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TMI Blog2022 (1) TMI 644X X X X Extracts X X X X X X X X Extracts X X X X ..... o re-open assessments on the basis of mere change of opinion , which cannot be per se reason to re-open. One must also keep in mind the conceptual difference between power to review and power to re-assess. The AO has no power to review; he has the power to re-assess. But re-assessment 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. Thus, based on these facts we note that reassessment proceedings initiated by the assessing officer are not in accordance with the provisions of section 147. Reassessment proceedings were initiated after the expiry of four years. We note that scrutiny assessment has been completed in the case of the assessee for the assessment year 2007-08, vide order u/s. 143(3) r.w.s. 153A dated 24-12-2010 accepting the returned income and therefore, the impugned notice issued u/s. 148 of the Act on 27-03-2014, is beyond the statutory period of 4 years, from the end of the relevant assessment year ending on 31-03-2012, which is ab-initio void; since there is no failure on the part of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d return of income was processed u/s. 143(1) of the Income Tax Act. Subsequently, the assessment was completed u/s. 143(3) r.w.s. 153A of the Income Tax Act, 1961, on 24.12.2010, determining total income at ₹ 1,41,370/-. Thereafter, assessee's case was reopened under section 147 of the Act. 4. The assessing officer observed that there was a search operation u/s. 132 of the I.T. Act, 1961, conducted by the Income Tax Department in the case of Bhawarlal Jain Group in Mumbai on 03.10.2013. During the course of search operation, it was noticed that there were bogus entries of unsecured loans and advances made by Bhawarlal Jain Group. The assessee is one of the beneficiary who has taken following accommodation entries of bogus unsecured loans and advances from the said group: Sr.No. Hawala Name Hawala PAN Amount (Rs). 1. AZ Jewels AAMFA7751J 20,00,000/- TOTAL 20,00,000/- In view of the above, assessing officer held that assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he notice u/s. 147/148 of the Act. There is a clear escapement of income. Therefore, reasons recorded by the Assessing Officer are valid and hence the reassessment proceeding initiated by the Assessing officer is valid in the eye of law. Hence, she prayed before the Bench that order passed by the assessing officer may be sustained. 8. We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that assessee is an individual and earning share of profit from partnership firm, rental income as also interest income during the year under consideration. The return of income for the subject assessment year in response to notice u/s. 153A was filed on 30-09-2009 declaring total income of ₹ 1,41,370/-. The assessment under section 143(3) r.w.s. 153A of the Act was completed on 24-12-2010, accepting the returned income. Thereafter, the case of the assessee was reopened vide notice under section 148 of the Act, dated 27-03-2014. In response to the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee had submitted before the assessing officer, the books of accounts, bills, invoices, purchase details, sales details, bank statements and other evidences/documents, as called by the assessing officer, hence there is no failure on the part of the assessee to disclose fully and truly all material facts. 10. We note that the main issue to reopen the concluded assessment was unsecured loan received from AZ Jewels. We note that loan received from AZ Jewels has been verified and accepted in the original assessment proceeding u/s. 143(3) by raising specific query in this regard. Thus, there is no question of there being any failure on the part of the assessee to disclose fully and truly all the material facts necessary to the impugned original assessment. 11. We note that during the original assessment proceedings, the assessing officer has issued notice u/s. 142(1) of the Act and raised the specific query about AZ Jewels. In response to the notice u/s. 142(1) of the Act, the assessee submitted its reply before the assessing Officer which is reproduced below: To The Assistant Commissioner of Income Tax, Central Circle-3, Aaykar Bhavan, Surat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion. On appeal by the department to the Supreme Court, (reported in 320 ITR 561(SC)) it was held that though the power to reopen under the amended section 147 is much wider, one needs to give a schematic interpretation to the words reason to believe failing which section 147 would give arbitrary powers to the AO to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to re-open. One must also keep in mind the conceptual difference between power to review and power to re-assess. The AO has no power to review; he has the power to re-assess. But re-assessment 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. Thus, based on these facts we note that reassessment proceedings initiated by the assessing officer are not in accordance with the provisions of section 147 of the Act. 13. At the cost of repetition, we also state that reassessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed reasons allude to an ostensible failure on the part of the Assessee to disclose fully and truly all material facts, however, the recorded reasons except for using the expression failure on the part of the Assessee to disclose fully and truly all material facts , do not specify as to what is the nature of default or failure on the part of the Assessee. The reasons also do not explain or specify as to what is the rationale connection between the reasons to believe and the material on record. The Supreme Court in ITO v. Techspan India (P.) Ltd. [2018] 6 SCC 685 has held that The use of the words reason to believe in section 147 has to be interpreted schematically as the liberal interpretation of the word would have the consequence of conferring arbitrary powers on the assessing officer who may even initiate such re-assessment proceedings merely on his change of opinion on the basis of some facts and circumstances which has already been considered by him during the original assessment proceedings. Such could not be the intention of the legislature. The said judgment further held that section 147 of the IT Act does not allow the reassessment of an income merely because of the f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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