EMINENCE CORPORATION (P) LIMITED,BHUBANESWAR vs. ITO,WARD-2(3), BHUBANESWAR

This appeal had originally been disposed off by the decision of the coordinate bench of the Tribunal vide order dated 06.08.2020. The said order of the Tribunal had been recalled in the Miscellaneous Application filed by the assessee being M.A.No.33/CTK/221 vide order dated 19.08.2022 for the limited purpose of adjudicating the ground No.1 of the assessee’s appeal. Now, the appeal is fixed for hearing before us today for adjudicating the ground No.1 raised in the grounds of appeal, which is as under :-

“1. That the order passed u/s.143(3)/147 of the I.T.Act, 1961 by the AO on 30.9.2011 is arbitrary, illegal and devoid of merit, being unjustified deserves to be quashed in limine.

At the time of hearing, it was submitted by the ld. AR that the return of income for the relevant assessment year came to be filed on 31.10.2005 and the assessment came to be completed u/s.143(3) of the Act on 13.12.2007. Notice u/s.148 of the Act came to be issued on 31.03.2011 and reassessment came to be completed on 30.09.2011. It was submitted that the reasons recorded for the reopening was extracted by the ld. AO at page 2 of his order. It was the submission that the reopening was for the exclusive purpose of invoking the provisions of Section 40A(3) of the Act in respect of alleged cash payments in excess of Rs.20,000/-. It was the submission that the alleged addition was to an extent of Rs.9,68,087/-. It was the submission that under identical circumstances the Hon’ble Jurisdictional High Court of Orissa in the case of Ram Kumar Agrawal Engineers Private Limited in W.P(C) Nos.11277 and 11291 of 2022, dated 19.05.2022 had quashed the reassessment on the ground of change of opinion. Further it was submitted by the ld. AR that under identical circumstances, the Hon’ble Jurisdictional High Court had, in the case of M/s B.C.Nayak, in W.P.(C) No.797/2012, quashed the assessment by holding as follows :- “3. It is stated by the learned counsel for the Revenue that the original assessment was completed u/s.143(3) of the Act on 04.12.2008, however, subsequently the assessment was re-opened u/s.147 of the Act on the ground that the assessee has made payments in contravention to the provision of Section 40A(3) and no tax has been deducted from the payments made to labour agent. No books of accounts or any supporting documents have been filed or produced for verification.

We have heard the rival legal contentions urged by the learned counsel for the parties and perused the record.

No doubt Section 147 of the Act is very wide and conferred power upon the Assessing Officer to re-assess the assessment made previously where there is escaped assessment and sufficient basis for re-assessment. However, Section 147 does not authorize the assessing officer to reopen his own assessment order on the basis of „reason to belief‟ by reviewing its own original assessment order without any basis and merely in change of opinion of the assessing officer. In the instant case, if the original order of assessment dated 04.12.2008 is erroneous or prejudicial to the interest of revenue or has not been properly, power under Section 263 is vested upon the Commissioner for revision of the orders of the Assessing Officer in the better interest of the revenue. 6. Considering the entire fact situation of the case we are of the view that the exercise of power by the Assessing Officer in the instant case is not sustainable in law. Hence, the impugned order of re-assessment dated 22.11.2011 under Annexure-4 is quashed. Writ Petition accordingly allowed. 7. If the Revenue is not satisfied with the assessment order dated 04.12.2008, it is open for the O.P.No.1-Commissioner to exercise its power U/s.263 of the Act.” 4. Ld. AR further placed reliance on the decision of the Hon’ble Jurisdictional High Court in the case of Sri Jagannath Promoters & Builders, reported [2021] 133 taxmann.com 270 (Orissa), wherein also under similar circumstances, the Hon’ble High Court has held that when all the facts are already disclosed by the petitioner in the questionnaires issued by the AO in the course of original assessment proceedings, the reason to believe that income has escaped assessment was based on mere change of opinion and had quashed the reassessment proceedings. It was the submission that the present reassessment was also only on the basis of change of opinion and is liable to be quashed. 5. In reply, the ld. Sr. DR submitted that the ground No.1, as extracted above, was only a general ground and on merits the addition has already Tribunal. It was submitted that the addition having already been sustained by the Tribunal, this is clearly a case of escapement of income and the reopening is liable to be upheld.

We have considered the rival submissions. The question of whether the income has escaped is to be considered at the point when the reasons are recorded and the notices were issued. Clearly the Hon’ble Jurisdictional High Court of Orissa in the various cases, referred to supra, has categorically held that for the purpose of making an addition by invoking the provisions of Section 40A(3) of the Act, the provisions of reopening u/s.147/148 of the Act cannot be invoked especially when all the materials were before the AO in the course of original assessment u/s.143(3) of the Act. When all the facts and evidences were before the AO in the course of original assessment and no fresh evidence had been brought out or had come to the attention of the AO, the reopening would be clearly on the basis of change of opinion and this is not permissible. This being so, in respectful obedience of the principle laid down by the Hon’ble Jurisdictional High Court in the cases referred to above, the reopening as made is found to be unsustainable and the same stands quashed. Since we have quashed the reassessment framed by the AO u/s.143(3)/147 of the Act on the issue raised by the assessee in ground No.1, the submission of the ld. Sr. DR that this Tribunal has confirmed the addition on merit is not sustainable.