SHRI DEBABHASH DEY,KOLKATA vs. ITO, WD, 56(3), KOLKATA, KOLKATA

The assessee in the present case is an individual, who carries on the business of transportation in the name of his proprietary concern M/s. Kiron Roadlines as well as in his personal name. The return of income for the year under consideration was filed by him on 31.10.2004 declaring total income of Rs.5,68,816/-. In the said return, a loss of Rs.2,46,687/- was declared by the assessee in respect of the transportation business carried on in his personal name. In the assessment originally completed under section 143(3), the said loss shown by the assessee was accepted by the Assessing Officer, although an addition of Rs.1,32,000/- was made by him to the total income of the assessee on account of unexplained/unproved liabilities. The total income of the assessee, accordingly, was determined by the Assessing Officer at Rs.7,00,816/- in ./2016 Assessment year: 2004-2005 Page 2 of 6 the assessment originally completed under section 143(3) vide an order dated 19.12.2006. Thereafter the Assessing Officer noticed from the balance-sheet of the assessee filed in respect of transportation business carried on in the personal name that although the assessee was the owner of seven trucks, the profits earned from hiring the same were not offered on presumptive taxation basis as provided in section 44AE of the Act. He, therefore, reopened the assessment after recording the reasons and issued a notice to the assessee under section 148. Pursuant to the said notice, reassessment was completed by the Assessing Officer under section 143(3)/147 of the Act vide an order dated 28.11.2011, wherein he disallowed the loss of Rs.2,46,846/- claimed by the assessee in respect of transportation business carried on in his personal name and determined the income of the said business at Rs.2,94,000/- as per section 44AE of the Act thereby making an addition of Rs.5,40,687/- to the total income of the assessee.

Against the order passed by the Assessing Officer under section 143(3)/147, an appeal was preferred by the assessee before the ld. CIT(Appeals) challenging the validity of the said order and also disputing the addition of Rs.5,40,687/- made therein to the total income on merit. The ld. CIT(Appeals), however, did not find merit in the said appeal of the assessee and after upholding the validity the order passed by the Assessing Officer under section 143(3)/147 and confirming the addition made therein on merit, he dismissed the same. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.

The preliminary issued raised by the assessee in this appeal relates to the validity of assessment made by the Assessing Officer under section 143(3)/147. Apropos this issue, the ld. counsel for the assessee contended that the original assessment for the year under consideration was completed by the Assessing Officer under section 143(3) of the Act ./2016 Assessment year: 2004-2005 Page 3 of 6 after verifying all the relevant records including the books of account of the assessee.

Apropos this issue, the ld. counsel for the assessee contended that the original assessment for the year under consideration was completed by the Assessing Officer in the case of the assessee under section 143(3) of the Act after verifying all the relevant records including the books of account of the assessee and in the absence of any new information or material coming to the possession of the Assessing Officer, the reopening of assessment on the basis of same records was based on a mere change of opinion, which is not permissible in law. In support of this contention, he relied on the decision of the Hon’ble Supreme Court in the case of CIT –vs.- Kelvinator of India Limited reported in 320 ITR 561 as well as the decision of the Hon’ble Calcutta High Court in the case of Manmohan Kedia –vs.- ITO reported in 344 ITR 187.

The ld. D.R., on the other hand, strongly relied on the impugned order of the ld. CIT(Appeals) in support of the revenue’s case on this issue and contended that the assessment having been reopened by the Assessing Officer on the new issues, which had not been specifically decided in the assessment originally completed under section 143(3) as evident from the reasons recorded by him, the reopening was in accordance with law.

I have considered the rival submissions and also perused the relevant material available on record. In order to appreciate the contention of the ld. counsel for the assessee on the preliminary issue raised in this case challenging the validity of reopening of assessment, it is relevant to refer to the reasons recorded by the Assessing Officer for reopening, which are extracted below:- “The assessee an individual, carried on the business of hiring trucks. He would maintain the accounts separately for his proprietary business named after M/s. Kiron Roadlines as well as that in his self name. ./2016 Assessment year: 2004-2005 Page 4 of 6

A perusal of the aforesaid reasons recorded by the Assessing Officer makes it abundantly clear that the assessment originally completed by him under section 143(3) was reopened by the Assessing Officer on the basis of the same records as was available before him while completing the original assessment under section 143(3) and there was no new tangible material that had come to his possession on the basis of which the assessment was reopened by him. At the time of hearing before me, the ld. D.R. has not disputed this position. The only contention raised by him is that the reopening of assessment by the Assessing Officer was based on altogether new issues, which had not been examined by the Assessing Officer during the course of original proceedings under section ./2016 Assessment year: 2004-2005 Page 5 of 6 143(3). However, as submitted by the ld. counsel for the assessee, the relevant records including the books of account of the assessee were duly examined by the Assessing Officer during the course of assessment proceedings and only after having satisfied with the same, the claim of the assessee was accepted by him in the assessment completed under section 143(3). The contention raised by the ld. D.R. in this regard, even otherwise runs contrary to the decision of the Hon’ble Calcutta High Court in the case of Debashis Moulik –vs.- ACIT reported in 370 ITR 660, wherein the assessment originally completed under section 143(3) was sought to be reopened by the Assessing Officer on the basis of new facts discovered from the assessment records and it was held by the Hon’ble Calcutta High Court that the assessment was reopened by the Assessing Officer merely on the basis of change of opinion, which was not permissible in law.

In the case of CIT –vs.- Kelvinator of India Limited (supra), cited by the ld. counsel for the assessee, it was held by the Hon’ble Supreme Court that after the amendment made w.e.f. 1st April, 1989, 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 a mere change of opinion. It was held that the concept of “change of opinion” must be treated as an in-built test to check the abuse of power and hence the Assessing Officer even after the amendments made in the relevant provisions from April 1, 1989 has the power to reopen an assessment provided there is tangible material to come to the conclusion that there was escapement of income from assessment. Applying the ratio laid down by the Hon’ble Supreme Court in the case of Kelvinator of India Limited (supra) and by the Hon’ble jurisdictional High Court in the case of Debashis Moulik –vs.- ACIT (supra), I hold that the reopening of assessment made by the Assessing Officer in the present case was bad in law as the same was based merely on the change of opinion and the assessment completed by him under section 143(3) read with section 147 in pursuance thereof is invalid and the same is liable to ./2016 Assessment year: 2004-2005 Page 6 of 6 be cancelled. I order accordingly and allow the grounds of appeal raised by the assessee.

In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on February 03, 2017.