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TMI Blog2016 (3) TMI 1312X X X X Extracts X X X X X X X X Extracts X X X X ..... 147 is invalid - Decided in favor of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee and profit earned thereof which has been claimed commission as now in question as it was claimed that as it is noted that the land in question is in the adjoining area of Tehsil Palwal and therefore it is a capital asset. The AO passed order u/s 143(3) of the read with Rule 147 taxing 50% of the capital gain on sold as this land as short-term capital gain. During the course of assessment proceedings the report of inspector was also obtained wherein it was stated that the area of distance from the market committee Palwal to the main land is about 11 kms and there are agricultural activities carried upon of the said land in the last 6 to 7 years. The inspector also reported that entire area is an industrial hub and therefore as in question was not used for agricultural purpose on the date when it was sold by the assessee or prior to 3 to 4 years. 4. Aggrieved by this the assessee preferred an appeal before the learned Commissioner of Income-tax (Appeals) challenging the order on the issue of reopening as well as on the merit. The learned Commissioner of Income-tax (Appeals) upheld the action of the reopening of the assessment and dismissed the appeal of the assessee on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y power to the AO for application of his mind and therefore the tangible material has come from the return itself and hence reopening is valid. 9. We have carefully considered the rival contention. The brief facts are already noted that the return of income was filed on 30th March 2007 and it was also processed on 30th March 2007 as per the reasons recorded. Second the reason recorded does not show any material based on which the reopening has been initiated. Further the reasons recorded for reopening as well as the inspector report are not in conformity with each other as the reopening has been made under the assumption with the land in question is falling within the specified number of kilometers, whereas the inspector's report shows that the main land is about 11 kms from the Palwal-Tehsil. Hon'ble Delhi High Court in the case of Orient Craft Ltd 354 ITR 536 has held as under:- "10. We think that the point taken on behalf of the assessee that even an assessment made under section 143(1) of the Act can be reopened under section 147 only subject to fulfilment of the conditions precedent, which include the condition that the Assessing Officer must have "reason to believe&qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment. It is, however, to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. The case at hand is covered by the main provision and not the proviso. So long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under section 143(1) had been issued. The inevitable conclusion is that the High Court has wrongly applied Adani's case [1999] 240 ITR 224 (Guj) which has no appli cation to the case on the facts in view of the conceptual difference between section 143(1) and section 143(3) of the Act." We have searched the judgment in vain for the liberty said to have been given to the Assessing Officer by the above judgment that the finality of an intimation under section 143(1) can be disturbed even by dispensing with the requirement of "reason to believe". On the contrary the observations extracted above reiterate that the intimation can be disturbed by initiating reassessment pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopen. We 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 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 . . . Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in section 147 of the Act. However, on receipt of representations from the companies against omission of the words 'reason to believe', Parliament reintroduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549, dated October 31, 1989 ([1990] 182 ITR (St.) 1, 29), which reads as follows : '7.2 Amendment made by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a pretence. To put it different, it is open to the court to examine the question whether the reasons for the belief have a rational connection or a relevant bearing to the formation of the belief and are not extraneous or irrelevant to the purpose of the sec tion. To this limited extent, the action of the Income-tax Officer instarting proceedings under section 34 of the Act is open to challenge in a court of law (see Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR191 (SC))." 13. In SheoNath Singh v. AAC of I. T. [1971] 82 ITR 147 (SC) the Supreme Court (Hegde J.) observed as under (page 153) : "There can be no manner of doubt that the words 'reason to believe' suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the Income- tax Officer may act on direct or circumstances evidence but not on mere suspicion, gossip or rumour. The Income-tax Officer would be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the section. The court can always examine this aspect though the declaration or sufficienc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power to reassess. But 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." It was also observed that after April 1, 1989, the Assessing Officer has power to reopen provided there is "tangible material" to come to the conclusion that there is escapement of income. This judgment has laid emphasis on two more aspects : that there can be no review of an assessment in the guise of reopening and that a bare review without any tangible material would amount to abuse of the power. 16. Having regard to the judicial interpretation placed upon the expression "reason to believe", and the continued use of that expression right from 1948 till date, we have to understand the meaning of the expression in exactly the same manner in which it has been understood by the courts. The assumption of the Revenue that somehow the words "reason to believe&q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no opportunity to the assessing authority to form an opinion and, therefore, when its finality is sought to be disturbed by issuing a notice under section 148, the proceedings cannot be challenged on the ground of "change of opinion". It was not opined by the Supreme Court that the strict requirements of section 147 can be compromised. On the contrary, from the observations (quoted by us earlier) it would appear clear that the court reiterated that "so long as the ingredients of section 147 are fulfilled" an intimation issued under section 143(1) can be subjected to proceedings for reopening. The court also emphasised that the only requirement for disturbing the finality of an intimation is that the Assessing Officer should have "reason to believe" that income chargeable to tax has escaped assessment. In our opinion, the said expression should apply to an intimation in the same manner and subject to the same interpretation as it would have applied to an assessment made under section 143(3). The argument of the Revenue that an intimation cannot be equated to an assessment, relying upon certain observations of the Supreme Court in Rajesh Jhaveri (supr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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