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TMI Blog2022 (1) TMI 652X X X X Extracts X X X X X X X X Extracts X X X X ..... was passed in consonance with various judicial pronouncements and there is no escapement of income. In the case of P.C.Patel Co. v. Dy.CIT [ 2015 (8) TMI 722 - GUJARAT HIGH COURT] as held that any reassessment proceedings initiated at the instance of audit party objection, without the assessing officer himself has reason to believe that the income chargeable to tax having escaped the assessment, must fail. This is the view expressed by the Coordinate Bench of this Court in the case of Commissioner of Income-tax v. GMR Holdings (P) Ltd., [ 2018 (9) TMI 353 - HIGH COURT OF KARNATAKA AT BANGLORE] . Thus on the ground of change of opinion the substantial question of law raised herein require to be answered in favour of the assessee and against the revenue. - I.T.A.No.65/2017 - - - Dated:- 23-11-2021 - HON BLE MRS.JUSTICE S. SUJATHA AND HON BLE MR. JUSTICE HANCHATE SANJEEVKUMAR APPELLANT (BY SRI V. CHANDRASHEKAR, ADV. A/W SRI BHAIRAV KUTTAIAH, ADV.) RESPONDENT (BY SRI K.V. ARAVIND, ADV.) J U D G M E N T S. SUJATHA, J., This appeal is filed by the assessee under Section 260A of the Income Tax Act, 1961 ( Act for short) challenging the order d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and circumstances of the case. 4) Without prejudice, whether the Tribunal is justified in law in holding that an amount of ₹ 44,53,500/- is to be assessed as income under the head Capital Gain and not under income from business and consequently denied the exemption under Section 80P(2)(a)(i) of the Act, 1961 and consequently passed a perverse order on the fact and circumstances of the case. 5. Learned counsel appearing for the appellant placing reliance on, (1) ALA Firm v. CIT, reported in (1991) 189 ITR 285; (2) Commissioner of Income-tax, Delhi v. Kelvinator of India Ltd., reported in (2010) 320 ITR 561; and (3) TTK Prestige Ltd., v. Deputy Commissioner of Income-tax, Bengaluru, (2018) 97 taxmann.com 112 submitted that reopening of the assessment proceedings under Section 147/148 of the Act was made not on any new material or information, but on mere change of opinion. By referring to the reasons recorded by the assessing officer, learned counsel submitted that reopening of the proceedings is not justifiable; there was no failure on the part of the appellant to disclose all the material facts necessary for assessment of the correct income; an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... waari Co-op. Bank Ltd., Davanagere, Asst. year/s : 2004-05 The assessee is a Regional Rural Bank notified u/s 3 of the Regional Rural Banking Service Act, 1976. The Bank is deemed Cooperative Society and therefore eligible for exemption u/s 80P of the Act. During the year, the assessee had earned profit of ₹ 44,53,500/- from purchase and sale of Govt. securities and had claimed that this income was also exempt u/s 80P of the Act for the following reasons: a) The assessee Bank is constituted under RRBS Act, 1976; b) As per sec. 18 of the RRBS Act, the Banks can carry all business specified in clause (b) of sec.5 and sub-sec.(1) of sec.6 of the Banking Regulation Act; c) As per Sub-sec.(1) of sec.6 of Banking Regulation Act, Banks can carry business of dealing in stock, funds, shares, debentures, debenture stock, bonds obligations, securities and investments of all kinds. So, the purchase and sale of Govt. securities was a part of regular banking business only. d) The various Govt. securities held by the assessee Bank was in the normal course of business of banking only and profit earned on sale of these investments forms part of business of bankin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erated with effect from 1st April, 1989, i.e., after substitution of Section 147 of the Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act, 1987? To answer the above question, we need to note the changes undergone by Section 147 of the Income Tax Act, 1961 [for short, the Act ]. Prior to Direct Tax Laws (Amendment) Act, 1987, Section 147reads as under: 147. Income escaping assessment. If [a] the Income-tax Officer has reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the Income-tax Officer or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax has escaped assessment for that year, or [b] notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income- tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But reassessment has to be based on fulfillment 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 1st April, 1989, Assessing Officer has power to re-open, 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons. In the second and third situation, the Revenue is not without remedy. In case the assessment order is erroneous and prejudicial to the interest of the Revenue, they are entitled to and can invoke power under Section 263 of the Act. This aspect and position has been highlighted in CIT vs. DLF Powers Limited, ITA 973/2011 decided on 29th November, 2011 and BLB Limited vs. ACIT Writ Petition (Civil) No. 6884/2010 decided on 1st December, 2011. since reported in [2012] 343 ITR 129 (Delhi). In the last decision it has been observed (page 135): The Revenue had the option, but did not take recourse to Section 263 of the Act, inspite of audit objection. Supervisory and revisionary power under Section 263 of the Act is available, if an order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. An erroneous order contrary to law that has caused prejudiced can be correct, when jurisdiction under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Officer had not at all applied his mind to the question whether the surplus is taxable or not. It is true that the return was filed and the assessment was completed on the same date. Nevertheless, it is opposed to normal human conduct that an officer would complete the assessment without looking at the material placed before him. It is not as if the assessment record contained a large number of documents or the case raised complicated issues rendering it probable that the I.T.O. had missed these facts. It is a case where there is only one contention raised before the I.T.O. and it is, we think, impossible to hold that the Income-tax Officer did not at all look at the return filed by the assessee or the statements accompanying it. The more reasonable view to take would, in our opinion, be that the Income-tax Officer looked at the facts and accepted the assessee's contention that the surplus was not taxable. But, in doing so, the obviously missed to take note of the law laid down in Ramachari which there is nothing to show, had been brought to his notice. When he subsequently became aware of the decision, he initiated proceedings under Section 147(b). The material which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agere for the A.Y. 2004-05 as under: the deduction claimed by the assessee u/s 80(P)(2) of the Act to the tune of ₹ 44,53,500/-, being the profit on sale of Securities, is not allowable, as the same has to be charged under the head Capital Gain and is not an income from banking business. 13. The reasons recorded by the assessing officer that could be found in the original record reads thus: The assessee has filed return of income for the Asst. Year 2004-2005 on 27.10.2004 declaring NIL income. The same was completed u/s 143(3) with NIL an income of ₹ 44,53,500/- from profit on sale of securities and has claimed as exemption u/s 80P(2) of the I.T.Act. As per Section 80P(2), in the case of Co-operative Society engaged in carrying on the business of banking or providing credit facilities to its members etc., the whole of the amount of profit or gain of such business is available for deduction u/s 80P(2). The assessee has sold the securities and earned profit of ₹ 44,53,500/- which is not a business income and hence not eligible for deduction u/s 80(P)(2) of the I.T.Act. Thus, the total addition to be made works out to ₹ 44,53,500/- whic ..... X X X X Extracts X X X X X X X X Extracts X X X X
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