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TMI Blog2022 (11) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... e, that the AO has taken the figures while arriving at the additions during the reassessment proceedings. This is not a case where the assessment is sought to be reopened on the reasonable belief that income had escaped assessment on account of failure of the assessee to disclose truly and fully all material facts that were necessary for computation of income but this is a case wherein the assessment is sought to be reopened on account of change of opinion of the AO - we set aside the order of CIT(A) and quash the reassessment order - Decided in favour of assessee. - ITA No. 675/Bang/2020 - - - Dated:- 17-10-2022 - SHRI GEORGE GEORGE K. , JUDICIAL MEMBER AND Ms. PADMAVATHY S , ACCOUNTANT MEMBER Appellant by : Shri Narendra Sharma , Advocate Respondent by : Smt. Priyadarshini Baseganni, Addl.CIT(DR)(ITAT) , Bengaluru ORDER Per Padmavathy S. , Accountant Member This appeal is against the order of CIT(Appeals), Bangalore-9, dated 28.8.2020 for the assessment year 2006-07. 2. Assessee is a private company engaged in the business of manufacture and sale of biscuits and job work. The assessee filed return of income for AY 2006-07 on 29.11.2006 declaring a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s.147 were not present in the Appellant's case. 3. The impugned assessment order is bad in law in as much as the assessment is completed on an altogether different footing than the 'Reasons Recorded' to reopen the Appellant's case under section 148. 4. The issue of notice under section 148 is bad in law since the Appellant has neither concealed income nor has furnished inaccurate particulars of income. 5. The impugned assessment proceedings have been commenced purely as a result of a change in opinion and hence the same is bad in law and void-ab-initio. 6. The learned Authorities below are not justified in determining the income of the Appellant at Rs.4,88,22, 789/ - as against the returned income of Rs.20,82,889/- under the facts and in the circumstances of the Appellant's case. 7. Without prejudice to the above grounds it is further urged that the Commissioner of Income Tax (Appeals) is not justified in confirming the action of the Assessing Officer in adopting the WDV of the land, as on 01.04.2005, of Rs.11,67,700/-, as the cost of acquisition of the asset sold as against the market value of the same as on 01.04.1981, u/s.55(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.9,50,00,000. In the return of income assessee indexed the value as of 1.4.1981 and computed the long term capital gain. In the books of accounts, the assessee has credited the sale value of the land to the capital reserve account after adjusting the cost of land. The assessee had also filed computation of tax leviable u/s. 115JB of the Act as per which the book profit for an amount of (-) 5,34,59,161. Since the tax on the book profits is lower, the assessee had paid taxes under the normal provisions of the Act. 10. The AO reopened the assessment by issue of notice u/s. 148 and the reason recorded for reopening the case is as under:- 1. The assessee company had filed its return of income declaring a net taxable income of Rs. 20,82,889/ -. The assessee company had also filed computation of tax leviable u/ s. 115JB as per which the book profit had been shown at (-) 5,34,59,161/-. The taxes had been paid under normal provisions. The tax on the taxable income had been calculated at Rs.4,16,578/-. After adding surcharge and education cess, the total taxes payable had been worked out at Rs. 4,67,401/ -. The return filed by the assessee had been taken up for scrutiny and a s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1I5JB of the Income Tax Act. 5. As per the regular provisions of computation of Income Tax Act, the assessee had shown the expenses of capital gains on account of sale of buildings held. While admitting the gross long term capital gains at Rs.9,50,00,000/- the assessee has claimed the indexed cost in acquisition of land at Rs. 1,04,81,625/-. The land held by the assessee had always been shown at a cost of acquisition of Rs. 11,67,700/-. The excess increased cost of acquisition declared by the assessee to the extent of Rs. 1,04,81,625/- needs to be reduced and brought to tax for an appropriate amount. 6. As per the Profit and Loss account filed, the assessee had claimed a loss on account of sale of assets at Rs. 77,82,682/-. However, as per the statement of income filed, the assessee has claimed the loss to be at Rs.50,46,912/ -. For the computation for profit or loss on sale of depreciable assets, the assessee should have reduced the WDV of the asset from the sale consideration received. Considering the variation between the two, it is seen that the assessee company has claimed excess loss to the extent of Rs. 27,35,770/-. This excess loss claimed by the assessee durin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g that the assessee has not challenged the jurisdictional issue before the AO and in this regard relied on the decision of Karnataka High Court in the case of N. Govindaraju v. ITO. The CIT(A) further held that the reasons for reopening have been properly recorded by the AO and that the income of the assessee has escaped assessment therefore the AO has correctly exercised jurisdiction. 14. Before us, the ld. AR reiterated the submissions made before the lower authorities. The ld. AR submitted that no new material or information came to the possession of the AO to come to the conclusion that certain income has escaped assessment. The ld. AR submitted that reopening of impugned assessment is purely borne out of the change of opinion and not based on any fresh material or additional evidence which has come to the possession of the AO. The ld AR further submitted that the materials based on which the additions in reassessment proceedings are done were already available before the AO during the original assessment proceedings and the details pertaining to the impugned transaction were also produced before the AO during original proceedings. It is argued by the ld AR that the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is requested that the same may be disposed off in favour of Revenue. Other legal grounds raised by the appellant are already rebutted by the AO in his detailed order. The Hon'ble, ITAT Bench is requested to dismiss all the legal grounds raised by the appellant and decide the case on Merits. 16. We heard the rival submissions and perused the material on record. We will first look at the relevant provisions of section 147 which reads as follows:- 147. If the Assessing Officer has reason to believe that any 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 and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153, referred to as the relevant assessment year : Provided that where an assessment under sub-section (3) of section 143 or this section has been made for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 reason 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 hereinbelow the relevant portion of Circular No. 549 , dated 31-10-1989, which reads as follows : 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly to reassess based on any new material that has come to his possession. In assessee s case, the AO has made the additions based on the materials which are part of assessment records which have already been verified during the original assessment u/s.143(3). The proviso to section 147 states that no reopening after a period of 4 years is possible unless there is failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. The AO in reassessment proceedings has raised questions on the facts which have been disclosed in the statement of income of the assessee and has made the addition by taking a different view on the cost of acquisition and the accounting treatment of the sale consideration. The accounting treatment in the books of accounts cannot be considered as failure to disclose fully and truly all material facts, since the assessee while computing the taxable income under the Act, has disclosed the details pertaining to the capital gains on sale of land and depreciable assets. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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