ACIT 3(2)(2), MUMBAI vs. NATIONAL BANK FOR AGRICULATURE AND RURAL DEVELOPEMENT, MUMBAI

ITA No.4277/Mum/2016 A.Y. 2007-08 1 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “B” MUMBAI BEFORE SHRI PRAMOD KUMAR (VICE PRESIDENT) AND SHRI RAVISH SOOD (JUDICIAL MEMBER) ITA No. 4277/MUM/2016 (Assessment Year: 2007-08) A.C.I.T-3(2)(2) National Bank for Agriculture and R. No. 674, 6th Floor, Vs. Rural Development, Aaykar Bhavan, M.K. Road, C-24, G-Block, Bandra Kurla Mumbai -400 020 Complex,Bandra, Mumbai – 400 051 PAN No. AAACT4020G (Revenue) (Assessee) Assessee by : Shri Jehangir Mistri, Senior Advocate Revenue by : Shri Rahul Raman, CIT D.R Date of Hearing : 16/09/2021 Date of pronouncement : 01/12/2021 ORDER PER RAVISH SOOD, J.M:

The present appeal filed by the revenue is directed against the order passed by the CIT(A)-8, Mumbai, dated 30.03.2016, which in turn arises from the order passed by the A.O u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 (for short „Act‟), dated 12.03.2013 for A.Y. 2007-08. The revenue has assailed the order on the following grounds of appeal before us:

“1. Whether on the facts and circumstances and in law the Id.CIT(A) was right in holding that the reopening of assessment u/s.147 was invalid and bad in law and quashing the same. ?" 2. Whether on the facts and circumstances and in law the Id.CIT(A) is right in holding the reopening of assessment u/s. 147 as invalid and bad in law without appreciating the fact that the reopening of assessment was not on the basis of change of opinion since the issues on which reopening was made were not verified in the original assessment. 3. Whether on the facts and circumstances and in law the Id.CIT(A) is right holding the reopening of assessment u/s.147 as invalid and bad in law without following the decision of the Hon'ble Supreme Court in the case of Kalyanji Mavji & Co.

ITA No.4277/Mum/2016 A.Y. 2007-08 2 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

V.CIT (1976) 102 ITR (SC), which was subsequently confirmed in Indian & Eastern Newspaper Society v. CIT(1979) 119 ITR 996 (SC) and A.L.A. Firm v. CIT(1991) 189 ITR 285 (C). ? 4. Whether on the facts and circumstances and in law the Id.CIT(A) erred in not adjudicating the issues raised by the assessee in Ground no.2 to 4 of their appeal on merit and therefore it is humbly prayed that the Id.CIT(A) may be directed to decided the issues contained in ground no.2 to 4 on merit. 5. The appellant prays that the order of CIT(A) on the above ground be set aside and that of the Assessing Officer be restored. 6. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”

"On perusal of the balance sheet and the computation of income, it is observed that during the year under consideration, the assessee has transferred an amount of Rs.410.00 crore to special reserve, while the corresponding deduction u/s.36(l)(vii) of the Act Has been claimed at Rs.456.43 crore. The provisions of section 36(l){viii) of the 1-T.Act for the period under consideration, are as under:- "In respect of any special reserve created and maintained by a financial corporation which is engaged in providing long term finance for industrial or agricultural development or development of infrastructure facility, in India or by a public company formed and registered in India with the main objective of carrying on the business of providing long term finance for construction or purchase of houses in India for residential purpose, an amount not exceeding forty percent of the profits derived from such business of providing long term finance (computed under head “profits or gains of business or profession” before making any deduction under this clause) carried to such reserve account.” Provided that where the aggregate of the amounts carried to such reserve account from time to time exceeds twice the amount of the paid up shares capital and of the reserves of the corporation or, as the case may be, the company, no allowance under tills clause shall be made in respect of such excess. ……(e) “long term finance" means any loan or advance where the terms under which moneys are loaned or advanced provide for repayment along with Interest thereof during a period of not less than five years". The provisions of section 36(l)(Viii) of the I.T. Act, very clearly state that the deduction will be allowed for an amount (not exceed forty percent of the profits-from such business of long term

ITA No.4277/Mum/2016 A.Y. 2007-08 3 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

finance) as carried to such reserve. However, In the case of the assessee for the year under consideration, the amount carried to reserved is only Rs.410 crore, while the deduction claimed is Rs.456.43 crore. Hence, the assessee has claimed excess deduction of Rs.46.43 crore for the year under consideration. Accordingly, income amounting to Rs.46.53 crore has escaped assessment. Based on above, I have reason to believe that income of Rs.46,43,13,723 has escaped assessment in the hands of assessee for A.Y.2007-08 within the meaning of section 147 of I.T. Act."

Thereafter, the A.O vide his order passed u/s 147 r.w.s 143(3), dated 12.03.2013 assessed the income of the assessee at Rs.1242,83,78,880/- after making the following additions/disallowances:

Sr. No. Particulars Amount 1 Disallowance of the assessee‟s claim for deduction Rs.4643,13,723/- u/s 36(1)(viii) 2. Disallowance of the assessee‟s claim for deduction of Rs.219,64,13,423/- interest on deposit under Rural Infrastructure Development Fund (RIDF) 3. Aggrieved, the assessee carried the matter in appeal before the CIT(A). Before the CIT(A) the assessee assailed the validity of the assessment framed by the A.O for reopening of its case on multiple grounds. The CIT(A) taking note of the fact that the A.O had reopened the concluded assessment of the assessee merely on the basis of a „change of opinion‟ de hors any new information/material coming to his notice after completion of the original assessment, therein, relied on the judgment of the Hon‟ble Supreme Court in the case of CIT vs. Kelvinator of India Ltd, 320 ITR 561 (SC) a/w a host of other judicial pronouncements and concurred with the assessee that the A.O had wrongly assumed jurisdiction and reopened its case. Apart from that, the CIT(A) found favour with the claim of the assessee that as the reopening of the assessee‟s case was undeniably done on the basis of an audit objection, therefore, the same was not sustainable on the said count too. Also, it was observed by the CIT(A) that the fact that the A.O had sought to rectify the assessee‟s claim for deduction u/s 36(1)(viii) qua the original assessment had also not been denied. Backed by his aforesaid deliberations the

ITA No.4277/Mum/2016 A.Y. 2007-08 4 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

CIT(A) quashed the reopening of the assessment and held the same as bad in law.

“5. DECISION I have carefully considered the facts of the case, assessment order, submissions and contention of the appellant as summarised above and relevant judicial pronouncements on the issues involved. 5.1 Ground No.1 5.1.1 This ground relates to validity of reopening the assessment under section 147 of Income Tax Act, 1961. 5.1.2 Recapitulate the basic facts as already mentioned above in this order, it is noted that the original assessment order under section 143 (3) was passed on 03/12/2009 after making certain additions/disallowances. The appellant preferred appeal before CIT(A) and thereafter to ITAT. The issue involved was disallowance under section 14A of the Act. Hon'ble ITAT restored the matter to the Assessing Officer to decide the issue afresh. Thereafter, the assessment was reopened by notice dated 28/03/2012 issued under section 148 along with reasons recorded for reopening. In response, the appellant filed its return of income on 12/04/2012. 5.1.3 The reasons for reopening are quoted in the instant order under section 147 r.w.s 143(3) on page 2. The same has been reproduced by the appellant in the contention extracted above and is hence not being reproduced here. The only important thing to be noted is the opening line of the reasons recorded for reopening, "On perusal of balance sheet and computation of income, it is observed that during the year under consideration, the assessee has transferred an amount of Rs. 410,00 crore to special reserve, while the corresponding deduction u/s 36(1)(vii) of the Act has been claimed at Rs. 456.43 crore........" the AO has reopened the case on the ground that the assessee has claimed excess deduction of Rs. 46.43 crore. 5.1.4 The appellant filed its objections to reopening vide its letter dated 11/12/2012 which was disposed of by Assessing Officer vide order dated 24/12/2012. Copies of both are available on record. 5.1.5 The appellant had made the same objections as are made in the course of these appellate proceedings and given above as part of the contentions of the appellant on this ground. In brief, they are objecting to reopening on the ground that it is done as a result of audit objection; that reopening is not permissible when proceedings are initiated

ITA No.4277/Mum/2016 A.Y. 2007-08 5 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

earlier under section 154 and have been dropped; no income chargeable to tax has escaped assessment and reopening is on basis of "change of opinion". 5.1.6 It is noted that in his order dated 24/12/2012 disposing of the objections raised by the appellant, the Assessing Officer has no where disputed the fact of audit objection dated 19/07/2010, a copy of which is available on record. The Assessing Officer has merely questioned how the appellant had managed to get hold of the same. 5.1.7 As regards the objection relating to dropping of proceedings under section 154, the Assessing Officer relied on CIT v Beedies Pvt. Ltd, 273 ITR 13 (SC) which held that reopening on basis of actual error pointed out by the audit party was permissible under law. 5.1.8 Regarding the objection pertaining to "change of opinion", the Assessing Officer has relied on certain case laws such as 117 Taxman 12, 87 Taxman 306, 221 ITR 538, amongst others. 5.1.9 In the instant case the following facts are not in dispute:  There was initiation of rectification proceedings under section 154 which included the issue of excess claim of deduction under section 36(1)(viii) to which the appellant had responded and subsequently, the AO did not take any further action in the matter.  The appellant had claimed deduction under section 36(1)(vii) in the original return as is evident from the statement of computation of total income which included working of the deduction.  The amount transferred to special reserve was clearly brought out in the Annual Accounts.  The AO had passed the original assessment order after considering all of the above details. 5.1.10 The above facts, which are all matter of record do not support any conclusion that the appellant had failed to disclose fully and truly all material facts necessary for his assessment, for that assessment year, which is an essential condition for reopening within 4 years as laid out in proviso to s. 147. 5.1.11 Without going into the question of reopening on basis of audit objection or A dropping of proceedings u/s 154, from the very wordings of the reasons recorded for reopening quoted above, it is clear that the Assessing Officer had reviewed/re-examined the very material/accounts/workings/computation and other material that was made available to the Assessing Officer at the time of the original assessment in which the impugned deduction was allowed in the order passed u/s. 143(3). 5.1.12 I find that in NYK Line (India) Ltd. v. DCIT (346 ITR 361)(BOM), the Hon'ble jurisdictional High Court has held that where the assessee has disclosed all material facts relating to a particular item, mere fact that the Assessing Officer had come to a different conclusion in respect of the said item in subsequent assessment year would not justify reopening of assessment. Relevant paragraph of the said decision is reproduced below:

ITA No.4277/Mum/2016 A.Y. 2007-08 6 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

“.... Undoubtedly an order of assessment which has been passed for a subsequent ignored in assessment year may furnish a foundation to reopen an assessment for an earlier assessment year. However, there must be some new facts which come to light in the course of assessment for the subsequent assessment year which emerge in the order of assessment. Otherwise, a mere change of opinion on the part of the Assessing Officer in the course of assessment for a subsequent assessment year would not by itself legitimise the reopening of an assessment for an earlier year. [Para 14]" 5.1.13 Even after the amendment made in section 147 of the Act [made by the Direct Tax Laws (Amendment) Act, 1987 w.e.f. 01.04.89] reassessment can be commenced only if Assessing officer has "reason to believe” that income chargeable to tax has escaped assessment. The expression "reason to believe", postulates a bonafide belief that income has escaped assessment and the existence of objective reasons for that belief. Further, the foregoing expression also does not mean a purely subjective satisfaction of the Assessing Officer or pretense based on suspicion and conjecture, but must be a belief held in good faith and founded on material that is not irrelevant or arbitrary. 5.1.14 As observed above, there was no new information/material found by the A.O (after completion of the original assessment) for reopening the proceedings under section 147 of the Act and, therefore, the reasons recorded for reopening reflect a mere change in the opinion by the Assessing Officer. In this regard reliance is placed on the following judicial pronouncements: a) The Hon'ble Bombay High Court, being the Jurisdictional High Court in our case, in the case of Prashant Joshi v. ITO (189 Taxman 1) (HC) (Bom.) and the Hon'ble Mumbai Tribunal, being the Jurisdictional Tribunal in our case, in the case of Pirojsha Godrej Foundation v. ADIT (44 SOT 24) (Mum.), has categorically held that without proper "reasons to believe", reassessment u/s. 147 of the Act is bad in law. b) In the case of CIT vs. Kelvinator of India Ltd. (256 ITR 1) (Delhi), Hon'ble Delhi High Court has observed as under: “An order of assessment can be passed either in terms of subsection (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of clause (e) of section 114 of the Indian Evidence Act judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding without anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong. Hence, it is clear that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceedings upon mere change of opinion."

ITA No.4277/Mum/2016 A.Y. 2007-08 7 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

(c) The decision in case of CIT vs. Kelvinator of India Ltd (supra) has been affirmed by the Supreme Court (320 ITR 561) with the following observations: "We must keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re- assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re- opening 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 1st April, 1989, Assessing Officer has power to re-open, 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.” d) The Hon'ble Supreme Court in the case of CIT Vs. Foramer France has held that the assessment could not be reopened on a mere change of opinion. e) CIT Vs. Rao Thakur Narayan Singh (56 ITR 234) (SC) wherein the Hon'ble Supreme Court has held that a mere change in opinion without any information that income has escaped assessment, does not warrant re-opening. f) CIT Vs. Bhanji Lavji (79 ITR 582) (SC) wherein the Apex Court has held that when the primary facts necessary for assessment are fully and truly disclosed, the ITO will not be entitled, on mere change of opinion to commence proceedings for reassessment. g) ITO Vs. Nawab Mir Barkat Alt Khan Bahadur (97 ITR 239) (SC) wherein the Hon'ble court has held that having second thought on the same material and omission to draw the correct legal presumption during original assessment do not warrant the imitation of a proceeding u/s. 147 of the Act. h) CIT Vs. Maharashtra Sugar Mills Ltd. (263 ITR 180) (Bom.) wherein the Hon'ble jurisdictions! High Court has held that where all the primary facts were disclosed by the assessee and that there was no failure on the part of the assessee to disclose fully and truly all the material facts, re-opening of the assessment could not be initiated u/s.148 r.w.s. 147(a) of the Act. 5.1.15 Reopening on the basis of same set of facts without fresh material on records is bad in law. All facts pertaining to the issues under re-opening were provided to the Assessing Officer in the original assessment u/s. 143(3) of the Act. It is one of the underlying requisites for initiating re-opening proceedings u/s. 147 of the Act that the Assessing Officer should have some fresh tangible material on record to form an opinion that some income has escaped assessment. Re-opening in the absence of any fresh material coming to the notice of the Assessing Officer is contrary to the letter and intent of various judicial pronouncements some of which are mentioned below: a) In the case of CIT vs. Amitabh Bachchan (2012) (349 ITR 76) (Bom.), the Hon'ble jurisdictional High Court has held that re-opening without any fresh

ITA No.4277/Mum/2016 A.Y. 2007-08 8 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

tangible material coming to the AO, is illegal. This, too, was the case where the AO had re-opened the assessment within 4 years from the end of the assessment year. (b) Hon'ble Bombay High Court, being the jurisdictional High Court in our case, in the case of Purity Techtextile (P.) Ltd. vs. ACIT (325 ITR 459/189 Taxman 21), has held that when the AO did not have any additional material at all to form belief that income had escaped assessment then the reopening of assessment is bad and quash. (c) In Jal Hotels Co. Limited v. ADIT (2009) (184 Taxman 1) (Del.), the Hon'ble Delhi High Court held that in absence of new material on record which could form basis for recording reasons for reassessment; it would be a change of opinion which is not permissible u/s. 147 of the Act. (d) In Aipita Marketing Pvt. Ltd. vs. ITO (21 SOT 302) (Mum.), the Hon'ble jurisdictional Mumbai Tribunal has held that in the absence of any new material, the AO is not empowered to reopen an assessment irrespective of whether it is made u/s 143(1) or 143(3). (e) Reliance is also placed on the decision of the Madras High Court in Bapalal & Co. Exports v. JCIT (289 ITR 37) (Mad.) wherein it has been held that a change of opinion is not permissible whether the opinion was expressed under 143(2) or 143(1) of the Act and reassessment can be done only on the basis of fresh material to show that some income escaped assessment. (f) In the case of Legato Systems (India) Pvt. Ltd vs. DCIT (2009) (187 Taxman 294) (Del.), it has held that proceedings u/s. 147/148 vis a vis completed assessments cannot be reopened, on a mere change of opinion i.e. on the basis of the same set of facts and material which were in the knowledge of AO, and that the proceedings for reopening of assessment on the ground of income escaping assessment is an exception to the finality of the proceedings arrived at u/s. 143(3) of the Act during the regular assessment proceedings of the assessment years. 5.1.16 Reason to believe' as envisaged in section 147 of the Income Tax Act, 1961 has been the matter of judicial scrutiny by the Apex Court and other courts in several cases. In the case of Calcutta Discount Co. Ltd. v. ITO 41 ITR 191 (SC), it was observed that it is the duty of the appellant to disclose all the primary facts which have a bearing on the liability of the income earned by the appellant being subjected to tax. It is for the Assessing Officer to draw inferences from the facts and apply the law determining the liability of the appellant. The appellant cannot draw the conclusions drawn by the Assessing Officer and once the conclusion is drawn and the assessment order framed, the Assessing Officer cannot at a later point of time form a different opinion by giving a second thought to the facts disclosed by the appellant, holding that he committed an error in computing taxable income and reopen the assessment under section 147. 5.1.17 Discovery of new and important matters or knowledge of fresh facts which were not present at the time of original assessment would constitute a 'reason to believe that income had escaped assessment' within the meaning of section 147. Similar view has been taken by the apex court in the following cases :- (i) Phool Chand Bajrang Lal v. ITO 203 ITR 456, 477;

ITA No.4277/Mum/2016 A.Y. 2007-08 9 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

(ii) ALA Firm v. CIT189 ITR 285, 298; (iii) Indian and Eastern Newspaper Society v. CIT119 ITR 996, 1004; and (iv) ITO v. Lakhmani Mewal Das 103 ITR 437, 445. 5.1.18 However, merely change of opinion in the mind of assessing officer on interpretation of law cannot be basis for forming 'reason to believe'. Section 147 does not empower the Assessing Officer to review on the same set of facts the assessment order which had already been framed merely by fresh application of to its own decision or to the decision of predecessor. 5.1.19 Fresh application of mind by the Assessing Officer on similar facts would tantamount to review of own decision. Amended section 147 does not authorize the Assessing Officer to reopen assessment under the garb of 'reason to believe' to review its own decision. If Assessing Officer does not bring any fresh/new material on record and neither receives any fresh information, then this would be a case of absence of jurisdiction on the part of the Assessing Officer to militate proceedings under section 147/148 and in the absence of jurisdiction, reassessment framed would be illegal void. 5.1.20 Reopening of an assessment completed under section 143(3) of the Act is not permissible merely on the basis of new opinion formed on the same material which happened to be the material of Sec 143(3) assessment. If on perusal of the reasons recorded by the assessing officer for initiating reassessment proceeding clearly shows that on the very same material which was available while completing the assessment under section 143(3) of the Act he had on a mere change of opinion issued notice for reassessment, it is not permissible for the assessing officer to resort to proceedings under Section 147 merely on change of opinion. 5.1.21 In the instant case, I find that the ratio of above decisions emphatically legate the action of the Assessing Officer in reopening the original assessment concluded under Section 143(3) of Income Tax Act, 1961. Under the circumstances, it would be a gross disregard to the view expressed by Hon'ble Supreme Court and jurisdictional Bombay High Court regarding reopening of assessment under section 147 of the Income Tax, 1961. I, therefore, find this action of the assessing officer against law as specially interpreted by the Hon'ble Supreme Court and High Court. 5.1.22 Apart from the above position, the appellant has raised the issue that reopening was done on account of audit objection and the Assessing Officer too has not established otherwise. I have given due consideration to the numerous case laws cited by the appellant in its contention above. I find that the ratio of those case laws apply in the instant case also. Further more, the fact of the Assessing Officer seeking to rectify the claim of deduction under section 36(1)(viii) in respect of the original assessment has also not been denied. Therefore, the case laws cited by the appellant on this issue, particularly from jurisdictional Courts also apply in the instant case. 5.1.23 In view of the above, this ground of appeal is allowed and the reopening of assessment is held bad in law.” 5. We have heard the ld. Authorized Representatives for both the parties, perused the orders of the lower authorities and the material available on record,

ITA No.4277/Mum/2016 A.Y. 2007-08 10 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

as well as considered the judicial pronouncements that have been pressed into service by the ld. A.R in support of his aforesaid contentions. As observed by us hereinabove, it was, inter alia, observed by the CIT(A) that as the A.O had reopened the concluded assessment in the case of the assessee merely on the basis of a mere „change of opinion‟ i.e in the absence of any fresh material coming to his notice after the conclusion of the original assessment, therefore, he had clearly exceeded his jurisdiction and reopened the case of the assessee. On a perusal of the „reasons to believe‟ on the basis of which the case of the assessee had been reopened, we find, that it is a matter of fact borne from the record that no new information/material had came to the notice of the A.O (after completion of the original assessment) which would have justified the reopening of the assessment u/s 147 of the Act. In fact, as observed by the A.O, and rightly so, a perusal of the opening line of the reasons recorded for reopening the case of the assessee, viz. "On perusal of balance sheet and computation of income, it is observed that during the year under consideration, the assessee has transferred an amount of Rs. 410.00 crore to special reserve, while the corresponding deduction u/s 36(1)(vii) of the Act has been claimed at Rs. 456.43 crore........" ,reveals beyond any scope of doubt that the A.O had reopened the concluded assessment only on the ground that the assessee had claimed an excess deduction of Rs.46.43 crore, which in our considered view is nothing but clearly an attempt on his part to review/re-examine the assessee‟s claim for deduction on the basis of the same material/accounts/workings/computation as were available before his predecessor at the time of framing of the original assessment, vide his order passed u/s 143(3), dated 03.12.2009. We find substantial force in the contention of the ld. A.R that the entire exercise for reopening the concluded assessment of the assessee was embarked upon by the A.O not on the basis of any fresh tangible material or any new information which had came to his notice subsequent to the culmination of the original assessment proceedings, but on the basis of the same set of facts as were there

ITA No.4277/Mum/2016 A.Y. 2007-08 11 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

before his predecessor while framing of the original assessment under Sec. 143(3), dated 03.12.2009. Backed by the aforesaid facts, we find substance in the claim of the ld. A.R that the reassessment proceedings had been initiated by the A.O not on the basis of any fresh tangible material or any new information which had came to his notice subsequent to the culmination of the original assessment proceedings, but on the basis of the same set of facts as were there before his predecessor at the time of framing of the regular assessment u/s 143(3) dated 03.12.2009. On a careful perusal of the reasons recorded by the A.O, we are of a strong conviction that in the garb of reopening the case of the assessee he had on the basis of the same set of facts as were available on record at the time of framing of the original assessment, tried to substitute his view as against that of his predecessor. In fact, we are unable to comprehend as to what new „material‟ or „information‟ had came to the notice of the A.O after the framing of the original assessment, which would have justified the reopening of its case. As can safely be gathered from a perusal of the reasons to believe, we are of the considered view that the A.O with the sole objective of substituting his view as against that of his predecessor had sought to reopen the case of the assessee bank. We are afraid that such a substitution of a view of a successor A.O cannot form a justifiable basis for reopening the case of an assessee. Our aforesaid view is fortified by the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Kelvinator of India (2010) 320 ITR 561 (SC), wherein the Hon‟ble Apex Court had observed that merely on the basis of a „change of opinion‟ the case of an assessee cannot be reopened, and had held as under:-

“On going through the changes, quoted above, made to s. 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the AO to make a back assessment, but in s. 147 of the Act (w.e.f. 1st April, 1989), they are given a go by and only one condition has remained, viz., that where the AO 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, s. 147

ITA No.4277/Mum/2016 A.Y. 2007-08 12 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

would give arbitrary powers to the AO 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 AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition 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 AO. Hence, after 1st April, 1989, AO 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 s. 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 s. 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament re-introduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the AO. We quote hereinbelow the relevant portion of Circular No. 549, dt. 31st Oct., 1989 [(1990) 82 CTR (St) 1], which reads as follows : "7.2 Amendment made by the Amending Act, 1989, to re-introduce the expression „reason to believe‟ in s. 147.—A number of representations were received against the omission of the words „reason to believe‟ from s. 147 and their substitution by the „opinion‟ of the AO. It was pointed out that the meaning of the expression, „reason to believe‟ had been explained in a number of Court rulings in the past and was well settled and its omission from s. 147 would give arbitrary powers to the AO to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended s. 147 to reintroduce the expression „has reason to believe‟ in place of the words „for reasons to be recorded by him in writing, is of the opinion‟. Other provisions of the new s. 147, however, remain the same.” Further, following the judgment of the „Full bench‟ of the Hon‟ble High Court of Delhi in the case of Kelvinator of India (supra), which had been upheld by the Hon‟ble Apex Court the Hon’ble High Court of Bombay in the case of Asteroids Trading & Investment P. Ltd. Vs. DCIT (2009) 308 ITR 190 (Bom), had held, that an A.O is precluded from assuming jurisdiction to initiate reassessment proceedings on the basis of a „Change of opinion‟, observing as under:

“8. Perusal of the record shows that the petitioner had made full disclosure necessary for claiming deduction under s. 80M. The AO after applying his mind to the relevant records had made a specific order allowing the deduction. A perusal of the record shows that now respondent No. 1 proposes to reopen the

ITA No.4277/Mum/2016 A.Y. 2007-08 13 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

assessment because according to him deduction under s. 80M was wrongly allowed, and, therefore, he was of the opinion that the income has escaped assessment. Though, in the notice respondent No. 1 has used the phrase "reason to believe", admittedly between the date of the order of assessment sought to be reopened and the date of forming of opinion by respondent No. 1, nothing new has happened and there is no change of law, no new material has come on record, no information has been received. It is merely a fresh application of mind by the same officer to the same set of facts. Thus, it is a case of mere change of opinion, which, in our opinion, does not provide jurisdiction to respondent No. 1 to initiate proceedings under s. 148 of the Act. It can now be taken as a settled law, because of a series of judgments of various High Courts and the Supreme Court, which have been referred to in the judgment of the Full Bench of the Delhi High Court in the case of Kelvinator of India Ltd. (supra) referred to above, that under s. 147 assessment cannot be reopened on a mere change of opinion.” We further find that the Hon’ble High Court of Bombay in the case of Asian Paints Ltd. Vs. DCIT (2008) 308 ITR 195 (Bom), had observed, that as no new information/material was received by the A.O, therefore, the fresh application of mind by him to the same set of facts and material which were available on record at the time of framing of the assessment but had inadvertently remained omitted to be considered would tantamount to review of order, which is not permissible as per law. The Hon‟ble High Court while concluding as hereinabove had held as under:-

“10. It is further to be seen that the legislature has not conferred power on the AO to review its own order. Therefore, the power under s. 147 cannot be used to review the order. In the present case, though the AO has used the phrase "reason to believe", admittedly between the date of the order of assessment sought to be reopened and the date of formation of opinion by the AO, nothing new has happened, therefore, no new material has come on record, no new information has been received; it is merely a fresh application of mind by the same AO to the same set of facts and the reason that has been given is that the some material which was available on record while assessment order was made was inadvertently excluded from consideration. This will, in our opinion, amount to opening of the assessment merely because there is change of opinion. The Full Bench of the Delhi High Court in its judgment in the case of Kelvinator (supra) referred to above, has taken a clear view that reopening of assessment under s. 147 merely because there is a change of opinion cannot be allowed. In our opinion, therefore, in the present case also, it was not permissible for respondent No. 1 to issue notice under s. 148”. Further, the Hon’ble High Court of Bombay in the case of ICICI Prudential Life Insurance Co. Ltd. Vs. ACIT (2010) 325 ITR 471 (Bom), relying on the

ITA No.4277/Mum/2016 A.Y. 2007-08 14 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

judgment of the Hon‟ble Supreme Court in the case of Kelvinator of India (supra), had held as under:

ITA No.4277/Mum/2016 A.Y. 2007-08 15 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

“There is merit in the submission which has been urged on behalf of the assessee that there was no tangible material before the AO on the basis of which the assessment could have been reopened and what is sought to be done is to propose a reassessment on the basis of a mere change of opinion. This, in view of the settled position of law is impermissible. No tangible material is shown on the basis of which the assessment is sought to be reopened. In the absence of tangible material, what the AO has done while reopening the assessment is only to change the opinion which was formed earlier on the allowability of the deduction. The power to reopen an assessment is conditional on the formation of a reason to believe that income chargeable to tax has escaped assessment. The power is not akin to a review. The existence of tangible material is necessary to ensure against an arbitrary exercise of power. There is no tangible material in the present case. 6. At this stage, we may herein observe, that as per the mandate of law even where a concluded assessment is sought to be reopened by the A.O within a period of 4 years from the end of the relevant assessment year, it is must that the A.O has fresh material or information with him that had led to the formation of belief on his part that the income of the assessee chargeable to tax has escaped assessment. Our aforesaid view is fortified by the judgments of the Hon’ble High Court of Bombay in the case of NYK Lime (India) Ltd. Vs. DCIT (No.2) [2012] 346 ITR 361 (Bom) and Purity Tech Textile Pvt. Ltd. Vs. ACIT & Anr. [2010] 325 ITR 459 (Bom). Backed by the aforesaid settled position of law, we are of the considered view that as the A.O for the reasons discussed at length hereinabove had wrongly assumed jurisdiction and reopened the concluded assessment of the assessee bank without satisfying the mandate of law as required u/s 147 of the Act, therefore, the CIT(A) had rightly observed that the assessment framed by him vide his order passed u/s 147 r.w.s 143(3), dated 12.03.2013 cannot be sustained and is liable to be struck down. Before parting, we may herein observe that as the revenue had assailed the striking down of the reassessment order by the CIT(A), on the standalone basis that the A.O had wrongly assumed jurisdiction and had reopened the concluded assessment on the basis of a mere „change of opinion‟, therefore, we herein confine our aforesaid adjudication only to the said grievance of the revenue so raised before us. We, thus, in the backdrop of our aforesaid observations finding no infirmity in

ITA No.4277/Mum/2016 A.Y. 2007-08 16 ACIT 3(2)(2)Vs. National Bank for Agriculture and Rural Development

the view taken by the CIT(A) who had rightly struck down the assessment order passed by the A.O under Sec. 147 r.w.s 143(3), dated 12.03.2013 by holding the reopening of the assessment as bad in law, uphold the same. The Grounds of appeal Nos. 1-3 are accordingly dismissed.

Order pronounced in the open court on 01.12.2021

Sd/- Sd/- (Pramod Kumar) (Ravish Sood) VICE PRESIDENT JUDICIAL MEMBER Mumbai; Dated: 01.12.2021 PS: Rohit Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A)- 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, //True Copy// (Sr. Private Secretary) ITAT, Mumbai