ASST CIT 4(3), MUMBAI V. MUIMBAI STOCK BROKERS P.LTD, MUMBAI

ITA 6369/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1969 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 14-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AJAY R SINGH
• Keywords: Reopening of assessment; Depreciation; Question of law; Tangible material; Difference of opinion; Assessment record; Reason to believe; Change of opinion; Reassessment proceedings
• Section: 143(3); 142(1); 115JB; 147; 148; 144; 139

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , . . , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO.6369/MUM/2014 ASSESSMENT YEAR: 2006-07 ACIT - 4(3), 6 TH FLOOR, R. NO.649, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-4020 / VS. M/S MUMBAI STOCK BROKERS PVT. LTD. R NO.10A, 1 ST FLOOR, 7/10, BOTWALA BUILDING, HORNIMAN CIRCLE, FORT, MUMBAI-400023 ( ' / REVENUE) ( #$ % /ASSESSEE) P.A. NO. AABCM4133A M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 2 CROSS OBJECTION NO.39/MUM/2016 (ARISING OUT OF ITA NO.6369/MUM/2014) ASSESSMENT YEAR: 2006-07 M/S MUMBAI STOCK BROKERS PVT. LTD. R NO.10A, 1 ST FLOOR, 7/10, BOTWALA BUILDING, HORNIMAN CIRCLE, FORT, MUMBAI-400023 / VS. ACIT - 4(3), 6 TH FLOOR, R. NO.649, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-4020 ( #$ % /ASSESSEE) ( ' / REVENUE) P.A. NO. AABCM4133A #$ % / ASSESSEE BY SHRI AJAY R. SINGH ' / REVENUE BY SHRI PURUSHOTTAM KUMAR- DR & '' ( % ) / DATE OF HEARING : 15/11/2016 ( % ) / DATE OF ORDER: 15/11/2016 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE REVENUE IS AGGRIEVED BY THE IMPUGNED ORDER DAT ED 12/08/2014 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI AND ASSESSEE HAS PREFERRED CROSS OBJECTION. 2. DURING HEARING, THE LD. COUNSEL FOR THE ASSESSE E, SHRI AJAY R. SINGH, CONTENDED THAT CROSS OBJECTION OF THE ASSESSEE MAY BE TAKEN FIRST AS LEGAL ISSUE IS INVOL VED, WHEREIN, THE ASSESSEE HAS CHALLENGED REOPENING OF ASSESSMENT U/S 147/148 OF THE INCOME TAX ACT, 1961 (HEREINAFTER TH E ACT) M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 3 BEING BEYOND THE PERIOD OF FOUR YEARS MORE SPECIFIC ALLY WHEN THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE MATERIAL FACTS FULLY AND TRULY WHICH WERE NECESSARY FOR FRAMING THE ASSESSMENT. IT WAS ALSO CONTENDED THAT NOTICE U /S 148 OF THE ACT DATED 22/03/2013 FOR REOPENING THE COMPLETE D ASSESSMENT MADE U/S 143(3) DATED 27/05/2008 IS MERE LY BASED UPON CHANGE OF OPINION. IT WAS CONTENDED THA T THE ORIGINAL ASSESSMENT WAS COMPLETED AFTER DUE APPLICA TION OF MIND ON THE ISSUE OF SECTION 115JB OF THE ACT AS WE LL AS SECTION 88E OF THE ACT. 2.1. ON THE OTHER HAND, THE LD. DR, SHRI PURUSHOTT M KUMAR, DEFENDED THE REOPENING OF ASSESSMENT BY CONT ENDING THAT THERE IS NO CHANGE OF OPINION BY THE ASSESSING OFFICER AS INCOME AS ESCAPED ASSESSMENT. 2.2. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN THE L IGHT OF THE FOREGOING ARGUMENTS FROM BOTH SIDES, NOW QUESTION A RISES WHETHER ANY OPINION WAS FORMED BY THE ASSESSING OFF ICER. WE FIND THAT THE LD. ASSESSING OFFICER CONSIDERED THE ISSUE OF SECTION 115JB OF THE ACT ALONG WITH SECTION 88E OF THE ACT WHILE FRAMING THE ORIGINAL ASSESSMENT. IT IS NOTED THAT WHILE FRAMING THE ASSESSMENT THE LD. ASSESSING OFFICER DU LY APPLIED HIS MIND AND AFTER CONSIDERING THE MATERIAL FACTS, FILED BY THE ASSESSEE, THE ASSESSMENT WAS FRAMED U/S 143(3) OF T HE ACT. M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 4 2.3. NOW, QUESTION ARISES WHETHER THERE WAS A CHAN GE OF OPINION BY THE ASSESSING OFFICER AND THE VALIDITY O F REOPENING OF ASSESSMENT U/S 147/148 AFTER A PERIOD OF FOUR YE ARS. SINCE, WE HAVE OBSERVED THAT AN OPINION WAS FORMED BY THE ASSESSING OFFICER THAT TOO AFTER DUE DELIBERATION, THEREFORE, WE SHALL ANALYSE THE VALIDITY OF REOPENING OF ASSESSME NT. CONSIDERING THE TOTALITY OF FACTS, WE FIND THAT REA SSESSMENT PROCEEDINGS WILL BE INVALID, IN CASE, THE ASSESSMEN T ORDER ITSELF RECORDS THAT THE ISSUE WAS RAISED AND DECIDED THAT TOO WHILE FRAMING THE ASSESSMENT U/S 143(3) OF THE ACT. THERE FORE, THE REASSESSMENT PROCEEDINGS IN THIS CASE IS HIT BY THE PRINCIPLE OF CHANGE OF OPINION BECAUSE REASSESSMENT PROCEEDING S WILL BE INVALID AS NOTICES/QUERIES WERE RAISED BY THE ASSES SING OFFICER AS IS EVIDENT FROM THE ASSESSMENT ORDER. THE ASSESS EE DULY REPLIED TO THE QUERY AS IS EVIDENCED FROM LETTER DA TED 27/05/2008, ADDRESSED TO THE ASSESSING OFFICER (PAG E 16 & 17 OF THE PAPER BOOK). THE QUERIES RAISED BY THE ASS ESSING OFFICER WERE DULY ANSWERED BY THE ASSESSEE DURING O RIGINAL ASSESSMENT PROCEEDINGS. THE EXPRESSION CHANGE OF O PINION POSTULATES FORMATION OF OPINION AND THEN A CHANGE T HEREOF. IN THE CONTEXT OF ASSESSMENT PROCEEDINGS, IT MEANS FOR MATION OF BELIEF BY AN ASSESSING OFFICER RESULTING FROM WHAT HE THINKS ON A PARTICULAR QUESTION. IT IS A RESULT OF UNDERSTAND ING, EXPERIENCE AND REFLECTION. A DISTINCTION MUST BE DR AWN BETWEEN ERRONEOUS APPLICATION/ INTERPRETATION/ UNDE RSTANDING OF LAW AND CASES WHERE FRESH OR NEW FACTUAL INFORMA TION COMES TO THE KNOWLEDGE OF THE ASSESSING OFFICER SUBSEQUEN T TO THE M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 5 PASSING OF THE ASSESSMENT ORDER. IF NEW FACTS, MATE RIAL OR INFORMATION COMES TO THE KNOWLEDGE OF THE ASSESSING OFFICER, WHICH WAS NOT ON RECORD OR NOT MADE AVAILABLE BY TH E ASSESSEE, DURING ASSESSMENT PROCEEDINGS, THE PRINCI PLE OF CHANGE OF OPINION WILL NOT APPLY. THE REASON IS THAT OPINION IS FORMED ON FACTS. OPINION FORMED OR B ASED ON WRONG AND INCORRECT FACTS OR WHICH ARE BELIED AND U NTRUE DO NOT GET PROTECTION AND COVER UNDER THE PRINCIPLE OF CHANGE OF OPINION. FACTUAL INFORMATION OR MATERIAL WHICH WAS INCORRECT OR WAS NOT AVAILABLE WITH THE ASSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT WOULD JUSTIFY INITIATION OF REA SSESSMENT PROCEEDINGS. THE REQUIREMENT IN SUCH CASES IS THAT THE INFORMATION OR MATERIAL AVAILABLE SHOULD RELATE TO MATERIAL FACTS. THE EXPRESSION MATERIAL FACTS MEANS THOSE FACTS WHICH IF TAKEN INTO ACCOUNT WOULD HAVE AN ADVERSE EFFECT ON THE ASSESSEE BY A HIGHER ASSESSMENT OF INCOME THAN THE ONE ACTUALLY MADE. THEY SHOULD BE PROXIMATE AND NOT HAV E A REMOTE BEARING ON THE ASSESSMENT. THE OMISSION TO D ISCLOSE MAY BE DELIBERATE OR INADVERTENT. THE QUESTION OF C ONCEALMENT IS NOT RELEVANT AND IS NOT A PRECONDITION WHICH CON FERS JURISDICTION TO REOPEN THE ASSESSMENT. CORRECT MATE RIAL FACTS CAN BE ASCERTAINED FROM THE ASSESSMENT RECORDS ALSO AND IT IS NOT NECESSARY THAT THE SAME COME FROM A THIRD PERSO N OR SOURCE, I.E., FROM SOURCE OTHER THAN THE ASSESSMENT RECORDS. HOWEVER, IN SUCH CASES, THE ONUS WILL BE ON THE REV ENUE TO SHOW THAT THE ASSESSEE HAD STATED INCORRECT AND WRO NG MATERIAL FACTS RESULTING IN THE ASSESSMENT PROCEEDI NGS ON THE M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 6 BASIS OF FACTS, WHICH ARE INCORRECT AND WRONG. THE REASONS RECORDED AND THE DOCUMENTS ON RECORD ARE OF PARAMOU NT IMPORTANCE AND WILL HAVE TO BE EXAMINED TO DETERMIN E WHETHER THE STAND OF THE REVENUE IS CORRECT. IF A S UBJECT- MATTER, ENTRY OR CLAIM/DEDUCTION IS NOT EXAMINED BY AN ASSESSING OFFICER, IT CANNOT BE PRESUMED THAT HE MU ST HAVE EXAMINED THE CLAIM/DEDUCTION OR THE ENTRY, AND, THE REFORE, IT IS A CASE OF CHANGE OF OPINION. WHEN AT THE FIRST INSTANCE, IN THE ORIGINAL ASSESSMENT PROCEEDINGS, NO OPINION IS FORMED, THE PRINCIPLE OF CHANGE OF OPINION CANNOT AND DOES NO T APPLY. THERE IS A DIFFERENCE BETWEEN CHANGE OF OPINION A ND FAILURE OR OMISSION OF THE ASSESSING OFFICER TO FORM AN OP INION ON A SUBJECT-MATTER, ENTRY, CLAIM, DEDUCTION, ETC. WHEN THE ASSESSING OFFICER FAILS TO EXAMINE A SUBJECT-MATTER , ENTRY, CLAIM OR DEDUCTION, HE FORMS NO OPINION. IT IS A CA SE OF NO OPINION. WHETHER OR NOT THE ASSESSING OFFICER HAD A PPLIED HIS MIND AND EXAMINED THE SUBJECT-MATTER, CLAIM, ETC., DEPENDS UPON FACTUAL MATRIX OF EACH CASE. THE ASSESSING OFF ICER CAN EXAMINE A CLAIM OR SUBJECT-MATTER EVEN WITHOUT RAIS ING A WRITTEN QUERY. THERE CAN BE CASES WHERE AN ASPECT O R QUESTION IS TOO APPARENT OR OBVIOUS TO HOLD THAT THE ASSESSI NG-OFFICER DID NOT EXAMINE A PARTICULAR SUBJECT-MATTER, CLAIM, ETC. THE STAND AND SUBSTANCE OF THE ASSESSEE AND THE ASSESSI NG OFFICER IN SUCH CASES ARE RELEVANT. 2.4. SECTION 114 OF THE EVIDENCE ACT, 1872, IS PER MISSIVE AND NOT A MANDATORY PROVISION. NINE SITUATIONS BY W AY OF M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 7 ILLUSTRATIONS ARE STATED. THESE ARE BY WAY OF EXAMP LE OR GUIDELINES. AS A PERMISSIVE PROVISION IT ENABLES TO JUDGE TO SUPPORT HIS JUDGMENT BUT THERE IS NO SCOPE OF PRESU MPTION WHEN FACTS ARE KNOWN. PRESUMPTION OF FACTS UNDER SE CTION 114 IS REBUTTABLE. THE PRESUMPTION RAISED UNDER ILLUSTR ATION (E) TO SECTION 114 OF THE ACT MEANS THAT WHEN AN OFFICIAL ACT IS PROVED TO HAVE BEEN DONE, IT WILL BE PRESUMED TO HA VE BEEN REGULARLY DONE BUT IT DOES NOT RAISE ANY PRESUMPTIO N THAT AN ACT WAS DONE FOR WHICH THERE IS NO EVIDENCE OR PROO F. (I) ASSESSMENTS CANNOT BE VALIDLY REOPENED UNDER S ECTION 147 OF THE ACT EVEN WITHIN FOUR YEARS, IF AN ASSESSEE H AD FURNISHED FULL AND TRUE PARTICULARS AT THE TIME OF ORIGINAL A SSESSMENT WITH REFERENCE TO THE INCOME ALLEGED TO HAVE ESCAPE D ASSESSMENT, IF THE ORIGINAL ASSESSMENT WAS MADE UND ER SECTION 143(3). SO LONG AS THE ASSESSEE HAS FURNISH ED FULL AND TRUE PARTICULARS AT THAT TIME OF ORIGINAL ASSESSMEN T AND SO LONG AS THE ASSESSMENT ORDER IS FRAMED UNDER SECTIO N 143(3) OF THE ACT, IT MATTERS LITTLE THAT THE ASSESSING OFFIC ER DID NOT ASK ANY QUESTION OR QUERY WITH RESPECT TO ONE ENTRY OR NOTE BUT HAD RAISED QUERIES AND QUESTIONS ON OTHER ASPECTS. (II) SECTION 114(E) OF THE ACT CAN BE APPLIED TO AN ASSESSMENT ORDER FRAMED UNDER SECTION 143(3) OF THE ACT, PROVI DED THERE HAS BEEN A FULL AND TRUE DISCLOSURE OF ALL MATERIAL AND PRIMARY FACTS AT THE TIME OF ORIGINAL ASSESSMENT. IN SUCH A CASE IF THE ASSESSMENT IS REOPENED IN RESPECT OF A MATTER COVER ED BY THE DISCLOSURE, IT WOULD AMOUNT TO CHANGE OF OPINION. T HE RATIO M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 8 LAID DOWN IN THE FOLLOWING CASES USEFULLY THROW LIG HTS ON THE ISSUE IN HAND:- A. L. A. FIRM V. CIT [1976] 102 ITR 622 (MAD) (PARA 9) A. L. A. FIRM V. CIT [1991] 189 ITR 285 (SC) (PARAS 32, 60, 61) ANANDJI HARIDAS AND CO. P. LTD. V. KUSHARE (S. P.), STO [1968] 21 STC 326 (SC) (PARA 35) BANKIPUR CLUB LTD. V. CIT [1971] 82 ITR 831 (SC) (PA RA 34) BARIUM CHEMICALS LTD. V. CLB [1966] 36 COMP CAS 639 (SC) (PARA 56) BLB LTD. V. ASST. CIT [2012] 343 ITR 129 (DELHI) (PAR A 14) CALCUTTA DISCOUNT CO. LTD. V. ITO [1961] 41 ITR 191 (SC) (PARA 45) CIT V. A. RAMAN AND CO. [1968] 67 ITR 11 (SC) (PARAS 9, 34) CIT V. CHASE BRIGHT STEEL LTD. (NO. 1) [1989] 177 ITR 124 (BOM) (PARA 21) CIT V. DLF POWER LTD. [2012] 345 ITR 446 (DELHI) (PAR A 14) CIT V. EICHER LTD. [2007] 294 ITR 310 (DELHI) (PARAS 1 0, 28) CIT V. KELVINATOR OF INDIA LTD. [2002] 256 ITR 1 (DE LHI) [FB] (PARAS 2, 12, 20, 48) CIT V. KELVINATOR OF INDIA LTD. [2010] 320 ITR 561 ( SC) (PARAS 2, 28) CIT V. KHEMCHAND RAMDAS [1938] 6 ITR 414 (PC) (PARA 50) CIT V. P. V. S. BEEDIES P. LTD. [1999] 237 ITR 13 (S C) (PARA 18) CIT (ASST.) V. RAJESH JHAVERI STOCK BROKERS P. LTD. [2 007] 291 ITR 500 (SC) (PARAS 4, 12) CIT V. SHARMA (H. P.) [1980] 122 ITR 675 (DELHI) (PARA 9) CONSOLIDATED PHOTO AND FINVEST LTD. V. ASST.CIT [200 6] 281 ITR 394 (DELHI) (PARAS 9, 11) DALMIA P. LTD. V. CIT [2012] 348 ITR 469 (DELHI) (PAR A 17) G. R. RAMACHARI AND CO. V. CIT [1961] 41 ITR 142 (MAD) (PARAS 38, 61) HARI IRON TRADING CO. V. CIT [2003] 263 ITR 437 (P&H ) (PARA 10) ITO V. HABIBULLAH (S. K.) [1962] 44 ITR 809 (SC) (PAR A 50) INDIAN AND EASTERN NEWSPAPER SOCIETY V. CIT [1979] 119 ITR 996 (SC) (PARAS 34, 35) INDIAN HUME PIPE CO. LTD. V. ASST. CIT [2012] 348 I TR 439 (BOM) (PARA 17) 3I INFOTECH LTD. V. ASST. CIT [2010] 329 ITR 257 (BOM ) (PARA 26) INTERNATIONAL WOOLLEN MILLS V. STANDARD WOOL (U. K. ) LTD. [2001] 5 SCC 265 (PARA 30) KALYANJI MAVJI AND CO. V. CIT [1976] 102 ITR 287 (SC ) (PARAS 9, 33, 34, 35) KLM ROYAL DUTCH AIRLINES V. ASST. DIRECTOR OF I. T. [ 2007] 292 ITR 49 (DELHI) (PARA 12) KUNHAYAMMED V. STATE OF KERALA [2000] 245 ITR 360 (SC ) (PARA 31) MAHARAJ KUMAR KAMAL SINGH V. CIT [1959] 35 ITR 1 (SC) (PARA 34) MUTHUKRISHNA REDDIAR V. CIT [1973] 90 ITR 503 (KER) (P ARA 9) M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 9 NEW LIGHT TRADING CO. V. CIT [2002] 256 ITR 391 (DELHI ) (PARA 18) PRAFUL CHUNILAL PATEL V. MAKWANA (M. J.)/ASST. CIT [ 1999] 236 ITR 832 (GUJ) (PARA 21) SNOWCEM INDIA LTD. V. DEPUTY CIT [2009] 313 ITR 170 (BOM) (PARA 31) SRI KRISHNA P. LTD. V. ITO [1996] 221 ITR 538 (SC) (P ARAS 56, 58) SURESH BUDHARMAL KALANI V. STATE OF MAHARASHTRA [1998] 7 SCC 337 (PARA 29) UNION OF INDIA V. SURESH C. BASKEY [1996] AIR 1996 SC 849 (PARA 20) UNITED MERCANTILE CO. LTD. V. CIT [1967] 64 ITR 218 (KER) (PARA 9) '(I) WHAT IS MEANT BY THE TERM 'CHANGE OF OPINION' ? (II) WHETHER ASSESSMENT PROCEEDINGS CAN BE VALIDLY REOPE NED UNDER SECTION 147 OF THE ACT, EVEN WITHIN FOUR YEAR S, IF AN ASSESSEE HAS FURNISHED FULL AND TRUE PARTICULARS AT THE TIME OF ORIGINAL ASSESSMENT WITH REFERENCE TO INCOME ALLEGE D TO HAVE ESCAPED ASSESSMENT AND WHETHER AND WHEN IN SUCH CAS ES REOPENING IS VALID OR INVALID ON THE GROUND OF CHAN GE OF OPINION ? (III) WHETHER THE BAR OR PROHIBITION UNDER THE PRINCIPLE 'CHANGE OF OPINION' WILL APPLY EVEN WHEN THE ASSESS ING OFFICER HAS NOT ASKED ANY QUESTION OR QUERY WITH RESPECT TO AN ENTRY/NOTE, BUT THERE IS EVIDENCE AND MATERIAL TO S HOW THAT THE ASSESSING OFFICER HAD RAISED QUERIES AND QUESTI ONS 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 ?' 2.5. TO EXPLAIN THE AFOREMENTIONED POSITION OF THE LAW, WE ARE REPRODUCING HEREUNDER THE RELEVANT PROVISION OF SEC TION 147 OF THE ACT. '147. INCOME ESCAPING ASSESSMENT.IF THE ASSESSING OFFICER, HAS REASON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSE SS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS E SCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 10 OF THE PROCEEDINGS UNDER THIS SECTION, OR RE-COMPUT E THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS T HE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THI S SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASS ESSMENT YEAR) : PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER T HE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PAR T OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE T O A NOTICE ISSUED UNDER SUB- SECTION (1) OF SECTION 142 OR SECTION 14 8 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HI S ASSESSMENT FOR THAT ASSESSMENT YEAR. EXPLANATION 1.PRODUCTION BEFORE THE ASSESSING OFFI CER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENC E COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FORE GOING PROVISO. EXPLANATION 2.FOR THE PURPOSES OF THIS SECTION, TH E FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY : (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF AN Y OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DU RING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARG EABLE TO INCOME-TAX ; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY TH E ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOM E OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN T HE RETURN ; (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT (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 M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 11 (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR AN Y OTHER ALLOW ANCE UNDER THIS ACT HAS BEEN COMPUTED. EXPLANATION 3.FOR THE PURPOSE OF ASSESSMENT OR REA SSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSES S OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED A SSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THA T THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN THE REASONS RE CORDED UNDER SUB- SECTION (2) OF SECTION 148.' 2.6. FOR REOPENING AN ASSESSMENT MADE UNDER SECTIO N 143(3) OF THE ACT, THE FOLLOWING CONDITIONS ARE REQ UIRED TO BE SATISFIED:- (I) THE ASSESSING OFFICER MUST FORM A TENTATIVE OR PRIMA FACIE OPINION ON THE BASIS OF MATERIAL THAT THERE IS UNDE RASSESSMENT OR ESCAPEMENT OF INCOME ; (II) HE MUST RECORD THE PRIMA FACIE OPINION INTO WR ITING ; (III) THE OPINION FORMED IS SUBJECTIVE BUT THE REAS ONS RECORDED OR THE INFORMATION AVAILABLE ON RECORD MUST SHOW THAT THE OPINION IS NOT A MERE SUSPICION. (IV) REASONS RECORDED AND/OR THE DOCUMENTS AVAILAB LE ON RECORD MUST SHOW A NEXUS OR THAT IN FACT THEY ARE GERMANE AND RELEVANT TO THE SUBJECTIVE OPINION FORMED BY THE ASSESSING O FFICER REGARDING ESCAPEMENT OF INCOME. (V) IN CASES WHERE THE FIRST PROVISO APPLIES, THERE IS AN ADDITIONAL REQUIREMENT THAT THERE SHOULD BE FAILURE OR OMISSIO N ON THE PART OF THE ASSESSEE IN DISCLOSING FULL AND TRUE MATERIA L FACTS. THE EXPLANATION TO THE SECTION STIPULATES THAT MERE PRO DUCTION OF BOOKS OF ACCOUNT OR OTHER DOCUMENTS FROM WHICH THE ASSESSING OFFICER COULD HAVE, WITH DUE DILIGENCE, INFERRED MA TERIAL FACTS, DOES NOT AMOUNT TO 'FULL AND TRUE DISCLOSURE OF MAT ERIAL FACTS' (THE PROVISO IS NOT APPLICABLE WHERE REASONS TO BEL IEVE FOR ISSUE OF NOTICE ARE RECORDED AND NOTICE IS ISSUED WITHIN FOU R YEARS FROM THE END OF ASSESSMENT YEAR). M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 12 2.7. THE EXPRESSION 'CHANGE OF OPINION' POSTULATES FORMATION OF OPINION AND THEN A CHANGE THEREOF. IN THE CONTEXT OF SECTION 147 OF THE ACT IT IMPLIES THAT T HE ASSESSING OFFICER SHOULD HAVE FORMED AN OPINION AT THE FIRST INSTANCE, I.E., IN THE PROCEEDINGS UNDER SECTION 143(3) AND T HEREAFTER, WITH THE INITIATION OF THE REASSESSMENT PROCEEDING, THE ASSESSING OFFICER PROPOSES OR WANTS TO TAKE A DIFFE RENT VIEW. THE WORD 'OPINION' IS DERIVED FROM THE LATIN WORD ' OPINARI' WHICH MEANS 'TO BELIEVE', 'TO THINK'. THE WORD 'OPI NION' AS PER THE BLACK'S LAW DICTIONARY MEANS A STATEMENT BY A J UDGE OR A COURT OF A DECISION REACHED BY HIM INCORPORATING CA USE TRIED OR ARGUED BEFORE THEM, EXPOUNDING THE LAW AS APPLIED T O THE CASE AND, DETAILING THE REASONS UPON WHICH THE JUDGMENT IS BASED. ADVANCED LAW LEXICON BY P. RAMANATHA AIYAR (THIRD ED ITION) EXPLAINS THE TERM 'OPINION' TO MEAN 'SOMETHING MORE THAN MERE RETAINING OF GOSSIP OR HEARSAY; IT MEANS JUDGM ENT OR BELIEF, THAT IS, A BELIEF OR A CONVICTION RESULTING FROM WHAT ONE THINKS ON A PARTICULAR QUESTION . . . AN OPINION IS A CONVICTION BASED ON TESTIMONY . . . THEY ARE AS A RESULT OF RE ADING, EXPERIENCE AND REFLECTION'. 2.8. IN THE CONTEXT OF ASSESSMENT PROCEEDINGS, IT MEANS FORMATION OF BELIEF BY AN ASSESSING OFFICER RESULTI NG FROM WHAT HE THINKS ON A PARTICULAR QUESTION. IT IS A RESULT OF UNDERSTANDING, EXPERIENCE AND REFLECTION TO USE THE WORDS IN LAW LEXICON BY P. RAMANATHA AIYAR. THE QUESTION OF CHANGE OF OPINION ARISE WHEN AN ASSESSING OFFICER FORMS AN OP INION AND M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 13 DECIDES NOT TO MAKE AN ADDITION OR HOLDS THAT THE A SSESSEE IS CORRECT AND ACCEPTS HIS POSITION OR STAND. IN HARI IRON TRADING CO. V. CIT [2003] 263 ITR 437 (P&H), A DIVISION BEN CH OF THE HONBLE PUNJAB AND HARYANA HIGH COURT OBSERVED THAT AN ASSESSEE HAS NO CONTROL OVER THE WAY AN ASSESSMENT ORDER IS DRAFTED. IT WAS OBSERVED THAT, GENERALLY, THE ISSUE S WHICH ARE ACCEPTED BY THE ASSESSING OFFICER DO NOT FIND MENTI ON IN THE ASSESSMENT ORDER AND ONLY SUCH POINTS ARE TAKEN NOT E OF ON WHICH THE ASSESSEE'S EXPLANATIONS ARE REJECTED AND ADDITIONS/DISALLOWANCES ARE MADE. APPLYING THE PRI NCIPLES LAID DOWN BY THE FULL BENCH OF THIS COURT AS WELL A S THE OBSERVATIONS OF THE PUNJAB AND HARYANA HIGH COURT, WE FIND THAT IF THE ENTIRE MATERIAL HAD BEEN PLACED ON RECO RD BY THE ASSESSEE BEFORE THE ASSESSING OFFICER AT THE TIME W HEN THE ORIGINAL ASSESSMENT WAS MADE AND THE ASSESSING OFFI CER APPLIED HIS MIND TO THAT MATERIAL AND ACCEPTED/REJE CTED THE VIEW CANVASSED BY THE ASSESSEE, THEN MERELY BECAUSE HE DID EXPRESS THIS IN THE ASSESSMENT ORDER, THAT BY ITSEL F WOULD NOT GIVE HIM A GROUND TO CONCLUDE THAT INCOME HAS ESCAP ED ASSESSMENT AND, THEREFORE, THE ASSESSMENT NEEDED TO BE REOPENED. ON THE OTHER HAND, IF THE ASSESSING OFFIC ER DID NOT APPLY HIS MIND AND COMMITTED A LAPSE, THERE IS NO R EASON WHY THE ASSESSEE SHOULD BE MADE TO SUFFER THE CONSEQUEN CES OF HIS LAPSES. 2.9. THE HONBLE DELHI HIGH COURT IN CONSOLIDATED PHOTO AND FINVEST LTD. [2006] 281 ITR 394 (DELHI) HELD AS UNDER: M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 14 ' IN THE LIGHT OF THE AUTHORITATIVE PRONOUNCEMENTS OF THE SUPREME COURT REFERRED TO ABOVE, WHICH ARE BINDING UPON US AND THE OBSERVATIONS MADE BY THE HIGH COURT OF GUJARAT WITH WHICH WE FIND OURSELVES IN RESPECTFUL AGREEMENT, THE ACTI ON INITIATED BY THE ASSESSING OFFICER FOR REOPENING THE ASSESSMENT CANNOT BE SAID TO BE EITHER INCOMPETENT OR OTHERWISE IMPROPER TO CALL FOR INTERFERENCE BY A WRIT COURT. THE ASSESSING OFFICER HAS IN THE REASONED ORDER PASSED BY HIM INDICATED THE BASIS ON WHICH INCOME EXIGIBLE TO TAX HAD IN HIS OPINION ESCAPED A SSESSMENT. THE ARGUMENT THAT THE PROPOSED REOPENING OF ASSESSM ENT WAS BASED ONLY UPON A CHANGE OF OPINION HAS NOT IMPRESS ED US. THE ASSESSMENT ORDER DID NOT ADMITTEDLY ADDRESS ITSELF TO THE QUESTION WHICH THE ASSESSING OFFICER PROPOSES TO EX AMINE IN THE COURSE OF REASSESSMENT PROCEEDINGS. THE SUBMISSION OF MR. VOHRA THAT EVEN WHEN THE ORDER OF ASSESSMENT DID NO T RECORD ANY EXPLICIT OPINION ON THE ASPECTS NOW SOUGHT TO B E EXAMINED, IT MUST BE PRESUMED THAT THOSE ASPECTS WERE PRESENT TO THE MIND OF THE ASSESSING OFFICER AND HAD BEEN HELD IN FAVOU R OF THE ASSESSEE IS TOO FAR-FETCHED A PROPOSITION TO MERIT ACCEPTANCE. THERE MAY INDEED BE A PRESUMPTION THAT THE ASSESSME NT PROCEEDINGS HAVE BEEN REGULARLY CONDUCTED, BUT THER E CAN BE NO PRESUMPTION THAT EVEN WHEN THE ORDER OF ASSESSMENT IS SILENT, ALL POSSIBLE ANGLES AND ASPECTS OF A CONTROVERSY HAD BE EN EXAMINED AND DETERMINED BY THE ASSESSING OFFICER. IT IS TRIT E THAT A MATTER IN ISSUE CAN BE VALIDLY DETERMINED ONLY UPON APPLIC ATION OF MIND BY THE AUTHORITY DETERMINING THE SAME. APPLICATION OF MIND IS, IN TURN, BEST DEMONSTRATED BY DISCLOSURE OF MIND, WHIC H IS BEST DONE BY GIVING REASONS FOR THE VIEW WHICH THE AUTHO RITY IS TAKING. IN CASES WHERE THE ORDER PASSED BY A STATUT ORY AUTHORITY IS SILENT AS TO THE REASONS FOR THE CONCLUSION IT H AS DRAWN, IT CAN WELL BE SAID THAT THE AUTHORITY HAS NOT APPLIED ITS MIND TO THE ISSUE BEFORE IT NOR FORMED ANY OPINION. THE PRINCIP LE THAT A MERE CHANGE OF OPINION CANNOT BE A BASIS FOR REOPENING C OMPLETED ASSESSMENTS WOULD BE APPLICABLE ONLY TO SITUATIONS WHERE THE ASSESSING OFFICER HAS APPLIED HIS MIND AND TAKEN A CONSCIOUS DECISION ON A PARTICULAR MATTER IN ISSUE. IT WILL H AVE NO APPLICATION WHERE THE ORDER OF ASSESSMENT DOES NOT ADDRESS ITSELF TO THE ASPECT WHICH IS THE BASIS FOR REOPENI NG OF THE ASSESSMENT, AS IS THE POSITION IN THE PRESENT CASE. IT IS IN THAT VIEW INCONSEQUENTIAL WHETHER OR NOT THE MATERIAL NE CESSARY FOR M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 15 TAKING A DECISION WAS AVAILABLE TO THE ASSESSING OF FICER EITHER GENERALLY OR IN THE FORM OF A REPLY TO THE QUESTION NAIRE SERVED UPON THE ASSESSEE. WHAT IS IMPORTANT IS WHETHER THE ASSESSING OFFICER HAD BASED ON THE MATERIAL AVAILABLE TO HIM TAKEN A VIEW. IF HE HAD NOT DONE SO, THE PROPOSED REOPENING CANNO T BE ASSAILED ON THE GROUND THAT THE SAME IS BASED ONLY ON A CHAN GE OF OPINION.' 2.10. FROM THE FOREGOING DISCUSSION, THE CLEAR PO SITION EMERGES AS UNDER: (1) REASSESSMENT PROCEEDINGS CAN BE VALIDLY INITIAT ED IN CASE RETURN OF INCOME IS PROCESSED UNDER SECTION 143(1) AND NO SCRUTINY ASSESSMENT IS UNDERTAKEN. IN SUCH CASES TH ERE IS NO CHANGE OF OPINION. (2) REASSESSMENT PROCEEDINGS WILL BE INVALID IN CAS E THE ASSESSMENT ORDER ITSELF RECORDS THAT THE ISSUE WAS RAISED AND IS DECIDED IN FAVOUR OF THE ASSESSEE. REASSESSMENT PRO CEEDINGS IN THE SAID CASES WILL BE HIT BY THE PRINCIPLE OF 'CHA NGE OF OPINION'. (3) REASSESSMENT PROCEEDINGS WILL BE INVALID IN CAS E AN ISSUE OR QUERY IS RAISED AND ANSWERED BY THE ASSESSEE IN ORI GINAL ASSESSMENT PROCEEDINGS BUT THEREAFTER THE ASSESSING OFFICER DOES NOT MAKE ANY ADDITION IN THE ASSESSMENT ORDER. IN S UCH SITUATIONS IT SHOULD BE ACCEPTED THAT THE ISSUE WAS EXAMINED BUT THE ASSESSING OFFICER DID NOT FIND ANY GROUND OR RE ASON TO MAKE ADDITION OR REJECT THE STAND OF THE ASSESSEE. HE FO RMS AN OPINION. THE REASSESSMENT WILL BE INVALID BECAUSE THE ASSESS ING OFFICER HAD FORMED AN OPINION IN THE ORIGINAL ASSESSMENT, T HOUGH HE HAD NOT RECORDED HIS REASONS. 2.11. THUS, WHERE AN ASSESSING OFFICER INCORRECTL Y OR ERRONEOUSLY APPLIES LAW OR COMES TO A WRONG CONCLUS ION AND INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, RE SORT MAY BE MADE THROUGH SECTION 263 OF THE ACT. BUT INITIAT ION OF REASSESSMENT PROCEEDINGS WILL BE INVALID ON THE GRO UND OF CHANGE OF OPINION. HERE A DISTINCTION HAS TO BE DR AWN BETWEEN M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 16 ERRONEOUS APPLICATION/INTERPRETATION/ UNDERSTANDING OF LAW AND CASES WHERE FRESH OR NEW FACTUAL INFORMATION CO MES TO THE KNOWLEDGE OF THE ASSESSING OFFICER SUBSEQUENT TO TH E PASSING OF THE ASSESSMENT ORDER. IF NEW FACTS, MATERIAL OR INFORMATION COMES TO THE KNOWLEDGE OF THE ASSESSING OFFICER, WH ICH WAS NOT ON RECORD AND AVAILABLE AT THE TIME OF THE ASSE SSMENT ORDER, THE PRINCIPLE OF 'CHANGE OF OPINION' WILL NO T APPLY. THE REASON IS THAT 'OPINION' IS FORMED ON FACTS. 'OPINI ON' FORMED OR BASED ON WRONG AND INCORRECT FACTS OR WHICH ARE BEL IED AND UNTRUE DO NOT GET PROTECTION AND COVER UNDER THE PR INCIPLE OF 'CHANGE OF OPINION'. FACTUAL INFORMATION OR MATERIA L WHICH WAS INCORRECT OR WAS NOT AVAILABLE WITH THE ASSESSING O FFICER AT THE TIME OF ORIGINAL ASSESSMENT WOULD JUSTIFY INITIATIO N OF REASSESSMENT PROCEEDINGS. THE REQUIREMENT IN SUCH C ASES IS THAT THE INFORMATION OR MATERIAL AVAILABLE SHOULD R ELATE TO MATERIAL FACTS. THE EXPRESSION 'MATERIAL FACTS' MEA NS THOSE FACTS WHICH IF TAKEN INTO ACCOUNT WOULD HAVE AN ADV ERSE EFFECT ON THE ASSESSEE BY A HIGHER ASSESSMENT OF INCOME TH AN THE ONE ACTUALLY MADE. CORRECT MATERIAL FACTS CAN BE A SCERTAINED FROM THE ASSESSMENT RECORDS ALSO AND IT IS NOT NECE SSARY THAT THE SAME MAY COME FROM A THIRD PERSON OR SOURCE, I. E., FROM SOURCE OTHER THAN THE ASSESSMENT RECORDS. HOWEVER, IN SUCH CASES, THE ONUS WILL BE ON THE REVENUE TO SHOW THAT THE ASSESSEE HAD STATED INCORRECT AND WRONG MATERIAL FA CTS RESULTING IN THE ASSESSING OFFICERS PROCEEDING ON THE BASIS OF FACTS, WHICH ARE INCORRECT AND WRONG. THE REASONS R ECORDED AND THE DOCUMENTS ON RECORD ARE OF PARAMOUNT IMPORT ANCE M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 17 AND WILL HAVE TO BE EXAMINED TO DETERMINE WHETHER T HE STAND OF THE REVENUE IS CORRECT. A DECISION FROM HON BLE DELHI HIGH COURT DATED SEPTEMBER 26, 2011 IN DALMIA P. LT D. V. CIT [2012] 348 ITR 469 (DELHI) AND ANOTHER DECISION FRO M HONBLE JURISDICTIONAL HIGH COURT DATED NOVEMBER 8, 2011, I N INDIAN HUME PIPE CO. LTD. V. ASST. CIT [2012] 348 ITR 439 (BOM.) ARE TWO SUCH CASES, WHICH THROW LIGHT ON THE ISSUE. I N THE ORIGINAL ASSESSMENT/ORDER DATED 27/05/2008, THE ASS ESSING OFFICER FOUND THAT THE ASSESSEE DECLARED INCOME OF RS.2,47,77,760/- AND THE RETURN WAS PROCESSED U/S 1 43(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY, THEREFORE, NOTICES U/S 143(2) AND 142(1) WERE ISSUE D AND SERVED UPON THE ASSESSEE. AS IS EVIDENCED FROM PARA 2 OF THE ORIGINAL ASSESSMENT ORDER, THE ASSESSEE ATTENDED FR OM TIME TO TIME AND FILED THE DETAILS CALLED FOR. THE DETAILS WERE ALSO EXPLAINED BY THE ASSESSEE. THE LD. ASSESSING OFFICE R DULY EXAMINED THE PROFIT & LOSS ACCOUNT, TAX AUDIT REPOR T, COMPUTATION OF INCOME, BALANCE SHEET WITH THEIR SCH EDULES. THE LD. ASSESSING OFFICER DULY CONSIDERED THE DEPRE CIATION ON EARLIER YEARS ON COMPUTER, DISALLOWANCE U/S 14A, TH E ISSUE OF REBATE U/S 88E (PARA-9) OF THE ASSESSMENT ORDER AND CONCLUDED THAT THE ASSESSEE HAS CORRECTLY CLAIMED T HE STT REBATE IN COMPUTATION OF INCOME THEN THE INCOME WAS COMPUTED AS MENTIONED IN PARA 10 ONWARDS OF THE ASS ESSMENT ORDER, THUS, IT IS CLEAR THAT THE ORIGINAL ASSESSME NT WAS FRAMED AFTER DUE APPLICATION OF MIND. THUS, THE REASSESSME NT FRAMED BY THE ASSESSING OFFICER IN THE SECOND CATEGORY IS A CASE OF M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 18 'CHANGE OF OPINION' AND CANNOT BE REOPENED FOR THE REASON THAT THE ASSESSEE, AS REQUIRED, HAS PLACED ON RECOR D PRIMARY FACTUAL MATERIAL BUT ON THE BASIS OF LEGAL UNDERSTA NDING, THE ASSESSING OFFICER HAS TAKEN A PARTICULAR LEGAL VIEW . 2.12. A DIVISION BENCH OF HONBLE DELHI HIGH COUR T IN NEW LIGHT TRADING CO. V. CIT [2002] 256 ITR 391 (DE LHI), REFERRED TO THE DECISION OF THE HONBLE APEX COURT IN CIT V. P. V. S. BEEDIES P. LTD. [1999] 237 ITR 13 (SC) AND MA DE FOLLOWING OBSERVATIONS. (PAGE 392) : 'IN THE CASE OF CIT V. P. V. S. BEEDIES P. LTD. [19 99] 237 ITR 13 (SC), THE APEX COURT HELD THAT THE AUDIT PARTY CAN POINT OUT A FACT, WHICH HAS BEEN OVERLOOKED BY THE INCOME-TAX OFFICER IN THE ASSESSM ENT. THOUGH THERE CANNOT BE ANY INTERPRETATION OF LAW BY THE AUDIT PA RTY, IT IS ENTITLED TO POINT OUT A FACTUAL ERROR OR OMISSION IN THE ASSESS MENT AND REOPENING OF A CASE ON THE BASIS OF FACTUAL ERROR OR OMISSION PO INTED OUT BY THE AUDIT PARTY IS PERMISSIBLE UNDER LAW. AS THE TRIBUNAL HAS RIGHTLY NOTICED, THIS WAS NOT A CASE OF THE ASSESSING OFFICER MERELY ACTI NG AT THE BEHEST OF THE AUDIT PARTY OR ON ITS REPORT. IT HAS INDEPENDENTLY EXAMINED THE MATERIALS COLLECTED BY THE AUDIT PARTY IN ITS REPOR T AND HAS COME TO AN INDEPENDENT CONCLUSION THAT THERE WAS ESCAPEMENT OF INCOME. THE ANSWER TO THE QUESTION IS, THEREFORE, IN THE AFFIRM ATIVE, IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE.' AS RECORDED ABOVE, THE REASONS RECORDED OR THE DOC UMENTS AVAILABLE MUST SHOW NEXUS THAT IN FACT THEY ARE GERMANE AND R ELEVANT TO THE SUBJECTIVE OPINION FORMED BY THE ASSESSING OFFICER REGARDING ESCAPEMENT OF INCOME. AT THE SAME TIME, IT IS NOT T HE REQUIREMENT THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAIN ED ESCAPEMENT OF INCOME BY RECORDING CONCLUSIVE FINDINGS. THE FINAL ASCERTAINMENT TAKES PLACE WHEN THE FINAL OR REASSESSMENT ORDER IS PASSE D. IT IS ENOUGH IF THE ASSESSING OFFICER CAN SHOW TENTATIVELY OR PRIMA FAC IE ON THE BASIS OF THE REASONS RECORDED AND WITH REFERENCE TO THE DOCUMENT S AVAILABLE ON RECORD THAT INCOME HAS ESCAPED ASSESSMENT. M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 19 THIS BRINGS US TO THE OBSERVATIONS OF THE DELHI HIG H COURT IN KELVINATOR OF INDIA LTD. [2002] 256 ITR 1 (DELHI) [FB] WHICH READ AS UNDER (PAGE 18): 'THE BOARD IN EXERCISE OF ITS JURISDICTION UNDER TH E AFOREMENTIONED PROVISIONS HAD ISSUED THE CIRCULAR ON OCTOBER 31, 1989. THE SA ID CIRCULAR ADMITTEDLY IS BINDING ON THE REVENUE. THE AUTHORITY, THEREFORE, C OULD NOT HAVE TAKEN A VIEW, WHICH WOULD RUN COUNTER TO THE MANDATE OF THE SAID CIRCULAR. FROM A PERUSAL OF CLAUSE 7.2 OF THE SAID CIRCULAR IT WOULD APPEAR THAT IN NO UNCERTAIN TERMS IT WAS STATED AS TO UNDER WHAT CIRCUMSTANCES THE AMENDMENTS HAD BEEN CARRIED OUT, I.E., ONLY WITH A VIEW TO ALLAY THE FEARS THAT THE OMISSION OF THE EXPRESSION 'REASON TO BELIEVE' FROM SECTION 147 WOU LD GIVE ARBITRARY POWERS TO THE ASSESSING OFFICER TO REOPEN PAST ASSESSMENT ON MERE CHANGE OF OPINION. IT IS, THEREF ORE, EVIDENT THAT EVEN ACCORDING TO THE CBDT A MERE CHANGE OF O PINION CANNOT FORM THE BASIS FOR REOPENING A COMPLETED ASS ESSMENT. 2.13 . ANOTHER ASPECT OF THE MATTER ALSO CANNOT BE LOST SIGHT OF. A STATUTE CONFERRING AN ARBITRARY POWER M AY BE HELD TO BE ULTRA VIRUS ARTICLE 14 OF THE CONSTITUTION OF INDIA. IF TWO INTERPRETATIONS ARE POSSIBLE, THE INTERPRETATION WH ICH UPHOLDS CONSTITUTIONALITY, IT IS TRITE, SHOULD BE FAVOURED. IN THE EVENT IT IS HELD THAT BY REASON OF SECTION 147 IF THE INCOME -TAX OFFICER EXERCISES ITS JURISDICTION FOR INITIATING A PROCEED ING FOR RE- ASSESSMENT ONLY UPON MERE CHANGE OF OPINION, THE SA ME MAY BE HELD TO BE UNCONSTITUTIONAL. WE ARE, THEREFORE, OF THE OPINION THAT SECTION 147 OF THE ACT DOES NOT POSTUL ATE M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 20 CONFERMENT OF POWER UPON THE ASSESSING OFFICER TO I NITIATE REASSESSMENT PROCEEDING UPON MERE CHANGE OF OPINION . 2.14. THE HONBLE APEX COURT THEREAFTER REFERRED T O THE SUBSEQUENT DECISION IN INDIAN AND EASTERN NEWSPAPER SOCIETY V. CIT [1979] 119 ITR 996 (SC) WHEREIN IT WAS OBSER VED THAT SOME OF THE OBSERVATIONS MADE IN KALYANJI MAVJI (SU PRA) WERE FAR TOO WIDE AND THE STATUTE DID NOT PERMIT REAPPRA ISAL OF MATERIAL CONSIDERED BY THE ASSESSING OFFICER DURING THE ORIGINAL ASSESSMENT. THE OBSERVATIONS IN KALYANJI M AVIJI (SUPRA) THAT REOPENING WOULD COVER A CASE 'WHERE IN COME HAS ESCAPED ASSESSMENT DUE TO THE OVERSIGHT, INADVERTEN CE OR MISTAKE' WAS TOO BROADLY EXPRESSED AND DID NOT LAY DOWN THE CORRECT LAW. IT WAS CLARIFIED AND OBSERVED AT PAGE 1004 IN INDIAN AND EASTERN NEWSPAPER SOCIETY [1979] 119 ITR 996 (SC) AS UNDER : ' NOW, IN THE CASE BEFORE US, THE INCOME-TAX OFFICER HAD, WHEN HE MADE THE ORIGINAL ASSESSMENT, CONSIDERED THE PROVISIONS OF SECTIONS 9 AND 10. ANY DIFFERENT VIEW TAKEN BY HIM AFTERWARDS ON THE A PPLICATION OF THOSE PROVISIONS WOULD AMOUNT TO A CHANGE OF OPINION ON M ATERIAL ALREADY CONSIDERED BY HIM. THE REVENUE CONTENDS THAT IT IS OPEN TO HIM TO DO SO, AND ON THAT BASIS TO REOPEN THE ASSESSMENT UNDE R SECTION 147(B). RELIANCE IS PLACED ON KALYANJI MAVJI AND CO. V. CIT [1976] 102 ITR 287 (SC), WHERE A BENCH OF TWO LEARNED JUDGES OF THIS C OURT OBSERVED THAT A CASE WHERE INCOME HAD ESCAPED ASSESSMENT DUE TO THE 'OVERSIGHT, INADVERTENCE OR MISTAKE' OF THE INCOME-TAX OFFICER MUST FALL WITHIN SECTION 34(1)(B) OF THE INDIAN INCOME-TAX ACT, 1922 . IT APPEARS TO US, WITH RESPECT, THAT THE PROPOSITION IS STATED TOO WI DELY AND TRAVELS FARTHER THAN THE STATUTE WARRANTS IN SO FAR AS IT C AN BE SAID TO LAY DOWN THAT IF, ON REAPPRAISING THE MATERIAL CONSIDERED BY HIM DURING THE ORIGINAL ASSESSMENT, THE INCOME-TAX OFFICER DISCOVE RS THAT HE HAS COMMITTED AN ERROR IN CONSEQUENCE OF WHICH INCOME H AS ESCAPED ASSESSMENT IT IS OPEN TO HIM TO REOPEN THE ASSESSME NT. IN OUR OPINION, M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 21 AN ERROR DISCOVERED ON A RECONSIDERATION OF THE SAM E MATERIAL (AND NO MORE) DOES NOT GIVE HIM THAT POWER. THAT WAS THE VI EW TAKEN BY THIS COURT IN MAHARAJ KUMAR KAMAL SINGH V. CIT [1959] 35 ITR 1 (SC), CIT V. A. RAMAN AND CO. [1968] 67 ITR 11 (SC) AND BANKI PUR CLUB LTD. V. CIT [1971] 82 ITR 831 (SC), AND WE DO NOT BELIEVE T HAT THE LAW HAS SINCE TAKEN A DIFFERENT COURSE. ANY OBSERVATIONS IN KALYANJI MAVJI AND CO. V. CIT [1976] 102 ITR 287 (SC) SUGGESTING THE C ONTRARY DO NOT, WE SAY WITH RESPECT, LAY DOWN THE CORRECT LAW.' 2.15. IN A. L. A. FIRM (SUPRA), THE HONBLE APEX C OURT EXPLAINED THAT THERE WAS NO DIFFERENCE BETWEEN THE OBSERVATIONS OF THE SUPREME COURT IN KALYANJI MAVIJ I [1976] 102 ITR 287 (SC) AND INDIAN AND EASTERN NEWSPAPER S OCIETY CASE [1979] 119 ITR 996 (SC), AS FAR AS PROPOSITION (4) IS CONCERNED. IT WAS HELD THAT (PAGE 297 OF 189 ITR) : 'WE HAVE POINTED OUT EARLIER THAT KALYANJI MAVIJI'S CASE [1976] 102 ITR 287 (SC) OUTLINES FOUR SITUATIONS IN WHICH ACTION UNDER SECTION 34(1)(B) CAN BE VALIDLY INITIATED. THE INDI AN EASTERN NEWSPAPER SOCIETY'S CASE [1979] 119 ITR 996 (SC) HA S ONLY INDICATED THAT PROPO SITION (2) OUTLINED IN THIS CA SE AND EXTRACTED EARLIER MAY HAVE BEEN SOMEWHAT WIDELY STATED ; IT H AS NOT CAST ANY DOUBT ON THE OTHER THREE PROPOSITIONS SET OUT I N KALYANJI MAVJI'S CASE. THE FACTS OF THE PRESENT CASE SQUAREL Y FALL WITHIN THE SCOPE OF PROPOSITIONS 2 AND 4 ENUNCIATED IN KALYANJ I MAVIJI'S CASE [1976] 102 ITR 287 (SC). PROPOSITION (2) MAY BE BRI EFLY SUMMARIZED AS PERMITTING ACTION EVEN ON A 'MERE CHA NGE OF OPINION'. THIS IS WHAT HAS BEEN DOUBTED IN THE INDI AN AND EASTERN NEWSPAPER SOCIETY CASE [1979] 119 ITR 996 (SC) AND WE SHALL DISCUSS ITS APPLICATION TO THIS CASE A LITTLE LATER . BUT, EVEN LEAVING THIS OUT OF CONSIDERATION, THERE CAN BE NO DOUBT TH AT THE PRESENT CASE IS SQUARELY COVERED BY PROPOSITION (4) SET OUT IN KALYANJI MAVIJI'S CASE [1976] 102 ITR 287 (SC). THIS PROPOSI TION CLEARLY ENVISAGES A FORMATION OF OPINION BY THE INCOME-TAX OFFICER ON THE BASIS OF MATERIAL ALREADY ON RECORD PROVIDED THE FO RMATION OF SUCH OPINION IS CONSEQUENT ON 'INFORMATION' IN THE SHAPE OF SOME LIGHT THROWN ON ASPECTS OF FACTS OR LAW WHICH THE INCOME- TAX OFFICER HAD NOT EARLIER BEEN CONSCIOUS OF. TO GIVE A COUPLE OF ILLUSTRATIONS ; SUPPOSE AN INCOME-TAX OFFICER, IN THE ORIGINAL ASSE SSMENT, WHICH IS A VOLUMINOUS ONE INVOLVING SEVERAL CONTENTIONS, ACC EPTS A PLEA OF M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 22 THE ASSESSEE IN REGARD TO ONE OF THE ITEMS THAT THE PROFITS REALISED ON THE SALE OF A HOUSE IS A CAPITAL REALISATION NOT CHARGEABLE TO TAX. SUBSEQUENTLY, HE FINDS, IN THE FOREST OF PAPERS FIL ED IN CONNECTION WITH THE ASSESSMENT, SEVERAL INSTANCES OF EARLIER S ALES OF HOUSE PROPERTY BY THE ASSESSEE. THAT WOULD BE A CASE WHER E THE INCOME- TAX OFFICER DERIVES INFORMATION FROM THE RECORD ON AN INVESTIGATION OR ENQUIRY INTO FACTS NOT ORIGINALLY UNDERTAKEN. AGAIN, SUPPOSE THE INCOME-TAX OFFICER ACCEPTS THE P LEA OF AN ASSESSEE THAT A PARTICULAR RECEIPT IS NOT INCOME LI ABLE TO TAX. BUT, ON FURTHER RESEARCH INTO LAW HE FINDS THAT THERE WA S A DIRECT DECISION HOLDING THAT CATEGORY OF RECEIPT TO BE AN INCOME RECEIPT. HE WOULD BE ENTITLED TO REOPEN THE ASSESSMENT UNDER SECTION 147(B) BY VIRTUE OF PROPOSITION (4) OF KALYANJI MAV JI. THE FACT THAT THE DETAILS OF SALES OF HOUSE PROPERTIES WERE ALREA DY IN THE FILE OR THAT THE DECISION SUBSEQUENTLY COME ACROSS BY HIM W AS ALREADY THERE WOULD NOT AFFECT THE POSITION BECAUSE THE INF ORMATION THAT SUCH FACTS OR DECISION EXISTED COMES TO HIM ONLY MU CH LATER. WHAT THEN, IS THE DIFFERENCE BETWEEN THE SITUATIONS ENVISAGED IN PROPOSITIONS (2) AND (4) OF KALYANJI MAVIJI'S CASE [1976] 102 ITR 287 (SC). THE DIFFERENCE, IF ONE KEEPS IN MIND THE TREND OF THE JUDICIAL DECISIONS, IS THIS. PROPOSITION (4) REFERS TO A CASE WHERE THE INCOME- TAX OFFICER INITIATES REASSESSMENT PROCEEDI NGS IN THE LIGHT OF 'INFORMATION' OBTAINED BY HIM BY AN INVESTIGATIO N INTO MATERIAL ALREADY ON RECORD OR BY RESEARCH INTO THE LAW APPLI CABLE THERETO WHICH HAS BROUGHT OUT AN ANGLE OR ASPECT THAT HAD B EEN MISSED EARLIER, FOR E.G., AS IN THE TWO MADRAS DECISIONS R EFERRED TO EARLIER. PROPOSITION (2) NO DOUBT COVERS THIS SITUATION ALSO BUT IT IS SO WIDELY EXPRESSED AS TO INCLUDE ALSO CASES IN WHICH THE INCOME-TAX OFFICER, HAVING CONSIDERED ALL THE FACTS AND LAW, A RRIVES AT A PARTICULAR CONCLUSION, BUT REINITIATES PROCEEDINGS BECAUSE, ON A REAPPRAISAL OF THE SAME MATERIAL WHICH HAD BEEN CON SIDERED EARLIER AND IN THE LIGHT OF THE SAME LEGAL ASPECTS TO WHICH HIS ATTENTION HAD BEEN DRAWN EARLIER, HE COMES TO A CON CLUSION THAT AN ITEM OF INCOME WHICH HE HAD EARLIER CONSCIOUSLY LEFT OUT FROM THE EARLIER ASSESSMENT SHOULD HAVE BEEN BROUGHT TO TAX. IN OTHER WORDS, AS POINTED OUT IN INDIAN AND EASTERN NEWSPAP ER SOCIETY'S CASE [1979] 119 ITR 996 (SC), IT ALSO ROPES IN CASE S OF A 'BARE OR MERE CHANGE OF OPINION' WHERE THE INCOME-TAX OFFICE R (VERY OFTEN A SUCCESSOR OFFICER) ATTEMPTS TO REOPEN THE ASSESSM ENT BECAUSE THE OPINION FORMED EARLIER BY HIMSELF (OR, MORE OFTEN, BY A PREDECESSOR INCOME- TAX OFFICER) WAS, IN HIS OPINION, INCORRECT . JUDICIAL DECISIONS HAD CONSISTENTLY HELD THAT THIS COULD NOT BE DONE AND THE M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 23 INDIAN AND EASTERN NEWSPAPER SOCIETY'S CASE [1979] 119 ITR 996 (SC) HAS WARNED THAT THIS LINE OF CASES CANNOT BE T AKEN TO HAVE BEEN OVERRULED BY KALYANJI MAVJI [1976] 102 ITR 287 (SC). THE SECOND PARAGRAPH FROM THE JUDGMENT IN THE INDIAN AN D EASTERN NEWSPAPER SOCIETY'S CASE [1979] 119 ITR 996 (SC) EA RLIER EXTRACTED HAS ALSO REFERENCE ONLY TO THIS SITUATION AND INSISTS UPON THE NECESSITY OF SOME INFORMATION WHICH MAKE THE IN COME-TAX OFFICER REALISE THAT HE HAS COMMITTED AN ERROR IN T HE EARLIER ASSESSMENT. THIS PARAGRAPH DOES NOT IN ANY WAY AFFE CT THE PRINCIPLE ENUMERATED IN THE TWO MADRAS CASES CITED WITH APPROVAL IN ANANDJI HARIDAS 21 STC 326. EVEN MAKING ALLOWANC ES FOR THIS LIMITATION PLACED ON THE OBSERVATIONS IN KALYANJI M AVJI, THE POSITION AS SUMMARISED BY THE HIGH COURT IN THE FOL LOWING WORDS REPRESENTS, IN OUR VIEW, THE CORRECT POSITION IN LA W (AT PAGE 629 OF 102 ITR) : THE RESULT OF THESE DECISIONS IS THAT THE STATUTE D OES NOT REQUIRE THAT THE INFORMATION MUST BE EXTRANEOUS TO THE RECO RD. IT IS ENOUGH IF THE MATERIAL, ON THE BASIS OF WHICH THE R EASSESSMENT PROCEEDINGS ARE SOUGHT TO BE INITIATED, CAME TO THE NOTICE OF THE INCOME-TAX OFFICER SUBSEQUENT TO THE ORIGINAL ASSES SMENT. IF THE INCOME-TAX OFFICER HAD CONSIDERED AND FORMED AN OPI NION ON THE SAID MATERIAL IN THE ORIGINAL ASSESSMENT ITSELF, TH EN HE WOULD BE POWERLESS TO START THE PROCEEDINGS FOR THE REASSESS MENT. WHERE, HOWEVER, THE INCOME-TAX OFFICER HAD NOT CONSIDERED THE MATERIAL AND SUBSEQUENTLY CAME BY THE MATERIAL FROM THE RECO RD ITSELF, THEN SUCH A CASE WOULD FALL WITHIN THE SCOPE OF SECTION 147(B) OF THE ACT'.' (EMPHASIS SUPPLIED) THE AFORESAID OBSERVATIONS ARE A COMPLETE ANSWER TO THE ISSUE THAT IF A PARTICULAR SUBJECT-MATTER, ITEM, DE DUCTION OR CLAIM IS NOT EXAMINED BY THE ASSESSING OFFICER, IT WILL NEVERTHELESS BE A CASE OF CHANGE OF OPINION AND T HE REASSESSMENT PROCEEDINGS WILL BE BARRED. 2.16. WE ARE CONSCIOUS OF THE FACT THAT THE AFORE SAID OBSERVATIONS HAVE BEEN MADE IN THE CONTEXT OF SECTI ON 147(B) WITH REFERENCE TO THE TERM 'INFORMATION' AND CONCEP TUALLY THERE IS DIFFERENCE IN SCOPE AND AMBIT OF REOPENING PROVISIONS M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 24 INCORPORATED WITH EFFECT FROM APRIL 1, 1989. HOWEVE R, IT WAS OBSERVED BY THE HONBLE APEX COURT IN KELVINATOR OF INDIA LTD. [2010] 320 ITR 561 (SC) THAT THE AMENDED PROVISIONS ARE WIDER. WHAT IS IMPORTANT AND RELEVANT IS THAT THE P RINCIPLE OF 'CHANGE OF OPINION' WAS EQUALLY APPLICABLE UNDER TH E UN- AMENDED PROVISIONS. THE SUPREME COURT WAS, THEREFOR E, CONSCIOUS OF THE SAID PRINCIPLE, WHEN THE OBSERVATI ONS MENTIONED ABOVE IN A. L. A. FIRM [1991] 189 ITR 285 WERE MADE. 2.17. UNDER THE NEW PROVISIONS OF SECTION 147, AN ASSESSMENT CAN BE REOPENED IF THE ASSESSING OFFICER HAS 'REASON TO BELIEVE' THAT INCOME CHARGEABLE TO TAX H AS ESCAPED ASSESSMENT; BUT IF HE WANTS TO DO SO AFTER A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR, HE CAN D O SO ONLY IF THE ASSESSEE HAS FALLEN SHORT OF HIS DUTY TO DISCLO SE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT. IT DOES NOT FOLLOW THAT HE CANNOT REOPEN THE ASSESSMENT EVE N WITHIN THE PERIOD OF FOUR YEARS AS AFORESAID IF HE HAS REA SON TO BELIEVE THAT THE ASSESSEE HAS FAILED TO MAKE THE REQUISITE DISCLOSURE. ALL THAT THE SECTION SAYS IS THAT IN A CASE WHERE T HE ASSESSMENT IS SOUGHT TO BE REOPENED AFTER THE PERIO D OF FOUR YEARS, THE ONLY REASON AVAILABLE TO THE ASSESSING O FFICER IS THE NON-DISCLOSURE ON THE PART OF THE ASSESSEE. THE AC T PLACES A GENERAL DUTY ON EVERY ASSESSEE TO FURNISH FULL AND TRUE PARTICULARS ALONG WITH THE RETURN OF INCOME OR IN T HE COURSE OF THE ASSESSMENT PROCEEDINGS SO THAT THE ASSESSING OF FICER IS M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 25 ENABLED TO COMPUTE THE CORRECT AMOUNT OF INCOME ON WHICH THE ASSESSEE SHALL PAY TAX. THE POSITION HAS BEEN F URTHER CLARIFIED BY THE PROVISO ITSELF IN A CASE WHERE ASS ESSMENT UNDER SUB-SECTION (3) OF SECTION 144 OF THE ACT OR THIS S ECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTI ON SHALL BE TAKEN AFTER THE EXPIRY OF FOUR YEARS FROM THE END O F THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TA X HAS ESCAPED ASSESSMENT FOR SUCH YEAR BY THE REASON OF F AILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN U/S 139 O R IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) O F SECTION 142 OR SECTION 148 OR TO DISCLOSE TRULY AND FULLY A LL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSM ENT YEAR. IT IS ALSO NOTED THAT THE SCOPE OF NEWLY SUBSTITUTED ( W.E.F. 01/04/1989) SECTION 147 HAS BEEN ELABORATED IN DEPA RTMENT CIRCULAR NUMBER 549 DATED 31 ST OCTOBER, 1989, MEANING THEREBY, ON OR AFTER 01/04/1989, INITIATION OF REAS SESSMENT PROCEEDINGS HAS TO BE GOVERNED BY THE PROVISIONS OF SECTION 147 TO 151 AS SUBSTITUTED (AMENDED) W.E.F. 01/04/19 89. STILL, POWER U/S 147 OF THE ACT, THOUGH VERY WIDE BUT NO P LENARY. WE ARE AWARE THAT HONBLE GUJARAT HIGH COURT IN PRA FUL CHUNILAL PATEL: VASANT CHUNILAL PATEL VS ACIT (1999 ) 236 ITR 82, 840 (GUJ.) EVEN WENT TO THE EXTENT THAT ACTION UNDER MAIN SECTION 147 IS POSSIBLE IN SPITE OF COMPLETE DISCLO SURE OF MATERIAL FACTS. THE PRIMARY CONDITION OF REASONABLE BELIEF HAVING NEXUS WITH THE MATERIAL ON RECORD IS STILL O PERATIVE. HOWEVER, WE ARE OF THE VIEW, THAT MERE FRESH APPLIC ATION OF MIND TO THE SAME SET OF FACTS OR MERE CHANGE OF OP INION DOES M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 26 NOT CONFER JURISDICTION TO THE ASSESSING OFFICER EV EN UNDER THE POST 1989 SECTION 147 OF THE ACT. OUR VIEW FIND SU PPORT FROM THE DECISION FROM HONBLE DELHI HIGH COURT IN JINDA L PHOTO FILMS LTD. VS DCIT (1998) 234 ITR 170 (DEL.), GARDE N SILK MILLS PVT. LTD. VS DCIT (1999) 151 CTR (GUJ.) 533, GOVIND CHHAPABHAI PATEL VS DCIT 240 ITR 628, 630 (GUJ.), F ORAMER VS CIT (2001) 247 ITR 436 (ALL.), AFFIRMED IN CIT V S FORAMER FINANCE (2003) 264 ITR 566, 567 (SC), IPICA LABORAT ORIES VS DCIT (2001) 251 ITR 416 (BOM.), RITU INVESTMENT PVT . LTD.(2012) 345 ITR 214 (DEL.), KETAN B. MEHTA VS AC IT (2012) 346 ITR 254 (GUJ.), MS. PRAVEEN P. BHARUCHA VS DCIT (2012) 348 ITR 325 (BOM.), CIT VS USHA INTERNATIONAL LTD. 348 ITR 485 (DEL.), AGRICULTURAL PRODUCE MARKET COMMITTEE V S ITO (2013) 355 ITR 348 (GUJ.), B.B.C. WORLD NEWS LTD. V S ASST. DIT (2014) 362 ITR 577 (DEL.). IDENTICAL RATIO WAS LAID DOWN IN CIT VS MALAYALA MANORMA COMPANY LTD. (2002) 253 ITR 378 (KER.) WE THINK THIS THREAD RUNS THROUGH THE VARIOUS PROVI SIONS OF THE ACT. BUT EXPLANATION 1 TO THE SECTION CONFINES THE DUTY TO THE DISCLOSURE OF ALL PRIMARY AND MATERIAL FACTS NE CESSARY FOR THE ASSESSMENT, FULLY AND TRULY. AS TO WHAT ARE MAT ERIAL OR PRIMARY FACTS WOULD DEPEND UPON THE FACTS AND CIRCU MSTANCES OF EACH CASE AND NO UNIVERSAL FORMULA MAY BE ATTEMP TED. THE LEGAL OR FACTUAL INFERENCES FROM THOSE PRIMARY OR M ATERIAL FACTS ARE FOR THE ASSESSING OFFICER TO DRAW IN ORDER TO C OMPLETE THE ASSESSMENT AND IT IS NOT FOR THE ASSESSEE TO ADVISE HIM, FOR OBVIOUS REASONS. THE EXPLANATION, HOWEVER, CAUTIONS THE ASSESSEE THAT HE CANNOT REMAIN SMUG WITH THE BELIEF THAT SINCE M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 27 HE HAS PRODUCED THE BOOKS OF ACCOUNT BEFORE THE ASS ESSING OFFICER FROM WHICH MATERIAL OR EVIDENCE COULD HAVE BEEN WITH DUE DILIGENCE GATHERED BY HIM, HE HAS DISCHARGED HI S DUTY. IT IS FOR HIM TO POINT OUT THE RELEVANT ENTRIES WHICH ARE MATERIAL, WITHOUT LEAVING THAT EXERCISE TO THE ASSESSING OFFI CER. THE CAVEAT, HOWEVER, IS THAT SUCH PRODUCTION OF BOOKS O F ACCOUNT MAY, IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES, A MOUNT TO FULL AND TRUE DISCLOSURE; THIS IS CLEAR FROM THE US E OF THE EXPRESSION 'NOT NECESSARILY' IN THE EXPLANATION. TH US, THE QUESTION OF FULL AND TRUE DISCLOSURE OF PRIMARY OR MATERIAL FACTS IS A PURE QUESTION OF FACT, TO BE DETERMINED ON THE FACTS AND CIRCUMSTANCES OF EACH CASE. NO GENERAL PRINCIPLE CA N BE LAID DOWN. IT WAS OBSERVED BY THE HONBLE APEX COURT, IN VARIO US CASES THAT THERE SHOULD BE SOME 'TANGIBLE MATERIAL' COMING INTO THE POSSESSION OF THE ASSESSING OFFICER IN SUC H CASES TO ENABLE HIM TO RESORT TO SECTION 147 OF THE ACT. DES PITE BEING A CASE OF FULL AND TRUE DISCLOSURE, TANGIBLE MATERIAL COMING TO THE POSSESSION OF THE ASSESSING OFFICER AFTER HE MA DE THE ORIGINAL ASSESSMENT UNDER SECTION 143(3), WOULD INF LUENCE THE OPINION, FORMED OR PRESUMED TO HAVE BEEN FORMED EAR LIER, BY THE ASSESSING AUTHORITY; HE CAN WITH JUSTIFICATION CHANGE IT, BUT THAT WOULD NOT BE A CASE OF A 'MERE CHANGE OF O PINION' UNGUIDED BY NEW FACTS OR CHANGE IN THE LEGAL POSITI ON. IT WILL BE A CASE OF THE ASSESSING AUTHORITY HAVING 'REASON TO BELIEVE', NOTWITHSTANDING THAT FULL AND TRUE PARTICULARS WERE FURNISHED BY THE ASSESSEE WHICH WERE EXAMINED, OR PRESUMED TO BE EXAMINED, BY HIM. THERE WAS A DIVERGENCE OF OPINIO N AMONGST M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 28 VARIOUS HIGH COURTS AS TO WHAT CONSTITUTE INFORMAT ION FOR THE PURPOSES OF SECTION 34(1)(B) OF THE 1922 ACT (WHICH CORRESPONDS TO SECTION 147(B) OF THE 1961 ACT) THE HONBLE APEX COURT IN CWT VS IMPERIAL TOBACCO COMPANY LTD. (1966) 61 ITR 461 HAS NOTED SUCH DIVERGENCE OF OPINION ON THE POINT. HONBLE JURISDICTIONAL HIGH COURT IN CIT VS SIR MOH AMMAD YUSUF ISMAIL (1944) 12 ITR 8 (BOM.) HELD THAT MERE CHANGE OF OPINION ON THE SAME FACTS ARE ON QUESTION OF LAW OR MERE DISCOVERY OF MISTAKE OF LAW IS NOT SUFFICIENT INFOR MATION AND THAT IN ORDER TO SUSTAIN ACTION U/S 34 BY FURTH ER HOLDING THAT REASSESSMENT IS NOT PERMISSIBLE. THE HONBLE A PEX COURT IN SIMON CARVES LTD. (1976) 105 ITR 212 HELD THAT E RRORLESS LEGALLY CORRECT ORDER CANNOT BE REOPENED, THEREFORE , IT IS SETTLED LAW THAT WITHOUT ANY NEW INFORMATION AND ON THE BAS IS OF MERE CHANGE OF OPINION, REOPENING OF ASSESSMENT IS NOT P ERMISSIBLE. AS WAS HELD IN CIT VS TTK PRESTIGE LTD. (2010) 322 ITR 390 (KARN.) SLP DISMISSED IN 2010 322 ITR (ST.) 14 (SC) . REFERENCE ALSO MADE TO ASIAN PAINTS LTD. VS DCIT (2009) 308 I TR 195 (BOM.), ANDHRA BANK LTD. VS CIT (1997) 225 ITR 447 (SC). THE OBSERVATIONS OF THE SUPREME COURT ARE A PROTECTION AGAINST THE ABUSE OF POWER; THEY ALSO PROTECT THE REVENUE WHICH CAN, IN THE LIGHT OF SUBSEQUENT COMING INTO LIGHT OF FACTS OR LAW, REOPEN THE ASSESSMENT. IN THE LIGHT OF THE AFORESAI D DISCUSSION, SINCE, THERE WAS NO NEW TANGIBLE MATERI AL AVAILABLE WITH THE ASSESSING OFFICER WHILE RESORTING TO SECTI ON 147/148 OF THE ACT, MORE SPECIFICALLY, WHILE FRAMING ORIGIN AL ASSESSMENT U/S 143(3) OF THE ACT, THERE WAS FULL DISCLOSURE OF MATERIAL M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 29 FACTS BY THE ASSESSEE AND ON THE BASIS OF THOSE FAC TS, ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT. 2.18. THE HON'BLE JURISDICTIONAL HIGH COURT IN A L ATER DECISION DATED 18/01/2016 IN NIRMAL BANG SECURITIES PVT. LTD. VS ACIT (2016) 382 ITR 83 (BOM.) ON THE ISSUE OF RE OPENING U/S 147/148 OF THE ACT, CONSIDERING VARIOUS JUDICIA L PRONOUNCEMENTS LIKE HINDUSTAN LEVER LTD. VS ACIT (2 004) 268 ITR 332 (BOM.), CIT VS K MOHAN & COMPANY (2012) 349 ITR 653 (BOM.), PRASHANT S. JOSHI VS INCOME TAX OFFICER (2010) 324 ITR 154 (BOM.) HELD THAT THE NOTICE ISSUED U/S 148 OF THE ACT CANNOT BE SUSTAINED AS THE SAME IS WITHOUT JURI SDICTION, THEREFORE, IN OUR OPINION, THE REOPENING WAS NOT JU STIFIED, THEREFORE, THE CROSS OBJECTION OF THE ASSESSEE IS A LLOWED. 3. SO FAR AS, MERITS OF THE APPEAL IS CONCERNED, T HOUGH WE ARE NOT EXPECTED TO GO INTO THE MERITS OF THE CA SE STILL DURING HEARING, THE LD. COUNSEL FOR THE ASSESSEE CO NTENDED THAT THE ISSUE ON MERIT IS COVERED BY THE DECISION OF TH E TRIBUNAL FOR ASSESSMENT YEAR 2007-08 (ITA NO.5821/MUM/2013) ORDER DATED 19/10/2016, THEREFORE, WE ARE REPRODUCING HER EUNDER THE RELEVANT PORTION FROM THE ORDER OF THE TRIBUNAL DATED 19/10/2016 FOR READY REFERENCE AND ANALYSIS:- THIS APPEAL FILED BY THE REVENUE ON 27.9.2013 IS AG AINST THE ORDER OF THE CIT (A)-8, MUMBAI DATED 5.7.2013 FOR THE ASSESSMENT YEAR 2007-2008. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS W HICH READ AS UNDER:- M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 30 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD CIT (A) HAS ERRED IN DIRECTING THE AO TO ALLOW TO THE ASSES SEE THE REBATE U/S 88E WHEN TAX LIABILITY WAS DETERMINED U/S 115JB OF THE INCOM E TAX ACT. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE IMPUGNED ORDER OF THE CIT (A) IS CONTRARY TO LAW AND CONSEQU ENTLY MERITS TO BE SET ASIDE AND THAT OF THE AO BE RESTORED. 2. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE T HAT THE ASSESSEE IS A SUB- BROKER IN SHARES AND SECURITIES AND TRADER IN SHARE S AND SECURITIES. ASSESSEE FILED THE RETURN OF INCOME DECLARING THE T OTAL INCOME OF RS. 2,66,56,652/-. ASSESSMENT WAS COMPLETED U/S 143 (3) R.W.S 147 OF THE ACT AND THE ASSESSED INCOME WAS DETERMINED AT RS.2,71,1 2,400/-. IN THE ASSESSMENT, AO DID NOT ALLOW THE REBATE U/S 88E OF THE ACT. IT IS THE OPINION OF THE AO THAT THE ASSESSEE COMPANY PAID TA X AT A LOWER RATE BY COMPLYING TO THE NORMAL PROVISIONS OF THE ACT RATHE R THAN PAYMENT TAX @ 10% ON BOOK PROFITS CALCULATED AS PER SECTION 115JB OF THE ACT. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE THE FIRST APPELLATE AUTHORITY. 3. DURING THE PROCEEDINGS BEFORE THE FIR ST APPELLATE AUTHORITY, AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, CIT (A) GRANTED RELIEF AND DIRECTED THE AO TO ALLOW DEDUCTION U/S 88E OF T HE ACT TO THE ASSESSEE WHILE COMPUTING THE TAXABILITY U/S 115JB OF THE ACT . AGGRIEVED WITH THE SAID DECISION OF THE CIT (A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUNDS. 4. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE BRIEFLY NARRATED THE AB OVE FACTS OF THE CASE AND SUBMITTED THAT THE ONLY ISSUE INVOLVED IN THIS APPEAL RELATES TO THE ALLOWABLE OF REBATE U/S 88E OF THE ACT AT THE TIME OF COMPUTING TAX LIABILITY U/S 115JB OF THE ACT. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THIS ISSUE IS NOW SETTLED BY VARIOUS DECISIONS MENTIONED IN PARA 2.6 OF THE IMPUGNED ORDER AND THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF HORIZON CAPITAL LTD IS ONE OF SUCH DECISIONS. LD COUNSEL FOR THE ASSESSEE HEAVILY RELI ED ON THE ORDER OF THE CIT (A). 5. ON THE OTHER HAND, LD DR FOR THE REVENU E RELIED ON THE ORDER M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 31 OF THE AO. 6. WE HAVE HEARD BOTH THE PARTIES AND PE RUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIA L PLACED BEFORE US. ON PERUSAL OF THE ORDER OF THE CIT (A) IN GENERAL AND PARA 2.6 IN PARTICULAR, WE FIND THE SAME IS RELEVANT IN THIS REGARD. CONSID ERING THE SIGNIFICANCE OF THE SAID PARA 2.6 OF THE CIT (A)S ORDER FOR THE SA KE OF COMPLETENESS THIS ORDER THE SAME IS EXTRACTED AS UNDER:- 2.6. DURING THE APPELLATE PROCEEDINGS, THE APPELLA NT HAS FILED EXHAUSTIVE SUBMISSION. IN ITS EXHAUSTIVE SUBMISSION / ARGUMENT, AMONGST OTHER EXPLANATIONS, THE APPELLANT SUBMITTED THAT TOTAL INCOME HAS THE SAME MEANING IF THE INCOME IS COMPUTED UNDE R THE NORMAL PROVISIONS OF THE ACT OR UNDER THE PROVISIONS OF SE CTION 115JB OF THE ACT. THE APPELLANT ARGUED THAT THE DEDUCTION U/S 88 E OF THE ACT IS ALLOWABLE BOTH WHEN THE INCOME TAX IS COMPUTED UNDE R THE NORMAL PROVISIONS OF THE ACT AND ALSO WHEN THE TAX LIABILI TY IS COMPUTED UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT. IN ITS EXHAUSTIVE SUBMISSION, THE APPELLANT ALSO RELIED UPON THE DECI SION OF KARNATAKA HIGH COURT IN THE CASE OF HORIZON CAPITAL LTD. ON T HIS ISSUE, THE APPELLANT HAS ALSO RELIED ON THE DECISION OF KOLKAT A ITAT IN THE CASE OF GANESHYAM SECURITIES (P) LTS VS. CIT (ITA NO.342 / KOL / 2012); NAKAMICHI SECURITIES LTD KOLKATA VS. ITO (ITA NO.11 08/KOL/2011); AHMEDABAD ITAT IN THE CASE OF S.K. STOCK BROKING PV T LTD VS. CIT (ITA NO.1074/AHD/2011) AND MUMBAI ITAT IN THE CASE OF TOUCHSTONE CAPITAL MARKET VS. DEPARTMENT OF INCOME TAX (ITA NO.6031/M/2011) WHEREIN THE MUMBAI ITAT FOLLOWED IT S OWN DECISION IN THE CASE OF SHREEPATI HOLDINGS & FINANC E PVT LTD IN ITA NO.6046/M/2011. 7. CONSIDERING THE ABOVE, WE ARE OF THE OPINION, CI T (A) DISCUSSED THE ISSUE AT LENGTH AND RELIED ON VARIOUS PRECEDENTS BE FORE GRANTING RELIEF TO THE ASSESSEE. THEREFORE, WE ARE OF THE OPINION, THE ORDER OF THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY IN TERFERENCE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 8. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED 3.1. WE FIND THAT ON THE ISSUE OF REBATE U/S 88E, WHEN TAX LIABILITY WAS DETERMINED U/S 115JB OF THE ACT, THE TRIBUNAL CONSIDERED THE FACTUAL MATRIX AND BY FOLLOWING THE DECISION FROM HON'BLE KARNATAKA HIGH COURT IN THE CASE OF HO RIZON CAPITAL LTD. DISMISSED THE APPEAL OF THE REVENUE, T HUS, WE M/S MUMBAI STOCK BROKER PVT. LTD. ITA NO.6369/MUM/2014 C.O. NO.39/MUM/2016 32 FIND NO MERIT IN THE APPEAL OF THE REVENUE ALSO, CO NSEQUENTLY, DISMISSED. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 15/11/2016. SD/- SD/- ( N.K. PRADHAN ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER & ' MUMBAI; * DATED : 15/11/2016 F{X~{T? P.S / +' !%$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. ,-./ / THE APPELLANT 2. 0./ / THE RESPONDENT. 3. 1 1 & 2% ( ,- ) / THE CIT, MUMBAI. 4. 1 1 & 2% / CIT(A)- , MUMBAI 5. 4'5% , 1 ,-), 6 , & / DR, ITAT, MUMBAI 6. 7#8 / GUARD FILE. ! / BY ORDER, 04-%% //TRUE COPY// / (DY./ASSTT. REGISTRAR) , & / ITAT, MUMBAI,