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TMI Blog2011 (3) TMI 718X X X X Extracts X X X X X X X X Extracts X X X X ..... rder dated 13-10-2004, allowed the said appeal of the assessee partly. Against the order of the learned CIT(A), both the department and the assessee preferred their appeals before the tribunal and when the said appeals were pending with the Tribunal, the Assessing Officer noticed from the assessment records that in his statement recorded under section 131, Shri Swarn Singh Mor, Director of M/s. Peero Export Ltd., had expressed his ignorance about the transaction involving receipt of loan by the assessee from M/s. Peero Export Ltd., which was shown as outstanding in the books of the assessee as on 31-3-2000 at Rs. 3,57,29,647. According to the Assessing Officer, the amount of the said loan was liable to be added to the total income of the assessee in view of the statement of Shri Swarn Singh Mor and since it was not done in the original assessment, he entertained a belief that there was escapement of income of the assessee to that extent. He, therefore, reopened the assessment for the year under consideration by issuing notice under section 148 after recording the reasons. In reply, a letter dated 6-12-2004 was filed by the assessee stating therein that the return filed by him origi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) in the absence of any new material coming to his possession and on the same set of facts was based merely on a change of opinion which is not permissible. It was pointed out that there was no new information received by the Assessing Officer after completion of original assessment to justify the reopening of the assessment. It was also submitted that there was no clear inference of escapement of income in the reasons recorded by the Assessing Officer and the assessment was reopened by the Assessing Officer just to verify whether it was a case of diversion of funds. Relying on the various judicial pronouncements, it was contended by the assessee that the reasons to believe under section 147 must be held in good faith and should have rational conclusion and relevant bearings on the formation of the belief of the Assessing Officer about the escapement of income. The submissions made by the assessee were forwarded by the learned CIT(A) to the Assessing Officer calling for his comments thereon. The Assessing Officer submitted a remand report dated 2-2-2007 to the learned CIT(A) offering his comments therein. The said report was made available by the learned CIT(A) to the assessee f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liminary issue challenging the validity of assessment made by the Assessing Officer under section 143(3)/147 on the ground that initiation of re-assessment proceeding itself was bad in law. 7. The learned counsel for the assessee invited our attention to the copy of the reasons recorded placed at page 29 of his paper book and submitted that the assessment originally completed under section 143(3) was reopened by the Assessing Officer on the basis of the statement of Shri Swarn Singh Mor, showing ignorance of relevant loan transaction of his company with the assessee company. He submitted that this statement was available with the Assessing Officer even when the assessment was originally completed under section143(3) and there was nothing new which had come to the possession of the Assessing Officer after the completion of the original assessment to justify the reopening. He invited our attention to the copy of the assessment order originally passed by the Assessing Officer placed at page Nos. 1 to 9 of his paper book and pointed out that the relevant loan transactions were duly examined by the Assessing Officer in the light of the statement of Shri Swarn Singh Mor. He contended th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther submitted that even though the statement of Shri Swarn Singh Mor, was available with the Assessing Officer when he completed the assessment originally under section 143(3), the said evidence giving rise to the doubt about the genuineness of the relevant loan transaction was not taken into consideration by the Assessing Officer. He submitted that such non-consideration by the Assessing Officer had resulted in under-statement of total income of the assessee and there was escapement of income to that extent, as rightly held by the learned CIT(A). In support of this contention, he strongly relied on the decision of the Hon' ble Supreme Court in the case of Kalyanji Mavji & Co. v. CIT [1976] 102 ITR 287. He submitted that after taking into consideration its earlier decisions, the Hon'ble Apex Court has laid down certain categories of cases where the provisions of section 34(1)(b) of 1922 Act, which are analogous to the provisions of section 147 of 1961 Act, are applicable and one of such categories is where the information may be obtained even from the record of the original assessment from investigation of a material on record, or the facts disclosed thereby or from other enquiry ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Allana Cold Storage Ltd. v. ITO [2006] 287 ITR 1 (Bom.) and IOT Infrastructure & Energy Services Ltd. v. Asstt. CIT [2010] 329 ITR 547 (Bom). 11. In the rejoinder, the learned counsel for the assessee submitted that in all the cases cited by the learned Departmental Representative, the contention was raised by the assessee regarding non-consideration of their objections to the reopening by the Assessing Officer in the form of writ petitions filed before the Hon'ble High Courts when the reassessment proceedings were still pending. He contended that in these facts and circumstances, the Assessing Officer was directed by Their Lordships to first consider and dispose of the objections of the assessee to the reopening and then complete the re-assessment. He submitted that in the case of the assessee, reassessment, however, has been completed by the Assessing Officer without considering and disposing of the objections raised by the assessee to the reopening during the course of the re-assessment proceedings. He contended that the facts involved in the case of the assessee are therefore different from the facts involved in the cases relied upon by the learned Departmental Representati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) read with section 147 has been challenged by the learned counsel for the assessee mainly on the ground that initiation of reassessment proceedings itself was bad in law being based on a mere change of opinion as there was no new material or information which had come to the possession of the Assessing Officer after completion of original assessment under section 143(3). In support of this contention, he has relied, inter alia, on the decision of the Hon'ble Bombay high Court in the case of Asian Paints Ltd. (supra) and that of the Hon'ble Delhi High Court in the case of Kelvinator of India Ltd. (supra). The learned Departmental Representative, on the other hand, has strongly supported the impugned order of the learned CIT(A) upholding the validity of the assessment made by the Assessing Officer under section 143(3) read with section 147 mainly relying on the decision of the Hon'ble Supreme Court in the case of Kalyanji Mavji & Co. (supra). He has contended that the material evidence in the form of statement of Shri Swarn Singh Mor was sufficient to show that the loan amount taken by the assessee from M/s. Peero Exports Ltd., was liable to be added to the total income of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cision of the Hon'ble Delhi High Court in the case of Kelvinator of India Ltd. (supra). The learned Departmental Representative, on the other hand, has relied on the decision of the Hon'ble Supreme Court in the case of Kalyanji Mavji & Co., (supra). In support of the revenue's case that the reopening made by the Assessing Officer on the basis of information available on the record of the original assessment was in accordance with law. In the said decision, it was held by the Hon'ble Supreme Court that the provisions of section 34(1)(b) of the 1922 Act which are analogous to the provisions of section 147 would be applicable to the following categories of cases: "(1) Where the information is as to the true and correct state of the law derived from relevant judicial decisions: (2) where in the original assessment the income liable to tax has escaped assessment due to oversight, inadvertence or a mistake committed by the Income-tax Officer. This is obviously based on the principle that the taxpayer would not be allowed to take advantage of an oversight or mistake committed by the taxing authority; (3) where the information is derived from an external so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the law has since taken a different course. Any observations in Kalyanji Mavji & Co. v. CIT [1976] 102 ITR 287 (SC) suggesting the contrary do not, we say with respect lay down the correct law." 18. As is clearly evident from the relevant observations of the Larger Bench of the Hon'ble Supreme Court highlighted above, the proposition laid down in the case of Kalyanji Mavji & Co. Ltd. (supra) that "if on reappraising material considered by him during the original assessment, the ITO discovers that he has committed an error in consequence of which the income has escaped assessment, it is open to him to reopen the assessment", has been found by the Larger Bench of the Supreme Court as stated TOO widely and travels farther than the statute warrants and as opined very categorically by the Larger Bench of the Hon'ble Supreme Court an error discovered on a re-consideration of the same material (and no more) does not give the Assessing Officer the power to reopen the assessment. It was held by the Larger Bench that this was the view taken by the Court in the earlier judgments and the law has not taken a different course since then. It was held by the Larger Bench that the observation rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at a later point of time under section 147 of the Act unless any information comes to his possession from an extraneous sources. While upholding the decision of the Full Bench of the Hon'ble Delhi High Court in the case of Kelvinator of India Ltd. (supra), the Hon'ble Supreme has held that the concept of "change of opinion" on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the amendment made by the Direct Tax Laws (Amendment) Act, 1987 and 1989 and even after the said amendment the Assessing Officer cannot open an assessment on 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. 21. As already noted, the initiation of assessment proceedings in the present case was based on statement of Shri Swarn Singh Mor, which was available on record when the assessment came to be made originally under section 143(3) and there was no new material or information which had come to the possession of the Assessing Officer after the completion of the original assessment to justify the reopening. The reopening thus was based merely on a fresh application of mind by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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