OMKARA DIAMOND EXPORTS PRIVATE LIMITED,MUMBAI vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 5(2)(1), MUMBAI

However, thereafter, the Assessing Officer once again reopened the assessment under section 147. The reasons recorded in the second round, as borne out from the record, reveal that they are based on the very same material, namely, the Investigation Wing information, statement of Shri Bhanwarlal Jain, the same eight parties and the same quantum of alleged purchases.

The undisputed chronology of events is as under:

The learned counsel for the assessee submitted that the second reopening is wholly without jurisdiction as it is based on identical material and therefore constitutes a clear case of change of opinion. It was further submitted that once the issue had travelled up to the Tribunal and attained finality, the Assessing Officer could not reopen the same issue again. It was also contended that there was no failure on the part of the assessee to disclose fully and truly all material facts.

We have heard the rival submissions and perused the entire material placed before us, including the reasons recorded in both rounds of reassessment and the admitted chronology of events.

At the outset, it is imperative to underscore that the foundation of jurisdiction under section 147 is the existence of “reason to believe” based on tangible material, and not a mere change in the subjective perception of the Assessing Officer as to how the same material ought to be appreciated. In the present case, the reasons recorded in the second round, when juxtaposed with the reasons recorded in the first round, reveal a complete identity of material facts. The source of information remains the Investigation Wing, the factual substratum remains the alleged accommodation entries of the Bhanwarlal Jain group, the parties remain the same eight concerns, and even the quantum of alleged purchases remains the identical figure of Rs. 8,24,01,689/-. Thus, there is not even a whisper of any fresh tangible material having come into possession of the Assessing Officer subsequent to the completion of the first reassessment.

What, however, has undergone a change is the opinion of the Assessing Officer. In the first round, the Assessing Officer, upon consideration of the very same material, took a conscious view that only the profit element embedded in such purchases is liable to be taxed, which view thereafter travelled through the appellate hierarchy and ultimately culminated in a direction of the Tribunal, followed by an order giving effect passed by the Assessing Officer himself. In the second round, the Assessing Officer, on the same material, now seeks Omkara Diamond Exports Private Limited 5 to hold that the entire purchases ought to have been disallowed. This, in our considered opinion, is nothing but a textbook case of review in the guise of reassessment, which is impermissible in law.

The scheme of section 147 does not envisage conferring upon the Assessing Officer a power to sit in appeal over his own earlier decision, much less over a decision which has merged with that of the appellate authorities. Once an issue has been examined, adjudicated and carried to its logical conclusion within the statutory framework, the same cannot be resurrected by initiating a fresh round of reassessment proceedings on the very same material. To permit such an exercise would render the entire concept of finality of assessment otiose and would open floodgates for endless reassessment on the same issue till the Assessing Officer arrives at a conclusion to his satisfaction.

Further, we find that the very issue sought to be reopened had already become the subject matter of appeal before the learned CIT(A) and thereafter before the Tribunal. The statutory bar engrafted in the proviso to section 147 squarely applies, and the Assessing Officer is precluded from assuming jurisdiction in respect of matters which have already entered the appellate domain. In the present case, the matter has not only entered but has traversed the entire appellate hierarchy and culminated in an order giving effect. The attempt of the Assessing Officer to once again reopen the same issue is thus in direct contravention of the statutory mandate.

Equally untenable is the allegation of failure on the part of the assessee to disclose fully and truly all material facts. When the entire basis of reopening is the very same material which was available, Omkara Diamond Exports Private Limited 6 examined and acted upon in the first round of reassessment, it is inconceivable as to how such material can now be characterised as having been not disclosed. The condition precedent stipulated in the first proviso to section 147 thus remains unfulfilled.

What is even more disconcerting is the manner in which the Assessing Officer has proceeded to record reasons in the second round, fully conscious of the earlier proceedings and their culmination. The reasons themselves acknowledge the earlier reassessment, yet proceed to disregard the conclusions arrived therein and attempt to substitute them with a different inference. This, in our considered view, reflects a complete non-application of mind to the binding nature of earlier proceedings and the limitations on the power of reopening, and such an exercise cannot be countenanced.

Thus, viewed from any angle—be it absence of fresh material, bar against change of opinion, statutory embargo under the provisos to section 147, or the doctrine of finality—the impugned reassessment proceedings are wholly without jurisdiction and liable to be quashed.

Since we have quashed the reassessment proceedings, the issues on merits are rendered academic and do not call for adjudication.

In the result, the appeal of the assessee is allowed.