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TMI Blog2022 (6) TMI 294X X X X Extracts X X X X X X X X Extracts X X X X ..... hip firm, which is managing a depot for M/s Mankind Pharma Limited and M/s Lifestar Pharma Ltd, i.e. operating their Mother warehouse facility to cater CFA's of various states. Essentially the companies have outsourced their distribution and logistics function to the Petitioner for efficiency in operation and cost saving. The companies are paying commission to the Petitioner on the basis of number of cases dispatched. In addition to the commission, the companies reimburse some expenses to the petitioner on the actual basis. 4. The petitioner has further stated that during the assessment year 2013-14 it had shown receipts from commission amounting to Rs.2,40,77,127/- received from various companies on account of commission and the amount of TDS claimed was Rs.12,35,202/-. The Petitioner filed a return of its income declaring a total income of Rs.8,27,370/- plus interest income amounting to Rs.97,352.00. The Petitioner's case was selected for scrutiny under CASS. The A.O. sought some details under different heads in the assessment proceedings, which were duly provided by the Petitioner. During the hearing of the assessment proceedings held on 12.02.2015, the A.O. raised a specific q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eclare its true particulars of income, but it did not discharge this liability properly while filing the ITR and, therefore, the discrepancy could not be reconciled during original assessment proceedings. It was also stated in the said letter that the petitioner had disclosed TDS at Rs.12,32,202/- whereas it works out to Rs.24,64,404/-. Thus there are sufficient grounds for initiation of reassessment proceedings. Thus the petitioner's objections were disposed off. 8. On 28-01-2022, the petitioner submitted its objections against the notice under Section 148 mainly on the following grounds: - i. The case was re-opened on the basis of audit objection whereas earlier the A.O. had himself refused to accept the audit objection by means of his letter dated 20-10-2020 addressed to the Additional CIT and the notice under Section 148 was issued in contravention of CBDT Instruction no. 07 of 2017 dated 21-07-2017, through which the CBDT has strictly prohibited the remedial action if audit objection has not been accepted; ii. the notice has been issued without bringing any tangible material on record, on the basis of same set of documents, which were already on record; and iii. The cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.2021 issued under Section 148 of the Act and the proceedings initiated in furtherance of the notice, mainly on the grounds that the notice has been issued in contravention of C.B.D.T. Instruction No. 07 of 2017; the case has been reopened as a consequence of the audit objection while earlier the A.O. had not accepted the audit objection as per his letter dated 20.10.2020 addressed to the Additional CIT; the reasons recorded for reopening of the case are based upon a change of opinion and no new material has been brought on record; while rejecting the petitioner's objection filed in response to the notice under Section 148 of the Act, the letter sent by the petitioner earlier demanding a copy of the reasons recorded has wrongly been treated to be the petitioner's objections and the objections raised by the petitioner after receipt of a copy of the reasons have not been dealt with and the approving authority has not recorded his detailed satisfaction on the reasons recorded by the A.O. 12. Before proceeding to examine the rival contentions advanced on behalf the parties, it would be appropriate to have a look at the relevant provisions of the Act and refer to some pronounc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome chargeable to tax has escaped assessment for any assessment year. The Hon'ble Supreme Court has explained the scope of judicial review while examining the validity of a notice under Section 148 of the Act in Raymond Woolen Mills Ltd. Versus I.T.O., (1999) 236 ITR 36 (SC), in which it has been held that at the stage of the notice of reopening of the assessment, the Court has only to see whether there is prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage. 15. Again, in Raymond Woollen Mills Ltd. v. ITO, (2008) 14 SCC 218, the Hon'ble Supreme Court reiterated that while examining the validity of a notice issued under Section 148 of the Income Tax Act, "we do not have to give a final decision as to whether there is suppression of material facts by the assessee or not. We have to see only whether there was prima facie some material on the basis of which the Department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at this stage." 16. In light of the aforesaid pronouncements of the Hon'ble Supreme Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on) and, therefore, these receipts are not reflecting in its income. However, the petitioner has received payments under Sections 194 I and 194 J also, but it did not show the above receipts and gave no explanation for the same. It did not show the amount of claim of reimbursement of expenses sent by it to the principal companies and the actual amount received by it towards reimbursement. Further, the details of expenses incurred by it on behalf of the principals were also not submitted for verification during the assessment proceedings. The petitioner did not produce any ledger, bills and vouchers of expenses incurred by it on behalf of the principal companies. Thus the petitioner has not truly and fully disclosed all material facts necessary for the assessment, thereby necessitating reassessment under Section 147 of the Act. 19. It is also evident from the original record produced before the Court that on the basis of the abovementioned reasons recorded by the A.O. proposing issuance of a notice under Section 148 of the Act, the Additional CIT, Range 3, Lucknow made a recommendation for issuance of a notice under Section 148 of the Act and the Principal Commissioner of Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment on the very same issue due to change of opinion, in the absence of any fresh material, is held to be invalid and bad in law. 23. Relying upon the judgment in Arun Gupta versus Union of India, (2015) 371 ITR 394 (All), the learned Counsel for the petitioner has submitted that even if new facts are discovered from the records already available before the A.O., it would amount to a change of opinion, since there is no fresh tangible material from which the authority to reopen the assessment has emerged. 25. The reasons recorded by the A.O. for initiating the process of re-assessment state that on examination of the documents on record and 26 AS, it was noticed that in the P&L account, the petitioner had showed the total receipt of Rs.2,61,28,435/-, including commission income of Rs.2,50,58,983/-, and interest income of Rs.10,69,452/-. However, as per 26 AS its total receipt under Sections 194 A, 194 C, 194 H, 194 I and 194 J is Rs.5,23,84,738/-. Hence there is a difference of Rs.2,62,56,303/- in the receipts shown by the petitioner, which income has escaped assessment. During the assessment proceedings, the petitioner was asked to explain the discrepancy and it stated that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income Tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income Tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income Tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income Tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligation, placed upon him by the statute, to disclose fully and truly all material facts. Indubitably, whether a loan, alleged to have been taken by the assessee, is true or false, is a material fact - and not an inference, factual or legal, to be drawn from given facts. In this case, it is shown to us that ten persons (who are alleged to have advanced loans to the assessee in a total sum of Rs 3,80,000 out of the total hundi loans of Rs 8,53,298) were established to be bogus persons or mere namelenders in the assessment proceedings relating to the subsequent assessment year. Does it not furnish a reasonable ground for the Income Tax Officer to believe that on account of the failure - indeed not a mere failure but a positive design to mislead - of the assessee to disclose all material facts, fully and truly, necessary for his assessment for that year, income has escaped assessment? We are of the firm opinion that it does. It is necessary to reiterate that we are now at the stage of the validity of the notice under Sections 148/147. The enquiry at this stage is only to see whether there are reasonable grounds for the Income Tax Officer to believe and not whether the omission/failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 7. 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." 18. Before interfering with the proposed reopening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is non-speaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed reassessment proceedings. Every attempt to bring to tax, income that has escaped assessment, cannot be absorbed by judicial i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer aforesaid, that it is a fit case for the issue of such notice." 33. The order dated 23-03-2021 passed by the approving authority under Section 151 of the Act has been placed on record by the Department and the detailed reasons recorded by the A.O. have been annexed to, and made a part of the order. The approving authority - the PCIT, has stated that he agrees with the comments of the A.O., which were annexed with the order, and has recorded his satisfaction that it was a fit case for issuance of the notice under Section 148 of the Act. The aforesaid order does not indicate non-application of mind by the PCIT to the proposal made by the A.O. and we are not able to accept the submission that the PCIT has granted approval without application of mind to the proposal put up by the A.O. 34. Keeping in view the scope of judicial review while scrutinizing a notice issued under Section 148 of the Act as explained in Raymond woolen Mills Ltd. (1) and (2) and Phool Chand Bajarang Lal and Srikrishna (Supra), we do not have t ..... 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