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TMI Blog2012 (8) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellants: Mr B S Soparkar Mrs Swati Soparkar For Respondent: Mrs Mauna M Bhatt JUDGEMENT Per: Harsha Devani: 1. The petitioner in this petition under Article 226 of the Constitution of India has challenged the notice dated 7th January, 2005 issued by the respondent under section 148 of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') reopening the assessment for assessment year 2001-02. 2. The petitioner, a private limited company, filed its return of income for assessment year 2001-02 on 31st October, 2001 declaring total income of Rs.31,039/-. The case of the petitioner came to be taken in scrutiny and an assessment came to be framed under section 143(3)(i) of the Act on 24th February, 2004. Subsequently, by the impugned notice, the Assessing Officer sought to reopen the assessment for the year under consideration. On request made by the petitioner to furnish a copy of the reasons recorded, the Assessing Officer furnished such reasons which read as under:- The assessee company has taken loan of Rs.6 crores and the same was diverted to a group company and interest expenses incurred was of Rs.1.30 crores. As against interest expenses of Rs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recorded to submit that the sole ground for reopening the assessment is in respect of the diversion of interest bearing fund for non-business purpose. Referring to the assessment as originally framed under section 143(3) of the Act, it was pointed out that originally in scrutiny assessment, two issues had been raised one of which was as regards the interest bearing fund having been diverted for non-business purpose. It was submitted that pursuant to the notice issued by the Assessing Officer under section 143(2) of the Act, the petitioner had filed detailed submissions. That the Assessing Officer on being satisfied that the explanation given by the petitioner had, by a reasoned order, allowed the claim of the petitioner. It was submitted that while reopening the assessment, the Assessing Officer has not come across any new or additional material for the purpose of forming a belief that income chargeable to tax has escaped assessment. Therefore, the reopening is based on a mere change of opinion which is not permissible in law. In support of the submission, the learned advocate placed reliance upon the decision of the Supreme Court in the case of Commissioner of Income-Tax vs. Kel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .25.77 lakhs only resulting in excess expenditure of Rs.76.34 lakhs. Thus, it is the case of the respondent that there is an under-assessment of income to the tune of Rs.76.34 lakhs. 9. On behalf of the petitioner, it has been contended that the reopening is based upon a mere change of opinion and that the Assessing Officer has not come across any new material on the basis of which he can form a belief that income chargeable to tax has escaped assessment. In this regard, it may be pertinent to refer to the order made by the Assessing Officer under section 143(3) of the Act wherein it has inter alia been recorded thus:- From the Profit and Loss Account of the assessee it is found that the assessee had received interest income of Rs.25,79,071/- as against which the assessee had paid interest and finance charges of Rs.1,30,04,183/-. The assessee was asked to furnish evidences in support of its claim for interest payment and case was fixed for hearing on 30-10-2002. In response to which Mr. Manan Shah, C.A. attended and case was discussed with him. Subsequently notices u/s 143(2) was issued and in response to which the assessee filed its submissions dated 4th February 2004, 9th F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above referred arrangement vis-a-vis the increase in sales in the last 9 months, the assessee find that they cannot reach the expected target of sale and hence it was decided to discontinue the arrangement and therefore, the assessee requested vide its letter dated 28- 12-2000 to the said M/s Nachmo Textiles to return the said temporary advance of Rs.6 crores given to them which the assessee had borrowed. On the basis of the request of the assessee the said M/s Nachmo Textiles had ultimately returned the said temporary advance of Rs.6 crores to the assessee in the month of January 2001 and the assessee in turn returned the borrowings made by the assessee. The assessee had paid interest of Rs.1,02,13,107/- on the said temporary advance of Rs. 6 crores but at the same time the assessee had received a sum of Rs.25,79,071/- from the said M/s Nachmo Textiles, a division of Nachmo Knitex Ltd. on its normal business of trading with the said company. The said amount of receipt of interest is shown under the head Other Income . Therefore ultimately net interest burden of the assessee is only Rs.76,34,036/- which have been claimed as a business expenditure u.s.36(1)(iii). The assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n at a lower rate. 12. From the submissions made by the petitioner during the course of the assessment proceedings as well as the findings recorded by the Assessing Officer, it is apparent that the petitioner had furnished necessary evidence in support of its case that in exchange of the loan at a lower rate to M/s. Nachmo Textiles, it had given trade discounts so as to meet with the deficiency caused by giving loan at a lower rate. Thus, the reasons recorded by the Assessing Officer are apparently contrary to the record of the case. 13. Besides, the contention which is now sought to be raised that the petitioner had not disclosed that Nachmo Textiles is a sister concern is coming out for the first time in the submission made by the learned counsel for the respondent. Such contention is not borne out from the reasons recorded or in the order rejecting objections or even in the affidavit filed by the respondent. Though, in the reasons recorded it has been stated that M/s. Nachmo Textiles is a sister concern of the petitioner company and that by borrowing loan at a higher rate, the petitioner had diverted the same to a sister concern at a lower rate of interest, it is nowhere sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer has no power to review; he has the power to reassess. The reassessment has to be based on fulfilment of certain preconditions and if the concept of change of opinion is removed, then in the garb of reopening the assessment, review would take place. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Under the circumstances, the assumption of jurisdiction by the Assessing Officer under section 147 of the Act is invalid. 14. The above referred decision would be squarely applicable to the facts of the present case. 15. Insofar as the decision of the Bombay High Court in the case of Multiscreen Media Private Limited vs. Union of India and Another (supra) on which reliance has been placed by the learned counsel for the respondent, the same does not carry the case of the respondent any further inasmuch as in the facts of the said case, the Assessing Officer had reopened the assessment on the basis of fresh materi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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