TMI Blog2022 (8) TMI 1279X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer sought to reopen the assessment are not new and are the same which were already available before the then Assessing Officer at the time of scrutiny assessment and the predecessor of the present Assessing Officer had already formed an opinion on the said material and allowed relief to the assessee petitioner on the said issue in course of scrutiny assessment. Respondent revenue could not establish in course of hearing that there was any omission or failure on the part of the assessee petitioner in disclosing truly and fully any material fact necessary for the assessment before the Assessing Officer in course of scrutiny assessment. We are inclined to allow this Writ Petition by quashing the impugned notice under Section 148 relating to Assessment Year 2012-13 and all subsequent proceedings on the basis of the aforesaid impugned notice under Section 148 of the Act by holding that the initiation of impugned reassessment proceeding under Section 147 and issuance of notice under Section 148 of the Income Tax Act, 1961 are based on the self-same material which were already available before the Assessing Officer in course of regular assessment and upon which the predecessor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 12.09.2013 submitted all detailed documents and information called for in the said notice dated 22nd August, 2013 under Section 142 (1) of the Act which inter alia included Hard copy of the e-filled return form, computation, audited accounts Tax Audit Report and Form No. 3CD. The Assessing Officer issued another notice on 05.08.2014 Notice under Section 142 (1) of the Act asking the petitioner to produce the documents as mentioned therein and the petitioner complied with the notice dated 5th August, 2014 by furnishing details to the Assessing Officer on 19.08.2014 and 23.12.2014. Petitioner company on 21.01.2015 submitted various particulars/ documents with the Assessing Officer. In Annexure-4 of the said reply, a detailed note was filed as regards treatment of gain from sale of right to property in question as income under the head Capital Gains . Further, all facts relating to entering into Memorandum of Understanding were duly furnished and on 04.02.2015 petitioner company filed with the respondent no. 1 various other documents and information. In Annexure-II, the ledger account for investment in right to properties was duly furnished to the Assessing Officer. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are without or in excess of jurisdiction because there can be no question of the assessee company not disclosing truly and fully all material particulars relating to its income in the Assessment year in question since the petitioner company had submitted all necessary details of the transactions at various stages in response to queries raised by the Assessing Officer from time to time, in course of scrutiny assessment proceedings. Petitioner further submits that it is settled law that when reassessment proceedings are sought to be initiated after expiry of 4 years from the end of the relevant Assessment Year, it has to be shown that there was failure on the part of the assessee to disclose truly and fully all materials necessary in course of regular assessment which the Assessing Officer failed. Hence, an essential pre-condition for assumption of jurisdiction under Section 147 of the Income Tax Act, 1961 has not been satisfied in the present case. Petitioner submits that the income alleged to have escaped assessment have been duly accounted and disclosed and assessed to tax in the Assessment Year 2015-16 when such income can be said to have accrued to the petitioner company upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form the subject matter of the notice dated 31st March, 2019 forming a part of 37 flats assessed and referred to in the Assessment Order for the Assessment Year 2015-16 read with the Appellate Order was completed in the financial year 2014-15 and as such, the question of same escaping assessment in the Assessment Year 2012-13 cannot and does not arise. Petitioner submitted that it is mater of record which would appear from Annexure-IV of its letter dated 21st January, 2015 filed during the course of the scrutiny assessment proceedings that the petitioner assessee company filed a detailed note on advance towards sale of Right to Property wherein the assessee very clearly explained that right to properties is a capital asset and the gain arising on transfer therefrom is a capital asset taxable in the year of transfer . Petitioner submitted that the letter dated 21st January, 2015, while referring to another transaction of similar nature wherein the petitioner assessee entered into Agreements of Sale with respect to 77 flats, it was categorically submitted in detail that the transaction resulted into capital gains taxable in the hands of the assessee company in the year of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there cannot be any escapement of income on the ground alleged. Petitioner submitted that none of the agreements for sale in question was registered within the year under consideration and the conveyance in favour of the ultimate purchasers were only registered within the period relevant to the Assessment Year 2015-16 in which the income from transfer of right to properties have been duly considered in its return of income by the assessee company and which has been also found to be correct by the learned CIT (Appeals). Thus, once the related income has been already assessed to tax in one year i.e. Assessment Year 2015-16, the impugned assessment proceeding seeking to reassess the same income again in another year cannot be sustained either legally or on facts. Petitioner submitted that the allegation in the alleged reasoned order dated 3rd September, 2019 to the effect that the petitioner company was beneficiary of Rs.6,48,00,000/- from Hi-tech Traders Pvt. Ltd./ during the Financial year is incorrect, perverse, perfunctory and malicious since no such amount or any amount at all was received by the petitioner company during the Financial Year 2011-12. The petitioner company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961, which were issued after the expiry of four years from the end of the relevant assessment year and in view of the fact that there is no whispering in the recorded reason that there was any omission or failure on the part of the assessee in disclosing fully and truly material facts for assessment and in view of the fact that the Assessing Officer could not establish that the information of alleged escaped income was not within his knowledge and was not considered at the time of passing of the assessment order under Section 143 (3) of the Income Tax Act, 1961 and it came to his knowledge subsequent to the assessment order passed under Section 143 (3) of the Income Tax Act, 1961 and that subsequent decision of the Hon ble Supreme Court reversing the legal position prevailing at the time of regular assessment cannot be called an omission or failure on the part of the assessee in disclosing fully and truly the material facts necessary for relevant assessment. Relevant portion of the judgment in the case of Peerless Hospitex Hospital and Research Center Ltd. vs- Principal Commissioner of Income Tax -1, Kolkata Ors. reported in [2022] 137 taxmann.com 359 (Calcutta) whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e end of relevant assessment year were already available at the time of regular assessment yet on the self-same material he has formed an opinion that the same should not have been allowed in view of Circular No. 5/2012 dated 1st August, 2012 and Indian Medical Council (Professional Conduct, Etiquette and Ethics) Regulation, 2002 which is nothing but mere change of opinion. Considering the facts and circumstances of the case as appears from record and discussion made herein, I am inclined to hold that since condition precedent for invoking Section 147 of the Income Tax Act, 1961, for reopening of assessments after expiry of four years from the end of relevant assessment years has not been fulfilled and the impugned reopening of assessment is on mere change of opinion, the impugned notices dated 27th July, 2018 under Section 148 of the Income Tax Act, 1961 in both the Writ Petitions relating to assessment year 2011-12 and 2012-13 are held as bad and not sustainable in law and the said impugned notices under Section 148 of the Income Tax Act, 1961 and all subsequent proceedings on the basis of the aforesaid impugned notices under Section 148 of the Income Tax Act, 1961, are qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e discussion or the reasons stated therein. Reliance was placed on the decision of this Court in Commissioner of Income Tax versus H.P. Sharma, 1980 (122) ITR 675 (Del.) and Consolidated Photo and Finvest Limited versus Assistant Commissioner of Income Tax, (2006) 281 ITR 394(Del.). The relevant portion of the judgment in H.P. Sharma (supra) reads as under:- Adverting to the next question as to whether the resorts to reassessments under ss. 147(b) and 148 of the Act were justified or not, it is noteworthy that both the ITO and the AAC have clearly observed that the assessee had not disclosed at the original assessment stage that the rents realised exceeded those mentioned in the municipal records. The Tribunal has not controverted this finding, perhaps it did not consider it appropriate to go into the same after having held that the municipal valuation should have a sway over the rent realised. My learned brother has on this score sent the matter back to the Tribunal for giving a finding on this aspect. I will only like to observe in this connection that the Second Explanation to s. 147 itself makes it clear that the production before the ITO of account books or other evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom 1 st April, 1989, but was with reference to Section 147(b) of the Act under which an Assessing Officer could reopen assessment on the basis of information. The term to inform it was observed means to impart knowledge and it does not mean mere availability. It gets transmuted into an item of information only when its existence is realized and its implications are recognized. However, it is not possible to agree with the observations made in paragraph 16, which have been underlined. The reason is that experience shows that the Assessing Officers do examine several aspects and raise queries but when the written opinion is expressed in form of the assessment order, there is no discussion or elucidation on certain aspects and issues decided or held in favour of the assessee. Assessee is not the author of the assessment order and has no control over what the Assessing Officer wants to state or mention. It is in this context that Delhi High Court in Commissioner of Income Tax Vs. Eicher Ltd., (2007) 294 ITR 310, observed as under: In Hari Iron Trading Co. v. Commissioner of Income Tax,(2003) 263 ITR 437, a Division Bench of Punjab and Haryana High Court observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee 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 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 completed assessments would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a particular matter in issue. It will have no application where the order of assessment does not address itself to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation, the Revenue is not without remedy. In case the assessment order is erroneous and prejudicial to the interest of the Revenue, they are entitled to and can invoke power under Section 263 of the Act. This aspect and position has been highlighted in CIT vs. DLF Powers Limited, ITA 973/2011 decided on 29th November, 2011 and BLB Limited vs. ACIT Writ Petition (Civil) No. 6884/2010 decided on 1st December, 2011 . In the last decision it has been observed: 13. Revenue had the option, but did not take recourse to Section 263 of the Act, in spite of audit objection. Supervisory and revisionary power under Section 263 of the Act is available, if an order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. An erroneous order contrary to law that has caused prejudiced can be correct, when jurisdiction under Section 263 is invoked. 15. Thus where an Assessing Officer incorrectly or erroneously applies law or comes to a wrong conclusion and income chargeable to tax has escaped assessment, resort to Section 263 of the Act is available and should be resorted to. But initiation of reassessment proceedings will be invalid on the ground of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo such cases. In the first case, the Assessing Officer in the original assessment had made additions of Rs.19,86,551/- under Section 40(1) on account of unconfirmed sundry creditors. The reassessment proceedings were initiated after noticing that unconfirmed sundry creditors, of which details etc. were not furnished, were to the extent of Rs.52,84,058/- and not Rs.19,86,551/-. In Indian Hume Pipe Company Limited (supra), after verification the claim under Section 54-EC was allowed but subsequently on examination it transpired that the second property was purchased prior to the date of sale. The aforesaid decisions/facts cases must be distinguished from cases where the material facts on record are correct but the Assessing Officer did not draw proper legal inference or did not appreciate the implications or did not apply the correct law. The second category will be a case of change of opinion and cannot be reopened for the reason that the assessee, as required, has placed on record primary factual material but on the basis of legal understanding, the Assessing Officer has taken a particular legal view. However, as stated above, an erroneous decision, which is also prejudicial to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is important. From a perusal of Clause 7.2 of the said Circular it would appear that in no uncertain terms it was stated as to under what circumstances the amendments had been carried out i.e. only with a view to allay the fears that the omission of the expression reason to believe from Section 147 would give arbitrary powers to the Assessing Officer to reopen past assessment on mere change of opinion. It is, Therefore, evident that even according to the CBDT a mere change of opinion cannot form the basis for re- opening a completed assessment. The submission of Mr. Jolly to the effect that the said Circular cannot be construed in such a manner whereby the jurisdiction of the statutory authority would be taken away is not apposite for the purpose of this case. In Union of India and Others (supra), whereupon Mr. Jolly had placed strong reliance, the Apex Court was dealing with an administrative instructions whereby no right was conferred upon the respondents to have the house rent amount included in their emoluments for the purpose of computing overtime allowance. The Apex Court held that otherwise also the Government s instruction have to be read in conformity with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cessary to examine the facts of the said case. The assessment year in reference was 1987-88 but the reopening notice was issued on 20th April, 1990 after the amended Section 147 was applicable. Original return filed on 29th June, 1987 was revised on 5th October, 1989, along with a letter explaining why the return was being revised. In the letter the assessee had explained and submitted that rent of Rs.1,76,000/- and depreciation of Rs.66,441/- should be allowed in terms of Section 30 and 32 of the Act. This was the reason for revising the return and these facts were specifically brought to the notice of the Assessing Officer who did not, in the original assessment order, make any disallowance or addition on the said account except Rs.91,485/- which was disallowed as submitted in the revised computation. The assessee in support of the revised computation had relied on judgment of Bombay High Court in CIT vs. Chase Bright Steel Ltd. (No. 1) [1989] 177 ITR 124 (Bom.). On behalf of Revenue, it was contended and submitted that the assessment order did not contain or have any discussion on the issue and therefore, there same was rendered without application of mind. It was submitted, r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... matter, entry or claim/deduction is not examined. 24. Distinction between disclosure/declaration of material facts made by the assessee and the effect thereof and the principle of change of opinion is apparent and recognized. Failure to make full and true disclosure of material facts is a precondition which should be satisfied if the reopening is after four years of the end of the assessment year. The explanation stipulates that mere production of books of accounts and other documents, from which the Assessing Officer could have with due diligence inferred facts does not amount to full and true disclosure. Thus in cases of reopening after 4 years as per the proviso, conduct of the assessee and disclosures made by him are relevant. However, when the proviso is not applicable, the said precondition is not applicable. This additional requirement is not to be satisfied when reassessment proceedings are initiated within four years of the end of the assessment year. The sequitor is that when the proviso does not apply, the re-assessment proceedings cannot be declared invalid on the ground that the full and true disclosure of material facts was made. In such cases, re-assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... completed in a time fame. To protect the interests of the Revenue, therefore, such special provisions are made under section 147 of the Act. However, it must be appreciated that an assessment previously framed after scrutiny when reopened, results into considerable hardship to the assessee. The assessment gets reopened not only qua those grounds which are recorded in the reasons, but also with respect to the entire original assessment, of course at the hands of the Revenue. This obviously would lead to considerable hardship and uncertainty. It is precisely for this reason that even while recognizing such powers, in special requirements of the statute, certain safeguards are provided by the statute which are zealously guarded by the courts. Interpreting such statutory provisions courts upon courts have held that an assessment previously framed cannot be reopened on a mere change of opinion. It is stated that the power to reopening cannot be equated with review. 42. Bearing in mind these conflicting interests, if we revert back to central issue in debate, it can hardly be disputed that once the Assessing Officer notices a certain claim made by the assessee in the return filed, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer. 43. We are, therefore, of the opinion that in a situation where the Assessing Officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition. (i) Learned Advocate appearing for the respondents could not deny the admitted factual and legal position that the impugned reassessment proceeding has been initiated and notice under Section 148 of the Act has been issued after the expiry of 4 years from the end of relevant Assessment Year to reopen scrutiny assessment under Section 143 (3) of the Income Tax Act, 1961. (ii) That the assessment sought to be reopened by the Assessing Officer is against the scrutiny assessment on the issue which was already considered and accepted by the then Assessing Officer after being satisfied with the replies by the assessee petitioner on the quarries raised by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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