RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., Jaipur V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-6, Jaipur

ITA 110/JPR/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6867 (ITAT-JAIPUR)
• Duration Of Justice: 5 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 31-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BK GUPTA
• Keywords: Reopening of assessment; Depreciation; Additional depreciation; Tangible material; Difference of opinion; Reason to believe; Unabsorbed depreciation; Change of opinion; Reassessment proceedings
• Section: 143(3); 143(1); 147; 148; 263

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENC HE B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRA M SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 110/JP/2019 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2005-06 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., VIDYUT BHAWAN, JAN PATH, JYOTI NAGAR, JAIPUR CUKE VS. ACIT, CIRCLE-6, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AABCR7436B VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI P. C. PARWAL (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI B. K. GUPTA (CIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 11/07/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 29/07/2019 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 20 TH NOVEMBER, 2018 OF LD. CIT (A), AJMER FOR THE ASSESS MENT YEAR 2005-06. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW I N UPHOLDING THE VALIDITY OF THE ORDER PASSED BY AO U/S 147 OF THE I T ACT, 1961. 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE ADDITION OF RS. 24.59 CRORES ON ACCOUNT OF ACCRUED INTEREST ON DEFERRED SUBVENTION RECEIVABLE FROM STATE GOVERNMEN T BY HOLDING THAT SINCE THERE IS NO CHANGE IN THE FACTS AS COMPARED TO THE FACTS OF EARLIER AYS, THERE CANNOT BE ANY JU STIFICATION FOR ACCOUNTING THE INTEREST ON CASH BASIS DURING THE YE AR AS AGAINST ACCRUAL BASIS IN THE EARLIER YEARS. 2 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR 2. THE ASSESSEE IS A STATE GOVERNMENT UNDERTAKING A ND ENGAGED IN GENERATION OF POWER. THE ASSESSEE FILED ITS RETURN OF INCOME F OR THE YEAR UNDER CONSIDERATION ON 28.10.2005 DECLARING TOTAL INCOME AT NIL. SCRUTINY ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED ON 25.02.2013 BY MAKING VARIOUS ADDIT IONS TO THE TUNE OF RS. 121,85,97,423/- THOUGH THE TOTAL INCOME WAS ASSESSE D AT NIL AFTER SETTING OFF OF BROUGHT FORWARD UNABSORBED DEPRECIATION TO THE EXTE NT OF AVAILABLE INCOME. SUBSEQUENTLY THE AO NOTED THAT DURING THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE WAS FOLLOWIN G MERCANTILE SYSTEM OF ACCOUNTING AND FROM THE CURRENT YEAR, THE METHOD OF ACCOUNTING ON DEFERRED SUBVENTION RECEIVABLE FROM GOVERNMENT OF RAJASTHAN WAS CHANGED FROM ACCRUAL BASIS TO CASH BASIS. THIS CHANGE OF METHOD OF ACCO UNT ON A PARTICULAR ITEM OF INCOME HAS RESULTED UNDERSTATEMENT OF INCOME OF RS. 24.59 CRORES. ACCORDINGLY, THE AO PROPOSED TO REOPEN THE ASSESSMENT BY ISSUING A N OTICE UNDER SECTION 148 OF THE ACT. THE ASSESSEE OBJECTED TO THE ADDITION PROPOSE D BY THE AO ON ACCOUNT OF INTEREST ON DEFERRED SUBVENTION RECEIVABLE FROM STA TE GOVERNMENT AS WELL AS CHALLENGED THE VALIDITY OF NOTICE UNDER SECTION 148 OF THE IT ACT ON THE GROUND THAT THE AO HAS REOPENED THE ASSESSMENT ON THE BASIS OF INFORMATION ALREADY AVAILABLE ON RECORD. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND MADE AN ADDITION OF RS. 24.59 CRORES ON ACCOUNT OF INTEREST ON SUBVENTION RECEIVABLE FROM GOVERNMENT OF RAJASTHAN. THE ASSESSEE CHALLENGED T HE ACTION OF THE AO BEFORE THE LD. CIT (A) BUT COULD NOT SUCCEED. 3. DURING THE COURSE OF HEARING, THE LD. A/R OF THE ASSESSEE HAS SUBMITTED THAT THE ORIGINAL ASSESSMENT WAS COMPLETED ON 14.06.2007 UNDER SECTION 143(3) AND THE 3 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR REOPENING OF THE ASSESSMENT IS AFTER 4 YEARS FROM T HE END OF THE ASSESSMENT YEAR UNDER CONSIDERATION, THEREFORE, WHEN THERE IS NO FA ILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECE SSARY FOR ASSESSMENT, THE REOPENING IS BAD IN LAW AS BARRED BY LIMITATION AS PER THE PR OVISION TO SECTION 147 OF THE IT ACT. THE LD. A/R HAS POINTED OUT THAT THE AO IN THE REAS ONS RECORDED HAS MENTIONED THAT ON PERUSAL OF THE RECORD AND PARTICULARLY FROM THE AUDIT REPORT HE NOTICED THAT THE ASSESSEE HAS CHANGED THE METHOD OF ACCOUNTING IN RE SPECT OF INTEREST ON DEFERRED SUBVENTION RECEIVABLE FROM STATE GOVERNMENT. THIS FACT ITSELF SHOWS THAT THE ENTIRE FACTS AND RECORD WAS AVAILABLE WITH THE AO AT THE T IME OF ORIGINAL ASSESSMENT ORDER PASSED UNDER SECTION 143(3) AND, THEREFORE, IT CANN OT BE SAID THAT THE ASSESSEE HAS FAILED TO DISCLOSE FULLY AND TRULY ALL MATERIAL FAC TS NECESSARY FOR ITS ASSESSMENT. FROM THE ABOVE PROVISIONS IT CAN BE NOTED THAT ASSESSMEN T U/S 147 IN RESPECT OF ORIGINAL ASSESSMENT COMPLETED U/S 143(3) CAN BE REOPENED AFT ER 4 YEARS ONLY WHEN THERE IS FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS. IN THE PRESENT CASE, THE AO HAS REOPENED THE ASSESSMENT ON THE BASIS OF CHANGE IN ACCOUNTING POLICY. IT IS SUBMITTED THAT WHILE FILIN G RETURN OF INCOME ASSESSEE HAS DISCLOSED ALL THE MATERIAL FACTS FULLY AND TRULY. T HE FACTS RELATING TO CHANGE IN AFORESAID ACCOUNTING POLICY HAS BEEN SPECIFICALLY M ENTIONED IN PARA 5 OF SCHEDULE 28 NOTES ON ACCOUNTS AS UNDER :- DURING THE YEAR CHANGE HAS BEEN MADE IN THE POLIC Y REGARDING ACCOUNTING OF THE INTEREST ON THE DEFERRED SUBVENTI ON RECEIVABLE FROM STATE GOVERNMENT. PREVIOUSLY THE SAME WAS BEING ACC OUNTED FOR ACCRUAL BASIS AND INTEREST @ 5% WAS ACCOUNTED FOR, BUT FROM NOW ONWARDS INTEREST IS BEING ACCOUNTED FOR ON ACTUAL C ASH BASIS DUE TO THIS CHANGE, OTHER INCOME OF THE CURRENT YEAR IS LO WER BY RS. 24.59 CRORES. 4 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR FURTHER IN PARA 11(B) & (C) TO FORM NO. 3CD OF TAX AUDIT REPORT WHICH DEALS WITH METHOD OF ACCOUNTING, CHANGE IN ACCOUNTING POLICIES AND EFFECT OF CHANGE, IT HAS BEEN SPECIFICALLY MENTIONED THAT THE COMPANY HAS CH ANGED THE METHOD OF ACCOUNTING OF INTEREST INCOME ON DEFERRED SUBVENTIO N RECEIVABLE FROM THE GOVERNMENT OF RAJASTHAN FROM ACCRUAL TO CASH BASIS. IT HAS ALSO BEEN MENTIONED THAT DUE TO AFORESAID CHANGE, THE INCOME OF THE YEA R IS UNDERSTATED BY RS. 24.59 CRORES. THE LD. A/R HAS ALSO SUBMITTED THAT STATUT ORY AUDITORS HAS ALSO MENTIONED IN ITS AUDIT REPORT IN PARA 13(A)(III) OF ANNEXURE II TO AUDIT REPORT THAT INTEREST ON DEFERRED SUBVENTION RECEIVABLE FROM STATE GOVERNMEN T HAS BEEN ACCOUNTED ON RECEIPT BASIS. THUS, FACTS RELATING TO CHANGE IN A CCOUNTING POLICY VIS A VIS EFFECT OF CHANGE IN ACCOUNTING POLICY HAS BEEN FULLY AND TRUL Y DISCLOSED BY THE ASSESSEE. THE AO IN THE ORDER PASSED U/S 143(3) HAS STATED THAT A SSESSEE HAS FILED ITS RETURN DECLARING TOTAL INCOME OF RS. NIL AND AUDIT REPORT U/S 44AB WAS ACCOMPANIED WITH THE RETURN. HENCE, REOPENING OF ASSESSMENT PROCEEDI NG IS NOTHING BUT CHANGE OF OPINION WHICH IS OUTSIDE THE SCOPE OF PROVISION OF SECTION 147. IN SUPPORT OF HIS CONTENTION, HE HAS RELIED UPON THE FOLLOWING DECISI ONS:- DCIT VS. ARISTOCRAT LUGGAGE LTD 46 CCH 254 (MUMBAI TRIB.) PCIT VS. TUPPERWARE INDIA PVT LTD.127 DTR 161 (DEL. HC) CIT VS. HINDUSTAN ZINC LTD 143 DTR 79 (RAJ. HC) 4. THE LD AR HAS FURTHER RELIED ON THE DECISION OF THE COORDINATE BENCH WHEREIN UNDER IDENTICAL SET OF FACTS AND CIRCUMSTANCES OF T HE CASE, THE REASSESSMENT HAS 5 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR BEEN QUASHED IN CASE OF M/S RAJASTHAN RAJYA VIDYUT PRASARAN NIGAM LTD VS ACIT (IN ITA NO. 25/JP/2019 DATED 3.07.2019. 5. ON THE OTHER HAND, THE LD. D/R HAS RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE HAS CHANGED T HE METHOD OF ACCOUNTING FOR RECOGNIZING THE INCOME OF A PARTICULAR HEAD BEING I NTEREST ON DEFERRED SUBVENTION RECEIVABLE FROM STATE GOVERNMENT. THE SAID CHANGE OF METHOD OF ACCOUNTING IS SOLELY FOR AVOIDING THE TAX LIABILITY BY DEFERRING THE INCOME. THE AO HAS GOT SPECIFIC INFORMATION THAT THE ASSESSEE HAS NOT OFFERED TO TA X THE INTEREST ACCRUED OF RS. 24.59 CRORES, THEREFORE, IT CONSTITUTE A TANGIBLE M ATERIAL TO FORM THE BELIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE ORIGINAL ASSE SSMENT WAS COMPLETED ON 14.06.2007 UNDER SECTION 143(3) WHEREBY THE AO MADE VARIOUS ADDITIONS TO THE TUNE OF RS. 121,85,97,423/-. SUBSEQUENTLY THE AO RE OPENED THE ASSESSMENT BY RECORDING THE REASONS AS UNDER:- 6 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR 7. WE FIND THAT UNDER IDENTICAL SET OF FACTS AND CI RCUMSTANCES OF THE CASE, THE COORDINATE BENCH IN CASE OF M/S RAJASTHAN RAJYA VID YUT PRASARAN NIGAM LTD (SUPRA) HAS QUASHED THE REASSESSMENT PROCEEDINGS AND THE RE LEVANT FINDINGS READ AS UNDER: 7 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR ON PLAIN READING OF THE REASONS RECORDED BY THE AO , IT REVEALS THAT AFTER COMPLETION OF THE ASSESSMENT UNDER SECTION 143(3), THE AO NOTICED FROM THE AUDIT REPORT IN FORM 3CD THAT THE ASSESSEE IS OTHER WISE FOLLOWING MERCANTILE BASIS OF ACCOUNTING BUT FOR THE YEAR UNDER CONSIDER ATION, THE ASSESSEE HAS CHANGED THE METHOD OF ACCOUNTING IN RESPECT OF DEFE RRED SUBVENTION RECEIVABLE FROM GOVERNMENT OF RAJASTHAN. THUS THE A O WAS OF THE VIEW THAT THIS CHANGE OF METHOD OF ACCOUNTING NOT RECOGNIZING THE INTEREST ON DEFERRED SUBVENTION RECEIVABLE FROM STATE GOVERNMENT HAS RES ULTED UNDERSTATEMENT OF INCOME OF RS. 24.59 CRORES. THIS INFORMATION HAS BEEN TAKEN BY THE AO FROM THE RECORD AND FACTS ALREADY AVAILABLE WITH THE AO AT THE TIME OF ASSESSMENT COMPLETED UNDER SECTION 143(3). WE FURTHER NOTE TH AT APART FROM THE AUDIT REPORT, THIS FACT WAS ALSO REVEALED BY THE ASSESSEE AS PER NOTE ON ACCOUNTS ITEM NO. 16 OF SCHEDULE-28 OF ANNUAL REPORT. THIS FACT IS ALSO RECORDED BY THE AO IN THE REASONS RECORDED. THUS THE ENTIRE IN FORMATION WHICH IS GATHERED BY THE AO FOR FORMATION OF THE BELIEF THAT INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT WAS AVAILABLE ON THE ASSESSM ENT RECORD. THOUGH THE CHANGE OF METHOD OF ACCOUNTING FOR A PARTICULAR ITEM OF INCOME FROM ACCRUAL TO CASH BASIS AND NOT TAKING A CONSISTENT P OLICY DECISION IN RESPECT OF THE CORRESPONDING EXPENDITURE TOWARDS INTEREST PAYA BLE TO GOVERNMENT OF RAJASTHAN MAY BE A SERIOUS DIVERGENT FROM THE CONSI STENT ACCOUNTING POLICY, HOWEVER, WHEN ALL THESE FACTS AND MATERIAL WERE ALR EADY AVAILABLE WITH THE AO AT THE TIME OF SCRUTINY ASSESSMENT, THEN NOT TAK ING UP THE SCRUTINY ON THIS POINT AND CONDUCTING ANY ENQUIRY ON THIS ISSUE WOUL D HAVE RENDERED THE 8 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR ASSESSMENT ORDER PASSED UNDER SECTION 143(3) AS ERR ONEOUS SO FAR AS PREJUDICIAL TO THE INTEREST OF THE REVENUE AND, THE REFORE, THE REMEDY WITH THE REVENUE WAS UNDER SECTION 263 OF THE IT ACT. IT IS NOT OPEN TO THE AO TO REVIEW ITS OWN DECISION BY RE-ANALYZING AND EVALUAT ING THE SAME MATERIAL AFTER COMPLETING THE ASSESSMENT UNDER SECTION 143(3 ). THIS WOULD AMOUNT TO CHANGE OF OPINION OR REVIEWING ITS OWN DECISION. EV EN OTHERWISE, IF THE AO HAS FAILED TO CONDUCT AN ENQUIRY IN RESPECT OF A PA RTICULAR ISSUE, IT WILL BE A LAPSE AND DEFECT IN THE SAID ORDER AND SUBSEQUENTLY THE AO IS NOT PERMITTED TO MAKE UP THE SAID DEFICIENCY BY RESORTING TO THE PROVISIONS OF SECTION 147/148 OF THE IT ACT. THEREFORE, ONCE THE RELEVAN T FACTS WERE AVAILABLE BEFORE THE AO AT THE TIME OF SCRUTINY ASSESSMENT, T HEN ON THE BASIS OF THE SAME FACTS THE AO CANNOT TAKE A DIFFERENT STAND UND ER THE PROVISIONS OF SECTION 147/148 OF THE IT ACT. THE HONBLE DELHI H IGH COURT IN CASE OF PCIT VS. TUPPERWARE INDIA PVT. LTD. 236 TAXMAN 494 (DELH I) HAS CONSIDERED THIS ISSUE OF REOPENING OF THE ASSESSMENT ON THE BASIS O F THE MATERIAL ALREADY AVAILABLE WITH THE AO AND HELD IN PARA 12 TO 21 AS UNDER :- 12. AT THE OUTSET IT REQUIRES TO BE FACTUALLY NOTIC ED THAT THE REOPENING ORDER OF THE AO ONLY REFERS TO THE REPORT OF STATUTORY AUDIT OR UNDER SECTION 44AB OF THE ACT WHICH REPORT WAS ALREADY ENCLOSED WITH THE RETU RN FILED BY THE ASSESSEE. THEREFORE, FACTUALLY, THERE WAS NO NEW MATERIAL THA T THE AO CAME ACROSS SO AS TO HAVE REASONS TO BELIEVE THAT THE INCOME HAD ESCAPE D ASSESSMENT. 13. AS FAR AS THE LEGAL REQUIREMENT IS CONCERNED, T HE COURT FINDS THAT THE DECISION IN CIT V. ORIENT CRAFT LTD. (SUPRA) ANSWERS THE QUE STION SQUARELY IN FAVOUR OF THE ASSESSEE IN THE FACTS OF THE PRESENT CASE. IN ORIEN T CRAFT LTD. THIS COURT CONSIDERED THE DECISIONS OF THE SUPREME COURT IN CI T V. KELVINATOR INDIA LTD. (2010) 320 ITR 561 AND RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA). 14. THE QUESTION EXAMINED BY THE COURT IN CIT V. OR IENT CRAFT LTD. (SUPRA) IS IDENTICAL TO THE ONE SOUGHT TO BE PROJECTED BY THE REVENUE IN THIS APPEAL VIZ., WHETHER THE TRIBUNAL WAS RIGHT IN LAW IN HOLDING TH AT IN THE ABSENCE OF ANY TANGIBLE MATERIAL AVAILABLE WITH THE AO TO FORM THE REQUISITE BELIEF REGARDING 9 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR ESCAPEMENT OF INCOME, THE REOPENING (UNDER SECTION 147/148) OF THE ASSESSMENT MADE UNDER SECTION 143 (1) WAS BAD IN LAW? 15. IN CIT V. ORIENT CRAFT LTD. (SUPRA) THE REVENUE SOUGHT TO ARGUE, PLACING RELIANCE ON RAJESH JHAVERI STOCK BROKERS P. LTD. (S UPRA) THAT INTIMATION COULD NOT BE EQUATED WITH ASSESSMENT. THE COURT OBSERVE D THAT THE DECISION IN RAJESH JHAVERI STOCK BROKERS P. LTD. (SUPRA) CONTR ARY TO WHAT THE REVENUE WOULD HAVE US BELIEVE, DOES NOT GIVE A CARTE BLANCHE TO T HE ASSESSING OFFICER TO DISTURB THE FINALITY OF THE INTIMATION UNDER SECTION 143 (1 ) AT HIS WHIMS AND CAPRICE; HE MUST HAVE REASON TO BELIEVE WITHIN THE MEANING OF T HE SECTION. THE COURT IN ORIENT CRAFT LTD. RECORDED THAT THE DECISION IN RAJ ESH JHAVERI STOCK BROKERS P. LTD. UNDERSCORED THAT THE INTIMATION UNDER SECTION 143 (1) OF THE ACT COULD BE DISTURBED BY INITIATING REASSESSMENT PROCEEDINGS ON LY: SO LONG AS THE INGREDIENTS OF SECTION 147 ARE FULF ILLED AND WITH REFERENCE TO SECTION 143(1) VIS-A-VIS SECTION 147, THE ONLY INGR EDIENT IS THAT THERE SHOULD BE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT AND IT DOES NOT MATTER THAT THERE HAS BEEN NO FAILURE OR O MISSION ON THE PART OF THE ASSESSEE TO DISCLOSE FULL AND TRUE PARTICULARS AT T HE TIME OF THE ORIGINAL ASSESSMENT. THERE IS NOTHING IN THE LANGUAGE OF SEC TION 147 TO UNSHACKLE THE ASSESSING OFFICER FROM THE NEED TO SHOW REASON TO BELIEVE. THE FACT THAT THE INTIMATION ISSUED UNDER SECTION 143(1) CANNOT BE EQ UATED TO AN ASSESSMENT, A POSITION WHICH HAS BEEN ELABORATED BY THE SUPREME C OURT IN THE JUDGMENT CITED ABOVE, CANNOT IN OUR OPINION LEAD TO THE CONCLUSION THAT THE REQUIREMENTS OF SECTION 147 CAN BE DISPENSED WITH WHEN THE FINALITY OF AN INTIMATION UNDER SECTION 143(1) IS SOUGHT TO BE DISTURBED. 16. THE COURT IN CIT V. ORIENT CRAFT LTD. (SUPRA) E XAMINED THE MEANING GIVEN OF THE WORDS REASONS TO BELIEVE, QUOTED FROM THE DEC ISION OF THE SUPREME COURT IN CIT V. KELVINATOR INDIA LTD. AND HELD AS UNDER: HAVING REGARD TO THE JUDICIAL INTERPRETATION PLACE D UPON THE EXPRESSION REASON TO BELIEVE, AND THE CONTINUED USE OF THAT EXPRESSI ON RIGHT FROM 1948 TILL DATE, WE HAVE TO UNDERSTAND THE MEANING OF THE EXPRESSION IN EXACTLY THE SAME MANNER IN WHICH IT HAS BEEN UNDERSTOOD BY THE COURTS. THE ASS UMPTION OF THE REVENUE THAT SOMEHOW THE WORDS REASON TO BELIEVE HAVE TO BE UN DERSTOOD IN A LIBERAL MANNER WHERE THE FINALITY OF AN INTIMATION UNDER SE CTION 143(1) IS SOUGHT TO BE DISTURBED IS ERRONEOUS AND MISCONCEIVED. AS POINTED OUT EARLIER, THERE IS NO WARRANT FOR SUCH AN ASSUMPTION BECAUSE OF THE LANGU AGE EMPLOYED IN SECTION 147; IT MAKES NO DISTINCTION BETWEEN AN ORDER PASSE D UNDER SECTION 143(3) AND THE INTIMATION ISSUED UNDER SECTION 143(1). THEREFO RE IT IS NOT PERMISSIBLE TO ADOPT DIFFERENT STANDARDS WHILE INTERPRETING THE WO RDS REASON TO BELIEVE VIS-A- VIS SECTION 143(1) AND SECTION 143(3). WE ARE UNABL E TO APPRECIATE WHAT PERMITS THE REVENUE TO ASSUME THAT SOMEHOW THE SAME RIGOROU S STANDARDS WHICH ARE APPLICABLE IN THE INTERPRETATION OF THE EXPRESSION WHEN IT IS APPLIED TO THE REOPENING OF AN ASSESSMENT EARLIER MADE UNDER SECTI ON 143(3) CANNOT APPLY WHERE ONLY AN INTIMATION WAS ISSUED EARLIER UNDER S ECTION 143(1). IT WOULD IN EFFECT PLACE AN ASSESSEE IN WHOSE CASE THE RETURN W AS PROCESSED UNDER SECTION 143(1) IN A MORE VULNERABLE POSITION THAN AN ASSESS EE IN WHOSE CASE THERE WAS A FULL-FLEDGED SCRUTINY ASSESSMENT MADE UNDER SECTION 143(3). WHETHER THE RETURN IS PUT TO SCRUTINY OR IS ACCEPTED WITHOUT DEMUR IS NOT A MATTER WHICH IS WITHIN THE CONTROL OF ASSESSEE; HE HAS NO CHOICE IN THE MATTER . THE OTHER CONSEQUENCE, WHICH IS SOMEWHAT GRAVER, WOULD BE THAT THE ENTIRE RIGOROUS PROCEDURE INVOLVED IN REOPENING AN ASSESSMENT AND THE BURDEN OF PROVIN G VALID REASONS TO BELIEVE COULD BE CIRCUMVENTED BY FIRST ACCEPTING THE RETURN UNDER SECTION 143(1) AND 10 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR THEREAFTER ISSUE NOTICES TO REOPEN THE ASSESSMENT. AN INTERPRETATION WHICH MAKES A DISTINCTION BETWEEN THE MEANING AND CONTENT OF TH E EXPRESSION REASON TO BELIEVE IN CASES WHERE ASSESSMENTS WERE FRAMED EAR LIER UNDER SECTION 143(3) AND CASES WHERE MERE INTIMATIONS WERE ISSUED EARLIE R UNDER SECTION 143(1) MAY WELL LEAD TO SUCH AN UNINTENDED MISCHIEF. IT WOULD BE DISCRIMINATORY TOO. AN INTERPRETATION THAT LEADS TO ABSURD RESULTS OR MISC HIEF IS TO BE ESCHEWED. 17. THE COURT IN CIT V. ORIENT CRAFT LTD. (SUPRA) F URTHER COMPREHENSIVELY REJECTED THE ARGUMENT OF THE REVENUE, WHICH IT SEEKS TO URGE IN THE PRESENT CASE AS WELL, THAT AN 'INTIMATION' UNDER SECTION 143 (1) CANNOT B E EQUATED TO AN ASSESSMENT. THE COURT HELD: THE ARGUMENT OF THE REVENUE THAT AN INTIMATION CAN NOT BE EQUATED TO AN ASSESSMENT, RELYING UPON CERTAIN OBSERVATIONS OF TH E SUPREME COURT IN RAJESH JHAVERI (SUPRA) WOULD ALSO APPEAR TO BE SELF-DEFEAT ING, BECAUSE IF AN INTIMATION IS NOT AN ASSESSMENT THEN IT CAN NEVER BE SUBJECT ED TO SECTION 147 PROCEEDINGS, FOR, THAT SECTION COVERS ONLY AN ASSE SSMENT AND WE WONDER IF THE REVENUE WOULD BE PREPARED TO CONCEDE THAT POSITION. IT IS NOBODYS CASE THAT AN INTIMATION CANNOT BE SUBJECTED TO SECTION 147 PRO CEEDINGS; ALL THAT IS CONTENDED BY THE ASSESSEE, AND QUITE RIGHTLY, IS TH AT IF THE REVENUE WANTS TO INVOKE SECTION 147 IT SHOULD PLAY BY THE RULES OF T HAT SECTION AND CANNOT BOG DOWN. IN OTHER WORDS, THE EXPRESSION REASON TO BEL IEVE CANNOT HAVE TWO DIFFERENT STANDARDS OR SETS OF MEANING, ONE APPLICA BLE WHERE THE ASSESSMENT WAS EARLIER MADE UNDER SECTION 143(3) AND ANOTHER APPLI CABLE WHERE AN INTIMATION WAS EARLIER ISSUED UNDER SECTION 143(1). IT FOLLOWS THAT IT IS OPEN TO THE ASSESSEE TO CONTEND THAT NOTWITHSTANDING THAT THE ARGUMENT O F CHANGE OF OPINION IS NOT AVAILABLE TO HIM, IT WOULD STILL BE OPEN TO HIM TO CONTEST THE REOPENING ON THE GROUND THAT THERE WAS EITHER NO REASON TO BELIEVE O R THAT THE ALLEGED REASON TO BELIEVE IS NOT RELEVANT FOR THE FORMATION OF THE BE LIEF THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. IN DOING SO, IT IS FURT HER OPEN TO THE ASSESSEE TO CHALLENGE THE REASONS RECORDED UNDER SECTION 148(2) ON THE GROUND THAT THEY DO NOT MEET THE STANDARDS SET IN THE VARIOUS JUDICIAL PRONOUNCEMENTS. 18. IT MAY BE NOTICED AT THIS STAGE THAT THE DECISI ON IN ORIENT CRAFT LTD HAS BEEN FOLLOWED BY THIS COURT IN MADHUKAR KHOSLA V. ASSIST ANT COMMISSIONER OF INCOME TAX (2013) 354ITR 356. 19. THERE IS NO GROUND URGED IN THE PRESENT APPEAL BY THE REVENUE THAT THE DECISION IN CIT V. ORIENT CRAFT LTD. WAS ERRONEOUSL Y DECIDED AND REQUIRES RECONSIDERATION. DURING THE COURSE OF ARGUMENTS IT WAS SUBMITTED THAT HAVING REGARD TO THE DECISION OF THE FULL BENCH IN CIT-VI V. USHA INTERNATIONAL LTD. (2012) 348 ITR 485, THE QUESTION SHOULD BE RE-EXAMI NED BY THE COURT. 20. IN THE FIRST PLACE, IT REQUIRES TO BE NOTED THA T THE DECISION IN ORIENT CRAFT LTD. WAS DELIVERED AFTER THE DECISION OF THE FULL BENCH IN USHA INTERNATIONAL LTD. (SUPRA). SECONDLY, THE SUBSEQUENT DECISION IN MADHU KAR KHOSLA NOTED THE DECISION IN USHA INTERNATIONAL LTD. AND REITERATED THE DICTUM IN ORIENT CRAFT LTD. AGAIN IN A DECISION DATED 28 TH JANUARY 2015 IN MOHAN GUPTA (HUF) V. COMMISSIONER OF INCOME TAX-XI (2014) 366ITR 115 (DE L) THE COURT REITERATED THE DECISION IN ORIENT CRAFT LTD. THIRDLY, THE COURT FI NDS THAT THE QUESTIONS FRAMED FOR CONSIDERATION BY THE FULL BENCH IN USHA INTERNATION AL LTD. AS SET OUT IN PARA 1 OF THE SAID JUDGMENT DID NOT PERTAIN TO REOPENING OF A N ASSESSMENT UNDER SECTION 143 (1) OF THE ACT. THE FOUR QUESTIONS REFERRED TO THE FULL BENCH WERE AS UNDER: 11 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR (I) WHAT IS MEANT BY THE TERM 'CHANGE OF OPINION'? (II) WHETHER ASSESSMENT PROCEEDINGS CAN BE VALIDLY REOPENED UNDER SECTION 147 OF THE ACT, EVEN WITHIN FOUR YEAR, IF AN ASSESSEE H AS FURNISHED FULL AND TRUE PARTICULARS AT THE TIME OF ORIGINAL ASSESSMENT WITH REFERENCE TO INCOME ALLEGED TO HAVE ESCAPED ASSESSMENT AND WHETHER AND WHEN IN SUC H CASES REOPENING IS VALID OR INVALID ON THE GROUND OF CHANGE OF OPINION? (III) WHETHER THE BAR OR PROHIBITION UNDER THE PRIN CIPLE '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? (IV) WHETHER AND IN WHAT CIRCUMSTANCES SECTION 114 (E) OF THE EVIDENCE ACT CAN BE APPLIED AND IT CAN BE HELD THAT IT IS A CASE OF CHANGE OF OPINION? 21. THEREFORE, THE CENTRAL ISSUE EXAMINED IN THE DE CISION OF THE FULL BENCH IN USHA INTERNATIONAL LTD. WAS AS TO WHAT CONSTITUTED A CHANGE OF OPINION. THE COURT, THEREFORE, DOES NOT CONSIDER THE DECISION IN ORIENT CRAFT LTD. AS BEING CONTRARY TO THE DECISION IN USHA INTERNATIONAL LTD. IN OTHER WORDS, THERE IS NO OCCASION FOR THE COURT TO REFER TO A LARGER BENCH T HE QUESTION OF THE CORRECTNESS OF THE DECISION IN ORIENT CRAFT LTD. WHICH DECISION SQ UARELY APPLIES TO THE FACTS OF THE PRESENT CASE. THUS THE HONBLE HIGH COURT HAS HELD THAT IN THE AB SENCE OF ANY NEW INFORMATION FOR TAKING RECOURSE TO PROVISIONS OF SE CTION 147/148, THE REOPENING OF THE ASSESSMENT IS NOT VALID. THE HONB LE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. HINDUSTAN ZINC LTD. 393 ITR 264 HAS HELD IN PARA 5 TO 13 AS UNDER :- 5. INDISPUTABLY, AS PER THE PROVISION OF SECTION 147 OF THE ACT, THE ASSESSING OFFICER IS EMPOWERED TO INITIATE THE RE- ASSESSMENT PROCEED INGS IF ANY INCOME OF THE ASSESSEE CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR. BUT THEN, BEFORE INITIATING THE RE-ASSESSMENT PROCEEDINGS, THE AO HA S TO RECORD THE REASONS IN TERMS OF SUB-SECTION (2) OF SECTION 148, FOR FORMATION OF TH E BELIEF THAT ANY INCOME OF THE ASSESSEE CHARGEABLE TO TAX FOR THE RELEVANT ASSESSM ENT YEAR HAS ESCAPED ASSESSMENT. AS LAID DOWN BY THE HON'BLE SUPREME COURT, THE BELI EF ENTERTAINED BY THE ASSESSING OFFICER MUST NOT BE ARBITRARY OR IRRATIONAL, IT MUS T BE REASONABLE AND BASED ON MATERIAL ON RECORD. THE ASSUMPTION OF JURISDICTION BY THE ASSESSING OFFICER UNDER THE PROVISIONS OF THE ACT PRE-SUPPOSES DUE APPLICATION OF MIND BY THE ASSESSING OFFICER ON THE MATERIAL ON RECORD AND FORMATION OF THE BELI EF BY THE ASSESSING OFFICER THAT THE INCOME HAS ESCAPED ASSESSMENT CANNOT BE BASED ON WH IMS AND FANCY, THERE MUST EXISTS RATIONAL AND INTELLIGIBLE NEXUS BETWEEN THE REASONS AND THE BELIEF. 12 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR 6. IN THE MATTER OF CALCUTTA DISCOUNT CO. LTD. V. ITO [1961] 41 ITR 191 (SC) , THE HON'BLE SUPREME COURT WHILE DEALING WITH THE AMBIT AND SCOPE OF THE PROVISIONS OF SECTION 34 OF THE INDIAN INCOME TAX, 1922, WHICH WERE SIMILAR TO THE PROVISIONS OF SECTION 147 OF THE ACT OF 1961 EXPLAINED THE PURPORTS OF SECTION 34, AS UNDER: 'TO CONFER JURISDICTION UNDER THIS SECTION TO ISSUE NOTICE IN RESPECT OF ASSESSMENTS BEYOND THE PERIOD OF FOUR YE ARS, BUT WITHIN A PERIOD OF EIGHT YEARS, FROM THE END OF THE RELEVANT YEAR TWO CONDITIONS HAVE THEREFORE TO BE SATISFIED. THE FIRST IS THAT THE INCOME-TAX OFFICER MUST HAVE REASON TO BELIEVE THAT INCOME, PROFITS OR GAINS CHARGEABLE TO INCOME-TAX HAVE BEEN UNDER- ASSESSED. THE SECOND IS THAT HE MUST HAVE ALSO REAS ON TO BELIEVE THAT SUCH 'UNDER-ASSESSMENT', HAS OCCURRED BY REASON OF EITHER (I) OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RETURN OF HIS INCOME UNDER SECTION 22, OR (I I) OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO DISCLOSE F ULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT YEAR. BOTH THESE CONDITIONS ARE CONDITIONS PRECEDENT TO B E SATISFIED BEFORE THE INCOME-TAX OFFICER COULD HAVE JURISDICTI ON TO ISSUE A NOTICE FOR THE ASSESSMENT OR REASSESSMENT BEYOND TH E PERIOD OF FOUR YEARS, BUT WITHIN THE PERIOD OF EIGHT YEARS, F ROM THE END OF THE YEAR IN QUESTION.' THE HON'BLE SUPREME COURT FURTHER OBSERVED THAT IT IS DUTY OF EVERY ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS NECESSARY FOR HIS ASSESSMENT. BUT, HIS DUTY DOES NOT EXTEND BEYOND TH IS. THE HON'BLE SUPREME COURT OPINED THAT ONCE ALL PRIMARY FACTS AR E BEFORE THE ASSESSING AUTHORITY, HE REQUIRES NO FURTHER ASSISTA NCE BY WAY OF DISCLOSURE . IT IS FOR HIM TO DECIDE WHAT INFERENCE S OF FACTS CAN BE REASONABLY DRAWN AND WHAT LEGAL INFERENCES HAVE ULT IMATELY TO BE DRAWN. 7. IN THE MATTER OF S. NARAYANAPPA AND OTHERS V. COMM ISSIONER OF INCOME TAX, BANGALORE [1967] 63 ITR 219 , THE HON'BLE SUPREME COURT WHILE RELYING UPON THE DECISION IN THE MATTER OF CA LCUTTA DISCOUNT CO. LTD. (SUPRA), HAS OBSERVED AS UNDER : 'BUT THE LEGAL POSITION IS THAT IF THERE ARE IN FAC T SOME REASONABLE GROUNDS FOR THE INCOME-TAX OFFICER TO BELIEVE THAT THERE HAD BEEN ANY NON-DISCLOSURE AS REGARDS ANY FACT, WHICH COULD HAV E A MATERIAL BARING ON THE QUESTION OF UNDER-ASSESSMENT, THAT WO ULD BE SUFFICIENT TO GIVE JURISDICTION TO THE INCOME TAX OFFICER TO ISSU E THE NOTICE UNDER SECTION 34. WHETHER THESE GROUNDS ARE ADEQUATE OR N OT IS NOT A MATTER FOR THE COURT TO INVESTIGATE. IN OTHER WORDS, THE S UFFICIENCY OF THE GROUNDS WHICH INDUCED THE INCOME-TAX OFFICER TO ACT IS NOT A JUSTICIABLE ISSUE. IT IS OF COURSE OPEN FOR THE ASS ESSEE TO CONTEND THAT THE INCOME-TAX OFFICER DID NOT HOLD THE BELIEF THAT THERE HAD BEEN SUCH NON-DISCLOSURE. IN OTHER WORDS, THE EXISTENCE OF TH E BELIEF CAN BE CHALLENGED BY THE ASSESSEE BUT NOT THE SUFFICIENCY OF THE REASONS FOR THE BELIEF. AGAIN THE EXPRESSION 'REASON TO BELIEVE' IN SECTION 34 DOES NOT 13 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR MEAN A PURELY SUBJECTIVE SATISFACTION ON THE PART O F THE INCOME-TAX OFFICER. THE BELIEF MUST BE HELD IN GOOD FAITH: IT CANNOT BE MERELY A PRETENCE. TO PUT IT DIFFERENTLY, IT IS OPEN TO THE COURT TO EXAMINE WHETHER THE REASONS FOR THE BELIEF HAVE A RATIONAL CONNECTION OR A RELEVANT BEARING TO THE FORMATION OF THE BELIEF AND ARE NOT EXTRANEOUS OR IRRELEVANT TO THE PURPOSE OF THE SECTION. TO THI S LIMITED EXTENT, THE ACTION OF THE INCOME-TAX OFFICER IN STARTING PROCEE DINGS UNDER SECTION 34 OF THE ACT IS OPEN TO CHALLENGE IN A COURT OF LA W.' (EMPHASIS SUPPLIED) 8. IN THE MATTER OF ITO V. LAKHMANI MEWAL DAS [1976] 103 ITR 437 , THE HON'BLE SUPREME COURT HAS OBSERVED AS UNDER : 'PRODUCTION BEFORE THE INCOME-TAX OFFICER OF THE AC COUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD W ITH DUE DILIGENCE AMOUNT TO DISCLOSURE CONTEMPLATED BY LAW. THE DUTY OF THE ASSESSEE IN ANY CASE DOES NOT EXTEND BEYOND MAKING A TRUE AND F ULL DISCLOSURE OF PRIMARY FACTS. ONCE HE HAS DONE THAT HIS DUTY ENDS. IT IS FOR THE INCOME-TAX OFFICER TO DRAW THE CORRECT INFERENCE FR OM THE PRIMARY FACTS. IT IS NO RESPONSIBILITY OF THE ASSESSEE TO A DVICE THE INCOME-TAX OFFICER WITH REGARD TO THE INFERENCE WHICH HE SHOUL D DRAW FROM THE PRIMARY FACTS. IF AN INCOME-TAX OFFICER DRAWS AN IN FERENCE WHICH APPEARS SUBSEQUENTLY TO BE ERRONEOUS, MERE CHANGE O F OPINION WITH REGARD TO THAT INFERENCE WOULD NOT JUSTIFY INITIATI ON OF ACTION FOR REOPENING ASSESSMENT. THE GROUNDS OR REASONS WHICH LEAD TO THE FORMATION OF THE BELIEF CONTEMPLATED BY SECTION 147 (A) OF THE ACT MUST HAV E A MATERIAL BEARING ON THE QUESTION OF ESCAPEMENT OF INCOME OF THE ASSESSEE FROM ASSESSMENT BECAUSE OF HIS FAILURE OR OMISSION TO DI SCLOSE FULLY AND TRULY ALL MATERIAL FACTS. ONCE THERE EXIST REASONAB LE GROUNDS FOR THE INCOME-TAX OFFICER TO FORM THE ABOVE BELIEF, THAT W OULD BE SUFFICIENT TO CLOTHE HIM WITH JURISDICTION TO ISSUE NOTICE. WHETH ER THE GROUNDS ARE ADEQUATE OR NOT IS NOT A MATTER FOR THE COURT TO IN VESTIGATE. THE SUFFICIENCY OF THE GROUNDS WHICH INDUCE THE INCOME- TAX OFFICER TO ACT IS, THEREFORE, NOT A JUSTICIABLE ISSUE. IT IS, OF C OURSE, OPEN TO THE ASSESSEE TO CONTEND THAT THE INCOME-TAX OFFICER DID NOT HOLD THE BELIEF THAT THERE HAD BEEN SUCH NON-DISCLOSURE. THE EXISTE NCE OF THE BELIEF CAN BE CHALLENGED BY THE ASSESSEE BUT NOT THE SUFFICIEN CY OF THE REASONS FOR THE BELIEF. THE EXPRESSION 'REASON TO BELIEVE' DOES NOT MEAN A PURELY SUBJECTIVE SATISFACTION ON THE PART OF THE INCOME-T AX OFFICER. THE REASON MUST BE HELD IN GOOD FAITH. IT CANNOT BE MER ELY A PRETENSE. IT IS OPEN TO THE COURT TO EXAMINE WHETHER THE REASONS FO R THE FORMATION OF THE BELIEF HAVE A RATIONAL CONNECTION WITH OR A REL EVANT BEARING ON THE FORMATION OF THE BELIEF AND ARE NOT EXTRANEOUS OR I RRELEVANT FOR THE PURPOSE OF THE SECTION. TO THIS LIMITED EXTENT, THE ACTION OF THE INCOME- TAX OFFICER IN STARTING PROCEEDINGS IN RESPECT OF I NCOME ESCAPING ASSESSMENT IS OPEN TO CHALLENGE IN A COURT OF LAW.' THE HON'BLE SUPREME COURT FURTHER OBSERVED : 14 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR 'AS STATED EARLIER, THE REASONS FOR THE FORMATION O F THE BELIEF MUST HAVE A RATIONAL CONNECTION WITH OR RELEVANT BEARING ON T HE FORMATION OF THE BELIEF. RATIONAL CONNECTION POSTULATES THAT THERE M UST BE A DIRECT NEXUS OR LIVE LINK BETWEEN THE MATERIAL COMING TO THE NOT ICE OF THE INCOME - TAX OFFICER AND THE FORMATION OF HIS BELIEF THAT TH ERE HAS BEEN ESCAPEMENT OF THE INCOME OF THE ASSESSEE FROM ASSES SMENT IN THE PARTICULAR YEAR BECAUSE OF HIS FAILURE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS.' (EMPHASIS SUPPLIED) 9. IN THE MATTER OF GANGA SARAN & SONS (P.) LTD. V. I TO [1981] 130 ITR 1/6 TAXMAN 14 (SC) , THE HON'BLE SUPREME COURT HELD AS UNDER: '6. IT IS WELL SETTLED AS A RESULT OF SEVERAL DECIS IONS OF THIS COURT THAT TWO DISTINCT CONDITIONS MUST BE SATISFIED BEFORE TH E INCOME TAX OFFICER CAN ASSUME JURISDICTION TO ISSUE NOTICE UNDER SECTI ON 147(A). FIRST, HE MUST HAVE REASON TO BELIEVE THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT AND SECONDLY, HE MUST HAVE REASO N TO BELIEVE THAT SUCH ESCAPEMENT IS BY REASON OF THE OMISSION OR FAI LURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR HIS ASSESSMENT. IF EITHER OF THESE CONDITIONS IS NO T FULFILLED, THE NOTICE ISSUED BY THE INCOME TAX OFFICER WOULD BE WITHOUT J URISDICTION. THE IMPORTANT WORDS UNDER SECTION 147 (A) ARE 'HAS REAS ON TO BELIEVE' AND THESE WORDS ARE STRONGER THAN THE WORDS ' IS SATISF IED'. THE BELIEF ENTERTAINED BY THE INCOME TAX OFFICER MUST NOT BE A RBITRARY OR IRRATIONAL. IT MUST BE REASONABLE OR IN OTHER WORDS IT MUST BE BASED ON REASONS WHICH ARE RELEVANT AND MATERIAL. THE COURT, OF COURSE, CANNOT INVESTIGATE INTO THE ADEQUACY OR SUFFICIENCY OF THE REASONS WHICH HAVE WEIGHED WITH THE INCOME TAX OFFICER IN COMING TO TH E BELIEF, BUT THE COURT CAN CERTAINLY EXAMINE WHETHER THE REASONS ARE RELEVANT AND HAVE A BEARING ON THE MATTERS IN REGARD TO WHICH HE IS R EQUIRED TO ENTERTAIN THE BELIEF BEFORE HE CAN ISSUE NOTICE UNDER SECTION 147(A). IF THERE IS NO RATIONAL AND INTELLIGIBLE NEXUS BETWEEN THE REASONS AND THE BELIEF, SO THAT, ON SUCH REASONS, NO ONE PROPERLY INSTRUCTED O N FACTS AND LAW COULD REASONABLY ENTERTAIN THE BELIEF, THE CONCLUSI ON WOULD BE INESCAPABLE THAT THE INCOME TAX OFFICER COULD NOT H AVE REASON TO BELIEVE THAT ANY SUCH ESCAPEMENT WAS BY REASON OF T HE ASSESSEE HAD ESCAPED ASSESSMENT AND SUCH ESCAPEMENT WAS BY REASO N OF THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS AND THE NOTICE ISSUED BY H IM WOULD BE LIABLE TO BE STRUCK DOWN AS INVALID.' (EMPHASIS SUPPLIED) 10. IN THE MATTER OF SRI KRISHNA (P.) LTD. V. ITO [1996] 221 ITR 538/87 TAXMAN 315 , THE HON'BLE SUPREME COURT HAS OBSERVED AS UNDER : 'THE INCOME-TAX OFFICER CAN ISSUE NOTICE UNDER SECT ION 148 OF THE INCOME-TAX ACT,1961, PROPOSING TO REOPEN AN ASSESSM ENT ONLY WHERE HE HAS REASON TO BELIEVE THAT ON ACCOUNT OF EITHER THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO FILE THE RET URN OR ON ACCOUNT OF THE OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT FOR THAT YEAR, INCOME HAS ESCAPED ASSESSMENT. THE EXISTENCE OF THE REASON(S) TO 15 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR BELIEVE IS INTENDED TO BE A CHECK, A LIMITATION, UP ON HIS POWER TO REOPEN THE ASSESSMENT. SECTION 148(2) IMPOSES A FUR THER CHECK UPON THE SAID POWER, VIZ., THE REQUIREMENT OF RECORDING OF REASONS FOR SUCH REOPENING BY THE INCOME-TAX OFFICER. SECTION 151 IM POSES YET ANOTHER CHECK UPON THE SAID POWER, VIZ., THE COMMISSIONER O R THE BOARD, AS THE CASE MAY BE, HAS TO BE SATISFIED, ON THE BASIS OF T HE REASONS RECORDED BY THE INCOME-TAX OFFICER, THAT IT IS A FIT CASE FO R ISSUANCE OF SUCH A NOTICE. THE POWER CONFERRED UPON THE INCOME-TAX OFF ICER BY SECTIONS 147 AND 148 IS THUS NOT AN UNBRIDLED ONE. IT IS HED GED IN WITH SEVERAL SAFEGUARDS CONCEIVED IN THE INTEREST OF ELIMINATING ROOM FOR ABUSE OF THIS POWER BY THE ASSESSING OFFICERS. THE IDEA WAS TO SAVE THE ASSESSEES FROM HARASSMENT RESULTING FROM MECHANICAL REOPENING OF ASSESSMENTS BUT THIS PROTECTION AVAILS ONLY TO THOS E ASSESSEES WHO DISCLOSE ALL MATERIAL FACTS TRULY AND FULLY. EVERY DISCLOSURE IS NOT AND CANNOT BE TREATED TO BE TRUE AND FULL DISCLOSURE. A DISCLOSURE MAY BE A FALSE ONE OR A TRUE ONE. IT MAY BE A FULL DISCLOSUR E OR IT MAY NOT BE. A PARTIAL DISCLOSURE MAY VERY OFTEN BE A MISLEADING O NE. WHAT IS REQUIRED IS A FULL AND TRUE DISCLOSURE OF ALL MATER IAL FACTS NECESSARY FOR MAKING ASSESSMENT FOR THAT YEAR. ALL THE REQUIREMEN TS STIPULATED BY SECTION 147 MUST BE GIVEN DUE AND EQUAL WEIGHT.' IT WAS FURTHER OBSERVED THAT : 'SINCE THE BELIEF IS THAT OF THE INCOME-TAX OFFICER , THE SUFFICIENCY OF REASONS FOR FORMING THE BELIEF IS NOT FOR THE COURT TO JUDGE BUT IT IS OPEN TO AN ASSESSEE TO ESTABLISH THAT, IN FACT THERE EXI STED NO BELIEF OR THAT THE BELIEF WAS NOT AT ALL A BONA FIDE ONE OR WAS BA SED ON VAGUE, IRRELEVANT AND NON-SPECIFIC INFORMATION. TO THAT LI MITED EXTENT, THE COURT MAY LOOK INTO THE CONCLUSION ARRIVED AT BY TH E INCOME-TAX OFFICER AND EXAMINE WHETHER THERE WAS ANY MATERIAL AVAILABL E ON THE RECORD FROM WHICH THE REQUISITE BELIEF COULD BE FORMED BY THE INCOME-TAX OFFICER AND FURTHER WHETHER THAT MATERIAL HAD ANY R ATIONAL CONNECTION OR A LIVE LINK FOR THE FORMATION OF THE REQUISITE B ELIEF.' (EMPHASIS SUPPLIED) 11. IN THE MATTER OF CIT V. KELVINATOR OF INDIA LTD. [2010] 320 ITR 561/187 TAXMAN 312 (SC) , THE HON'BLE SUPREME COURT HELD: 'HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETAT ION TO THE WORDS 'REASON TO BELIEVE', FAILING WHICH SECTION 147 WOUL D GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMEN TS ON THE BASIS OF 'MERE CHANGE OF OPINION', WHICH CANNOT BE PER SE RE ASON TO REOPEN. ONE MUST ALSO KEEP IN MIND THE CONCEPTUAL DIFFERENC E BETWEEN POWER TO REVIEW AND POWER TO REASSESS. THE ASSESSING OFFI CER HAS NO POWER TO REVIEW; HE HAS THE POWER TO REASSESS, BUT THE RE ASSESSMENT HAS TO BE BASED ON FULFILMENT OF CERTAIN PRE-CONDITIONS AND I F THE CONCEPT OF 'CHANGE OF OPINION' IS REMOVED AS CONTENDED ON BEHA LF OF THE DEPARTMENT, THEN IN THE GARB OF REOPENING THE ASSES SMENT, REVIEW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF 'CH ANGE OF OPINION' AS AN IN-BUILT TEST TO CHECK ABUSE OF POWER BY THE ASS ESSING OFFICER. HENCE, AFTER 1-4-1989, THE ASSESSING OFFICER HAS PO WER TO REOPEN, 16 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR PROVIDED THERE IS 'TANGIBLE MATERIAL' TO COME TO CO NCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. UNDER THE DIR ECT TAX LAWS (AMENDMENT) ACT, 1987, THE PARLIAMENT NOT ONLY DELE TED THE WORDS 'REASON TO BELIEVE', THE PARLIAMENT REINTRODUCED TH E SAID EXPRESSION AND DELETED THE WORD 'OPINION' ON THE GROUND THAT I T WOULD VEST ARBITRARY POWERS IN THE ASSESSING OFFICER.' (EMPHAS IS SUPPLIED) 12. IN THE BACKDROP OF THE SETTLED POSITION OF LAW NOT ICED HEREINABOVE ADVERTING TO THE FACTS OF THE PRESENT CASE, IT IS T O BE NOTICED THAT THE ASSESSEE HAD MADE TRUE AND FULL DISCLOSURE OF ALL RELEVANT F ACTS RELATING TO THE CLAIM OF ADDITIONAL DEPRECIATION AND ALSO IN RESPECT OF CLAI M FOR GRANT OF DEDUCTION UNDER SECTION 80 IA. A SEPARATE AUDIT REPORT IN THE PRESCRIBED FORM 10CCB IN SUPPORT OF THE CLAIM FOR DEDUCTION UNDER SECTION 80 IA/80IB WAS ALSO DULY SUBMITTED. THE ASSESSEE HAD ALSO SUBMITTED REPLY PU RSUANT TO ALL QUERIES MADE BY AO DURING THE ASSESSMENT PROCEEDINGS UNDER SECTI ON 143(3) OF THE ACT. IN THIS VIEW OF THE MATTER, THE CONTENTION SOUGHT TO B E RAISED BY THE REVENUE ABOUT NON-DISCLOSURE ON THE BASIS OF THE FAILURE ON THE PART OF THE ASSESSEE IN MENTIONED BIFURCATED AMOUNT OF ADDITIONAL DEPRECIAT ION ALLOWABLE IN THE DEPRECIATION CHART IS ABSOLUTELY BASELESS. IT IS TO BE NOTICED THAT ALL THAT HAS BEEN SAID BY THE AO IS THAT AFTER SCRUTINY ASSESSME NT, IT WAS OBSERVED THAT ASSESSEE HAS MADE INCORRECT CLAIM OF ADDITIONAL DEP RECIATION ON CPP WHEREAS, THE CLAIM FOR ADDITIONAL DEPRECIATION ON C PP WAS ALLOWED BY THE AO WHILE FRAMING THE ASSESSMENT UNDER SECTION 143(3) A FTER CONSCIOUS CONSIDERATION OF THE MATERIAL ON RECORD. IT IS NOT EVEN THE CASE OF THE REVENUE THAT THE FORMATION OF THE BELIEF REGARDING THE ESCA PEMENT OF THE ASSESSMENT BY THE AO IS BASED ON ANY NEW MATERIAL COMING ON RECOR D. APPARENTLY, THE FORMATION OF THE BELIEF BY THE AO REGARDING ESCAPEM ENT OF THE ASSESSMENT IS BASED ON RE-APPRECIATION OF THE MATERIAL ALREADY AV AILABLE ON RECORD AT THE TIME OF SCRUTINY ASSESSMENT WHICH AMOUNTS TO MERE C HANGE OF OPINION. OBVIOUSLY, IN THE GARB OF PURPORTED EXERCISE OF THE POWER TO REASSESS, THE AO CANNOT BE PERMITTED TO REVIEW HIS OWN ORDER OR THE ORDER PASSED BY HIS PREDECESSOR. THUS, THE FINDING ARRIVED AT BY THE IT AT THAT THE REASSESSMENT PROCEEDINGS INITIATED BY THE AO BY MERE CHANGE OF O PINION IS PATENTLY ILLEGAL, CANNOT BE FAULTED WITH. 13. THE ITAT HAVING ARRIVED AT THE CATEGORICAL FINDING THAT RE- OPENING OF THE COMPLETED ASSESSMENT WITHOUT ANY FRESH MATERIAL, ME RELY ON THE BASIS OF CHANGE OF OPINION OF THE AO, IS WITHOUT JURISDICTIO N AND ERRONEOUS, THE APPEAL PREFERRED BY THE REVENUE HAS RIGHTLY BEEN DISMISSED AS HAVING BECOME INFRUCTUOUS. THEREFORE, REOPENING OF THE COMPLETED ASSESSMENT WI THOUT FRESH MATERIAL MERELY ON THE BASIS OF CHANGE OF OPINION ON THE MAT ERIAL ALREADY AVAILABLE WITH THE AO IS WITHOUT JURISDICTION AND NOT SUSTAIN ABLE IN LAW. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AS DISCUSSED AB OVE AS WELL AS FOLLOWING THE DECISION CITED SUPRA, WE HOLD THAT THE REOPENIN G OF THE COMPLETED 17 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR ASSESSMENT UNDER SECTION 147 ON THE BASIS OF THE FA CTS AND MATERIAL ALREADY AVAILABLE WITH THE AO AT THE TIME OF SCRUTINY ASSES SMENT IS NOT PERMISSIBLE UNDER THE LAW. ACCORDINGLY, WE QUASH THE REOPENING OF THE ASSESSMENT AND CONSEQUENTIAL REASSESSMENT ORDER PASSED BY THE AO. 8. IN THE INSTANT CASE AS WELL, WE FIND THAT THERE IS NO FRESH MATERIAL WHICH HAS BEEN BROUGHT ON RECORD AND MERELY BASIS THE DISCLOS URE IN THE FINANCIAL STATEMENTS AND THE AUDIT REPORT, THE ASSESSING OFFICER HAS SOU GHT TO REOPEN THE COMPLETED ASSESSMENT WHICH IS WITHOUT JURISDICTION AND NOT SU STAINABLE IN LAW. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND FOLLOWING T HE DECISION CITED SUPRA, WE HOLD THAT THE REOPENING OF THE COMPLETED ASSESSMENT UNDE R SECTION 147 ON THE BASIS OF THE FACTS AND MATERIAL ALREADY AVAILABLE WITH THE A O AT THE TIME OF SCRUTINY ASSESSMENT IS NOT PERMISSIBLE UNDER THE LAW. ACCORD INGLY, WE QUASH THE REOPENING OF THE ASSESSMENT AND CONSEQUENTIAL REASSESSMENT ORDER PASSED BY THE AO. 9. SINCE WE HAVE QUASHED THE REASSESSMENT ON THE VA LIDITY OF REOPENING, THEREFORE, WE DO NOT PROPOSE TO ADJUDICATE GROUND N O. 2 OF ASSESSEES APPEAL. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 29/07/201 9. SD/- SD/- FOT; IKY JKO FO E FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER JAIPUR DATED:- 29/07/2019. 18 ITA NO. 110/JP/2019 M/S RAJASTHAN RAJYA VIDYUT UTPADAN NIGAM LTD., JAIP UR VS. ACIT, JAIPUR GANESH KUMAR VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- M/S RAJASTHAN RAJYA VIDYUT UTPAD AN NIGAM LTD., JAIPUR 2. THE RESPONDENT THE ACIT, CIRCLE-6, JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 110/JP/2019) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR