M/S. ICICI BANK LTD., Mumbai V. THE DY CIT RG. 3(1), Mumbai

ITA 4161/MUM/2004

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 4985 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 3 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Next Hearing Date: 11-08-2010
• Assessment Year: 1997-1998
• Appeal Filed On: 21-05-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS KUSUM INGLE
• Assessee Lawyers: MRS AARTI VISSANJI
• Keywords: Business income; Search and seizure; Tangible material; Wrong claim; Difference of opinion; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148; 11

Judgement Text

1 ITA NOS.4160,4161,4819 & 4822/MUM/2004 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J MUMBAI BEFORE SHRI R S PADVEKAR, JM & SHRI B RAMAKOTAIAH , AM ITA NOS. 4160 & 4161/MUM/2004 (ASST YEAR 1996-97 & 97-98 ) ICICI BANK LTD (ERSTWHILE ICIC LTD) ICIC BANK TOWERS BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 51 VS THE DY.COMMR OF INCOME TAX RANGE 3(1) MUMBAI PAN AAACTI398K ITA NOS. 4819 &4822/MUM/2004 (ASST YEAR 1996-97 & 97-98) THE DY.COMMR OF INCOME TAX RANGE 3(1) MUMBAI VS ICICI BANK LTD (ERSTWHILE ICIC LTD) ICIC BANK TOWERS BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 51 (APPELLANT) (RESPONDENT) ASSESSEE BY: MRS AARTI VISSANJI REVENUE BY: MRS KUSUM INGLE, CIT-DR O R D E R PER R S PADVEKAR: IN THIS BUNCH OF FOUR APPEALS, TWO ARE FILED BY TH E ASSESSEE AND TWO ARE FILED BY THE REVENUE, FOR THE ASSESSMENT YEARS 1996-97 & 1997-98 AGAINST THE RESPECTIVE IMPUGNED ORDERS OF THE LD CI T(A)XII, MUMBAI. 2 FIRST WE TAKE THE APPEALS OF THE ASSESSEE FOR BOT H THE ASSESSMENT YEARS AS THE ASSESSEE HAS CHALLENGED THE LEGALITY A ND VALIDITY OF REASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER U/S 147 OF THE ACT. 2 ITA NOS.4160,4161,4819 & 4822/MUM/2004 3 IN BOTH THESE ASSESSMENT YEARS, THE ORIGINAL ASSE SSMENTS ARE COMPLETED U/S 143(3) OF THE ACT. MOREOVER, THE REA SSESSMENT PROCEEDINGS U/S 147 OF THE ACT ARE INITIATED WITHIN FOUR YEARS FROM THE END OF THE RESPECTIVE ASSESSMENT YEARS AND HENCE, THE PROTECTI ON OF THE PROVISO TO SEC. 147 IS NOT AVAILABLE TO THE ASSESSEE. 3.1 THE ASSESSEE COMPANY IS A PUBLIC FINANCIAL INST ITUTION SET UP IN JAN 1955. THE MAIN OBJECTS OF THE ASSESSEE COMPANY ARE TO CARRY ON THE BUSINESS OF ASSISTING INDUSTRIAL ENTERPRISES BY PRO VIDING FINANCE IN THE FORM OF LONG OR MEDIUM TERM LOANS, EQUITY PARTICIPATION, SPONSORING AND UNDER WRITING NEW ISSUES OF SHARES AND SECURITIES, GUARAN TYING LOANS, PROVIDING FINANCIAL ASSISTANCE BY MEANS OF HIRE PURCHASE, LEN DING ETC. 3.2 IN RESPECT OF AY 1996-97, THE ASSESSEE FILED IT S RETURN OF INCOME ON 30.11.1996 AND THE ASSESSEES INCOME WAS DETERMINED AT ` 1,93,68,46,050/-. 3.3 SAME WAY, THE AO DETERMINED THE INCOME OF THE A SSESSEE FOR THE AY 1997-98 AT ` .4,46,96,07,540/-. 4 THE ASSESSING OFFICER ISSUED NOTICES U/SEC. 148 I N BOTH THESE ASSESSMENT YEARS TO THE ASSESSEE BY GIVING THE FOLL OWING REASONS: ASST YEAR 1996-97: IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 199 8-99, THE ISSUE HAS BEEN EXAMINED ON THE BASIS OF DETAILS OBTAINED FROM THE ASSESSEE. AFTER GOING THROUGH THE DETAILS, IT IS SEEN THAT THE ASSE SSEE HAS BEEN CLAIMING DEDUCTION U/S 36(1)(VIII) ON IS INCOME WHICH INCLUD ED NON-FUND BASED INCOME AND INCOME FROM SHORT TERM FINANCE. AS SUCH INFORMATION WAS NOT FURNISHED FOR AY 1996-97, THE SAME COULD NOT BE EXAMINED AND PROPER DEDUCTION/S 36(1)(VIII) WAS NOT COMPUTED. CO NSEQUENTLY, THE ASSESSEE WAS ALLOWED EXCESS DEDUCTION U/S 36(1)(VII I) TO WHICH I WAS NOT ENTITLED TO. IN VIEW OF THE ABOVE, I HAVE REASO N TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WIT HIN THE MEANING OF SEC. 147. THE ASSESSMENT IS REQUIRED TO BE REOPE NED BY ISSUING NOTICE U/S 148. 3 ITA NOS.4160,4161,4819 & 4822/MUM/2004 ASST YEAR 1997-98: IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR AY 199 8-99, THE ISSUE HAS BEEN EXAMINED ON THE BASIS OF DETAILS OBTAINED FROM THE ASSESSEE. AFTER GOING THROUGH THE DETAILS, IT IS SEEN THAT THE ASSE SSEE HAS BEEN CLAIMING DEDUCTION U/S 36(1)(VIII) ON IS INCOME WHICH INCLUD ED NON-FUND BASED INCOME AND INCOME FROM SHORT TERM FINANCE. AS SUCH INFORMATION WAS NOT FURNISHED FOR AY 1997-98, THE SAME COULD NOT BE EXAMINED AND PROPER DEDUCTION/S 36(1)(VIII) WAS NOT COMPUTED. CO NSEQUENTLY, THE ASSESSEE WAS ALLOWED EXCESS DEDUCTION U/S 36(1)(VII I) TO WHICH I WAS NOT ENTITLED TO. IN VIEW OF THE ABOVE, I HAVE REASO N TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WIT HIN THE MEANING OF SEC. 147. THE ASSESSMENT IS REQUIRED TO BE REOPE NED BY ISSUING NOTICE U/S 148. 4.1 THE ONLY REASON FOR INITIATING THE PROCEEDINGS U/S 147 OF THE ACT IN BOTH THESE ASSESSMENT YEARS IS THAT WHILE COMPUTING THE TOTAL INCOME, THE ASSESSEE WAS ALLOWED EXCESS DEDUCTION U/S 36(1)(VII I) OF THE ACT AND THE SAID REASON IS COMMON IN BOTH THESE ASSESSMENT YEARS. TH E ASSESSING OFFICER COMPLETED THE ASSESSMENT IN BOTH THE ASSESSMENT YEA RS U/S 143(3) R.W.S 147 VIDE ORDER DATED 26.3.2002. 5 THE LD COUNSEL FOR THE ASSESSEE VEHEMENTLY ARGUED THAT WHILE COMPLETING THE ORIGINAL ASSESSMENT U/S 143(3), THE ASSESSING OFFICER HAS APPLIED HIS MIND AND HAS ALLOWED THE DEDUCTION TO T HE ASSESSEE U/S 36(1)(VIII) OF THE ACT. THE LD COUNSEL FOR THE ASS ESSEE REFERRED TO PAGE 6 OF THE ASSESSMENT ORDER PASSED UNDER SEC. 143(3) FOR AY 1 996-97 (PAGE NO. 19 OF P/B) AND SUBMITS THAT THE ASSESSEE HAD CLAIMED THE DEDUCTION TO THE EXTENT OF ` .80,43,73,875/- AND AFTER CONSIDERING THE ASSESSEE S CLAIM OF DEDUCTION UNDER THE PROVISIONS OF SEC. 36(1)(VIII), THE ASSES SING OFFICER ALLOWED THE DEDUCTION TO THE EXTENT OF `. 85 CRORES 5.1 THE LD COUNSEL ALSO REFERRED TO THE ASSESSMENT ORDER FOR AY 1997-98 PASSED U/S 143(3) AND SUBMITS THAT THE ASSESSING O FFICER HAS CONSIDERED THE CLAIM OF THE ASSESSEE U/S 36(1)(VIII) AND THE S AME WAS ALLOWED TO THE EXTENT OF ` .204,98,79,749/- WHICH WAS 40% OF ` .512,46,99,373/-. THE LD 4 ITA NOS.4160,4161,4819 & 4822/MUM/2004 COUNSEL FOR THE ASSESSEE REFERRED TO THE REASONS RE CORDED BY THE ASSESSING OFFICER WHICH ARE REPRODUCED HERE-IN ABOVE AND SUBM ITS THAT THE ASSESSEE ITSELF HAS EXCLUDED THE ITEMS OF THE INCOME IN COMP UTATION OF THE INCOME, WHEN THE A.O REFERRED SAID ITEMS IN REASONS RECORDE D FOR ISSUANCE OF NOTICE UNDER SEC. 148. THE LD COUNSEL ALSO REFERRED TO THE PAGE 5 OF THE PAPER BOOK WHEREIN A COPY OF THE COMPUTATION IS PLACED. IT IS ARGUED THAT WHILE COMPLETING THE ASSESSMENT, THE ASSESSING OFFICER HA S ONLY DISTURBED THE ALLOCATION OF THE EXPENDITURE AND COMPLETED THE ASS ESSMENT. IT IS FURTHER ARGUED THAT THOUGH SECTION 147 UNDERGONE AMENDMENT W.E.F 1.4.1989; BUT THE BASIC MANDATE THAT THERE MUST BE SOME TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER FOR FORMATION OF BELIEF HAS BEEN RETAINED BY THE LEGISLATURE AND IN ASSESSEES CASE, THE ASSESSING OFFICER HAS T RIED TO REVIEW THE ASSESSMENT ORDER PASSED U/S 143(3) IN BOTH THE ASSE SSMENT YEARS MERELY ON CHANGE OF OPINION. THE LD COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING PRECEDENTS AND PLEADED THAT AS THE REASSESSMENT PRO CEEDINGS INITIATED BY THE ASSESSING OFFICER IN BOTH THE ASSESSMENT YEARS ARE NOT AS PER THE MANDATE OF SEC. 147; AND HENCE, THE PROCEEDINGS MAY BE QUASHED. I) CIT VS KELVINATOR OF INDIA LTD )320 ITR 561 (SC ) II) PRASHANT S JOSHI VS ITO (189 TAXMAN 1 (BOM) III)PURITY TECHTEXTILE (P) LTD VS ACIT (189 TAXMAN 21(BOM) 5.2 PER CONTRA, THE LD DR VEHEMENTLY ARGUED THAT THE REASSESSMENT PROCEEDINGS INITIATED BY THE ASSESSING OFFICER ARE WELL WITHIN FOUR CORNERS OF THE PROVISIONS OF SEC. 147 OF THE ACT. IT IS FURTHE R ARGUED THAT WRONG CLAIM WAS ALLOWED TO THE ASSESSEE AND HENCE THE ASSESSEE S CASE IS COVERED IN EXPLANATION 1 TO SEC. 147. IT IS FURTHER ARGUED TH AT, IF SUBSEQUENTLY, THE ASSESSING OFFICER DISCOVERED THAT THE ASSESSEE IS ALLOWED WRONG OR EXCESS CLAIM, THEN THE ASSESSING OFFICER CAN CORRECT THE C LAIM BY RESORTING TO THE PROCEEDINGS U/S 147 OF THE ACT. IT IS FURTHER ARGU ED THAT THERE WAS TANGIBLE MATERIAL BEFORE THE ASSESSING OFFICER AND IT IS NOT CORRECT TO SAY THAT THE REASSESSMENT PROCEEDINGS INITIATED IN BOTH THE ASSE SSMENT YEARS ARE PASSED MERELY ON CHANGE OF OPINION. THE LD DR RELIED ON T HE FOLLOWING PRECEDENTS: 5 ITA NOS.4160,4161,4819 & 4822/MUM/2004 I) KALYANJI MAVJI & CO VS CIT (102 ITR 287(SC) II) EMA INDIA LTD VS ACIT 226 CTR 659(ALL) 5.3 IN THE REJOINDER, THE LD COUNSEL FOR THE ASSESS EE SUBMITS THAT THE ASSESSING OFFICER HAS ALREADY INITIATED PROCEEDINGS U/S 147 ON THE ISSUE OF DEDUCTION U/S 80M FOR THE AY 1996-97 AND THE REASSE SSMENT PROCEEDINGS WERE QUASHED BY THE TRIBUNAL AND THE ORDER OF THE T RIBUNAL HAS BEEN AFFIRMED BY THE HONBLE SUPREME COURT. 6 WE HAVE GIVEN OUR ANXIOUS CONSIDERATION TO THE RI VAL SUBMISSIONS OF THE PARTIES AND ALSO PERUSED THE MATERIAL BEFORE US . IN THIS CASE, THE ASSESSMENTS ARE MADE U/S 143(3) AND THE REASSESSMEN TS ARE ALSO INITIATED WITHIN FOUR YEARS FROM THE END OF THE RESPECTIVE AS SESSMENT YEARS. THE MAIN THRUST OF THE ARGUMENTS OF THE LD COUNSEL FOR THE ASSESSEE IN BOTH THESE ASSESSMENT YEARS IS THAT PROCEEDINGS ARE INIT IATED U/S 147 MERELY ON CHANGE OF OPINION. WE FIND FORCE IN THE ARGUMENTS OF THE LD COUNSEL FOR THE ASSESSEE. ON THE PERUSAL OF THE COPIES OF THE ASSE SSMENT ORDERS IN BOTH THESE ASSESSMENT YEARS I.E. 1996-97 & 1997-98, WE FIND THAT THE ASSESSEE HAS MADE THE CLAIM OF DEDUCTION U/S 36(1)(VIII) OF THE ACT WHICH HAS BEEN CONSIDERED AND ALLOWED BY THE ASSESSING OFFICER. I T IS ALSO SEEN THAT EXCEPT THE FACTS AND FIGURES SUBMITTED BY THE ASSESSEE, TH ERE WAS NO MATERIAL BEFORE THE AO. THE BUSINESS INCOME OF THE ASSESSEE CONSISTS OF NON-FUND BASED INCOME SUCH AS GUARANTEE COMMISSION, LC COMMI SSION PROJECT ADVICE FEE ETC., AND FUND BASED INCOME IN THE NATUR E OF SHORT TERM FINANCE AND THE SAID INCOME COMPONENTS WHICH ARE OTHERWISE NOT ELIGIBLE FOR DEDUCTION U/S 36(1)(VIII), THE ASSESSEE HAS NOT BEE N ALLOWED THE DEDUCTION. THOUGH THE ASSESSING OFFICER HAS MENTIONED IN REASO NS RECORDED THAT THE ASSESSEE HAS NOT FURNISHED THE INFORMATION IN BOTH THE ASSESSMENT YEARS AND HENCE, THE SAME COULD NOT BE EXAMINED. WE ARE UNABLE TO ACCEPT SUCH STATEMENT IN THE REASONS AS NOTHING HAS BEEN MENTIO NED IN THE ASSESSMENT ORDER PASSED U/S 143(3) THAT THE ASSESSEE DID NOT F URNISH ANY INFORMATION. MOREOVER, WHILE ALLOWING DEDUCTION U/S 36(1)(VIII), WE FIND THAT THE ASSESSING OFFICER HAS APPLIED HIS MIND AND THEN HAS COME TO THE DECISION IN RESPECT OF 6 ITA NOS.4160,4161,4819 & 4822/MUM/2004 QUANTUM OF DEDUCTION. IN OUR OPINION, JUST TO MAKE OUT A CASE, THE ASSESSING OFFICER HAS MADE SUCH STATEMENT IN THE RE ASONS. 6.1 IT IS ALSO SEEN THAT THE ASSESSING OFFICER HAS NOT DEVIATED FROM THE WORKING OF THE CLAIM MADE BY THE ASSESSEE AND ALLOW ED IN EARLIER PROCEEDINGS EXCEPT RESTRICTING THE ALLOCABLE EXPEND ITURE TO 10% AS AGAINST THE ALLOCABLE EXPENDITURE CLAIMED AT THE SAME RATIO AS THAT OF NON-FUND BASED ACTIVITIES TO THAT OF FOUND BASED ACTIVITIES (I.E. 20.01% FOR ASSESSMENT YEAR 1996-97). THIS ISSUE WAS NOT EVEN IN THE REASO N FOR REOPENING THE ASSESSMENT AND THE ISSUE OF CLAIMING DEDUCTION ON I NCOME FROM NON-FUND BASED ACTIVITIES DOES NOT ARISE AT ALL AS THE ASSES SEE EXCLUDED THEM IN THE CLAIM ITSELF. IN ANY CASE IF ANY EXCESS ALLOWANCE W AS ALLOWED IN CASE THE INCOME ASSESSED WAS REDUCED IN APPELLATE PROCEEDING S, THE PROCEEDINGS U/S 154/155 COULD BE INITIATED BUT NOT PROCEEDINGS U/S 147. 7 IN THE CASE OF KELVINATOR OF INDIA LTD (SUPRA), THEIR LORDSHIP HAVE EXAMINED THE CONCEPT OF CHANGE OF OPINION AS WELL A S EXPRESSION REASONS TO BELIEVE IN SEC. 147 AND HAS HELD AS UNDER: ON GOING THROUGH THE CHANGES, QUOTED ABOVE, MADE T O SEC. 147 OF THE ACT WE FIND THAT, PRIOR TO THE DIRECT TAX LAWS (AMENDMENT) ACT, 1987, REOPENING COULD BE DONE UNDER THE ABOVE TWO C ONDITIONS AND FULFILMENT OF THE SAID CONDITIONS ALONE CONFERRED J URISDICTION ON THE ASSESSING OFFICER TO MAKE A BACK ASSESSMENT, BUT I N SECTION 147 OF THE ACT (WITH EFFECT FROM 1.4.1989 THEY ARE GIVE N A GOBY AND ONLY ONE CONDITION HAS REMAINED, VIZ. THAT WHERE TH E ASSESSING OFFICER HAS REASON TO BELIEVE THAT INCOME HAS ESCA PED ASSESSMENT, CONFERS JURISDICTION TO REOPEN THE ASSE SSMENT. THEREFORE, POST 1.4.1989, POWER TO REOPEN IS MUCH W IDER. HOWEVER, ONE NEEDS TO GIVE A SCHEMATIC INTERPRETATI ON TO THE WORDS REASON TO BELIEVE FAILING WHICH, WE ARE AFRAID, S ECTION 147 WOULD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN ASSESSMENTS ON THE BASIS OF MERE CHANGE OF OPINION , WHICH CANNOT BE PER SE REASON TO REOPEN. WE MUST ALSO KEE P IN MIND THE CONCEPTUAL DIFFERENCE BETWEEN POWER TO REVIEW AND P OWER TO 7 ITA NOS.4160,4161,4819 & 4822/MUM/2004 REASSESS. THE ASSESSING OFFICER HAS NO POWER TO REV IEW, HE HAS THE POWER TO REASSESS. BUT REASSESSMENT HAS TO BE B ASED ON FULFILMENT OF CERTAIN PRECONDITIONS AND IF THE CONC EPT OF CHANGE OF OPINION IS REMOVED, AS CONTENDED ON BEHALF OF THE DEPARTMENT, THEN, IN THE GARB OF REOPENING THE ASSESSMENT, REVI EW WOULD TAKE PLACE. ONE MUST TREAT THE CONCEPT OF CHANGE OF OPI NION AS AN IN- BUILT TEST TO CHECK ABUSE OF POWER BY THE ASSESSING OFFICER. HENCE, AFTER 1 ST APRIL, 1989, THE ASSESSING OFFICER HAS POWER TO RE OPEN, PROVIDED THERE IS TANGIBLE MATERIAL TO COME TO TH E CONCLUSION THAT THERE IS ESCAPEMENT OF INCOME FROM ASSESSMENT. REAS ONS 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 (AMEN DMENT) 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 COM PANIES AGAINST OMISSION OF THE WORDS REASON TO BELIEVE, PARLIAME NT REINTRODUCED THE SAID EXPRESSION AND DELETED THE WORD OPINION ON THE GROUND THAT IT WOULD VEST ARBITRARY POWERS IN THE ASSESSIN G OFFICER. 7.1 IN THE CASE OF PRASHANT S JOSHI (SUPRA), THE HO NBLE BOMBAY HIGH COURT HAS HELD AS UNDER: FOR ALL THESE REASONS, IT IS EVIDENT THAT THERE WA S ABSOLUTELY NO BASIS FOR THE FIRST RESPONDENT TO FORM A BELIEF THAT ANY INCOME CHARGEABLE TO TAXED HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF THE SUBSTANTIVE PROVISIONS OF SECTION 147. EXPLANATION (2) TO SEC. 147 CREATES A DEEMING FICTION OF CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. CLAUSE (B) DEALS WITH A SITUATION WHER E A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMEN T HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOS S, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN. FOR THE PURPOS E OF CLAUSE (B) TO EXPLANATION (2), THE ASSESSING OFFICER MUST NOTICE THAT THE ASSESSEE HAS UNDERSTATED HIS INCOME OR HAS CLAIMED EXCESSIVE LOS S, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN. THE TAKING OF SU CH NOTICE MUST BE CONSISTENT WITH THE PROVISIONS OF THE APPLICABLE LA W. THE ACT OF TAKING NOTICE CANNOT BE AT THE ARBITRARY WHIM OR CAPRICE O F THE ASSESSING OFFICER AND MUST BE BASED ON A REASONABLE FOUNDATIO N. THE SUFFICIENCY F THE EVIDENCE OR MATERIAL IS NOT OPEN TO SCRUTINY BY THE COURT BUT THE EXISTENCE OF THE BELIEF IS THE SINE QUA NON FOR A V ALID EXERCISE OF POWER. 8 ITA NOS.4160,4161,4819 & 4822/MUM/2004 THE PRESENT CASE, HAVING REGARD TO THE LAW LAID DOW N BY THE SUPREME COURT, IT WAS IMPOSSIBLE FOR ANY PRODUCT PERSON TO FORMA REASONABLE BELIEF THAT THE INCOME HAD ESCAPED ASSESSMENT. THE REASONS WHICH HAVE BEEN RECORDED COLD NEVER HAVE LED A PRUDENT PE RSON TO FORM AN OPINION THAT INCOME HAD ESCAPED ASSESSMENT WITHIN T HE MEANING OF SEC. 147. IN THESE CIRCUMSTANCES, THE PETITION SHAL L HAVE TO BE ALLOWED BY SETTING ASIDE THE NOTICE U/S 148. 7.2 THE EXPRESSION REASONS TO BELIEVE HAS UNDERGO NE JUDICIAL SCRUTINY IN PLETHORA OF DECISIONS OF HONBLE SUPREME COURT AS W ELL AS JURISDICTIONAL HIGH COURT AND IN THE UNANIMOUS OPINION IT IS NOW WELL S ETTLED PRINCIPLE THAT THE REASSESSMENT PROCEEDINGS CANNOT BE BASED ON MERE CH ANGE OF OPINION. EVEN AFTER THE AMENDMENT TO SEC. 147 W.E.F 1.4.1989 , THE REASONS TO BELIEVE MUST BE SUPPORTED BY SOME TANGIBLE MATERIAL. 7.3 SO FAR AS THE PRESENT CASE IS CONCERNED, AS RIG HTLY SUBMITTED BY THE LD COUNSEL FOR THE ASSESSEE, THE ASSESSING OFFICER HAS REVIEWED HIS DECISION IN RESPECT OF DEDUCTION ALLOWED U/S 36(1)(VIII) AND IT IS NOTHING BUT ACT OF MERE CHANGE OF OPINION. 7.4 THE LD DR HEAVILY RELIED ON THE DECISION OF THE SUPREME COURT IN THE CASE OF KALYANJI MAVJI & CO (SUPRA). 8 IN OUR HUMBLE OPINION, THE RATIO OF THE SAID DECI SION HAS NOT APPLICATION TO THE FACTS OF THE PRESENT CASE AS IN THE SAID CASE THE DEDUCTION WAS WRONGLY CLAIMED AND THERE WAS SUFFICIENT MATERI AL BEFORE THE ASSESSING OFFICER. MOREOVER, THE DECISION OF THE HONBLE SUPR EME COURT IN THE CASE OF KELVINATOR OF INDIA LTD (SUPRA) IS A SUBSEQUENT DEC ISION AND HENCE, THE RATIO OF THE SAID DECISION HAS TO BE APPLIED. 8.1 SO FAR AS THE ANOTHER DECISION RELIED UPON BY T HE LD DR I.E. IN THE CASE OF EMA INDIA LTD (SUPRA) IS CONCERNED, IN OUR OPINI ON THE SAID DECISION IS ALSO DISTINGUISHABLE ON FACTS. WE, THEREFORE, OF T HE CONSIDERED OPINION THAT THE ASSESSING OFFICER INITIATED THE PROCEEDINGS U/S 147 IN BOTH THE 9 ITA NOS.4160,4161,4819 & 4822/MUM/2004 ASSESSMENT YEARS MERELY ON CHANGE OF OPINION AND H ENCE, NOTICES UNDER SEC. 148 ISSUED IN BOTH ASSESSMENT YEARS ARE BAD IN LAW. ACCORDINGLY, THE PROCEEDINGS INITIATED BY THE ASSESSING OFFICER ARE QUASHED AND RESPECTIVE GROUNDS ARE ALLOWED IN BOTH THE APPEALS. 09. SO FAR AS OTHER GROUNDS ON MERIT ARE CONCERNED, AS WE HAVE QUASHED THE REASSESSMENT PROCEEDINGS ITSELF, WE DO NOT CONS IDER IT NECESSITY TO DECIDE THE SAME. 11 SO FAR AS THE APPEALS FILED BY THE REVENUE ARE C ONCERNED, THE GRIEVANCE IS ON THE ALLOCATION OF THE EXPENDITURE AND ALLOCAT ION OF THE INTEREST ATTRIBUTABLE TO NON-FINANCE INCOME. 12 AS WE HAVE QUASHED THE REASSESSMENT PROCEEDINGS IN BOTH THE ASSESSMENT YEARS; THEREFORE, THE APPEALS FILED BY T HE REVENUE DOES NOT SURVIVE AS VERY BASE OF SAID APPEALS HAS GONE. 13 IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED AND THE APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED ON THE 27 TH , DAY OF AUG 2010. SD/- SD/- ( B RAMAKOTAIAH ) ACCOUNTANT MEMBER (R S PADVEKAR ) JUDICIAL MEMBER PLACE: MUMBAI : DATED:27 TH , AUG 2010 RAJ* 10 ITA NOS.4160,4161,4819 & 4822/MUM/2004 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI