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TMI Blog2018 (4) TMI 1179X X X X Extracts X X X X X X X X Extracts X X X X ..... s, it can be inferred that the AO in the original assessment proceedings has consciously treated the LTCG as exempted income. Thus, in our considered view the initiation of proceedings u/s 147 of the Act on the same set of documents is nothing but mere change of opinion. AO initiated the proceedings u/s 147 after taking the approval from the Ld CIT for issuing notice u/s 148 of the Act. The permission was obtained by the AO on 16-08-2010 for initiating the proceedings u/s 147 of the Act whereas the proceedings u/s 154 of the Act were dropped on 18-08-2010. From the above, it is implied that proceedings were initiated and pending by the AO on the same issue simultaneously u/s 147 and 154 of the Act which is not permitted in the eyes of law. Reassessment proceedings cannot be resorted after realizing that the error cannot be rectified u/s 154 - Decided in favour of assessee. - ITA No.165/Kol/2015 - - - Dated:- 20-4-2018 - Shri N.V.Vasudevan, Judicial Member And Shri Waseem Ahmed, Accountant Member For The Appellant : Shri S.K. Tulsiyan, Advocate For The Respondent : Shri S. Dasagupta, Addl. CIT-DR ORDER PER Waseem Ahmed, Accountant Member:- Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pure case of mere change of opinion. 8. That the Ld. CIT(A)-XXXII, Kolkata n upholding the order passed by the Ld. AO u/s 147/143(3) of the Income Tax Act, 1961 failed to appreciate that the reopening was initiated by the Ld. AO on the basis of Revenue Audit observation as per AO's observation in the remand report. The aforesaid grounds arise out of the appellate order passed by the Ld. CIT(A)- s order passed u/s. 147/143(3) of the Income Tax Act, 1961 disallowing the appellant s claim of exempt LTCG to the tune of ₹ 18,38,241/-, even after the issue was examined during the original assessment u/s. 143(3) of the Income Tax Act, 1961 leading to the impugned reopening being on a change of opinion and on the basis of a Revenue Audit objection and since the first ground of appeal also arises out of the order passed by the Ld. CIT(A)-XXXII, Kolkata on 905/11/2014 and the whole fact leading to the aforesaid grounds being on record which does not require any investigation of fact, the above grounds being the questions of law arising out of the impugned appellate order may be admitted. The ld AR before us submitted that the issue raised by assessee in additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed before him in support of the payment of STT on sale of shares. But the AO observed that the transactions of sale of shares require further verification which was beyond the purview of section 154 of the Act. 6.1 The AO in the meantime initiated proceedings on 22/08/2010 i.e. a day before passing the Order u/s 154 of the Act issued notice u/s 148 of the Act for the reopening of the case for escapement of income. In compliance thereto the assessee raised the objection on the reopening of the case under section 147 of the Act on the ground that it was initiated on the same premise as done u/s 154 of the Act. But the AO rejected the contentions of the assessee and framed the assessment u/s 147/143(3) of the Act after making the addition to the total income of the assessee. 7. Aggrieved assessee carried the matter to the ld. CIT(A). The assessee before the ld. CIT(A) submitted that the AO before the issue of the notice u/s 148 of the Act initiated the proceedings under section 154 of the Act for the rectification of the mistake so as bring the LTCG on sale of shares under the net of tax. The AO of the view that the LTCG was not exempt from tax as the STT was not paid on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ake of law. Mistake apparent from the record is a mistake, which is ex facie borne out from the plain reading of the record of the proceedings as it stands. On the basis of the record of the proceedings it becomes obvious that there is a mistake committed, i.e. incorrect conclusion reached a mistaken conclusion which is not at all warranted from this record. If, however, the conclusion is plausible and may be warranted from the record, then it cannot be said that from the record the mistake is intellectually evident or obvious. If on the existing state of record, permissible discretion is exercised or two view are reasonably possible including the one which is taken, then it cannot be said with the required certainty that there is a mistake in the order which is apparent from the record. 9. On the other hand, the emphasis of the proceedings under section 147 is entirely on the question whether according to the Assessing Officer, income chargeable to tax has escaped assessment for any assessment year irrespective of the question whether there is or not an obvious mistake in the assessment order that he may have passed. In the assessment proceedings under section 147, the Assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess of rectification under section 14. The proceedings under section in 147 for assessing income chargeable to tax that has escaped assessment would very often involve a complete rewriting of the original assessment. Once the Assessing Officer has reason to believe that income has escaped assessment, he is at liberty to reconsider the whole matter, at all events in relation to everything that is material to the assessment of the tax under the head of liability affected. He is at liberty to reconsider the whole question of how he would ascertain the assessable and taxable income of the taxpayer. The function of the Assessing Officer acting under section 147 is not limited as under section 154, merely to rectifying the result which may have been vitiated due to mistake apparent from the record. It would, therefore, follow that in cases of mistake resulting in escapement, which is the area where both the provisions would become relevant, the Assessing Officer will have to consider whether he was required by the nature of escapement to reconsider the question of how he would ascertain and assess income that has escaped assessment and reopen the assessment or if that is not required, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the record, in order to resort to section 147 from reopening the assessment, to record that though the mistake in assessments is not obvious from the record, he still has reason to believe that the said income had escaped assessment warranting reopening of the assessment under section 147. It will not be open to the Assessing Officer to arbitrarily or wantonly resort to the provisions of section 147 where the process of rectification under section 154 fails on merits. (emphasis supplied) The high Court has held that the AO has to have the belief that the mistake cannot be rectified under section 154 of the Act and hence recourse to section 147 of the Act is needed. The present appeal by the assessee is not a case where the mistake could have been rectified under section 154 of the Act. The AO also has not examined the issue u/s. 154 of the Act on merits. Similarly the view of the High Court of Kolkata in the case of Berger Paints India Ltd v. ACIT 2010) 322 ITR 369 (Cal) (supra) is same as in the case of the Gujarat High Court when the court holds; However, if the Assessing Officer is of the view that income has escaped assessment by reason of a mistake apparent f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the decision of Gujarat High Curt in Damodar H Shah v. Asst. CIT [2000] 245 ITR 774 and Calcutta High Curt in Berger Paints India Ltd. v. asstt. CIT [2010] 322 ITR 36 for the same reason is misconceived. 20. The aforesaid judgments do not state that once notice under section 154 of the Act is issued, resort to section 147 is barred or prohibited under the Act. what is highlighted by the Gujarat High Court is the distinction between sections 154 and 147 of the Act. it is further pointed out that if section 154 of the Act is applicable then the Assessing Officer should not arbitrarily and in a wanton manner resort to process of reopening the assessment under section 147 of the Act. this reasoning is contrary and goes against the plea and argument of the petitioner as it accepts the difference in scope and ambit of the said provisions. It has been held that when mistakes are apparent, the Assessing Officer should invoke section 154 of the Act but in cases where mistakes are not apparent form the record, the Assessing Officer can reopen assessments under section 147 of the Act when the preconditions are satisfied . 21. Rectification of a mistake apparent from the record cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n section 14A of the Income-tax ct, 1961. 2. Subject to the above, the special leave petition is dismissed (emphasis supplied) In view of the decision of the Supreme Court above, it is settled that if the preconditions for section 147 of the Act are met, then there is no bar on issuing a notice u/s. 148 of the Act even if the proceedings u/s. 154 of the Act have been dropped by the AO on the same issue. Being aggrieved by the order of Ld. CIT(A) Order, the assessee is in appeal before us. 8. The ld. AR before us filed a paper book comprising of pages 1 to 53 of the PB and submitted that as under: [ Income escaping assessment. 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 re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TCG claimed on them referred in the Reasons Recorded). The same is also evident from the Ld. AO's observations in para 1 page 2 of the Assessment Order passed by him u/s 143(3) of the Income Tax Act, 1961 which reads as: It is seen that the assessee had income from house property, remuneration and interest on capital from partnership firm, capital gain and from other sources. Thus, the assessee had made full and true disclosure of his claim of exempt LTCG u/s 10(38) of the Act and the same was accepted by the Assessing Officer in the order passed by him u/s 143(3) of the Act on 30/11/2009 after examining the claim by applying his mind to the details -submitted by the appellant. Thus, while passing his order u/s 143(3) of the Act on 30/11/2009 the Assessing Officer applied his mind to all the material submitted before him by the assessee and accepted the view canvassed by the appellant with regard to the appellant's claim of exempt LTCG u/s 10(38) of the Act. In fact the appellant's case for the relevant Assessment Year was reopened by the Ld. AO u/s 147 of the Act on the basis of the documents which were already on record before the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such transactions is covered under STT out from the detailed of aforesaid schedule-IV was sown sale of shares of ₹ 17,39,150/- of Lotus Home and ₹ 99,091/- of Shradraj Tradefin Ltd. aggregating of ₹ 18,38,241/- was not covered under STT out of total LTCG of ₹ 23,36,822/-. Hence, the LTCG of ₹ 18,38,241/- was required to be added back to the total income of the assessee as the said amount claimed by the assessee is his exempted income resulting under assessment. Issue notice u/s.148 of the Act for the Assessment Year 2007-08. A plain reading of the above reasons reveals that it was alleged by the AO that the income escaped assessment on account of exemption claimed by the assessee u/s 10(38) of the Act on the sale of shares but the fact is that no STT was paid by the assessee on the sale of shares. However we note that the assessee during the assessment proceedings u/s 143(3) of the Act duly furnished the details of capital gain income. The queries were raised by the AO u/s 142(1) of the Act vide letter dated 16-09-2009. The requisition made by the AO u/s 142(1) of the Act is placed on page 9 of the paper book and detailed as under:- ANNE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he paper book. As such we note that the AO initiated the proceedings u/s 147 of the Act on the basis of the materials which were available before him during the assessment proceedings under section 143(3) of the Act. From the above facts, we find that the AO at the time of original assessment had in his possession all the relevant details regarding the LTCG. Accordingly, we disagree with the view taken by the ld. CIT(A) for validating the initiation of the reassessment proceedings u/s 147 of the Act as valid. In the instance case, the relevant data /information was available before the AO at the time of assessment and it was duly verified. Thus, it can be inferred that the AO in the original assessment proceedings has consciously treated the LTCG as exempted income. Thus, in our considered view the initiation of proceedings u/s 147 of the Act on the same set of documents is nothing but mere change of opinion. In this regard we find support and guidance from the judgments of the Hon ble Supreme Court in the case of CIT vs Kelvinator of India Ltd. Reported in 320 ITR 561 (SC) wherein it has been held as under :- The concept of change of opinion on the part of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground for reassessment. (5) ICICI Prudential Life Insurance Co. Ltd. (2010) 325 ITR 471 (Bom), in the said case, the Hon'ble Bombay High Court held that re-opening of assessment on the same ground in the absence of any tangible material was based on mere change of opinion and therefore is not sustainable. Based on the ratio of judgment decided in the aforesaid cases, it follows that no valid proceeding u/s.147 could be initiated even within a period of four years on mere change of opinion, if all material facts had been disclosed by the assessee and the AO had complete knowledge of all such materials and further, the assessment had also been completed after taking into consideration all such material facts. Therefore, following the above, the conclusion can be drawn in the instant case that in absence of new information or detail being available to the AO, after completion of the original assessment u/s l43(3) of the Act, proceedings initiated u/s.l47 of the Act for the relevant assessment year is not valid. It is clear in the present case of the assessee that the reason to believe is based on non existing material and therefore in absence of tangible materia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in 322 ITR 369(Cal). The relevant extract of the order is reproduced below. If the Assessing Officer is of the view that income has escaped assessment by reason of a mistake apparent from records, and takes recourse to section 154, but finds later, that there is no apparent mistake, then he cannot, in the absence of any other ground on the basis of which he still has reason to believe that the income has escaped assessment, start reassessment proceedings under section 147. In other words, the Assessing Officer cannot again start reassessment proceedings on the basis of the same reasons. However we also note that the ld CIT(A) has heavily relied on the judgment of Hon ble High Court of Delhi in the case of Honda siel Power Products Ltd versus DCIT reported in 340 ITR 53 which has been discussed in the preceding paragraphs. However as per our understanding the issue whether the Revenue can resort to the provisions of section 154 and 147 of the Act simultaneously was not adjudicated as evident from the judgment which is reproduced below : The question; whether reopening is justified when both provisions 154 and 147/148 of the Act are attracted, is not ur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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