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TMI Blog2024 (3) TMI 723X X X X Extracts X X X X X X X X Extracts X X X X ..... a bare perusal of the reasons to believe , which reveals that the reopening of the concluded assessment of the assessee was based on a mere re- appreciation of the facts available on record by the successor A.O. DR on being confronted with the aforesaid factual position could not rebut the same. A.O. had traversed beyond the scope of his jurisdiction and had wrongly reopened the concluded assessment of the assessee under Sec. 147 of the Act. We are unable to comprehend what new material or information had come up before the A.O., which justified the reopening of the concluded assessment of the assessee. We are afraid that re-appreciation of the facts already available on record before the A.O. while framing the original assessment is not permissible u/s 147. It would be relevant to point out that the view taken by the Full bench of the Hon ble High Court of Delhi in CIT Vs. Kelvinator of India [ 2002 (4) TMI 37 - DELHI HIGH COURT] that the failure of the A.O to consider certain material that was available on record while framing the original assessment cannot justify the reopening of his concluded assessment, as the same would amount to opening of the assessment based on a change o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year. Decided in favour of assessee. - SHRI RAVISH SOOD, JUDICIAL MEMBER AND SHRI ARUN KHODPIA, ACCOUNTANT MEMBER For the Appellant : Shri S.R. Rao, Advocate For the Respondent : Shri Satya Prakash Sharma, Sr. DR ORDER PER RAVISH SOOD, JM: The captioned appeals filed by the revenue are directed against the respective orders passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 24.09.2023, which in turn arises from the orders passed by the A.O under Sec. 143(3)/147 of the Income-tax Act, 1961 (in short the Act ) dated 25.12.2017 23.12.2017 for the assessment year 2010-11 2012-13, respectively. As the issues involved in the captioned appeals are inextricably interlinked or interwoven, therefore, the same are being taken up and disposed of by way of a consolidated order. 2. We shall first take up the appeal filed by the revenue in ITA No. 321/RPR/2023 for the assessment year 2010-11, wherein the revenue has assailed the impugned order on the following grounds of appeal: 1. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A)/NFAC was justified in quashing the assessment order passed u/s. 14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iance, the assessee filed his return of income on 11.05.2016 declaring his total income as originally returned at Rs. 2,53,80,620/-. 5. During the course of reassessment proceedings, it was, inter alia, observed by the A.O. that in the return of income filed in response to notice u/s. 148 of the Act, the assessee had suddenly changed his version and claimed the Carbon credit receipts as a capital receipt in nature whereas, in the original return, he had treated the same as a revenue receipt and claimed deduction u/s. 80IA of the Act at Rs. 1,04,01,562/- which was allowed. 6. The A.O. vide his order passed u/ss. 143(3)/147 of the Act dated 25.12.2017 reassessed the income of the assessee at Rs. 3,82,01,600/- after, inter alia, making the following additions/disallowances: Sr. No. Particulars Amount 1. Disallowance of excess deduction allowed u/s. 80IA of the Act in Green power division Rs.1,04,01,562/- 2. Disallowance on account of depreciation claimed in the original return on biogas plant (the depreciation was not claimed in the return filed in response to the notice u/s. 148 of the Act) Rs. 21,98,105/- 7. Aggrieved the assessee carried the matter before the CIT(Appeals) who allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed. Considering the facts and circumstances of the case, I have reason to believe that the income of the assessee escaped assessment to the extent of Rs. 125,99,670/- and therefore the case is required to be re-opened u/s 147 of the income Tax Act, 1961 for assessment of the escaped income. 7.3 In this case, the deduction u/s 80IA was claimed by the appellant. In the original assessment proceedings, it is noted that vide his questionnaire (filed by the appellant as Annexure 2 to his submissions) issued along with a notice u/s 142(1) dated 27.02.2012, the AO specifically queried about the deduction in terms of following questions: ...9. Justify the deductions claimed u/s 80G and 80IA with due evidence. . 32. To explain in brief regarding Carbon Credit Receipts (Green Power Dvn.). 7.4 In response, the appellant filed a detailed reply to the queries vide his letter dated nil, which has been submitted by the appellant as a part of the paper book in the present appellate proceedings. Apparently, the AO was satisfied with the reply of the appellant, and he went on to complete the assessment vide his order dated 17.04.2012 without taking any adverse view on the claim of deduction u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pening of the assessment is nothing but a mere change of opinion. 7.9 In a number of decisions, various courts have ruled that in such situations, the reopening is not valid in law. Reliance is placed on the following decisions: 1) Commissioner of Income-tax, Delhi V. Kelvinator of India Ltd. (2010) 320 ITR 561 (SC); 2) Axis Bank Ltd. v. Assistant Commissioner of Income-tax, [2023] 149 taxmann.com 395 (Gujarat); 3) Assistant Commissioner of Income Tax (Central), Circle 1(2) V. Dharmnath Shares Services (P) Ltd, reported in (2018) 100 taxmann.com 416(SC) 4) Principal Commissioner of Income Tax Vs. Maruti Suzuki India Ltd. reported in (2019) 107 corn 375(SC). Also, in a recent decision in the case of Shahlon Silk Industries Pvt Ltd Vs ACIT (Special Civil Application No. 20436 of 2018) (2023), Gujarat High Court has also held that reopening of an assessment on a mere change of opinion is not permissible and is liable to be quashed. 7.10 It is apparent from the facts of this case that there is change of opinion by the Assessing Officer to reopen the assessment for the Assessment Year 2010-2011. During the original assessment proceedings, the AO raised a query about the issue in questio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ept of change of opinion as an in-built lest 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 herein below 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 in Section 147.-A Number of representations were received against the omission of the words reason to believe from Section 147 and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O be restored. 10. Per contra, Shri S.R. Rao, Ld. Authorized Representative (for short 'AR') for the assessee supported the order of the CIT(Appeals). It was submitted by the Ld. AR that as the assessee's claim for deduction u/s. 80IA of the Act was at length looked into and deliberated upon by the A.O while framing the original assessment, therefore, reopening of the concluded assessment of the assessee on the ground that carbon credit being like ancillary income was not allowable for deduction u/s. 80IA of the Act was an exercise taken recourse to based on a mere change of opinion of the successor A.O. Also, it was submitted by him that as the A.O while framing the original assessment had looked into the assessee's claim for depreciation and partly disallowed the same to the extent relatable to that claimed by the assessee on motor cars, therefore, reopening of the assessee's case on the ground that depreciation on bio gas plant was liable to be disallowed as the said asset was not required to earn carbon credit was also based on a mere change of opinion , which, thus, was not permissible as per the mandate of law. The Ld. AR in support of his contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that his income chargeable to tax had escaped assessment, had, thus, wrongly assumed jurisdiction and reopened the concluded assessment of the assessee, therefore, we shall first deal with the same. 15. On a perusal of the assessment record, it transpires that as per the reasons to believe, the view taken by the A.O while framing the original assessment vide his order u/s. 143(3) dated 17.04.2012 had been revisited based on a mere change of opinion of the successor A.O as against that of his predecessor. For the sake of clarity, the reasons to believe that had formed the very basis for reopening the concluded assessment in the case of the assessee are culled out as under: The assessee filed return of income on 01.10.2010 declaring total income of Rs. 2,53,80,620/-. The assessment order u/s. 143(3) was passed in re case on 17.04.2012 determining total income of Rs. 2,56,01,930/- with addition of Rs. 1,00,000/- on account of disallowance out of Vehicle exp., Rs. 36,790/- out of depreciation, Rs. 15,000/- out of General exp., Rs. 36,840/- out of telephone exp., Rs. 20,000/- out of traveling/ con. and Rs. 12,680/- in Power Dvn. The assessee is an individual deriving income from manufa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cument had come in the possession of the A.O. after the culmination of the original assessment proceedings, which would have vested jurisdiction with him to reopen the concluded assessment of the assessee. Our aforesaid conviction is duly fortified on a bare perusal of the reasons to believe , which reveals that the reopening of the concluded assessment of the assessee was based on a mere re- appreciation of the facts available on record by the successor A.O. The Ld. Departmental Representative ( DR , for short) on being confronted with the aforesaid factual position could not rebut the same. 17. Because the case of the assessee had been reopened with the purpose to re-appreciate the facts that were already available on record and not based on any fresh material/document coming into the possession of the A.O after the culmination of the original assessment by his predecessor vide order u/s. 143(3) dated 17.04.2012, which would reveal that any income of the assessee chargeable to tax had escaped assessment, we find substance in the claim of the Ld. AR that the A.O. had traversed beyond the scope of his jurisdiction and had wrongly reopened the concluded assessment of the assessee un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inadvertently the same were not taken into account while framing the assessment and, therefore, it cannot be said that there is a change of opinion. According to respondent No. 1, thus, the relevant material was available on record, but he failed to apply his mind to that material in making the assessment order. The question is, can respondent No. 1 take recourse to the provision of section 147 for his own failure to apply his mind to the material which, according to him, is relevant and which was available on record. We find that this situation has been considered by the Full Bench of the Delhi High Court in its judgment in the case of CIT v. Kelvinator of India Ltd . [2002] 256 ITR 1 and the Full Bench has observed thus (page 19) : The said submission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt out that the view taken by the Full bench of the Hon ble High Court of Delhi in CIT Vs. Kelvinator of India (2002) 256 ITR 1 (Del), that the failure of the A.O to consider certain material that was available on record while framing the original assessment cannot justify the reopening of his concluded assessment, as the same would amount to opening of the assessment based on a change of opinion , which is not allowed as per the mandate of law, had thereafter been approved by the Hon ble Apex Court in CIT Vs. Kelvinator of India (2010) 320 ITR 561 (SC). The observations of the Full bench of the Hon ble High Court of Delhi in CIT Vs. Kelvinator of India (2002) 256 ITR 1 (Del), which thereafter had been approved by the Hon ble Apex Court in 320 ITR 561, are culled out as under (relevant extract): 10. It is further to be seen that the legislature has not conferred power on the AO to review its own order. Therefore, the power under s. 147 cannot be used to review the order. In the present case, though the AO has used the phrase reason to believe , admittedly between the date of the order of assessment sought to be reopened and the date of formation of opinion by the AO, nothing new ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation was looked into by the A.O. while framing the original assessment and were allowed after necessary deliberations. We, thus, concur with the contention of the Ld. AR that as the concluded assessment of the assessee had been reopened based on a mere change of opinion , therefore, the same had rightly been struck down on the said count itself by the first appellate authority. 20. Alternatively, we concur with the claim of the Ld. AR that the reopening of the concluded assessment of the assessee is also hit by the 1st proviso to Sec. 147 of the Act. Admittedly, the original assessment was framed in the case of the assessee for the year under consideration, i.e., A.Y 2010-11 vide order passed under Sec. 143(3) of the Act, dated 17.04.2012. The concluded assessment of the assessee was thereafter reopened vide notice issued under Sec. 148 of the Act, dated 31.03.2016. It is the claim of the ld. A.R. that the A.O. had exceeded his jurisdiction and framed the reassessment order under Sec. 143(3) r.w.s 147, dated 25.12.2017, inter alia, for the reason that the same had been passed in violation of the mandate of the 1st proviso of Sec. 147 of the Act. Admittedly, as stated by the Ld. A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (2020) 116 Taxmann.com 151 (SC), had, inter alia, held that though the assessee is obligated to disclose the primary facts but it is neither required to disclose the secondary facts nor required to give any assistance to the A.O by disclosure of the other facts and it is for the A.O to decide what inferences are to be drawn from the facts before him. It was observed by the Hon ble Apex Court that the extended period of limitation for initiating proceedings under the 1st proviso of Section 147 of the Act would only get triggered where the assessee had failed to disclose fully and truly all material facts necessary for his assessment. Now, in the case before us, we are unable to comprehend what facts the assessee had failed to disclose which would have otherwise justified bringing his case within the realm of the extended period contemplated in the 1st proviso of section 147 of the Act. As the assessee had disclosed fully and truly all the material facts as were necessary for his assessment for the year under consideration, i.e., AY 2010-11; therefore, it could by no means be held to be in default to bring it within the sweep of 1st proviso of Section 147 of the Act. 23. Analyzi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears from the end of relevant assessment year, an essential requirement is that the escapement of income chargeable to tax is due to the failure on the part of the assessee to disclose truly and fully all material facts. This is part of section 147 of the Act itself and is on number of occasions by various judgments of High Court and Supreme Court held to be mandatory pre- requirement. In view of such settled law, it is not necessary to refer to any judgment. Revenue is unable to bring to our notice any aspect or element which did not form part of the record and on the basis of which from the reasons recorded, it can be culled out that the Assessing Officer had formed a belief that income chargeable to tax had escaped assessment. In clear terms therefore, there was no failure on the part of the assessee to disclose truly and fully all material facts. 7. Counsel for the revenue however submitted that one of the issues raised by the Assessing Officer is that the activity carried on by the assessee does not amount to manufacturing activity. In the present petition, it is not necessary for us to comment on this aspect of the matter. What is important however is such belief also the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before us: 1. Whether on the facts and in the circumstance of the case and in law, the Ld. CIT(A)/NFAC was justified in quashing the assessment order passed u/s. 148/143(3) of the Act wherein addition on account of wrong claim of deduction u/s. 80IA of the Income Tax Act, 1961 were made? 2. Whether on the facts and circumstances of the case the Ld. CIT(A) was justified in quashing the re-assessment order by stating it as a mere change of opinion when the re-assessment proceedings was based on the wrong claim of deduction u/s 80IA of the Act and depreciation claimed wrongly on bio-gas plant , whereas Hon'ble High Court of Delhi in the case of Chetan Sabharwal vs. ACIT [2019] 110 taxmann.com 57 (Delhi) has held that where original assessment orders were silent on aspect on which re-opening had been ordered, it could not be said that reason to believe constituted a 'change of opinion'? 3. Any other ground which may be adduced at the time of hearing. 28. Succinctly stated, the assessee had e-filed his return of income for A.Y.2012- 13 on 28.09.2012, declaring an income of Rs. 1,63,40,630/-. The original assessment was framed by the A.O. vide order u/s. 143(3) dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 2011-12 suffered a loss in his power generation of Rs. 1,33,34,231/-, therefore, as per sub-section (5) of Section 80IA of the Act, the earlier year losses were to be first adjusted and then only the balance amount was to be allowed as deduction under the said statutory provision. Accordingly, the A.O. based on his aforesaid observation was of the view that his predecessor while framing the original assessment had wrongly allowed the assessee's claim for deduction u/s. 80IA of the Act to the extent of Rs. 1,07,62,181/-. 29. Thereafter, the A.O. vide his order passed u/ss. 143(3)/147 of the Act, dated23.12.2017 disallowed the assessee's claim for deduction u/s. 80IA of the Act by an amount of Rs. 1,07,62,181/- (supra) and recasted his income at Rs. 2,71,02,810/-. 30. Aggrieved the assessee carried the matter in appeal before the CIT(Appeals). Observing, that the A.O had assumed jurisdiction for reopening of the concluded assessment of the assessee based on a mere change of opinion , the CIT(Appeals) quashed the assessment for want of valid assumption of jurisdiction on the part of the A.O. For the sake of clarity, the relevant observations of the CIT(Appeals) are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ... 7.10 Similar decision has been rendered by the hon'ble Delhi High Court (Full Bench) in the case of CIT, Delhi-VI v Usha International Ltd. (348 ITR 485) in which it was held that: Expression 'Change of opinion' The expression 'change of opinion' postulates formation of opinion and then a change thereof. In the context of section 147 it implies that the Assessing Officer should have formed an opinion at the first instance, i.e., in the proceedings under section 143(3) and now by initiation of the reassessment proceeding, the Assessing Officer proposes or wants to take a different view. [Para 6] The word 'opinion' is derived from the latin word 'opinari' which means 'to believe, 'to think'. The word 'opinion' as per the Blacks Law Dictionary means a statement by a Judge or a Court of a decision reached by him incorporating cause tried or argued before them, expounding the law as applied to the case and, detailing the reasons upon which the judgment is based. Advanced Law Lexicon by P. Ramanatha Aiyar (3rd Edition) explains the term 'opinion' to mean 'something more than mere retaining of gossip or hearsay; it me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer to reopen the assessment for the Assessment Year 2012-2013. During the original assessment proceedings, the AO raised a query about the issue in question which was duly responded to by the appellant. After that, no addition was made by the AO on such issue. Later on, while recording the reasons at the time of reopening the assessment, the AO made no reference to any new information being available with him which was not in his possession during the first round of assessment. Under such circumstances, the Assessing Officer cannot have any jurisdiction to issue the notice under section 148 of the Act, 1961 for reopening the assessment for the year under consideration as it squarely falls within the purview of 'change of opinion'. 7.12 In view of foregoing reasons, various case laws on the issue and considering the facts of the case, impugned reassessment proceedings initiated vide notice under section 148 of the Act, 1961 are not tenable in law, and are accordingly quashed as the notice u/s 148 of the Act has been issued only on a change of opinion. Ground of appeal number 1 related to validity of reassessment notice on account of mere change of opinion su ..... X X X X Extracts X X X X X X X X Extracts X X X X
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