Case Law Details
RELEVANT PARAGRAPH
7. We have carefully considered the relevant facts, arguments advanced and the case laws cited. It is not in dispute that the assessments sought to be reopened were earlier completed only by accepting the same under section 143(l)(a) of the Act. When assessments are completed under section 143(l)(a) it cannot be said that the Assessing Officer has expressed any opinion on the correctness or otherwise of the return furnished before him. Thus there is no case of change of opinion, when there was no opinion formed at all on earlier occasions. It is also admitted fact that the assessee never disclosed the fact regarding judgment of Estate Officer (Land), Northern Railways dated 28.3.1990, even when the assessments were originally, completed for assessment years 1993-94 and 1995-96. Even in the order of Tribunal for assessment year 1995-96 dated 22.11.2004, this fact is not noted by the Tribunal. When the notice dated 23.3.1988 increasing the licence fee was subject matter of dispute and the Estate Officer having found that the respondent assessee is not liable to pay the same and the proceedings before him were liable to be dropped because the enhancement is not made in accordance with law or is not validly revised. If that be the case even by issuing subsequent notices either dated 25.7.1995 or dated 29.7.1999, the assessee did not become liable to pay enhanced licence fee. In the bill dated 29.7.1999 for the payment of licence fee, it is specifically mentioned that ‘the payment will be subject to the decision of the court case pending before Tis Hazari Court and only for information1, hi that view of the situation the assessee was under obligation to pay licence fee only to the extent as payable prior to the order dated 23.3.1988. Since these facts were never disclosed by the assessee and this came to the notice of the Assessing Officer only during the course of proceedings for assessment year 2001-02, the Assessing Officer was prima facie of the opinion that the assessee had claimed excess deduction by way of licence fee payable to the Railways and was therefore, empowered to reopen the completed assessment. At this juncture it is apt to note from the judgment of Hon’ble Supreme Court in the case of Phool Chand Bajrang Lai vs. ITO, 203 ITR 456 at page 478 as extracted hereunder:-
“We are not persuaded to accept the argument of Mr. Sharma that the question regarding the tmthfulness or falsehood of the transactions reflected in the return can only be examined during the original assessment proceedings and not at any stage subsequent thereto. The argument is too broad and general in nature and does violence to the plain phraseology of sections 147(a) and 148 of the Act and is against the settled law laid down by this court. We have to look to the purpose and intent of the provisions. Once of the purposes of section 147 appears to us to be to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say “your accepted my lie, now your hands are tied and you. can do nothing”.. It would be a travesty of justice to allow the assessee that latitude.”
7.1 The Hon’ble Supreme Court in the case of ACIT vs. Rajesn Jhaveri Stock Brokers P. Ltd. (supra) held that under the scheme of section 143(1) as substituted with effect from 1.4.1989 prior to its substitution with effect from 1.6.1999, what were permissible to be adjusted were (1) Only apparent arithmetical error in writing accounts etc. (2) Loss carried forward deduction allowance or relief which was prima facie inadmissible but were claimed in the return. The Assessing Officer had no authority to make adjustment or adjudicate upon any debatable issue. In other words, the Assessing Officer had no power to go behind the return, accounts and documents etc. With effect from 1st April, 1998 the second Proviso to section 143(l)(a) was substituted. During the period 1st April 1998 and 31st May 1999 sending an intimation was mandatory but did not empower the Assessing Officer to make any prima facie adjustment. With effect from 1st June 1999 the acknowledgement of return shall be deemed to be an intimation where (i) either no sum is payable; or (ii) no refund is due to him. Such an intimation under section 143(l)(a) cannot be said that “assessment” is done by him. Nothing more can be inferred from the deeming provision. Therefore, there being no assessment under section 143(l)(a), the question of change of opinion does not arise. The Hon’ble Supreme Court further held as under:-
“The expression “reason to believe” in section 147 would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by. legal evidence or conclusion. What is required is “reason to believe” but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether material would conclusively prove escapement of income is not the concern at that stage. This is so because the formation of -the.belief i&. within the realm of the subjective satisfaction of the Assessing Officer.
Taxing income escaping assessment in the case of an intimation under section 143(l)(a) is covered by the main provision of section 147 as substituted with effect from April 1, 1989, and initiating reassessment proceedings in the case of intimation would be covered by the main provision of section 147 and not the proviso thereto. Only one condition has to be satisfied. Failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings when intimation under section 143(1) has been issued.”
7.2 Similar view was held by Hon’ble Delhi High Court in the case of Mahanagar Telephone Nigam Ltd. (supra) wherein the Hon’ble Court held that so long as the ingredients of section 147 are fulfilled, the Assessing Officer is free to initiate proceedings under section 147 and failure to take steps under section 143(3) will not render the Assessing Officer powerless to initiate re-assessment proceedings even when intimation under section 143(1) had been issued. Hon’ble High Court also held that at the initiation stage what is required is “reason to believe”, but not the established tact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether the material would conclusively prove escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction.
8. The only question is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the A.O. within realm of subjective satisfaction. In the present case it is seen that the A.O. had definite information in his possession to form an opinion that income chargeable to tax has escaped assessment. The assessee was claiming liability of expenses in respect of licence fee payable to Railways which were not payable but was contingent upon the outcome of the decision by the Court. The decision of the Court was not rendered prior to the close of the relevant financial years. Accordingly the contingent or non-existing liabilities which were claimed and allowed in assessment under section 143(l)(a) amounted to income escaping assessment. The assessments completed for earlier years which were not reopened cannot be considered as an opinion formed for the years under appeal so as to treat the present reassessment on the basis of change of opinion. Each year is a separate year and if in the subsequent assessments due to changed circumstances or further information in possession of the A.O., the A.O. had prima facie reason to believe regarding income escaping assessment. The A.O. was justified in assuming jurisdiction for making reassessment under section 147. We, therefore, uphold the action of the A.O. in framing the reassessment.
9. Various decisions relied upon by the learned counsel for the assessee are clearly distinguishable on facts. In the case of Kelvinator of India (supra), the original assessments were completed under section 143(3) and not under section 143(l)(a) as done in the present case. The Hon’ble Court held that change of opinion is not permissible. But in the present case before us, there was no opinion formed on the earlier occasion while making assessment under section 143(l)(a). Similarly m the case of Jindal Photo Films Ltd. (supra) the original assessment was completed under section 143(3) and merely on the changed opinion the Assessing Officer sought to reopen the assessment. The Hon’ble Supreme Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd. (supra) have clearly held that when assessment is completed under section 143(l)(a) no opinion can be said to have been formed by the A.O. and hence question of change of opinion does not arise. In the case of Lakhmani Mewal Das (SC), the Hon’ble Supreme Court held that reasons for formation of belief must be held in a good faith and shoute not be a mere pretence. However, in the present case the A.O. has information in his possession to form an opinion that income chargeable to tax has escaped assessment and there is intelligible nexus between reason and belief. Accordingly the decision of Hon’ble Supreme Court in Lakhmani Mewal Das (supra) or Sheo Nath Singh vs. ACIT, 82 ITR 147 (SC) will not apply to the present set of facts. We, therefore, uphold the order of the learned CIT(A) and dismiss the cross objection raised by the assessee.
