DILIP B. DESAI,KOLKATA vs. ACIT, CENTRAL CIRCLE - 4(2), KOLKATA

The assessee in the present case is an individual. In the assessment originally completed for the year under consideration under section 143(3) of the Act vide an order dated 28.03.2013, the total income of the assessee was determined by the Assessing Officer at Rs.24,20,10,570/-. The said assessment was subsequently reopened by the Assessing Officer and a notice under section 148 was issued by him to the assessee on 21.03.2017 after recording the reasons. In compliance with the said notice, the return of income was filed by the assessee on 20.04.2017 1 Assessment Year: 2010-2011 Dilip B. Desai declaring the same income of Rs.24,20,10,570/- as disclosed in the return of income originally filed on 14.10.2010. In the assessment completed under section 147/143(3) of the Act vide an order dated 29.12.2017, the total income of the assessee was determined by the Assessing Officer at Rs.24,45,15,490/- after making a disallowance of Rs.21,75,217/- on account of education cess and disallowance of Rs.3,29,519/- under section 14A of the Act.

Against the order passed by the Assessing Officer under section 147/143(3) of the Act, an appeal was preferred by the assessee before the ld. CIT(Appeals) challenging the validity of the assessment made by the Assessing Officer under section 147/143(3) of the Act as well as disputing inter alia the additions of Rs.21,75,217/- and Rs.3,29,519/- made therein on account of disallowance of education cess and disallowance under section 14A respectively. During the course of appellate proceedings before the ld. CIT(Appeals), a detailed submission was filed by the assessee in support of his case on all these three issues. The ld. CIT(Appeals), however, did not find merit in the same and upholding the validity of the assessment made by the Assessing Officer under section 147/143(3) of the Act, he also confirmed both the additions made by the Assessing Officer on account of disallowance of education cess and disallowance under section 14A. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

In Grounds No. 1 to 4, the assessee has raised a preliminary legal issue challenging the validity of the assessment made by the Assessing Officer under section 147/143(3) of the Act on various counts. One of the grounds taken by the assessee is that the assessment originally completed by the Assessing Officer under section 143(3) of the Act was reopened by him on the basis of the same set of facts and the same material as was available at the time of making the assessment originally Assessment Year: 2010-2011 Dilip B. Desai under section 143(3) and there being no new material coming to the possession of the Assessing Officer, the reopening of assessment was based on a mere change of opinion, which is not permissible in law. To support and substantiate this contention, she has invited our attention to the reasons recorded by the Assessing Officer for reopening the assessment, which as given on page no. 23 of the paper book, are extracted below: “In the instant case, the assessee filed his return of income for A.Y. 2010-11 on 14.10.2010 declaring Total income at Rs.24,20,10,750/-. The assessment was completed vide order u/s 143(3) of the I.T. Act, 1961 on 28.03.2013 at assessed income of Rs,24,20,10,750/-.

Subsequently it IS observed that the assessee has debited provision for Tax, for Rs.7,49,33,646/-, in his Profit and Loss Account for the previous year ended on 31.03.2010. However the assessee has added back an amount of Rs.7,27,58,429/- only as provision for Income Tax, in the computation sheet of total income to arrive at the returned income for the previous year ended on 31.03,2010. As per the provisions of section 40(a)(ii) of the I. T. Act, 1961 any deduction claimed on account of provision for Tax is an inadmissible expenses and cannot be allowed. Hence the deduction claimed on account of provision for Tax, to the extent of Rs.21,75,217/- i.e. (Rs.7,49,33,646/- - Rs,7,27,58,429/-), should also have been added back in the computation sheet of total income to arrive at the returned income, for the previous year ended on 31.03.2010, by the assessee. Since this was not done there is an omission and failure on the part of assessee to such an extent.

As is evident from the reasons recorded by the Assessing Officer, the assessment originally completed by him under section 143(3) of the Act was reopened by him on the basis of the same set of facts and the same material as was available with him at the time of completing the assessment originally under section 143(3) and there is no new information or material, much less tangible material, coming to his possession after the completion of the original assessment, which has been referred to or relied upon by him in the reasons recorded to form the belief about the escapement of any income of the assessee from the assessment for the year under consideration. Even the ld. D.R. has not been able to point out any such information or material which has been referred to or relied upon by the Assessing Officer in the reasons recorded to form the belief regarding the escapement of any income of the assessee from the assessment.

In the case of CIT –vs.- Kelvinator of India Limited (320 ITR 561), Hon’ble Supreme Court has held that after the amendment made with effect from 1st April, 1989 in the relevant provisions, the Assessing Officer has to reason to believe that income has escaped assessment but this does not imply that the Assessing Officer can reopen an assessment on the mere change of opinion. Explaining further, the Hon’ble Apex Court has observed that the concept of ‘change of opinion’ has been treated as an in-built test to check abuse of power and hence the Assessing Officer even after the amendment made in the relevant provisions from 1st April, 1989 has power to reopen an assessment provided that there is “tangible material” to come to the conclusion that there was escapement of income from assessment. If the facts of the present case are considered in the light of the decision of the Hon’ble Supreme Court in the case of Kelvinator of India Limited (supra), we find that the reopening of assessment made by the Assessing Officer was bad-in-law as the same was based merely on the change of opinion and the assessment completed by him under section 147/143(3) in pursuance thereof is liable to be Assessment Year: 2010-2011 Dilip B. Desai cancelled being invalid. We accordingly cancel the assessment made by the Assessing Officer under section 147/143(3) and allow the relevant ground of the assessee’s appeal.

As a result of the decision rendered above on the preliminary legal issue cancelling the assessment made by the Assessing Officer under section 147/143(3), the other grounds raised by the assessee in his appeal have become infructuous and we do not consider it necessary or expedient to adjudicate upon the same.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on February 28, 2020.