Case Law Details
The grievance of the Revenue with regard to the impugned order so far as change of opinion is concerned, is that the Assessing Officer had acted upon on audit objection which has been received by him. Thus, there was tangible material available for issuing notice for reopening of the assessment. It is further submitted that merely because the Assessing Officer does not deal with a particular issue in the original assessment proceedings, it would not prohibit the Revenue from issuing reopening, otherwise provisions of Section 147 and 148 would be rendered redundant. Mr.Chhotaray, learned Counsel for the Revenue relied upon various decisions including the decision of the Supreme Court in the case of “Kalyanji Mavji & Co. Vs. Commissioner of Income Tax, West Bengal II, (102 ITR 287)”, the decision of Delhi High Court in the case of “New Light Trading Co. Vs. Commissioner of Income Tax, (256 ITR 391)”, and the decision of this Court in the case of “Dr.Amin’s Pathology Laboratory Vs. P.N.Prasad, Joint Commissioner of Income Tax & Ors (No.1), (252 ITR 673)”.
The grievance of the Revenue with regard to the impugned order so far as change of opinion is concerned, is that the Assessing Officer had acted upon on audit objection which has been received by him. Thus, there was tangible material available for issuing notice for reopening of the assessment. It is further submitted that merely because the Assessing Officer does not deal with a particular issue in the original assessment proceedings, it would not prohibit the Revenue from issuing reopening notice, otherwise provisions of Section 147 and 148 would be rendered redundant. Mr.Chhotaray, learned Counsel for the Revenue relied upon various decisions including the decision of the Supreme Court in the case of “Kalyanji Mavji & Co. Vs. Commissioner of Income Tax, West Bengal II, (102 ITR 287)”, the decision of Delhi High Court in the case of “New Light Trading Co. Vs. Commissioner of Income Tax, (256 ITR 391)”, and the decision of this Court in the case of “Dr.Amin’s Pathology Laboratory Vs. P.N.Prasad, Joint Commissioner of Income Tax & Ors (No.1), (252 ITR 673)”.
We find that the impugned order of the Tribunal has rendered a finding of fact on the basis of material before it, in particular the fact that during original assessment proceedings a query was made with regard to the same issue which was responded to by the respondent – Assessee and on satisfaction of the same, the Assessing Officer had passed an assessment order. Therefore, reopening of assessment on an issue in respect of which a query was raised and responded to by the assessee would amount to a change of opinion. The tangible material being urged before us by Mr.Chhotaray, is the audit objections received by the Assessing Officer. However, as would be clear from the reasons reproduced hereinabove, there is no mention of any tangible material in the reasons recorded for issuing
reopening notice under Section 148 of the Act. Thus, we find no fault with the findings of the Tribunal that there is no tangible material mentioned in the reasons recorded by the Revenue which would warrant a different opinion being taken then which was taken when the original order of assessment was passed. It is a settled position in law that a reopening notice can be sustained only on the basis of grounds mentioned in the reasons recorded. It is not open to the Revenue to add and/or supplement later the reasons recorded at the time of issuing reopening notice.
Mr.Chhotaray, learned Counsel for the Revenue urged on merits of the Revenue’s case to charge Rs.1.34 crores allowed as bad debts, has to be appropriately brought to tax as capital loss. We pointed out to Mr.Chhotaray, learned Counsel for the Revenue that the scope of the present proceedings is only with regard to reopening notice under Section 148 of the Act and we are not dealing with the merits of the assessibility of the income alleged to have escaped assessment. On this Mr.Chhotaray submitted that the issue which he seeks to urge is that merely because the Assessing Officer has been careless in bringing to tax a particular amount which is chargeable to tax, the Revenue should not be precluded from issuing notice under Section 148 of the Act. This submission of Mr.Chhotaray overlooks the facts that power to reopen is not a power to review an assessment order. At the time of passing assessment order, it expected of the Assessing Officer that he will apply mind and pass an order. An assessment order is not a mere scrap of paper. To accept the submission of Mr.Chhotaray, would mean to negate the well settled position in law as stated by the Supreme Court in the case “CIT Vs. Kelvinator of India Ltd., [(2002) 256 ITR 1 (Delhi)(FB)]” that the concept of ‘change of opinion’ brought in so as to have in built test to check abuse of power. In view of the above, we find no substance in the submissions raised by Mr.Chhotaray.
The decisions cited by Mr.Chhotaray, learned Counsel on behalf of the Revenue in support of his submissions that oversight in passing assessment order will give Assessing Officer jurisdiction to issue notice, placed heavy reliance upon the case “Kalyanji Mavji & Co.” (supra). However, on the above aspect it has been held to be no longer good law by the subsequent decision of the Supreme Court in the case of “Indian and Eastern Newspaper Society Vs. Commissioner of Income Tax, New Delhi, (119 ITR 996)” wherein the Supreme Court has observed thus:-
“Now, in the case before us, the ITO had, when he made the original assessment, considered the provisions of S.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 s.147(b). Reliance is placed on Kalyanji Mavji & 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 ITO must fall within S.34(1)(b) of the Indian I.T.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 ITO 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 & Co. V. CIT (1976) 102 ITR 287(SC) suggesting the contrary do not, we say with respect, lay down the correct law.”
(emphasis supplied)
The aforesaid view on the above proportion has been reiterated by the Apex Court in A.L.A.Firm vs Commissioner of Income Tax 183 ITR 285 wherein the Court held that change of opinion where opinion was formed earlier does not give the Assessing Officer jurisdiction to reopen an assessment. The Apex Court interalia on the above issue held as under:
“Even making allowances for this limitation placed on the observations in Kalyanji Mavji (1976) 102 ITR 287 (SC) the position as summarised by the High Court in the following words represents, in our view the correct position in law (at p.620 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 original assessment itself then he would be powerless to start the proceedings for reassessment. Where, however the Income Tax Officer had not considered the material and subsequently came by the material from the record itself, the such a case would fall within the scope of section 147 (b) of the Act” (emphasis supplied)
The decision of Delhi High Court in the case “New Light Trading Co.”(supra) does not indicate what reasons were recorded for issuing notice of reopening therein. In the present case the reasons as recorded by the Assessing Officer and reproduced hereinabove clearly indicate that there was no tangible material adverting to the reasons recorded for issuing reopening notice. Similarly the decision of this Court in the case “Dr.Amin’s Pathology Laboratory” (supra), it has been observed that if any item has escaped from assessment which otherwise is includible within the assessment and the Assessing Officer notices it subsequently by his own investigation or by reason of some information received by him, one cannot say that it constitutes change of opinion. In the present facts during original proceedings itself this issue was investigated by the Assessing Officer by raising specific query with regard to bad debts of Rs.1.35 crores. Consequently, this is not a case where this information has been noticed by the Assessing Officer subsequently in the assessment proceedings. In view of the above, in our opinion, none of the three decisions are applicable in the present facts.
