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TMI Blog2016 (6) TMI 1045X X X X Extracts X X X X X X X X Extracts X X X X ..... on CPP whereas, the claim for additional depreciation on CPP was allowed by the AO while framing the assessment under Section 143(3) after conscious consideration of the material on record. It is not even the case of the Revenue that the formation of the belief regarding the escapement of the assessment by the AO is based on any new material coming on record. Apparently, the formation of the belief by the AO regarding escapement of the assessment is based on re-appreciation of the material already available on record at the time of scrutiny assessment which amounts to mere change of opinion. Obviously, in the garb of purported exercise of the power to reassess, the AO cannot be permitted to review his own order or the order passed by his predecessor. Thus, the finding arrived at by the ITAT that the reassessment proceedings initiated by the AO by mere change of opinion is patently illegal, cannot be faulted with. The ITAT having arrived at the categorical finding that reopening of the completed assessment without any fresh material, merely on the basis of change of opinion of the AO, is without jurisdiction and erroneous, the appeal preferred by the Revenue has rightly been dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In these circumstances, the Revenue preferred the appeal against the order of the CIT (A) before the ITAT. The assessee filed Cross Objection questioning the order passed by the CIT(A), confirming the proceedings under Section 147/148 of the Act. It was contended on behalf of the assessee that the assessee has disclosed true and complete material facts before the AO and no new facts had come on record, justifying the action in initiating re-assessment proceedings. It was contended that the re-assessment proceeding initiated by the AO on the basis of change of opinion, is not sustainable in the eyes of law. As noticed hereinabove, the ITAT has allowed the Cross Objection filed on behalf of the assessee, consequently, the appeal preferred by the Revenue questioning the order of the CIT(A) in allowing the additional depreciation, has been dismissed as having become infructuous. Hence, this appeal. 3. Learned counsel appearing for the Revenue contended that the ITAT has ignored the finding recorded by the AO that in the depreciation charts, the assessee never bifurcated amount of additional depreciation allowable on assets during the relevant assessment year and thus, apparently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been underassessed. The second is that he must have also reason to believe that such under-assessment , has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years, from the end of the year in question. The Hon'ble Supreme court further observed that it is duty of every assessee to disclose fully and truly all material facts necessary for his assessment. But, his duty does not extend beyond this. The Hon'ble Supreme Court opined that once all primary facts are before the Assessing Authority, he requires no further assistance by way of disclosure . It is for him t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advice the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. The grounds or reasons which lead to the formation of the belief contemplated by section 147 (a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of the grounds which induce the Income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income-tax Officer did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... must be reasonable or in other words it must be based on reasons which are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any such escapement was by reason of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid. (emphasis supplied) 10. In the matter of ' Sri Krishna Pvt. Ltd., Etc. Vs. Income Tax officer and Others ' (1996) 221 ITR 538, the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vailable on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. (emphasis supplied) 11. In the matter of CIT vs. Kelvinator of India Ltd. , (2010) 320 ITR 561 (SC), the Hon'ble Supreme Court held: However, one needs to give a schematic interpretation to the words 'reason to believe', failing which section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. One must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess, but the reassessment has to be based on fulfilment of certain pre-conditions and if the concept of 'change of opinion' is removed as contended on behalf of the department, then in the garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X
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