SANJEEV SAWANTH,BANGALORE vs. ACIT/DCIT, CIRCLE-4(3)(1), BANGALORE

PER SHRI WASEEM AHMED, ACCOUNTANT MEMBER: This appeal is filed by the Assessee against the order of Ld. NFAC vide DIN: ITBA/NFAC/S/250/2025-26/1080678390(1) dated 12-Sep-2025 for the Assessment Year 2012-13.

2.1 The Ld. AR before us submitted that the reassessment proceedings u/s 147 of the Act were initiated due to a mismatch between the amount of sundry creditors shown by the assessee and the amount confirmed by such creditors. He submitted that this issue was examined by the AO during the original assessment proceedings. All the relevant facts and details relating to the sundry creditors were already available before the AO.

2.2 Therefore, according to the Ld. AR, the reassessment proceedings were initiated on the basis of the same facts and material which had already been examined during the original assessment. Such reopening amounts to a change of opinion and is not permissible in law. In support of his contention, the Ld. AR relied upon the judgment of the Hon'ble Karnataka High Court reported in 167 ITR 22 and the judgment of the Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd.

5.1 The Hon'ble Karnataka High Court in the case of CIT v. Kalappa, Forest Contractor, reported in [1987] 167 ITR 22 (Karnataka), has held that where the assessee has disclosed the primary facts relating to the transaction, it is for the AO to make the necessary inquiries and draw the proper inference. If the AO fails to make such inquiry due to oversight, the same cannot be treated as a failure on the part of the assessee to disclose fully and truly all material facts. The relevant para of the cited judgement is reproduced below:

“2. The assessee is an individual. The assessment year is 1973-74. The original assessment had been completed by the ITO under section 143(1) of the Act on the income declared at Rs. 21,640. Subsequently, on the basis of the information that the purchaser of the lorry belonging to the assessee had disclosed the purchase value at Rs. 45,000 to obtain a loan from the bank, the ITO has reopened the assessment by invoking the provisions of section 147 of the Act. On appeal, the AAO rejected the assessee's contention and upheld the reopening of the assessment. But the Tribunal held to the contrary. The Tribunal was of the opinion that the assessee had made available all the informations and disclosed all the primary facts necessary for the assessment along with the return and that reopening of the assessment was, therefore, bad in law. The Tribunal also held that there has been no omission or failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment. The Tribunal has given detailed reasons in support of that conclusion on the material facts disclosed by the assessee at the first instance. On the facts found, in our opinion, the conclusion of the Tribunal is justified. 3. A case similar to the present one has been considered by the Supreme Court in Gemini Leather Stores v. ITO [1975] 100 ITR 1. The Supreme Court while reversing: the decision of the High Court has observed that if the assessee has disclosed primary facts relating to transactions, it was for the officer to make the necessary enquiries and draw proper inference as to whether the income returned is correct or not. It would be the plain duty of the officer to make an enquiry and if he did not make an enquiry, it is a case of oversight and it could not be said that the income chargeable to tax had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts. The ratio of the decision is clearly applicable to the facts of the present case. Indeed, the facts of the present case are better than those referred to in the aforesaid judgment of the Supreme Court. 4. In the result, we answer the question in the affirmative and against the revenue.”

5.2 We also find support from the judgment of the Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd., reported in [2010] 320 ITR 561 (SC). The Hon'ble Supreme Court has held that the AO has the power to reassess but has no power to review an assessment. It was further held that reopening on a mere change of opinion is not permissible and there must be tangible material to form a belief that income has escaped assessment. The relevant para of the cited judgement is reproduced below:

“Prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under two conditions, viz., if (a) the ITO had reason to believe that, by reason of the omission or failure on the part of an assessee to make a return under section 139 for any assessment year to the ITO or to disclose fully and truly all material facts necessary for his assessment for that year, income chargeable to tax had escaped assessment for that year, or (b ) the ITO had in consequence of information in his possession reason to believe that income chargeable to tax had escaped assessment for any assessment year. The fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 with effect from 1-4-1989 those conditions are given a go-by and only one condition has remained, viz., where the Assessing Officer has reason to believe that income has escaped assessment, the section confers jurisdiction to reopen the assessment. Therefore, post 1-4- 1989, power to re-open is much wider. 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 1-4-1989, the Assessing Officer has power to reopen, provided there is 'tangible material' to come to conclusion that there is escapement of income from assessment. Under the Direct Tax Laws (Amendment) Act, 1987, the 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', the Parliament re-introduced the said expression and deleted the word 'opinion' on the ground that it would vest arbitrary powers in the Assessing Officer. [ Para 4]” 5.3 Coming to the facts of the present case, we find that the details relating to the sundry creditors were available before the AO during the original assessment proceedings. In fact, this is not a case where the relevant details were merely available on record. The original assessment order passed u/s 143(3) of the Act shows that the AO had examined the difference between the balances appearing in the books of the assessee and the balances confirmed by the creditors. After such examination, the AO made an addition of Rs.4,74,456/- in respect of five creditors.

5.4 The reasons recorded for reopening also acknowledge this position. The subsequent AO noticed from the same assessment records that the total difference was Rs. 47,15,487/- in respect of 13 creditors. According to him, the original AO had made an addition of only Rs. 4,74,456/- in respect of five creditors and the balance amount of Rs.42,41,031/- ought to have been brought to tax.

5.5 Thus, the reasons recorded for reopening themselves show that the issue relating to the difference in sundry creditors had already been examined during the original assessment proceedings. The subsequent AO has merely taken a different view regarding the amount which ought to have been added on the basis of the same material. The relevant para from the assessment order is reproduced below:

It was noticed from the assessment records that the assessing officer had made disallowance of Rs. 4,74,456/- on account of difference in creditors account and assessee account in 5 cases. However, as per the submissions furnished by the assessee towards the creditors for confirmation. it was assessee books and creditor's books total amounting to Rs.47,15,487 / - While concluding the assessment, the assessing officer has Rs. 4,74,456/- in 5 cases only as against of Rs.47,15,487/- in 13 cases Therefore, the amount of Rs. 42,41,031/- being difference between the assessee books and the creditor's books is required to be brought to tax. Omission to do so has resulted in short computation of income by Rs.42,41,031/-. 5.6 In our view, the above exercise amounts to a review of the conclusion reached in the original assessment. There is no fresh tangible material referred to by the AO for reopening the assessment on this issue. The reassessment has been initiated because the subsequent AO was of the view that the addition made by the original AO on the same material was inadequate.

5.7 The principle laid down by the Hon'ble Supreme Court in Kelvinator of India Ltd. squarely applies to such a situation. The AO cannot use the reassessment proceedings to review the conclusion reached during the original assessment merely because another view is possible on the same material.

5.8 The decision of the Hon'ble Karnataka High Court in Kalappa, Forest Contractor also supports the case of the assessee. Once the primary facts were disclosed, any alleged failure on the part of the AO to draw the proper inference from such facts cannot be attributed to the assessee. In the present case, the position is even clearer because the issue was not only before the AO but was actually examined while completing the original assessment. Accordingly, we hold that the reopening is based on a mere change of opinion and cannot be sustained in law.

Order pronounced in the open court on 7th September, 2026

Sd/- Sd/- SOUNDARARAJAN K WASEEM AHMED JUDICIAL MEMBER ACCOUNTANT MEMBER Bangalore Dated: 7th September, 2026 Vms Copy to: SANJEEV SAWANTH, NEAR BOSTIK HOSUR ROAD, 1 BOMMASANDRA,, BANGALORE-560099, KARNATAKA ACIT/DCIT, CIRCLE-4(3)(1), BMTC BUILDING, 80 FEET ROAD, 6TH 2 BLOCK, KORAMANGALA, BANGALORE-560095, KARNATAKA 3 THE PCIT / CIT, 4 THE D.R., ITAT, BANGALORE BENCH 5 GUARD FILE By Order

ASSISTANT REGISTRAR / I.T.A.T., BANGALORE