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TMI Blog2008 (2) TMI 479X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) and the reference was made only after the original order was set aside by CIT vide order under s. 263 whereas in the instant case undisclosed investment in the construction over and above that shown by the assessee being under suspect required reference, so the reference was made during the original assessment proceedings and the reopening of the case was only incidental having regard to the provisions of the IT Act that the case was to be completed within the limitation period irrespective of the receival or not of the valuation report. So the reopening of the case under s. 147 was not a change of opinion but only extension of the original opinion or a technical compliance to a time-barring reference, necessitated due to limitation and was restored to bring the tax due on the undisclosed investment only which is also a guiding principle behind the provisions of the s. 147. Further the merits of the addition have nowhere been discussed giving rise to the fact that it is acceptable. 4. Under the facts and in the circumstances of the case the learned CIT(A) has erred on facts and in law while placing technical reliance on the decision in the case of Smt. Amiya Bala Paul vs. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clinic could not be considered during assessment for asst. yr. 1999-2000. It is found that the investment made in the construction of the clinic is more than Rs. 14 lacs as against Rs. 9,60,000 declared by the assessee. I have, therefore, reason to believe that the difference of Rs. 4,40,000 invested in the clinic has escaped assessment. Issue notice under s. 148 of the IT Act, 1961 for initiating action under s. 147 of the IT Act, 1961." The AO carried out reassessment proceedings and added the difference of Rs. 5,33,000 between two costs of construction, one shown by the assessee and other worked out by the DVO. 5. In appeal the learned CIT(A) annulled the assessment by holding that reopening of assessment was not valid. He relied on the decision of Hon'ble Allahabad High Court in the case of Girdhar Gopal Gulati vs. Union of India Ors. (2004) 188 CTR (All) 532 : (2004) 269 ITR 45 (All). In this regard he observed as under: "I have carefully considered the reply given by the appellant and perused the assessment order. It is an admitted fact that the assessment of the appellant was completed under s. 143(3) on 16th March, 2000 after making necessary enquiries and the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent DVO's report would constitute merely a change of opinion for the AO. But in the present case, the AO has not carried out any enquiry whatsoever. He has simply placed the AVO's report on record which shows that he did not apply his mind on the question of cost of construction and simply placed on record whatever the assessee has submitted. It seems that the AO was awaiting for the DVO's report but as the case seems to be time-barring he did not wait any longer and completed assessment on 16th March, 2000. The DVO's report constitutes information. It is an expert's opinion and, therefore, would be sufficient for invoking the provisions of s. 147/148(1). The learned Departmental Representative submitted that Hon'ble Allahabad High Court itself in Smt. Shashi Jain vs. ITO (1997) 228ITR 682 (All) upheld the reopening of assessment on the basis of DVO's report. The learned Departmental Representative then referred to the decision of Hon'ble Delhi High Court in Consolidated Photo Finvest Ltd. vs. Asstt. CIT (2006) 200 CTR (Del) 433 : (2006) 281 ITR 394 (Del) for the proposition that unless the AO consciously applies his mind and the controversy is examined by him, it could not be sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is. The learned Authorised Representative referred to a large number of decisions in his paper book as under: (1) Bhola Nath Majumdar vs. ITO (1997) 137 CTR (Gau) 198 : (1996) 221 ITR 608 (Gau); (2) Reliance Jute Industries Ltd. vs. ITO (1984) 43 CTR (Cal) 168 : (1984) 150 ITR 643 (Cal); (3) Indica Exports vs. ITO (2006) MTC 938 (All)(Trib); (4) Dy. CIT vs. Dr. Anoop Kumar Wahal (2006) MTC 854 (Lucknow)(Trib): (5) Foramer vs. CIT Anr. (2001) 166 CTR (All) 129 : (2001) 247 ITR 436 (All) affirmed by Supreme Court in CIT Anr. vs. Foramer France (2003) 185 CTR (SC) 512 : (2003) 264 ITR 566 (SC); (6) CIT vs. S.R. Construction (2002) 172 CTR (MP) 458 : (2002) 257 ITR 502 (MP); (7) Kamalam Rajendran vs. IAC (1999) 156 CTR (Mad) 538 : (1999) 237 ITR 299 (Mad); (8) Smt. Uma Devi Jhawar vs. ITO (1996) 218 ITR 573 (Cal); (9) Britannia Industries Ltd. vs. Dy. CIT (2000) 162 CTR (Cal) 152 : (1999) 238 ITR 57 (Cal); (10) ITO vs. Santosh Kumar Dalmia (1994) 121 CTR (Cal) 17 : (1994) 208 ITR 337 (Cal); (11) Girdhar Gopal Gulati vs. Union of India following J.P. Bajpai (HUF) vs. CIT(2004) 188 CTR (All) 527 : (2004) 269 ITR 40 (All); (12) CIT vs. Raj Kumar (1990) 182 ITR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in four years of the assessment year even if the assessee has made a complete disclosure of all relevant facts upon which a correct assessment could have been made, if the AO discovers an error of fact or error of law. 12. Under the present provision of s. 147 the AO has only to show that income chargeable to tax has escaped assessment. For the sake of convenience, we reproduce s. 147 which is existed at present as under: "147. Income escaping assessment-If the AO has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of ss. 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 (hereafter in this section and in ss. 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-s. (3) of s. 143 or this section has been made for the relevant assessment year, no action shall be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that it is a case of mere change of opinion. The concept of change of opinion would be applicable where AO has applied his mind, examined the issue and consciously came to a conclusion as to the taxability of an amount or state of an issue. Where the AO has simply placed AVO's report on record, it could not be said that he had examined it or examined the issue of cost of construction and accepted the valuation shown by AVO. The language used by the AO in his order dt. 16th March, 2000 in this regard is very relevant. The AO clearly writes that he has placed the AVO's report on record. It shows the state of mind of the AO. He has not discussed anything about the report. He has not considered the cost of construction declared therein. He has also not carried out any enquiry into the issue. Placing of AVO's report on record is clear indication that the AO is awaiting for DVO's report to whom he had made a reference before completion of assessment. The learned Authorised Representative also could not point out as to what enquiry the AO had done during the course of original assessment proceedings into the issue of cost of construction. As it appears, AVO's report was submitted by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rected to make a fresh assessment in accordance with the report of the valuation cell. In compliance with the order passed under s. 263, the District Valuation Officer prepared a valuation report. Meanwhile the assessments of the assessee and his brothers for the asst. yrs. 1996-97, 1997-98 and 1999-2000 were completed and the value of investment shown by them was accepted by the assessing authority under 143(3). Subsequently, the AO issued a notice under s. 148 seeking to reassess the assessee, on the basis of the valuation report. On a writ petition: Held, (i) that once an assessment was proposed to be made under s. 143(3) of the Act it is presumed that all the necessary enquiry has been done. The AO cannot issue notice under s. 148 after the assessment has been made unless there is deliberate concealment or there is information that income had escaped assessment. The record showed that for the asst. yr. 1996-97 a detailed enquiry had been held by the assessing authority before making the assessment of the petitioner. The notice issued under s. 148 was passed only on change of opinion and hence it was invalid.-J.P. Bajpai (HUF) vs. CIT (2004) 188 CTR (All) 527 : (2004) ITR 40 ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case. 17. On the other hand, we are of the considered view that the decision of Hon'ble Delhi High Court in Consolidated Photo Finvest Ltd. vs. Asstt. CIT is of great assistance in coming to the conclusion that whether there was a change of opinion or not. We refer to para 19 from that decision as under: "In the light of the authoritative pronouncements of the Supreme Court referred to above, which are binding upon us and the observations made by the High Court of Gujarat with which we find ourselves in respectful agreement, the action initiated by the AO for reopening the assessment cannot be said to be either incompetent or otherwise improper to call for interference by a Writ Court. The AO has in the reasoned order passed by him indicated the basis on which income exigible to tax had in his opinion escaped assessment. The argument that the proposed reopening of assessment was based only upon a change of opinion has not impressed us. The assessment order did not admittedly address itself to the question which the AO proposes to examine in the course of reassessment proceedings. The submission of Mr. Vohra that even when the order of assessment did not record any exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 'change of opinion' are concerned, we are of the view that though the material was available on record, at the time of first assessment, when no conscious consideration of the material is made and a mistake has been committed, it would not, in any case, create an embargo or a ban on the competent officer to exercise powers under the amended s. 147 of the IT Act, 1961, as prima facie, there could not be 'change of opinion' in that factual scenario. It has also not been shown to us on behalf of an assessee, if conscious application of mind is made to the relevant facts and material available or existing at the relevant point of time while making assessment and again a different or divergent view is sought, it would tantamount to 'change of opinion', whereas, in the case of existing material, no conscious attempt has been made, it would tantamount to mistake in not considering the relevant point or proposition and it would not be a 'change of opinion'." 19. The principles that are culled out from these two decisions are that unless the AO consciously applies his mind to an issue or facts before him and forms an opinion thereafter, it could not be a case of change of opinion if he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion report was not considered as information within the meaning of s. 147(b) nor it could form a ground for reason to believe that there was a failure on the part of the assessee. In the present case provisions of s. 147(b) are not applicable under the changed law and so also the proviso to s. 147 would not be applicable as assessment is reopened within four years. In Reliance Jute Industries Ltd.'s case the reference was made under s. 55A which is not the fact in the present case and hence this decision would be of no help to the assessee. In Indica Exports case and in Dr. Anoop Kumar Wahal's case, the provisions of s. 142A were not considered and, therefore, would not be applicable. In Foramer's case it was held that proviso to s. 147 applies. In the present case proviso to s. 147 is not applicable and hence this judgment will also not help the assessee. In S.R. Construction's case, the notice under s. 148 was declared invalid on the ground that there was no failure on the part of the assessee to disclose material facts. As proviso to s. 147 is not applicable this ratio will be of no help to the assessee. In Kamalam Rajendran's case provisions of s. 147(a) had been invoked for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23. Before parting away we may refer to the submission of the learned Authorised Representative for the assessee that his case is covered by the decision of this Bench in ITO vs. Vijeta Education Society. We have gone through that judgment of the Tribunal. It concerned with the reference to valuation cell without rejecting the books of accounts. It was held therein that for reference to valuation cell, rejection of books is necessary under s. 145 and that provision of s. 142(2A) cannot be looked into isolation from s. 145. In the present case, the issue involved is of reopening of the assessment on the basis of DVO's report which is squarely covered by the decision in ITO vs. Balasaheb B. Barbale, Pune Bench and was not the issue for adjudication in Vijeta Education Society's case. Therefore, this argument is rejected. 24. As a result, we hold that the learned CIT(A) was not justified in annulling the assessment. Under the circumstances, the matter is restored back to the file of the learned CIT(A) with the direction that he would examine the case afresh on merits after giving opportunity of being heard to the assessee and also to the AO. 25. As a result, the appeal filed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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