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TMI Blog2020 (2) TMI 941X X X X Extracts X X X X X X X X Extracts X X X X ..... believe does not mean purely subjective satisfaction of the Assessing Officer. The belief must be held in good faith. It cannot be merely pretence. Again, the belief must be of an honest and reasonable person based upon reasonable grounds. AO may act upon direct or circumstantial evidence, but his belief must not be based on mere suspicion, gossip or rumors. AO would be acting without jurisdiction, if the reasons for his belief are not material or relevant. There should be nexus between the information coming into possession of the AO and his belief on the basis of such information that income of the Assessee chargeable to tax has escaped assessment. Therefore, we note that it is a case of change of opinion and hence we quash the reassessment proceedings. - Decided in favour of assessee. - ITA No.444/ASR/2012 - - - Dated:- 18-2-2020 - Shri N.K. Choudhry, JM And Dr. A.L. Saini, AM For the Appellant : Sh. Padam Bahl, CA. For the Respondent : Sh. Charan Dass, DR. ORDER PER DR. A.L. SAINI: The captioned appeal filed by the assessee, pertaining to assessment year 2004- 05, is directed against the order passed by the Commissioner of Income Tax (Appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act on 24.3.2008 after recording the reasons. 4. In response to the said notice, the assessee filed return of income on 13.5.2008 declaring total income at ₹ 3723248/- wherein the assessee downwardly revised its claim of deduction u/s. 80HHC. Notices u/s. 143(2) 142 of the Income tax Act were issued by AO on 12.6.2008 along with a show cause letter which is reproduced as below: Please refer to the return filed on 13-05-2008 for A. Y 2004-05 in response to notice u/s 148. In this connection you are requested to show cause as to why deduction u/s 80HHC 80IB claimed in your return filed on 31-10-2004 for A.Y 2004-05 should not be disallowed on the following grounds:- You are showing a loss under Profits of business and the same had been ignored for the purpose of deduction u/s 80HHC. The deduction u/s.80HHC was calculated on 90% of export incentives in contravention of 5th proviso of Section 80HHC (3), as per which, loss of ₹ 5151926/- was to be set off against the amount which bears to 90% of the export incentives, the same proportion as export turnover bears to total turnover of business carried on by you. It was further noticed that you had n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me set of facts based on Audit objections . It is submitted that such a change of opinion is not permissible under the law. The reopening of assessment U/s 147 therefore bad in law and is illegal. 7. Thereafter ld. AO discussed the case with Counsel of the assessee and it was pointed out to the counsel that the reopening was valid. Moreover, the Assessing Officer can reopen a case within four years if he has reason to believe that income has escaped assessment even if there has been complete disclosure of all relevant facts by the assessee. The question of 'change of opinion does not arise.Having gone through the reply of the assessee the AO disallowed the claim of the assessee u/s 80IB and u/s 80HHC of the Act and accordingly the AO denied the claim of deduction u/s 80IB of the Act to the tune of _25,05,619/-. The AO also denied the claim of deduction u/s 80HHC of the Act to the tune of _37,98,609/-. 8. Aggrieved by the order of the AO the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the action of the AO observing the following: 6. I have carefully considered the appellant s written submissions furnished from time to time ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the I.T.Act,1961. -As per reasons recorded, the A.O. has formulated her independent opinion by applying her mind on the material and information available on record and lying in her possession that income has escaped for failure on the part of the appellant to disclose fully and truly facts for determining its actual 'assessable income, by making wrong deductions claimed u/s. 80IB and 80HHC of the I.T Act. 1961 which required to be withdrawn. Showing utmost regard to the case laws relied upon by the ld. A.R. for the appellant, but in my considered opinion, these are of little help to the appellant, having any direct bearing and being quite distinguishable to the peculiar facts circumstances of the present case. Accordingly, by confirming the AO s action of reopening the assessment u/s.147 and by negating the appellant s assertions, appellant s both grounds of appeal No. 1 6 are hereby rejected being without substance and not sustainable in the eye of law. The appellant thus fails on both the above grounds of appeal No. 1 6 and by negating the appellant s assertions, appellant s both grounds of appeal No. 1 6 are hereby rejected being without substance and not sustainabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y him on dated 24.03.2008 (vide paper book page 8) which reads as follows: Whereas I have reason to believe that your income/the income of ₹ 37.64.228 in respect of which you are assessable/chargeable to tax for the assessment year 2004-05 has escaped assessment within the meaning of section 147 of the Income-tax Act, 1961. I, therefore, propose to assess/re-assess the income/recomputed loss/depreciation allowance for the said assessment year and I hereby require you to deliver to me within 30 days from the date of service of this notice, a return in the prescribed form of your income/the income of in respect of which you are assessable for the said assessment year. It is abundantly clear that the Assessing Officer issued notice dated 24.03.2008 u/s 147/148 of Income Tax Act 1961, as mentioned above, to reassess income of ₹ 37,64,228/- only. 13. Subsequently, the assessing officer recorded another reasons and communicated to the assessee, (at Page 9 of the paper book), which are reproduced below: The assessee filed return of income declaring an income of ₹ 2203158/-. The same was assessed u/s. 143(3) vide order dated 29.12.2006 on the retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer has not applied his mind while recording reasons. The ld Counsel submitted before us that the reopening has been made on the basis of Audit objection, that is audit objection on law and not on facts. (vide Audit objections at pages 3 to 7 of Paper Book). It is submitted that there is no independent opinion on the part of the A.O. to reopen the case, therefore reopening is not sustainable in law. 14. We note that the Assessing Officer who passed the original assessment u/s 143(3) had examined the claims of the assessee us/ 80HHC 80IB and had allowed the same. The Trading and Profit Loss Account, Balance Sheet, Audit Reports were all part of informationon record. The deductions u/s 80HHC and 80IB were based on Audit Reports of Chartered Accountants. ( vide page Pages 10 to 53 of the Paper Book and Pages 79 to 84 of Paper Book II).It is therefore submitted by ld Counsel that no new information has come into the possession of the A.O now. It is merely a case of change of opinion. Even this change of opinion is not independent opinion of the Assessing Officer but is based on Audit objections raised by external Audit Party. The Assessing Officer had disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olds reasons to believe and change of opinion does not confer jurisdiction to reassess. In the assessee`s case there is no any tangible material/new material to reopen the assessment. (iv).Reasons recorded must show application of mind by the AO. There is no application of mind by AO, as the AO has issued two times the reasons of reopening , as noted above. In CIT vs. Kelvinator of India Ltd. 256 ITR 1 the Full Bench of the Delhi High Court was considering a case of reopening u/s 147 within 4 years from the end of the assessment year. The Court held that when a regular order of assessment is passed in terms of section 143 (3) of the Act, a presumption can be raised that such an order has been passed on application of mind. It was held that if it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving premium to an authority exercising quasi-judicial function to take benefit of its own wrong. It was held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first held that the section provides that there must exist reasons to believe and not reasons to suspect . The following were the relevant observations: The fact that the words definite information which were there in section 34 of the Act of 1922, at one time before its amendment in 1948, are not there in section 147 of the Act of 1961, would not lead to the conclusion that action can now be taken for reopening assessment even if the information is wholly vague, indefinite, far-fetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence. The powers of the Income-tax Officer to reopen assessment, though wide, are not plenary. The words of the statute are reason to believe and not reason to suspect . The reopening of the assessment after the lapse of many years is a serious matter. The Act, no doubt, contemplates the reopening of the assessment if grounds exist for believing that income of the assessee has escaped assessment. The underlying reason for that is that instances of concealed income or other income escaping assessment in a large number of cases come to the notice of the income-tax authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X
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