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TMI Blog2020 (8) TMI 764X X X X Extracts X X X X X X X X Extracts X X X X ..... ghtly amortized the same. Re-assessment provisions under Section 147 of the Act do not provide for reassessment on a mere change of opinion. The re-assessment on a mere of change of opinion is not permissible under law. Such change of opinion amounts to review of the order of the assessment, which is not permissible under law. In support of our opinion, we would like to press into service the Judgment of Commissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT ] . - Decided in favour of assessee. - HONOURABLE DR. JUSTICE VINEET KOTHARI HONOURABLE MR. JUSTICE KRISHNAN RAMASAMY For Appellant : Mr. T.R. Senthilkumar, Senior Standing Counsel For Respondent : Mr. R. Venkatnarayanan for Mr.Subbraya Aiyar Padmanaban JUDGMENT (Delivered by Mr.KRISHNAN RAMASAMY, J.) The Court was held by Video Conference, as per the Resolution of the Full Court dated 3 July 2020, by Judges at their respective residences and the counsel, staff of the Court appearing from their respective residences. 2. Heard Mr. T.R. Senthilkumar, learned Senior Standing Counsel appeared for the Appellant/department and Mr. R. Venkatnarayanan, for Mr. Subbraya Aiyar Padmanaban, learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessed.........; or (ii) such income.................................................................; or (iii) such income has been made the subject of excessive relief under this Act................or (iv) excessive.................................Act has been computed] 6. By referring to the above Section, the learned counsel submitted that the department is empowered to make re-assessment under Section 147, in case, the income chargeable to tax has escaped assessment i.e., such income has been made the subject of excessive relief. In the present case, according to the department, the total product development expenditure was a sum of ₹ 3,39,27,315/-. Out of the said amount, a sum of ₹ 1,33,49,000/- was amortized towards the product development expenditure and the balance of ₹ 2,65,78,000/- was claimed as deferred revenue expenditure, which is not allowable for deduction. However, the Assessing Officer wrongly allowed the deduction. Therefore, the notice under Section 148 was issued for making re-assessment in terms of Explanation 2(c)(iii) of Section 147 of the Act, by the Deputy Commissioner of Income Tax and passed the assessment order on 19.03.2015. He ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee has amortized a portion of the product development expenditure and the balance amount was claimed as deferred revenue expenditure. The assessee has deducted this amount while computing the total income, even though the same was not debited to the profit and loss account which is not correct . 7. It could be clearly seen that the assessee has given the entire material facts on the issue of product development expenditure during the original assessment proceedings itself and failure to produce full and true disclosure of facts during the original assessment proceedings has not been proved by the Assessing Officer. It has to be accepted that, when the Assessing Officer has raised an issue or query and the assessee has answered the query in the original assessment proceedings itself and the Assessing Officer has not made any addition, the issue has been examined and there is no failure on the part of the assessee to disclose the facts during the original assessment proceedings. 8. As the Assessing Officer has not brought any new material on record warranting the reopening of the assessment after four years. The reopening of the assessment is only on account of chang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther submitted that in the present case, the assessment order was made on 31.12.2010, notice under Section 148 was issued on 11.06.2013 and the re-assessment proceedings was initiated by the department within the period of limitation. Further, he submitted that the Assessing Officer has rightly invoked the provision under section 147 of the Act for re-assessment, since the assessee sought excessive relief under the Act. The assessee has debited in the profit and loss account a sum of ₹ 1.33 crore as product development expenditure, whereas the assessee had taken ₹ 3.39 crore as a deduction for the purpose of computing the income for the payment of Income Tax. According to him, whatever the amount is shown in the profit and loss account alone can be permitted to be deducted for the purpose of computing the Income Tax. All these facts were not considered by both the Commissioner of Income Tax (Appeals) I, Coimbatore as well as the Income Tax Appellate Tribunal. Therefore, he pleaded before this Court that the orders passed by the Commissioner of Income Tax (Appeals) - I, Coimbatore, as well as the Income Tax Appellate Tribunal have to be set aside. 10. Per contra, the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of the scrutiny, the Assessing Officer called for several details and all the information were furnished by the assessee. The Assessing Officer pointed out certain mistakes and therefore, the order made under Section 143(3) was modified and rectification order was passed on 19.04.2012. The notice for reassessment was issued under Section 148 on 11.06.2013. It is to be noted that in the present case, the return was filed on 13.11.2007 for the assessment year 2007-08, for which reassessment proceedings under sections 147 and 148 ought to have been initiated within the period of four years, which was over by 31.03.2012. But, the notice for reassessment proceedings under Section 148 was issued on 11.06.2013, beyond the period of limitation. Therefore, we do not find any error in the finding of the Income Tax Appellate Tribunal in this aspect. 14. Another contention of the department was that the product development expenses incurred during the year was a sum of ₹ 3.39 crore and it cannot be deducted during the year since in the profit and loss account the assessee has shown only a sum of ₹ 1.33 crores. We have gone through the materials on record and we are not in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profit and loss account and therefore, the assessee is entitled to claim income tax benefit only to the extent of ₹ 1.33 crore and hence, he disallowed a sum of ₹ 2.6 crores (3.39-1.33). It is highly shocking to see the method of calculation made during the re-assessment under Section 147, as the same is without any basis. The assessee in his reply has clearly stated that a sum of ₹ 1.33 crore is relating to the previous year, which is 1/3rd of product development expenses for which they are amortizing this year. As the assessee had deducted its entire amount of ₹ 4 crores towards product development expenditure, while computing the income tax during the year 2006-2007, it has rightly added while computing the income for the income tax purpose. That apart, since the assessee has incurred a sum of ₹ 3.39 crores towards product development expenditure during the assessment year 2007-2008, as the same is revenue in nature, it has deducted the entire amount, while computing the income tax. (e) We do not see any error in the deduction made by the assessee and we could only find a lack of understanding on the part of the Assessing Officer during the course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of re-opening 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, Assessing Officer has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words reasons 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 re-introduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the Assessing Officer. We quote herein b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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