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TMI Blog2010 (1) TMI 733X X X X Extracts X X X X X X X X Extracts X X X X ..... ent below:- An amount of Rs.14,65,08,264/- being interest on borrowing was charged to Capital Work in Progress relating to the expansion of certain projects. This amount is being claimed as deduction u/s.36(1)(iii) of the Income Tax Act. In this regard we refer to and rely upon the following decisions:- CIT vs. Alembic Glass Industries Ltd. (Gujarat) (103 ITR 715) Shivakami Mills Ltd. vs. CIT (120 ITR 211) 3. It is also seen that the assessee has claimed administrative expenses of Rs.16,85,30,166/- the reasons as mentioned below:- "The administrative expenses amounting to Rs.16,85,30,166/- incurred by the Engineering and Project Department at the Headquarters Office and the Refinery for the purpose of monitoring and supervision of the execution of the projects which is charged to capital work in progress as Establishment charges is being claimed as deduction from the computation of income. This expenditure is in the nature of routine administrative expenses incurred on day to day functioning of the company and not in the nature of establishing new line of business of the company, hence these expenses are not in the nature of capital expenditure and since these are incurred whol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laimed by the assessee in the statement of income as per the principles of accounting and the present position of law and in view of explanation 8 to sec.43. 7. Therefore, I have reason to believe that the income of Rs.16,85,30,166/- on account of incorrect allowance of administrative expense pertaining to Engineering and Project Department pertaining to capital work in progress as revenue expenditure and income of Rs.14,65,08,254/- on account of incorrect allowance of the interest expenses pertaining to capital work in progress which had to be capitalized and allowed as revenue expenditure, has escaped assessment by allowance of the above amounts and the income has also escaped on non allocation of head office expenses towards capital expenditure which have been allowed as revenue expenditure." 3. The assessment was completed u/s.143(3) r.w.s. 147 on 20.12.2006 by making addition of Rs.14.65 crores towards interest and Rs.16.85 crores towards administrative expenses thereby determining total income at Rs.351.01 crores as against the total income computed as per original order u/s.143(3) on 28.1.2004 at Rs.319.50 crores. The assessee unsuccessfully challenged the initiation of re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld. counsel stated that the subsequent action of the AO in initiating the reassessment proceedings on these two items of deductions amounted to change of opinion. He relied on the judgement of the Hon'ble jurisdictional High Court in the case of Cartini India Limited vs. Addl.CIT and Ors. [(2009) 314 ITR 275 (Bom)] to bolster his submission that the reassessment be held as invalid. 5. Per contra, the learned Departmental Representative strongly supported the impugned order by contending that there is no whisper in the assessment order with reference to these two items and hence it was wrong to claim that there was a change of opinion. He contended that in order to bring a case within the scope of "change of opinion" it was essential that initially there should be formation of opinion. Unless an opinion is formed, the learned Departmental Representative stated that there could be no change. Since there was no formation of opinion by the Assessing Officer in the original assessment on these two items claimed as deduction, the learned Departmental Representative stated that the Assessing Officer was justified in initiating the reassessment proceedings. 6. We have heard the rival su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im of the assessee about these two items of deduction was accepted in the original assessment proceedings. The Hon'ble Delhi High Court in Consolidated Photo and Finvest Ltd. vs. ACIT [(2006) 281 ITR 394 (Delhi)] has held that the principle of change of opinion is applicable only to the circumstances where the A.O. has applied his mind and taken a conscious decision on a particular matter in issue. From this judgment it transpires that in order to be governed by the principle of change of opinion, it is of paramount importance that the assessing authority should initially form an opinion on the issue. If there is no formation of opinion, then resort to the provisions of section 147 cannot be interfered with subject to the relevant provisions. Formation of opinion is a process by which the assessing authority examines all the relevant aspects of a particular issue, raises queries, wherever required and thereafter on consideration of the relevant material before him and on the proper application of mind, reaches a positive conclusion as to the acceptability or otherwise of the assessee's claim. Ordinarily the discussion in the assessment order about a particular issue demonstrates th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the ld. DR on this line of reasoning is accepted that in the absence of any discussion in the assessment order it must invariably be taken as a case of non-application of mind by the AO, then that would require the Assessing Officer to discuss each and every aspect of the assessment in the assessment order whether he agrees with the assessee's claim or not. That would fasten the duty on the AO to take up each and every item of trading, profit and loss and balance sheet for discussion and then record his finding, which obviously cannot be the case. The crux of the matter is that where circumstances indicate positively that the Assessing Officer did conduct proper inquiry on a particular issue and thereafter accepted the assessee's claim, it can be held as the formation of opinion on the acceptability of the assessee's claim, even if there is no discussion in the assessment order on that point. 8. Adverting to the facts of the instant case, we observe the AO, on the basis of Notes to the Computation of income giving justification for the said deductions, was initially of the opinion that these two amounts are not deductible and accordingly required the assessee to explain as to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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