TMI Blog2005 (3) TMI 388X X X X Extracts X X X X X X X X Extracts X X X X ..... dquarter and controlling office at Jaipur. The nature of lottery business carried on by the assessee in assessment years 1994-95 and 1995-96 in the name of Manish Lottery Agencies, Jaipur was as a stockist/dealer/distributor/wholesaler. As a result of ban for the lottery business in Rajasthan, the assessee did not carry on the said business from 28-3-1995 onwards at Jaipur. The business in the name of Ravi Ajmera, Delhi and Ravi Ajmera, Pune is in the nature of sole distributor/super stockist/organizer. Assessee had filed the returns of income for the respective assessment years. For the assessment year 1995-96, return of income was filed on 31-10-1995 declaring income of Rs. 2,44,85,735. This return was revised on 12-4-1996 declaring income of Rs. 2,44,65,460. Assessment was completed by the Assessing Officer under section 143(3) on 23-3-1998 at income of Rs. 2,46,12,260. Subsequently, the Assessing Officer has issued notice under section 148 on 22-3-2002 by recording the following reasons:- (1) Prize winning ticket amount reflected in the balance sheet on the current asset side not taken to the profit loss account by the assessee. (2) Valuation of closing stock - the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Assessee has shown advance sales of Rs. 1,91,84,860 in the liability side of M/s. Ravi Ajmera, Delhi. Similarly, in the balance sheet of M/s. Ravi Ajmera, Pune, advance sales of Rs. 80,72,730 in the liability side and advance purchases of Rs. 81,60,812 in the asset side of the balance sheet has been shown. The sustaining an addition of advance sales/advance purchases have not been reflected in the profit and loss account of the respective concerns. Therefore, profit shown has not been shown by the assessee during the year under consideration. The Assessing Officer completed the reassessment at Rs. 3,09,69,730 by estimating the net profit at 3 per cent on turnover after invoking the provisions of section 145(3). 7. On appeal, the CIT(A) has reduced the addition to Rs. 70,56,300. It may be pertinent to mention that the CIT(A) has sustained the addition for the assessment year 1995-96 by applying the net profit rate on advance sales only. 8. For the assessment year 1996-97, the CIT(A) estimated the profit on advance sales at Rs. 15,98,096. He has further made an addition of Rs. 67,28,022 in respect of regular sales by adopting the same rate of profit. Similarly, for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M.J. Makwana, Asstt. CIT [1999] 236 ITR 832 (Guj.) (vii) Krishna Metal Industries v. H.M. Algotar, Asstt. CIT [1997] 225 ITR 853, 856 (Guj.) and (viii) VXL India Ltd. v. Asstt. CIT [1995] 215 ITR 295 (Guj.). 10. The ld. Counsel for the assessee pointed out that for the assessment year 1995-96, a notice under section 148 could be issued by 31-3-2000 if there was escapement of income for any reasons specified under section 147. Since notice under section 148 was issued on 22-3-2002 for the assessment year 1995-96, the conditions provided under proviso to section 147 were to be satisfied for the validity of the notice issue under section 148. It was contended that since there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, notice under section 148 was invalid and bad in law. 11. Even on merits, the revenue, according to the ld. Counsel, was not justified in rejecting the method of accounting regularly employed by the assessee. According to the ld. Counsel, the assessee had followed a recognized method of accounting and, therefore, there was no justification for rejection of the same. It was further contende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reads as under:- "147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereinafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 1996-97 was validly issued for the reasons recorded by the Assessing Officer, which have been reproduced elsewhere in this order. 14. For the assessment years 1995-96 and 1997-98, assessments were made under section 143(3). The Assessing Officer had made assessments after due scrutiny. The assessee had reflected advance sales in the balance sheet and the Assessing Officer had not disturbed the trading results of the assessee after due scrutiny. Since the period of four years had expired, it was not open to the Assessing Officer to issue notice under section 148 unless the income chargeable to tax had escaped assessment by reason of failure on the part of the assessee to make a return under section 139 or in response to notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for assessment for that assessment year. Assessee had disclosed the material facts in the statement of accounts. The view of that Assessing Officer that income of the assessee had escaped assessment may, for argument's sake, be accepted but the escapement, if any, was not by reason of assessee's failure to disclose fully and tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that even according to the Central Board of Direct Taxes a mere change of opinion cannot form the basis for reopening a completed assessment. A statute conferring an arbitrary power may be held to be ultra vires article 14 of the Constitution of India. If two interpretations are possible, the interpretation which upholds constitutionality should be favoured. In the event it is held that by reason of section 147 the Income-tax Officer may exercise his jurisdiction for initiating a proceeding for reassessment only upon a mere change of opinion, the same may be held to be unconstitutional. 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 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, 1872, judicial and official acts have been regularly performed. It be held that an order which has been passed purportedly without application of mind would itself conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould not be reopened on a change of opinion was the same before and after amendment by the Direct Tax Laws (Amendment) Act, 1987, of section 147; and (vi) as the notices were without jurisdiction, the assessee should; not be relegated to the alternative remedy, the Department preferred appeals to the Supreme Court. The Supreme Court saw no reason to differ and dismissed the appeals." 17. From the aforementioned decisions, it becomes abundantly clearly that reopening of assessment is not permissible on change of opinion even under the amended provisions of section 147. Moreover, when the assessment is reopened after the expiry of four years from the end of the assessment year, the escapement of income has got to be by reason of failure of the assessee to file the returns of failure of the assessee to disclose fully and truly all material facts necessary for assessments. In this case, even the Assessing Officer has not alleged that there was any nondisclosure of material facts by the assessee at the time of original assessment. Whether the system of accounted adopted by the assessee is acceptable or not is a question of opinion. While framing the original assessment, as pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Engineering Works (P.) Ltd [1992] 198 ITR 297, when proceedings under section 147 of the Act are initiated, the proceedings are open only qua items of under assessment. The finality of assessment proceedings on other issues remains undisturbed. It makes no difference whether the assessment proceedings have become final on account of framing of an assessment under section 143(3) of the Act or on account of non-issue of a notice under section 143(2) of the Act within the stipulated period. The amendments made in sections 143 and 147 of the Act with effect from April 1, 1989, do not in any manner negate this proposition of law as enunciated by the Supreme Court in the case of CIT v. Sun Engineering Works (P.) Ltd. [1992] 198 ITR 197." 19. In the present case, the issues raised by the Assessing Officer for reopening of assessments are on the basis of original return filed by the assessee. The Assessing Officer had not issued notice under section 143(2) for verification of the return. Thus, the assessment in respect of the return had become final. There was no fresh information available to the Assessing Officer on the basis of which it could be said with some amount of certainty tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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