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TMI Blog2023 (10) TMI 1284X X X X Extracts X X X X X X X X Extracts X X X X ..... f other expenses and entry of lump-sum compensation was made. Even in response to the notice under Section 143(2) of the Act, a specific response was given under the headlump- sum compensation, producing the orders, the Court and relating documents to justify the lump-sum compensation paid by the company. Whereas the letter would indicate that a reference was made to memorandum of understanding between Ratna Bhumi Developers Private Limited and Ratna Developers along with bank statements earmarking the payments made to Ratna Developers for the compensation - during the entire scrutiny assessment, the question of the debit of an amount of Rs. 135.00 lakhs was gone into. In fact, the reasons recorded would indicate the fact that the very records were sought to be claimed as the basis of information for reopening. Reasons recorded indicate that there was no new tangible material or information or fresh evidence which came into the possession of the assessing officer and the entire basis of the reasons to believe was founded on the original assessment proceedings. Having built an opinion on the basis of the original assessment records which did not call for any clarifications and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of its shareholders are citizens of India. 4.2 The petitioner filed his return of income on 30.09.2012 declaring total income of Rs. 6,39,91,610/-. 4.3 The case of the petitioner was taken up for scrutiny assessment, and accordingly, notice u/s 143(2) was issued on 13.08.2013. 4.4 During the course of the original assessment proceedings, the petitioner had submitted Audited accounts in the Form No. 3CB 3CD, copy of Balance Sheet and Profit Loss account. 4.5 During the course of the original assessment proceedings, the then Assessing Officer had asked the petitioner to justify the Lump Sum Compensation of Rs. 135 Lacs debited into the Profit Loss account. In connection thereto, the petitioner vide letter dated 03.11.2014 furnished copy of the order of the court and related documents to justify the Lump Sum Compensation paid by the petitioner. 4.6 in furtherance to the queries raised by the then Assessing Officer, the petitioner vide its letter dated 22.12.2014 furnished the Memorandum of Understanding entered into between the petitioner and Ratna Developers, ledger account of Lump Sum Compensation account of Ratna Developers and Bank Statements earmarking the pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of the Income Tax Act, 1961 (hereinafter referred to as the Act ), the petitioner had attached the order of the court and related documents for reference by the Assessing Officer to justify the lump sum compensation paid by the company. It was pointed out that plaint of the suit as well as the order passed thereon had been produced before the Assessing Officer during the time of scrutiny assessment. Reference was made to a communication dated 22.12.2014 filed by the petitioner in connection with the details and explanation sought for by the Assessing Officer wherein, at serial No. 1, the petitioner has dealt with Agreement for Compensation and has attached the memorandum of understanding between Ratnabhumi Developers Private Limited and Ratna Developers and also attached the lump sum compensation account of Ratna Developers along with the bank statements, earmarking the payments made to Ratna Developers for this compensation. It was submitted that, after considering all the material placed before him, the Assessing Officer, while framing the assessment under section 143(3) of the Act, did not make any addition. It was submitted that, now, the Assessing Officer seeks to reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nished the orders of the Court and related documents such as memorandum of understanding, entered into between the petitioner and the Ratna developers, ledger, account of the lump-sum compensation and the bank statement showing that the payment was made with regard to the lump sum compensation. The Assessing Officer at the time of original assessment proceedings after satisfying himself about the correctness of the lump-sum compensation had passed an assessment order under section 143(3) of the Act? In other words, there was no reason for the author of the notice under section 148 of the Act to have reason to believe or come to a conclusion that the income had escaped assessment of the year under consideration. 8. Reading of the annual report and the auditor s report indicates that in note 19 of other expenses and entry of lump-sum compensation of Rs. 1,35,00,000/- was made. Even in response to the notice under Section 143(2) of the Act, a specific response was given under the headlump- sum compensation, producing the orders, the Court and relating documents to justify the lump-sum compensation paid by the company. Whereas the letter dated 22.12.2014 would indicate that a refere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 depreciation allowance, as the case may be, for the assessment year concerned (hereafter in sections 148 to 153 referred to as the relevant assessment year). After enactment of Direct Tax Laws (Amendment) Act, 1987, i.e., prior to 1st April, 1989, Section 147 of the Act, reads as under: 147. Income escaping assessment.-- If the Assessing Officer, for reasons to be recorded by him in writing, is of the opinion 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 incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 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 31st October, 1989, which reads as follows: 7.2 Amendment made by the Amending Act, 1989, to reintroduce the expression `reason to believe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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