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TMI Blog2004 (2) TMI 298X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant. 3. That, looking to the facts and in the circumstances of the case, the learned CIT(A) has erred in confirming the charging of interest under ss. 234B and 234C of the IT Act, which was not according to the provisions of law and hence invalid and illegal." 2. Ground No. 1. The brief facts of the case are that originally assessment was completed under s. 143(3) on 8th March, 1999. Later on, it was noticed that assessee had changed its method of valuation of closing stock during the previous year, which was detected from the tax audit report dt. 31st Dec., 1997, which was filed along with the return. Auditors had commented that due to change in method of closing stock, the profits were understated by Rs. 115.20 lakhs approximately. On the basis of this information, AO concluded that income has escaped tax within the meaning of s. 147 and, therefore, a notice under s. 148 was issued on 22nd Feb., 2001. The reassessment was completed by making addition of Rs. 1,15,20,000 on account of undervaluation of closing stock and Rs. 1,79,068 on account of depreciation on computer software which was allowed at 25 per cent instead of 100 per cent as claimed by the assessee. 3. B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly. Learned authorised representative vehemently argued that this amounts to change of opinion which is not permitted even in the amended law in respect of reassessment. He strongly relied on Full Bench decision of Hon ble Delhi High Court in CIT vs. Kelvinator of India Ltd. (2002) 174 CTR (Del)(FB) 617 : (2002) 256 ITR 1 (Del)(FB). He particularly referred to p. 19 where Hon ble Court declined to entertain the contention of Revenue that reassessment was based on information derived from tax audit report. The Court observed that tax audit report had already been submitted by the assessee and, therefore, information was already there which AO must have considered. He contended that in the case before us audit report was already on record and from the fact of disallowance of entertainment expenses on the basis of same audit report, it is clear that such audit report was duly considered by the AO. Thus, it is a clear-cut case of only a change of opinion. He also referred to CBDT Circular No. 549 reported in (1990) 82 CTR (St) 1 : (1990) 182 ITR (St) 1. He referred to para 7.2 of the circular where it is clarified that Board had received number of representations against the omission o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Kerala Agrl. IT Act, 1950 is similar to the provision of s. 147 of IT Act, 1961. In any case, majority of the High Courts have held that reassessment on change of opinion is not valid. As far as decision of Bawa Abhaisingh vs. Dy. CIT is concerned, same has been considered in CIT vs. Kelvinator of India Ltd. by Full Bench of Delhi High Court and has been distinguished by observing that decision of Bawa Abhaisingh vs. Dy. CIT is not an authority for the proposition that a mere change in the opinion would also confer jurisdiction upon the AO to initiate proceedings under s. 147 of the Act. In CIT vs. Kelvinator of India Ltd., Hon ble Full Bench of Delhi High Court has clearly held that mere change of opinion of AO is not a valid ground for reassessment. In that case, assessee had incurred a sum of Rs. 3,33,926 (comprising of rent Rs. 1,76,000, expenses Rs. 91,485 and depreciation Rs. 66,441) towards guest house expenses and the same were not claimed in the original return. Later on, a revised return was filed along with a letter where sum of Rs. 1,76,000 towards rent of guest house and Rs. 66,441 towards depreciation of guest-house was claimed under ss. 30 and 32 of the Act on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f s. 154 of the Act. The said power can be exercised when mistake is apparent. Even a mistake cannot be rectified where it may be a mere possible view or where the issues are debatable. The Tribunal has limited jurisdiction under s. 254(2) of the Act. It is a well-settled principle of law that what cannot be done directly cannot be done indirectly. If the ITO does not possess the power of review, he cannot be permitted to achieve the said object by taking recourse to initiating a proceeding of reassessment. In a case of this nature the Revenue is not without remedy. Sec. 263 of the Act empowers the CIT to review an order which is prejudicial to the Revenue." 6. We also find that in Circular No. 549, dt. 31st Oct., 1989, CBDT has stated in para 7.2 as under: "Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in s. 147. A number of representations were received against the omission of the words 'reason to believe' from s. 147 and their substitution by the 'opinion' of the AO. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of Court rulings in the past and was well settled and its o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment is completed under s. 143(3), a presumption can be raised that such an order has been passed on application of mind. Now, in such circumstances, if AO chooses not to consider the effect of change in method of valuation of closing stock, then he cannot take advantage of his own wrong and support reassessment proceedings. In these circumstances, we are of the considered view that it is merely a case of change in opinion which is not permitted under the law. In these circumstances we set aside the order of learned CIT(A) and allow the ground raised by the assessee. However, we would like to examine the issue on merit also as raised in ground No. 2. 7. Ground No. 2. Learned authorised representative submitted that a sum of Rs. 1,15,20,000 on account of low valuation of closing stock on the basis of comment in the auditors report that profits of the company were understated to that extent was added to the income. AO has ignored all the explanations and submissions given by the assessee. He further contended that it is well settled principle of law that assessee has a right to change the method of accounting including valuation of closing stock if the same was bona fide and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de in the closing stock for this year because same has to be allowed as a credit in the next year s opening stock by way of adjustment. He also relied on CIT vs. Travancore Cochin Chemicals Ltd. (2000) 161 CTR (Ker) 124 : (2000) 243 ITR 284 (Ker), CIT vs. Haryana Minerals Ltd. (1999) 156 CTR (P H) 356 : (2000) 242 ITR 704 (P H), CIT vs. Atul Products Ltd. (2001) 170 CTR (Guj) 371 : (2002) 255 ITR 85 (Guj), CIT vs. Andhra Pradesh Industrial Infrastructure Corpn. (1999) 152 CTR (AP) 5 : (1999) 236 ITR 648 (AP), Chainrup Sampatram vs. CIT (1953) 24 ITR 481 (SC) and CIT vs. Corporation Bank Ltd. (1988) 73 CTR (Kar) 88 : (1988) 174 ITR 616 (Kar). 8. On the other hand, learned Departmental Representative strongly supported the order of CIT(A). He also relied on Mahendra Mills Ltd. vs. Asstt. CIT 1975 CTR (SC) 82 : (1975) 99 ITR 135 (SC), CIT vs. Dum Duma India Ltd. (1994) 117 CTR (Gau) 156 : (1993) 200 ITR 496 (Gau) and Smt. Radhadevi vs. CIT (1998) 150 CTR (All) 55. 9. We have considered the rival submissions carefully and have gone through the relevant material on record as well as judgments cited by the parties. It is settled principle of law that if a bona fide change in method o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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