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TMI Blog2022 (4) TMI 1183X X X X Extracts X X X X X X X X Extracts X X X X ..... g officer is not justified in reopening the file u/s. 148 of the Income Tax Act 1961 just to review its own order passed the time of regular scrutiny c. The learned Commissioner appeals erred in acknowledging the fact that the assessing officer is not justified in opening the file of the assessee u/s. 148 of the Income Tax Act based on a High Court judgment d. The learned Commissioner appeals is not justified in ignoring the income tax return filed audited books of accounts produced and supporting documents at the time of regular scrutiny assessment for the AY 13-14. e. The learned Commissioner appeals wherein knowledge in the fact that an investment was made with unrelated and independent people and does not fall for the inclusion of number of residential house property for the deduction u/s. 54F of the Income Tax Act 1961. f. The learned Commissioner appeals erred in calculation of the interest u/s. 234B at the time of passing the impugned assessment order g. The learned Commissioner appeals has not considered the valid explanation given by your appellant in this regard 3. The assessee is an individual and has filed the return of income on 30.09.2013. The case was sele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d AR also submitted the details submitted before the AO during the course of regular assessment. 6. The learned DR submitted that the nature and character of the asset sold during the assessment year 2015-16 was never verified by the AO and had he done it with due diligence the ownership of two assets of two residential assets at the time of sale of the capital asset in assessment 2012-13 would have surfaced whereby the assessee would not have got the exemption u/s.54F. The Learned DR in this regard placed reliance on the decision of the Supreme Court in the case of Ess Ess Kay Engineering Co. P. Ltd. vs CIT (2001) 247 ITR 818 SC. 7. We have heard the rival submissions and perused the materials on record. We notice that the AO during the course of original assessment u/s.143(3) of the Act, had called for various details including the statement of income, Balance sheet and Profit & Loss account, property details, rental agreements etc. which the assessee has been sharing on from time to time. These details that have been called for are for assessment years 2012-13 and 2011-12 also besides the year under consideration. The AO has raised queries after perusal of materials for which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Of India Ltd, 256 ITR 1 has considered a similar issue where the court has held that 18. From a bare perusal of the provisions contained in Section 147 of the said Act, as it stood up to 31st March 1989, it is evident that to confer jurisdiction u/s. 147 of the Act two conditions were required to be satisfied viz.; (i) the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment; and (2) he must also have a reason to believe that such escapement occurred by reason of either; (a) omission or failure on the part of the assessed to make a return of his income u/s. 139 or (b) omission or failure on the part of the assessed to disclose fully and truly all material facts necessary for his assessment for that year. The afore-mentioned requirements of law must be held to be conditions precedent for invoking jurisdiction of the Assessing Officer to re-open the assessment u/s. 147 of the said Act. It is trite that both the conditions afore-mentioned are cumulative. It is also a well settled principle of law that, in the event, it is found that any of the said two conditions is not fulfillled the notice issued by the Assessing Officer would be wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ulted from nondisclosure of material facts, cannot therefore be accepted." 22. In Indian & Eastern Newspaper Society v. C.I.T. (S.C.) reported in (1979) 119 ITR 996 three Judges Bench of the Apex Court held that although disclosure of a new fact therein may be an information within the meaning of the afore-mentioned provisions this opinion of law would not be as regard a contention on the part of the Revenue that the expression information in Section 147(b) refers to realization by the ITO that he has committed an error while making original assessment. The Apex Court said: "that he has committed an error when making the original assessment. it is said that, when upon receipt of the audit note the ITO discovers or realizes that a mistake has been committed in the original assessment, the discovery of the mistake would be "information" within the meaning of Section 147(b). The submission appears to us inconsistent with the terms of Section 147(b). Plainly, the statutory provision envisages that the ITO must first have information in his possession, and then in consequence of such information he must have reason to believe that income has escaped assessment. The realization that in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well settled that if a notice u/s. 148 has been issued without the jurisdictional foundation u/s. 147 being available to the Assessing Officer, the notice and the subsequent proceedings will be without jurisdiction, liable to be struck down in exercise of writ jurisdiction of this court. If "reason to believe" be available, the writ court will not exercise its power of judicial review to go into the sufficiency or adequacy of the material available. However, the present one is not a case of testing the sufficiency of material available. It is a case of absence of material and hence the absence of jurisdiction in the Assessing Officer to initiate the proceedings u/s. 147/148 of the Act." 25. Thus, the Court held that even under the newly substituted Section 147, with effect from 1st April 1989, an assessment could not be re-opened on a mere change of opinion. Yet again in Foramer's cases (supra) a Division Bench of the Allahabad High Court has held that if a notice u/s. 147/148 was issued after the coming into force of the amended Act, the latter shall be attracted. However it is observed that: "Although we are of the opinion that the law existing on the date of the impugne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chargeable to a given taxpayer. The word "assessment" would mean the ascertainment of the amount of taxable income and of the tax payable thereon. In other words, where there is no ascertaining of the amount of taxable income and the tax payable thereon, it can never be said that such income was assessed. Merely because during the assessment proceedings the relevant material was on record or could have been with due diligence discerned by the Assessing Officer for the purpose of assessing a particular item of income chargeable to tax, it cannot be inferred that the Assessing Officer must necessarily have deliberated over it and taken it out while ascertaining the taxable income or that he had formed any opinion in respect thereof. If looking back it appears to the Assessing Officer (albeit within four years of the end of the relevant assessment year) that a particular item even though reflected on the record was not subjected to assessment and was left out while working out the taxable income and the tax payable thereon, i.e., while making the final assessment order, that would enable him to initiate the proceedings irrespective of the question of nondisclosure of material facts by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such a belief. In other words, it contemplates existence of reasons on which the belief is founded and not merely a belief in the existence of reasons inducing the belief. Such a belief may not be based merely on reasons but it must be founded on information. As was observed in Ganga Saran and Sons P. Ltd. v. ITO (1981) 130 ITR 1 (SC), the expression "reason to believe" is stronger than the expression "is satisfied". The belief entertained by the Assessing Officer should not be irrational and arbitrary. To put it differently, it must be reasonable and must be based on reasons which are material. in S.Narayanappa v. CIT (1967) 63 ITR 219, it was noted by the apex court that the expression "reason to believe" in Section 147 does not mean purely a subjective satisfaction on the part of the Assessing Officer, the belief must be held in good faith; it cannot be merely a pretence. It is open to the court to examine whether the reasons for the belief have a rational nexus or a relevant bearing to the formation of the belief and are not extraneous or irrelevant for the purpose of the section. To that limited extent, the action of the Assessing Officer in initiating proceedings u/s. 147 ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions must be fulfillled if the case is one which is covered by the proviso to Section 147 operative with effect from April v, 1989." (emphasis supplied by us). 32. It is evident from the afore-extracted position of the decision that it is not an authority for the proposition that a mere change in the opinion would also confer jurisdiction upon the Assessing Officer to initiate a proceeding u/s. 147 of the Act as was contended by Mr. Jolly. 33. A decision as is well known, is an authority for the proposition that it decides and not what can logically be deduced there from. A point not raised nor argued at the bar cannot be said to be the ration of the decision. 34. Another aspect of the matter cannot be also lost sight of. The Board has power to issue Circulars under. Section 119 of the said Act. It is trite that the Circulars which are issued by the CBDT are legally binding on the Revenue (see UCO Bank v. C.I.T. (1999) 237 ITR 889). Recently in C.I.T. Mumbai v. Anjum M.H. Ghaswala and Ors. Reported in , the Apex Court following the said decision observed: It is true that by this press release the board had interpreted the provisions of the Act in a particular manner. Be tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued the Circular on 31st October 1989. The said Circular admittedly is binding on the Revenue. The Authority, therefore, could not have taken a view, which would run counter to the mandate of the said Circular. Clause 7.2 as referred to hereinbefore is important. 36. From a perusal of Clause 7.2 of the said Circular it would appear that in no uncertain terms it was stated as to under what circumstances the amendments had been carried out i.e. only with a view to allay the fears that the omission of the expression "reason to believe" from Section 147 would give arbitrary powers to the Assessing Officer to reopen past assessment on mere change of opinion. 37. It is, therefore, evident that even according to the CBDT a mere change of opinion cannot form the basis for re-opening a completed assessment. 38. The submission of Mr. Jolly to the effect that the said Circular cannot be construed in such a manner whereby the jurisdiction of the statutory authority would be taken away is not apposite for the purpose of this case. In Union of India and Others (supra), whereupon Mr. Jolly had placed strong reliance, the Apex Court was dealing with an administrative instructions whereby no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regular order of assessment is passed in terms of the said Sub-section (3) of Section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of Clause (e) of Section 114 of the Indian Evidence Act the judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without anything further, the same would amount to giving premium to an authority exercising quasi judicial function to take benefit of its own wrong. 45. For the reasons afore-mentioned we are of the opinion that answer to the question raised before this Bench must be rendered in the affirmative, i.e. in favor of the assessed and against the Revenue. No order as to costs. On appeal by the department to the Supreme Court, HELD dismissing the appeal [2010] 320 ITR 561 (SC) 10. In assessee's case the AO in the impugned order passed u/s. 143(3) r.w.s 147, has mentioned that the AO who completed the regular assessment u/s. 143(3) has done it without due diligence and that the fact of assessee owning more than one house property other than new propert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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