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TMI Blog2013 (1) TMI 517X X X X Extracts X X X X X X X X Extracts X X X X ..... be urged that under Section 44 read with Rule 5(a), it would not be open to the Assessing Officer to make an income addition. Moreover, it has been urged that in the past, the same practice had been accepted by the Revenue. These are matters which on merits will be considered by the Assessing Officer and it would be inappropriate for this Court to express any opinion on the merits of issue. Moreover, once the Court has come to the conclusion that even a single ground on the basis of which the assessment is sought to be reopened is valid and within jurisdiction, the notice for reopening of the assessment would have to be upheld. Consequently,though submissions have been urged on the merits of each of the grounds, keeping all rights and contentions of the parties open to be urged before the AO, once the assessment is reopened in exercise of the power conferred by Section 147. The AO has acted within jurisdiction in reopening the assessment - no case for interference under Article 226 of the Constitution is made out - against assessee. - WRIT PETITION NO.502 OF 2012 - - - Dated:- 11-1-2013 - DR.D.Y.CHANDRACHUD AND A.A.SAYED, JJ. Mr.F.V.Irani with Mr.R.Murli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ized on individual assessment/estimate basis as per the accounting practice followed by the company in this regard. Pursuant to the change in accounting policy during the year, the provision for estimated recoveries in respect of claims paid and outstanding for recovery for a period exceeding 3 years as on the Balance Sheet date, the recoveries have been estimated at ₹ 100.00 for each claim instead of individual assessment/estimates as hitherto followed. The change in the policy has the effect of existing provision for estimated recoveries being written off by about ₹ 20 crores to the revenue account and reducing the profit of the year consequently. (emphasis supplied) In view of the above note, the change in the accounting policy resulted in a reduction in the income during the year under consideration by ₹ 20 crores which, however, has remained to be added in the total income leading to short levy of tax; (iii) Paragraph 13 of Schedule 17 of the Notes to the accounts reads as follows: Subsequent to the balance sheet date, approval has been received from the Ministry of Commerce for 1) revision of pay scales w.e.f. 1.8.2002 and consequently, on estimat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction to make an income addition. Grounds (i), (ii) and (v) of the reasons disclosed to the assessee would indicate that the Assessing Officer is proposing to make an income addition which is contrary to the statutory provision; (iii) As regards Ground (i) in respect of an earlier year, the CIT(A) held in favour of the assessee and the Committee on Disputes had not permitted the Commissioner to carry the matter further, which has been accepted by the Revenue; (iv) Even on merits also, there is no reason to believe that income has escaped assessment. In view of the judgment of the Supreme Court in CIT vs. Hindustan Housing and Land Development Trust Ltd.,1 there must be an absolute right on the part of the assessee to receive an amount for income to accrue. In the present case, claims which have been received by the assessee are required to be disbursed to various persons and pending the disbursal, the amount was held in suspense. Income had hence not accrued; (v) As regards Ground (ii), the mere making of a claim does not amount to income in view of the judgment of the Supreme Court in Godhra Electricity Co. Ltd. vs. CIT;2 (vi) As regards Ground (iii), the object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eopened, when he passed the original order of assessment; (iii) By way of illustration, it may be noted that the assessee has admitted in paragraph 6.1 of the Notes forming part of the accounts in Schedule 17 that profit had, as a result of a change in the accounting policy, been reduced in view of the existing provision of estimated recovery being written off by ₹ 20 crores. Yet, no query was raised by the Assessing Officer in the proceedings under Section 143(3); (iv) In the circumstances, for this Court to preempt any enquiry whatsoever would go against the object and purpose of Section 147 and would be impermissible; (v) In respect of each of the grounds for reopening, the Petitioner has sought to make submissions on merits, but this is not the appropriate stage where that can be determined. At this stage, the only issue before the Court is whether the Assessing Officer has reason to believe that income has escaped assessment and not whether it can be conclusively held that the original order of assessment is incorrect. 7. The assessment for Assessment Year 2006-07 is admittedly sought to be reopened within a period of four years from the end of the relevant A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years cannot reopen an assessment merely on the basis of a change of opinion. The Assessing Officer has no power to review an assessment which has been concluded. But where he has tangible material to come to the conclusion that there is an escapement of income from assessment, the power to reopen can be exercised. The expression reason to believe in Section 147 has been construed in the judgment of the Supreme Court in Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers P. Ltd.,4 to mean a cause or justification. However, at the stage when the Assessing Officer reopens an assessment, it is not necessary that the material before the Court should conclusively prove or establish that income has escaped assessment. A reason to believe at the stage of reopening is all that is relevant. This aspect must be emphasized because it clearly emerges from the judgment of Rajesh Jhaveri Stock Brokers: Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word 'reason' in the phrase 'reason to believe' would mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the formation of that belief. A reason to believe is what is relevant not an established fact of the escapement of income. 10. The salient aspect of the case that merits emphasis is that the order of assessment that was passed by the Assessing Officer under Section 143(3) is completely silent in respect of each one of the five points on the basis of which the assessment is sought to be reopened. There is merit in the contention which has been urged on behalf of the Revenue that no query had been raised during the course of the assessment and the assessment order would ex-facie disclose that the Assessing Officer has not applied his mind at all to any of the points on the basis of which the assessment is now sought to be reopened. That there exists tangible material for the Assessing Officer to reopen the assessment in the present case is evident from the record. For instance, as we have noted earlier, in respect of one of the grounds, Ground (ii), the reasons which have been disclosed to the assessee would indicate that reliance has been placed on paragraph 6.1 of the Notes forming part of the accounts in Schedule 17. Paragraph 6.1 posits that an amount of ₹ 27.96 crore ..... X X X X Extracts X X X X X X X X Extracts X X X X
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