GMR Holdings Private Limited, Bangalore V. DCIT, Bangalore

ITA 1006/BANG/2010

• Counselvise Citation: 100621114 RSA 2010
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-10-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 18-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V GOPALA RAO CIT IDR
• Assessee Lawyers: RONAK G DOSHI
• Keywords: Capital asset; Invalid notice; Business income; Depreciation; Charitable institution; Audit objection; Question of law; Tangible material; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 147; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER ITA NO. 1006/BANG/2010 ASSESSMENT YEAR : 2003-04 M/S. GMR HOLDINGS PVT. LTD., NO.25/1, SKIP HOUSE, MUSEUM ROAD, BANGALORE 560 025. PAN : AAACR 1554R VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(3), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI RONAK G. DOSHI, C.A. RESPONDENT BY : SHRI G.V. GOPALA RAO, CIT-I(DR) DATE OF HEARING : 11.10.2011 DATE OF PRONOUNCEMENT : 31.10.2011 O R D E R PER N.K. SAINI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 2.7.2010 OF THE CIT(APPEALS)-I, BANGALORE FOR THE ASSESSMENT YE AR 2003-04. 2. THE FOLLOWING GROUNDS HAVE BEEN RAISED IN THIS A PPEAL : I. 1. THE COMMISSIONER OF INCOME TAX (APPEALS) - I, B ANGALORE [THE CIT(A)] HAS ERRED IN UPHOLDING THE ACTION OF THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(3), BANGALO RE, THAT THE ITA NO.1006/BANG/10 PAGE 2 OF 24 ASSESSMENT COMPLETED VIDE ASSESSMENT ORDER DATED DE CEMBER 30, 2005 HAS BEEN VALIDLY RE-OPENED BY RESORTING TO THE PROVISIONS OF SECTION 147 OF THE INCOME TAX ACT, 1961. 2. HE FURTHER ERRED IN MAKING CERTAIN IRRELEVANT, I NCORRECT OBSERVATION AND IN PARTICULAR THAT: (I) IT IS NOT A CASE OF MERE CHANGE OF OPINION AND THE ASSESSING OFFICER HAD DISCOVERED FACTUAL ERROR IN THE ORIGINA L ASSESSMENT; AND (II) THE REOPENING HAS BEEN DONE WITHIN THE PERIOD OF 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AFTER RECORDING PROPER REASONS. 3. THE APPELLANT THEREFORE PRAYS THAT THE IMPUGNED ASSESSMENT WHICH IS CONTRARY TO THE PROVISIONS OF SECTION 147 AND THE JUDICIAL PRONOUNCEMENT ON ISSUE SHOULD BE ANNULLED AS SUCH. II. 1. THE CIT(A) ERRED IN UPHOLDING THE ACTION OF ASS ESSING OFFICER OF TREATING THE INTEREST INCOME OF RS.1,20, 65,861/- AS ASSESSABLE UNDER THE HEAD INCOME FROM OTHER SOURCE S AS CORRECT AS AGAINST TO THE SAME BEING OFFERED BY THE APPELLA NT AS BUSINESS INCOME IN THE RETURN FILED BY IT. 2. HE HAS FURTHER ERRED IN UPHOLDING THE ACTION OF ASSESSING OFFICER IN APPORTIONING THE INTEREST AND ADMINISTRA TIVE EXPENDITURE OF RS. 2,31,78,586/- AMONG THE INCOME F ROM LONG TERM CAPITAL GAINS AND INCOME FROM OTHER SOURCES, O N A PROPORTIONATE BASIS AS CORRECT. 3. THE APPELLANT PRAYS THAT IN THE FACTS AND CIRCUM STANCES OF THE CASE THE APPORTIONING OF INTEREST AND ADMIN EXPENSE S IS NOT CORRECT AND IS INCONSISTENT WITH THE TREATMENT GIVE N IN EARLIER YEARS AND HENCE THE ASSESSING OFFICER BE DIRECTED T O ASSESS THE INTEREST INCOME AS WELL AS INTEREST AND ADMINISTRAT IVE EXPENDITURE UNDER THE HEAD BUSINESS INCOME AND DETERMINE THE CAPITAL GAINS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 48 OF THE ACT AS WERE DONE IN THE ORIGINAL ASSESSMENT COMPLETED UNDER SEC TION 143(3) OF THE INCOME TAX ACT, 1961. III. 1. THE CIT(A) HAS ERRED IN REJECTING THE ALTERNATI VE PLEA OF THE APPELLANT THAT THE AMOUNT OF INTEREST ATTRIBUTA BLE TO MONEY UTILISED IN INVESTMENTS ACTIVITY IF NOT ALLOWED AS DEDUCTION UNDER THE HEAD BUSINESS INCOME THE SAME NEEDS TO BE ALL OWED AS DEDUCTION UNDER SECTION 57(III) OF THE INCOME TAX A CT, 1961. ITA NO.1006/BANG/10 PAGE 3 OF 24 2. THE APPELLANT THEREFORE PRAYS THAT THE ASSESSING OFFICER BE DIRECTED TO ALLOW THE INTEREST AND ADMIN EXPENSES P ERTAINING TO INVESTMENT ACTIVITY UNDER THE HEAD INCOME FROM OTH ER SOURCES. IV. 1. THE CIT(A) HAS ERRED IN REJECTING THE ALTERNATI VE PLEA OF THE APPELLANT THAT INTEREST AND ADMIN EXPENDITURE I S TO BE FIRST ADJUSTED AGAINST THE INTEREST INCOME ON MONEY LENT FROM AND OUT OF BORROWED FUNDS UNDER THE HEAD INCOME FROM OTHER SOURCES AND TOTAL INCOME IN ACCORDANCE WITH THE PROVISIONS OF SECTION 14 OF THE INCOME TAX ACT, 1961. 2. THE APPELLANT THEREFORE PRAYS THAT THE ASSESSING OFFICER BE DIRECTED TO FIRST ADJUST THE INTEREST AND ADMIN EXP ENDITURE WITH THE INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER S OURCES, DETERMINE THE CAPITAL GAINS IN ACCORDANCE WITH THE PROVISIONS OF SECTION 48 OF THE ACT AND TOTAL INCOME IN ACCORDANC E WITH THE SCHEME OF INCOME TAX AS GIVEN IN SECTION 14 OF THE INCOME TAX ACT, 1961. V. THE APPELLANT CRAVE TO LEAVE, ADD, MODIFY, ALTER O R AMEND THE ABOVE GROUNDS OF APPEAL BEFORE OR AT THE TIME OF HE ARING. 3. GROUNDS I. 1 TO 3 ARE LEGAL GROUNDS AND RELATE TO REOPENING B Y RESORTING TO THE PROVISIONS OF SECTION 147 OF THE I NCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO AS THE ACT IN SHORT]. 4. AT THE FIRST INSTANCE BOTH THE PARTIES ARGUED TH ESE GROUNDS. THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 28.11.03 DECLARING THEREIN INCOME OF RS.4 8,70,14,798 WHICH CONSISTED OF LONG TERM CAPITAL GAINS OF RS.49,44,07 ,583 AND BUSINESS LOSS OF RS.73,92,785. THE ASSESSING OFFICER COMPLETED T HE ASSESSMENT U/S. 143(3) VIDE ORDER DATED 30.12.05 ACCEPTING THE RETU RNED INCOME AMOUNTING TO RS.48,70,14,798. THEREAFTER, THE AO NOTICED THA T INCOME HAD ESCAPED ASSESSMENT FOR THE FOLLOWING REASONS: ON VERIFICATION OF THE STATEMENT OF TOTAL INCOME F ILED ALONGWITH THE RETURN OF INCOME, IT IS OBSERVED THAT THE ASSES SEE-COMPANY WHILE WORKING OUT TAXABLE INCOME, HAS PAID TAX @ 10 % ON THE PROFIT ON THE SALE OF INVESTMENTS (TOTAL INCOME) WH ICH IS INCLUSIVE ITA NO.1006/BANG/10 PAGE 4 OF 24 OF DIVIDEND INCOME; INTEREST INCOME AND OTHER INCOM E. SINCE, THESE INCOME ARE TO BE CLASSIFIED UNDER INCOME FRO M OTHER SOURCES, THEY HAVE TO BE TREATED SEPARATELY FOR TA X PURPOSE. IT IS ALSO OBSERVED THAT THE ASSESSEE-COMPANY HAS NOT SET -OFF THE BUSINESS LOSS AGAINST THE CAPITAL GAINS WHICH IS CO NTRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961. 5. THE AO ISSUED NOTICE U/S. 148 OF THE ACT ON 26.4 .07, IN RESPONSE TO THAT THE ASSESSEE FILED A LETTER DATED 5.10.07 AND OBJECTED TO THE REOPENING. THE AO REJECTED THE OBJECTION RAISED BY THE ASSESSEE TO THE REASONS RECORDED U/S. 148(2) OF THE ACT BY STATING THAT AT THE THRESHOLD STAGE THE CORRECTNESS OR SUFFICIENCY OF THE REASONS COULD NOT BE CALLED IN QUESTION. HE ALSO STATED THAT THERE WAS NO CHANGE OF OPINION SINCE THE ISSUE NOW CONSIDERED, WAS NOT AT ALL CONSIDERED IN THE ASSESSMENT PROCEEDINGS CULMINATING IN THE EARLIER ASSESSMENT O RDER DATED 30.12.2005. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF A.L.A. FIRM V. CIT REPORTED IN 189 ITR 285. 6. BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(APPEALS) AND THE SUBMISSIONS MADE BY THE ASSESS EE AS INCORPORATED IN PARA 6.1 OF THE IMPUGNED ORDER BY THE LD. CIT(A) ARE REPRODUCED VERBATIM AS UNDER: 1. THE APPELLANT SUBMITS THAT SECTION 147 OF THE LN COME-TAX ACT, 1961 AUTHORIZES AND PERMITS AN ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO TAX IF HE HAS REASON TO BELIEVE THAT THE SAID INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE EXPRESSION ESCAPED ASSESSMENT CLEARLY CONNOTE S A VERY BASIC POSTULATE THAT THE INCOME FOR A PARTICULAR AS SESSMENT YEAR WENT UNNOTICED BY THE ASSESSING OFFICER AND BECAUSE OF IT NOT BEING NOTICED BY HIM FOR ANY REASON, IT ESCAPED ASS ESSMENT. THUS, THE MEANING OF THE EXPRESSION ESCAPED ASSESSMENT IS SO SIMPLE AND STRAIGHT THAT IT DOES NOT LEAVE ANYONE IN DOUBT THAT THE POWER UNDER SECTION 147 COULD BE INVOKED IF IT IS A CASE OF ESCAPE ITA NO.1006/BANG/10 PAGE 5 OF 24 ASSESSMENT OF INCOME FOR A PARTICULAR YEAR. ONCE TH E INCOME WAS SUBJECTED TO ASSESSMENT FOR ANY PARTICULAR YEAR, IT CANNOT BE SAID TO HAVE ESCAPED ASSESSMENT THUS PERMITTING THE ASSE SSING OFFICER TO INVOKE SECTION 147. RELIANCE IN THIS RESPECT IS PLACED ON THE DECISION OF CALCUTTA HIGH COURT IN THE CASE OF HUM BOLDT WEDAGE INDIA LTD VS. ASST. CIT (236 ITR 845). 2. IT WOULD BE EVIDENT THAT IN THE PRESENT CASE TH AT THE ASSESSMENT HAS BEEN COMPLETED UNDER SECTION 143(3) VIDE ASSESS MENT ORDER DATED DECEMBER 30, 2005. AS PER CLAUSE (C) OF EXPLA NATION 2 TO SECTION 147, WHERE AN ASSESSMENT HAS BEEN COMPLETED , FOR THE PURPOSES OF SECTION 147, THE FOLLOWING SHALL BE DEE MED TO BE THE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT, NAMELY: (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSE D; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO LOW A RAT E; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCE SSIVE RELIEF UNDER THIS ACT, OR (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED THE READING OF ABOVE WILL SHOW THAT A COMPLE TED ASSESSMENT CAN BE RE-OPENED BY RESORTING TO THE PROVISIONS OF SECTION 147 ONLY IN THE CIRCUMSTANCES AS STATED ABOVE. IT WOULD BE EVIDENT IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE THA T THERE IS NO ESCAPEMENT OF ANY INCOME. WHEN THERE IS NO ESCAPEME NT OF INCOME OR THE CONDITIONS LAID DOWN IN EXPLANATION-2 TO SECTION 147 ARE NOT FULFILLED THEN IN THAT EVENT NO ACTION UNDER SECTION 147 CAN BE TAKEN. 3. THE APPELLANT FURTHER SUBMITS THAT: (I) THE NOTICE UNDER SECTION 147 IS BEING ISSUED DU E TO AUDIT OBJECTION . IT IS A SETTLED POSITION IN LAW THAT AN OPINION O F AN INTERNAL AUDIT PARTY OF THE INCOME-TAX DEPARTMENT O N A POINT OF LAW CANNOT BE REGARDED AS INFORMATION WITHIN THE MEANING OF SECTION 147 AND THE SAME CANNOT LEAD TO PROPER AND VALID INITIATION OF REASSESSMENT PROCEEDINGS UNDER SECTIO N 147. RELIANCE IN THIS RESPECT IS PLACED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF INDIAN & EASTERN NEWSP APER SOCIETY VS. CIT (119 ITR 996). (II) IT IS A SETTLED POSITION IN LAW THAT THE DUTY CAST UPON THE ASSESSEE TO MAKE A FULL AND TRUE DISCLOSURE OF ALL MATERIAL FACTS ITA NO.1006/BANG/10 PAGE 6 OF 24 DOES NOT ABSOLVE TO MAKE ENQUIRY, ESPECIALLY WHEN T HE PRIMARY FACTS WERE AVAILABLE ON RECORD. IT IS NOT POSSIBLE TO FALL BACK ON SECTION 147 TO MAKE GOOD HIS DEFICIENCIES IN THE FIRST COMPLETED ASSESSMENT. RELIANCE IN THIS RESPECT IS PLACED ON T HE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. KAL APPA, (167 ITR 22) AND CALCUTTA HIGH COURT IN THE CASE OF DUNL OP RUBBER CO. LTD. VS. ITO (79 ITR 349) & CALCUTTA CREDIT COR PORATION LTD. VS. ITO (79 ITR 483). (III) IT IS A SETTLED POSITION IN LAW THAT AN ASSES SING OFFICER HAS NO POWER TO REVIEW HIS ORDER AND HE CANNOT DO SO IN THE PURPORTED EXERCISE OF THE AUTHORITY UNDER SECTION 147. RELIAN CE IN THIS RESPECT IS PLACED ON THE DECISION OF ALLAHABAD HIGH COURT IN THE CASE OF SMT. JAMILA ANSARI VS. IT DEPARTMENT (225 I TR 490). (IV) IT IS A SETTLED POSITION OF LAW THAT WHERE ALL THE MATERIAL FACTS ARE BEFORE THE ASSESSING OFFICER BUT HE TAKES A PAR TICULAR VIEW, WHICH SUBSEQUENTLY TRANSPIRES TO BE ERRONEOUS ONE, ON THOSE FACTS, IT IS NOT PERMISSIBLE FOR HIM TO INITIATE PROCEEDIN GS UNDER SECTION 147 IN ORDER TO CURE THE ERROR OF JUDGEMENT EARLIER COMMITTED. FURTHER A DISTINCTION HAS TO BE DRAWN BETWEEN FALSI TY OF THE MATERIAL FACTS DISCLOSED BY THE ASSESSEE AND THE ER RONEOUS INFERENCE, WHICH AN ASSESSING OFFICER MAY DRAW FROM MATERIAL FACTS, WHICH ARE OTHERWISE FULL AND TRUE. IT IS IN THE LATER CASES THE COURTS HAVE COME TO THE VIEW THAT REASSESSMENT MAY NOT BE PERMISSIBLE AS THE SAME WOULD AMOUNT TO CHANGE OF O PINION. RELIANCE IN THIS RESPECT IS PLACED ON THE DECISION OF DELHI HIGH COURT IN THE CASE OF BASTI SUGAR MILLS CO. LTD VS. CIT (142 ITR 487). (V) THE HONBLE SUPREME COURT IN THE CASE OF CALCUT TA DISCOUNT CO. LTD. VS. ITO (41 ITR 191) HAS HELD THAT THE ASS ESSEE HAS RESPONSIBILITY OF DISCLOSING ALL PRIMARY FACTS, BUT ONCE HE HAS DISCLOSED ALL THE PRIMARY FACTS, HIS DUTY ENDS AND IT IS FOR THE ASSESSING AUTHORITY TO DRAW THE PROPER CONCLUSIONS FROM IT. IF THE WRONG CONCLUSION WAS DRAWN, IT IS NO GROUND FOR REO PENING AN ASSESSMENT UNDER SECTION 147. BECAUSE THE ASSESSING AUTHORITY PREVIOUSLY HELD ANOTHER OPINION AS TO THE LEGAL EFF ECT OF CERTAIN PRIMARY FACTS, AND THE ASSESSING AUTHORITY LATER ON TOOK A DIFFERENT VIEW, THERE DOES NOT EXIST ANY GROUND FOR SUCH REOP ENING. (VI) THE HONBLE SUPREME COURT, IN THE CASE OF FORM ER FINANCE VS. CIT (264 ITR 566) HAS HELD THAT WHERE ON THE SAME MATE RIAL, THE SUCCEEDING OFFICER WANTS TO TAKE A DIFFERENT VI EW THAN THAT TAKEN BY THE PREDECESSOR OFFICER AND WANTS TO TAKE ACTION UNDER SECTION 147 , SUCH ACTION CANNOT BE SUSTAINED BECAUSE THE VIEW ITA NO.1006/BANG/10 PAGE 7 OF 24 TAKEN BY THE SUBSEQUENT OFFICER IS NOTHING BUT A CH ANGE OF OPINION WHICH IS NOT PERMISSIBLE UNDER SECTION 147. 4. THE APPELLANT FURTHER SUBMITS THAT THE ORIGINAL ASSESSMENT IN THE PRESENT CASE HAS BEEN COMPLETED ON THE BASIS OF FULL AND TRUE DISCLOSURE OF ALL THE PRIMARY FACTS (AS AFORESAID) AND THERE IS NO ESCAPEMENT AND/OR UNDERSTATEMENT OF ANY INCOME SINC E THE CONCLUSION FOR ALLOWING THE INTEREST INCOME AS WELL AS INTEREST EXPENDITURE TO BE ASSESSED UNDER THE HEAD BUSINESS INCOME BY THE ASSESSING OFFICER WAS DRAWN AFTER THOROUGH EXAM INATION OF ALL MATERIAL FACTS, DETAILED ENQUIRY, APPLYING HIS MIND TO THE PROVISIONS OF INCOME TAX LAW VIS--VIS FACTS OF PRE SENT CASE AND FURTHER, THE SAME WAS CONSISTENT WITH THAT OF THE V IEW TAKEN IN THE CASE OF EARLIER YEARS OF THE APPELLANT. 5. IT IS SUBMITTED THAT IT IS A SETTLED LEGAL POSIT ION IN LAW THAT ASSESSING OFFICER CANNOT CHANGE THE HEAD OF INCOME IN WHICH INTEREST INCOME OR ANY OTHER INCOME CAN BE ASSESSED SINCE THIS AMPLY AMOUNT TO CHANGE IN OPINION. HENCE, CHANGE OF HEAD OF INCOME TO ASSESS INTEREST INCOME FROM BUSINESS HEAD TO INCOME FROM OTHER SOURCE IS NOT PERMISSIBLE IN AN PROCEEDI NGS UNDER SECTION 147. THE APPELLANT THEREFORE SUBMITS THAT THE REASS ESSMENT ORDER DATED DECEMBER 31, 2008 PASSED BY THE ASSESSING OFF ICER IS LIABLE TO BE ANNULLED IN AS MUCH AS THE FACTS AND C IRCUMSTANCES OF THE APPELLANTS CASE DO NOT WARRANT REOPENING OF AS SESSMENT COMPLETED VIDE ASSESSMENT ORDER DATED DECEMBER 30, 2005. 7. THE LD. CIT(APPEALS) AFTER CONSIDERING THE SUBMI SSIONS OF THE ASSESSEE OBSERVED THAT MOST OF THE CASES RELIED UPO N BY THE ASSESSEE WERE RELATING TO THE ASSESSMENT YEARS PRIOR TO 1.4. 1989 ON WHICH DATE THE SUBSTITUTED SECTION 147 OF I.T. ACT, 1961 AMENDED B Y DTLA ACT, 1987 R.W. DTLA 1989 CAME INTO EFFECT MAKING A RADICAL DEPARTU RE FROM THE ORIGINAL SECTION 147 INSOMUCH AS CLAUSES (A) AND (B) HAD BEE N DELETED. HE FURTHER OBSERVED THAT THE PRESENT AMENDED SECTION IS MUCH W IDER IN SCOPE THAN THAT OF PRE-AMENDED SECTION. IT WAS ALSO OBSERVED THAT THE PRESENT SECTION HAS SIMPLIFIED AND RATIONALIZED THE PROCEDURE FOR R EOPENING OF ITA NO.1006/BANG/10 PAGE 8 OF 24 REASSESSMENT BY OMITTING THE PROVISIONS ALTOGETHER IN CONSEQUENCE OF INFORMATION IN HIS POSITION AND EVEN LIMITING THE S COPE OF DUTY CAST UPON THE AO TO SHOW THAT THE ASSESSEE HAS FAILED TO DISCLOSE THE MATERIALS TRULY AND FULLY TO THE CASES OF REASSESSMENT BEYOND FOUR YEAR S FROM THE END OF RELEVANT ASSESSMENT YEARS, THAT TOO NOT IN THE MAIN SECTION BUT THROUGH A PROVISO. ACCORDING TO THE LD. CIT(APPEALS), THE AS SESSING OFFICER HAD BEEN GIVEN ALMOST FREE HAND TO REOPEN THE CASES WITHIN F OUR YEARS OF RELEVANT ASSESSMENT YEAR, EVEN IF HE DID NOT STUMBLE WITH AN Y FRESH INFORMATION OR EVEN IF THE ASSESSEE HAD DISCLOSED ALL MATERIAL FAC TS DURING THE COURSE OF ORIGINAL ASSESSMENT. RELIANCE WAS PLACED ON THE JU DGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF PRAFUL CHUNILAL PATEL VS. ACIT (1999) 236 ITR 832, 840 (GUJ) . HE FURTHER OBSERVED THAT EVEN IF A FACTUAL ERRO R IS POINTED OUT BY THE INTERNAL AUDIT PARTY, REASSESSME NT IS NOT BARRED. RELIANCE WAS PLACED ON THE JUDGMENT OF THE HONBLE DELHI HIGH COURT IN THE CASE OF NEW LIGHT TRADING CO. V. CIT (2002) 256 ITR 391 . 8. THE LD. CIT(A) HELD THAT IT WAS NOT A CASE OF ME RE CHANGE OF OPINION AND THE AO HAD DISCOVERED FACTUAL ERROR IN THE ORIG INAL ASSESSMENT AS COULD BE EVIDENCED BY THE RECORDED REASONS MADE PAR T OF THE REASSESSMENT ORDER AND SINCE THE SERVICE OF NOTICE U/S. 148 WAS BEFORE THE END OF FOUR YEARS, THE NOTICE WAS VALID I.E., THE A SSUMPTION OF JURISDICTION U/S. 147 OF THE ACT WAS VALID. ACCORDINGLY THE GRO UND RAISED BY THE ASSESSEE WAS DISMISSED. NOW THE ASSESSEE IS IN APP EAL. 9. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE PRESENT CASE, NO INCOME ESCAPED ASSESSMENT BECAUSE THE BUSINESS L OSS WAS SET OFF AGAINST THE CURRENT LONG TERM CAPITAL GAINS AS PER THE PROVISIONS CONTAINED ITA NO.1006/BANG/10 PAGE 9 OF 24 IN SECTION 71 OF THE ACT. IT WAS FURTHER STATED TH AT NO OTHER INCOME WAS INCLUDED IN THE INCOME UNDER THE HEAD CAPITAL GAINS AND THERE WAS BUSINESS LOSS, SO THE QUESTION OF INCOME ESCAPING A SSESSMENT DOES NOT ARISE. IT WAS ALSO STATED THAT THE AO TREATED THE INTEREST INCOME AND DIVIDEND INCOME AS INCOME FROM OTHER SOURCES, HOW EVER, NO DISALLOWANCE OF EXPENSES WAS MADE. IT WAS FURTHER STATED THAT I N THE ORIGINAL ASSESSMENT FRAMED U/S. 143(3) OF THE ACT AS WELL AS IN THE SUBSEQUENT YEAR AND THE PRECEDING YEAR, THE INTEREST INCOME AS WELL AS INCOME FROM DIVIDEND WAS TREATED BY THE ASSESSING OFFICER AS BU SINESS INCOME, BUT ONLY FOR THE YEAR UNDER CONSIDERATION THOSE INCOME WERE CONSIDERED AS INCOME FROM OTHER SOURCES, WHILE FRAMING THE REASSESSMEN T WHICH WAS FRAMED U/S. 147 R.W.SEC.143(3) OF THE ACT. IT WAS POINTED OUT THAT WHILE FRAMING THE ORIGINAL ASSESSMENT, THE AO HIMSELF TREATED THE INT EREST INCOME AS WELL AS THE DIVIDEND INCOME AS BUSINESS INCOME, THEREFORE T HERE WAS A CONSISTENT VIEW FOR THOSE TWO INCOME FOR THE YEAR UNDER CONSID ERATION AS WELL AS IN THE PRECEDING AND SUCCEEDING YEARS, AS SUCH THE NOTICE ISSUED U/S. 148 OF THE ACT WAS ONLY ON THE BASIS OF CHANGE OF OPINION. I T WAS POINTED OUT THAT IN THE REASONS RECORDED FOR REOPENING THE ASSESSMENT, THE AO NOWHERE STATED THAT INCOME OF THE ASSESSEE ESCAPED ASSESSME NT. IT WAS SUBMITTED THAT THE REOPENING HAD BEEN MADE ONLY ON THE BASIS OF OBJECTION OF THE AUDIT PARTY AND THE AO HAD NOT APPLIED HIS OWN MIND , THEREFORE REOPENING BY ISSUING NOTICE U/S. 148 OF THE ACT WAS NOT VALID . RELIANCE WAS PLACED ON THE FOLLOWING CASE LAWS:- (I) ADANI EXPORTS V. DCIT (ASSESMENTS) [1999] 240 ITR 2 24 (GUJ) (II) I.M.C.LTD. & ANR. V. JCIT [2003] 261 ITR 731 (CAL) ITA NO.1006/BANG/10 PAGE 10 OF 24 (III) NARANG OVERSEAS P. LTD. V. ACIT [2008] 300 ITR (AT) 1 (MUMBAI) (SB) (IV) AMRIT FEEDS LTD. V. ACIT [2011] 196 TAXMANN 244 (CA L) (V) CIT,DELHI V. KELVINATOR OF INDIA LTD. [2010] 187 TA XMAN 312 (SC) (VI) CIT, DELHI V. INDIAN SUGAR & GENERAL INDUSTRY EXPOR T IMPORT CORPN. LTD. [2008] 170 TAXMAN 229 (DELHI) (VII) CIT V. KELVINATOR OF INDIA LTD. [2002] 123 TAXMAN 4 33 (DELHI)(FB) (VIII) CIT V. MODIPON LTD., DELHI HIGH COURT JUDGMENT DATE D 21.3.2011 IN ITA NO.533 OF 2011. 10. IN HIS RIVAL SUBMISSIONS, THE LD. CIT(DR) STRON GLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND FURTHER SUBMITTED THAT WHILE FRAMING ASSESSMENT U/S. 143(3) OF THE ACT, THE AO HAD NOT E XAMINED THE ISSUE RELATING TO INTEREST INCOME AND DIVIDEND INCOME, SO HE HAS NOT FORMED ANY OPINION, THEREFORE, THE QUESTION OF CHANGE OF OPIN ION DOES NOT ARISE. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAD ADJUSTED AL L THE EXPENSES AGAINST THE INCOME FROM LONG TERM CAPITAL GAINS, WHILE SOME OF THE EXPENSES WERE ATTRIBUTABLE TO THE INTEREST INCOME AND DIVIDEND IN COME, WHICH WERE TO BE ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES , HENCE THE INCOME ESCAPED ASSESSMENT, AS SUCH THE ASSESSING OFFICER W AS JUSTIFIED IN REOPENING THE ASSESSMENT BY ISSUING NOTICE U/S. 148 OF THE ACT. 11. AS REGARDS TO THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE SAME VIEW HAS BEEN TAKEN IN THE PRECEDING AS WE LL AS SUCCEEDING YEARS, THE LD. CIT(DR) SUBMITTED THAT RES JUDICATA IS NOT APPLICABLE IN INCOME-TAX PROCEEDINGS AND IF A WRONG VIEW HAS BEEN TAKEN IN ANY PARTICULAR ASSESSMENT YEAR, IT IS NOT NECESSARY TO TAKE THE SAME VIEW IN ITA NO.1006/BANG/10 PAGE 11 OF 24 ANOTHER ASSESSMENT YEAR. IT WAS ALSO SUBMITTED THA T THE INFORMATION GIVEN BY THE AUDIT PARTY COULD ALSO BE CONSIDERED AS AN I NFORMATION FOR THE PURPOSE OF REOPENING ASSESSMENT U/S. 147 OF THE ACT . IT WAS CONTENDED THAT FOR REOPENING THE ASSESSMENT, A PRIMA FACIE VIEW THAT INCOME HAS ESCAPED ASSESSMENT IS SUFFICIENT AND IT IS NOT NECE SSARY TO PROVE THE ESCAPEMENT OF INCOME AT THE TIME OF RECORDING THE R EASONS, PARTICULARLY WHEN A CLEAR APPLICATION OF MIND BY THE ASSESSING O FFICER IS THERE. HE ACCORDINGLY SUBMITTED THAT THE LD. CIT(APPEALS) WAS FULLY JUSTIFIED IN CONFIRMING THE ACTION OF THE AO FOR REOPENING THE A SSESSMENT U/S. 147 OF THE ACT BY ISSUING NOTICE U/S. 148 OF THE ACT. REL IANCE WAS PLACED ON THE FOLLOWING CASE LAWS: (A) CIT V. P.V.S. BEEDIES PVT. LTD. [1999] 237 ITR 13 (SC) (B) CIT V. SMT. S. VIJAYALAKSHMI [2000] 242 ITR 46 (MAD) (C) CIT V. JUHI METAL WORKS (2003] 263 ITR 287 (AL L) (D) NAGRATH CHEMICALS WORKS (PVT.) LTD. V. CIT [20 04] 265 ITR 401 (ALL) (E) TRIVENI ENGG. & INDUSTRIES LTD. V. DCIT [2006] 280 ITR (AT) 210 (DELHI) (F) YUVRAJ V. UOI & ANR. [2009] 315 ITR 84 (BOM) (G) DELHI CLOTH & GENERAL MILLS CO. LTD. V. STATE OF U.P. & OTHERS [1979] 118 ITR 277 (SC) (H) NEW LIGHT TRADING CO. V. CIT [2002] 256 ITR 39 1 (DEL) 12. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ORIGINAL ASSESS MENT WAS FRAMED BY THE AO U/S. 143(3) OF THE ACT VIDE ORDER DATED 30.12.2005. LATER ON, THE AO, ON ITA NO.1006/BANG/10 PAGE 12 OF 24 THE BASIS OF OBJECTION BY THE AUDIT PARTY REOPENED THE ASSESSMENT BY RECORDING THE FOLLOWINGS REASONS, WHICH HAVE ALSO B EEN REPRODUCED BY THE AO IN THE ASSESSMENT ORDER DATED 31.12.2008: ON VERIFICATION OF THE STATEMENT OF TOTAL INCOME F ILED ALONGWITH THE RETURN OF INCOME, IT IS OBSERVED THAT THE ASSES SEE-COMPANY WHILE WORKING OUT TAXABLE INCOME, HAS PAID TAX @ 10 % ON THE PROFIT ON THE SALE OF INVESTMENTS (TOTAL INCOME) WH ICH IS INCLUSIVE OF DIVIDEND INCOME; INTEREST INCOME AND OTHER INCOM E. SINCE, THESE INCOME ARE TO BE CLASSIFIED UNDER INCOME FRO M OTHER SOURCES, THEY HAVE TO BE TREATED SEPARATELY FOR TA X PURPOSE. IT IS ALSO OBSERVED THAT THE ASSESSEE-COMPANY HAS NOT SET -OFF THE BUSINESS LOSS AGAINST THE CAPITAL GAINS WHICH IS CO NTRARY TO THE PROVISIONS OF THE INCOME TAX ACT, 1961. 13. FROM THE ABOVE REASONS, IT IS NOTICED THAT THE AO NOWHERE OBSERVED THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT. IT IS NOT THE CASE OF THE AO THAT THE ASSESSEE HAD NOT FULLY DISCLOSED AL L THE MATERIAL FACTS RELATING TO THE INCOME. WHEN THE AO FRAMED THE ORI GINAL ASSESSMENT VIDE ORDER DATED 30.12.2005, ALL THE RELEVANT DOCUMENTS RELATING TO THE INCOME OR LOSSES OF THE ASSESSEE WERE AVAILABLE TO THE AO, SO IT CANNOT BE SAID THAT THE AO HAD NOT APPLIED HIS MIND WHILE FRAMING THE ORIGINAL ASSESSMENT VIDE ORDER DATED 30.12.2005. IT IS ALSO NOTICED FR OM PAGE NO.18 OF THE ASSESSEES PAPERBOOK, WHICH IS A COPY OF THE COMPUT ATION OF TOTAL INCOME THAT THE ASSESSEE CLEARLY DISCLOSED THE CAPITAL GAI NS OF RS.49,44,07,583/- AND BUSINESS LOSS OF RS.73,92,785/-. FROM PAGE NO. 37 OF THE ASSESSEES PAPERBOOK, WHICH IS A COPY OF THE ASSESSMENT ORDER DATED 30.12.2005, IT IS NOTICED THAT THE RETURN OF INCOME FILED BY THE ASSE SSEE WAS EARLIER PROCESSED U/S. 143(1) ON 8.3.2004, THEREAFTER NOTIC E U/S. 143(2) WAS ISSUED ON 15.4.2004 AND THE AO MENTIONED THAT THE ASSESSEE FURNISHED THE ITA NO.1006/BANG/10 PAGE 13 OF 24 DETAILS CALLED FOR AND AFTER EXAMINING THE INFORMAT ION FILED AND DISCUSSING THE CASE, ASSESSMENT WAS COMPLETED. SO IT CANNOT B E SAID THAT THE AO DID NOT APPLY HIS MIND WHILE FRAMING THE ASSESSMENT U/S . 143(3) OF THE ACT VIDE ORDER DATED 30.12.2005. MOREOVER, THE VIEW TAKEN B Y THE AO WAS IN CONSONANCE WITH THE VIEW ALREADY TAKEN WHILE FRAMIN G THE ASSESSMENT FOR THE PRECEDING YEAR I.E., A.Y. 2002-03 VIDE ORDER DA TED 25.11.2004, THE SAME VIEW HAD BEEN TAKEN IN THE SUBSEQUENT YEAR I.E ., A.Y. 2004-05 WHEREIN ALSO THE ASSESSMENT WAS FRAMED U/S. 143(3) OF THE ACT VIDE ORDER DATED 29.9.2006, COPIES OF THE SAID ORDERS WERE FUR NISHED BY THE LD. COUNSEL FOR THE ASSESSEE AND ARE KEPT ON RECORD. 14. FROM THE ABOVE FACTS, IT APPEARS THAT THE AO WH ILE FRAMING ASSESSMENT U/S. 143(3) ON 30.12.2005 APPLIED HIS MI ND AND FRAMED THE ASSESSMENT. LATER ON, ON THE BASIS OF AUDIT OBJECTI ON, THE AO ISSUED NOTICE U/S. 148 OF THE ACT FOR REOPENING THE ASSESSMENT U/ S. 147 OF THE ACT. 15. IT IS NOT IN DISPUTE THAT THE AMENDMENT HAD BEE N MADE IN SECTION 147 OF THE ACT BY DIRECT TAX LAWS (AMENDMENT) ACT, 1987 W.E.F. 1.4.1989. PRIOR TO THE AMENDMENT, REOPENING COULD HAVE BEEN D ONE IF THE AO WAS OF THE OPINION THAT ANY INCOME CHARGEABLE TO TAX HAD E SCAPED ASSESSMENT BY RECORDING THE REASON IN WRITING, BUT WITH EFFECT FR OM 1.4.1989 THE ONLY CONDITION IS THAT IF THE AO HAS REASON TO BELIEVE T HAT INCOME HAS ESCAPED ASSESSMENT, HE ENJOYS THE JURISDICTION TO REOPEN TH E ASSESSMENT. HOWEVER, A MERE CHANGE OF OPINION PER SE CANNOT BE A REASON TO REOPEN BECAUSE THE AO HAS NO POWER TO REVIEW, BUT THE POWE R TO REASSESS. MORE OVER, REASSESSMENT IS TO BE MADE ON FULFILLMENT OF CERTAIN PRE-CONDITIONS, THAT CONDITION IS THAT THE AO MUST HAVE RECORDED RE ASONS AND BELIEVED THAT ITA NO.1006/BANG/10 PAGE 14 OF 24 THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT, THE SAID REASONS MUST HAVE BEEN BY APPLYING HIS OWN MIND AND NOT ON THE B ASIS OF THE MIND APPLIED BY ANY ANOTHER PARTY OR PERSON. 16. IN THE PRESENT CASE, THE AO ONLY AFTER HAVING T HE OBJECTION BY THE AUDIT PARTY ISSUED THE NOTICE U/S. 148 OF THE ACT A ND IN THE REASONS RECORDED, HE NOWHERE STATED THAT INCOME OF THE ASSE SSEE ESCAPED ASSESSMENT, HE SIMPLY STATED THAT THE DIVIDEND INCO ME, INTEREST INCOME AND OTHER INCOME WERE TO BE CLASSIFIED AS INCOME UN DER THE HEAD INCOME FROM OTHER SOURCES. HOWEVER, IN THE PRECEDING YEA R AS WELL AS SUBSEQUENT YEAR AND EVEN WHILE FRAMING THE ORIGINAL ASSESSMENT FOR THE YEAR UNDER CONSIDERATION, THE AFORESAID INCOMES WERE TREATED A S BUSINESS INCOME WHILE FRAMING ASSESSMENT U/S. 143(3) OF THE ACT AND THE AO NOT GIVEN ANY REASON TO DEVIATE FROM THE SAID VIEW WHILE ISSUING THE NOTICE U/S. 148 OF THE ACT. ASSUMING THERE WAS SOME MISTAKE IN THE ASSESS MENT ORDER DATED 30.12.05 AND INCOME IF ANY HAD BEEN TAKEN UNDER A W RONG HEAD, THAT MISTAKE COULD HAVE BEEN RECTIFIED BY ISSUING NOTICE U/S. 154 OF THE ACT, HOWEVER THE REOPENING OF THE ASSESSMENT BY ISSUING THE NOTICE U/S. 148 OF THE ACT COULD HAVE BEEN DONE ONLY WHEN THERE WAS ES CAPEMENT OF INCOME. IN THE PRESENT CASE, THE AO NOWHERE STATED THAT THE INCOME OF THE ASSESSEE ESCAPED ASSESSMENT AND IT WAS IN HIS KNOWL EDGE THAT INCOME ESCAPED ASSESSMENT BY FAULT OF THE ASSESSEE. IN OU R OPINION, A MERE CHANGE OF OPINION IS NOT SUFFICIENT TO ISSUE NOTICE U/S. 148 OF THE ACT FOR REASSESSING THE INCOME BY INVOKING THE PROVISIONS O F SECTION 147 OF THE ACT. ITA NO.1006/BANG/10 PAGE 15 OF 24 17. IN THE PRESENT CASE, ANOTHER OBJECTION TAKEN BY THE AO IN THE REASONS RECORDED FOR REOPENING THE ASSESSMENT IS TH AT THE ASSESSEE HAD NOT SET OFF BUSINESS LOSS AGAINST THE CAPITAL GAINS , WHICH IS CONTRARY TO THE PROVISIONS OF THE ACT. IN OUR OPINION, THE SAID OB SERVATION OF THE AO IS TOTALLY WRONG BECAUSE THE ASSESSEE HAD SET OFF THE BUSINESS LOSS AGAINST THE INCOME FROM CAPITAL GAIN AND THE PROVISIONS CON TAINED IN SECTION 71(2) OF THE ACT CLEARLY STIPULATES THAT THE LOSS MUST BE SET OFF AGAINST THE INCOME, IF ANY, ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER A NY HEAD OF INCOME INCLUDING THE HEAD CAPITAL GAINS, WHETHER SHORT T ERM CAPITAL GAIN OR LONG TERM CAPITAL GAIN. THE SAID PROVISION READS AS UND ER: 71 (2) WHERE IN RESPECT OF ANY ASSESSMENT YEAR, THE NET RESULT OF THE COMPUTATION UNDER ANY HEAD OF INCOME, OTHER THA N CAPITAL GAINS, IS A LOSS AND THE ASSESSEE HAS INCOME ASSES SABLE UNDER THE HEAD CAPITAL GAINS, SUCH LOSS MAY, SUBJECT TO THE PROVISIONS OF THIS CHAPTER, BE SET OFF AGAINST HIS INCOME, IF ANY , ASSESSABLE FOR THAT ASSESSMENT YEAR UNDER ANY HEAD OF INCOME INCLU DING THE HEAD CAPITAL GAINS (WHETHER RELATING TO SHORT-TER M CAPITAL ASSETS OR ANY OTHER CAPITAL ASSETS). IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE SECOND OBJECTION OF THE AO IN THE REASONS RECORDED FOR REO PENING THE ASSESSMENT U/S. 147 OF THE ACT IS TOTALLY WRONG. 18. AS REGARDS TO THE REOPENING ON THE BASIS OF AUD IT OBJECTION IS CONCERNED, THE HONBLE GUJARAT HIGH COURT IN THE CA SE OF ADANI EXPORTS V. DCIT (ASSESMENTS) [1999] 240 ITR 224 (GUJ) HELD AS UNDER: . IN THE INSTANT CASE, THE ASSESSING OFFICER DID NOT HOLD ANY BELIEF THAT INCOME HAD ESCAPED ASSESSMENT ON ACCOUN T OF ERRONEOUS COMPUTATION OF BENEFIT UNDER SECTION 80HH C. THE MERE FACT THAT AS A SUBORDINATE OFFICER HE ADDED TH E SUGGESTION THAT IF HIS VIEWS WERE NOT ACCEPTED, REMEDIAL ACTIO NS MAY BE TAKEN COULD NOT BE SAID TO BE BELIEF HELD BY HIM. HE HAD NO AUTHORITY TO SURRENDER OR ABDICATE HIS FUNCTION TO HIS SUPERIORS ITA NO.1006/BANG/10 PAGE 16 OF 24 NOR COULD THE SUPERIORS ARROGATE TO THEMSELVES SUCH AUTHORITY. AUDIT OBJECTIONS WERE RAISED BUT THAT WOULD NOT AMO UNT TO INFORMATION WITHIN THE MEANING OF SECTION 147(B). THE BOARD HAD DIRECTED REMEDIAL ACTION UNDER SECTION 147(B) ON TH E BASIS OF THE AUDIT OBJECTIONS. THE DIRECTION WAS NOT VALID. TH E NOTICE UNDER SECTION 147(B) WAS NOT VALID AND WAS LIABLE TO BE Q UASHED. 19. SIMILAR VIEW HAS BEEN TAKEN BY THE HONBLE CALC UTTA HIGH COURT IN THE CASE OF I.M.C.LTD. & ANR. V. JCIT [2003] 261 ITR 731 (CAL) WHEREIN IT HAS BEEN HELD AS UNDER: THAT FOR THE ASSESSMENT YEAR 1994-95 THE AUDIT PART Y HAD GIVEN A LEGAL OPINION THAT INCOME FROM INTEREST WAS TAXAB LE UNDER THE INTEREST-TAX ACT. THE NOTICES WERE BAD BECAUSE IT WAS A CLEAR CASE OF CHANGE OF OPINION BASED ON THE OPINION OF T HE AUDIT PARTY. CHANGE OF OPINION DID NOT AUTHORISE INITIATION OF PROCEEDINGS FOR REOPENING THE ASSESSMENT. 20. SIMILARLY, THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT, DELHI V. INDIAN SUGAR & GENERAL INDUSTRY EXPORT IMPORT CORPN . LTD. [2008] 170 TAXMAN 229 (DELHI) HAS HELD AS UNDER: THERE WAS NOTHING TO SUGGEST IN THE REASONS OR IN T HE NOTE RECORDED BY THE ASSESSING OFFICER THAT THERE WAS AN INDEPENDENT EXAMINATION OF THE MATERIALS COLLECTED BY THE AUDIT PARTY NOR WAS THERE ANY INDEPENDENT CONCLUSION ARRIVED AT BY THE ASSESSING OFFICER. IN FACT, THE REASONS THEMSELVES DID NOT M AKE ANY REFERENCE TO THE OBJECTION OF THE AUDIT PARTY BUT I T WAS ONLY THE NOTE, THAT MADE A REFERENCE AND MERELY STATED A FAC T THAT AN OBJECTION HAD BEEN RAISED. THERE WAS NOTHING TO SU GGEST FROM THE LANGUAGE OF THE NOTE THAT THE ASSESSING OFFICER HAD APPLIED HIS MIND TO THE CONTENTS OF THE AUDIT OBJECTION BEF ORE ISSUING A NOTICE UNDER SECTION 148. ON THE CONTRARY, THE NOT E SUGGESTED THAT THE NOTICE WAS ISSUED MECHANICALLY AS A RESULT OF THE AUDIT OBJECTION. ITA NO.1006/BANG/10 PAGE 17 OF 24 21. IN THE PRESENT CASE ALSO, THE AO ISSUED NOTICE U/S. 148 OF THE ACT ONLY AFTER THE AUDIT PARTY RAISED CERTAIN OBJECTION S, THEREFORE REOPENING WAS NOT VALID IN VIEW OF THE RATIO LAID DOWN IN THE AFO RESAID REFERRED TO CASES. AS REGARDS THE INITIATION OF THE PROCEEDINGS FOR TH E REASSESSMENT U/S. 147 OF THE ACT ON THE BASIS OF CHANGE OF OPINION, THE H ONBLE HIGH COURT OF DELHI (FULL BENCH) IN CIT, DELHI V. KELVINATOR OF INDIA LTD. [2010] 187 TAXMAN 312 (SC) HELD AS UNDER: IN THE EVENT IT IS HELD THAT BY REASON OF SECTION 147 IF THE ITO EXERCISES ITS JURISDICTION FOR INITIATING A PROCEED ING FOR REASSESSMENT ONLY UPON MERE CHANGE OF OPINION, THE SAME MAY BE HELD TO BE UNCONSTITUTIONAL. SECTION 147 DOES NOT POSTULATE CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO I NITIATE REASSESSMENT PROCEEDING UPON HIS MERE CHANGE OF OPI NION. THE AFORESAID CASE HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT AS REPORTED IN [2010] 187 TAXMAN 312 SC WHEREIN IT HAS BEEN HELD AS UNDER: PRIOR TO THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987 , RE- OPENING COULD BE DONE UNDER TWO CONDITIONS VIZ., IF (A) THE ITO HAD REASON TO BELIEVE THAT, BY REASON OF THE OMISSI ON OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RETURN UNDER SECT ION 139 FOR ANY ASSESSMENT YEAR TO THE ITO OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THA T YEAR, INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR THAT Y EAR, OR (B) THE ITO HAD IN CONSEQUENCE OF INFORMATION IN HIS PO SSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR. THE FULFILLMEN T OF THE SAID CONDITIONS ALONE CONFERRED JURISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT IN SECTION 1 47 OF THE ACT WITH EFFECT FROM 1-4-1989, THOSE CONDITIONS ARE GIV EN A GO-BY AND ONLY ONE CONDITION HAS REMAINED, VIZ., WHERE THE AS SESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCAP ED ASSESSMENT, THE SECTION CONFERS JURISDICTION TO RE- OPEN THE ASSESSMENT. THEREFORE, POST 1-4-1989, POWER TO RE -OPEN IS MUCH WIDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTE RPRETATION TO THE WORDS 'REASON TO BELIEVE' FAILING WHICH SECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO R E-OPEN ITA NO.1006/BANG/10 PAGE 18 OF 24 ASSESSMENTS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE REASON TO RE-OPEN. ONE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND POWER TO RE-ASSESS. THE ASSESSING OFFI CER HAS NO POWER TO REVIEW; HE HAS THE POWER TO RE-ASSESS, BU T THE RE- ASSESSMENT HAS TO BE BASED ON FULFILLMENT OF CERTAI N PRE- CONDITIONS AND IF THE CONCEPT OF CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN IN T HE GARB OF RE- OPENING THE ASSESSMENT, REVIEW WOULD TAKE PLACE. O NE MUST TREAT THE CONCEPT OF CHANGE OF OPINION AS AN IN-BUILT T EST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFT ER 1-4-1989, THE ASSESSING OFFICER HAS POWER TO RE-OPEN, PROVIDE D THERE IS TANGIBLE MATERIAL TO COME TO THE CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. UNDER THE DI RECT TAX LAWS (AMENDMENT) ACT, 1987, THE PARLIAMENT NOT ONLY DELETED THE WORDS REASON TO BELIEVE BUT ALSO INSERTED THE WOR D OPINION IN SECTION 147. HOWEVER ON RECEIPT OF REPRESENTATIONS FROM THE COMPANIES AGAINST OMISSION OF THE WORDS REASON TO BELIEVE, THE PARLIAMENT RE-INTRODUCED THE SAID EXPRESSION AND DE LETED THE WORD OPINION ON THE GROUND THAT IT WOULD VEST ARB ITRARY POWERS IN THE ASSESSING OFFICER. 22. RECENTLY, THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT V. MODIPON LTD. IN ITA NO.533 OF 2011 BY FOLLOWING THE AFORESAID RE FERRED TO JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. KELVINATOR OF INDIA LTD. 320 ITR 561 (SC) HAS HELD VIDE ORDER DATED 21.3.2011 AS UNDER: 4. IT IS NOT IN DISPUTE THAT THE RE-ASSESSMENT PRO CEEDINGS WERE INITIATED BY THE AO ON THE BASIS OF TAX AUDIT REPOR T FILED BY THE ASSESSEE IN FORM NO.3CD AND ON THE BASIS OF INFORMA TION AVAILABLE IN THE PROFIT AND LOSS ACCOUNT. THERE WAS NO REFERENCE TO ANY NEW MATERIAL BY THE AO WHICH HAD COME INTO H IS POSSESSION AFTER THE COMPLETION OF ORIGINAL ASSESSM ENT UNDER SECTION 143(3) OF THE ACT. IT IS ALSO A MATTER OF RECORD THAT BEFORE INITIATING RE-ASSESSMENT PROCEEDINGS BY ISSUING NOT ICE UNDER SECTION 148 OF THE ACT, THE AO HAD INITIATED PROCEE DINGS UNDER SECTION 154 OF THE ACT FOR THE SAME REASONS AND PRO CEEDINGS INITIATED UNDER SECTION 154 WERE DROPPED BY HIM AFT ER THE ISSUANCE OF NOTICE UNDER SECTION 148 AND WERE THUS PENDING ON THE DATE OF INITIATION OF THE RE-ASSESSMENT PROCEED INGS. IN THESE CIRCUMSTANCES, THE TRIBUNAL WHILE SETTING ASIDE THE REASSESSMENT PROCEEDINGS RELIED UPON THE FULL BENCH JUDGMENT OF THIS COURT IN ITA NO.1006/BANG/10 PAGE 19 OF 24 THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) AND QUOTED THE FOLLOWING PASSAGE FROM THE SAID JUDGMENT: . . 5. VARIOUS OTHER JUDGMENTS ARE ALSO REFERRED TO B Y THE TRIBUNAL IN SUPPORT OF ITS AFORESAID VIEW. 6. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY SUBST ANTIAL QUESTION OF LAW THAT WOULD ARISE FOR CONSIDERATION IN THIS APPEAL. THE APPEAL IS DEVOID OF ANY MERIT AND IS ACCORDINGL Y DISMISSED. 23. WE THEREFORE, BY KEEPING IN VIEW THE RATIO LAID DOWN BY THE VARIOUS HONBLE COURTS IN THE AFORESAID REFERRED TO CASES, ARE OF THE VIEW THAT IN THE PRESENT CASE REOPENING U/S. 147 OF THE ACT BY THE A O ON THE BASIS OF CHANGE OF OPINION WAS NOT JUSTIFIED. 24. AS REGARDS THE DECISIONS RELIED BY THE LD. CIT( DR) ARE CONCERNED, THOSE ARE DISTINGUISHABLE ON FACTS. 25. IN THE CASE OF NAGRATH CHEMICALS WORKS (PVT.) LTD. V. CIT [2004] 265 ITR 401 (ALL) , THE HONBLE ALLAHABAD HIGH COURT HELD AS UNDER: IF THE AUDIT POINTS OUT CERTAIN FACTS WHICH WERE N OT IN THE KNOWLEDGE OF THE INCOME-TAX OFFICER WHEN HE MADE TH E ORIGINAL ASSESSMENT, IT WOULD CONSTITUTE INFORMATION UNDER S ECTION 147(B) OF THE INCOME-TAX ACT, 1961. FROM THE ABOVE, IT WOULD BE CLEAR THAT IN THE SAID CASE, CERTAIN POINTS WERE NOT IN THE KNOWLEDGE OF THE AO WHEN HE MADE THE ORI GINAL ASSESSMENT, THIS CAME TO HIS KNOWLEDGE AFTER THE AUDIT PARTY POINTED OUT. THEREFORE IT WAS HELD THAT IT WOULD CONSTITUTE AN INFORMATION U/S. 1 47(B) OF THE ACT. HOWEVER, IN THE PRESENT CASE, AS WE HAVE ALREADY POINTED OUT IN THE FORMER PART OF ITA NO.1006/BANG/10 PAGE 20 OF 24 THIS ORDER THAT ALL THE INFORMATION RELATING TO LON G TERM CAPITAL GAIN, DIVIDEND INCOME, INTEREST INCOME, ETC. WERE IN THE KNOWLEDGE OF THE AO, WHO FRAMED ASSESSMENT U/S. 143(3) OF THE ACT, THEREFORE THIS C ASE RELIED BY THE LD. CIT(DR) IS DISTINGUISHABLE ON FACTS. 26. SIMILARLY IN THE CASE OF CIT V. P.V.S. BEEDIES PVT. LTD. [1999] 237 ITR 13 (SC) , THE RECOGNITION GRANTED TO CHARITABLE TRUST HAD E XPIRED AND IT WAS NOT IN THE KNOWLEDGE OF THE AO, WHICH WAS POINT ED OUT BY THE INTERNAL AUDIT PARTY, SO THIS WAS AN INFORMATION AND IT WAS HELD BY THE HONBLE SUPREME COURT THAT REOPENING OF THE CASE ON THE BAS IS OF FACTUAL ERROR POINTED OUT BY THE AUDIT PARTY WAS PERMISSIBLE UNDE R LAW. HOWEVER, IN THE PRESENT CASE, THE AO FRAMED THE ORIGINAL ASSESSMENT BY APPLYING HIS MIND AND ALL THE FACTS WERE IN HIS KNOWLEDGE, EVEN THE V IEW TAKEN BY HIM WAS IN CONSONANCE WITH THE VIEW TAKEN IN THE PRECEDING YEA R AS WELL AS IN THE SUCCEEDING YEAR. THEREFORE, THE SAID CASE RELIED B Y THE LD. CIT(DR) IS ALSO DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE. 27. SIMILARLY IN THE CASE OF CIT V. JUHI METAL WORKS (2003] 263 ITR 287 (ALL) , THE HONBLE ALLAHABAD HIGH COURT HAS HELD AS UNDE R: IF THERE IS INFORMATION REGARDING THE LAW AND NOT ITS INTERPRETATION BY THE AUDIT PARTY, AND IF THE ASSES SING AUTHORITY APPLIES HIS MIND TO THE SAID LEGAL POSITION AND FIN DS THAT IT IS A CASE FOR REOPENING, THE REOPENING IS VALID UNDER SE CTION 147(B) OF THE INCOME-TAX ACT, 1961. IN THE AFORESAID CASE, THE HONBLE ALLAHABAD HIGH C OURT HELD REOPENING IS VALID FOR THE REASON THAT THERE WAS INFORMATION REG ARDING THE LAW AND NOT ITS INTERPRETATION BY THE AUDIT PARTY, SINCE THE ASSESS EE WAS NOT MANUFACTURING THE GOODS BY ITSELF AND GETTING THEM MANUFACTURED T HROUGH SOME OTHER ITA NO.1006/BANG/10 PAGE 21 OF 24 PARTY AND THE ACCOUNTS HAD NOT BEEN AUDITED AS REQU IRED U/S. 80J(6A) OF THE ACT, THEREFORE THE ASSESSEE WAS NOT ENTITLED FO R THE BENEFIT OF SECTION 80J OF THE ACT. BUT IN THE PRESENT CASE, THERE WAS NO SUCH INFRINGEMENT OF LAW BY THE ASSESSEE AND THE INCOME FROM LONG TERM CAPITAL GAIN AND LOSS FROM BUSINESS HAD BEEN SHOWN ON THE SAME BASIS AS WERE SHOWN IN THE EARLIER YEAR WHICH HAD BEEN ACCEPTED BY THE AO WHIL E FRAMING ASSESSMENT U/S. 143(3) OF THE ACT. THEREFORE THE CASE RELIED B Y THE LD. CIT(DR) IS DISTINGUISHABLE ON FACTS. 28. ONE MORE JUDGMENT OF THE HONBLE BOMBAY HIGH CO URT IN THE CASE OF YUVRAJ V. UOI & ANR. [2009] 315 ITR 84 (BOM) WAS RELIED BY THE LD. CIT(DR) WHEREIN THE FACTS WERE THAT THE VALUE OF TH E LAND HAD NOT BEEN DETERMINED NOR THE ISSUE RELATING TO WHETHER THE IN COME WAS TO BE TREATED AS CAPITAL GAIN OR CASUAL INCOME BEEN ADDRESSED BY THE AO, THEREFORE IT WAS HELD THAT HE DID NOT APPLY HIS MIND AND FAILED TO RECORD GOOD AND PROPER REASONS FOR PASSING THE ORDER U/S. 143(3). THEREFORE IT WAS NOT A CASE OF MERE CHANGE OF OPINION AND THE AO WAS JUSTI FIED IN ISSUING NOTICE U/S. 148. HOWEVER, IN THE PRESENT CASE, THE AO ISS UED THE QUESTIONNAIRE U/S. 142(1) OF THE ACT AND THEREAFTER FRAMED THE AS SESSMENT U/S. 143(3) OF THE ACT AND CLEARLY STATED IN THE BODY OF THE ASSES SMENT ORDER DATED 30.12.2005 THAT ALL THE DETAILS AND DOCUMENTS SOUGH T WERE FURNISHED BY THE ASSESSEE. THEREFORE, IT CANNOT BE SAID THAT THE AO DID NOT APPLY HIS MIND WHILE FRAMING THE ORIGINAL ASSESSMENT, THEREFORE, T HE NOTICE ISSUED U/S. 148 ON THE BASIS OF OBJECTION OF THE AUDIT PARTY WAS ME RELY A CHANGE OF OPINION. IN VIEW OF THE ABOVE, THE CASE RELIED BY THE LD. CI T(DR) IS DISTINGUISHABLE ON FACTS. ITA NO.1006/BANG/10 PAGE 22 OF 24 29. IN THE CASE OF NEW LIGHT TRADING CO. V. CIT [2002] 256 ITR 391 (DEL) RELIED BY THE LD. CIT(DR), THE HONBLE DELHI HIGH COURT HA S HELD AS UNDER: .. THE TRIBUNAL HAD RIGHTLY NOTICED THAT THIS WA S NOT A CASE OF THE ASSESSING OFFICER MERELY ACTING AT THE BEHEST O F THE AUDIT PARTY OR ON ITS REPORT. HE HAD INDEPENDENTLY EXAMI NED THE MATERIALS COLLECTED BY THE AUDIT PARTY IN ITS REPOR T AND HAD COME TO AN INDEPENDENT CONCLUSION THAT THERE WAS AN ESCA PEMENT OF INCOME. THEREFORE, THE REOPENING OF THE ASSESSMENT S UNDER SECTION 147(B) BASED ON THE AUDIT REPORT WAS VALID. FROM THE ABOVE, IT WOULD BE CLEAR THAT REOPENING OF THE ASSESSMENT WAS MADE BY THE ASSESSING OFFICER NOT ONLY ON THE BASIS OF REPORT OF THE AUDIT PARTY, BUT HE HAD INDEPENDENTLY EXAMINED THE MATERI ALS COLLECTED BY THE AUDIT PARTY IN ITS REPORT AND HAD COME TO AN INDEPE NDENT CONCLUSION THAT THERE WAS AN ESCAPEMENT OF INCOME; BUT NO SUCH EXER CISE HAS BEEN DONE IN THE PRESENT CASE, THEREFORE THE FACTS OF THE SAI D CASE ARE DISTINGUISHABLE FROM THE FACTS OF THE PRESENT CASE. 30. IN VIEW OF THE AFORESAID DISCUSSION, REOPENING U/S. 147 OF THE ACT BY ISSUING NOTICE U/S. 148 WAS NOT JUSTIFIED BECAUSE F IRSTLY, THE AO NOWHERE MENTIONED IN THE REASONS RECORDED THAT THE INCOME E SCAPED ASSESSMENT AND THE VIEW TAKEN BY THE AO WHILE FRAMING THE ORIG INAL ASSESSMENT U/S. 143(3) OF THE ACT VIDE ORDER DATED 30.12.2005 WAS I N CONSONANCE WITH THE VIEW TAKEN IN THE PRECEDING AS WELL AS SUCCEEDING Y EAR. THE SAID VIEW IN RESPECT OF DIVIDEND INCOME AND INTEREST INCOME WHIC H WERE TREATED AS BUSINESS INCOME WAS IN CONSONANCE WITH THE VIEW TAK EN IN THE PRECEDING AS WELL AS SUCCEEDING YEAR WHEREIN THE ASSESSMENT W AS ALSO FRAMED U/S. 143(3) OF THE ACT. SECONDLY, THE REOPENING WAS M ADE ON THE BASIS OF ITA NO.1006/BANG/10 PAGE 23 OF 24 OBJECTION OF THE AUDIT PARTY AND NO INDEPENDENT APP LICATION OF MIND WAS THERE BY THE AO. FURTHERMORE, THE SECOND LIMB OF R EASONS RECORDED BY THE AO THAT NO LOSS FOR THE SAME ASSESSMENT YEAR WAS A DJUSTED AGAINST THE LONG TERM CAPITAL GAINS WAS CONTRARY TO THE FACTUAL MATRIX. THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AS DISCUSSED IN THE FORMER PART OF THIS ORDER AND IN VIEW OF THE VARIOUS JUDICIAL PRONOUNCE MENTS MENTIONED HEREINABOVE, WE ARE OF THE CONSIDERED VIEW THAT THE NOTICE ISSUED U/S. 148 OF THE ACT FOR REOPENING THE ASSESSMENT U/S. 147 OF THE ACT IN THE PRESENT CASE WAS NOT JUSTIFIED. IN THAT VIEW OF THE MATTER , THE REASSESSMENT FRAMED BY THE AO ON THE BASIS OF INVALID NOTICE IS SET ASI DE. 31. SINCE WE HAVE DECIDED THE LEGAL ISSUE RELATING TO REOPENING U/S. 147 OF THE ACT IN FAVOUR OF THE ASSESSEE AND REASSESSME NT ORDER FRAMED ON THE BASIS OF NOTICE UNDER SECTION 148 IS SET ASIDE, NO FINDINGS ARE GIVEN ON THE OTHER GROUNDS RAISED BY THE ASSESSEE ON MERITS. 32. IN THE RESULT, THE APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 31 ST DAY OF OCTOBER, 2011. SD/- SD/- ( SMT. P. MADHAVI DEVI ) ( N.K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED, THE 31 ST OCTOBER, 2011. DS/- ITA NO.1006/BANG/10 PAGE 24 OF 24 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE (1+1) BY ORDER ASSISTANT REGISTRAR ITAT, BANGALORE.