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Assessing Officer having examined the nature of receipts and the corresponding expenditure in the original assessment, now cannot be permitted to change his view with respect to the nature of treatment such receipts must receive.
During the course of assessment proceedings the Income Tax Officer has raised certain queries with regard to deductions, which were replied by the assessee and the in the assessment order in paragraph no.4.1 the Assessing Officer has dealt with the question of grant of deduction and has allowed deductions. In our opinion, the reasons given for reopening the assessment and the notice issued under section 148 of the Act is nothing, but a change of opinion. It is not the case of escape assessment as nothing was concealed by the assessee nor he has failed to furnish the material relevant to the assessment year before the Assessing Officer. For the aforesaid reasons, notice issued under section 148 of the Act deserves to be quashed.
it is well settled that even if an issue is brought to the notice of the Assessing Officer by the audit party, it would not preclude the Assessing Officer from acting on such communication as long as the final opinion to take appropriate action is that of the Assessing Officer and not that of the audit party. Referring to the decision in case of CIT v. P.V.S Beedies (P.) Ltd. [1999] 237 ITR 13, it is equally well settled however that if the Assessing Officer has acted only under compulsion of the audit party and not independently, the action of re-opening would be vitiated.
The argument of the learned counsel for the respondent-assessee that merely participation of the assessee will not validate the reassessment proceeding if the notice is invalid, is of no help, in view of the fact that the question of validity of notice under Section 147 of the Act is not in issue. The only defect which could be pointed out is that the assessment year was not mentioned in the reasons recorded by the Assessing Officer.
There is no scrutiny assessment in the assessment years 2002-03 and 2003-04. Thus, the Assessing Officer has not formed any opinion on these issues, i.e., about the assessability of interest expenses. There is no condition in section 147 that information should have flown from an external source after filing of the return and only then a notice under section 148 can be issued.
From the perusal of the reasons recorded by the Assessing Officer, it is seen that in paragraph 1 the Assessing Officer has mentioned about the receipt of report from the office of the Commissioner of Income-tax indicating that enquiries were initiated by the Directorate of Income-tax (Investigation) to probe into bank account which were used by entry operators for the purpose issue of cheques to beneficiaries against cash paid by them.
This is a clear case where the primary facts were available before the AO, and therefore, the assessee cannot be held to have failed to disclose “fully and truly all material facts”. In our opinion, it was for the AO to draw the appropriate inference. The assessee is/was under no obligation to draw the inference of fact or law based on the primary facts available on record.
For these reasons, we have come to the conclusion that the Petitions would have to be allowed. We accordingly allow the Petitions by quashing and setting aside the notices under section 148 of the Income-tax Act, 1961 purporting to re-open the assessment for A.Ys. 2005-06, 2006-07, 2007-08 and 2008-09. Rule is made absolute in the aforesaid terms. There shall be no order as to costs.
The original assessment was made on 30-11-2006 under section 143(3). The Finance Act, 2008 inserted clause (h) of Explanation 1 to section 115JB retrospectively from 1-4-2001. The effect of this clause was to increase the book profit by the amount of deferred tax and the provision therefor. It is not in dispute that one of the reasons to believe as recorded by the respondent is that in view of the retrospective amendment, the deferred tax liability, for which a provision had been made in the accounts, was to be added back to the book profit.
In the present case, the Assessing Officer having examined the entire claim threadbare, any deviation from his decision on the ground that the receipts of the assessee from sale of land should be treated as business income in and not as long term capital gain must be taken to be a change of opinion. It may be that in the assessment order, the Assessing Officer did not elaborate on this aspect of the matter. To our mind the same would be of no consequence.
