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TMI Blog2024 (12) TMI 1175X X X X Extracts X X X X X X X X Extracts X X X X ..... d legal position as held in case of Kelvinator of India Limited [ 2010 (1) TMI 11 - SUPREME COURT] held after 1st April, 1989, AO 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. 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. 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 AO. In view of the above conspectus of law, the impugned notice dated 31st March, 2021 is hereby quashed and set aside and accordingly, the petition succeeds. The impugned notice is hereby quashed and set aside and accordingly, the petition succeeds. - HONOURABLE MR. JUSTICE BHARGAV D. KARIA AND HONOURABLE MR. JUSTICE D.N.RAY Appearance: For the Petitioner(s) No. 1: Mr Tushar Hemani, Ld. Sr. Adv With Ms Vaibha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad booked/sold residential flats to the customers by receiving advances/deposits and thereby the amount was shown as liability and in asset side some amount was shown as Inventory/construction/Work in progress. This transpires that the assessee had received substantial revenue against expenditure made in the work in progress. However, no matching income for the receipt of amount on percentage completion method as per the provisions of Section AS-7, was offered for taxation. The revenue is recognised every year on basis of percentage of works completed as certified by civil engineer/architect. However, the assessee has not followed the percentage completing method and not offered the true income. (ii) in this case during the verification of Income-tax case records of the assessee for A.Y.2014-15, it was observed that the assessee had made investment of Rs. 1,11,97,054/- in partnership firms as capital in South Beach Investment LLC, which is tax exempt in the hands of the assessee u/s. 10 (2A). Therefore, the expenditure relatable to the exempt investment was required to be disallowed, which, in the instant case, comes to Rs. 55,985/- (1,11,97,054*0.5%). Failure to do so has resulted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issues which are raised in the reasons recorded for re-opening of the assessment. Reliance was placed on the letter dated 30th June, 2016 (point No.2) relevant to the point Nos.12, 13, 14, and 15 of the notice dated 20th July, 2016, letter dated 3rd October, 2016 and other submissions made during the course of the regular assessment. 6.3. It was therefore submitted that there is no escapement of income chargeable to tax even on merits as no addition is called for. 6.4. It was submitted that on bare perusal of the reasons recorded, it is apparent that there is no allegation made by the respondent against the assessee for not disclosing fully and truly all material facts during the course of the Assessment Proceedings. It was therefore submitted that the impugned notice is liable to be quashed and set aside on ground of mere change of opinion. 7.1. On the other hand, learned Senior Standing Counsel Mr. Karan Sanghani for the respondent No. 1 submitted that the respondent-Assessing Officer after taking into consideration the relevant material available on the record has formed the prima-facie reason to believe to re-open the assessment for the year under consideration. 7.2. It was fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as held by the Hon ble Supreme Court in case of Commissioner of Income Tax versus Kelvinator of India Limited reported in (2010) 320 ITR 561 (SC) wherein, it is held as under : 6. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of mere change of opinion , which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power ..... X X X X Extracts X X X X X X X X Extracts X X X X
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