Case Law Details
Mina Kumari Sahoo Vs ITO (ITAT Cuttack)
As observed by Hon’ble Supreme Court in the case of CIT Vs Kelvinator of India Ltd (320 ITR 561), one has to give a schematic interpretation to the words “reason to believe” failing which, section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of “mere change of opinion”, which cannot be per se reason to reopen. A reassessment has to be based on fulfilment of certain pre-condition and if the concept of “change of opinion” is removed, as was contended on behalf of the Department before Hon’ble Supreme Court, in the garb of re-opening the assessment, review would take place which is not permissible under scheme of reassessment under the Income Tax Act. The Hon’ble Supreme Court have observed that “One must treat the concept of “change of opinion” as an in-built test to check abuse of power by the Assessing Officer” and, therefore, even after 1st April 1989, Assessing Officer has power to reopen, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment”. As regards the credit of Rs.87,17,806/- in the bank, in the assessment proceedings u/s of the Act, the Assessing Officer has taken into consideration the facts and estimated the profit taking into deposits in the bank accounts. Thereafter, there were no new facts before the Assessing Officer which could justify the reopening. On these facts, it was nothing more than change of mind by the Assessing Officer, and a reopening of assessment on the basis of change of opinion, in view of Hon’ble Supreme Court’s judgment in Kelvinator’s case (supra), is not permissible in law.
FULL TEXT OF THE ITAT JUDGEMENT
This is an appeal filed by the assessee against the order of the CIT(A),1, Bhubaneswar dated 16.11.2015 for the assessment year 20092010.
2. The assessee has filed additional revised ground, which reads as under:
“For that the impugned order of reassessment so passed u/s.147/144 by the AO being based on change of opinion is without jurisdiction and without the authority of law, as such, the same being not sustainable in the eye of law is liable to be quashed in the interest of justice.”
3. At the outset, ld counsel for the assessee submitted that the additional revised ground of appeal pertains to a purely legal ground and all the material facts, necessary for its disposal, are already on record. It is contended that, as held by Hon’ble Supreme Court in the case of NTPC Vs CIT, 229 ITR 383 (SC), the powers of the Tribunal are not really confined to the issues arising out of order of the CIT(A) but also to the questions of law arising from facts which are already on record. It is submitted that the revised additional ground of appeal be admitted and dispose of the same on merits.
4. Replying to above, Learned Departmental Representative (DR) submitted that the assessee had all the opportunities to raise this grievance before the Assessing Officer and before the CIT(A) but he has not availed the opportunity for the reasons best known to him and approach the Tribunal directly. It is submitted that while Tribunal may indeed have powers to admit an additional ground of appeal, but there have to be good reasons for assessee not raising such a grievance before the first appellate authority. On the above backdrop, we are urged to reject the additional ground of appeal.
5. After considering the rival submissions and having perused the material on record, we are inclined to admit the additional ground of appeal since, as assessee rightly contends, it is a pure question of law challenging the very assumption of jurisdiction to pass impugned order and merely because the assessee did not raise this grievance earlier the assessee cannot be prevented from raising this grievance now. In view of these facts, and in view of the law laid down by Hon’ble Supreme Court in the case of NTPC (supra), we admit the additional ground of appeal and proceed to deal with the same.
6. The brief facts of the case are that during the course of original assessment, the Assessing Officer noticed that the assessee has shown sales at Rs.42,05,622/- and the gross receipt was arrived at Rs.4,20,562/-, which is worked out at 10%. The net profit was shown at Rs.23,10,218/-after claiming different expenses. The Assessing Officer on going through the saving bank account of the assessee, noticed that the assessee has transacted Rs.87,17,806/-, therefore, there is excess credit of Rs.45,12,184/- . Since the assessee could not appear before the AO during the assessment proceedings, the AO passed order u/s.144 of the Act on 26.12.2011, determining the total income at Rs.27,32,560/-, inter alia, estimating the profit taking into account the deposits.
7. Thereafter, the Assessing Officer served a reassessment notice under section 148 on 19.2.2013 to explain the discrepancies the deposit in the bank account. Subsequently, another notice u/s.142(1) was issued requesting the assessee to explain the omission of Rs.45,12,184/-, which has escaped assessment. The reasons recorded by the Assessing Officer for reopening the assessment vide order sheet dated 7.2.2013 are as under:
“During the assessment proceedings, it was noted by the AO that the SB A/c. of the assessee was credited by Rs.87,17,806/- during the A.Y. 2009-10, whereas the assessee has disclosed her gross receipt at Rs.42,05,622/-. The assessee did not produce any books of account whatsoever during the course of the proceedings. Hence, the AO rejected the book result as estimated the profit on Rs.,87,17,806/-. Total credit in the bank account treating it as the turnover of the assessee instead of the disclosed turnover of Rs.42,05,622/-. Hence, in view of the above, I have reason to believe that income to the extent of Rs.42,05,622/- has escaped assessment. So, issue notice u/s.148 fixing the compliance on dt.18.2.2013.”
8. Ld A.R. submitted that the above ground of reopening the assessment is not good in law, and, therefore, reopening of assessment, based on the above reasons, cannot be sustained. He submitted that in the assessment under section 144 of the Act, the Assessing Officer has treated the amount of Rs.87,17,806/- as sales of the assessee effected during the year as against Rs.42,05,622/- disclosed by the assessee and the gross profit at the disclosed percent was adopted on the differential amount of Rs.45,12,184/-, which comes to Rs.4,51,218/- and was added to the total income of the assessee. The fact reveals that the Assessing Officer has taken into consideration the above facts during the assessment proceedings u/s.144 of the Act. According to the learned counsel, the reopening of assessment is merely on account of change of opinion. It is submitted that a mere change of opinion of the Assessing Officer, on the same facts and without any new material coming to light, cannot justify the reassessment proceedings. It is pointed out that a reopening of assessment, for the aforesaid reason, is not sustainable in law. It is submitted that there is no new material before the Assessing Officer, and it is a simply case of change of mind by the Assessing Officer on the same set of facts.
9. Ld D.R. submitted that during the proceedings u/s.144 of the Act, the Assessing Officer estimated the profit taking into account the deposits in the bank instead of making an addition to the total income of the assessee. When, it came to the knowledge of the AO, he had taken a conscious decision and reopened the assessment. Ld D.R. submitted that when the Assessing Officer has not considered the above aspect of the matter, it is clear that opinion has not been formed and when opinion is not formed, there cannot be any question of a change of opinion.
10. On consideration of the rival submissions and having perused the material on record, we see merits in the plea of the assessee. As observed by Hon’ble Supreme Court in the case of CIT Vs Kelvinator of India Ltd (320 ITR 561), one has to give a schematic interpretation to the words “reason to believe” failing which, section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of “mere change of opinion”, which cannot be per se reason to reopen. A reassessment has to be based on fulfilment of certain pre-condition and if the concept of “change of opinion” is removed, as was contended on behalf of the Department before Hon’ble Supreme Court, in the garb of re-opening the assessment, review would take place which is not permissible under scheme of reassessment under the Income Tax Act. The Hon’ble Supreme Court have observed that “One must treat the concept of “change of opinion” as an in-built test to check abuse of power by the Assessing Officer” and, therefore, even after 1st April 1989, Assessing Officer has power to reopen, provided there is “tangible material” to come to the conclusion that there is escapement of income from assessment”. As regards the credit of Rs.87,17,806/- in the bank, in the assessment proceedings u/s of the Act, the Assessing Officer has taken into consideration the facts and estimated the profit taking into deposits in the bank accounts. Thereafter, there were no new facts before the Assessing Officer which could justify the reopening. On these facts, it was nothing more than change of mind by the Assessing Officer, and a reopening of assessment on the basis of change of opinion, in view of Hon’ble Supreme Court’s judgment in Kelvinator’s case (supra), is not permissible in law.
11. Further more, from the reasons recorded (supra in para 7 of this order), we find that the AO first writes the assessee has disclosed turnover of Rs.42,05,622/- and also noted that the AO has estimated profit of Rs.87,17,080/- (which includes disclosed turnover of Rs.42,05,622/-) and thereafter writes that he has reason to believe that the income to the extent of Rs.42,05,622/- has escaped assessment. These inconsistent and contrary facts clearly show that the AO has not applied his mind to the facts of the case and original assessment order dated 26.12.2011, wherein, at page 2, the AO has discussed entire issue and has made addition by estimating of profit on entire deposits to the bank account. Hence, we are bound to accept the contention of ld A.R. of the assessee that initiation of reassessment proceedings u/s.147 of the Act and notice u/s.148 of the Act has been issued by the AO without complete non-application of mind and same is upheld by the first appellate authority. In view of above, we are of the considered view that the reassessment proceedings and reassessment order dated 15.3.2013 passed under section 144/147 of the Act are not sustainable on above noted both the counts and same are quashed.
12. In the result, appeal of the assessee is allowed.
Order pronounced on 07 /10/2020.
