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TMI Blog2025 (3) TMI 307X X X X Extracts X X X X X X X X Extracts X X X X ..... sion that there was failure on the part of the petitioner to fully disclose all materials that were required for passing the assessment order dated 31.03.2016, and there should have been a live link between the information that was surfaced for issuance of notice under Section 148 of the Income Tax Act, 1961, to reopen the assessment and to pass fresh re-assessment order under Section 147 of the Income Tax Act, 1961. To invoke the machinery under Section 148 of the IT Act as it stood till 31.03.2021, the Courts have repeatedly held that the term "reason to believe" means that Assessing Officer must have some tangible material passing before assuming jurisdiction under Section 147 of the IT Act. A reference is made to Commissioner of Income Tax, Delhi Vs. Kelvinator of India Ltd. [2010 (1) TMI 11 - SUPREME COURT] The dispute in the present case pertains to the Assessment Year 2014-2015. It can therefore hardly be said that the Assessing Officer was unaware of the search proceedings and the seizure made pursuant to the search conducted on 03.09.2013 resulting in seizure of a sum of Rs. 1,77,50,045/- from the petitioner Firm, and a sum of Rs. 50,00,000/- from the petitioner's pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012-2013 11,31,70,000 9,25,02,130 2,06,67,870 2013-2014 9,99,30,000 7,92,45,220 2,06,84,780 Total : 4,85,67,400 5. It is submitted that as far as search conducted during the Financial Year 2013-2014 which is subject matter of the Assessment Year 2014-2015 is concerned, the petitioner by Letter dated 28.10.2013 admitted the tax liability on Rs. 1,98,00,000/-, however, voluntarily had enhanced the same to Rs. 2,34,86,595/- in the returns filed on 22.02.2016. 6. Learned counsel for the petitioner would submit that the cash and the golds that were seized during the search conducted on 03.09.2013 barring an amount of Rs. 1,77,50,045/-, the other amounts of Rs. 50,00,000/- of each have been offered independently to tax by Mr.Dhanapal, who is a partner of the petitioner Firm and in the hands of M/s.VIP City (petitioner's another Firm) respectively along with the value of gold seized from M/s.VIP City of Rs. 38,69,168/-. 7. It is submitted that there is no scope for including the entire amount into taxable income of the petitioner particularly when the Assessment Order dated 31.03.2016 itself preceded a Notice issued under Section 142(1) of the Income Tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was filed was assessed on 31.03.2016 was under the assumption that the entire amount of Rs. 3,16,19,213/- that was seized on 03.09.2013 had been offered to tax by the petitioner. 13. Arguing further, the learned Senior Standing Counsel for the respondents would submit that in the return that was filed by the petitioner on 22.02.2016, the petitioner declared an income of Rs. 2,34,86,595/- only. It was not based on any records. It is further submitted that the law on the subject is clear. It is further submitted that once an Assessment Order is passed, it can be rectified under Section 154 of the Income Tax Act, 1961 for the error apparent on the face of record or a revision pursuant to an Order under Section 263 of the Income Tax Act, 1961 by the Higher Officer on the ground that the assessment was erroneous and prejudicial to the interest of the Revenue or under Section 264 of the Income Tax Act, 1961 or under Section 147 of the Income Tax Act, 1961 in case of escaped assessment. 14. It is submitted that in this case, the income had escaped assessment as the Assessing Officer had no occasion to form an opinion regarding the amount recovered during the course of search operation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 22.02.2016. 20. No Income Tax Officer can be presumed to have completed the assessment without looking at all this material. This is the view of this Court in Ramachari Case, (1961) 41 ITR 142 (Mad). Thus, the notice issued on 31.03.2021 under Section 148 of the Income Tax Act, 1961, was on the account of "change of opinion", the assessment was in the background of the above search in respect of which notices were issued under Section 153A of the Income Tax Act, 1961 as mentioned above which have culminated in the Assessment Orders for the Assessment Years 2011-2012, 2012-2013 and 2013- 2014. 21. The Hon'ble Supreme Court in Kalyanji Mavji and Co. Vs. Commissioner of Income Tax, (1976) 102 ITR 287 / (1976) 1 SCC 985, in the context of Section 34(1)(b) of the Income Tax Act, 1922 which is pari materia with Section 147 of the Income Tax Act, 1961 and as it stood prior to 01.04.2021. 22. This view was also upheld in CIT, Excess Profits Tax, Hyderabad, Andhra Pradesh v. V. Jagan Mohan Rao (1969) 2 SCC 389, while following the decision of the Hon'ble Supreme Court in Maharaj Kumar Kamal Singh v. CIT, (1959) 35 ITR 1, observed as follows : "In these circumstances it w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed earlier by himself (or, more often, by a predecessor ITO) was, in his opinion, incorrect. Judicial decisions had consistently held that this could not be done and the IENS case [(1979) 4 SCC 248 : 1979 SCC (Tax) 336 : (1979) 119 ITR 996] has warned that this line of cases cannot be taken to have been overruled by Kalyanji Mavji [(1976) 1 SCC 985 : 1976 SCC (Tax) 111 : (1976) 102 ITR 287]. The second paragraph from the judgment in the IENS case [(1979) 4 SCC 248 : 1979 SCC (Tax) 336 : (1979) 119 ITR 996] earlier extracted has also reference only to this situation and insists upon the necessity of some information which make the ITO realise that he has committed an error in the earlier assessment. This paragraph does not in any way affect the principle enumerated in the two Madras cases cited with approval in Anandji Haridas [(1968) 21 STC 326 : AIR 1968 SC 565 : (1968) 1 SCR 661]. Even making allowances for this limitation placed on the observations in Kalyanji Mavji [(1976) 1 SCC 985 : 1976 SCC (Tax) 111 : (1976) 102 ITR 287], the position as summarised by the High Court in the following words represents, in our view, the correct position in law: (ITR p. 629) "The result of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the income or redoing of an assessment and be allowed a claim which he either failed to make or which was otherwise rejected at the time of original assessment which has since acquired finality. Of course, in the reassessment proceedings it is open to an assessee to show that the income alleged to have escaped assessment has in truth and in fact not escaped assessment but that the same had been shown under some inappropriate head in the original return, but to read the judgment in Jagan Mohan Rao case [(1969) 2 SCC 389 : (1970) 75 ITR 373] as if laying down that reassessment wipes out the original assessment and that reassessment is not only confined to "escaped assessment" or "under assessment" but to the entire assessment for the year and start the assessment proceedings de novo giving right to an assessee to reagitate matters which he had lost during the original assessment proceeding, which had acquired finality, is not only erroneous but also against the phraseology of Section 147 of the Act and the object of reassessment proceedings. Such an interpretation would be reading that judgment totally out of context in which the questions arose for decision in that case. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d assessment. That material is the retrospective legislative amendment. Under the pre-1989 law of reassessment, information as to the true state of law could form a valid basis for reopening the assessment : Maharaj Kumar Kamal Singh v. CIT (1959) 35 ITR 1 (SC). A retrospective amendment of the law can even permit action for rectification of the assessment on the ground of mistake apparent from the record : M.K. Venkatachalam v. Bombay Dyeing & Manufacturing Co. Ltd. (1958) 34 ITR 143 (SC). But just because action for rectification is permissible, it does not follow that no action can be taken for reopening, for, the powers under sections 147 and 154 are not mutually exclusive; there could be some overlapping, and so long as the conditions for the applicability of the sections are satisfied, the action taken thereunder has to be validated and it is no answer to say that action should be taken under another section. Under this principle, it is held that one of the reasons for reopening in the present case being the retrospective amendment, the notice is valid." 26. However, this Court dealt with the case where the assessment was completed on 30.11.2006 under Section 143(3) of the I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of any enquiry with reference to this aspect and that, the amount involved being sufficiently large, the ITO, if he had been aware of the existence of the entry would certainly have discussed it. He urged that the question whether the ITO had considered this matter at the time of the original assessment or not is purely a question of fact and the Tribunal's conclusion thereon having been endorsed by the High Court, there is no justification to interfere with it at this stage. 22. We think there is force in the argument on behalf of the assessee that, in the face of all the details and statement placed before the ITO at the time of the original assessment, it is difficult to take the view that the Income Tax Officer had not at all applied his mind to the question whether the surplus is taxable or not. It is true that the return was filed and the assessment was completed on the same date. Nevertheless, it is opposed to normal human conduct that an officer would complete the assessment without looking at the material placed before him. It is not as if the assessment record contained a large number of documents or the case raised complicated issues rendering it probable that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the information that was surfaced for issuance of notice under Section 148 of the Income Tax Act, 1961, to reopen the assessment and to pass fresh re-assessment order under Section 147 of the Income Tax Act, 1961. 31. Pursuant to the search conducted under Section 132 of the Income Tax Act, 1961 (for brevity, "IT Act") on 03.09.2013 in the above mentioned premises and at the place of the petitioner, notices dated 12.01.2016 were issued to the petitioner under Section 153A(1) of the IT Act for the preceding Assessment years and Assessment Orders were passed on 31.03.2016 as detailed below:- Year of Assessment Income Returned in the original return of Income Income Returned in Return of Income filed in response to 153A Notice Additional Income Offered to Tax Total Income determined, finalized and accepted 2011-2012 1,13,85,250 1,86,00,000 72,14,750 1,86,00,000 2012-2013 9,25,02,130 11,31,70,000 2,06,67,870 11,31,70,000 2013-2014 7,92,45,220 9,99,30,000 2,06,84,780 9,99,30,000 32. These proceedings have also culminated in the Assessment Orders for the above mentioned Assessment Years in terms of Section 153A(2) of the IT Act. 33. As far as Assessment Year 2014- ..... 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