of the mistake in the calculation of the depreciation, was allowed and income escaped assessment because of the assessee's omission or failure to disclose fully and truly all material facts and no action can be taken for reopening the assessment under section 147(a) of the Income-tax Act, 1961, on the basis of detection of that mistake alone after the expiry of four years from the end of the assessment year. vii. CIT Vs. BhanjiLavji 79 ITR 582 (SC) The Income Tax Officer may, if he is satisfied, that on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of assessment, income has escaped assessment, he may assess or re-assess the income. But when the primary facts necessary for assessment are fully and truly disclosed, he is not entitled on change of opinion to commence proceedings for re-assessment. The Income Tax Officer was apprised of all the primary facts necessary for assessment, and he proceeded to drop the assessment proceedings . He may have raised a wrong legal inference from the facts disclosed but on that account he was not competent to commence re-assessment proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... afraid, Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of mere change of opinion , which cannot 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, the 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment order, detailed reasons have not been recorded an analysis of the materials on the record by itself may justify the Assessing Officer to initiate a proceeding under section 147 of the Act. The said submission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong. (Emphasis supplied) (i) The Apex Court in its judgment in the case of ACIT Vs. ICICI Securities Primary Dealership Ltd., repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ara 10, are closely read, there has been no failure on the part of the petitioner to have disclosed fully and truly all material fact, available on record of the AO as is mandated by the Apex Court in its judgment above, so obliged to have examined as to whether the tax deducted at source by the petitioner was on such income and was subjected to tax in the hands of the recipient under Section 44BB or under Section 44D of the Act. It is submitted that in so far as the present case is concerned, undisputedly right from the inception i.e., from the assessment year even prior to AY 2002-03, petitioner had been deducting tax at source on income which fell under Section 44BB which had to be accepted by the AO. Incidentally, it is submitted that the Apex Court in its judgment in Oil Natural Gas Corporation Limited Vs. CIT reported in 376 ITR 306 dated July 01, 2015 has also held that such income is liable to be taxed under Section 44BB of the act and not under Section 44D of the Act as was opined in the reasons, as a result of change of opinion by the respondent. Thus, the law declared by the Apex Court is that such sum which had been remitted by its was only liable to be deducted tax a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ., 113 ITR 393 (AP) (m) The petitioner further submitted that on identical facts in the case of petitioner alone for the AY 2002-03 on identical reason (pg.310 of Typed Set), the Hon'ble Madras High Court by its judgment dated 29.10.2011 (pg.32-43 of case law compilation) had quashed the initiation of proceedings inter-alia on the ground that there had been no omission or failure to disclose fully and truly all material facts and otherwise too, the initiation of proceedings under Section 147 of the Act was beyond jurisdiction. It is submitted the reasons to initiate proceeding in the said case are absolutely identical and the facts are also identical. It is thus submitted that the allegation in the reasons to believe that there had been a deduction of tax @ 4% as against the higher rate of taxation may be an opinion of the succeeding AO who is said to have recorded the reasons to believe, but in the said reasons to initiate the proceedings there had been no mention that there is omission to disclose fully and truly all material facts. The facts in the instant case in respect of the remittances made for the services rendered along with the deduction of tax at source had dul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that once the reopening is made for the Assessment Years 2004-05, 2006-07, it necessitated the authorities for reopening of assessment for the Assessment Year 2005-06 also as they have 'reason to believe' that the income chargeable to tax escaped assessment. In this regard, the learned Senior Standing counsel relied on the judgment of Kalyanji Mavji Co., Vs. CIT [1976] 102 ITR 287 (SC). 8. Let us consider the reasons for reopening of assessment. A) For the A.Y.2005-06, the assessee debited the following amounts in the profit and loss account on payments made towards geological studies, seismic data acquiring and processing and chartered hire charges (drilling preparation, rig mobilization and demobilization) detailed as follows: A-Y Geological Studies Seismic data acquisition processing Charter hire charges drilling perpetration/rig mobilization/demobilization Exploration Development Exploration Development 2005-06 ₹ 18,57,16,823 ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of ₹ 154,73,86,700 being the expenditure relating to Exploration and Development-depletion write off and in lieu deducted a sum of ₹ 3,09,81,422 pertaining to Exploration and Development expenditure (Schedule 4 to the CEIPL Financials). But, the deduction of ₹ 3,09,81,422 claimed in the statement of computation did not agree with the expenditure booked in schedule 4 to the financials and no separate details for claim of ₹ 3,09,81,422 towards Exploration and Development expenditure in respect of each project was available. Further, during the previous year relevant to AY 2005- 06, a portion of participating interest in Block/Oil Gas Field, KG/DWN-98/2 was also assigned. For the assignment of the interest in the contract areas, the assessee received a consideration of ₹ 382,34,82,330. In the financials for the previous year relevant to AY 2005-06, the above sum was adjusted as reduction of expenditure on exploration. It was seen that for the purpose of Income Tax, the assessee used to deduct the entire expenditure on exploration and development in the statement of computation of income. As such, the assessee had no unallowed expenditure in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts on record and as per provisions of IT Act 1961. The belief can be verified, ascertained and confirmed only after verifying various details/factors during the assessment proceedings. 4.4 As regards the change of opinion, it is submitted that the change of opinion arises when the assessing officer forms an opinion that decides not to make an addition and holds that the assessee is correct. The reassessment proceedings under section 147 is pending and the issue can be examined during the course of proceedings only. The submission of the assessee company is incorrect and misleading. This view is supported by the Delhi High Court decision in the case of Dalmia Pvt Ltd., Vs. CIT in which the court has held that despite specific and pointed queries in section 143(3) assessment, the Assessing officer cannot be said to have formed any opinion if explicit opinion not recorded. 5.The assessee has relied on case laws on the issue of payments towards geological studies, seismic data acquiring and processing and chartered hire charges. The applicability of other case laws relied upon by the assessee company with respect to the merits of the issues need not be verified during the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening proceedings. Once, the materials are available and such materials were not taken into consideration by the original assessing authority, or any findings are given in the assessment order, which would be sufficient for the purpose of reopening of assessment and once such reopening is made based on tangible materials, then the assessee has to defend his case by furnishing further particulars or explanations or documents during the course of reopening proceedings. High Court cannot form any opinion in respect of such findings to be made. Only endeavour of the High Court is to ensure that, whether the conditions stipulated and the process adopted for the purpose of reopening of assessment in consonance with the provisions of the Act and in accordance with the Directives of the Hon ble Supreme Court of India in the case of GKN Driveshafts (cited supra) are not. If the conditions are fulfilled, then it is for the assessee to defend their case in the manner known to law. 12. As discussed in the aforementioned paragraphs, the reasons furnished in the case of the petitioner would be sufficient for the purpose of reopening of assessment as the case of the petitioner is initiat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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