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TMI Blog2014 (1) TMI 1719X X X X Extracts X X X X X X X X Extracts X X X X ..... ceedings u/s 147 after a period of four years is not valid since the case of the assessee falls under explanation 1 of section 147 of the IT Act. 3. Briefly the facts of the case are that assessment was completed by the Assessing Officer after making disallowance u/s 40A(3) of the Act of ₹ 28,80,000/-. The Assessing Officer noticed that the assessee purchased land of 36 acres for development as plots. The land was purchased by making cash payments of ₹ 1.44 crores. For the year under consideration, the land was taken to Balance Sheet towards the assets side without routing through the P L A/c. As per the accounting principles, the land cost purchased should be debited in the P L Account and the unsold i.e. total land should be shown as closing stock in credit side. In the assessee s case, the land (stock-in-trade was directly taken to the balance sheet without routing through P L A/c. Therefore, the Assessing Officer was of the view that this can be construed that the cost of land was deemed to have been debited to the P L A/c and then taken to the balance sheet as closing stock. Hence, the Assessing Officer held that as per the provisions of section 40A(3) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d into non-agricultural use. The same was not debited to the profit and loss account. No income was derived by trading in of the said land. Therefore, the provisions of section 40A(3) have no application. 6. Aggrieved, the revenue is in appeal before us. 7. We have heard the arguments of both the parties, perused the record and have gone through the orders of the revenue authorities. We find that the issue of reopening of assessment, has been exhaustively dealt by the Hon ble Delhi High Court in the case of CIT Vs. Usha International Ltd., vide ITA No. 2026/2010 judgement dated 21st September, 2012, wherein the relevant findings of the Hon ble High Court as follows: ++ for reopening an assessment made u/s 143(3) of the Act, the following conditions are required to be satisfied:- (i) The Assessing Officer must form a tentative or prima facie opinion on the basis of material that there is under-assessment or escapement of income; (ii) He must record the prima facie opinion into writing; (iii) The opinion formed is subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion. (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s decided in favour of the assesse e . Reassessment proceedings in the said cases will be hit by principle of 'change of opinion'. (3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situ ations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons; ++ in the second and third situation, the Revenue is not without remedy. In case the assessment order is erroneous and prejudicial to the interest of the Revenue, they are entitled to and can invoke power u/s 263 of the Act. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bjective opinion formed by the Assessing Officer regar d ing escapement of income. At the same time, it is not the requirement that the Assessing Officer should have finally ascertained escapement of income by recording conclusive findings. The final ascertainment takes place when the final or reassessment order is passed. It is enough if the Assessing Officer can show tentatively or prima facie on the basis of the reasons recorded and with reference to the documents available on record that income has escaped assessment; ++ the Full Bench of Delhi High Court in Kelvinator of India Ltd. rejected the submission that reassessment proceedings would be justified if the assessment order is silent or does not record reasons or analysis of material on record. This, the Revenue had propounded, would show non application of mind by the assessing officer. It was held that the said submission was fallacious. Full Bench explained that when an assessment order was passed u/s 143(3), a presumption could be raised that the order was passed after application of mind. Reference was made to clause (e) to Section 114 of the Indian Evidence Act, 1872. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not to be satisfied when re-assessment proceedings are initiated within four years of the end of the assessment year. The sequitor is that when the proviso does not apply, the re-assessment proceedings cannot be declared invalid on the ground that the full and true disclosure of material facts was made. In such cases, re-assessment proceedings can be declared invalid when there is a change of opinion. As a matter of abundant caution we clarify that failure to state true and correct facts can vitiate and make the principle of change of opinion inapplicable. This does not require reference to and the proviso is not invoked. The difference is this; when proviso applies the condition stated therein must be satisfied and in other cases it is not a prerequisite or condition precedent but the defence/plea of change of opinion shall not be available and will be rejected; ++ if a subject matter, entry or claim/deduction is not examined by an Assessing Officer, it cannot be presumed that he must have examined the claim/deduction or the entry, and therefore, it is the case of 'change of opinion'. When at the first instance, in the original assessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gment but there is no scope of presumption when facts are known. A presumption can be drawn only from facts and not from other presumptions b y a process of probable and logical reasoning . Presumption of facts u/s 114 is rebuttable. The presumption raised under illustration (e) to Section 114 of the Evidence Act, means that when official act is proved to have been done, it will be presumed to have been regularly done but it does not raise any presumption that an act was done for which there is no evidence or proof. The presumption cannot be applied to defend the conclusion on merits; ++ the assessee had submitted that the reference should be declined and not answered in view of doctrine of merger as the decision of the Full Bench of this Court in the case of Kelvinator of India Ltd. has merged and was approved by the Supreme Court. The Supreme Court in their decision in Kelvinator of India had examined the question whether 'change of opinion' can justify reopening of assessing. The Supreme Court has not stated or made any observation with reference to Section 114 of the Evidence Act. The doctrine of merger, if applied, would require that we acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, there must be some new facts which come to light in the course of assessment for the subsequent assessment year which emerge in the order of the assessment. Otherwise, a mere change of opinion on the part of the Assessing Officer in the course of assessment for a subsequent assessment year would not by itself legitimise reopening of assessment for an earlier year. The point we make it clear herein is that whether in the course of assessment proceedings for subsequent year certain additional information is obtained by the Revenue which was not available to it in the course of assessment for an earlier year, that may legitimately be utilised as a ground for reopening of assessment of the earlier year. Whether the reopening has taken place within four years that may legitimately give rise to an inference of escapement of income. The new information which has come to the knowledge of the Revenue, therefore, constitutes tangible material. If there is a fresh material that that would not preclude the Assessing Officer to reopen the assessment for an earlier year on the basis of fresh material which has come to light in the course of assessment for a subsequent assessment year. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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