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Issues Involved:
1. Whether the Assessing Officer can re-open the assessment after the expiry of 4 years on the ground that income chargeable to tax had escaped assessment. 2. Whether the re-opening of the assessment was justified based on the reasons provided by the Assessing Officer. 3. Whether the notice issued u/s 148 and the subsequent order rejecting the objections were valid. Issue 1: Re-opening of Assessment After 4 Years The short question which arises for consideration in this writ petition is `whether after expiry of 4 years the Assessing Officer can re-open the assessment on the ground that income chargeable to tax had escaped assessment, in spite of the fact that query raised by the Assessing Officer was replied by assessee, and thereafter, the Assessing Officer passed an assessment order u/s 143(3) of the Income Tax Act, 1961. Issue 2: Justification for Re-opening the AssessmentThe reasons for reopening the case u/s 147 of the Act given by the Deputy Commissioner of Income Tax, Surat are as under: "On verification of the balance sheet revealed that following amounts were shown as provision under schedules-E. Current liabilities and provisions being exchange difference debited to profit and loss account on PSCFC loan and PCFC loan. 1. Provisions for exchange difference on PCFC loan Rs. 73,77,337/- 2. Provisions for exchange difference on PSCRC loan Rs. 1,62,26,848/- As the above expense of Rs. 2,36,04,185/- being capital nature i.e. towards repayment/liabilities of loan amount, deduction was not admissible under any of the provisions of the Act arriving at the profit and gain of business. The said expenses required to be disallowed and added to the total income for the purpose of income tax which was not done. This resulted in under assessment of Rs. 2,36,04,185/-, tax effect on which works out to Rs. 1,14,87,690/-. Thus, there is reason to believe that the income chargeable to tax to the extent of Rs. 1,14,87,680/- has escaped assessment for A.Y. 2005-06. Accordingly, this case falls within the purview of provisions of Sec.147 of the I.T. Act. Therefore, Notice U/s.148 is issue in this case for A.Y. 2005-06." Issue 3: Validity of Notice u/s 148 and Subsequent OrderIt is not disputed by learned counsel for the Revenue that the original assessment order is sought to be re-opened after the expiry of period of four years from the end of the relevant assessment order, i.e. 2005-06. From the record it is shown that the provisions for exchange difference on PCFC loan and provisions for exchange difference on PSCFC loan were mentioned in the balance sheet of the petitioner. The Assessing Officer has raised specific queries with regard to the aforesaid two items, which were replied by the assessee along with other necessary evidence. The Assessing Officer had considered the reply to the queries given by the petitioner. If he has not made any mention about the reply in the said assessment order, it will not make the assessment order illegal nor the Court can infer that the income chargeable to that has escaped assessment and the assessee has failed to disclose material facts necessary for assessment. In view of the aforesaid decision, the law is clear that it is not open to the Assessing Officer to change his opinion unless there is some new tangible material available with the Assessing Officer, on the basis of which he has reason to believe that income chargeable to tax has escaped assessment. It is not open to the Assessing Officer to change his opinion so as to review his original assessment order. That is not permissible. So far as the argument of learned counsel for the Revenue that Explanation 1 to section 147 would apply to the facts of this case, and therefore, the Assessing Officer was justified in re-opening the assessment is concerned, we have gone through Explanation 1 to section 147 of the Act, and we find that the argument of learned counsel for the Revenue has no substance. The provision of Explanation 1 cannot apply to the facts of this case as the Assessing Officer has made specific queries from the assessee which were replied by the assessee along with evidence. The reply of the queries given by the assessee had been considered by the Assessing Officer. Merely because of the fact that it has not been mentioned by the Assessing Officer in the original assessment order, it could not be treated to be the income chargeable to tax having escaped assessment and material
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