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TMI Blog2014 (9) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of the relevant assessment year. Thereby, the provisions of the first proviso to Section 147 of the said Act would be invoked. Along with the notice under Section 148 dated 29.03.2012 the purported reasons for the re-opening were also furnished. The said reasons read as under:- "Reasons for reopening the case u/s 147 of the Income Tax Act, 1961 in the case of M/s Oriental Bank of Commerce- A.Y. 2005-06 Return declaring an income of Rs. 174,45,44,140/- was filed on 29.10.2005. Assessment u/s 143(3) of the IT Act was made on 20.03.2006 at an income of Rs. 664,17,56,340/- and under section 154/154/154/143(3) was made on 28.03.2008 at an income of Rs. 583,65,72,060/- under normal provisions of the IT Act. The scrutiny of assessment revealed that the assessee has failed to disclose following facts in its Computation of Income and Balance Sheet:- (a) The assessee had made a provision of Rs. 4,67,46,051/- on account of "Expenses" in the balance sheet. As the provision made was not an ascertained liability, the same should also have been disallowed and added back to the income of the assessee. The mistake resulted in underassessment of Income of Rs. 4,67,46,051/- involving tax effec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, an addition has been made to the extent of Rs. 453,96,44,854/- on account of the opening balance pertaining to the assessment year 2005-06. The learned counsel for the petitioner drew our attention to paragraphs 3.3.1 and 3.3.2 of the said re-assessment order which read as under:- "3.3.1 In response thereto, the assessee submitted detail of deduction claimed U/s. 36(1)(viia). A perusal of detail shows that the opening balance of deduction U/s. 36(1)(viia) already claimed and allowed to the assessee as at 1/4/2014 is Rs. 453,96,44,854/- {both 10% of rural advances and 7.5% of total income}. A perusal of the details submitted further reveals that aggregate of average advance made by each rural branch of the assessee computed in the manner prescribed in Rule 6ABA is Rs. 1040.56 crore. The total income of the assessee for the assessment year under consideration before making any deduction under section 36(1)(viia) and Chapter VIA is Rs. 303,48,04,587/- 3.3.2 Thus, the amount of deduction to which the assessee is eligible by the provisions of section 36(1)(viia), is worked out as under: (i) 7.5% on Rs. 303,48,04,587, i.e., Rs. 22,76,10,344; and (ii) 10% on Rs. 1040,55,96,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessment Year 2005-06, the bank has claimed deduction of Rs. 104,05,59,600/- towards Aggregate Average Advances pertaining to Rural Branches of the Bank under Section 36(1)(viiia) of the Income Tax Act, 1961. Certificate in this regard from Statutory Auditors of the bank is being enclosed for your kind perusal. Please note this certificate is issued by the auditors taking into consideration the criteria prescribed under Rule 6ABA as is evident from the certificate." 8. Thereafter, the Assessing Officer did not disallow the deduction so claimed. Consequently, it was argued, the fact that the Assessing Officer, through the re-assessment order, had made an addition on this very ground, would straightaway amount to a mere change of opinion, which is not permissible in law. 9. Finally, the learned counsel for the petitioner also submitted that the deduction under Section 36(1)(viia) of the said Act which has been disallowed by virtue of the re-assessment order does not even pertain to the assessment year 2005-06 but relates to earlier assessment years. This also is not permissible, particularly, because it had become time barred by 16.03.2013 when the note sheet entry was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... headwise details of expenses and the provision made thereon." 12. He submitted that though the Assessing Officer recorded his finding rejecting the pleas of the petitioner/assessee, through an inadvertence and by a mistake no addition has been made in the computation given at the end of the assessment order which, according to him, can be rectified under Section 154 of the said Act. The computation given in the assessment order is as under:- "Based upon the above, the income of the assessee is re computed as under: 1. Income as per order U/s. 154, Dt. 31-03-2009 Rs. 267,25,60,863/- 2. Add: disallowance of excess deduction claimed Rs. 453,96,44,854/- U/s. 36(1)(viia) Total Income Rs. 721,22,05,717/- Rounded off to Rs. 721,22,05,720/- Income is assessed at Rs. 721,22,05,720/-/ Penalty proceedings u/s 271(1)(c) with reference to all disallowance/additions discussed above are being initiated separately. Charge interest u/s 234B, 234D, and 244A(c) of I.T. Act as per law. Issue necessary forms." 13. Insofar as the question of charging of interest under Section 234D on the purported excess refund granted to the petitioner/assessee is concerned, Mr Sahni submitted that although the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e provisions of Section 147, particularly, in view of the first proviso thereof wherein one of the pre-conditions is that there must be failure on the part of the assessee to make a full and true disclosure of the material facts which would be necessary for making the assessment. Since there is no failure on the part of the assessee, the provisions of Section 147 could not at all have been invoked after the period of four years from the end of the assessment year. Insofar as the disallowance under Section 36(1)(viia) of the said Act is concerned, the learned counsel for the petitioner reiterated that there was a clear case of change of opinion which, in any event, was not permissible. 16. Now, let us examine the decisions relied upon by the learned counsel for the petitioner. In Ranbaxy Laboratories Ltd.(supra), a Division Bench of this court had agreed with the reasoning of the Bombay High Court in the case of CIT v. Jet Airways (I) Ltd.: (2011) 331 ITR 236 (Bom). In the latter case, the Bombay High Court had observed in the context of proceedings under Sections 147/148 of the said Act that:- "Section 147 has this effect that the Assessing Officer has to assess or reassess the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under Section 148." 18. In Ranbaxy Laboratories Ltd.(supra), which was an appeal under Section 260A of the said Act, the question under consideration was as follows:- "Whether on the facts the Tribunal was right in law in holding that the Assessing Officer had jurisdiction to reassess issues other than the issues in respect of which proceedings were initiated especially when the reasons for the latter ceased to survive?" The facts in that case were that the reassessment proceedings had been initiated on the premise that on account of items such as club fees, gifts and presents and provision for leave encashment, income had escaped assessment. The explanation given by assessee pursuant to the notice under Section 148 was accepted by the Assessing Officer and he did not make any disallowance in respect of these items. However, during the reassessment proceedings the Assessing Officer found that tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra) which was rendered in the context of the concept of "change of opinion". The question before the Supreme Court was - "whether the "concept of change of opinion" stands obliterated with effect from 1st April, 1989, i.e., after substitution of Section 147 of the Income Tax Act, 1961 by the Direct Tax Laws (Amendment) Act, 1987?" The Supreme Court held as under:- "6. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in Section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition has been highlighted in CIT v. DLF Power Ltd. ITA No. 973 of 2011 decided on November 29, 2011 - since reported in [2012] 345 ITR 446 (Delhi) and BLB Limited v. Asst. CIT Writ Petition (Civil) No. 6884 of 2010 decided on December 1, 2011 - since reported in [2012] 343 ITR 129 (Delhi). In the last decision it has been observed (page 135): "The Revenue had the option, but did not take recourse to Section 263 of the Act, in spite of audit objection. Supervisory and revisionary power under Section 263 of the Act is available, if an order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. An erroneous order contrary to law that has caused prejudiced can be correct, when jurisdiction under Section 263 is invoked." 15. Thus where an Assessing Officer incorrectly or erroneously applies law or comes to a wrong conclusion and income chargeable to tax has escaped assessment, resort to Section 263 of the Act is available and should be resorted to. But initiation of reassessment proceedings will be invalid on the ground of change of opinion." 22. Finally, in Wel Intertrade Pvt. Ltd. (supra), a Division Bench of this court analyzed the first pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cific point was taken in reason (a) and it was one of the "reasons" to believe that income had escaped assessment yet, no addition was made. The proposition that by "mistake" or through "inadvertence" the Assessing Officer did not make the addition, cannot be accepted. Reason (a) was one of only two reasons for reopening the assessment. How can it be accepted that the Assessing Officer was so callous or naïve (whichever expression is taken) that, though he found against the assessee yet he did not make any addition in respect of reason (a)? As pointed out in Usha International Ltd.(supra), when an Assessing Officer raises a specific issue in the assessment proceedings and yet does not make any addition in the assessment order, it should be accepted that the Assessing Officer did not find any ground or reason to make the addition. What is stated in paragraph 2 and 2.1 of the reassessment order are mere observations and not the conclusions. The fact remains that no addition was made by the Assessing Officer insofar as reason (a) is concerned. And, it must be taken that the Assessing Officer consciously did not make any addition after examining the entire issue. 24. Coming to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see failing to make a return under Section 139, etc., or by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, for that assessment year." This essential pre-condition is clearly missing in the present case even if we were, for the sake of argument, to assume, which we cannot, that the note-sheet entry of 16.03.2013 was a notice under Section 148 as also the "reasons to believe" rolled into one! 28. As regards the deduction claimed under Section 36(1)(viia) of the said Act to the tune of Rs. 126,81,944/-, the learned counsel for the petitioner has correctly pointed out that the same has been accepted by the Assessing Officer insofar as the assessment year 2005-06 is concerned. This would be evident from paragraph 3.3.2 of the reassessment order which has been extracted in paragraph 4 above. The disallowance of Rs. 453,96,44,854/- in the reassessment order does not pertain to assessment year 2005-06 but to an earlier year which was not the subject-matter of reassessment. This is clearly impermissible in law. This is apart from the fact that reassessment for an earlier year was in any event time-barred and would also ..... 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