CHARUSHULA SURESH BOROLE,JALGAON vs. INCOME-TAX OFFICER, WARD - 2 (4), JALGAON

आदेश / ORDER PER ANIL CHATURVEDI, AM :

Assessee is an individual stated to be engaged in the business of Land Development and construction of Buildings. Assessee filed his return of income for A.Y. 2011-12 on 29.09.2011 declaring total income at Rs.Nil. The case was selected for scrutiny and thereafter assessment

was framed u/s 143(3) of the Act vide order dt.17.01.2014 determining

the total income at Rs.81,861/-. Subsequently, the case was re-opened

by issuing notice u/s 148 of the Act dated 28.03.2016 which was served

on the assessee on 30.03.2016. Thereafter, the case was taken up for

scrutiny and consequently assessment was framed u/s 143(3) r.w.s. 148

of the Act dated 06.12.2016 whereby the total income was determined at

Rs.24,56,700/-. Aggrieved by the order of AO, assessee carried the

matter before Ld.CIT(A), who vide order dt.05.03.2019 (in appeal

No.Nsk/CIT(A)-2/445/2016-17) dismissed the appeal of the assessee.

Aggrieved by the order of Ld.CIT(A), assessee is now in appeal and has

raised the following grounds :

“1. In the absence of conditions precedent for issuance of notice u/s 148 of the I.T. Act 1961, the impugned reassessment proceedings are bad in law, null and void-ab-initio and without jurisdiction and hence the impugned reassessment order be vacated / quashed / annulled. 2. In the absence of proper sanction to the issue of notice u/s 148 by the JT. CIT, the reassessment proceedings are bad in law. 3. Without prejudice to above, the learned CIT(A) erred in facts and in law in confirming the disallowance of expenditure of Rs. 23,74,841/- incurred wholly & exclusively in connection with transfer of property under question in the normal course of business and supported by corroborative evidence.”

to press ground No.2. In view of Ld.A.R.’s aforesaid submission, ground

No.2 is dismissed as not pressed and the other grounds being inter-

connected are considered together.

sold his property for Rs.71,00,000/- to Buldhana Urban Co-operative

Credit Society, Chopda to adjust the loan availed. On the verification of

the accounts of assessee, it was noticed that assessee had credited the

sale of property in the books of accounts and had claimed direct

expenses of Rs.23,74,841/-. He noticed that assessee had worked out

the book value of the property at Rs.8,13,286/- and thus according to

the AO, the difference of Rs.62,86,714/- (Rs.71,00,000/- -

Rs.8,13,286/-) was the profits earned by the assessee on sale of plots. It

was noticed that in the trading account, gross profit was shown as

Rs.39,11,873/-. The AO was therefore of the view that the difference of

Rs.23,74,841/- had escaped from assessment and accordingly notice

u/s 148 of the Act was issued. During the course of re-assessment

proceedings, the assessee was asked to explain the details which were

furnished by the assessee but the same was not found acceptable to the

AO. Accordingly, AO treated Rs.23,74,841/- as income from sale of land

and made its addition. Aggrieved by the order of AO, assessee carried

the matter before Ld.CIT(A), who upheld the order of AO.

Aggrieved by the order of Ld.CIT(A), assessee is now in appeal.

Ld.CIT(A) and further submitted that it is an undisputed fact that the

original return of income filed by the assessee was taken up for scrutiny

and assessment was passed u/s 143(3) of the Act and the issuance of

notice u/s 148 of the Act is within a period of 4 years from the end of

relevant assessment year. Ld.A.R. submitted that the very material on

which the re-opening of assessment has initiated was considered by the

AO during the course of original assessment proceedings and that there

was no new material which did not find part of the original record. It

was therefore submitted that the re-opening was based only on change of

opinion and was impermissible. In support of his contention that the

issue was examined by the AO during the course of assessment, he

pointed to the copy of the order sheet which is placed at Page 4 of the

Paper Book and from therein he pointed to the relevant query of the AO

and also the reply of the assessee on the same which is noted by the AO

in the order sheet. He therefore submitted that since the issue has

already been examined by the AO during the course of original

assessment proceedings, the AO could not have resorted to re-opening of

assessment u/s 148 of the Act as it would amount to change of opinion,

which is not permissible. Ld.A.R. further relied on the decision of

Hon’ble Supreme Court in the case of CIT Vs. Kelvinator India Limited

reported in 320 ITR 561 wherein the Hon’ble Apex Court held that the

change of opinion cannot constitute a reason for re-opening of the

completed assessment. He therefore submitted that the order of AO be

set aside. Ld. D.R. on the other hand, supported the order of lower

authorities.

record. Assessee in the present ground is challenging the re-opening of

the assessment u/s 143(3) r.w.s. 147 of the Act. It is an undisputed fact

that assessee had filed original return of income for A.Y. 2011-12 on

29.09.2011 and the original assessment was framed u/s 143(3) of the

Act vide order dt.17.01.2014. Thereafter, notice u/s 148 of the Act was

issued on 28.03.2016 i.e., within four years from the end of the

assessment year A.Y. 2011-12. The law on re-opening of an assessment

under the Act, is fairly settled. The Assessing Officer can re-open an

assessment only in accordance with the express provisions provided in

Section 147/148 of the Act. It is only on the Assessing Officer strictly

satisfying the provisions of Section 147 of the Act that he acquires

jurisdiction to re-open an assessment. Section 147 of the Act, clothes the

Assessing Officer with jurisdiction to reopen an assessment on

satisfaction of the following: (a) The Assessing Officer must have reason

to believe that (b) Income chargeable to tax has escaped the assessment

and (c) In cases where the assessment sought to be reopened is beyond

the period of four years from the end of the relevant assessment year,

then an additional condition is to be satisfied viz: there must be failure

on the part of the Assessee to fully and truly disclose all material facts

necessary for assessment.

issued on 28.03.2016 in relation to assessment year 2011-12. Hence,

the reopening of assessment is within a period of four years from the end

of the relevant assessment year. In such cases, the Assessing Officer

would be clothed with jurisdiction to issue a notice for reopening of an

assessment if he has reason to believe that income chargeable to tax has

escaped the assessment. The requirement of failure to make true and full

disclosure as provided in the proviso to Section 147 of the Act is not to

be satisfied for issuing of re-opening notice within the period of four

years from the end of the relevant assessment year. Thus, in the absence

of cumulative satisfaction of reason to believe and in the absence of any

income chargeable to tax escaping assessment, the Assessing Officer is

not empowered with jurisdiction to reopen an assessment.

the year under consideration was framed under section 143(3) of the

Act. In such a situation, another aspect that has to be kept in mind is as

to whether the reopening is based upon any tangible material which has

come to the knowledge of the Assessing Officer subsequent to the

framing of the earlier assessment or whether the same is merely a

change of opinion on the part of the Assessing Officer. In the present

case, I find force in the contention of the Ld AR that the impugned

notice have been occasioned by a change of opinion. It is trite law that a

mere change of opinion cannot constitute a reason for re-opening the

assessment. On the issue that change of opinion cannot constitute a

reason for reopening, Ld.A.R. relied on the decision of Hon’ble Apex

Court in the case of CIT Vs. Kelvinator India (2010) 320 ITR 561 (SC)

which has held as under:

"6. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April, 1989), they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, 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. We 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 reassessment has to be based on fulfillment of certain preconditions 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 inbuilt test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in section 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer."

thereafter. Considering the totality of the aforesaid facts and in view of

the decision cited hereinabove, I am of the view that in the present case,

the notice of reopening the assessment u/s 148 of the Act is on account

of change of opinion by the AO, which is not permissible as per law. I am

therefore of the view that the impugned notice cannot be sustained and

the same deserves to be quashed and set aside. I therefore quash the

impugned reassessment proceedings for A.Y. 2011-12 are thus set aside

the same. Since I have hereinabove set aside the assessment framed u/s

143(3) r.w.s 147 of the Act and held it to be void therefore the issue on

merits have been rendered academic and requires no adjudication. Thus,

the grounds of Assessee are allowed.

Order pronounced on 18th day of October, 2019.

Sd/- (ANIL CHATURVEDI) लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 18th October, 2019. Yamini

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. CIT(A)-2, Nashik. 4. The PCIT – 2, Nashik. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “एक सद�य” / DR, ITAT, “SMC” Pune; 6. गाड� फाईल / Guard file.

आदेशानुसार/ BY ORDER

// True Copy / व�र�ठ �नजी स�चव / Sr. Private Secretary आयकर अपील�य अ�धकरण ,पुणे / ITAT, Pune.