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TMI Blog2024 (5) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... der to hold that the reassessment proceedings initiated by the assessing officer was based on change of opinion, is perverse and unsustainable in law. We also find that the ITAT has not decided the appeal of the revenue on merit with regard to the income which allegedly escaped assessment to tax. Decided in favour of revenue. - THE HON BLE JUSTICE SURYA PRAKASH KESARWANI AND THE HON BLE JUSTICE RAJARSHI BHARADWAJ Mr. Soumen Bhattacharjee , Advocate Ms. Doyel Dey , Advocate for the appellant Mr. Ananda Sen , Advocate. Mr. Sabysaschi Mandal , Advocate for the respondent ORDER 1. Heard Sri Soumen Bhattacharjee, learned junior standing counsel for the appellant and Sri Ananda Sen, learned advocate for the respondent/assessee. 2. This appeal was under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act, 1961 ) has been preferred by the revenue praying to setting aside the order dated 7.9.2016 in ITA No.476/Kol/2013 (Assessment Year 2005-06) (Deputy Commissioner of Income Tax vs. West Bengal Fisheries Corporation Ltd.) and the crossobjection No.44/Kol/2013 (Assessment Year 2005-06) (West Bengal Fisheries Corporation Ltd. Vs. Deputy Commissioner of Income Tax) p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4/- Discussion above _______________ Net Profit Rs. 77,41,629/- Less: Accumulated loss Brough forward fromPrevious Year Rs. 2,88,71,747/- Loss to be carried forward for Rs.(-) 2,11,30,118/- Next year Tax, thereon NIL Assessed u/s. 143 (3) as above Please issue Demand Notice and copy of the order to the assessee. ( MONALISA PAL MUKHERJEE ) Income Tax Officer Ward-2 (3), Kolkata 5. As stated by learned counsel for the respondent assessee, a notice dated 23.03.2010 under Section 147/148 of the Act, 1961 for the assessment year 2005-06 was issued by the assessing officer to the respondent assessee to reopen the aforesaid assessment. After reopening, the assessing officer passed reassessment order dated 21.12.2010 assessing the respondent assessee to tax. Aggrieved with the reassessment order, the respondent assessee preferred an appeal No.348/CIT(A)-I/C-2/10- 11 before the Commissioner of Income Tax (Appeals) I, Kolkata, which was partly allowed by the CIT(A) on merits by its order dated 27.11.2012 and the point taken by the respondent assessee challenging the jurisdiction for reassessment on the ground of change of opinion was rejected. 6. Aggrieved with the aforesaid order of CIT(A), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and perused the paper. 10. Before we proceed to consider rival submissions of learned counsel for the parties, it would be appropriate to reproduce Section 115JB of the Act, 1961 as applicable for the assessment year 2005-06:- Special provision for payment of tax by certain companies. 115JB. (1) Notwithstanding anything contained in any other provision of this Act, where in the case of an assessee, being a company, the income-tax, payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the 1st day of April, 2001, is less than seven and one-half per cent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income-tax at the rate of seven and one-half per cent]. (2) Every assessee, being a company, shall, for the purposes of this section, prepare its profit and loss account for the relevant previous year in accordance with the provisions of Parts II and III of Schedule VI to the Companies Act, 1956 (1 of 1956): Provided that while preparing the annual accounts including profit and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that where this section is applicable to an assessee in any previous year, the amount withdrawn from reserves created or provisions made in a previous year relevant to the assessment year commencing on or after the 1st day of April, 1997 shall not be reduced from the book profit unless the book profit of such year has been increased by those reserves or provisions (out of which the said amount was withdrawn) under this Explanation or Explanation below the second proviso to section 115JA, as the case may be; or] (ii) the amount of income to which any of the provisions of section 10 [(other than the provisions contained in clause (23G) thereof)] or section 10A or section 10B or section 11 or section 12 apply, if any such amount is credited to the profit and loss account; or [(iii) the amount of loss brought forward or unabsorbed depreciation, whichever is less as per books of account. Explanation. For the purposes of this clause,- (a) the loss shall not include depreciation; (b) the provisions of this clause shall not apply if the amount of loss brought forward or unabsorbed depreciation is nil; or] (iv) the amount of profits eligible for deduction under section 80HHC, computed un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing a company, the income tax payable on the total income as computed under this Act in respect of any previous year relevant to the assessment year commencing on or after the first day of April, 2001, is less than seven and one-half per cent of its book profit, such book profit shall be deemed to be the total income of the assessee and the tax payable by the assessee on such total income shall be the amount of income tax at the rate of seven and one-half per cent. 12. As per Explanation to Section 115JB of the Act, 1961, for the purposes of this Section, book profit means the net profit as shown in the profit and loss account for the relevant previous year prepared under subsection (2) which shall be increased by the amounts referable in clauses (a) to (f) if debited in the profit and loss account and the book profit shall be reduced by the amounts falling under clauses (i) to (vii) to the aforesaid Explanation. 13. It is evident from bare reading of the original assessment order passed by the assessing officer under Section 143(3) of the Act, 1961 that there was a book profit of Rs.58,67,595/- but the assessing officer has not considered it at all for computation of tax under Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee, the relevant records including the books of account of the assessee were duly examined by the Assessing Officer during the course of assessment proceedings and only after having satisfied with the same, the claim of the assessee was accepted by him in the assessment completed under section 143(3). The contention raised by the ld. D.R. in this regard, even otherwise runs contrary to the decision of the Hon'ble Calcutta High Court in the case of Debashis Moulik vs. ACIT reported in 370 ITR 660, wherein the assessment originally completed under section 143(3) was sought to be reopened by the Assessing Officer on the basis of new facts discovered from the assessment records and it was held by the Hon'ble Calcutta High Court that the assessment was reopened by the Assessing Officer merely on the basis of change of opinion, which was not permissible in law. 9. In the case of C1T vs. Kelvinator of India Limited (supra), cited by the ld. counsel for the assessee, it was held by the Hon'ble Supreme Court that after the amendment made w.e.f. 1st April, 1989, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law laid down in the judgments referred above, leaves no manner of doubt that:- (a) The assessing officer under Section 147 of the Act, 1961 has the power to re-assess any income which escaped assessment to tax for any assessment year subject to the provisions of Sections 148 to 153. The power to reassess under Section 147 of the Act, 1961 has been incorporated so as to empower the Assessing Authorities to re-assess any income on the ground which escaped his knowledge. (b) The words reason to believe suggest that the belief must be bona fide and must be that of an honest and reasonable person based upon reasonable grounds and that the Income Tax Officer may act on direct or circumstantial evidence but not on mere suspicion, gossip or rumour. His vague feeling that there might have been some escapement of income from assessment is not sufficient. The reasons for the formation of the belief must be based on tangile material and must be based on a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he original assessment proceedings on the basis of material facts and subsequently finds it to be erroneous; it is not a valid reason under the law for re-assessment. 18. Applying the settled position of law on facts of the present case on the question of change of opinion as discussed above, we hold that the original assessment order under Section 143(3) of the Act, 1961 is totally silent on liability of the assessee to tax under Section 115JB of the Act, 1961. He neither noticed the provisions of Section 115JB nor formed any opinion with regard to liability to tax of the assessee on book profit. The assessment order was non-speaking and cryptic. Therefore, reassessment proceedings initiated by the assessing officer under Section 147 of the Act, 1961, is not based on change of opinion. The finding of the ITAT in the impugned order to hold that the reassessment proceedings initiated by the assessing officer was based on change of opinion, is perverse and unsustainable in law. 19. We also find that the ITAT has not decided the appeal of the revenue on merit with regard to the income which allegedly escaped assessment to tax. 20. For all the reasons aforestated, the impugned order da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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