ITO, Ward-2, Khammam V. M/s R.K.Real Estates, Khammam

ITA 874/HYD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74464 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 27-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S RAMA RAO
• Keywords: Reopening of assessment; Revision of order; Audit objection; Tangible material; Difference of opinion; Assessment record; Onus to prove; Change of opinion; Reassessment proceedings
• Section: 40A(3); 143(3); 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO. 874/HYD/2013 ASSESSMENT YEAR: 2005-06 INCOME-TAX OFFICER, WARD 2, KHAMMAM. VS. M/S R.K. REAL ESTATES, KHAMMAM. PAN AAIFR 9517 M APPELLANT RESPONDENT REVENUE BY: SRI SOLGY JOSET KOTTARAM ASSESSEE BY: SRI S. RAMA RAO DATE OF HEARING: 08/01/2014 DATE OF PRONOUNCEMENT: 08/01/2014 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED A GAINST THE ORDERS OF THE CIT(A), VIJAYAWADA DATED 11/03/2013 F OR THE ASSESSMENT YEAR 2005-06. 2. THE REVENUE HAS RAISED 11 GROUNDS OF APPEAL, THE SUM AND SUBSTANCE OF WHICH ARE THAT THE CIT(A) ERRED IN HOL DING THAT THE INITIATION OF PROCEEDINGS U/S 147 AFTER A PERIOD OF FOUR YEARS IS NOT VALID SINCE THE CASE OF THE ASSESSEE FALLS UNDER EX PLANATION 1 OF SECTION 147 OF THE IT ACT. 3. BRIEFLY THE FACTS OF THE CASE ARE THAT ASSESSMEN T WAS COMPLETED BY THE ASSESSING OFFICER AFTER MAKING DIS ALLOWANCE U/S 40A(3) OF THE ACT OF RS. 28,80,000/-. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE PURCHASED LAND OF 36 ACRES FOR DE VELOPMENT AS PLOTS. THE LAND WAS PURCHASED BY MAKING CASH PAYMEN TS OF RS. 1.44 CRORES. FOR THE YEAR UNDER CONSIDERATION, THE LAND WAS TAKEN I.T.A. NO. 874/HYD/2013 M/S R.K. REAL ESTATES 2 TO BALANCE SHEET TOWARDS THE ASSETS SIDE WITHOUT RO UTING THROUGH THE P&L A/C. AS PER THE ACCOUNTING PRINCIPLES, THE LAND COST PURCHASED SHOULD BE DEBITED IN THE P&L ACCOUNT AND THE UNSOLD I.E. TOTAL LAND SHOULD BE SHOWN AS CLOSING STOCK IN CRED IT SIDE. IN THE ASSESSEES CASE, THE LAND (STOCK-IN-TRADE WAS DIREC TLY TAKEN TO THE BALANCE SHEET WITHOUT ROUTING THROUGH P&L A/C. THER EFORE, THE ASSESSING OFFICER WAS OF THE VIEW THAT THIS CAN BE CONSTRUED THAT THE COST OF LAND WAS DEEMED TO HAVE BEEN DEBITED TO THE P&L A/C AND THEN TAKEN TO THE BALANCE SHEET AS CLOSING STOC K. HENCE, THE ASSESSING OFFICER HELD THAT AS PER THE PROVISIONS O F SECTION 40A(3) OF THE ACT, 20% OF THE EXPENDITURE INCURRED FOR THE PURCHASE OF LAND HELD AS STOCK-IN-TRADE BY WAY OF CASH HAS TO BE DIS ALLOWED AND ACCORDINGLY HE DISALLOWED. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A), THE ASSESSEE CONTENDED WITH R EGARD TO INITIATION OF PROCEEDINGS U/S 147 OF THE IT ACT, TH AT THE NOTICE U/S 148 WAS ISSUED ON 19/10/2011 AFTER A PERIOD OF FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED THE RETURN OF INC OME ON 09/06/2006 AND THE ASSESSMENT WAS COMPLETED U/S 143 (3) OF THE IT ACT. IT WAS SUBMITTED THAT THE INFORMATION CONCERNI NG THE DETERMINATION OF THE TOTAL INCOME IS AVAILABLE ON R ECORD BEFORE THE ASSESSING OFFICER. BASED ON THE DATA AVAILABLE IN T HE ASSESSMENT RECORD, THE ASSESSING OFFICER CONCLUDED THE ASSESSM ENT. IT WAS THE CONTENTION OF THE LEARNED AR THAT THE ASSESSING OFF ICER WITHOUT ANY FURTHER INFORMATION BASED ON AN AUDIT OBJECTION INI TIATED PROCEEDINGS U/S 147 OF THE ACT. IT WAS, THEREFORE, PLEADED THAT THE PROCEEDINGS ARE NOT VALID IN VIEW OF THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. KELVINATOR IND IA LTD., 320 ITR 561 (SC). I.T.A. NO. 874/HYD/2013 M/S R.K. REAL ESTATES 3 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) OBSERVED THAT NO EVIDENCE TO THE FACT THAT INITIATI ON OF THE PROCEEDINGS IS BASED ON ANY AUDIT OBJECTION. HE FUR THER OBSERVED THAT THE REGULAR ASSESSMENT WAS COMPLETED U/S 143(3 ) AND THE NOTICE U/S 148 WAS ISSUED AFTER A PERIOD OF FOUR YE ARS AND THE ASSESSING OFFICER DID NOT COMMUNICATE THE REASONS A S TO WHY THE PROCEEDINGS WERE INITIATED AS WELL AS NO FRESH INFO RMATION HAS TO COME TO THE FILE OF THE ASSESSING OFFICER. IN VIEW OF THE ABOVE, THE CIT(A) HELD THAT THE ASSESSEE DISCLOSED FULLY ALL T HE RELEVANT FACTORS, THEREFORE, THE INITIATION OF PROCEEDINGS U /S 147 AFTER A PERIOD OF FOUR YEARS FOR EFFECTING DISALLOWANCE U/S 40A(3) OF THE ACT IS NOT VALID. EVEN ON MERITS OF THE CASE, THE CIT(A ) HELD AS FOLLOWS: 5.5 IN THE CASE OF THE APPELLANT, (A) THE AMOUNT DO ES NOT REPRESENT THE EXPENDITURE AND (B) THE AMOUNT WAS NO T PAID BY THE APPELLANT FIRM. THE LEARNED AR CONTENDED THAT I N SUCH CIRCUMSTANCES, THE PROVISIONS OF SECTION 40A(3) ARE NOT APPLICABLE AND NO DISALLOWANCE CAN BE MADE. I FIND FORCE IN THE CONTENTIONS OF THE LEARNED AR. THE APPELLANT DI D NOT AFFECT SALE OF LAND. HE DID NOT CONVERT THE AGRICUL TURAL LAND INTO NON-AGRICULTURAL USE. THE SAME WAS NOT DEBITED TO THE PROFIT AND LOSS ACCOUNT. NO INCOME WAS DERIVED BY T RADING IN OF THE SAID LAND. THEREFORE, THE PROVISIONS OF SECT ION 40A(3) HAVE NO APPLICATION. 6. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES, PE RUSED THE RECORD AND HAVE GONE THROUGH THE ORDERS OF THE REVENUE AUTHORITIES. WE FIND THAT THE ISSUE OF REOPENING OF ASSESSMENT, HAS BEEN EXHAUSTIVELY DEALT BY THE HONBLE DELHI HIGH C OURT IN THE CASE OF CIT VS. USHA INTERNATIONAL LTD., VIDE ITA NO. 20 26/2010 JUDGEMENT DATED 21 ST SEPTEMBER, 2012, WHEREIN THE RELEVANT FINDINGS OF THE HONBLE HIGH COURT AS FOLLOWS: ++ FOR REOPENING AN ASSESSMENT MADE U/S 143(3) OF THE ACT, THE FOLLOWING CONDITIONS ARE REQUIRED TO BE SATISFIED:- (I) THE ASSESSING OFFICER MUST FORM A TENTATIVE OR PRIMA FACIE OPINION ON THE BASIS OF MATERIAL THAT THERE IS UNDE R-ASSESSMENT OR ESCAPEMENT OF INCOME; I.T.A. NO. 874/HYD/2013 M/S R.K. REAL ESTATES 4 (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 AVAILABL E ON RECORD MUST SHOW A NEXUS OR THAT IN FACT THEY ARE GERMANE AND RELEVANT TO THE SUBJECTIVE OPINION FORMED BY THE ASSESSING OFFI CER 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 MATERIAL F ACTS. EXPLANATION TO THE SECTION STIPULATES THAT MERE PRODUCTION OF B OOKS OF ACCOUNTS OR OTHER DOCUMENTS FROM WHICH THE ASSESSING OFFICER COULD HAVE, WITH DUE DILIGENCE, INFERRED MATERIAL FACTS, DOES N OT AMOUNT TO 'FULL AND TRUE DISCLOSURE OF MATERIAL FACTS'. (THE PROVIS O IS NOT APPLICABLE WHERE REASONS TO BELIEVE FOR ISSUE OF NOTICE ARE RE CORDED AND NOTICE IS ISSUED WITHIN FOUR YEARS FROM THE END OF ASSESSMENT YEAR.) ++ THE QUESTIONS OF LAW AT SERIAL NOS. 1 TO 3 REFERRED TO THE FULL BENCH ARE INTER-CONNECTED. THEY DEAL WITH THE TERM AND FACETS OF THE TERM 'CHANGE OF OPINION'. THE EXPRESSION 'CHANG E OF OPINION' POSTULATES FORMATION OF OPINION AND THEN A CHANGE T HEREOF. 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 U/S 143(3) AND NOW BY INITIATION OF THE REASSESSMENT PROCEEDING, THE ASSESSING OFFICER PROP OSES OR WANTS TO TAKE A DIFFERENT VIEW; ++ THE WORD 'OPINION' IS DERIVED FROM THE LATIN WORD ' OPINARI' WHICH MEANS 'TO BELIEVE', 'TO THINK'. IN THE CONTEXT OF A SSESSMENT PROCEEDINGS, IT MEANS FORMATION OF BELIEF BY AN ASS ESSING OFFICER RESULTING FROM WHAT HE THINKS ON A PARTICULAR QUEST ION. IT IS A RESULT OF UNDERSTANDING, EXPERIENCE AND REFLECTION TO USE THE WORDS IN LAW LEXICON BY P. RAMANATHA AIYAR. QUESTION OF CHAN GE OF OPINION ARISE WHEN AN ASSESSING OFFICER FORMS AN OP INION AND DECIDES NOT TO MAKE AN ADDITIO N OR HOLDS THAT THE ASSESSEE IS CORRECT AND ACCEPTS HIS POSITION OR STAND; ++ IT IS CLEAR FROM THE JUDICIAL PRONOUNCEMENTS THAT (1) REASSESSMENT PROCEEDINGS CAN BE VALIDLY INITIATED I N CASE RETURN OF INCOME IS PROCESSED U/S 143(1) AND NO SCRUTINY ASSESSMENT IS UNDERTAKEN. IN SUCH CASES THERE IS NO CHANGE OF OPINION; (2) REASSESSMENT PROCEEDINGS WILL BE INVALID IN CASE TH E ASSESSMENT ORDER ITSELF RECORDS THAT THE ISSUE WAS RAISED AND IS DECIDED IN FAVOUR OF THE ASSESSE E . REASSESSMENT PROCEEDINGS IN THE SAID CASES WILL BE HIT BY PRINCIPLE OF 'CHANGE OF OPINION'. (3) I.T.A. NO. 874/HYD/2013 M/S R.K. REAL ESTATES 5 REASSESSMENT PROCEEDINGS WILL BE INVALID IN CASE 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 SITU ATIONS IT SHOULD BE ACCEPTED THAT THE ISSUE WAS EXAMINED B UT THE ASSESSING OFFICER DID NOT FIND ANY GROUND OR REASON TO MAKE ADDITION OR REJECT THE STAND OF THE ASSESSEE. HE FORMS AN OPINION. THE REASSESSMENT WILL BE INVALID BECAUSE THE ASSESS ING OFFICER HAD FORMED AN OPINION IN THE ORIGINAL ASSESSMENT, T HOUGH HE HAD NOT RECORDED HIS REASONS; ++ IN THE SECOND AND THIRD SITUATION, THE REVENUE IS N OT WITHOUT REMEDY. IN CASE THE ASSESSMENT ORDER IS ERRONEOUS A ND PREJUDICIAL TO THE INTEREST OF THE REVENUE, THEY ARE ENTITLED TO AND CAN INVOKE POWER U/S 263 OF THE ACT. THUS WHERE AN ASSESSING OFFICER INCORRECTLY OR ERRONEOUSLY APPLIES LAW OR C OMES TO A WRONG CONCLUSION AND INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, RESORT TO SECTION 263 OF THE ACT IS AVAILABLE AND SHOULD BE RESORTED TO. BUT INITIATION OF REASSESSMENT PROCEEDINGS WILL BE INVALID ON THE GROUND OF CHANGE OF OPINION; ++ A DISTINCTION MUST BE DRAWN BETWEEN ERRONEOUS APPLI CATION/ INTERPRETATION/ UNDERST ANDING OF LAW AND CASES WHERE FRESH OR NEW FACTUAL INFORMATION COMES TO THE KNOWLEDGE OF THE ASSESSING OFFICER SUBSEQUENT TO THE PASSING OF THE ASSESSMENT ORDER. IF NEW FACTS, MATERIAL OR INFORMATION COMES TO THE KNOWLED GE OF THE ASSESSING OFFICER, WHICH WAS NOT ON RECORD AND AVAI LABLE AT THE TIME OF THE ASSESSMENT ORDER, THE PRINCIPLE OF 'CHANGE OF OPINION' WILL NOT APPLY. THE REASON IS THAT 'OPINION' IS FOR MED ON FACTS. 'OPINION' FORMED OR BASED ON WRONG AND INCORRECT FA CTS OR WHICH ARE BELIED AND UNTRUE DO NOT GET PROTECTION AND COV ER UNDER THE PRINCIPLE OF 'CHANGE OF OPINION'. FACTUAL INFORMATION OR MATERIAL WHICH WAS INCORRECT OR WAS NOT AVAILABLE WITH THE A SSESSING OFFICER AT THE TIME OF ORIGINAL ASSESSMENT WOULD JUSTIFY INITIATION OF REASSESSMENT PROCEEDINGS. THE REQUIREMENT IN SUCH C ASES IS THAT THE INFORMATION OR MATERIAL AVAILABLE SHOULD RELATE TO MATERIAL FACTS. THE EXPRESSION 'MATERIAL FACTS' MEANS THOSE FACTS W HICH IF TAKEN INTO ACCOUNT WOULD HAVE AN ADVERSE AFFECT ON THE AS SESSEE BY A HIGHER ASSESSMENT OF INCOME THAN THE ONE ACTUALLY MADE. THEY SHOULD BE PROXIMATE AND NOT HAVE REMOTE BEARING ON THE ASSESSMENT. THE OMISSION TO DISCLOSE MAY BE DELIBER ATE OR INADVERTENT. THE QUESTION, OF CONCEALMENT IS NOT RELEVANT AND IS NOT A PRECONDITION WHICH CONFERS JURISDICTION TO RE OPEN THE ASSESSMENT; ++ CORRECT MATERIAL FACTS CAN BE A SCERT A INED FROM THE ASSESSMENT RECORDS ALSO AND IT IS NOT NECESSARY THAT THE SAME MAY COME FROM A THIRD PERSON OR SOURCE, I.E., FROM SOURCE OTHER T HAN THE ASSESSMENT RECORDS. HOWEVER, IN SUCH CASES, THE ONU S WILL BE ON THE REVENUE TO SHOW THAT THE ASSESSEE HAD STATED IN CORRECT AND I.T.A. NO. 874/HYD/2013 M/S R.K. REAL ESTATES 6 WRONG MATERIAL FACTS RESULTING IN THE ASSESSING OFF ICER PROCEEDING ON THE BASIS OF FACTS, WHICH ARE INCORRECT AND WRONG. THE REASONS RECORDED AND THE DOCUMENTS ON RECORD ARE OF PARAMOUNT IMPORTANCE AND WILL HAVE TO BE EXAMINED TO DETERMIN E WHETHER THE STAND OF THE REVENUE IS CORRECT; ++ THE REASONS RECORDED OR THE DOCUMENTS AVAILABLE MUS T SHOW NEXUS THAT IN FACT THEY ARE GERMANE AND RELEVANT TO THE SUBJECTIVE OPINION FORMED BY THE ASSESSING OFFICER REGAR D ING ESCAPEMENT OF INCOME. AT THE SAME TIME, IT IS NOT THE REQUIREMENT THAT THE ASSESSING OFFICER SHOULD HAVE FINALLY ASCERTAINED E SCAPEMENT OF INCOME BY RECORDING CONCLUSIVE FINDINGS. THE FINAL ASCERTAINMENT TAKES PLACE WHEN THE FINAL OR REASSESSMENT ORDER IS PASSED. IT IS ENOUGH IF THE ASSESSING OFFICER CAN SHOW TENTATIVEL Y OR PRIMA FACIE ON THE BASIS OF THE REASONS RECORDED AND WITH REFERENCE TO THE DOCUMENTS AVAILABLE ON RECORD THAT INCOME HAS ESCAP ED ASSESSMENT; ++ THE FULL BENCH OF DELHI HIGH COURT IN KELVINATOR OF INDIA LTD. REJECTED THE SUBMISSION THAT REASSESSMENT PROCEEDIN GS WOULD BE JUSTIFIED IF THE ASSESSMENT ORDER IS SILENT OR DOES NOT RECORD REASONS OR ANALYSIS OF MATERIAL ON RECORD. THIS, THE REVENUE HAD PROPOUNDED, WOULD SHOW NON APPLICATION OF MIND BY THE ASSESSING OFFICER. IT WAS HELD THAT THE SAID SUBMISSION WAS F ALLACIOUS. FULL BENCH EXPLAINED THAT WHEN AN ASSESSMENT ORDER WAS P ASSED U/S 143(3), A PRESUMPTION COULD BE RAISED THAT THE ORDER WAS PA SSED AFTER APPLICATION OF MIND. REFERENCE WAS MADE TO CLAUSE (E) TO SECTION 114 OF THE INDIAN EVIDENCE ACT, 1872. THE CONTENTION IF ACCEPTED WOULD GIVE PREMIUM TO THE AUTHORITY EXERCI SING QUASI- JUDICIAL FUNCTION TO TAKE BENEFIT OF ITS OWN WRONG I.E. FAILURE TO DISCUSS OR RECORD REASONS IN THE ASSESSMENT ORDER. THE AFORESAID OBSERVATIONS HAVE BEEN MADE IN THE CONTEXT AND FOR EXPLAINING THE PRINCIPLE OF 'CHANGE OF OPINION'. THE SAID PRINCIPL E WOULD APPLY EVEN WHEN THERE IS NO DISCUSSION IN THE ASSESSMENT ORDER BUT WHERE THE ASSESSING OFFICER HAD APPLIED HIS MIND. A WRONG DECISION, WRONG UNDERSTANDING OF LAW OR FAILURE TO DRAW PROPER INFERENCES FROM THE MATERIAL FACTS ALREADY ON RECOR D AND EXAMINED, CANNOT BE RECTIFIED OR CORRECTED BY RECOURSE TO REA SSESSMENT PROCEEDINGS. ASSESSEE IS REQUIRED TO DISCLOSE FULL AND TRUE MATERIAL FACTS AND NEED NOT EXPLAIN AND INTERPRET LAW. LEGAL INFERENCE HAS TO BE DRAWN BY THE ASSESSING OFFICER FROM THE FACTS DI SCLOSED. IT IS FOR THE ASSESSING OFFICER TO UNDERSTAND AND APPLY THE L AW. IN SUCH CASES RESORT TO REASSESSMENT PROCEEDINGS IS NOT PER MISSIBLE BUT IN A GIVEN CASE WHERE AN ERRONEOUS ORDER PREJUDICIAL T O THE REVENUE IS PASSED, OPTION TO CORRECT THE ERROR IS AVAILABLE U/S 263 OF THE ACT; ++ THE SAID OBSERVATIONS DO NOT MEAN THAT EVEN IF THE ASSESSING OFFICER DID NOT EXAMINE A PARTICULAR SUBJECT MATTER , ENTRY OR CLAIM/DEDUCTION AND THEREFORE HAD NOT FORMED ANY OP INION, IT MUST BE PRESUMED THAT HE MUST HAVE FORMED AN OPINION. TH IS IS NOT I.T.A. NO. 874/HYD/2013 M/S R.K. REAL ESTATES 7 WHAT WAS ARGUED BY THE ASSESSEE OR HELD AND DECIDED . THERE CANNOT BE DEEMED FORMATION OF OPINION EVEN WHEN THE PARTICULAR SUBJECT MATTER, ENTRY OR CLAIM/DEDUCTION IS NOT EXA MINED; ++ DISTINCTION BETWEEN DISCLOSURE/DECLARATION OF MATER IAL FACTS MADE BY THE ASSESSEE AND THE EFFECT THEREOF AND THE PRINCIPLE OF CHANGE OF OPINION IS APPARENT AND RECOGNIZED. FAILU RE TO MAKE FULL AND TRUE DISCLOSURE OF MATERIAL FACTS IS A PRECONDI TION WHICH SHOULD BE SATISFIED IF THE REOPENING IS AFTER FOUR YEARS O F THE END OF THE ASSESSMENT YEAR. THE EXPLANATION STIPULATES THAT ME RE PRODUCTION OF BOOKS OF ACCOUNTS AND OTHER DOCUMENTS, FROM WHIC H THE ASSESSING O FF ICER COULD HAVE WITH DUE DILIGENCE INFERRED FACTS DOES NOT AMOUNT TO FULL AND TRUE DISCLOSURE. THUS IN CAS ES OF REOPENING AFTER 4 YEARS AS PER THE PROVISO, CONDUCT OF THE ASSESSEE A ND DISCLOSURES MADE BY HIM ARE RELEVANT. HOWEVER, WHEN THE PROVISO IS NOT APPLICABLE, THE SAID PRECONDITION IS NOT APP LICABLE. THIS ADDITIONAL REQUIREMENT IS NOT TO BE SATISFIED WHEN RE-ASSESSMENT PROCEEDINGS ARE INITIATED WITHIN FOUR YEARS OF THE END OF THE ASSESSMENT YEAR. THE SEQUITOR IS THAT WHEN THE PROV ISO DOES NOT APPLY, THE RE-ASSESSMENT PROCEEDINGS CANNOT BE DECL ARED INVALID ON THE GROUND THAT THE FULL AND TRUE DISCLOSURE OF MATERIAL FACTS WAS MADE. IN SUCH CASES, RE-ASSESSMENT PROCEEDINGS CAN BE DECLARED INVALID WHEN THERE IS A CHANGE OF OPINION. AS A MAT TER OF ABUNDANT CAUTION WE CLARIFY THAT FAILURE TO STATE TRUE AND CORRECT FACT S CAN VITIATE AND MAKE THE PRINCIPLE OF CHANGE OF OPINION INAPPLICABLE. THIS DOES NOT REQUIRE REFERENCE TO AND THE PROVISO IS NOT INVOKED. THE DIFFERENCE IS THIS; WHEN PROVISO APPLIES THE CO NDITION STATED THEREIN MUST BE SATISFIED AND IN OTHER CASES IT IS NOT A PREREQUISITE OR CONDITION PRECEDENT BUT THE DEFENCE/PLEA OF CHAN GE OF OPINION SHALL NOT BE AVAILABLE AND WILL BE REJECTED; ++ IF A SUBJECT MATTER, ENTRY OR CLAIM/DEDUCTION IS NO T EXAMINED BY AN ASSESSING OFFICER, IT CANNOT BE PRESUMED THAT HE MUST HAVE EXAMINED THE CLAIM/DEDUCTION OR THE ENTRY, AND THER EFORE, IT IS THE CASE OF 'CHANGE OF OPINION'. WHEN AT THE FIRST INSTANCE, IN THE ORIGINAL ASSESSMENT PROCEEDINGS, NO OPINION IS FORM ED, PRINCIPLE OF 'CHANGE OF OPINION' CANNOT AND DOES NOT APPLY. THERE IS A DIFFERENCE BETWEEN CHANGE OF OPINION AND FAILURE OR OMISSION OF THE ASSESSING OFFICER TO FORM AN OPINION ON A SUBJE CT MATTER, ENTRY, CLAIM, DEDUCTION. WHEN THE ASSESSING OFFICER FAILS TO EXAMINE A SUBJECT MATTER, ENTRY, CLAIM OR DEDUCTION, HE FORMS NO OPINION. IT IS A CASE OF NO OPINION; ++ PRODUCING VOLUMINOUS RECORD BEFORE THE ASSESSING OF FICER DOES NOT ABSOLVE THE ASSESSEE AND THE ASSESSEE CANNOT BE HEARD TO SAY THAT IF THE ASSESSING OFFICER WERE TO CONDUCT A FURTHER INQUIRY, HE WOULD HAVE COME INTO POSSESSION OF MATERIAL EVIDENCE WITH THE EXERCISE OF D UE DILIGENCE. ASSESSMENTS CAN BE COMPLEX AND REQUIRE EXAMINATION OF SEVERAL SUBJECT MATTER, CLAI MS, ENTRIES OR DEDUCTIONS. THE ASSESSING OFFICER INSPITE OF BEST E FFORTS OR I.T.A. NO. 874/HYD/2013 M/S R.K. REAL ESTATES 8 INTENTION CAN MISS OUT AND NOT EXAMINE AND GO INTO A SUBJECT MATTER, CLAIM, ENTRY OR DEDUCTION. AN ASSESSEE CANN OT CONTEND OR STATE THAT IN THE REAMS AND PLETHORA OF PAPERS, NOT ES AND ENTRIES, ENTRY, A STATEMENT WAS MADE, OR CLAIM OR ENTRY WAS EXPLAINED AND THE PRINCIPLE OF BETTER BE-WARE APPLIES. WHEN A SUBJECT MATTER, ENTRY, CLAIM OR DEDUCTION REMAINS HIDDEN OR UNEXAMI NED BY THE ASSESSING OFFICER: BE IT FOR ANY REASON, IT IS NOT A CASE OF CHANGE OF OPINION; ++ WHETHER OR NOT THE ASSESSING OFFICER HAD APPLIED HI S MIND AND EXAMINED THE SUBJECT MATTER, CLAIM ETC. DEPENDS UPON FACTUAL MATRIX OF EACH CASE. THE ASSESSING OFFICER CAN EXAM INE A CLAIM OR SUBJECT MATTER EVEN WITHOUT RAISING A WRITTEN QUERY. THERE CAN BE CASES WHERE AN ASPECT OR QUESTION IS TOO APPAREN T OR OBVIOUS TO HOLD THAT THE ASSESSING OFFICER DID NOT EXAMINE A PARTICULAR SUBJECT MATTER, CLAIM ETC. THE STAND AND STANCE OF THE ASSESSEE AND THE ASSESSING OFFICER IN SUCH CASES ARE RELEVAN T; ++ SECTION 114 OF THE INDIAN EVIDENCE ACT IS A GENERAL PROVISION DEALING WITH PRESUMPTION OF FACTS, INFERENCES DRAWN FROM FACTS, PATTERNS DRAWN FROM EXPERIENCE AND OBSERVATIONS BAS ED UPON HABITS OF THE SOCIETY, HUMAN ACTION, USAGES AND ORDINARY COUR SE OF HUMAN AFFAIRS AND CONDUCT. THE PRESUMPTION IS NO EV IDENCE OR PROOF. IT ONLY SHOWS ON WHOM THE BURDEN OF PROOF LI ES. SECTION 114 IS PERMISSIVE AND NOT A MANDATORY PROVISION. AS A PERMISSIVE PROVISION IT ENABLES THE JUDGE TO SUPPORT HIS JUDGM ENT BUT THERE IS NO SCOPE OF PRESUMPTION WHEN FACTS ARE KNOWN. A PRE SUMPTION CAN BE DRAWN ONLY FROM FACTS AND NOT FROM OTHER PRE SUMPTIONS B Y A PROCESS OF PROBABLE AND LOGICAL REASONING'. PRESUMP TION OF FACTS U/S 114 IS REBUTTABLE. THE PRESUMPTION RAISED UNDER ILLUSTR ATION (E) TO SECTION 114 OF THE EVIDENCE ACT, MEANS THAT WHEN OFFICIAL ACT I S 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 PROOF. T HE PRESUMPTION CANNOT BE APPLIED TO DEFEND THE CONCLUS ION ON MERITS; ++ THE ASSESSEE HAD SUBMITTED THAT THE REFERENCE SHOUL D BE DECLINED AND NOT ANSWERED IN VIEW OF DOCTRINE OF ME RGER AS THE DECISION OF THE FULL BENCH OF THIS COURT IN THE CAS E OF KELVINATOR OF INDIA LTD. HAS MERGED AND WAS APPROVED BY THE SUPRE ME COURT. THE SUPREME COURT IN THEIR DECISION IN KELVINATOR O F INDIA HAD EXAMINED THE QUESTION WHETHER 'CHANGE OF OPINION' C AN JUSTIFY REOPENING OF ASSESSING. THE SUPREME COURT HAS NOT S TATED OR MADE ANY OBSERVATION WITH REFERENCE TO SECTION 114 OF THE EVIDENCE ACT. THE DOCTRINE OF MERGER, IF APPLIED, W OULD REQUIRE THAT WE ACCEPT AND APPLY THE REASONING AND RATIO GIVEN BY T HE SUPREME COURT. BY APPLYING THE 'DOCTRINE OF MERQER', IT CANNOT BE HELD THAT THE REASONING OR THE RATIO GIVEN BY THE S UPREME COURT IS THE REASONING GIVEN BY THE HIGH COURT. SUPREME COUR T IN THE PRESENT CASE HAS GIVEN DETAILED REASONS AND RATIO W HY 'CHANGE OF I.T.A. NO. 874/HYD/2013 M/S R.K. REAL ESTATES 9 OPINION' CANNOT BE A GROUND TO REOPEN ASSESSMENT. THE SAID REASONING OR RATIO ARE THE BINDING PRECEDE NT; ++ THERE MAY BE CASES WHERE THE ASSESSING OFFICER DOES NOT AND MAY NOT RAISE ANY WRITTEN QUERY BUT STILL THE ASSES SING OFFICER IN THE FIRST ROUND/ ORIGINAL PROCEEDINGS MAY HAVE EXAM INED THE SUBJECT MATTER, CLAIM ETC, BECAUSE THE ASPECT OR QU ESTION MAY BE TOO APPARENT AND OBVIOUS. TO HOLD THAT THE ASSESSIN G OFFICER IN THE FIRST ROUND DID NOT EXAMINE THE QUESTION OR SUBJECT MATTER AND FORM AN OPINION, WOULD BE CONTRARY AND OPPOSED TO NORMAL HUMAN CONDUCT. SUCH CASES HAVE TO BE EXAMINED INDIVIDUALL Y. SOME MATTERS MAY REQUIRE EXAMINATION OF THE ASSESSMENT O RDER OR QUERIES RAISED BY THE ASSESSING OFFICER AND ANSWERS GIVEN BY THE ASSESSEE BUT IN OTHERS CASES, A DEEPER SCRUTINY OR EXAMINATION MAY BE NECESSARY. THE STAND OF THE REVENUE AND THE ASSESSEE WOULD BE RELEVANT. SEVERAL ASPECTS INCLUDING PAPERS FILED AND SUBMITTED WITH THE RETURN AND DURING THE ORIGINAL P ROCEEDINGS ARE RELEVANT AND MATERIAL. SOMETIMES APPLICATION OF MIN D AND FORMATION OF OPINION CAN BE ASCERTAINED AND GATHERE D EVEN WHEN NO SPECIFIC QUESTION OR QUERY IN WRITING HAD BEEN R AISED BY THE ASSESSING OFFICER. THE ASPECTS AND QUESTIONS EXAMIN ED DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF MAY IND ICATE THAT THE ASSESSING OFFICER MUST HAVE APPLIED HIS MIND ON THE ENTRY, CLAIM OR DEDUCTION ETC. IT MAY BE APPARENT AND OBVIOUS TO HOLD THAT THE ASSESSING OFFICER WOULD NOT HAVE GONE INTO THE SAID QUESTION OR APPLIED HIS MIND. HOWEVER, THIS WOULD DEPEND UPON T HE FACTS AND CIRCUMSTANCES OF EACH CASE; ++ THE ITA WILL BE PLACED BEFORE THE RE GULA R BENCH AS PER THE ROSTER FOR DISPOSAL OF THE SAME KEEPING IN MIND THE ELUCIDATION OF LAW MADE ABOVE. 8. MOREOVER, THE COORDINATE BENCH IN THE CASE OF S. RANJIT REDDY AND OTHERS IN ITA NO. 292/HYD/2012 AND OTHERS OBSERVED AS FOLLOWS: NOW, UNDOUBTEDLY AN ORDER OF THE ASSESSMENT WHICH HAS BEEN PASSED IN SUBSEQUENT ASSESSMENT YEAR MAY FURNISH A FOUNDATION TO REOPEN AN ASSESSMENT FOR AN EARLIER ASSESSMENT YEAR . HOWEVER, THERE MUST BE SOME NEW FACTS WHICH COME TO LIGHT IN THE COURSE OF ASSESSMENT FOR THE SUBSEQUENT ASSESSMENT YEAR WHICH EMERGE IN THE ORDER OF THE ASSESSMENT. OTHERWISE, A MERE CHANGE OF OPINION ON THE PART OF THE ASSESSING OFFICER IN THE COURSE OF ASSE SSMENT FOR A SUBSEQUENT ASSESSMENT YEAR WOULD NOT BY ITSELF LEGI TIMISE REOPENING OF ASSESSMENT FOR AN EARLIER YEAR. THE POINT WE MA KE IT CLEAR HEREIN IS THAT WHETHER IN THE COURSE OF ASSESSMENT PROCEEDING S FOR SUBSEQUENT YEAR CERTAIN ADDITIONAL INFORMATION IS OBTAINED BY THE REVENUE WHICH WAS NOT AVAILABLE TO IT IN THE COURSE OF ASSESSMENT FOR AN EARLIER YEAR, THAT MAY LEGITIMATELY BE UTILISED AS A GROUND FOR R EOPENING OF I.T.A. NO. 874/HYD/2013 M/S R.K. REAL ESTATES 10 ASSESSMENT OF THE EARLIER YEAR. WHETHER THE REOPEN ING HAS TAKEN PLACE WITHIN FOUR YEARS THAT MAY LEGITIMATELY GIVE RISE TO AN INFERENCE OF ESCAPEMENT OF INCOME. THE NEW INFORMATION WHICH HAS COME TO THE KNOWLEDGE OF THE REVENUE, THEREFORE, CONSTITUTE S TANGIBLE MATERIAL. IF THERE IS A FRESH MATERIAL THAT THAT W OULD NOT PRECLUDE THE ASSESSING OFFICER TO REOPEN THE ASSESSMENT FOR AN E ARLIER YEAR ON THE BASIS OF FRESH MATERIAL WHICH HAS COME TO LIGHT IN THE COURSE OF ASSESSMENT FOR A SUBSEQUENT ASSESSMENT YEAR. 9. IN VIEW OF THE RATIO LAID DOWN BY THE HONBL E DELHI HIGH COURT IN CASE OF USHA INTERNATIONAL (SUPRA) AND THE OBSER VATIONS OF THE COORDINATE BENCH IN CASE OF S. RANJIT REDDY AND OTH ERS (SUPRA), WE ARE OF THE OPINION THAT THE CIT(A) HAS RIGHTLY QUAS HED THE REOPENING OF ASSESSMENT MADE BY THE ASSESSING OFFICER U/S 147 OF THE ACT BY OBSERVING THAT THERE WAS ABSOLUTELY NO FRESH INFORM ATION PROVIDED OR COLLECTED AND THE INITIATION OF PROCEEDINGS U/S 147 AFTER A PERIOD OF FOUR YEARS FOR EFFECTING DISALLOWANCE U/S 40A(3) OF THE ACT IS NOT VALID. ACCORDINGLY, WE UPHOLD THE ORDER OF THE CI T(A) AND DISMISS THE GROUNDS RAISED BY THE REVENUE ON THIS ISSUE. 10. IN THE RESULT, BOTH THE APPEAL OF REVENUE UND ER CONSIDERATION IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 08/01/2014 SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 08/01/2014. KV COPY FORWARDED TO: 1. ITO, WARD 2, AAYAKAR BHVAN, BEHIND KINNERASANI THEATRE, RAJIV GUNJ, KHAMMAM. 2. M/S R.K. REAL ESTATES, 5-1-181/A, KHANAPURAM HAV ELI, KHAMMAM. 3. CIT(A), VIJAYAWADA 4 CIT, VIJAYAWADA THE DR, ITAT, HYDERABAD