SUSHIL KASHMIRILAL AGARWAL,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX,

आदेश / ORDER PER ANIL CHATURVEDI, AM :

This appeal filed by the assessee is emanating out of the order of 1. Commissioner of Income Tax (A) – 2, Nashik dated 07.03.2014 for the assessment year 2006-07.

Assessee is an individual stated to be carrying on business of weighbridge in the name and style of “Goyal Weighbridge”. Assessee filed his return of income for A.Y. 2006-07 on 31.03.2007 declaring total income of Rs.54,18,350/-. The case was initially taken up for scrutiny and thereafter assessment was framed vide order dated 24.12.2008 u/s

143(3) of the Act. Thereafter, notice u/s 148 of the Act dt.30.03.2011

was issued and served on the assessee. In response to notice u/s 148 of

the Act, assessee vide reply dated 12.04.2011 submitted that the return

of income filed by him on 31.03.2007 for A.Y. 2006-07 be considered as

return of income in response to notice u/s 148 of the Act. Thereafter,

the case was taken up for scrutiny and assessment was framed u/s

143(3) r.w.s. 147 of the Act vide order dt.30.12.2011 and the total

income was determined at Rs.1,05,42,450/-. Aggrieved by the order of

AO, assessee carried the matter before Ld.CIT(A), who vide order dated

07.03.2014 (in appeal Nsk/CIT(A)-2/754/13-14) dismissed the appeal of

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

before us and has raised the following grounds :

“1. On the facts and in the circumstances of the case and in the law the lower authorities erred in initiating reassessment proceedings u/s 147 of the Income Tax, 1961 in spite of the fact that all the material facts were available before Assessing Officer at the time of passing of original assessment order therefore, entire proceedings are bad in law. 2. On the facts and in the circumstances of the case and in the law the lower authorities erred in not passing speaking order in reference to objection raised by the appellant therefore, the entire proceedings are bad in law 3. On the facts and in the circumstances of the case and in the law the lower authorities erred in making the addition of a sum of Rs. 51, 24,097/- on account of cash payments made to parties for claiming alleged fake capital gain. The addition is entirely based on presumption of Assessing Officer and is by disregarding appellant submission in this regard and therefore needs to be struck down.”

3.1. Before us, Ld.A.R. submitted that a survey action at the business

premises of the assessee’s wife took place on 29.02.2008 wherein

documents pertaining to the assessee were found in a Diary in which

certain entries relatable to share purchase and share sale transaction of

the assessee were recorded. On the basis of the aforesaid documents,

the reasons were recorded for re-opening and it was concluded that

there was an escapement of income in the case of assessee. He

submitted that during the course of original assessment proceedings for

A.Y. 2006-07 the AO had made a detailed enquiry relating to various

transactions of the assessee including share purchase and sale

transactions to which the assessee also made detailed submissions from

time to time and after taking into consideration of all the submissions,

assessment order was passed u/s 143(3) of the Act on 24.12.2008. In

support of his contentions about the inquiries with respect to share

purchase / sale transactions made during the course of assessment

proceedings and assessee’s reply to it, he pointed to the copy of the

questionnaire placed at Pages 160 and 161 of the Paper Book and the

submission made by the assessee at Page 134 to 159 of the Paper Book.

He submitted that the case of assessee and his wife are assessed by the

same Assessing Officer. He further submitted that survey action on the

business premises of the assessee’s wife was conducted on 29.02.2008

and the assessment proceedings for A.Y. 2006-07 in assessee’s case

were completed on 24.12.2008. He submitted that in between

assessment proceedings for A.Y. 2007-08 were also initiated on

18.09.2008 and in the assessment order passed u/s 143(3) of the Act

dated 23.12.2009 for A.Y. 2007-08, there is a reference about the

documents found during the search. He further submitted that the

addition made in the order u/s 143(3) of the Act for A.Y. 2007-08 on

account of capital gains was subsequently deleted by the AO by suo

moto by passing a rectification order as assessee has offered the same

for taxation. He therefore submitted that the necessary enquiries were

made regarding entire purchase of sale of share transactions and after

application of mind, the AO had passed the assessment order and the

re-opening is on the basis of change of opinion, which is not

permissible. He therefore submitted that the proceedings u/s 147 of the

Act be treated as void and ab initio and for which he placed reliance on the decision of Hon’ble Supreme Court in the case of M/s. CIT Vs. Kelvinator of India Limited reported in (2010) 320 ITR 561 SC. Ld. D.R.

on the other hand, supported the order of AO and Ld.CIT(A).

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

the assessment u/s 147 / 148 of the Act. It is an undisputed fact that

assessee had filed original return of income for A.Y. 2006-07 on

31.03.2007 and the original assessment was framed u/s 143(3) of the

Act vide order dt.24.12.2008. Thereafter, notice u/s 148 of the Act was

issued on 30.03.2011 i.e., within four years from the end of the

assessment year A.Y. 2006-07. 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 30.03.2011 in relation to assessment year 2006-07. 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.

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.

aforesaid legal position, it is an undisputed fact that during the course

of original assessment proceedings, AO had issued questionnaire and

had sought information of the transactions of sale/purchase of shares

and the assessee had also made available the information and details to

the AO from time to time. Thereafter the assessment was framed u/s

143(3) and the submissions of the assessee in respect of purchase and

sale of shares was accepted by the AO and no addition was made. It is

also a fact that the assessee and his wife are assessed by the same

Assessing Officer. Further, the document found at the place of business

of assessee’s wife was found during the course of survey conducted on

29.2.2008 and the assessment of the assessee u/s 143(3) for A.Y 2006-

07 was finalized on 24.12.2008 meaning thereby that the document

found during the course of the survey and which is the basis of the

present reopening was already before the AO while conducting the

assessment proceedings. In such a situation, the conclusion would be

that the document found during survey was considered while framing

the original proceedings and therefore we 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 we find that Hon’ble

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

(SC) has held so. The relevant observation of the Hon’ble Apex Court is

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 decisions cited hereinabove, we are 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. We are therefore of the view that the impugned notices cannot be

sustained and the same deserves to be quashed and set aside. We

therefore quash the impugned reassessment proceedings for A.Y. 2006-

2007 are thus set aside the same. Since we 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 16th day of October, 2019.

Sd/- Sd/- (SUSHMA CHOWLA) (ANIL CHATURVEDI) �या�यक सद�य / JUDICIAL MEMBER लेखा सद�य / ACCOUNTANT MEMBER

पुणे Pune; �दनांक Dated : 16th day of 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. Pr. CIT-2, Nashik. 5 �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” / DR, ITAT, “B” Pune; गाड� फाईल / Guard file. 6.

आदेशानुसार/ BY ORDER

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