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TMI Blog2018 (2) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ACA And Shri Vijay Shah, FCA For The Respondent : ShriArindam Bhattacharya, Addl. CIT-SR-DR ORDER PER Waseem Ahmed, Accountant Member:- This appeal by the Revenue and Cross Objection (CO) by the assessee are for the assessment year 2008-09. Both are directed against the order of Commissioner of Income Tax (Appeals)-XII, Kolkata dated 26.09.2014 05.08.2011. Assessment was framed by ITO Ward-11(1), Kolkata u/s 147/143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 30.12.2011. Shri Arindam Bhattacharya, Ld. Departmental Representative represented on behalf of Revenue and Shri Amit Agarwal and Shri Vijay Shah Ld. Authorized Representatives appeared on behalf of assessee. First we take up assessee s CO No.05/Kol/2015 . 2. Assessee in its CO has challenged the initiation of re-assessment proceedings u/s 147 of the Act on the ground that the re-assessment is based on mere change of opinion and it is fresh application of mind to the same set of facts. 3. Briefly stated facts are that assessee is a limited company and engaged in business of merchant banking, underwriting, fund mobilization and project co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that from the provisions of section 147 of the Act, it can be seen that for the purpose of initiating reassessment proceedings the AO should have reasons to believe that the income has escaped assessment. But in the instant case, the reasons recorded by the AO do not form firm belief or finding in this regard that the income has escaped assessment. He stated that the Explanation (2)(b) to Section 147 creates a deeming fiction of income having escaped assessment in cases where an assessment has not been made, the act of taking notice cannot be at arbitrary whim or caprice of the AO but must be based on a reasonable foundation through the sufficiency of the evidence or material. The ld. AR further submitted that there was no fresh/ material/ information / which came to the possession of the AO for initiating the re-assessment proceedings u/s 147 of the Act. In fact the AO after processing the return u/s. 143(1) has applied his mind on the same set of facts / material which were available on record. Thereafter AO changed his opinion from the same set of information and initiated proceedings u/s. 147 of the Act. Ld. AR in support of assessee s claim has relied on the following or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the instant case was available up to 30.09.2009. As the time for issuance of notice u/s 143(2) of the Act was expired, therefore, the AO initiated the re-assessment proceedings u/s. 147 of the Act by issuing notice u/s. 148 of the Act vide dated 28.07.2010. At this juncture we would like to reproduce the provisions of section 147 of the Act which reads as under:- 147 . If the [Assessing] Officer [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disclose fully and truly all material facts necessary for his assessment, for that assessment year A plain look at the above statutory provision makes it clear that the reassessment proceedings u/s. 147 of the Act can be initiated for re-assessment only when Assessing Officer has reasoned to believe that income chargeable to tax has escaped assessment. For holding reason to believe there should be some tangible material available in the hands of the AO that the income has escaped assessment. On perusal of the reasons recorded by the AO for initiation of re-assessment proceedings u/s. 147 of the Act, we find that it was based merely on the financial statements of the assessee which were very much available to the AO before processing the same u/s 143(1) of the Act. The law is well settled that there has to be tangible fresh material in the possession of the AO before initiating the re-assessment proceedings u/s. 147 of the Act. In relation to instant case, there is no ambiguity that there was no fresh material gathered by the AO for initiating the proceedings u/s. 147 of the Act. In holding so, we find guidance and support from the judgment of Hon'ble Delhi High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assumption because of the language employed in section 147; it makes no distinction between an order passed under section 143(3) and the intimation issued under section 143(1). Therefore, it is not permissible to adopt different standards while interpreting the words 'reason to believe' vis- -vis section 143(1) and section 143(3). [Par 13] An assessee in whose case the return was processed under section 143(1) cannot be placed in a more vulnerable position than an assessee in whose case there was a full-fledged scrutiny assessment made under section 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee; he has no choice in the matter. The other consequence, which is somewhat graver, would be that the entire rigorous procedure involved in reopening an assessment and the burden of proving valid reasons to believe could be circumvented by first accepting the return under section 143(1) and thereafter issue notices to reopen the assessment. An interpretation which makes a distinction between the meaning and content of the expression ' reason to believe ' in cases where assessments were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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. [Para 15] Similarly, we also rely on the order of Co-ordinate Bench of this Tribunal in the case of Vesuvius India Ltd. vs. DCIT in ITA No.2138/Kol/2013 dated 03.05.2017. The relevant extract is as under:- 5.10. In view of our aforesaid findings, the change of opinion is explicit for the Asst. Years 2000-01 and 2001-02. For the Asst. Year 2002-03, the necessary ingredients of section 147 of the Act were not fulfilled by the ld. AO. we hold that there is no tangible material available with the ld. AO for reopening the assessment for the Asst. Years 2000-01, 2001-02 and 2002-03 and hence the reassessment proceedings thereon deserves to be quashed in line with the judicial precedents relied upon. Since the reassessment proceedings of the ld. AO are quashed on the preliminary ground of assumption of jurisdiction by the ld. AO for the Asst. Years under a, we reframe in to give our opinion on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he power to reassess, but the reassessment has to be based on fulfilment of certain preconditions 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 Officer. Hence, after 1-4-1989, the Assessing Officer has power to reopen, provided there is ' tangible material ' to come to conclusion that there is escapement of income from assessment. Under the Direct Tax Laws (Amendment) Act, 1987, the Parliament not only deleted the words 'reason to believe' but also inserted the word ' opinion ' in section 147. However, on receipt of representations from the companies against omission of the words ' reason to believe ', the Parliament re-introduced the said expression and deleted the word ' opinion ' on the ground that it would vest arbitrary powers in the Assessing Officer. As in the present case, we find that the AO is unable to discern the link between the tangible material and the formation of the reason ..... X X X X Extracts X X X X X X X X Extracts X X X X
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