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TMI Blog2012 (9) TMI 16X X X X Extracts X X X X X X X X Extracts X X X X ..... tioner filed its return of income on 28.10.2002. On such return, the Assessing Officer sent intimation under section 143(1) of the Act on 16.1.2003. 2.2 It is not in dispute that during the statutory period envisaged under section 143 of the Act, the Assessing Officer issued no notice under section 143(2) of the Act. Such period expired on 1.11.2003. The return of income, thus, remained at the stage of intimation under section 143(1) of the Act and was never taken in scrutiny. 2.3 The Assessing Officer, however, issued the impugned notice on 28.12.2004 seeking to reopen the assessment for the assessment year 2002-03. In response to such notice, the petitioner issued a communication dated 30.12.2004 and besides objecting to the reopening of the assessment, also demanded that the reasons recorded by the Assessing Officer may be supplied. The respondent - Assessing Officer did not supply the reasons. Instead, he issued a notice dated 21.10.2005 under section 143(2) of the Act, stating that there were certain points with respect to return of income for the assessment year 2002- 03 on which he would like to have further information. 2.4 The petitioner thereupon wrote a letter dated 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 147 of the Act. Such objections were disposed of by an order dated 12.1.2006. At that stage, the petitioner filed the present petition and challenged the impugned notice issued by the respondent - Assessing Officer. 3. Appearing for the petitioner, Shri R. K. Patel contended that the notice is invalid. The Assessing Officer has assumed jurisdiction not vested in him. He, therefore, submitted that the notice be quashed. This contention the counsel sought to support on the following four arguments : [1] That the reasons were not recorded by the Assessing Officer before issuing notice. In this respect, counsel pointed out that though immediately upon receipt of notice under section 148 of the Act, the petitioner demanded a copy of the reasons recorded by the Assessing Officer, such reasons were not supplied for a long time. In the meantime, notices were issued under section 143(2) of the Act. [2] The counsel contended that the assessment proceedings cannot be reopened to circumvent time limit for issuing the notice under section 143(2) of the Act. He submitted that time-limit provided in the proviso to section 143(2) of the Act, must be given its due weightage. If the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 ITR 519 (Bom), wherein a Division Bench of the Bombay High Court, also in relation to reopening of assessment which was previously accepted without scrutiny, quashed the notice on the premise that the Assessing Officer could not have any reason to believe that the income chargeable to tax has escaped assessment. 4. On the other hand, learned counsel Shri Manish Bhatt for the Department, opposing the petition, contended as under : [1] In the present case, the Assessing Officer had recorded reasons for reopening of assessment. Such reasons were recorded before issuance of notice. He took us through the documents on record in the original file to contend that though the reasons recorded did not carry a specific date, from the record, it can be ascertained that such reasons were recorded before issuance of notice. [2] In the present case, notice for reopening has been issued after recording proper reasons. The return of the assessee was previously not taken in scrutiny. In that view of the matter, in view of the decision of the Apex Court in case of Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd., reported in (2007) 291 ITR 500 (SC), the revenue would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. Therefore, in my humble submission, the most proper remedial action to set right the audit objections appears to be recourse to section 147. Approval may kindly be accorded.". 7.1 Such approval was granted by the Commissioner under communication dated 16.2.2004. Thereupon, the impugned notice came to be issued. 8. In addition to above materials emerging from the original files, we also have an affidavit in-reply filed on one Shri James Kurian, Assistant Commissioner of Income Tax, Circle-4, Ahmedabad on behalf of the respondent in which he has stated that the reasons were recorded before issuance of notice for reopening. He pointed out that a proposal of reopening of the assessment was sent for approval of the Commissioner and the Commissioner had accorded such approval and thereafter, the notice was issued. 9. From such materials, we are of the opinion that it cannot be stated that the Assessing Officer had not recorded reasons before issuance of the notice. Firstly, the reasons recorded are found on the file immediately after the original notice under section 148 of the Act. Though such reasons are not dated, the note-sheet maintained by the Assessing Officer concerned re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment which was previously framed under section 143(3) of the Act, whether beyond or within four years from the end of the relevant assessment year, is substantially wider. The Apex Court in case of Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd., (supra) noticed such distinction and noted that the scheme of sections 143(1) and 143(3) of the Act is entirely different. It was noticed that after 1.4.1989, the provisions contained in section 143 underwent substantial changes. It was noticed that the intimation under section 143(1) of the Act is given without prejudice to the provisions of section 143(3) of the Act and though technically the intimation would be deemed to be demand notice under section 156, that did not per se preclude the right of the Assessing Officer to proceed under section 143(2)(a) of the Act. The Apex Court observed that the word "intimation" as substituted for assessment carried different concepts. It was observed that while making an assessment, the Assessing Officer is free to make any addition after granting an opportunity to the assessee. The Apex Court observed that, "It may be noted above that under the first proviso to the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stressed on the expression "reason to believe", observing that the Court has to give a schematic interpretation to such words, failing which section 147 would give arbitrary powers to the Assessing Officer to reopen the assessments on the basis of mere change of opinion. On that basis, the Apex Court concluded that even in the case of assessment which is sought to be reopened within a period of four years from the end of relevant assessment year, the concept of change of opinion is not given a gobye. It was observed that, "Hence, after 1.4.1989, the Assessing Officer has power to reopen, provided that there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief.". The Apex Court noticed that previously, the parliament had introduced the expression "opinion" under section 147 of the Act, however, on receipt of representations from various quarters, the same was substituted as was originally used to "reason to believe". 15. In case of Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd., (supra), the Apex Court observed that phrase "reason to believe" me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the Apex Court in the case of Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd., (supra) and several other decisions, such reason to believe need not necessarily be a firm final decision of the Assessing Officer. 17. If we accept such proposition, the petitioner's apprehension that the Assessing Officer would arbitrarily exercise powers under section 147 of the Act to circumvent the scrutiny proceedings which could not be framed in view of notice under section 143(2) having become time barred, would be taken care of. To reiterate, even for reopening of an assessment which was accepted previously under section 143(1) of the Act without scrutiny, the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment. 18. Reverting to the facts of the present case, we notice that in two out of four reasons recorded by the Assessing Officer for reopening the assessment, he stated that he need to verify the claims. In the second ground, he had recorded that admissibility of the bad debts written off required to be verified. In the fourth ground also, he had recorded that admissibility of royalty claim was required to be ..... 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