JAYANT MANILAL GANDHY,MUMBAI vs. ASST CIT CIR 16(2), MUMBAI

आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee is aggrieved by the impugned order

dated 01/04/2014 of the ld. First Appellate Authority,

Mumbai. The assessee has taken as many sixteen grounds

of appeal, however, during hearing, the assessee only

pressed ground numbers 1, 7 and 13.

assessee, by the ld. counsel, Shri Vijay Kothari, that notice

u/s 148/147 was issued beyond a period of four years,

therefore, as per the proviso to the said section, the

reopening is bad. It was also contended that the material

facts, were duly disclosed by the assessee, which were

necessary for assessment. Reliance was placed upon the

decision from Hon’ble Bombay High Court in IPCA

Laboratories Ltd. vs DCIT 251 ITR 416 (Bom.) by explaining

that, without prejudice that the amount of rupees one crore

was received by the assessee under the agreement dated

23/05/2004 for transferring his residual or revisionary

interest left after the agreement of lease dated 03/08/1998.

The ld. counsel further explained that the issue was

3 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

examined by the Assessing Officer during original

assessment, reasons does not state of any failure on the

part of the assessee and in the case of Asian paints, the

issue was considered, for which our attention was invited to

order in ITA No.408/Mum/2010 (para-25 to 29). The crux

of the argument is that there was no failure on the part of

the assessee.

2.1. On the other hand, the ld. DR, Shri S.R. Kirtney,

defended the conclusion arrived at in the impugned order

by contending that the facts were not truly disclosed by the

assessee, therefore, the proceedings were rightly initiated.

2.2. We have considered the rival submissions and

perused the material available on record. The facts, in brief,

are that the assessee is an individual declared income of

Rs.25,63,605/- on 29/08/2005, which was assessed u/s

143(3) of the Act determining the income at Rs.26,01,100/-

on 03/10/2007.

2.3. Later on, it was noticed by the Assessing Officer

that the assessee has offered long term capital gain of

rupees one cores and in its computation of income claimed

4 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

as exempt by investing the amount in specified bonds u/s

53EC of the Act. Further, it came to the notice of the

Assessing Officer the assessee had already sold the

property in the year 1998 and the ownership of the land

was transferred to the purchaser in the same year,

therefore, the receipt of rupees one crores remained to be

taxed in the hands of the assessee as “income from other

sources” u/s 56 of the Act.

2.4. In view of the above, the assessment was

reopened with the issuance of notice u/s 148 and the

reasons of reopening were provided to the assessee on

31/08/2012. The assessee was asked to submit the

balance sheet for the year ending 2000 to 2005,

computation of income for the same period showing lease

rent for the land concerned, copies of the development

agreement right of the land to Asian paint reversionary

agreement and proof of investment of capital gain in 54EC.

The ld. Assessing Officer noticed that the assessee had sold

all rights in the land at a consideration of Rs.3 crores to

M/s Asian Paints (I) Ltd. subject to a lease rent of

5 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

Rs.50,000/- to be received by him in perpetuity. It was

also found that the said consideration was offered to tax as

capital gain after deducting indexed deemed cost of plot as

on 01/04/1981 and claiming other deduction u/s 54EA

and 54EB thereby offering net amount of Rs.95,61,250/- to

tax in Assessment year 1999-2000 and the rent received at

the rate of Rs.50,000/- per month was offered to tax under

the head income from other sources. Still the ld. Assessing

Officer found the explanation of the assessee to be

unconvincing on the plea that the assessee failed to

disclose all material facts fully and truly which were

necessary for assessment, thus, the ld. Assessing Officer

reopened the assessment within the provisions of section

147/148 of the Act and added rupees one crore as income

of the assessee from other sources.

2.5. The assessee preferred appeal before the Ld.

Commissioner of Income Tax (Appeal), wherein, the

contention/submissions of the assessee were considered

and following the decision in Shri Krishna Pvt. Ltd. 221 ITR

538 (SC), wherein, it was held that every disclosure is not

6 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

and cannot be treated to be true and full disclosure,

another decision in Sheo Nath Singh 82 ITR 147 (SC),

Bhagwan Industrial Pvt. Ltd. 31 STC 293 (SC), Raymond

Woolen Mills Ltd. vs ITO 236 ITR 34, Consolidated Photo

and Finvest Ltd. vs ACIT 281 ITR 394 (Del.), Kantamani

Venkata Narain & Sons (1967) 63 ITR 638 (SC), Malagaon

Electricity Company Pvt. Ltd. vs CIT 78 ITR 466 (SC), CIT

vs Manoranjan Pictures Corporation 228 ITR 202 (Del.) and

various other decisions as mentioned in the impugned

order, dismissed the appeal of the assessee.

2.6. The assessee is aggrieved and is in further

appeal before this Tribunal. If the observation made in the

assessment order, leading to addition made to the total

income, conclusion drawn in the impugned order, material

available on record, assertions made by the ld. respective

counsel, if kept in juxtaposition and analyzed, we are

expected to first analyze the provision of section 147 of the

Act.

“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

7 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

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 recompute 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 that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :— (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax ;

8 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

(b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return ; (ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E; (c) where an assessment has been made, but— (i) income chargeable to tax has been underassessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; (d) where a person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3.—For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148. Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.

2.7. If the aforesaid provision of the Act is analyzed,

proviso has been added, where an assessment under sub-

section (3) of section 143 or the section that no action shall

be taken under the section after the expiry of four years

from the end of the relevant assessment year due to the

9 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

failure on the part of the assessee or material facts were not

fully and truly disclosed which are necessary for making

the assessment. In the present appeal, return was filed by

the assessee on 29/08/2005, which was assessed on

03/10/2007 u/s 143(3) of the Act, thus, four years ends on

31/03/2010. Notice u/s 148 of the Act was issued on

30/03/2012 (page-57 of the paper book). One fact is clearly

oozing out that the required notice was issued beyond the

limitation period of four years.

2.8. Now, we will examine the reasons recorded by

the ld. Assessing Officer which are available at page-57 of

the paper book. The same are reproduced hereunder for

ready reference:-

“On verification of the records, it is found that the assessee had offered long term capital gain amounting to Rs.1,00,00,000/- in the computation and the same was claimed exempted income by investing in specified bonds u/s.54EC. While calculating long term capital gain the assessee had not shown the date and the cost of acquisition of asset had not claimed indexation on the cost of asset and also had not submitted any documents in support of the acquisition. During the assessment the assssee had submitted the conveyance deed in support of the sale of the sale of the land. The assessee had made indenture conveyance with Asian Paints Ltd. on 22nd May, 2004 and mentioned that the assessee has at the request of the purchaser at the price of Rs.1, 00, 00, 000/-. Further, it is noticed that the said deed that assessee had

10 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

already entered in to a leased deed agreement with the Asian Paints Ltd. on 03.08.1998. Hence, it shows that the sa7d land was sold in the year 1998 only. A/so it is pertinent to mention here that the assessee had not reflected the-said-land as en -asset -in -his Balance-Sheet for the year, it shows that the ownership of the land was transferred to the purchaser in the year 1998 .. Hence, the amount received by- the assessee against the conveyance deed during the assessment year should have been treated as other income as per section 56 of the I T. Act. As the said income was treated as income from Capital Gain and Exemption u/s.54EC was also allowed instead of treating it as income from other source, it is clear that income has been under assessed by Rs.1,00,00,000/-. Considering the above mentioned facts, I have a reason to believe that it a fit case for reopening assessment since, the income assessable to tax to the tune of Rs.1,00,00,000/- has escaped assessment for the A. Y. 2005-06.”

2.9. If the aforesaid reasons are analyzed, it is

nowhere mentioned that the facts were not truly and fully

disclosed by the assessee rather the reasons recorded are

self contradictory. The material facts were duly disclosed

by the assessee, it is mentioned that while calculating long

term capital gain, the assessee has not shown the date and

cost of acquisition had not claimed indexation and the

assessee has not submitted any document in support of

acquisition. Whereas, in the next line itself, it has been

mentioned that the assessee submitted the conveyance

deed in support of sale of the land. In the next line, it has

11 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

been mentioned that the assessee had made indenture

conveyance with Asian Paints Ltd. on 22/05/2004.

2.10. Now, we shall examine whether there is any

failure on the part of the assessee in making the full and

true disclosure for making an assessment. We find that

firstly, the assessment was framed u/s 143(3) of the Act

that too in response to statutory notices issued to the

assessee u/s 143(2) and 142(1) of the Act. In support of

the return (as is evident from assessment order itself), the

assessee duly furnished the capital account of the firms,

statement of affairs, income and expenditure account,

statement of dividend and interest, Badla Account, bank

statement and cash flow statement, etc. At page-2 of the

assessment order, it has been clearly mentioned that after

discussion and on verification of the details filed by the

assessee, the income was computed. It is not the case,

something was hide by the assessee, thus, we find that

there is true and full disclosure of material facts,

consequently, from this angle also, prima facie, the

assessee is having a good case.

12 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

2.11. So far as, the issue of indenture conveyance with

Asian Paints on 22/05/2004 is concerned, this issue has

already been examined by the Tribunal vide order dated

31/10/2011 (ITA No.408 & 1937/Mum/2010) for

Assessment year 2005-06 and dismissed the appeal of the

Revenue (page 12 onwards of the order and page-69 of the

paper book). The same is reproduced hereunder for ready

reference:-

“25. Ground No. 1 pertains to the issue of cost of acquisition while computing the capital gains on sale of Matunga land. Briefly stated, assessee acquired perpetual lease rights of the land situated at Matunga (W) from Shri Jayant Manilal Gandhi for a total cost of Rs.3.32 crores on 3rd August 1998. These rights included occupation, development rights and also right to transfer/sale of the said land. There were sub-tenants occupying the land and on 22nd March 2000 an amount of Rs.4.77 crores was paid to the sub-tenants for vacating the land. On 22nd May 2004 assessee acquired reversionary rights from Shri Jayant Manilal Gandhi at a cost of Rs.1.12 crores. On 12.07.2004 assessee entered into development agreement with M/s. Chalet Hotels Ltd. to transfer the land and full development rights for a consideration of Rs.9.3 crores. Assessee worked out the long term capital gains by taking indexation of various amounts paid and arrived at loss of Rs.2,46,35,466/-. The A.O. however, considered that as short term capital gains and while recalculating the short term capital gains he allowed only

13 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

the cost of Rs.1.12 crores paid on 22nd May 2004 and arrived at the short term capital gain at Rs.8.02 crores. It was AO’s contention that the purchase of lease rights as well surrender of tenancy was not related to the purchase of land, therefore, the cost paid for that cannot be considered as cost of acquisition. Before the CIT(A) it was contended that assessee had acquired the capital asset by originally paying for complete lease hold rights and subsequently vacating the tenancy by paying an amount of Rs.4.77 crores, which amount should be considered as cost of improvement consequent to the decision of the Hon'ble Bombay High Court in the case of CIT vs. Piroja C. Patel 242 ITR 582. Further the payment for reversionary rights of Rs.1.12 crores was for betterment of existing lease hold rights and all put together assessee has acquired complete rights of the land which it has sold. Therefore, assessee was correct in taking indexed cost of acquisition at Rs.11.66 crores.

14 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

assessee and the original free hold rights obtained in 1998 and, therefore, the A.O. was correct in denying the amount paid for acquiring the lease hold rights on purchase of tenancy rights. He relied on the order of the A.O. to submit that the capital gain was correctly calculated by the A.O.

15 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

tenants has to be considered as cost of improvement of the existing tenancy rights as per the decision of the Hon'ble Bombay High Court in the case of CIT vs. Piroja C. Patel 242 ITR 582. Subsequent to the vacation of tenancy in 2000, assessee has complete tenancy rights which are perpetually handed over by the original owner Shri Gandhi. For betterment of the existing title which the assessee has already had, a further agreement was entered into with Shri Gandhi for acquiring reversionary rights so that the title is complete. So when the lessee purchased the leased property from the owner by acquiring the reversionary rights the lease got extinguished. Therefore, the decision of CIT(A) in treating that the complete rights were acquired only in 2004 consequent to the acquisition of reversionary rights cannot be faulted. The doctrine of merger was applied resulting in ‘drowning’ and ‘sinking’ of inferior right into superior right. Assessee has transferred his complete rights acquired by way of tenancy rights as well as reversionary rights in the property for development. Therefore, we are of the opinion that the CIT(A) has rightly considered the amount of Rs.3.32 crores paid in 1998 and Rs.4.77 crores paid for vacating the tenancy as cost of acquisition of the rights transferred. The Assessing Officer’s treatment of acquiring reversionary rights alone as cost of acquisition is not correct as what the assessee has acquired in 2004 from the erstwhile owner, who already surrendered tenancy right, is only part of the reversionary rights with him so that the title is complete in all respects as far as assessee is concerned. In view of this we do not see any merit in the claim of the Revenue that the lease rights acquired and tenancy rights acquired should not form part of cost of acquisition. It is also to be noted that AO allowed cost of acquiring ‘reversionary

16 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

rights’ as cost of ‘purchase of land’. Considering the facts of the case, we do not see any reason to interfere with the order of the CIT(A). Accordingly the ground 1 is rejected.” 2.12. Now, we shall examine the factual position in the

present appeal, therefore, question arises whether the

reopening was validly made by the Assessing Officer. At the

outset, we are of the view that reassessment proceedings

can be validly initiated in a case where the return is

processed u/s 143(1) of the Act and no scrutiny

assessment is undertaken. However, in the present appeal

undisputedly, the original assessment was framed u/s

143(3) of the Act, meaning thereby, a opinion was formed

by the Assessing Officer. In such cases there is no change

of opinion. Reassessment proceedings will be invalid in a

case where assessment order itself records that the issue

was raised, facts were examined, necessary details were

filed by the assessee and the Assessing Officer decides in

favour of the assessee, thus, reassessment proceedings in

such cases will be hit by the principle of “change of

opinion”. Reassessment proceedings will be invalid in a

case, where an issue or query is raised and answered by

17 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

the assessee in original assessment proceedings but

thereafter the Assessing Officer does not make any addition

in the assessment order. In such situations it should be

accepted that the issue was examined but the Assessing

Officer did not find any ground or reason to make addition

or reject the stand of the assessee, meaning thereby, he

forms an opinion. The expression “change of opinion”

postulates formation of opinion and then a change thereof.

In the context of assessment proceedings, it means

formation of belief by an Assessing Officer resulting from

what he thinks on a particular question. It is a result of

understanding, experience and reflection. A distinction

must be drawn between erroneous application/

interpretation/ understanding of law and cases where fresh

or new factual information comes to the knowledge of the

Assessing Officer subsequent to the passing of the

assessment order. The reason is that “opinion” is formed

on facts. “Opinion” formed or based on wrong and incorrect

facts or which are belied and untrue do not get protection

and cover under the principle of “change of opinion”.

Factual information or material which was incorrect or was

18 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

not available with the Assessing Officer at the time of

original assessment would justify initiation of reassessment

proceedings. The requirement in such cases is that the

information or material available should relate to material

facts. The expression “material facts” means those facts

which if taken into account would have an adverse effect

on the assessee by a higher assessment of income than the

one actually made. They should be proximate and not have

a remote bearing on the assessment. The omission to

disclose may be deliberate or inadvertent. However, in such

cases, the onus will be on the Revenue to show that the

assessee had stated incorrect and wrong material facts

resulting in the Assessing Officer proceeding on the basis of

facts, which are incorrect and wrong. The reasons recorded

and the documents on record are of paramount importance

and will have to be examined to determine whether the

stand of the Revenue is correct. There is a difference

between “change of opinion” and “failure or omission” of

the Assessing Officer to form an opinion on a subject-

matter, entry, claim, deduction, etc. When the Assessing

Officer fails to examine a subject-matter, entry, claim or

19 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

deduction, he forms no opinion. It is a case of no opinion.

Whether or not the Assessing Officer had applied his mind

and examined the subject-matter, claim, etc., depends

upon factual matrix of each case. The Assessing Officer can

examine a claim or subject-matter even without raising a

written query. There can be cases where an aspect or

question is too apparent or obvious to hold that the

Assessing-Officer did not examine a particular subject-

matter, claim, etc. The stand and stance of the assessee

and the Assessing Officer in such cases are relevant.

2.13. Section 114 of the Evidence Act, 1872, is

permissive and not a mandatory provision. Nine situations

by way of illustrations are stated, which are by way of

example or guidelines. As a permissive provision it enables

to judge to support his judgment but there is no scope of

presumption when facts are known. Presumption of facts

under section 114 is rebuttable. The presumption raised

under illustration (e) to section 114 of the Act means that

when an official act is proved to have been done, it will be

presumed to have been regularly done but it does not raise

20 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

any presumption that an act was done for which there is no

evidence or proof.

(i) Section 114(e) of the Act can be applied to an

assessment order framed under section 143(3) of the Act,

provided that there has been a full and true disclosure of

all material and primary facts at the time of original

assessment. In such a case if the assessment is reopened

in respect of a matter covered by the disclosure, it would

amount to change of opinion. The following cases are worth

mentioning:

A. L. A. Firm v. CIT [1976] 102 ITR 622 (Mad) (para 9) A. L. A. Firm v. CIT [1991] 189 ITR 285 (SC) (paras 32, 60, 61) Anandji Haridas and Co. P. Ltd. v. Kushare (S. P.), STO [1968] 21 STC 326 (SC) (para 35) Bankipur Club Ltd. v. CIT [1971] 82 ITR 831 (SC) (para 34) Barium Chemicals Ltd. v. CLB [1966] 36 Comp Cas 639 (SC) (para 56) BLB Ltd. v. Asst. CIT [2012] 343 ITR 129 (Delhi) (para 14) Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191 (SC) (para 45) CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC) (paras 9, 34) CIT v. Chase Bright Steel Ltd. (No. 1) [1989] 177 ITR 124 (Bom) (para 21) CIT v. DLF Power Ltd. [2012] 345 ITR 446 (Delhi) (para 14) CIT v. Eicher Ltd. [2007] 294 ITR 310 (Delhi) (paras 10, 28) CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) [FB] (paras 2, 12, 20, 48) CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) (paras 2, 28)

21 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

CIT v. Khemchand Ramdas [1938] 6 ITR 414 (PC) (para 50)

CIT v. P. V. S. Beedies P. Ltd. [1999] 237 ITR 13 (SC) (para 18)

CIT (Asst.) v. Rajesh Jhaveri Stock Brokers P. Ltd. [2007] 291 ITR 500 (SC) (paras 4, 12)

CIT v. Sharma (H. P.) [1980] 122 ITR 675 (Delhi) (para 9)

Consolidated Photo and Finvest Ltd. v. Asst.CIT [2006] 281 ITR 394 (Delhi) (paras 9, 11)

Dalmia P. Ltd. v. CIT [2012] 348 ITR 469 (Delhi) (para 17)

G. R. Ramachari and Co. v. CIT [1961] 41 ITR 142 (Mad) (paras 38, 61)

Hari Iron Trading Co. v. CIT [2003] 263 ITR 437 (P&H) (para 10)

ITO v. Habibullah (S. K.) [1962] 44 ITR 809 (SC) (para 50)

Indian and Eastern Newspaper Society v. CIT [1979] 119 ITR 996 (SC) (paras 34, 35)

Indian Hume Pipe Co. Ltd. v. Asst. CIT [2012] 348 ITR 439 (Bom) (para 17)

3i Infotech Ltd. v. Asst. CIT [2010] 329 ITR 257 (Bom) (para 26)

International Woollen Mills v. Standard Wool (U. K.) Ltd. [2001] 5 SCC 265 (para 30)

Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC) (paras 9, 33, 34, 35)

KLM Royal Dutch Airlines v. Asst. Director of I. T. [2007] 292 ITR 49 (Delhi) (para 12)

Kunhayammed v. State of Kerala [2000] 245 ITR 360 (SC) (para 31)

Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC) (para 34)

Muthukrishna Reddiar v. CIT [1973] 90 ITR 503 (Ker) (para 9)

New Light Trading Co. v. CIT [2002] 256 ITR 391 (Delhi) (para 18)

Praful Chunilal Patel v. Makwana (M. J.)/Asst. CIT [1999] 236 ITR 832 (Guj) (para 21)

Snowcem India Ltd. v. Deputy CIT [2009] 313 ITR 170 (Bom) (para 31)

Sri Krishna P. Ltd. v. ITO [1996] 221 ITR 538 (SC) (paras 56, 58)

Suresh Budharmal Kalani v. State of Maharashtra [1998] 7 SCC 337 (para 29)

Union of India v. Suresh C. Baskey [1996] AIR 1996 SC 849 (para 20)

United Mercantile Co. Ltd. v. CIT [1967] 64 ITR 218 (Ker) (para 9)

22 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

2.14. For reopening an assessment made undersection

143(3) of the Act, the following conditions are required to be

satisfied:

(i) the Assessing Officer must form a tentative or prima facie opinion on the basis of material that there is underassessment or escapement of income ;

(ii) he must record the prima facie opinion into writing ;

(iii) the opinion formed is subjective but the reasons recorded or the information available on record must show that the opinion is not a mere suspicion.

(iv) reasons recorded and/or the documents available on record must show a nexus or that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income.

(v) In cases where the first proviso applies, there is an additional requirement that there should be failure or omission on the part of the assessee in disclosing full and true material facts. The Explanation to the section stipulates that mere production of books of account or other documents from which the Assessing Officer could have, with due diligence, inferred material facts, does not amount to "full and true disclosure of material facts" (the proviso is not applicable where reasons to believe for issue of notice are recorded and notice is issued within four years from the end of assessment year).

2.15. The term and facets of the term "change of

opinion". The expression "change of opinion" postulates

formation of opinion and then a change thereof. In the

context of section 147 of the Act it implies that the

Assessing Officer should have formed an opinion at the first

23 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

instance, i.e., in the proceedings under section 143(3) and

now by initiation of the reassessment proceeding, the

Assessing Officer proposes or wants to take a different view.

2.16. The word "opinion" is derived from the latin word

"opinari" which means "to believe", "to think". The word

"opinion" as per the Black's Law Dictionary means a

statement by a judge or a court of a decision reached by

him incorporating cause tried or argued before them,

expounding the law as applied to the case and, detailing

the reasons upon which the judgment is based. Advanced

Law Lexicon by P. Ramanatha Aiyar (third edition) explains

the term "opinion" to mean "something more than mere

retaining of gossip or hearsay ; it means judgment or belief,

that is, a belief or a conviction resulting from what one

thinks on a particular question . . . An opinion is a

conviction based on testimony . . . they are as a result of

reading, experience and reflection".

2.17. In the context of assessment proceedings, it means

formation of belief by an Assessing Officer resulting from

what he thinks on a particular question. It is a result of

24 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

understanding, experience and reflection to use the words

in Law Lexicon by P. Ramanatha Aiyar. The question of

change of opinion arise when an Assessing Officer forms an

opinion and decides not to make an addition or holds that

the assessee is correct and accepts his position or stand. In

Hari Iron Trading Co. v. CIT [2003] 263 ITR 437 (P&H), a

Division Bench of the Hon’ble Punjab and Haryana High

Court observed that an assessee has no control over the

way an assessment order is drafted. It was observed that

generally, the issues which are accepted by the Assessing

Officer do not find mention in the assessment order and

only such points are taken note of on which the assessee's

explanations are rejected and additions/disallowances are

made. Applying the principles laid down by the Full Bench

of this court as well as the observations of the Punjab and

Haryana High Court, we find that if the entire material had

been placed by the assessee before the Assessing Officer at

the time when the original assessment was made and the

Assessing Officer applies his mind to that material and

accepted the view canvassed by the assessee, then merely

because he did express this in the assessment order, that

25 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

by itself would not give him a ground to conclude that

income has escaped assessment and, therefore, the

assessment needed to be reopened. On the other hand, if

the Assessing Officer did not apply his mind and committed

a lapse, there is no reason why the assessee should be

made to suffer the consequences of that lapse.

2.18. The Hon’ble Delhi High Court in Consolidated Photo

and Finvest Ltd. [2006] 281 ITR 394 (Delhi) held as under:

"In the light of the authoritative pronouncements of the Supreme Court referred to above, which are binding upon us and the observations made by the High Court of Gujarat with which we find ourselves in respectful agreement, the action initiated by the Assessing Officer for reopening the assessment cannot be said to be either incompetent or otherwise improper to call for interference by a writ court. The Assessing Officer has in the reasoned order passed by him indicated the basis on which income exigible to tax had in his opinion escaped assessment. The argument that the proposed reopening of assessment was based only upon a change of opinion has not impressed us. The assessment order did not admittedly address itself to the question which the Assessing Officer proposes to examine in the course of reassessment proceedings. The submission of Mr. Vohra that even when the order of assessment did not record any explicit opinion on the aspects now sought to be examined, it must be presumed that those aspects were present to the mind of the Assessing Officer and had been held in favour of the assessee is too far-fetched a proposition to merit acceptance. There may indeed be a presumption that the assessment proceedings have been regularly conducted, but there can be no presumption that even when the order of assessment is silent, all possible angles and aspects of a controversy had been examined and determined by the Assessing Officer. It is trite that a matter in issue can be validly determined only upon application of mind by the authority determining the same. Application of mind is, in turn, best

26 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

demonstrated by disclosure of mind, which is best done by giving reasons for the view which the authority is taking. In cases where the order passed by a statutory authority is silent as to the reasons for the conclusion it has drawn, it can well be said that the authority has not applied its mind to the issue before it nor formed any opinion. The principle that a mere change of opinion cannot be a basis for reopening completed assessments would be applicable only to situations where the Assessing Officer has applied his mind and taken a conscious decision on a particular matter in issue. It will have no application where the order of assessment does not address itself to the aspect which is the basis for reopening of the assessment, as is the position in the present case. It is in that view inconsequential whether or not the material necessary for taking a decision was available to the Assessing Officer either generally or in the form of a reply to the questionnaire served upon the assessee. What is important is whether the Assessing Officer had based on the material available to him taken a view. If he had not done so, the proposed reopening cannot be assailed on the ground that the same is based only on a change of opinion."

2.19. From the foregoing discussion, the clear position emerges as under:

(1) Reassessment proceedings can be validly initiated in case return of income is processed under section 143(1) and no scrutiny assessment is undertaken. In such cases there is no change of opinion.

(2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by the principle of "change of opinion".

(3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons.

27 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

2.20. Thus, where an Assessing Officer incorrectly or

erroneously applies law or comes to a wrong conclusion

and income chargeable to tax has escaped assessment,

resort to section 263 of the Act is available and should be

resorted to. But initiation of reassessment proceedings will

be invalid on the ground of change of opinion. Here a

distinction has to be drawn between erroneous

application/interpretation /understanding of law and cases

where fresh or new factual information comes to the

knowledge of the Assessing Officer subsequent to the

passing of the assessment order. If new facts, material or

information comes to the knowledge of the Assessing

Officer, which was not on record and available at the time

of the assessment order, the principle of "change of

opinion" will not apply. The reason is that "opinion" is

formed on facts. "Opinion" formed or based on wrong and

incorrect facts or which are belied and untrue do not get

protection and cover under the principle of "change of

opinion". Factual information or material which was

incorrect or was not available with the Assessing Officer at

the time of original assessment would justify initiation of

28 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

reassessment proceedings. The requirement in such cases

is that the information or material available should relate to

material facts. The expression "material facts" means those

facts which if taken into account would have an adverse

effect on the assessee by a higher assessment of income

than the one actually made. Correct material facts can be

ascertained from the assessment records also and it is not

necessary that the same may come from a third person or

source, i.e., from source other than the assessment

records. However, in such cases, the onus will be on the

Revenue to show that the assessee had stated incorrect and

wrong material facts resulting in the Assessing Officer

proceeding on the basis of facts, which are incorrect and

wrong. The reasons recorded and the documents on record

are of paramount importance and will have to be examined

to determine whether the stand of the Revenue is correct. A

decision from Hon’ble Delhi High Court dated September

26, 2011 in Dalmia P. Ltd. v. CIT [2012] 348 ITR 469

(Delhi) and another decision from Hon’ble jurisdictional

High Court dated November 8, 2011, in Indian Hume Pipe

Co. Ltd. v. Asst. CIT [2012] 348 ITR 439 (Bom) are two such

29 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

cases, which throws light on the issue. In the first case, the

Assessing Officer in the original assessment had made

addition of Rs. 19,86,551 under section 40(1) on account of

unconfirmed sundry creditors. The reassessment

proceedings were initiated after noticing that unconfirmed

sundry creditors, of which details, etc., were not furnished,

were to the extent of Rs. 52,84,058 and not Rs. 19,86,551.

In Indian Hume Pipe Co. Ltd. (supra), after verification the

claim under section 54EC was allowed but subsequently on

examination it transpired that the second property was

purchased prior to the date of sale. The aforesaid

decisions/ facts cases must be distinguished from cases

where the material facts on record are correct but the

Assessing Officer did not draw proper legal inference or did

not appreciate the implications or did not apply the correct

law. The second category will be a case of "change of

opinion" and cannot be reopened for the reason that the

assessee, as required, has placed on record primary factual

material but on the basis of legal understanding, the

Assessing Officer has taken a particular legal view.

However, as stated above, an erroneous decision, which is

30 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

also prejudicial to the interests of the Revenue, can be

made subject-matter of adjudication under section 263 of

the Act.

2.21. A division Bench of Hon’ble Delhi High Court in

New Light Trading Co. v. CIT [2002] 256 ITR 391 (Delhi),

referred to the decision of the Hon’ble Apex Court in CIT v.

P. V. S. Beedies P. Ltd. [1999] 237 ITR 13 (SC) and made

following observations. (page 392) :

"In the case of CIT v. P. V. S. Beedies P. Ltd. [1999] 237 ITR 13 (SC), the apex court held that the audit party can point out a fact, which has been overlooked by the Income-tax Officer in the assessment. Though there cannot be any interpretation of law by the audit party, it is entitled to point out a factual error or omission in the assessment and reopening of a case on the basis of factual error or omission pointed out by the audit party is permissible under law. As the Tribunal has rightly noticed, this was not a case of the Assessing Officer merely acting at the behest of the audit party or on its report. It has independently examined the materials collected by the audit party in its report and has come to an independent conclusion that there was escapement of income. The answer to the question is, therefore, in the affirmative, in favour of the Revenue and against the assessee."

“As recorded above, the reasons recorded or the documents available must show nexus that in fact they are germane and relevant to the subjective opinion formed by the Assessing Officer regarding escapement of income. At the same time, it is not the requirement that the Assessing Officer should have finally ascertained escapement of income by recording conclusive findings. The final ascertainment takes place when the final or reassessment order is passed. It is enough if the Assessing Officer can show tentatively or prima facie on the basis of the reasons recorded and with reference to the documents available on record that income has escaped assessment.”

31 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

This brings us to the observations of the Delhi High Court

in Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) [FB]

which read as under (page 18):

"The Board in exercise of its jurisdiction under the aforementioned provisions had issued the circular on October 31, 1989. The said circular admittedly is binding on the Revenue. The authority, therefore, could not have taken a view, which would run counter to the mandate of the said circular.” From a perusal of clause 7.2 of the said circular it

would appear that in no uncertain terms it was stated as to

under what circumstances the amendments had been

carried out, i.e., only with a view to allay the fears that the

omission of the expression 'reason to believe' from section

147 would give arbitrary powers to the Assessing Officer to

reopen past assessment on mere change of opinion. It is,

therefore, evident that even according to the CBDT a mere

change of opinion cannot form the basis for reopening a

completed assessment.

2.22. Another aspect of the matter also cannot be lost

sight of. A statute conferring an arbitrary power may be

held to be ultra virus article 14 of the Constitution of India.

If two interpretations are possible, the interpretation which

upholds constitutionality, it is trite, should be favoured. In

32 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

the event it is held that by reason of section 147 if the

Income-tax Officer exercises its jurisdiction for initiating

proceeding for re-assessment only upon mere change of

opinion, the same may be held to be unconstitutional. We

are, therefore, of the opinion that section 147 of the Act

does not postulate conferment of power upon the Assessing

Officer to initiate reassessment proceeding upon his mere

change of opinion. The Hon’ble Apex Court thereafter

referred to the subsequent decision in Indian and Eastern

Newspaper Society v. CIT [1979] 119 ITR 996 (SC) wherein

it was observed that some of the observations made in

Kalyanji Mavji (supra) were far too wide and the statute did

not permit reappraisal of material considered by the

Assessing Officer during the original assessment. The

observations in Kalyanji Maviji (supra) that reopening

would cover a case "where income has escaped assessment

due to the oversight, inadvertence or mistake" was too

broadly expressed and did not lay down the correct law. It

was clarified and observed at page 1004 in Indian and

Eastern Newspaper Society [1979] 119 ITR 996 (SC) as

under :

33 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

"Now, in the case before us, the Income-tax Officer had, when he made the original assessment, considered the provisions of sections 9 and 10. Any different view taken by him afterwards on the application of those provisions would amount to a change of opinion on material already considered by him. The Revenue contends that it is open to him to do so, and on that basis to reopen the assessment under section 147(b). Reliance is placed on Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC), where a Bench of two learned judges of this court observed that a case where income had escaped assessment due to the 'oversight, inadvertence or mistake' of the Income-tax Officer must fall within section 34(1)(b) of the Indian Income-tax Act, 1922. It appears to us, with respect, that the proposition is stated too widely and travels farther than the statute warrants in so far as it can be said to lay down that if, on reappraising the material considered by him during the original assessment, the Income-tax Officer discovers that he has committed an error in consequence of which income has escaped assessment it is open to him to reopen the assessment. In our opinion, an error discovered on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this court in Maharaj Kumar Kamal Singh v. CIT [1959] 35 ITR 1 (SC), CIT v. A. Raman and Co. [1968] 67 ITR 11 (SC) and Bankipur Club Ltd. v. CIT [1971] 82 ITR 831 (SC), and we do not believe that the law has since taken a different course. Any observations in Kalyanji Mavji and Co. v. CIT [1976] 102 ITR 287 (SC) suggesting the contrary do not, we say with respect, lay down the correct law."

2.23. In A. L. A. Firm (supra), the Hon’ble Apex Court

explained that there was no difference between the

observations of the Supreme Court in Kalyanji Maviji [1976]

102 ITR 287 (SC) and Indian and Eastern Newspaper

Society case [1979] 119 ITR 996 (SC), as far as proposition

(4) is concerned. It was held that (page 297 of 189 ITR) :

"We have pointed out earlier that Kalyanji Maviji's case [1976] 102 ITR 287 (SC) outlines four situations in which action under section 34(1)(b) can be validly initiated. The Indian Eastern Newspaper

34 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

Society's case [1979] 119 ITR 996 (SC) has only indicated that propo sition (2) outlined in this case and extracted earlier may have been somewhat widely stated ; it has not cast any doubt on the other three propositions set out in Kalyanji Mavji's case. The facts of the present case squarely fall within the scope of propositions 2 and 4 enunciated in Kalyanji Maviji's case [1976] 102 ITR 287 (SC). Proposition (2) may be briefly summarized as permitting action even on a 'mere change of opinion'. This is what has been doubted in the Indian and Eastern Newspaper Society case [1979] 119 ITR 996 (SC) and we shall discuss its application to this case a little later. But, even leaving this out of consideration, there can be no doubt that the present case is squarely covered by proposition (4) set out in Kalyanji Maviji's case [1976] 102 ITR 287 (SC). This proposition clearly envisages a formation of opinion by the Income- tax Officer on the basis of material already on record provided the formation of such opinion is consequent on 'information' in the shape of some light thrown on aspects of facts or law which the Income-tax Officer had not earlier been conscious of. To give a couple of illustrations ; suppose an Income-tax Officer, in the original assessment, which is a voluminous one involving several contentions, accepts a plea of the assessee in regard to one of the items that the profits realised on the sale of a house is a capital realisation not chargeable to tax. Subsequently, he finds, in the forest of papers filed in connection with the assessment, several instances of earlier sales of house property by the assessee. That would be a case where the Income-tax Officer derives information from the record on an investigation or enquiry into facts not originally undertaken. Again, suppose the Income-tax Officer accepts the plea of an assessee that a particular receipt is not income liable to tax. But, on further research into law he finds that there was a direct decision holding that category of receipt to be an income receipt. He would be entitled to reopen the assessment under section 147(b) by virtue of proposition (4) of Kalyanji Mavji. The fact that the details of sales of house properties were already in the file or that the decision subsequently come across by him was already there would not affect the position because the information that such facts or decision existed comes to him only much later.

What then, is the difference between the situations envisaged in propositions (2) and (4) of Kalyanji Maviji's case [1976] 102 ITR 287 (SC). The difference, if one keeps in mind the trend of the judicial decisions, is this. Proposition (4) refers to a case where the

35 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

Income- tax Officer initiates reassessment proceedings in the light of 'information' obtained by him by an investigation into material already on record or by research into the law applicable thereto which has brought out an angle or aspect that had been missed earlier, for e.g., as in the two Madras decisions referred to earlier. Proposition (2) no doubt covers this situation also but it is so widely expressed as to include also cases in which the Income-tax Officer, having considered all the facts and law, arrives at a particular conclusion, but reinitiates proceedings because, on a reappraisal of the same material which had been considered earlier and in the light of the same legal aspects to which his attention had been drawn earlier, he comes to a conclusion that an item of income which he had earlier consciously left out from the earlier assessment should have been brought to tax. In other words, as pointed out in Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 (SC), it also ropes in cases of a 'bare or mere change of opinion' where the Income-tax Officer (very often a successor officer) attempts to reopen the assessment because the opinion formed earlier by himself (or, more often, by a predecessor Income- tax Officer) was, in his opinion, incorrect. Judicial decisions had consistently held that this could not be done and the Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 (SC) has warned that this line of cases cannot be taken to have been overruled by Kalyanji Mavji [1976] 102 ITR 287 (SC). The second paragraph from the judgment in the Indian and Eastern Newspaper Society's case [1979] 119 ITR 996 (SC) earlier extracted has also reference only to this situation and insists upon the necessity of some information which make the Income-tax Officer realise that he has committed an error in the earlier assessment. This paragraph does not in any way affect the principle enumerated in the two Madras cases cited with approval in Anandji Haridas 21 STC 326. Even making allowances for this limitation placed on the observations in Kalyanji Mavji, the position as summarised by the High Court in the following words represents, in our view, the correct position in law (at page 629 of 102 ITR) :

The result of these decisions is that the statute does not require that the information must be extraneous to the record. It is enough if the material, on the basis of which the reassessment proceedings are sought to be initiated, came to the notice of the Income-tax Officer subsequent to the original assessment. If the Income-tax Officer had considered and formed an opinion on the said material in the

36 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

original assessment itself, then he would be powerless to start the proceedings for the reassessment. Where, however, the Income-tax Officer had not considered the material and subsequently came by the material from the record itself, then such a case would fall within the scope of section 147(b) of the Act'." (emphasis supplied) The aforesaid observations are a complete answer to

the issue that if a particular subject-matter, item,

deduction or claim is not examined by the Assessing

Officer, it will nevertheless be a case of “change of opinion”

and the reassessment proceedings will be barred.

2.24. We are conscious of the fact that the aforesaid

observations have been made in the context of section

147(b) with reference to the term "information" and

conceptually there is difference in scope and ambit of

reopening provisions incorporated with effect from April 1,

1989. However, it was observed by the Hon’ble Apex Court

in Kelvinator of India Ltd. [2010] 320 ITR 561 (SC) that the

amended provisions are wider. What is important and

relevant is that the principle of "change of opinion" was

equally applicable under the un-amended provisions. The

Supreme Court was, therefore, conscious of the said

principle, when the observations mentioned above in A. L.

A. Firm [1991] 189 ITR 285 were made.

37 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

2.25. Under the new provisions of section 147, an

assessment can be reopened if the Assessing Officer has

"reason to believe" that income chargeable to tax has

escaped assessment; but if he wants to do so after a period

of four years from the end of the assessment year, he can

do so only if the assessee has fallen short of his duty to

disclose fully and truly all material facts necessary for his

assessment. It does not follow that he cannot reopen the

assessment even within the period of four years as

aforesaid if he has reason to believe that the assessee has

failed to make the requisite disclosure. All that the section

says is that in a case where the assessment is sought to be

reopened after the period of four years, the only reason

available to the Assessing Officer is the non-disclosure of

material facts on the part of the assessee. The Act places a

general duty on every assessee to furnish full and true

particulars along with the return of income or in the course

of the assessment proceedings so that the Assessing Officer

is enabled to compute the correct amount of income on

which the assessee shall pay tax. The position has been

further clarified by the proviso itself in a case where

38 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

assessment under sub-section (3) of section 144 of the Act

or this section has been made for the relevant assessment

year, no action shall be taken after the expiry of four years

from the end of the relevant assessment year, unless any

income chargeable to tax has escaped assessment for such

year by the reason of failure on the part of the assessee to

make a return u/s 139 or in response to a notice issued

under sub-section (1) of section 142 or section 148 or to

disclose truly and fully all material facts necessary for his

assessment for that assessment year. It is also noted that

the scope of newly substituted (w.e.f. 01/04/1989) section

147 has been elaborated in department circular number

549 dated 31st October, 1989, meaning thereby, on or after

01/04/1989, initiation of reassessment proceedings has to

be governed by the provisions of section 147 to 151 as

substituted (amended) w.e.f. 01/04/1989. Still, power u/s

147 of the Act, though very wide but no plenary. We are

aware that Hon’ble Gujarat High Court in Praful Chunilal

Patel: Vasant Chunilal Patel vs ACIT (1999) 236 ITR 82,

840 (Guj.) even went to the extent that action under main

section 147 is possible in spite of complete disclosure of

39 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

material facts. The primary condition of reasonable belief

having nexus with the material on record is still operative.

However, we are of the view, that mere fresh application of

mind to the same set of facts or mere change of opinion

does not confer jurisdiction to the Assessing Officer even

under the post 1989 section 147 of the Act. Our view find

support from following decisions:-

a. Jindal Photo Films Ltd. vs DCIT (1998) 234 ITR 170 (Del.),

b. Garden Silk Mills Pvt. Ltd. vs DCIT (1999) 151 CTR (Guj.) 533,

c. Govind Chhapabhai Patel vs DCIT 240 ITR 628, 630 (Guj.),

d. Foramer vs CIT (2001) 247 ITR 436 (All.), affirmed in CIT vs Foramer Finance (2003) 264 ITR 566, 567 (SC),

e. Ipca Laboratories vs DCIT (2001) 251 ITR 416 (Bom.),

f. Ritu Investment Pvt. Ltd.(2012) 345 ITR 214 (Del.),

g. Ketan B. Mehta vs ACIT (2012) 346 ITR 254 (Guj.),

h. Ms. Praveen P. Bharucha vs DCIT (2012) 348 ITR 325 (Bom.),

i. CIT vs Usha International Ltd. 348 ITR 485 (Del.),

40 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

j. Agricultural Produce Market Committee vs ITO (2013) 355 ITR 348 (Guj.),

k. B.B.C. World News Ltd. vs Asst. DIT (2014) 362 ITR 577 (Del.).

2.26. Identical ratio was laid down in CIT vs Malayala

Manorma Company Ltd. (2002) 253 ITR 378 (Ker.) We

think this thread runs through the various provisions of

the Act. But Explanation 1 to the section confines the duty

to the disclosure of all primary and material facts necessary

for the assessment, fully and truly. As to what are material

or primary facts would depend upon the facts and

circumstances of each case and no universal formula may

be attempted. The legal or factual inferences from those

primary or material facts are for the Assessing Officer to

draw in order to complete the assessment and it is not for

the assessee to advise him, for obvious reasons. The

Explanation, however, cautions the assessee that he cannot

remain smug with the belief that since he has produced the

books of account before the Assessing Officer from which

material or evidence could have been with due diligence

gathered by him, he has discharged his duty. It is for him

41 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

to point out the relevant entries which are material, without

leaving that exercise to the Assessing Officer. The caveat,

however, is that such production of books of account may,

in the light of the facts and circumstances, amount to full

and true disclosure ; this is clear from the use of the

expression "not necessarily" in the Explanation. Thus, the

question of full and true disclosure of primary or material

facts is a pure question of fact, to be determined on the

facts and circumstances of each case. No general principle

can be laid down. It was observed by the Hon’ble Apex

Court, in various cases that there should be some "tangible

material" coming into the possession of the Assessing

Officer in such cases to enable him to resort to section 147

of the Act. Despite being a case of full and true disclosure,

tangible material coming to the possession of the Assessing

Officer after he made the original assessment under section

143(3), would influence the opinion, formed or presumed to

have been formed earlier, by the assessing authority; he

can with justification change it, but that would not be a

case of a "mere change of opinion" unguided by new facts

or change in the legal position. It will be a case of the

42 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

assessing authority having "reason to believe",

notwithstanding that full and true particulars were

furnished by the assessee which were examined, or

presumed to be examined, by him. There was a divergence

of opinion amongst various High Courts as to what

constitute “Information” for the purposes of section 34(1)(b)

of the 1922 Act (which corresponds to section 147(b) of the

1961 Act) the Hon’ble Apex Court in CWT vs Imperial

Tobacco Company Ltd. (1966) 61 ITR 461 has noted such

divergence of opinion on the point. Hon’ble jurisdictional

High Court in CIT vs Sir Mohammad Yusuf Ismail (1944) 12

ITR 8 (Bom.) held that mere change of opinion on the same

facts are on question of law or mere discovery of mistake of

law is not sufficient information and that in order to

sustained action u/s 34 by further holding that

reassessment is not permissible. The Hon’ble Apex Court in

Simon Carves Ltd. (1976) 105 ITR 212 held that errorless

legally correct order cannot be reopened, therefore, it is

settled law that without any new information and on the

basis of mere change of opinion, reopening of assessment is

not permissible. As was held in CIT vs TTK Prestige ltd.

43 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

(2010) 322 ITR 390 (Karn.) SLP dismissed in 2010 322 ITR

(St.) 14 (SC). Reference also made to Asian Paints ltd. vs

DCIT (2009) 308 ITR 195 (Bom.), Andhra Bank Ltd. vs CIT

(1997) 225 ITR 447 (SC). The observations of the Supreme

Court are a protection against the abuse of power; they also

protect the Revenue which can, in the light of subsequent

coming into light of facts or law, reopen the assessment. In

the light of the aforesaid discussion, since, there was no

new tangible material available with the Assessing Officer

while resorting to section 147/148 of the Act, more

specifically, while framing original assessment u/s 143(3) of

the Act, there was full disclosure of material facts by the

assessee and on the basis of those facts, assessment was

completed u/s 143(3) of the Act. Even otherwise, it is noted

by the ld. Assessing Officer issued statutory notices u/s

143(2) and 142(1) to which the assessee furnished the

necessary details as is evident from page-1 of the

assessment order itself, therefore, in our humble opinion,

the reassessment is unjustified as the reopening was done

by the Assessing Officer beyond the prescribed period of

four years, therefore, on this legal issue, the appeal of the

44 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

assessee deserves to be allowed. Our view find support from

Hon’ble jurisdictional High Court in Mistry Lalji Narsi

Development Corporation vs ACIT (2010) 323 ITR 194

(Bom.), Anil Radha Krishnawani vs ITO (2010) 323 ITR 564

(Bom.), Sadbhav Engineering Ltd. vs DCIT (2011) 333 ITR

483 (Guj.), Aayojan Developers vs ITO 335 ITR 234 (Guj.),

CIT vs PI & IC Corporation of UP Ltd. (2011) 332 ITR 324

(All.), SLP dismissed by Hon’ble Apex Court, Kimplas

Trenton Fittings Ltd. vs ACIT (2012) 340 ITR 299 (Bom.),

thus, considering the totality of facts and the ratio laid

down in the aforementioned judicial decisions, the appeal

of the assessee is allowed.

Finally, the appeal of the assessee is allowed. This order was pronounced in the open in the

presence of ld. representatives from both sides at the

conclusion of the hearing on 18/05/2016.

Sd/- Sd/- (Rajendra) (Joginder Singh) लेखा सद�य / ACCOUNTANT MEMBER �या�यक सद�य / JUDICIAL MEMBER मुंबई Mumbai; �दनांक Dated : 30/05/2016 f{x~{tÜ? P.S/.�न.स.

45 ITA No.4504/Mum/2014 Jayant Manilal Gandhy

आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to :

आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy//

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील�य अ�धकरण, मुंबई / ITAT, Mumbai