HETAL PAGARE, ACIT 16(2), MUMBAI, MUMBAI V. HASMUKH KABABHAI RAVAT, MULUND WEST

ITA 120/MUM/2025

AI Insights

The case involves an appeal by the revenue against the order of the CIT(A), which had allowed the appeal of the assessee, Hasmukh Kababhai Ravat. The revenue challenged the CIT(A)'s decision, which had found the reassessment under section 148 of the Income Tax Act to be invalid. The reassessment was based on the claim that certain interest expenses were incorrectly set off against professional income, which the revenue argued led to underassessment of income. The Tribunal examined whether the reassessment was justified and whether it constituted a mere change of opinion without new evidence.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 315870 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-05-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2015-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Set aside; Business income; Difference of opinion; Change of opinion; Revenue expenditure; Reassessment proceedings; Unexplained cash credit; Reopening of assessment; Capital expenditure; Search and seizure; Assessment record; Reason to believe; Tangible material
• Section: 147; 148; 144; 143(3); 142(1); 271(1)(c); 68

Judgement Text

"Page | 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “E”, MUMBAI BEFORE SHRI VIKRAM SINGH YADAV, ACCOUNTANT MEMBER AND SHRI RAJ KUMAR CHAUHAN, JUDICIAL MEMBER ITA NO. 120/MUM/2025 (A.Y: 2015-16) ACIT 16(2), Room no. 481, Aayakar Bhavan, Mumbai-400 020 Vs. Hasmukh Kababhai Ravat, 1901, Moksh Mahal Building, Maharashtra-400 080 PAN: AABPR2061D (Appellant) (Respondent) Department Represented by : Shri Hemanshu Joshi, Ld. DR Assessee Represented by : Shri Bhadresh Doshi, Ld. AR Date of conclusion of Hearing : 01.05.2025 Date of Pronouncement : 14.05.2025 O R D E R PER RAJ KUMAR CHAUHAN (J.M.): 1. This appeal is filed by the revenue against the order of National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the “CIT(A)”], passed under section 250 of the Income Tax Act, 1961 ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 2 [hereinafter referred to as “the Act”] dated 19.11.2024 for the A.Y. 2015-16 wherein the appeal of the assessee was allowed. 2. The brief facts as culled out from the lower authorities are that the assessee has filed return of income electronically on 29.09.2015 declaring total income of Rs. 98,99,830/-. The return was processed u/s 143(1) and the same was selected for scrutiny under CASS. Accordingly, notices u/s 143(2) and 142(1) of the act were issued and served on the assessee. In response, the representative of assessee attended from time to time and furnished necessary details as called for. The information received under AIR has been reconciled and the case was discussed with the representative. The assessee is a doctor and during the year, assessee has declared income under the head income from house property, business and profession and income from other sources. Subject to the above, the total income returned by the assessee at Rs. 98,99,830/- is accepted by the AO and assessed the income u/s 143(3) of the Act. 3. A show cause notice under clause (b) of section 148A of the Act was issued on 22.03.2022 alongwith questionnaire stating that the assessee’s returned income after scrutiny u/s 143(3) of the Act was accepted and one ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 3 of the reasons for limited scrutiny was \"Other Deduction claimed\". It is stated that during the AY 2015-16, the assessee has net professional fees of Rs. 1,88,59,697/-; assessee claimed related professional expenditure of Rs. 39,25,887/- against professional fees and computed professional income of Rs. 149,33,810/-. The assessee allegedly claimed a set off of Rs. 50,25,843/- being interest expenses at Vihag project. It is further stated that the interest expenses of Rs. 50,25,843/- were in the form of interest on loan by a different venture and which is not pertaining to professional income. The setting off of Rs. 50,25,843/- against the net surplus of professional income of Rs. 149,33,810/- is construed to be irregular as there was no income from Vihag project because the business/profession of Vihag project was in setting up stage. Moreover, such interest expenditure was not related to the professional income of the assessee. Therefore, such interest expenditure of Rs. 50,25,843/- should have been capitalized against the Vihag project and was to be set-off against the business income forthcoming from Vihag project in subsequent years. Therefore Omission to do so resulted in under assessment of income of Rs. 50,25,843/- with consequent short levy of tax of Rs. 15,52,984/-. Therefore show cause notice u/s 148A(b) of the Act was issued as to why Rs. 50,25,843/- should not be treated as income escaping ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 4 assessment from tax and why proceedings u/s 147 of the Act as per procedure laid down u/s 148A of the Act should not be initiated for the concerned assessment year 2015-16. In response to the said notice dated 22.03.2022, the assessee stated that the assessment of the year under consideration has already been made u/s 143(3) of the Act. Even though it was stated that to be limited scrutiny assessment, yet the assessment was conducted in all respects wherein all the details as regards income offered for tax was asked by the assessing officer. That all the details of the interest expenses at Vihang project was also submitted to the officer and the same was scrutinized and accepted. Since the same has already been assessed and the assessment order accepting the same is already passed under the Act, therefore omission of interest expenses at Vihag project cannot be treated as income escaping assessment. The assessee requested to drop the notice under clause (b) of section 148A of the Act. 4. However the order under clause (d) of the section 148 of the Act was passed on 07.04.2022 and the assessment was reopened stating that prima facie it appears that income to the tune of Rs.50,25,843/-, represented in the form of Asset being the Vihag project, chargeable to tax, has escaped assessment. Condition for reopening as stated in section 149(1)(b) of the ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 5 Act is satisfied as the income being interest expense of Rs. 50,25,843/- represented in the form of asset being the Vihag project which is valued at Rs. 7,00,00,000/- on assessee's balance sheet is greater than Rs. 50,00,000/-. After taking necessary approval of specified Authority i.e. Principal Commissioner of Income Tax, an order u/s 148A(d) of the Income Tax Act, 1961 was passed. 5. After receiving the approval from PCIT for issuing show cause notice u/s 148A(b) of the Act dated 22.03.2022, Ld. AO asked the assessee as to why notice u/s 148 should not be issued as income chargeable to tax has escaped assessment and assessee was given 7 days time till 29-03-2022 to respond to this notice. In response, the assessee submitted his reply dated 29.03.2022 requesting to drop the current proceedings initiated u/s 148A as all the details of the interest expenses on Vihang project were submitted to the AO and the same were scrutinized and accepted. However, the assessee has not put forth any documentary evidence regarding this claim. Further, on perusal of the Assessment records, this assertion of the Assessee is found to be incorrect. Specific questions pertaining to this interest expense were not asked and the issue was not analyzed, hence resulted in the favor of the Assessee. The AO stated that the condition for ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 6 reopening as stated in section 149(1)(b) of the Act is satisfied as the income being interest expense of Rs. 50,25,843/- represented in the form of asset being the Vihag project. Accordingly, notice issued u/s 148A of the Act was issued on 07.04.2022 and several opportunities were given for different dates as mentioned in the reassessment order, but no reply was filed. The show cause notice u/s 144 of the Act was issued on 14.07.2023 for compliance on 28.07.2023. Subsequently show cause notice was issued on 04.10.2023 for compliance on 19.10.2023. On 02.11.2023, the assessee has requested for adjournment to 17.11.2023. 6. In response to the notice u/s 148 of the Act, the assessee has submitted a letter dated 09.03.2023 along with audited financials and claimed that assessee correctly filed his return of income u/s 139(1) of the Act, hence not filed further return of income u/s 148 of the Act. In reply dated 09.03.2023, assessee has submitted that he has correctly filed the return of income u/s 139(1) of the Act, therefore no necessity to file the return u/s 148 of the Act because the computation of total income and audited financial statements are attached and it was clarified that he has procured loan for investment in LLP and the interest on such loan has been claimed as business expense. Therefore, the business loss has been set off ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 7 against net surplus of his professional income. The Ld. AO noted that the reply of the assessee was perused wherein assessee has claimed a total of unsecured loan to the tune of Rs. 2,32,69,006/- as on 31/03/2015. Further a notice u/s 142(1) dated 13.03.2023 was issued and asked the details of loan obtained, but the assessee has not responded to the notice issued. Further a reminder notice was also issued to the assessee on 20/06/2023 to respond to the notice issued u/s 142(1) dated 13/03/2023, but the assessee has not responded. Thereafter, a show cause notice u/s 144 dated 14/07/2023 was issued and duly delivered to the assessee. The assessee was provided an opportunity to show cause as to why the assessment should not be completed u/s 144 of the Act, but the assessee failed to make compliance to the said show cause notice u/s 148 of the Act. Since the assessee has not responded to the show cause notice within the time provided upto 19/10/2023, but in the meanwhile, the assessee has submitted a request on 02/11/2023 for adjournment till 17/11/2023 with a promise that on or before 17/11/2023, he will submit all required details, but the assessee has not adhered to the promise made and the assessee has also neither submitted any reply to the show cause notice nor submitted any details / documents called for. In the absence of any explanation from the assessee ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 8 in spite of providing numerous opportunities, the assessment proceedings in this case is completed u/s 147 r.w.s 144 r.w.s 144B of the Act. The total income of assessee was computed and extracted below:- “4.6.1. INTEREST EXPENDITURE FOR LLP: Since the interest expenses of Rs. 50,25,843/- is for the borrowed fund used for the investment in LLP of the assessee and the interest expenses is not related to professional income earned, the interest expenses to the tune of Rs. 50,25,843/- is proposed fo be disallowed and it will be added to the total income of the assessee for the A.Y. 2015-16. Penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 will be initiated for concealment of income. 4.6.2. UNEXPLAINED UNSECURED LOAN: It was noted that the assessee has claimed unsecured loan as on 31/03/2015 at Rs. 2,32,69,006/- vide notice issued u/s 142(1) dated 13/03/2023, the assessee was requested to submit details of the lenders along with their copy of ROI and confirmation, but the assessee has failed to furnish any details. Therefore, in the absence of any explanation from assessee, the unsecured loan to the tune of Rs. 2,32,69,006/- is proposed to be treated as unexplained credit u/s 68 r.w.s. 115BBE of the Income Tax Act 1961 and it will be added to the total income of the assessee for the A.Y. 2015-16. Penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 will be initiated for concealment of income. Penalty proceedings u/s 271(1)(b) will be initiated for non responding to notices issued under section 142(1) of the Act. 5. TABLE OF VARIATIONS: SL No Description Amount ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 9 1 Income as per Return of Income u/s 148 NIL 2 Income as computed u/s143(1)(a) -- 3 Variation in respect of issue as per para 4.6.1 Rs. 50,25,843/- 4 Variation in respect of issue as per para 4.6.2 Rs. 2,32,69,006/- 5 Total Income determined as per the above proposal Rs. 2,82,94,849/- 6. Assessed under section 147. r.w.s. 144 r.w.s. 144B of the Income Tax Act Penalty proceeding u/s 271(1)(c) of the act is initiated for furnishing inaccurate particulars of his income. Penalty u/s 271(1)(b) of the income tax act is initiated for non response to notice issued u/s 142(1) of the act. Computation of income and demand notice u/s 156 of the act is attached.” 7. Aggrieved by the impugned assessment order, assessee preferred the appeal before Ld. CIT(A) and has raised before him total 5 grounds in which the ground no.1 is legal grounds which extracts as under:- “1. On the facts and circumstances of the case and in law, Circle 16 (2), Mumbai has erred in issuing the notice u/s. 148 dated 07.04.2022 without appreciating that he was not having the jurisdiction for the same in view of Section 151A and the notification dated 29.03.2022 issued there under notifying e-Assessment of Income Escaping Assessment Scheme, 2022 and, thereby, rendering the said the notice as well as the entire assessment proceeding as null and void.” 8. Before the Ld. CIT(A), it was contended by the assessee that the assessment was initially completed under section 143(3) of the Act, wherein ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 10 the returned income was accepted as the assessed income; that the assessee has submitted /furnished true and full particulars during the regular assessment proceedings and no adverse inference was drawn against the assessee. It is further argued by assessee before the Ld. CIT(A) that the proceeding u/s 148 of the Act were initiated on the same grounds which were already verified during the course of assessment proceedings. Hence, the reopening of the assessment proceedings in respect of facts that was already examined during the original assessment proceedings amount to a change of opinion. Therefore, the reassessment proceeding conducted is void ab initio. 9. Ld. CIT(A) noticed that the assessee has submitted the necessary details in support of his claim and the issue of loss amounting to Rs. 50,25,843/- was looked into during the previous regular scrutiny assessment proceedings in the year 2017. The Ld. CIT(A) has reproduced the reply of assessee dated 27.09.2016 against notice u/s 143(2) of the Act. Thereafter, the AO observed that in the said reply, it is noticed that the issue of interest on loan in respect of investment in LLP Vihag amounting to Rs. 50,25,843/- was looked into during the previous scrutiny assessment ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 11 proceedings. Ld. CIT(A) therefore accepted the appeal while observing as under:- “In this back drop, one of the grounds raised by the appellant in this appeal is as follows: The Ld. A.O. erred in making assessment u/s 148 ignoring the fact that assessment proceedings concluded u/s 143(3) on 22.12.2017, which already dealt with the issue and the assessment proceedings are null & void. In para-1 of the instant assessment order dated 30-11-2023 presently in appeal, the AO while mentioning the response of the assessee to notice u/s 148A(b) of the IT Act, stated as follows: \"....Assessee submitted his reply dated 29.03.2022 requesting to drop the current proceedings-initiated u/s 148A as all the details of the interest expenses on Vihang project were submitted. The same were scrutinized & accepted. The Assessee has not put forth any documentary evidence regarding this claim. Further, on perusal of the Assessment records, this assertion of the Assessee was found to be incorrect. Specific questions pertaining to this interest expense were not asked and the issue was not analyzed in the favor of the Assessee.\" In this regard and in the context the ground raised the appellant, the following details are required to be perused since the jurisdiction is challenged and it goes to the root of the matter. 1. Reasons for which the case was selected for scrutiny earlier under CASS [as mentioned in assessment order dated 22-12-2017] ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 12 2. Information received in AIR as well as its the reconciliation [as mentioned in assessment order dated 22-12-2017] 3. Notice u/s 142(1) of the IT Act issued during previous scrutiny [as mentioned in assessment order dated 22-12-2017] 4. Notices/Order sheet noting with regard to the details called for and submitted [as mentioned in assessment order dated 22-12-2017] 5. Copies of all the relevant documents/assessment record based on which AO held that the assessee's assertion was found to be incorrect [as per the re-assessment order relevant portion of which is reproduced above]. Your reply submitting the above documents from the previous assessment record, should reach this office on or before 17.10.2024 It is discernible that the details called for from the AO are: 1. Reasons for which the case was selected for regular scrutiny earlier under CASS 2. Information received in AIR as well as its the reconciliation done during earlier scrutiny assessment proceedings. 3. Notice u/s 142(1) of the IT Act issued during previous scrutiny assessment proceedings, TAX DEPAN 4. Notices/Order sheet noting with regard to the details called for and submitted during the previous scrutiny assessment proceedings ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 13 5. Copies of all the relevant documents/assessment record based on which AO in the order u/s 148A(d), held that the assessee's assertion was found to be incorrect. The above details are very much necessary to ascertain if the AO's conclusion that the assessee's assertion was found to be incorrect, was based on any documentary proof. However, the AO had not responded by the date mentioned in the above extracted letter in as much as the sought details/documentary proof which were claimed by the AO as available on the assessment record were not furnished by the AO. Hence, another opportunity is given to the AO and a reminder is sent to the AO seeking his response/details to the above letter on 09.11.2024 and the AO was asked to submit the reply by 15/11/2024, since the appellant had challenged the jurisdiction of the AO and it goes to the root of the matter in the appeal. The AO had not responded even to the reminder. Thus, the AO had not substantiated his conclusion that \"the assessee's assertion is found to be incorrect\". As against this the appellant had submitted the details of the previous scrutiny assessment proceedings as already discussed above. It is very much evident from the facts examined above that the issue which triggered the proposed reopening of assessment was already dealt with in the previous assessment proceedings. This fact is accepted by the AO in the SCN u/s 148A(b) of the IT Act in as much as the AO himself mentioned therein as follows[vide para-4 of the Annexure to SCN As regards interest expenses of Rs. 50,25,843/- being set off against professional income you stated that the interest on loan is for different venture and is not pertaining to professional income. Since the income was ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 14 not forthcoming from different venture, said interest was claimed as loss venture and was offset against the net surplus of professional income. It is unambiguously clear that the issue of interest of Rs 50,25,843/-which triggered the issue of SCN u/s 148A(b) was very much an issue that was dealt with during previous assessment proceedings as admitted by the AO himself. While the AO's statement as above shows that the issue was already considered during previous assessment proceedings, yet the AO wasn't ready to accept the same and the reason given by the AO is that on a perusal of the assessment records the assertion of the assessee (that the issue was already taken into consideration during previous assessment proceedings) is found to be incorrect. However, the fact that remains is that the AO inspite of being specifically asked to furnish the details available on assessment record based on which he came to a conclusion that the assessee's assertion is incorrect, failed to respond and so the conclusion of the AO regarding the said assertion of appellant stands unsubstantiated. According to the AO, specific questions pertaining to this interest expense were not asked during previous assessment proceedings. This finding of the AO cannot be correct, as he himself stated in the SCN u/s 148A(b)of the IT Act that interest in issue pertains to loan related to Vihang project and that it was a different venture unconnected to professional income. All this information (that was called for during previous assessment proceedings) was available on record and so it was mentioned by the AO at the stage of issue of notice u/s 148A(b) of the IT Act. In the wake of the facts available on record regarding the interest claimed by the assessee, it is incorrect to say that no specific question was asked during previous assessment proceedings. The AO further stated that the issue was not analysed in the favour of the assessee and that the silence of the (then) AO can not be presumed to be ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 15 favourable to the assessee. In a very recent judgement in the case of ACIT v. AIM Fincon (P.) Ltd reported in 166 taxmann.com 681 (SC)[13-09-2024], the hon'ble supreme court held that, when the Assessing Officer had all material with respect to a transaction at time of Moriginal assessment and if Assessing Officer was not satisfied with explanation furnished by assessee at that stage, he could have exercised powers to make addition but did not choose to do anything on such count, thus, action of reopening was merely change of opinion and was to be set aside. The hon'ble high court of Delhi, in the case of Usha International Ltd, reported in 348 ITR 485 dealt with the question \"Whether the bar or prohibition under the principle 'change of opinion' will apply even when the Assessing Officer has not asked any question or query with respect to an entry/note, but there is evidence and material to show that the Assessing Officer had raised queries and questions on other aspects?\" The decision of the hon'ble high court as in para-13 is as below: \"13. It is, therefore, clear from the aforesaid position that (1) Reassessment proceedings can be validly initiated in case return of income is processed under Section 143(1) and no scrutiny assessment is undertaken. In such cases there is no change of opinion; (2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assesse. Reassessment proceedings in the said cases will be hit by principle of \"change of opinion\". ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 16 (3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons.\" Thus, it is a well settled law that the AO cannot issue a notice based on the facts and information gained by reading the documents and information that the assessee has already submitted during the course of the assessment. The AO can only issue a notice if and only if he has new information other than that available on record since already furnished by the assessee during earlier assessment proceedings. Thus, the formation of any opinion based on the same facts and circumstances which were then available to the AO at the time of scrutiny was change of opinion and thereby the same is not permissible. At the conclusion of the above discussion and in consonance with facts on record as well as the judicial pronouncements on the subject matter, it is held that the issue of notice u/s 148 of the IT Act is bad in law. Thus, the original ground No. 1 stands allowed. 6. In view of the above, since the appellant succeeds on the legal ground challenging the jurisdiction, all the other grounds become infructuous and hence the same needs no adjudication. 7. In result, the appeal is allowed.” 10. Aggrieved by the order of Ld. CIT(A), revenue preferred the appeal before us raising the following grounds:- ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 17 “1. Whether on the fact and circumstance of the case, the Ld.CIT(A) failed to appreciate the AO's reasoning in reopening the case, which was based on valid grounds under the provisions of the Act. The jurisdiction exercised by the AO to initiate reassessment proceedings u/s.148 of the Act was correct and justified and also the issue of interest expense was not adequately analyzed in the previous assessment, and the AO had reason to believe that certain facts were not properly examined? 2. Whether on the fact and circumstance of the case, the Ld. CIT(A) erred in not discussing or providing any reasoning on the addition made by the Assessing Officer (AO). The Ld. CIT(A) erred in not examining the specific findings of the AO regarding two significant issues interest expenses and unexplained unsecured loan, despite them being crucial to the case? 3. Whether on the fact and circumstance of the case, the Ld. CIT(A) erred in not discussing the issue of unexplained unsecured loan amounting to Rs. 2,32,69,006/-, which was the new fact in this re-assessment and not discussed in the original assessment order, which was crucial to this case?” 11. Since, the Ld. CIT(A) has dealt with only ground no. 1 and has allowed the appeal of the assessee while holding the notice u/s 148 of the Act as bad in law, therefore, the ground no. 1 raised before us is relevant to the findings returned by the Ld. CIT(A) in the impugned order. On perusal of the same, the question arises whether the findings returned by the Ld. CIT(A) suffers from illegality or perversity which may warrant interference of this Tribunal? Therefore the question to be determined is whether the impugned notice u/s 148 of the Act for initiating reassessment was bad in ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 18 law on being issued only on account of change of opinion and without any legal basis for reassessment u/s 148 of the Act? 12. We have heard Ld AR and Ld. DR and examined the record. Ld. AR submitted on behalf of the assessee that the Ld. CIT(A) has observed that all the facts as to the interest paid on loan taken from the investment in LLP Vihag amounting Rs. 50,25,843/- was duly noted in response to the notice issued u/s 142(1) of the Act dated 30.010.2017 and the said fact and financial statement in that regard submitted by the assessee were duly accepted, therefore the reassessment u/s 148 of the Act was bad in law as the same was just a mere change of opinion. Ld. AR brought to our notice the legal paper book wherein the following decisions were relied upon in support of his arguments:- i) Siemens Financial Services (P.) Ltd. vs. DCIT [2023] 154 taxmann.com 159 (Bombay) ii) Knight Riders Sports Pvt. Ltd. vs. ACIT (2023) 459 ITR 16 (Bom) iii) Peter Vaz vs. CIT [2021] 128 taxmann.com 180 (Bombay) iv) IDFC Ltd. vs. DCIT [2023] 155 taxmann.com 602 (Madras) ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 19 v) Ashok Commercial Enterprises vs. ACIT [2023] 154 taxmann.com 144 (Bom) 13. Ld. DR on the other hand supported the judgment of Ld. AO and stated that Ld. CIT(A) has failed to examine the submission of revenue and observations of the AO in respect of reassessment proceedings and for that reasons, it suffers from illegality and requested to allow the appeal filed by the revenue. 14. We have considered the rival submissions and examined the record as well as relevant law relied by Ld. AR. We have noticed that as per order dated 5th March 2025, the Tribunal has adjourned the hearing and directed Ld. DR on the ground extracted below:- “The Ld. DR is directed to file status report along with copy of the notice dated 30.10.2017 u/s 142 (1) of the act as well as notice u/s 143 (2) issued in the original assessment proceedings, which culminated into passing the Assessment Order dated 22.12.2017 u/s 143 (3) of the act. The AO should also clarify whether in the original assessment proceedings, the issue pertaining to deduction claimed on account of interest of loan taken from investment in LLP Vihagheg on the basis of which, the case was reopened u/s 147 of the Act, was ever examined or not. The assessing officer is also directed to produce the assessment record as well, without default/excuse. Adjourned to 12.03.2025.” ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 20 15. In pursuance of the said direction, the revenue has submitted the necessary details including notice issued u/s 142(1) of the Act dated 30.10.2017 and also made a written submission stating therein that the reassessment was initiated based on material available on record indicating that assessee has claimed interest expenditure of Rs. 50,25,843/- against professional income and the said interest pertained to a loan taken for investment in Vihang LLP, a separate venture in the set up stage and not related to the assessee’s professional activity. It is further submitted that the interest expenditure is directly linked to the assessee’s investment in Vihang LLP which is an asset appearing in the assessee’s balance sheet and valued at Rs. 7 crores and the interest expenditure should have been capitalized to the cost of the said asset and its incorrect treatment led to escapement of income. Therefore, the escaped income is represented in the form of an asset and the condition stipulated in section 149(1)(b) stands fully satisfied. 16. Explaining to the fact on the question of interest on loan taken for investment in LLP Vihang Rs. 50,25,843/-, the Ld. AR referred to the notice issued u/s 142(1) of the Act dated 30.10.2017 and its reply submitted by the assessee which is reproduced below ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 21 ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 22 ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 23 17. Ld. AR has also brought to our notice point no. 3 at page no. 4 of the paper book wherein the reply of the assessee was filed on 27.09.2016 ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 24 against the notice issued u/s 143(2) of the Act, which are reproduced below:- “3. Deduction Main deduction is Interest on Loan taken for Investment in LLP Vihag Rs.5025843/-. There is no other Income from LLP, Interest on investment is only a loss which was adjusted against Professional Income. We enclose herewith Statement of Income for the year ended 31.03.2015.” 18. Ld. AR has also brought to our notice point no. 2 in respect of income from profit/gains of business /profession at page no. 2 of the paper book, which are reproduced below:- “Income from profit/gains of business /profession Net profit /Loss from profession 14,933,810 Loss from Vihang Interest on Vihang 5,025,843 5,025,843 9,907,967” 19. After considering the above documents, the AO has passed the original assessment order for AY 2015-16 on 22.12.2017 wherein the AO has accepted the total income returned at Rs. 98,99,830/-. It was observed by AO in the original assessment order that the information received under AIR has been reconciled and the case was discussed with the representative of assessee and the total income returned by the assessee was accepted. ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 25 20. Vide notice under clause (b) of section 148A of the Act, the AO issued the said notice on 22.03.2022 wherein it was stated that the assessee has submitted a set off of Rs. 50,25,843/- being interest expenses on Vihang against the professional income and offered the remaining professional income for taxation. In reply to the show cause notice, assessee submitted that the claim on account of investment in Vihang was already assessed and the same was scrutinized and accepted. Ld. AR has pointed out page no. 2 of the order passed under clause (d) of section 148A of the Act on 07.04.2022 and referred the operative para, which are reproduced below:- “Assessee submitted his reply dated 29.03.2022 requesting to drop the current proceedings initiated u/s 148A as all the details of the interest expenses on Vihang project were submitted to the Assessing officer & the same were scrutinized & accepted. The Assessee has not put forth any documentary evidence regarding this claim. Further, on perusal of the Assessment records, this assertion of the Assessee is found to be incorrect. Specific questions pertaining to this interest expense were not asked and the issue was not analyzed in the favor of the Assessee. Silence of the Assessing Officer cannot be presumed to be favorable to the Assessee and thus it is income escaping assessment.” 21. Ld. CIT(A) in the impugned order while observing in the extracted portion of para 9 of the order has accepted the contention of the assessee and held that issue of notice u/s 148 of the Act is bad in law. The Ld CIT(A) clearly mentioned in his order that “The AO had all the material with ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 26 respect to a transaction at the time of original assessment and if Assessing Officer was not satisfied with explanation furnished by assessee at that stage, he could have exercised powers to make addition but did not choose to do anything on such count, thus, action of reopening was merely change of opinion and was to be set aside.” 22. We now proceed to discuss the legal precedents relied by the Ld. AR in support of his arguments especially reassessment has been done on the change of opinion. Ld. AR placed reliance on the judgment of Hon’ble Bombay High Court in the case of Siemens Financials Services (P) Ltd. (supra) wherein the Hon’ble Court has held as under:- 37 The Assessing Officer does not have any power to review his own assessment when during the original assessment petitioner provided all the relevant information which was considered by him before passing the assessment order under section 143(3) of the Act dated 23rd December 2018. Petitioner had debited an amount of Rs.6,41,87,931/- on account of software consumables in the profit and loss account and a detailed break-up of the said expenses were submitted before the Assessing Officer during the course of assessment proceedings vide a letter dated 6th December 2018. It is settled law that proceedings under section 148 cannot be initiated to review the earlier stand adopted by the Assessing Officer. The Assessing Officer cannot initiate reassessment proceedings to have a relook at the documents that were filed and considered by him in the original assessment proceedings as the power to reassess cannot be exercised to review an assessment. In petitioner‟s case the Assessing Officer having allowed the amount ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 27 of software consumables as a revenue expenditure now seeks to treat the same as capital expenditure which is a clear change of opinion. Various judicial precedents have held that reassessment proceedings initiated on the basis of a mere change of opinion are invalid and without jurisdiction. 38 The Apex Court in Kelvinator of India Ltd.(Supra) emphasised on the difference between a power to review and the power to reassess. The Apex Court held that the Assessing Officer has no power to review but has only the power to reassess. The concept of „change of opinion‟ must be treated as an in-built test to check abuse of power by the Assessing Officer. The relevant extract of the judgement is reproduced as under:- “…….However, one needs to give a schematic interpretation to the words \"reason to believe\" failing which, we are afraid, 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. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre-condition and if the concept of \"change of opinion\" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of \"change of opinion\" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989 , Assessing Officer has power to reopen, provided there is \"tangible material\" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987 Parliament not only deleted the words \"reason to believe\" but also inserted the word \"opinion\" in section 147 of the Act. However, on receipt of representations from the Companies against ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 28 omission of the words \"reason to believe\", Parliament re-introduced the said expression and deleted the word \"opinion\" on the ground that it would vest arbitrary powers in the Assessing Officer………….” 39 The Delhi High Court in Seema Gupta v. ITO held that the order under section 148A(d) and notice under section 148 of the Act should be set aside when the reassessment was initiated on a change of opinion where the same was discussed and verified by the Assessing Officer at the time of original assessment proceedings. 23. Ld. AR further placed reliance on the judgment of Hon’ble Bombay High Court in the case of Knight Riders Sports Pvt. Ltd. (supra) wherein the Hon’ble Court has held as under:- 17. The reason we say that there is a change of opinion is because once a query has been raised during the assessment and query has been answered and accepted by the AO while passing the assessment order, it follows that the query raised was a subject of consideration of the AO while completing the assessment. This would apply even if the assessment order has not specifically dealt with that issue. It is not necessary that an assessment order should contain reference and/or discussion to disclose his satisfaction in respect of the query raised. As held in Aroni Commercials Ltd (supra) if an AO has to record the consideration bestowed by him on all issues raised by him during the assessment proceedings even where he is satisfied, then it would be impossible for the AO to complete all the assessment which are required to be scrutinized by him under Section 143(3) of the Act. 18. In our view, therefore, it would follow that the reopening of the assessment by the impugned notice is merely on the basis of change of opinion from that held ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 29 earlier during the course of assessment proceedings that led to the passing of the assessment order dated 25th December 2018. In our view, this change of opinion does not constitute justification to believe that income chargeable to tax has escaped assessment. 24. Ld. AR further placed reliance on the judgment of Hon’ble Madras High Court in the case of IDFC Ltd. (supra) wherein the Hon’ble Court has held as under:- 45. A perusal of the reasons will confirm that in all the issues, the officer merely refers to the financials, Form 3CD, profit and loss account, computation statement and the details furnished during original scrutiny. Thus, in this case as well, there is no new or tangible information that has come to the notice of the authority to justify re-assessment as all relevant information was well available with the original authority. 46. xxxx 47. Thus, the question is as to whether, in a situation where all material in regard to the issues in respect of which reassessment is proposed have been placed on record even at the original instance, the assessment has beên completed under scrutiny and no new material brought on record to warrant re-opening, there could be any legal justification for re-assessment. 48. It is relevant that in both years under consideration, the stand of the revenue is only that the methodology 48 followed at the time of scrutiny assessment ought to have been different. The officer admittedly does not have any material over and above the material already with the department to justify the proceedings, which does not, in my view justify or warrant re-assessment in light of the new scheme. ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 30 25. It is thus evident from the findings and law laid down by the cases relied by Ld. AR that if the facts and circumstances were brought into the notice during original assessment and the same were considered and has been accepted in the original assessment proceedings, the reopening of the assessment u/s 148 of the Act without any new tangible material which was not considered during the original assessment, is bad in law and such reopening of assessment is void abinitio. No contrary judgment has been brought to our notice by the Ld. DR and for the above reasons, we are of the considered opinion that Ld. CIT(A) has passed its order on sound legal principles and settled legal precedents which amounts to correct and meticulous appreciation of facts and law. Hence, the reopening of the assessment proceedings in this case in respect of facts that was already examined during the original assessment proceedings amount to a change of opinion, which is not permissible in law. Accordingly, the impugned notice u/s 148 of the Act for initiating reassessment is held to be bad in law. Accordingly, we upheld the order of Ld. CIT(A) and do not find any merit in ground no. 1 raised by the revenue, hence this ground is dismissed as not maintainable. Since, the ground no. 1 is dismissed; the other grounds raised by the revenue become infructuous. ITA No. 120/Mum/2025 Hasmukh Kababhai Ravat Page | 31 26. In the result, the appeal filed by the revenue is accordingly dismissed in above terms. Order pronounced in the open court on 14.05.2025. Sd/- Sd/- (VIKRAM SINGH YADAV) (RAJ KUMAR CHAUHAN) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) Mumbai / Dated 14.05.2025 Dhananjay, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mumbai "