ANANDA PAUL,KOLKATA vs. ACIT, CIRCLE-50, KOLKATA, KOLKATA

आयकर अपील�य अधीकरण, �यायपीठ – “B” कोलकाता, IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH “B” KOLKATA Before Shri N.V.Vasudevan, Judicial Member and Shri Waseem Ahmed, Accountant Member ITA No.165/Kol/2015 Assessment Year :2007-08 Ananda Paul V/s. ACIT, Circle-50, CF-125, Salt Lake City, Manicktala Civic Centre, Kolkata-64 Uttarpan Complex, DS- [PAN No.AFKPP 2201 D] 2&3, Kolkata-54 .. अपीलाथ� /Appellant ��यथ�/Respondent Shri S.K. Tulsiyan, Advocate अपीलाथ� क� ओर से/By Appellant Shri S. Dasagupta, Addl. CIT-DR ��यथ� क� ओर से/By Respondent 12-02-2018 सुनवाई क� तार�ख/Date of Hearing 20-04-2018 घोषणा क� तार�ख/Date of Pronouncement आदेश /O R D E R PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-XXXII, Kolkata dated 05.11.2014. Assessment was framed by ACIT, Circle-50 Kolkata u/s 147/143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 30.12.2011 for assessment year 2007-08. Shri, S.K. Tulsiyan, Ld. Advocate appeared on behalf of assessee and Shri S. Dasgupta, Ld. Departmental Representative appeared on behalf of Revenue. 2. The assessee has raised the following grounds of appeal:- “1) That on the fats and in the circumstances of the case, the ld. CIT(A) erred in not treating the re-assessment proceeding u/s 143(3)/147 of the IT Act, 1961 as invalid, bad in law, unjust and contrary to the facts and law. 2) That on the facts and in respect to the circumstances of thee case, the ld. CIT(A) erred in confirming the assessment order passed u/s. 143(3)/147 of the IT Act, 1961 by the ld. AO as proper and valid without considering the

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 2 facts of the case as well as the law, without considering the submissions made by the appellant. 3) That on the facts and in the circumstances of the case, the ld. CIT(A) failed to appreciate and consider the facts of the case and erred in not annulling the am order passed by the AO u/s 143(3)/147. 4) That on the facts and in the circumstances of the case, the ld. CIT(A) erred in sustaining the addition of Rs.18,38,241/- on account of capital gains. 5) That on the facts and in respect to he circumstances of the case, the ld. CIT(A) erred in not allowing the entire addition of Rs.18,38,241/- as exempted u/s. 19(38) on account of Long Term Capital Gains. 6) Leave to urge such other ground or grounds before or at the time of hearing of appeal”. 2.1 The assessee vide letter dated NIL has filed additional grounds of appeal as detailed below:- “7. That the Ld. CIT(A)-XXXIII, Kolkata in upholding the ord4re passed by the Ld. AO u/s 147/143(3) of the Income Tax Act, 1961 disallowing the appellant’s claim of exempt LTCG of Rs.18,38,241/- failed to appreciate the fact that all the enquiries relating to claim of exempt LTCG u/s. 10(38) of the Income Tax Act, 1961 were conducted by the AO during the course of original assessment u/s. 143(3) of the Income Tax Act, 1961 and hence assessment u/s. 147/143(3) of the Income Tax Act, 1961 is a pure case of mere change of opinion. 8. That the Ld. CIT(A)-XXXII, Kolkata n upholding the order passed by the Ld. AO u/s 147/143(3) of the Income Tax Act, 1961 failed to appreciate that the reopening was initiated by the Ld. AO on the basis of Revenue Audit observation as per AO's observation in the remand report.” The aforesaid grounds arise out of the appellate order passed by the Ld. CIT(A)-‘s order passed u/s. 147/143(3) of the Income Tax Act, 1961 disallowing the appellant’s claim of exempt LTCG to the tune of Rs.18,38,241/-, even after the issue was examined during the original assessment u/s. 143(3) of the Income Tax Act, 1961 leading to the impugned reopening being on a change of opinion and on the basis of a Revenue Audit objection and since the first ground of appeal also arises out of the order passed by the Ld. CIT(A)-XXXII, Kolkata on 905/11/2014 and the whole fact leading to the aforesaid grounds being on record which does not require any investigation of fact, the above grounds being the questions of law arising out of the impugned appellate order may be admitted.” The ld AR before us submitted that the issue raised by assessee in additional grounds of appeal is legal in nature and the same can be raised at any stage of proceedings as held by the Hon'ble Supreme Court in the case of NTPC vs. CIT reported in 229 ITR 383 (SC). The ld. DR raised no objection on the admission of additional ground of appeal.

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 3 3. We have heard the rival contentions of both the parties and perused the material available on record. We admit the legal issue raised by assessee at the time of hearing after having reliance on the principle laid down by Hon'ble Supreme Court in the case of NTPC (supra). It was also observed that the issue raised in additional grounds by the assessee is similar to the grounds nos. 1 to 3 of appeal raised along with the memo of appeal in Form No. 36. Accordingly we proceed to adjudicate the appeal of the assessee. 4. First we take up the additional grounds of appeal and the grounds numbers 1, 2 & 3 raised by the assessee along with the memo of appeal in Form No. 36. 5. The assessee has challenged the validity of the reassessment proceedings initiated u/s 147 of the Act. 6. Briefly stated facts are that the assessee is an individual and deriving his income from rent, from partnership firm and other sources. The assessee filed his return of income on 17.10.2007 at a total income of Rs.1,04,13,450/- only. Subsequently the return was selected under scrutiny and assessment was framed u/s 143(3) of the Income Tax Act, 1961 vide order dated 30/11/2009 at Rs.1,05,02,850/- after making certain additions/disallowances to the total income of the assessee. Later on a notice u/s 154 of the Act was issued dated 20.04.2010 by the AO for the rectification of mistake apparent from the record in the assessment order passed by him under section 143(3) of the Act. The AO alleged that the assessee has claimed exemption on the long term capital gain income on account of sale of shares under section 10(38) of the Act though the assessee has not paid STT on the sale of such shares. The assessee in compliance thereto submitted that there is no such mistake in the order passed u/s 143(3) of the Act. However the AO subsequently dropped the proceedings initiated u/s 154 of the Income Tax Act, 1961 by passing an order dated 23/08/2010. The AO in his order sheet maintained for the proceedings under section 154 of the Act recorded dated 23/08/2010 that necessary contract notes were filed before him in support of the payment of

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 4 STT on sale of shares. But the AO observed that the transactions of sale of shares require further verification which was beyond the purview of section 154 of the Act. 6.1 The AO in the meantime initiated proceedings on 22/08/2010 i.e. a day before passing the Order u/s 154 of the Act issued notice u/s 148 of the Act for the reopening of the case for escapement of income. In compliance thereto the assessee raised the objection on the reopening of the case under section 147 of the Act on the ground that it was initiated on the same premise as done u/s 154 of the Act. But the AO rejected the contentions of the assessee and framed the assessment u/s 147/143(3) of the Act after making the addition to the total income of the assessee. 7. Aggrieved assessee carried the matter to the ld. CIT(A). The assessee before the ld. CIT(A) submitted that the AO before the issue of the notice u/s 148 of the Act initiated the proceedings under section 154 of the Act for the rectification of the mistake so as bring the LTCG on sale of shares under the net of tax. The AO of the view that the LTCG was not exempt from tax as the STT was not paid on the sale of shares. But the AO later on dropped the proceedings initiated u/s 154 of the Act. The AO however issued the notice u/s 148 of the Act on the same issue. The assessee submitted that the act of the AO for issuing the notice u/s 148 of the Act is nothing but change of opinion which is not permitted in reassessment proceedings. The assessee in support of his claim has relied on the orders of the Hon'ble High Courts. However the ld. CIT(A) disregarded the contention of the assessee and held that the reopening of the case u/s 147 of the Act is valid by observing as under:- “… … the above case laws are valid in their relative spheres but they cannot be selectively quoted to suit the arguments of the assessee. It has to be proved that the facts of the case of the assessee necessitate the application of the above case laws. This has not been proved in this case. The Gujarat High Court in the case of Damodar H. Shah (supra) has not simply held as quoted by the assessee but the High Court has explained in detail that the provision of section 154 and 147 of the Act and operate in different domains. This is clear from the following extract of the order of the High Court:-

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 5 ‘8.1 the expression ‘mistake apparent from the record’ occurring in section 154 would mean, in the context of the provision, that it should be evident on a reasonable reading of the record to show that there has been committed by the Assessing Officer a mistake in the order which needs to be rectified. The expression ‘from the record’ entails reading of the record and not a cursory look at its bulk. The word ‘apparent’ does not dilute the need to read the record for ascertaining whether there is a mistake on its plain reading. If the record so read is not at all capable of being construed in a different manner and the mistake is demonstrated on its plain reading, it would be a mistake which is apparent, i.e. evident or obvious from the record and ought to be rectified under section 154. If, however, on reading the record it cannot be said that the view taken in the order is mistaken, there would be no question of rectification because there is no mistake obvious from the record which could be rectified. A mistake may have arisen due to mere ignorance or forgetfulness of a fact or out of a belief that a particular fact exists when it does not or it may be a glaring mistake of law. Mistake apparent from the record is a mistake, which is ex facie borne out from the plain reading of the record of the proceedings as it stands. On the basis of the record of the proceedings it becomes obvious that there is a mistake committed, i.e. incorrect conclusion reached a mistaken conclusion which is not at all warranted from this record. If, however, the conclusion is plausible and may be warranted from the record, then it cannot be said that from the record the mistake is intellectually evident or obvious. If on the existing state of record, permissible discretion is exercised or two view are reasonably possible including the one which is taken, then it cannot be said with the required certainty that there is a mistake in the order which is apparent from the record. 9. On the other hand, the emphasis of the proceedings under section 147 is entirely on the question whether according to the Assessing Officer, income chargeable to tax has escaped assessment for any assessment year irrespective of the question whether there is or not an obvious mistake in the assessment order that he may have passed. In the assessment proceedings under section 147, the Assessing Officer is not just wanting to correct the mistake that is identified by him, by amending the order on the basis of the record of the proceedings, but wants to find out the chargeable income that, according to his prima facie view, had escaped assessment when the order of assessment was made. The reason to believe under section 147 is about the chargeable income having escaped assessment, the ascertainment of which requires reopening of the assessment by following the procedure as indicated under section 148. In all cases of income having escaped assessment, including the cases where mistake is committed in the assessment order, it would be open for the Assessing Officer to proceed under section 147 for assessment, reassessment or recomputation. However, in a case where, according to him, the assessment order requires to be amended by rectifying the mistake detected by him which is obvious or evident from the existing record and, according to him, there is no need to reopen the am for any

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 6 additional material, information, investigation or scrutiny, he may resort to section 154 and rectify it by amending the assessment order as per section 154(3). In fact, section 154 would cover all cases of mistakes apparent from the record, which could be rectified by the concerned authorities. Mistake apparent from the record which has the effect of enhancing assessment ought to be rectified by resorting to this special and speedy procedure when in the view of the Assessing Officer it is unnecessary to resort to reopening of the assessment. In the field of chargeable income escaping assessment, however, section 147 is very widely worded and would include even escapement due to any mistake in the assessment order. But, when even, according to the Assessing Officer himself, there is a mistake apparent from the record as it exists, committed in the order of assessment, which is rectifiable on the basis of the existing record under section 154 being a special provision made for the purpose, and that there is no need to resort to reopening of the assessment as contemplated by section 148 read with section 147, then he must resort to the provision and cannot wantonly or arbitrarily and without valid reason resort to reopening of the assessment. 10. The process of assessment, reassessment and recomputation under section 147 is much more onerous to the assessee than the process of rectification under section 14. The proceedings under section in 147 for assessing income chargeable to tax that has escaped assessment would very often involve a complete rewriting of the original assessment. Once the Assessing Officer has reason to believe that income has escaped assessment, he is at liberty to reconsider the whole matter, at all events in relation to everything that is material to the assessment of the tax under the head of liability affected. He is at liberty to reconsider the whole question of how he would ascertain the assessable and taxable income of the taxpayer. The function of the Assessing Officer acting under section 147 is not limited as under section 154, merely to rectifying the result which may have been vitiated due to mistake apparent from the record. It would, therefore, follow that in cases of mistake resulting in escapement, which is the area where both the provisions would become relevant, the Assessing Officer will have to consider whether he was required by the nature of escapement to reconsider the question of how he would ascertain and assess income that has escaped assessment and reopen the assessment or if that is not required, then merely to rectify the mistaken result on the basis of the existing record. If he chooses to resort to the former, i.e. section 147 read with section 148 proceedings, he cannot be compelled to resort to section 154 because that would impinge upon his subjective satisfaction under section 147. But if he resorts to section 154 on the ground that the mistake in the order apparent form the record has resulted in escapement which could be rectified by amending the order and enhancing the assessment, then he, on finding that there is no such mistake apparent from the record warranting rectification since the view taken is plausible, cannot in absence of any other ground on the basis of which he has still reasons to believe that the income has escape assessment, start proceedings again under section 147. If he

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 7 finds that there is no such mistake since the result was warranted from the record, there would be no occasion to amend the assessment order. Where the rectification could not be done on the ground that there were two views possible or that there was discretion lawfully exercised, then the same will also be true when the Assessing Officer starts the proceeding under section 147 on the same material, because, that power cannot be invoked when there is only a mere change of opinion and in cases where in the proceedings under section 154 it is found that what was thought to be a mistake was not a mistake because that view was warranted or permissible from the existing record, then the same finding will bind the Assessing Officer when trying to exercise powers under section 147. In such a case, it would be incumbent on the part of the Assessing Officer who has chosen to resort to section 154 to demonstrate why he is now for the same purpose resorting to section 147. There has to be some compelling reason in such a case for him still to believe that the income that was the subject-matter of rectification has escaped assessment though that was not due to any obvious mistake borne out from the existing record, which could be rectified under section 154. To prevent arbitrary exercise of power and fishing expeditions it would, therefore, be necessary for the Assessing Officer who has in respect of the same subject-matter not be able to find exiting of the mistake which he earlier thought was apparent from the record, i.e. on the basis of the existing material on the record, in order to resort to section 147 from reopening the assessment, to record that though the mistake in assessments is not obvious from the record, he still has reason to believe that the said income had escaped assessment warranting reopening of the assessment under section 147. It will not be open to the Assessing Officer to arbitrarily or wantonly resort to the provisions of section 147 where the process of rectification under section 154 fails on merits. (emphasis supplied)” The high Court has held that the AO has to have the belief that the mistake cannot be rectified under section 154 of the Act and hence recourse to section 147 of the Act is needed. The present appeal by the assessee is not a case where the mistake could have been rectified under section 154 of the Act. The AO also has not examined the issue u/s. 154 of the Act on merits. Similarly the view of the High Court of Kolkata in the case of Berger Paints India Ltd v. ACIT 2010) 322 ITR 369 (Cal) (supra) is same as in the case of the Gujarat High Court when the court holds; ‘However, if the Assessing Officer is of the view that income has escaped assessment by reason of a mistake apparent form records, and takes recourse to section 154, but finds later, that there is no apparent mistake, then he cannot, in the absence of any other ground on the basis of which he still has reason to believe that the income has escaped assessment, start reassessment proceedings under section 147 of the Act. in other works, the Assessing Officer cannot again start reassessment proceedings on the basis of the same reasons.”

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 8 As against the case laws cited by the assessee the following decision of the Delhi High Court is directly o the issue. In the case of Honda Siel Power Products Ltd. v. DCIT [2012] 340 ITR 53 (Del) the High Court has negated such a view of the assessee when it held as under:- ’18. Learned counsel for the petitioner had submitted that reopening proceedings cannot be sustained as after the original assessment proceedings were concluded, notice for rectification of mistake was issued under section 154 and a reply dated 20.11.2004 was filed by the petitioner-assessee. Thereafter, nothing was heard from the Assessing Officer and presumably no order under section 154 of the Act was passed. It was submitted that as a legal proposition; that once a notice under section 154 of the Act is issued, proceedings under section 147 of the Act on the same ground or reasons cannot be taken. It is not possible to accept the said proposition in broad terms as propounded or as one having universal application. Scope and ambit of sections 154 and 147/148 of the Act are different. Under section 154 of the Act, the Assessing Officer can only rectify mistakes and errors. Section154 is not a substitute for section 147/148. In a given case, resort to provisions of section 154 of the Act may be an appropriate remedy but in other cases resort to section 147/148 may be required. The question; whether reopening is justified when both provisions 154 and 147/148 of the Act are attracted, is not urged and argued by the petitioner. It is not the case of the petitioner that section 154 of the Act is applicable and can be invoked to make addition on ground No.2. 19. Decision of the Bombay High Court in Hindustan Unilever Ltd. v. DY CIT [2010] 325 ITR 102, which opines that when section 15 applies, reopening under section 147 of the Act should not be resorted to, is not applicable to the facts of the present case. Reliance placed by the learned counsel for the petitioner on the decision of Gujarat High Curt in Damodar H Shah v. Asst. CIT [2000] 245 ITR 774 and Calcutta High Curt in Berger Paints India Ltd. v. asstt. CIT [2010] 322 ITR 36 for the same reason is misconceived. 20. The aforesaid judgments do not state that once notice under section 154 of the Act is issued, resort to section 147 is barred or prohibited under the Act. what is highlighted by the Gujarat High Court is the distinction between sections 154 and 147 of the Act. it is further pointed out that if section 154 of the Act is applicable then the Assessing Officer should not arbitrarily and in a wanton manner resort to process of reopening the assessment under section 147 of the Act. this reasoning is contrary and goes against the plea and argument of the petitioner as it accepts the difference in scope and ambit of the said provisions. It has been held that when mistakes are apparent, the Assessing Officer should invoke section 154 of the Act but in cases where mistakes are not apparent form the record, the Assessing Officer can reopen assessments under section 147 of the Act when the pre- conditions are satisfied. 21. Rectification of a mistake apparent from the record cannot be equated with the power of reopening under sections 147 and 148 of the Act, which is conferred on the Assessing Officer to reopen cases under

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 9 assessment when conditions mentioned in the said section are satisfied. The object and purpose of the two provisions is separate and the preconditions and requirements are different. The words ‘reasons to believe’ when income chargeable to tax has escaped assessment has a different connotation and requirements and cannot be equated with the power under section 154 to rectify mistakes apparent from the record. In some cases albeit not in all cases, sections 154 and 147 both may be applicable and, therefore, the aforesaid decisions suggest that recourse to section 154 may be justified rather than recourse to the provisions of section 147/148 of the Act for reopening of assessments. But this is different from stating that if notice under section 154 is issued, then notice under section 147/148 is barred or prohibited. Per se and ex facie the language of section 147 shows that the pre-requisites of the said provision are not controlled, curbed and regulated with the requirement of mistake which is apparent from the record. 22. In the present case, the assessee in response to the notice under section 154 of the Act had objected to the rectification proceedings. It was submitted that rectification proceedings under section 154 of the Act were not justified and without jurisdiction as there was no mistake or error apparent from the record. W have examined the second ground. The Assessing Officer could not have resorted to section 154 proceedings to disallow expenditure under section 14A of the Act. This was not possible in section 154 proceedings as it was not an error or mistake apparent from the record. The writ petition stands accordingly dismissed, with no order as to costs “(emphasis supplied) The above decision of the Delhi High Court has since been affirmed by the Supreme Court of India in the case titled as Honda Siel Power Products Ltd. v. DCIT [2012] 340 ITR and the brief order reads as under:- ÓRDER 1. In our view, the reopening of assessment is fully justified on the facts and circumstances of the case. However, on the merits of the case, it would be open to the assessee to raise all contentions with regard to the amount of Rs.98.46 lakhs being offered for tax as well as its contention on section 14A of the Income-tax ct, 1961. 2. Subject to the above, the special leave petition is dismissed’(emphasis supplied) In view of the decision of the Supreme Court above, it is settled that if the preconditions for section 147 of the Act are met, then there is no bar on issuing a notice u/s. 148 of the Act even if the proceedings u/s. 154 of the Act have been dropped by the AO on the same issue.” Being aggrieved by the order of Ld. CIT(A) Order, the assessee is in appeal before us.

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 10 8. The ld. AR before us filed a paper book comprising of pages 1 to 53 of the PB and submitted that as under: [Income escaping assessment. 147. If the [Assessing] Officer [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or re-compute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) : [Provided ... [Explanation 4.-- For removal of.. .. I" day of April, 2012] Relevant extract reproduced The foregoing provision suggests that if the assessing officer has the reason to believe that any income chargeable to tax has escaped assessment then the assessing officer may, subject to the provisions of section 148 to 153 assess or reassess such income. Thereafter the appellant would like to submit that reason to believe being the foremost criteria for reopening of assessment under section 148 of the Act, it should be interpreted in the right perspective. 'Reason to believe' cannot be reason to suspect merely. There must be a direct nexus between the material coming to the notice of the assessing officer and the subsequent formation of a belief that there has been escapement of income on the part of the assessee in a particular A.Y. The basis of the belief should be discernible from the material on record, which was available with the Assessing Officer, when he recorded reason. A mere change of opinion cannot constitute a reason to believe. In light of the above the appellant would like to reiterate that his case was originally assessed u/s 143(3) of the Act vide order dated 30/11/2009 (copy enclosed at pages 11 to 13 of the paper book) at a total income of Rs.1,05,02,850/-, after making addition of Rs.20,400/- on account of fair rent and Rs.69,000/- on account of appellant's share of rent in property rented out. Before passing the Assessment Order u/s 143(3) of the Act the AO had examined the appellant's claim of exempt LTCG U/S 10(38) of the Act by issuing notice u/s 142(1) of the Act along with a questionnaire (copy enclosed at pages 07 to 09 of the paper book) enquiring about the appellant's claim of exempt LTCG u/s 10(38) of the Income Tax Act, 1961 along with enquiring about the other claims. The appellant in response to the Ld. AO's query replied vide letters dated 18/11/2009 and 23/10/2009 (copies at pages 10 and 10A of the paper book) by submitting the details of exempt LTCG u/s 10(38) of the Act contract notes and computation of the exempt LTCG which included the capital gains claimed by the appellant on account of sale of shares of Shardaraj Tradefin Ltd and Lotus Homes (LTCG claimed on them referred in the Reasons Recorded).

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 11 The same is also evident from the Ld. AO's observations in para 1 page 2 of the Assessment Order passed by him u/s 143(3) of the Income Tax Act, 1961 which reads as: "It is seen that the assessee had income from house property, remuneration and interest on capital from partnership firm, capital gain and from other sources. " Thus, the assessee had made full and true disclosure of his claim of exempt LTCG u/s 10(38) of the Act and the same was accepted by the Assessing Officer in the order passed by him u/s 143(3) of the Act on 30/11/2009 after examining the claim by applying his mind to the details -submitted by the appellant. Thus, while passing his order u/s 143(3) of the Act on 30/11/2009 the Assessing Officer applied his mind to all the material submitted before him by the assessee and accepted the view canvassed by the appellant with regard to the appellant's claim of exempt LTCG u/s 10(38) of the Act. In fact the appellant's case for the relevant Assessment Year was reopened by the Ld. AO u/s 147 of the Act on the basis of the documents which were already on record before the Assessing Officer at the time of passing the order u/s 143(3) of the. This is evident from the AO's reasons recorded (copy at page 2 of the paper book) which begins with "It is seen from the Balance Sheet of schedule-IV/ for the year ended on 31.03.2007… "making it clear that for reopening the appellant's assessment, he did not have any tangible material or information coming to his notice subsequent to the appellant's assessment concluded u/s 143(3) of the Act which led him to believe that the appellant's income escaped assessment. Therefore the impugned reopening of the Ld. AO's assessment u/s 147 of the Act for re examining his claim of exempt LTCG u/s 10(38) of the Act on sale of shares of Shardaraj Tradefin Ltd and Lotus Homes, in the absence of any new/tangible material coming to the Ld. AO's possession/notice which was not before the AO while passing the order u/s 143(3) of the Income Tax Act, 1961 is nothing but a mere change of opinion. Therefore the order passed by the Ld. AO u/s 147/143(3) of the Income Tax Act, 1961 on a change of opinion and further upheld by the Ld. CIT(A) is bad in law and should be struck down. On the other hand the Ld DR submitted that LTCG income was shown by the assessee but no verification was carried out by the AO during the assessment proceedings under section 143(3) of the Act. Therefore the notice u/s 148 dated 22.08.2010 was issued upon the assessee. There is no date mention on the reasons recorded by the AO for initiating the proceedings under section 147 of the Act. The AO dropped the proceedings u/s 154 of the Act considering the fact that the issue in hand cannot be covered under the provisions of section 154 of the

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 12 Act. But there is no bar for initiating the proceedings under section 147 of the Act in the cases where the proceedings u/s 154 of the Act had been initiated and subsequently dropped. The ld. DR vehemently supported the order of authorities below. 9. We have heard the rival contentions and perused the materials available on record. At this juncture we find important to reproduce the reasons recorded by the AO for reopening the case u/s 147 of the Act which reads as under:- “It is seen from the balance sheet of Schedule-IV for the year ended 31.02.2007, that Long Term Capital Gain of Rs.23,36,882/- claimed which was fully exempted u/s 10(38) if such transactions is covered under STT out from the detailed of aforesaid schedule-IV was sown sale of shares of Rs.17,39,150/- of Lotus Home and Rs.99,091/- of Shradraj Tradefin Ltd. aggregating of Rs.18,38,241/- was not covered under STT out of total LTCG of Rs.23,36,822/-. Hence, the LTCG of Rs.18,38,241/- was required to be added back to the total income of the assessee as the said amount claimed by the assessee is his exempted income resulting under assessment. Issue notice u/s.148 of the Act for the Assessment Year 2007-08.” A plain reading of the above reasons reveals that it was alleged by the AO that the income escaped assessment on account of exemption claimed by the assessee u/s 10(38) of the Act on the sale of shares but the fact is that no STT was paid by the assessee on the sale of shares. However we note that the assessee during the assessment proceedings u/s 143(3) of the Act duly furnished the details of capital gain income. The queries were raised by the AO u/s 142(1) of the Act vide letter dated 16-09-2009. The requisition made by the AO u/s 142(1) of the Act is placed on page 9 of the paper book and detailed as under:- “ANNEXURE NAME : Ananda Paul Address: CF-125, Salt Lake City, Bidhan Nagar, Sector-1, Kolkata-64 P.A. No. AFKPP201D Asstt. Year : 2007-08 1. Details of properties from which rent has been earned. 2. Copies of the profit & loss account and balance sheet of R.T Paul 3. Break-up of the salary received during the year. 4. Profit & loss account of A-Akhee Anand food & Beverage of the current year and last three financial years.

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 13 5. Details of capital gain with evidence. 6. Details of income from other sources 7. Evidence of receipt from LIC 8. Confirmation of gift. 9. Confirmation of accommodation loan. 10. Details of family members and their sources of income. 11. Copies of bank statements. 12. Book of accounts of the proprietorship business. The assessee in compliance thereto made a reply to the AO by letter dated 18th November 2009 and 23rd October 2009 which is placed on pages 10 and 10A of the paper book. The relevant extract of the reply placed on page 10 of the paper book is reproduced below. 1. Salary 30,60,000/- 2. Interest on capital 42,76,592/- 3. Interest from O/sources 6,7,347/- 4. Royalty 23,33,334/- 5. House property 2,21,970/- 6. Long term C.G. (exempted) (22,78,940/-) 7. Share profit fro firm (exempted) (33,30,028/-) 8. Short term C.G. 57,941/- The relevant extract of the reply placed on page 10A of the paper book is reproduced below. “the calculation of capital gains is enclosed.” We also note that the assessee has furnished the details of the investment in the form of some chart as evident from the order sheet entry of the AO relating to assessment proceedings under section 143(3) of the Act which are placed on pages 24 to 27 of the paper book. 9.1 We also find that the assessee has duly disclosed its exempted income in its computation of income which is placed on pages 20 to 23 of the paper book. As such we note that the AO initiated the proceedings u/s 147 of the Act on the basis of the materials which were available before him during the assessment proceedings under section 143(3) of the Act. From the above facts, we find that the AO at the time of original assessment had in his possession all the relevant details regarding the LTCG. Accordingly, we disagree with the view taken by the ld. CIT(A) for validating the initiation of the

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 14 reassessment proceedings u/s 147 of the Act as valid. In the instance case, the relevant data /information was available before the AO at the time of assessment and it was duly verified. Thus, it can be inferred that the AO in the original assessment proceedings has consciously treated the LTCG as exempted income. Thus, in our considered view the initiation of proceedings u/s 147 of the Act on the same set of documents is nothing but mere change of opinion. In this regard we find support and guidance from the judgments of the Hon’ble Supreme Court in the case of CIT vs Kelvinator of India Ltd. Reported in 320 ITR 561 (SC) wherein it has been held as under :- "The concept of "change of opinion" on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income-tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of ((change of opinion "must be treated as an in built test to check the abuse of power. Hence after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is ((tangible material" to come to the conclusion that there was ent income from assessment. Reason must have a link with the formation of the belief" 9.2 Further, reliance is also placed on the following judgments wherein it has been repeatedly held that re-opening of assessment on mere change of opinion is not sustainable: (1) M.J. Pharmaceuticals Ltd vs. CIT (2008) 297 ITR 119 (Bom) (Assessment Year 2003- 2004), in this case, the Hon'ble High Court observed as under: "Issue regarding addition of amount of deferred taxation for computing book profits u/s. 115JB having been raised by the AO at the time of original assessment u/s. 143(3) and no addition having been made by AO on the account on being satisfied with the explanation of the assessee reopening of assessment on the very same issue suffered from change of opinion in the absence of any fresh material hence invalid. " (2) D. T. & T. D. C. Ltd. vs. CIT (2010) 324 ITR 234 (Del.), in the said case, it was held as under: "The assessing officer has been given power to reassess under section 147 upon certain conditions being satisfied, and the assessing officer does not have power to review. If such a change of opinion were to be

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 15 permitted as a ground of reassessment then it would amount to granting a licence to the assessing officer to review his decision, which he does not have under the provision of section 147." (3) Asteroids Trading & Investment P. Ltd. vs DClT (2009) 308 lTR 190 (Bom), in the said case, it was held that since no new material brought on record, reassessment on change of opinion of officer not valid. (4) Asian Paints Ltd. vs. DCIT (2008) 308 ITR 195 (Bom), in this case, the Hon'ble High Court observed that mere change of opinion of A.O. not ground for reassessment. (5) ICICI Prudential Life Insurance Co. Ltd. (2010) 325 ITR 471 (Bom), in the said case, the Hon'ble Bombay High Court held that re-opening of assessment on the same ground in the absence of any tangible material was based on mere change of opinion and therefore is not sustainable. Based on the ratio of judgment decided in the aforesaid cases, it follows that no valid proceeding u/s.147 could be initiated even within a period of four years on mere change of opinion, if all material facts had been disclosed by the assessee and the AO had complete knowledge of all such materials and further, the assessment had also been completed after taking into consideration all such material facts. Therefore, following the above, the conclusion can be drawn in the instant case that in absence of new information or detail being available to the AO, after completion of the original assessment u/s l43(3) of the Act, proceedings initiated u/s.l47 of the Act for the relevant assessment year is not valid. It is clear in the present case of the assessee that the "reason to believe" is based on non existing material and therefore in absence of tangible material to reach a reasonable belief that the income liable to tax has escaped assessment, the entire proceeding initiated u/s.147 of the Act is liable to be quashed. Reference in this connection is also invited to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Amitabh Bachchan, ITA No.4646 of 2010 wherein it was held as under: "The assessee had made a claim for 30% ad hoc expenditure. This was withdrawn by the assessee when asked by the AO to substantiate. The reopening on the basis that the said ad hoc expenditure constituted

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 16 "unexplained expenditure" u/s 69 was based on the same material. There was no fresh tangible material before the AO to reach a reasonable belief that the income liable to tax has escaped assessment. It is a settled position of law that review under the garb of reassessment is not permissible. " 9.3 Again, at this juncture attention is invited to the recent decision of the Hon'ble Delhi High Court in the case of Pr. Commissioner of Income-tax v. Tupperware India (P.) Ltd. reported in [2016] 236 Taxman 494, wherein the Court while observing that the expression "reason to believe" cannot have two different standards or sets of meaning, one applicable where the assessment was earlier made u/s 143(3) and another applicable where an intimation was earlier issued u/s 143(1), held as under: “The reopening order of the Assessing Officer only refers to the report of statutory auditor under section 44AB which report was already enclosed with the return filed by the assessee. Therefore, factually, there was no new material that the Assessing Officer came across so as to have treasons to believe that the income had escaped assessment. " We also note that the AO initiated the proceedings u/s 147 of the Act after taking the approval from the Ld CIT for issuing notice u/s 148 of the Act. The permission was obtained by the AO on 16-08-2010 for initiating the proceedings u/s 147 of the Act whereas the proceedings u/s 154 of the Act were dropped on 18-08-2010. From the above, it is implied that proceedings were initiated and pending by the AO on the same issue simultaneously u/s 147 and 154 of the Act which is not permitted in the eyes of law. In this regard we find support and guidance from the judgement of Honourable jurisdictional High Court in the case of Berger Paints India Ltd versus ACIT reported in 322 ITR 369(Cal). The relevant extract of the order is reproduced below. “If the Assessing Officer is of the view that income has escaped assessment by reason of a mistake apparent from records, and takes recourse to section 154, but finds later, that there is no apparent mistake, then he cannot, in the absence of any other ground on the basis of which he still has reason to believe that the income has escaped assessment, start reassessment proceedings under section 147. In other words, the Assessing Officer cannot again start reassessment proceedings on the basis of the same reasons.”

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 17 However we also note that the ld CIT(A) has heavily relied on the judgment of Hon’ble High Court of Delhi in the case of Honda siel Power Products Ltd versus DCIT reported in 340 ITR 53 which has been discussed in the preceding paragraphs. However as per our understanding the issue whether the Revenue can resort to the provisions of section 154 and 147 of the Act simultaneously was not adjudicated as evident from the judgment which is reproduced below : “The question; whether reopening is justified when both provisions 154 and 147/148 of the Act are attracted, is not urged and argued by the petitioner. It is not the case of the petitioner that section 154 of the Act is applicable and can be invoked to make addition on ground No. 2.” 9.4 Similarly we also note that the Hon’ble Supreme Court on appeal against the Hon’ble Delhi High Court Judgment in the case of Honda siel Power Products Ltd (Supra) reported in 340 ITR 64 has not given any finding on section 154 of the Act for the facts of the case in hand. The relevant extract of the head note of the order is reproduced below: “Section 14A, read with section 147, of the Income-tax Act, 1961 - Expenditure incurred in relation to exempt income - Assessment year 2000-01 - Assessee had earned dividend income on long-term non-trade investments which was claimed as exempt under section 10(33) - Assessing Officer opined that expenses relating to earning of dividend income were not allowable - He found that assessee had reduced gross dividend income from its income for computing taxable income instead of reducing net dividend income after accounting for expenses related to earning dividend income and, therefore, income of assessee was under assessed on this account - Assessing Officer, accordingly, held that income had escaped assessment by reasons of failure on part of assessee to disclose fully and truly all material facts necessary for its assessment and, thus, he reopened assessment by issue of notice under section 148 - Assessee contended that Assessing Officer sought to invoke section 14A to disallow deduction of such expenses which were incurred for earning tax-free income which was exempt; that section 14A was introduced by Finance Act, 2001, with retrospective effect from 1-4-1962; that since assessee had filed its return of income on 30-11- 2000, it was not obligatory on part of assessee to disclose any fact in respect of expenditure incurred to earn exempt/tax-free income - High Court held that factum that section 14A was in statute book was known to assessee when original assessment order was passed and, thus, there was an omission and failure on part of assessee to point out expenses incurred relatable to tax- free/exempt income - Accordingly, High Court held that reopening of assessment was justified - Whether reopening of assessment was fully justified on facts and circumstances - Held, yes - Whether, however, it would

ITA No.165/Kol/2015 A.Y. 2007-08 Ananda Paul Vs. ACIT, Cir-50 Kol. Page 18 be open to assessee to raise contentions on merits with regard to amount being offered for tax as well as its contention on section 14A - Held, yes [In favour of revenue]” In view of above, we hold that the case laws relied by the ld CIT(A) in his order are distinguishable from the facts of the instant case. Therefore no reference to such cases can be made while deciding the issue in hand. In view of above, we hold that reassessment proceedings cannot be resorted after realizing that the error cannot be rectified u/s 154 of the Act. Hence on this count also we reverse the order of authorities below. As the issue has been decided by us on technical ground we refrain our-self from adjudicating the issue on merit. The appeal of the assessee is allowed. Thus, on this count also, we hold that addition made by the AO in the impugned order is unsustainable being beyond the scope of assessment framed u/s 143(3)/147 of the Act the appeal of assessee is allowed and other grounds raised on merits have become purely infructus and same are treated as dismissed. 10. In the result, assessee’s appeal stands are allowed. Order pronounced in the open court 20/04/2018 Sd/- Sd/- (�या$यक सद&य) (लेखा सद&य) (N.V.Vasudevan) (Waseem Ahmed) (Judicial Member) (Accountant Member) Kolkata, *Dkp, Sr.P.S (दनांकः-20/04/2018 कोलकाता । आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. अपीलाथ�/Appellant-Ananda Paul, CF-125, Salt Lake City, Kolkataa-64 2. ��यथ�/Respondent-ACIT, Circle-50, Manicktala Civic Centre, Utttarapan Complex, DS-2&3,Kolkata-54 3. संबं3धत आयकर आयु4त / Concerned CIT Kolkata 4. आयकर आयु4त- अपील / CIT (A) Kolkata 5. 7वभागीय �$त$न3ध, आयकर अपील�य अ3धकरण, कोलकाता / DR, ITAT, Kolkata 6. गाड< फाइल / Guard file. By order/आदेश से, /True Copy/ Sr. Private Secretary, Head of Office/DDO आयकर अपील�य अ3धकरण, कोलकाता ।