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TMI Blog2024 (5) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... itted the appeal on the following substantial question of law : "Whether finding of the Tribunal that the assessment involved in this appeal was reopened by the Assessing Officer merely on the basis of change of opinion was perverse or not, having regard to the factual background of the case and in particular the reasons for which the assessment was reopened ?" Facts : 4. Briefly stated facts of the present case are that the original assessment order under Section 143(3) of the Act, 1961 for the Assessment Year 2005-06 was passed by the Assessing Officer which is reproduced below: "1. The assessee company submitted its return of income on 16.11.2004 declaring total income at NIL which was duly processed U/s. 143 (1). The case was selected for scrutiny as per guidelines of C.B.D.T. and notice u/s. 143 (2) was issued on 21.04.2006. Notice u/s. 142 (1) was issued and served upon the assessee on 14.06.2007. The case was represented by Shri Gopal Chandra Biswas, Manager-Finance and a/r of the assessee company. 2. Assessee has debited an amount of Rs. 18,74,034/ in the profit and Loss account. However, the Balance Sheet shows a depreciation of Rs. 3, 00,33,116/- Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), the revenue filed the aforenoted appeal before the ITAT and the respondent assessee filed the afore-noted cross-objection. The ITAT allowed the cross-objection of the respondent assessee and dismissed the appeal of the revenue on account of lack of jurisdiction due to "change of opinion" by the assessing officer for initiating proceedings under Section 147 of the Act, 1961. The ITAT further observed in the impugned order that since cross-objection has been disposed of on the preliminary issue of jurisdiction, therefore, the appeal of the revenue relating to additions/disallowance made in the reassessment order, has become infructuous. Aggrieved with the order of the ITAT, the revenue has filed the present appeal. Submissions 7. Learned counsel for the revenue submits that as per the original assessment order, the respondent assessee has disclosed a net profit of Rs.58,77,595/-, to which, a sum of Rs.18,74,034/- was added on account of disallowance on depreciation and thus the net profit came to Rs.77,41,629/-. The loss carried forward by the assessee from previous year was Rs.2,88,71,747/- and after adjusting the aforesaid net profit, the loss carried forward for the next yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts including profit and loss account,- (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the depreciation, shall be the same as have been adopted for the purpose of preparing such accounts including profit and loss account and laid before the company at its annual general meeting in accordance with the provisions of section 210 of the Companies Act, 1956 (1 of 1956): Provided further that where the company has adopted or adopts the financial year under the Companies Act, 1956 (1 of 1956), which is different from the previous year under this Act,- (i) the accounting policies; (ii) the accounting standards adopted for preparing such accounts including profit and loss account; (iii) the method and rates adopted for calculating the depreciation, shall correspond to the accounting policies, accounting standards and the method and rates for calculating the depreciation which have been adopted for preparing such accounts including profit and loss account for such financial year or part of such financial year falling within the relev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion is nil; or] (iv) the amount of profits eligible for deduction under section 80HHC, computed under clause (a) or clause (b) or clause (c) of sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or (v) the amount of profits eligible for deduction under section 80HHE computed under sub-section (3) or sub-section (3A), as the case may be, of that section, and subject to the conditions specified in that section; or (vi) the amount of profits eligible for deduction under section 80HHF computed under sub-section (3) of that section, and subject to the conditions specified in that section; or (vii) the amount of profits of sick industrial company for the assessment year commencing on and from the assessment year relevant to the previous year in which the said company has become a sick industrial company under sub-section (1) of section 1772 of the Sick Industrial Companies (Special Provisions) Act, 1985 (1 of 1986) and ending with the assessment year during which the entire net worth of such company becomes equal to or exceeds the accumulated losses. Explanation.-For the purposes of this clause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at there was a book profit of Rs.58,67,595/- but the assessing officer has not considered it at all for computation of tax under Section 115JB of the Act, 1961. In other words, there is absolutely no whisper in the assessment order with regard to the tax liability of the respondent assessee under Section 115JB of the Act, 1961 on the admitted facts of the case, resulting in complete non-application of mind and total absence of formation of any opinion with regard to the tax liability of the respondent assessee under Section 115JB of the Act, 1961. 14. Under the circumstances, the assessing officer issued notice to the respondent assessee under Section 147 of the Act, 1961 after recording four reasons for reopening of assessment, which have been reproduced by the ITAT in paragraph 7 of the impugned order. The reason Nos.1 and 2 recorded by the assessing officer relate to the liability of the respondent assessee under Section 115JB of the Act, 1961 and escapement of tax to the tune of Rs.6,11,892/-. The third reason recorded by the assessing officer was that the loss available in the previous year was Rs.40,66,962/- but the carried forward loss has been taken by the assessing office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made w.e.f. 1st April, 1989, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on a mere change of opinion. It was held that the concept of "change of opinion" must be treated as an in-built test to check the abuse of power and hence the Assessing Officer even after the amendments made in the relevant provisions from April 1, 1989 has the power to reopen an assessment provided there is tangible material to come to the conclusion that there was escapement of income from assessment. Applying the ratio laid down by the Hon'ble Supreme Court in the case of Kelvinator of India Limited [supra] and by the Hon'ble jurisdictional High Court in the case of Debashis Moulik -vs.- ACIT (supra), we hold that the reopening of assessment made by the Assessing Officer in the present case was bad in law as the same was based merely on the change of opinion and the assessment completed by him under section 143(3) read with section 147 in pursuance thereof is invalid and the same is liable to be cancelled. We order accordingly and allow the Cross Objection filed by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular assessment year. In other words, such material on which the assessing Authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. If the grounds for formation of "reason to believe" are of an extraneous character, the same would not warrant initiation of proceedings under Section 147 of the Act, 1961. (c) If, there are, in fact, some reasonable grounds for the assessing authority to believe that the whole or any part of income of the assessee has escaped assessment, it can take action under Section 147 of the Act, 1961. If the grounds taken for initiating reassessment proceedings under Section 147 of the Act, 1961 are relevant and have a nexus with the formation of belief regarding escaped assessment, the assessing authority would be clothed with jurisdiction to take action under the section. Whether the grounds are adequate or not is not a matter which would be gone into by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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