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TMI Blog2017 (10) TMI 1529X X X X Extracts X X X X X X X X Extracts X X X X ..... time of original assessment, he failed to take a cognizance of that documents and framed the original assessment. In the present case, the AO observed that on verification of documents, it was seen that the value u/s.50C was fixed by DRO, of property at ₹ 735 lakhs. Hence, it means that the said details were called for by Ao at the time of original assessment. But inadvertently the same were not taken into account while framing the assessment and, therefore, it cannot be said that there is any fresh material to come to different conclusions. The relevant materials are available on record, but the Assessing Officer failed to apply his mind to that material in making the assessment order. In our considered opinion, Assessing Officer cannot recourse to the provisions of section 147 for his own failure to apply his mind to the material which, according to him, is relevant which is available on record - there was no tangible fresh material adverting to the reasons recorded for issuing reopening notice. AO reopened the assessment originally completed by him on the basis of the same records as were available before him while completing the original assessment and there was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 2009-10 and registered as Appeal No. ITA 1698/Chny/2016 before C Bench. 2. The appellant is not aware of the provisions of the Income Tax Act. Hence engaged the services of an Income Tax Practitioner before CIT(A)/Coimbatore. 3. The following legal issues were not raised before the Commissioner of Income Tax (Appeals) because of the mistake of the Counsel. 4. Without prejudice to the grounds taken in the appeal petition, the following are the additional grounds for which prayer for grant of leave under Rule 11 is sought. i. The value assessed for the purpose of stamp duty would not ipso facto substitute the7 actual sale consideration in the absence of admissible evidence. ii. The officer has not referred the matter for the valuation by District Valuation Officer and the CIT(A) is erred in upholding the same. iii. Sec. 50C applies only to Capital asset, being land or building or both, but it cannot be made applicable to any right in the above i.e. the appellant has the right only as power agent; Even if it is taken as capital asset, it is to be assessed in the hands of the owner of the asset and not on the power agents. 5. The issues involved are pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arrived at a conclusion that the so called revised return cannot be treated as a valid return as it was filed beyond stipulated time under the Act. Further it was filed after issue of notice under section 148 and after the reason for reopening was made, known to him. With regard to reclassifying the profit on sale of land under the head Business income in the so called revised return, the AO held this action as an afterthought to avoid application of provisions of section 50. According to the AO, the assessee understood that provisions of 50C would be invoked which would increase tax liability and this apprehension led the assessee to file revised return changing the head of income. Otherwise there is no need for filing a revised return, particularly after issue of notice u/s 148. The AO found that the other joint owner of the property offered the profit on sale of this land under capital gains and the same was also assessed as capital gains. With these observations, the AO refused to accept the invalid revised return and proceeded to assess capital gains by invoking the provisions of the section 50C. The value of the property for Stamp Duty purposes is taken as sale consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd Usha International Ltd., in 210 Taxman 188. Further, ld.A.R relied on the following judgments. i) Dishman Pharmaceuticals And Chemicals Ltd. Vs. DCIT in [2012] 346 ITR 245 (Guj) ii) CIT Vs. Ashley Services Ltd. in [2014] 369 ITR 209 (Mad) iii) Apollo Hospitals Enterprises Ltd. Vs. ACIT in [2006] 287 ITR 25 (Mad) iv) Debashis Moulik Vs. ACIT in [2015] 370 ITR 660 (Cal) v) Bapalal And Co. EXPORTS Vs. JCIT(OSD) in [2007] 289 ITR 37 (Mad) vi) INCOME TAX OFFICER Vs. Shri Haresh Chand Agarwal, HUF in ITA No.282/Agra/2013 vide order dated 20.12.2013 wherein held that:- 5. We have considered rival submissions and material available on record. Hon ble full Bench of Delhi High Court in the case of Kelvinator of India Ltd., 256 ITR 1 by following circular no.549 of CBDT held that on mere change of opinion of AO cannot be a ground for re-assessment and that amendment of sec. 147 w.e.f. 1.4.89 has not altered the position. Hon ble Gujrat High Court in the case of Garden Silk Mills P. Ltd., 237 ITR 668 held that however wide the scope of taking action u/s 148 of IT Act, it does not confirm jurisdiction on change of the interpretation of a particular provision earlier ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has accepted the cost of property as was declared by the assessee. Therefore, on mere change of opinion, the AO was not justified in reopening the assessment. The ld.A.R prayed that re-assessment order to be quashed. 8. Regarding reopening of assessment, the ld.D.R submitted that in the assessee s case, it was reopened within four years from the end of the assessment year. As per the provisions of section 147, it is only in a case where a scrutiny assessment was earlier made, the AO is barred from reopening assessment unless income chargeable to tax escaped ( assessment by reason of failure on the cart of the assessee to disclose fully and truly all material facts necessary for assessment in the original return or during the earlier proceedings. As per Explanation (1) to section 147, merely producing a document from which material evidence could have been gathered by the AO with due diligence, will not necessarily amount to full and true disclosure. The appellant might have produced the sale deed copy during original assessment proceedings but had not put to the notice of the AO that the sale consideration amount as per the document was less than the value fixed for Stamp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sections 148 to 152 are substantially different from the provisions as they stood prior to substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied: firstly, the Assessing Officer must have reason to believe that income, profits or gains chargeable to Income-tax have escaped assessment, and, secondly, he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son to believe', Parlia ment 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 : Page No : 0544 '7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression reason to believe in section 147. A number of representations were received against the omission of the words reason to believe from section 147 and their substitution by the opinion of the Assessing Officer. It was pointed out that the meaning of the expression, reason to believe had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression has reason to believe in place of the words for reasons to be recorded by him in writing, is of the opinion . Other provisions of the new section 147, however ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without jurisdiction if the reason for his belief that the condi tions 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 sufficiency of the reasons for the belief cannot be investigated by the court. 12.1 It was further observed that the reasons themselves cannot be stated to be beliefs, which would be an obvious self-contradiction. 13. The entire law as to what would constitute reason to believe was summed up by H. R. Khanna J., speaking for the Supreme Court in ITO v. Lakhmani Mewal Das [1976] 103 ITR 437 (SC). The following principles were laiddown : (a) The powers of the Assessing Officer to reopen an assessment, though wide, are not plenary. (b) The words of the statute are 'reason to believe' and not 'reason to suspect'. (c) The reopening of an assessment after the lapse of many years is a serious matter. Since the finality of a judicial or quasi-judicial proceedings are sought to be disturbed, it is essential that before taking action to reopen the assessment, the requirements of the law should be satisfied. (d) The reasons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht 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 have to be understood in a liberal manner where the finality of an intimation under section 143(3) is sought to be disturbed is erroneous and misconceived. As pointed out earlier, there is no warrant for such an assumption because of the language employed in section 147. 16. In the present case, the reasons disclosed that the AO reached the belief that there was an escapement of income on verification of the documents, which were already on record, and it was seen that Sec.50C value was fixed at ₹ 735 lakhs by DRO. The market value should be adopted at 367.5 lakhs (50% of ₹ 735 lakhs). Thus, the sale consideration for capital gains computation should have been worked out on this amount. Hence, the AO have a reason to believe that income chargeable to tax has escaped assessment within the ambit of section 147 of the Act and the case was re-opened. A notice u/s.148 was served on the assessee on 26.03.2014. There was no whisper that the AO came to kno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conclusion that there has been excessive loss or depreciation allowance or that there has been underassessment or assessment at a lower rate or for applying other provisions of Explanation 2 to section 147 , it must be on material and it should have nexus for holding such opinion contrary to what has been expressed earlier. Even after the amendment of section 147 mere change of opinion does not confer jurisdiction on the Income-tax Officer to initiate proceedings for reassessment merely by resorting to Explanation 1 to section 147. Hon ble Calcutta High Court in the case of Berger Paints India Ltd., 245 ITR 648 held when any particular issue has been considered by the ITO and CIT(A) and when there is no failure to disclose the facts, the reassessment proceedings are not valid. Hon ble Supreme Court in the case of CIT vs. Foraner France, 264 ITR 566 held reassessment - not on basis of mere change of opinion -law same before and after amendment by direct tax laws. Hon ble Supreme Court in the case of Indian Oil Corporation, 159 ITR 956 held that no case u/s 148 is made out when the facts were known all along with to the revenue while making the original assessment. Hon ble Suprem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... original assessment . We are well aware that it is neither necessary nor mandatory that at the time of recording of reasons itself, the AO should come to a conclusion that there will be option of escaped assessment as per reason recorded. The only requirement in law is, the AO prima facie must have a reason to believe on the basis of material in his possession, that income is escaped assessment . In facts of the present case, the AO completed the original assessment on the basis of records available with him and there was no allegation by the AO that neither disclosed correct consideration by the assessee in the return filed for the assessment year nor was available before the AO when the assessment was framed u/s.143(3) of the Act. Undoubtedly, the information on the basis of which assessment was reopened, which was already in the possession of the AO and it was not subsequently came to his possession after the completion of the original assessment so as to reveal understatement of the sale value. In such circumstances, the AO is not empowered under the Act to reopen the assessment. 20.1 In the present case, the Assessing Officer observed that on verification of documents, it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecourse to the provisions of s. 147. We find ourself in respectful agreement with the view taken by the Full Bench of the Delhi High Court. 20.3 It is further to be seen that the legislature has not conferred power on the AO to review its own order. Therefore, the power under s. 147 cannot be used to review the order. In the present case, though the AO has used the phrase reason to believe , admittedly between the date of the order of assessment sought to be reopened and the date of formation of opinion by the AO, nothing new has happened, therefore, no new material has come on record, no new information has been received; it is merely a fresh application of mind by the same AO to the same set of facts and the reason that has been given is that the some material which was available on record while assessment order was made was inadvertently excluded from consideration. This will, in our opinion, amount to opening of the assessment merely because there is change of opinion. The Full Bench of the Delhi High Court in its judgment in the case of Kelvinator (supra) referred to above, has taken a clear view that reopening of assessment under s. 147 merely because there is a change of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to reopen the concluded assessment, which is nothing but abuse of law. 23. At this stage, it is appropriate to address the contention of the ld.D.R that the AO has been careless in bringing to tax capital gains by applying sec.50C of the Act, the AO should not be precluded from issuing notice u/s.148 of the Act. This submission of the ld.D.R overlooks the facts that power to reopen is not a power to review an assessment order. At the time of passing the assessment order, it is expected from the AO that he will apply mind and pass an order in accordance with law. An assessment order is not a mere scrap of paper. To accept the submissions of the ld.D.R, would mean to negate the well settled position in law as stated by the Supreme Court in the case of CIT Vs. Kelvinator of India Ltd.(256 ITR 1). 23.1 Further, the Supreme Court in the case of Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC) wherein held that:- Now, in the case before us, the Income-tax Officer had, when he made the original assessment, considered the provisions of sections 9 and 10. Any different view taken by him afterwards on the application of those provisions would amount to a chang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment. If the Income-tax Officer had considered and formed an opinion on the said material in the original assessment itself then he would be powerless to start the proceedings for reassessment. Where, however the Income-tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147(b) of the Act.' (emphasis supplied) 23.3 The decision of the jurisdictional High Court in the case of CIT vs.Chakiat Agencies Pvt. Ltd., in [2009] 314 ITR 200 (Mad) wherein held that:- Dismissing the appeals, (i) that the Revenue had not stated that new materials were received by the Assessing Officer and the Assessing Officer on the basis of the new materials based his opinion that there was escapement of income. There was no material placed on record to show that the assessee had suppressed any material fact or had failed to disclose fully and truly all material facts necessary for the assessment. The Assessing Officer had recourse to reopening of the assessment only due to change of his opinion about the admissibility of deduction under section 80-O which was originally allowed by t ..... 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