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TMI Blog2016 (1) TMI 992X X X X Extracts X X X X X X X X Extracts X X X X ..... have any reason to believe or tangible material to form such an opinion that income chargeable to tax had escaped assessment. Prima facie, the facts appear to be glaring. Whether the assessee will be able to discharge the minimal burden of establishing identity, source and creditworthiness of the depositors is a question not possible to answer without scrutiny. Whether the assessee had started its manufacturing activity and consequently its business operations so as to earn income or not are the issues which cannot be gone into at this stage and must be made part of the reopened assessment to be judged on the basis of evidence which may be brought on record. It is always open for the assessee company to contend before the assessing authority that there has not been over valuation of the allotted shares or that for any legal reasons, in any case, addition cannot be made in the hands of the assessee, despite such glaring facts. These are the issues in the realm of assessment, once it is allowed to be reopened. We are not inclined to terminate the assessment proceedings at this stage on the grounds pressed in service by the petitioners. Decided against the assessee. - Special Civi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imited company at such a huge premium which is even higher than the real worth of the share. In fact a sound investor will never subscribe to the shares of the company with such meager profits at such high premiums. A detailed analysis of the data furnished by the assessee with its return shows that whereas the net worth of the shares issued is ₹ 33/-, the same have been allotted for ₹ 1000/-, i.e. an excess of ₹ 967/-. In my opinion this excess premium amount of ₹ 967/- is unexplained cash credit in the hands of the assessee. Hence I have reasons to believe that income to the extent of ₹ 5,80,20,000/- has escaped assessment in the hands of the assessee for A.Y. 2011-12. I have, therefore, reasons to believe that income /gain chargeable to Tax has escaped assessment for the A.Y. 2011-12. The above income /gain chargeable to tax has escaped assessment by reason of the failure on the part of the above named assessee who failed to disclose fully and truly all material fact necessary for the assessment for the A.Y. 2011- 12 within the meaning of explanation 2(b) of section 147 of the IT Act, 1961. Hence it is a fit case for re-opening the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded by the Assessing Officer in the present case do confirm our apprehension about the harm that a less strict interpretation of the words reason to believe vis- -vis an intimation issued under section 143(1) can cause to the tax regime. There is no whisper in the reasons recorded, of any tangible material which came to the possession of the assessing officer subsequent to the issue of the intimation. It reflects an arbitrary exercise of the power conferred under section 147. 5.1 Counsel also relied on the decision of Division Bench of this Court in case of Hindustan Inks Resins Ltd. Vs. Deputy Commissioner of Income Tax, reported in (2011) 60 DTR 0018, in which referring to the decision of the Supreme Court in case of CIT Vs. Lovely Exports (P) Ltd., reported in 251 ITR, page No.263, when the Court found that the investors were not even found to be bogus, observed that in any case, no addition can be made in hand of the company. 5.2 Counsel also relied on the decision of the Supreme Court in case of Income Tax Officer, I Ward, Distt. VI, Culcutta Ors. Vs. Lakhmani Mewal Das, reported in 103 ITR page No.437, in which the Supreme Court observed that the reason for the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [1996 (217) ITR 597 (SC)]; Raymond Woollen Mills Ltd. v. ITO [ 1999 (236) ITR 34 (SC)]. 17. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such esca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a case, scope for reopening such assessment under section 147 of the Act as compared to an assessment 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income chargeable to tax had escaped assessment. However, as held 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. 9. In case of Orient Craft Ltd. (supra), heavily relied upon by Shri Shah, the Division Bench of Delhi High Court, in the context of reopening of an assessment, which was originally accepted under Section 143(1) of the Act, reiterated that the requirement of 'reason to believe' would apply even in such case and that such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of original assessment record, per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. Expression tangible material does not mean material alien to the original record. 11. In such judgment, the Court noted the decision of 5 Judge Bench of the Delhi High Court in case of Commissioner of Income Tax Vs. Kelvinator of India Ltd., reported in 256 ITR, page No.1, which eventually came to be confirmed by the Supreme Court in case of CIT Vs. Kelvinator of India Ltd., reported in 320 ITR, page No.561. It was noted that even the Delhi High Court had questioned whether Kelvinator judgment of 5 Judge Bench could be read as to requiring some material outside of the record to enable the Assessing Officer to reopen an assessment within four years from the end of relevant assessment year. The issue was referred to Larger Bench in case of CIT Vs. Usha International Ltd., reported in (2012) 21 Taxmann.com, 454. Later on, Delhi High Court Full Bench rendered its decision in case of Commissioner of Income Tax Vs. Usha International Ltd., reported in 348 ITR, page No.485 (Delhi) (Full Bench). The majority opinion referring to the judgment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, it is the case of -change of opinion. When at the first instance, in the original assessment proceedings, no opinion is formed, principle of -change of opinion cannot and does not apply. There is a difference between change of opinion and failure or omission of the Assessing Officer to form an opinion on a subject matter, entry, claim, deduction. When the Assessing Officer fails to examine a subject matter, entry, claim or deduction, he forms no opinion. It is a case of no opinion. 11.1 The majority view thus relying on the decision of the Supreme Court in case of A.L.A. Firm Vs. CIT, reported in 189 ITR, page No.285, observed as under:- The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income-tax Officer subsequent to the original assessment. If the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself, then he would be powerless to start the proceedings for the reassessment. Where, however, the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer has equally discharged his functions in the manner required of him. If he passes an assessment order under section 143(3) of the Act, it hardly matters that he has not recorded his agreement with the assessee on every issue or point; that could be reasonably inferred. 12. Under the circumstances, we are unable to accept the contention of Counsel Shri Shah that the Assessing Officer, when recorded his reason to believe that income chargeable to tax has escaped assessment, could not have relied on the original assessment records and he must have some material outside or extraneous to the records to enable him to form such a belief. Being a case which was originally accepted under Section 143(1) of the Act without scrutiny, the only requirement to be fulfilled for issuing notice for reopening was that the Assessing Officer must have reason to believe that income chargeable to tax had escaped assessment. In this context, we may again revert back to the decision of the Supreme Court in case of Rajesh Jhaveri Stock Brokers P. Ltd. (supra), in which it has been highlighted that the reason to believe does not have to be a final opinion that the additions would certainly be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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