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TMI Blog2024 (10) TMI 882X X X X Extracts X X X X X X X X Extracts X X X X ..... the reopening of assessment is bad in law, however the AO was not convinced and continued to proceed with the reassessment. The reason to believe was judicially interpreted to mean an independent belief of the AO not based on borrowed satisfaction or opinion of another authority . Such reason to believe was to be based on new tangible material and not on material already available on record . The Hon ble Supreme Court in Calcutta Discount Co. Ltd.[ 1960 (11) TMI 8 - SUPREME COURT] held that even if the conclusion drawn by the AO from the facts disclosed by the assessee during the course of original assessment is erroneous, the AO cannot reopen the assessment to change that erroneous conclusion once reached at. Also in CIT v. Kelvinator of India Ltd.[ 2010 (1) TMI 11 - SUPREME COURT] held that mere change of opinion cannot per se be a reason to reopen the concluded assessment. The Court highlighted the conceptual difference between power to review and power to reassess and that review cannot be done in the garb of reopening the assessment. The concept of change of opinion must be treated as an in-built test to check abuse of power by the AO. CBDT in Circular No. 549 dated 31 Octobe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the AO issued a notice u/s. 148 dated 20.04.2011 for reopening the assessment. The assessee filed return in pursuant to the above notice. The reason for reopening was furnished vide their letter dated 30.05.2011, which reads as under: It was seen from the income and expenditure account and the Schedule VIII to the balance sheet that you are in receipt of interest income of Rs. 1,55,65,852/-. However, in the computation of taxable income, mutuality income / loss alone has been separately dealt with and interest income has been made part of the racing operations. Infact the interest income has to be dealt under the head income from other sources and brought to tax apart from that the profit and account shows a lease rent of Rs. 3.90 crores which does not seem to have the character of racing income or mutuality income. Thus there is reason to believe that income has escaped assessment . 4. The Appellant/Assessee vehemently objected to the reopening and filed Writ Petition before the Hon'ble Madras High Court in WP No.3005 of 2013 which was disposed of on 04.07.2014 by directing the Assessee to submit its arguments before the Assessing Officer. Accordingly, the Assessee submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmissibility and furnish a report. The AO in the remand report after examining the issue vide letter dated 15.02.2012 submitted that: On verifying the facts from the balance sheet, statement of computation of income and the assessment order for the AY 2007-08, it is seen that as per the balance sheet, the interest income received has been considered as 'other sources and business loss of Rs. 2,32,12,010/- has been arrived in the Profit and Loss Account. In the computation statement, as per the Income Tax Act, 1961, the assessee has started the computation with the business income of the same amount (Rs.2,32,12,010/-) and after making, adjustments as per the Income Tax Act, 1961 the assessee arrived at a loss of Rs. 56,73,976/-. In the assessment order, the assessing officer had started the computation with business loss as arrived at by the assessee in the computation statement (Rs.2,32 12,010/-) and has not disallowed the interest income of Rs. 1,55,65,851/-while considering the same as income from other sources. Therefore, on examining the facts of the case, it is stated that the business loss as computed in the assessment order for the AY 2007-08 is inclusive of interest inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oss. As pointed out by the CIT(A) in his order dated 28.03.2012, in the appeal against the order of assessment u/s. 143(3) of the Act for the impugned Assessment year, in the case of interest income, if the lease rental of Rs. 3.90 Crores is to be assessed as income from other sources (as it is lease of land only), the loss figure will correspondingly increase and if the lease rental is set off against such increased loss (in accordance with sec.71), the net loss figure will still be Rs. 56,73,976/-. Hence, the ld. Counsel pleaded that there is no escapement of income. The basic requirement of escapement of income is not met and hence the reopening on this point is also without jurisdiction. 10. The Learned Authorised Representative heavily relied on the judgement of the Hon'ble Madras High Court in the case of TANMAC India Ltd reported in 97 CCH 189, wherein the Division bench of the Jurisdictional High Court held that in that case the perusal of the reason for reopening would indicate that the AO proceeded solely on the basis of return of income and the enclosures thereto, being financials to initiate proceedings for reassessment. The aforesaid documents, however was part of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r reopening and therefore the reopening as invalid and the order of reassessment should be set aside. Further, in the course of reassessment proceedings, the AO had picked up two more issues. (1) the losses incurred by the Assessee is loss to which sec.74A applies and hence cannot be set off against other income and; (2) the long term lease deed dated 05.12.2006 is in fact a sale deed and assessed capital gains on the basis of deemed consideration at the guide line value. The Ld.AR further stated that it was held in the following decisions that the reasons mentioned in the reopening notice has to be read as it is. No additions and/or inferences are permissible. No amendment or substitution to the reasons originally intimated is permissible to substantiate the reopening. 1. Hindustan lever Ltd v R.B.Wadekar, 268 ITR 339 (Bom) 2. Peninsula Land Ltd 439 ITR 582 (Bom) 3. Donaldson India Filter Systems P. Ltd ITA-86/2014 dt.19.01.2015 (Del.) As the reasons for reopening first disclosed is without jurisdiction on the threshold itself, these further points considered in the course of the reassessment proceedings does not require consideration. In any event, as regards the first point, it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact in Para 6.9.9 of his order. There cannot be two sales of the same property between the same parties. It is the sale deed executed on 13.04.2018 which is the proper sale of the property and not under the lease deed 20.12.2006. Under the circumstances it is not clear on what basis the AO and CIT(A) concluded that the sale was completed under the lease deed dated 20.12.2006. The terms of the lease deed clearly stipulated return of property on the termination of the lease. Hence, factually as well as legally, the Lease deed dated 20.12.2006 cannot be considered as a sale deed. The reliance placed by the revenue on the decision of the Apex Court in the case of R.K.Palshikar (HUF) v Commissioner of Income Tax (172 ITR 311) is misplaced and is distinguishable on facts. Thus, the ld.AR prayed that for all the reasons stated above in the order of reassessment dated 24.10.2014 for the Assessment Year 2007-08 requires to be set aside on the ground that reopening is without jurisdiction. 13. Per contra, the ld.DR relied on the orders of the Lower authorities. 14. We have heard the rival contentions, perused the materials available on record and gone through the orders of the authorities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1989) in the then existing Section 147 of the Act. The Circular itself indicates that Legislature has never been the intention to permit the Assessing Officer to reopen an assessment on the basis of change of opinion . Therefore, in the cases where an original assessment had taken place and the Assessing Officer had formed a particular view based on the available material, the Assessing Officer could not have validly reopened an assessment. In the present case, the AO has reopened the original assessment with no fresh tangible material but based on the material available in the assessment records which was also taken upto the CIT(A). Therefore, the action of the AO/CIT(A) cannot be countenanced. The arguments of the assessee challenging the reasons recorded by the AO for reopening of the original assessment is justified based on reliance of the decisions of the various Hon ble courts (Supra). Thus, the legal grounds raised by the assessee are allowed. Consequently, we quash the order of reassessment and impugned order of Ld.CIT(A). The grounds of appeal raised by the assessee in respect of merits are not adjudicated, as these grounds become academic since the appeal is decide ..... X X X X Extracts X X X X X X X X Extracts X X X X
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