First of all, we have to examine the documents produced by the assessee during the course of original assessment framed u/s. 147 read with section 143(3) of the Act vide order dated 20.11.2009. We find from the assessment order that the assessee produced complete details of purchases i.e. purchase statement. Ld. counsel for the assessee drew our attention to pages 46 to 48 of assessee’s paper book, wherein total purchases made for an amount of Rs.14,67,200/- by way of cash memo is disclosed. Ld. counsel for the assessee stated that these were produced before the AO during the course of original assessment proceedings. On query from the bench, Ld. CIT, DR stated that he has no objection in admitting that these documents were placed before the AO during original assessment proceedings. From the above statement of paddy purchase during the FY 2006-07 relevant to AY 2007-08 from 49 parties was in cash as is evident from the statement. The statement was available before the AO during the course of assessment proceedings and on purchases, a specific query was raised by the AO, which is evident from the questionnaire issued along with notice u/s. 142(1) wherein vide point no.1, which is enclosed at page 51 of assessee’s paper book, the query raised was that “details of paddy purchase with name & address of the parties”. This was replied by the assessee vide letter dated 07.10.2009, which is enclosed at assessee’s paper book page 45, wherein statement of paddy purchase was given. From the very reasons recorded, as reproduced above, clearly reveals that this reopening is on scrutiny of assessment records, which has been gathered that the assessee has paid total amount of Rs.14,67,200/- to 49 parties in cash during the FY 2006- 07 relevant to AY 2007-08 for paddy purchase.Online GST Certification Course by TaxGuru & MSME- Click here to Join
From the above facts, we are of the view that the findings of AO now rejecting the objections of the assessee recording reasons for assumption of jurisdiction u/s. 147 of the Act and reasons recorded are contradictory. How this contradiction is, now we can explain that at the first instance the AO for recording of reasons states that from the assessment records it is revealed that the assessee has made cash payments for making purchases and on the other hand, while rejecting the objections of the assessee for assumption of jurisdiction u/s. 147 of the Act he merely states that there was no evidence available in the assessment record, which decipher the fact that the assessee has filed evidence that the purchases are in cash. Admittedly, the fact is available in the assessment record, and that was filed during the course of assessment proceedings by the assessee, that the purchases are made in cash and despite this fact, assessment was framed u/s. 147 r.w.s. 143(3) of the Act. From the above reason, it is clear that nothing new tangible material was available before the AO for reopening the assessment and consequently, the AO acted on the same material, which was available before him at the time of original assessment.
We find that this issue is squarely covered in favour of the assessee and against revenue by the judgment of Hon’ble Supreme Court in the case of CIT Vs. Kelvinator India Ltd. (2010) 310 ITR 561 (SC), wherein newly substituted provision of section 147 of the Act with effect from 01.04.1989 is interpreted by observing, that section 147 of the Act, as substituted w.e.f. 01.04.1989 does not postulates conferment of power upon the AO to initiate reassessment proceeding upon his mere change of opinion. Further, if ‘reason to believe’ of the AO is founded on an information which might have been received by the AO after the completion of assessment, it may be a sound foundation for exercising the power under section 147 r.w.s. 148 of the Act. It cannot be accepted that only because in the assessment order, detailed reasons have not been recorded, an analysis of the materials on the record by itself may be justifying the AO to initiate a proceeding u/s. 147 of the Act. When a regular order of assessment is passed in terms of section 143(3) of the Act, a presumption can be raised that such an order has been passed on application of mind. It is well known that a presumption can also be raised to the effect that in terms of section 114(e) of the Indian Evidence Act, 1872, judicial and official acts have been regularly performed. If it be held that an order which has been passed purportedly without application of mind would itself confer jurisdiction upon the AO to reopen the proceeding without any thing further, the same would amount to giving a premium to an authority exercising quasi judicial function to take benefit of its own wrong.