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TMI Blog2018 (2) TMI 2129X X X X Extracts X X X X X X X X Extracts X X X X ..... aw in upholding the validity of order passed u/s 147 of the IT Act, 1961. 2. The Ld. Commissioner of Income Tax (Appeals) has erred on facts and in law in not allowing the deduction u/s 80IA on other miscellaneous income of Rs. 26,02,007/-. 3. The assessee carves right to add, alter, amend, and modify any of the ground of appeal. 4. necessary cost be allowed to the assessee." Since, the assessee has raised a legal issue regarding the validity of reopening which goes to the rood of the matter, therefore, first we take up ground No. 1 of the cross objection of the assessee. 3. The assessee filed its return of income in the year under consideration on 22.10.2007 declaring income of Rs. 26,67,24,890/- after claiming his deduction u/s 80IA (4) (iii) of the Act of Rs. 56,84,24,379/-. The AO completed the scrutiny assessment u/s 143(3) of the Act vide order dated 24.12.2009 whereby the AO allowed the deduction u/s 80IA of the Act and assessed the total income of the assessee at Rs. 29,91,67,100/-. Thereafter the AO issue a notice u/s 148 of the Act on 23.03.2012 whereby proposed to disallowance the expenditure of Rs. 1,28,37,888/- incurred on maintenance of transferred area. The r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he has relied upon the decision of Hon'ble jurisdiction High Court in case of CIT vs. Hindustan Zinc Ltd. 241 Taxman 392 and submitted that the Hon'ble Hight Court has held that formation of belief by the AO regarding escaped income was based on re-appreciation of material already available on record at the time of scrutiny assessment which amounted to mere change of opinion. Reopening of completed assessment without any fresh material, merely on basis of change of opinion of the AO was without jurisdiction and patently illegal. The ld. AR has then relied upon the decision of Hon'ble Delhi High Court in case of Pr. CIT vs. Tupperware India Pvt. Ltd. 127 DTR 161 as well as decision of Hon'ble Supreme Court in case of CIT vs. Kelvinator of Indian Ltd. 320 ITR 561 and submitted that when there was no material with the AO so as to constitute the reason to belief that the income has escaped assessment then, reopening is not valid. The ld. AR has submitted that the ld. CIT(A) has relied upon the decision of Hon'ble Bombay High Court in case of Eleganza Jewellery Ltd. vs. CIT 364 ITR 132 however, this decision is distinguishable on the fact in as much as in the case of the assessee there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) on 24.12.2009. Therefore, there is no dispute that the AO has proposed to reopen the assessment by re-appreciating and re-evaluating the material already available on assessment record. Neither there was any change in the material available with the AO or any other information received thereafter nor any change in the judicial authority on the point after completion of assessment u/s 143(3) of the Act. There is no quarrel that mere production of books of account would not necessarily be amount to discloser of fully and truly all the facts necessary for assessment. However, in the case in hand the assessee has claimed the deduction u/s 80IA and as per the details of income in the income and expenditure account as well as in the audit report filed by the assessee, it is clear that the assessee has given the incomes under separate heads making it obvious and apparent the nature of income and items of income. Further, the Assessing Officer even did not disturb the original order of allowing deduction u/s 80IA while considering the first reassessment u/s 143(3) r.w.s. 147 on 01.03.2013. It is not the case of the Department that nitty-gritty of the nature of income on which the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under- assessed. The second is that he must have also reason to believe that such "under-assessment", has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under section 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the Income-tax Officer could have jurisdiction to issue a notice for the assessment or reassessment beyond the period of four years, but within the period of eight years, from the end of the year in question.' The Hon'ble Supreme court further observed that it is duty of every assessee to disclose fully and truly all material facts necessary for his assessment. But, his duty does not extend beyond this. The Hon'ble Supreme Court opined that once all primary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advice the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening assessment. The grounds or reasons which lead to the formation of the belief contemplated by section 147 (a) of the Act must have a material bearing on the question of escapement of income of the assessee from assessment because of his failure or omission to disclose fully and truly all material facts. Once there exist reasonable grounds for the Income-tax Officer to form the above belief, that would be sufficient to clothe him with jurisdiction to issue notice. Whether the grounds are adequate or not is not a matter for the court to investigate. The sufficiency of the grounds which induce the Income-tax Officer to act is, therefore, not a justiciable issue. It is, of course, open to the assessee to contend that the Income tax Officer did not hold the belief th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch are relevant and material. The court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under Section 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any such escapement was by reason of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid." (Emphasis Supplied) 10. In the matter of Sri Krishna (P.) Ltd. v. ITO [1996] 221 ITR 538/87 Taxman 315, the Hon'ble Supreme Court has observed as under : "The Income-tax Officer can issue notice under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er whether that material had any rational connection or a live link for the formation of the requisite belief." (Emphasis Supplied) 11. In the matter of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561/187 Taxman 312 (SC), the Hon'ble Supreme Court held: "However, one needs to give a schematic interpretation to the words 'reason to believe', failing which section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. One must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess, but the reassessment has to be based on fulfilment of certain pre-conditions and if the concept of 'change of opinion' is removed as contended on behalf of the department, then in the garb of reopening 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 1-41989, the Assessing Officer has power to reopen, provided there is 't ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r view has been taken by the Hon'ble Delhi High Court in case of Pr. CIT vs. Tupperware India Pvt. Ltd. (Supra). We further note that it is not the case of earning the interest income from the surplus fund deposited in the bank or other incomes are not connected with the business activity of the assessee developing and maintaining industrial parks but the interest and penal interest received by the assessee in respect of the late payment made by the allottees. Further, the other incomes though it is very small amount is also in respect of the maintenance and fee for sanction of plans etc and therefore, it is apparent that on this issue there is a possibility of two views. When the Assessing Officer has allowed the claim of the assessee u/s 80IA in the original assessment claim u/s 143(3) and also not disturbing the said claim in the first reassessment order passed u/s 143(3) r.w.s. 147 of the Act then the reopening for the purpose of the disallowing the said deduction on the issue on which two views are possible is not permissible in the absence of any fresh material came to the knowledge of the AO which could lead to the formation of belief that the income chargeable to tax has es ..... X X X X Extracts X X X X X X X X Extracts X X X X
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