Cairn India Ltd.,(Formerly Known As Cairn Energy India Private Limited)Rep.by Its Authorised Signatory,Mr.navin Jain,3[Rd] & 4[Th] Floor, Vipul Plaza,Suncity, S v. Deputy Director Of Income Tax-I,(International Taxation)Room

THE HON'BLE MR.JUSTICE S.M.SUBRAMANIAMW.P.No.12358 of 2013 Cairn India Ltd.,(Formerly Known as Cairn Energy India Private Limited)Rep.by its Authorised Signatory,Mr.Navin Jain,3[rd] & 4[th] Floor, Vipul Plaza,Suncity, Setor-54, Gurgaon – 122 002,Haryana...Petitioner vs Deputy Director of Income Tax-I,(International Taxation)Room No.703, IInd Floor,Annexe Building, Aaykar Bhawan,121, Mahatma Gandhi Road,Chennai – 600 034. ..Respondent Prayer: Writ Petition filed under Article 226 of theConstitution of India praying to issue a Writ of Certiorari,calling for the records of the respondent in respect of PANNo.AAACC3097L and impugned Notice u/s 148 of the Income Tax Act,1961 dated 29.03.2012 and the consequential Order dated05.03.2013 passed by the Respondent disposing off the Objectionsto the initiation of the proceedings u/s 147 of the Act. The writ on hand is filed, questioning the legal validity ofinitiation of reopening proceedings and the disposal of theobjections by the respondent. 2. The petitioner being a Company incorporated in New SouthWales, Australia was a subsidiary of Cairn Energy PLC based in https://hcservices.ecourts.gov.in/hcservices/ Edinburgh and is engaged in the business of exploration andproduction of oil and gas in India since 1996. By an order ofthe Bombay High Court dated June 22, 2010 in Company PetitionNo.155 of 2010, the present petitioner took over the business ofCairn Energy India Private Limited and filed the present writpetition. 3. The petitioner company filed its return of income underSection 139 (1) of the Income Tax Act, 1961 [hereinafterreferred to as the 'Act'] on 16.11.2006 for the Assessment Year2006-07, declaring a loss of Rs.43,95,90,051/-. The petitionerstates that the return of income was filed with true andadequate income of the petitioner along with the auditedfinancial statements, Tax Audit Report as required under Section44AB of the Act. The case of the petitioner was selected forscrutiny. Notice was issued. The petitioner submitted furtherdocuments, materials and answered the queries. The case of thepetitioner was referred to Transfer Pricing Officer, who inturn, submitted a report on the Arm’s length price. Aftercompleting the process of scrutiny, the assessment officerpassed the final assessment order under Section 143(3) of theAct in order dated 01.03.2010. 4. While so, the respondent issued the impugned notice dated29.03.2012 under Section 148 of the Act, which was received bythe petitioner company on 03.04.2012. In response, therespondent company filed its return of income and requested tofurnish reasons. The reasons were supplied to the petitioners.The initiation of reopening proceedings admittedly is beyond theperiod of four years, but within six years. The petitionersubmitted its detailed objections on the reasons furnished andthe respondents disposed of the objections by rejecting thesame. Thus, the writ petitioner is constrained to move thepresent writ petition. 5. The learned Senior counsel appearing on behalf of thewrit petitioner broadly raised several grounds for assailing thereopening proceedings. It is contended that 'reasons to believe'had been recorded prior to issuance of notice. There is nofailure on the part of the petitioner to produce the materialsfully and truly. Thus, the requirement contemplated underSection 147 that the Assessing Officer must have 'reason tobelieve' is not satisfied. It is contended that the Explanation1 to Section 147 of the Act has no application in the case ofthe writ petitioner. Thus, the reopening is mere change ofopinion. In support of the of the said contentions, the learnedSenior Counsel made the following submissions: 5. The learned Senior counsel appearing on behalf of thewrit petitioner broadly raised several grounds for assailing thereopening proceedings. It is contended that 'reasons to believe'had been recorded prior to issuance of notice. There is nofailure on the part of the petitioner to produce the materialsfully and truly. Thus, the requirement contemplated underSection 147 that the Assessing Officer must have 'reason tobelieve' is not satisfied. It is contended that the Explanation1 to Section 147 of the Act has no application in the case ofthe writ petitioner. Thus, the reopening is mere change ofopinion. In support of the of the said contentions, the learnedSenior Counsel made the following submissions: (a) It is at this stage submitted the reasons tobelieve are not plenary but are subject to judicial review. Insupport, the petitioner seeks to rely on the judgment of theHon'ble High Court of Delhi in the case of Asoke Kumar Sen Vs. ITO reported in 132 ITR 707. This judgment has been rendered ona Writ Petition filed by the petitioner, wherein their Lordshipsof the High Court of Delhi held at Page.710 as under: “The words "if the Income-tax Officer has reasonto believe" used in s. 147(a) suggest that the beliefmust be that of an honest and reasonable person basedupon reasonable grounds and that the ITO may act underthis section on direct or circumstantial evidence butnot on mere suspicion, gossip or rumour. The powersunder this section are not plenary. They are subject tojudicial review. The ITO in his affidavit has merelystated his belief but has not set out any material onthe basis of which he formed such belief. there isnothing in the affidavit to suggest that the ITO hadany material before him that would warrant a beliefthat a part of the income of the petitioner had escapedassessment by reason of his failure to make a true andfull disclosure of the material facts. (See ITO v.Madnani Engineering Works Ltd. [1979] 118 ITR 1 SC.) The words "reason to believe" appear in mostmodern statutes. Words such as "reasonable cause tobelieve" or "has reason to believe" are commonly foundwhen a Legislature or law-making authority conferspowers on a minister or official. As Lord Radcliffesaid [1980] 2 WLR 1, 22 (HL) : "However read, they must be intended to serve in somesense as a condition limiting the exercise of anotherwise arbitrary power. (Nakkuda Ali v. Jayaratne[1951] AC 66, 77 (PC)". These words do not make conclusive the officer's ownhonest opinion that he had reasonable cause for theprescribed belief. The grounds on which the officer acted must besufficient to induce in a reasonable person therequired belief before he can validly reopen acompleted assessment under s. 147(a). In England, themajority in Liversidge v. Anderson [1942] AC 206 (HL)held that the belief entertained by the officer was notjusticiable. Lord Atkin dissented. Now, it had beenheld by the House of Lords in the recent tax decisionof IRC v. Rossminster Ltd. [1980] 2 WLR 1, 49 (HL),that Lord Atkin was right and that the majority werewrong. Lord Diplock has said : "..... I think the time has come to acknowledge openlythat the majority of this House in Liversidge v.Anderson were expediently and, at that time, perhaps,excusably, wrong and the dissenting speech of LordAtkin was right." Lord Scarman at p. 104 (of [1980] 1 All ER) said thatthe ghost of Liversidge v. Anderson no longer fluttersin the pages of our books and need no longer haunt thelaw. It was laid to rest by Lord Radcliffe in NakkudaAli v. Jayaratne [1951] AC 66, 75 (HL) and no one hassought to revive it. It is now beyond recall. The Supreme Court in a long line of decisions has heldthat the matter is justiciable. [See ITO v. MadnaniEngineering Works[1979] 118 ITR 1 SC.] (EmphasisSupplied)” "..... I think the time has come to acknowledge openlythat the majority of this House in Liversidge v.Anderson were expediently and, at that time, perhaps,excusably, wrong and the dissenting speech of LordAtkin was right." Lord Scarman at p. 104 (of [1980] 1 All ER) said thatthe ghost of Liversidge v. Anderson no longer fluttersin the pages of our books and need no longer haunt thelaw. It was laid to rest by Lord Radcliffe in NakkudaAli v. Jayaratne [1951] AC 66, 75 (HL) and no one hassought to revive it. It is now beyond recall. The Supreme Court in a long line of decisions has heldthat the matter is justiciable. [See ITO v. MadnaniEngineering Works[1979] 118 ITR 1 SC.] (EmphasisSupplied)” (b) It would be seen from the aforesaid judgment that theApex Court in its judgment reported in 118 ITR 1 has held thatexistence of reason to belief on part of the ITO is ajusticiable issue. The same opinion had also been expressed bythe Constitution Bench of the Apex Court in the case of CalcuttaDiscount Co. Ltd., Vs. ITO, reported in 41 ITR 191. (c) The petitioner also seeks to rely on the judgment ofApex Court in the case of ITO Vs. Lakhmani Mewal Das, reportedin 103 ITR 437 at Pg.448, it has been held as under: “As stated earlier, the reasons for the formationof the belief must have a rational connection with orrelevant bearing on the formation of the belief.Rational connection postulates that there must be adirect nexus or live link between the material coming tothe notice of the Income-tax Officer and the formationof his belief that there has been escapement of theincome of the assessee from assessment in the particularyear because of his failure to disclose fully and trulyall material facts. It is no doubt true that the courtcannot go into the sufficiency or adequacy of thematerial and substitute its own opinion for that of theIncome-tax Officer on the point as to whether actionshould be initiated for reopening assessment. At thesame time we have to bear in mind that it is not any andevery material, howsoever vague and indefinite ordistant, remote and far- fetched, which would warrantthe formation of the belief relating to escapement ofthe income of the assessee from assessment. The factthat the words "definite information" which were therein section 34 of the Act of 1922 at one time before itsamendment in 1948 are not there in section 147 of theAct of 1961 would not lead to the conclusion that actioncannot be taken for reopening assessment even if theinformation is wholly vague, indefinite, far-fetched andremote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence.(Emphasis supplied)” In the long line of decisions of the Apex Court, it has beenheld that the power u/s 147 of the Act are not plenary and aresubject to the judicial review. (d) The petitioner thus prays that if the reasons recordedare perused for the sake of convenience which are extractedhereinabove, it would be seen that; (i) The petitioner has disclosed the complete facts in thereturn of income/books of account/assessment proceedings andthere is no allegation that the petitioner had failed todisclose fully and truly all material facts. Infact, admittedly,reasons to believe has been formed on the basis of the return ofincome/existing material, without any fresh tangible material. (ii) It is a case where the AO while framing assessment hadconsidered all such material facts which are the basis forinitiating the proceedings u/s 147 of the Act. It thus amountsto review as per the judgment of the Apex Court in the case ofACIT Vs. ICICI Securities Primary Dealership ltd., reported in348 ITR 299 at Pg.301. (iii) That no fresh material had surfaced from the date ofcompletion of assessment till the proceedings were initiated. (ii) It is a case where the AO while framing assessment hadconsidered all such material facts which are the basis forinitiating the proceedings u/s 147 of the Act. It thus amountsto review as per the judgment of the Apex Court in the case ofACIT Vs. ICICI Securities Primary Dealership ltd., reported in348 ITR 299 at Pg.301. (iii) That no fresh material had surfaced from the date ofcompletion of assessment till the proceedings were initiated. (iv) It is a case of mere change of opinion and there hasbeen otherwise no escapement of any income. The submission isthat the initiation of proceedings are without jurisdiction andas such deserves to be quashed. (v) The reasons have been recorded on incorrect facts assuch, assumption of jurisdiction is bad in law. (vi) That no reasons had been recorded before initiating theproceedings u/s 147 of the Act. (vii) To justify the reopening of the assessment, onlyreasons recorded has to be looked into. (viii) No sanction as is mandated under Section 151(1) ofthe Act had obtained by the AO from the Director of IncomeTax/Commissioner of Income Tax. (e) Scope of provisions of Section 147 of the Income TaxAct: The petitioner, at the outset, submitted that the ApexCourt in its judgment in the case of Calcutta Discount Co. Ltd.,Vs. ITO reported in 41 ITR 191, examined the scope of provisionsof Section 34 of the Act and held at Pg.199 as under: “To confer jurisdiction under this section toissue notice in respect of assessments beyond theperiod of four years, but within a period of eightyears, from the end of the relevant year two conditionshave therefore to be satisfied. The first is that theIncome-tax Officer must have reason to believe thatincome, profits or gains chargeable to income- tax havebeen under-assessed. The second is that he must havealso reason to believe that such " under assessment "has occurred by reason of either (i) omission orfailure on the part of an assessee to make a return ofhis income under s. 22, or (ii) omission or failure onthe part of an assessee to disclose fully and truly allmaterial facts necessary for his assessment for thatyear. Both these conditions are conditions precedent tobe satisfied before the Income-tax Officer could havejurisdiction to issue a notice for the assessment orre-assessment beyond the period of four years butwithin the period of eight years, from the end of theyear in question.(Emphasis supplied)” (f) It is the submission of the petitioner that if theaforesaid tests as laid down by the Hon'ble Supreme Court (whichholds good till date) when is applied, would show that theassumption of jurisdiction by the respondent to issue the noticeand initiate the proceedings is outside the scope of theprovisions of Section 147 of the Act. It had been held as abovethat before assuming jurisdiction both the conditions are to besatisfied namely:(i) there had to be omission or failure todisclose fully and truly all material facts; and (ii) that theAO is having a reason to believe. In the instant case both theconditions are not satisfied. Indeed even the reasons had notbeen recorded and also there had been no failure to disclosefully and truly all material facts. Without prejudice, even thereasons recorded and supplied to the petitioner shows that suchreasons are merely based on change of opinion. The petitionerfurther submitted that in the said judgment of Calcutta DiscountCo., Ltd., (Supra) at Pg.202-203, the Hon'ble Apex Court hasheld as under: “The only nondisclosure mentioned in the report isthat the company had failed to disclose " the trueintention behind the sale of the shares ". Mr.Choudhury contends that this is not an omission todisclose a material fact within the meaning of s. 34.The question whether sales of certain shares were byway of changing the investments or by way of trading inshares has to be decided on a consideration ofdifferent circumstances, including the frequency of thesales, the nature of the shares sold, the pricereceived as compared with the cost price, and several other relevant facts. It is the duty of the assessee todisclose all the facts which have a bearing on thequestion; but whether the assessee had the intention tomake a business profit as distinguished from theintention to change the form of the investments isreally an inference to be drawn by the assessingauthority from the material facts taken in conjunctionwith the surrounding circumstances. The law does notrequire the assessee to state the conclusion that couldreasonable drawn from the primary facts. The questionof the assessee's intention is an inferential fact andso the assessee's omission to state his " trueintentions behind the sale of shares " cannot by itselfbe considered to be a failure or omission to discloseany material fact within the meaning of s. 34. Indeed,an assessee whose contention is that the shares weresold to change the form of investment and not with theintention of making a business profit cannot beexpected to say that his true intention was other thanwhat he contended it to be.. Dealing with this questionthe learned Chief Justice has said:- " The expression that the Respondent had failed todisclose " the true intention behind the sale of shares" may lack directness, but that deficiency of languageis not sufficient to enable the Respondent to contend,in view of the circumstances alleged, that no failureto disclose facts was being complained of. On the factsas stated by the Income-tax Officer, it is clear thatthere had been a failure to disclose the fact that theRespondent was a dealer in shares and what the Income-tax Officer meant by the language used by him was thatthe Respondent had not disclosed that the sale ofshares had been of the nature of a trading sale, madein pursuance of an intention to make a business profit,and not of the nature of a change of investment, madein pursuance of an intention to put certain capitalassets into another form. If that be so, it is equallyclear that the Income-tax Officer who, by the way, wasa successor to the officers who had made the originalassessments, was not merely changing his opinion as tofacts previously known, but was taking notice of a newfact." (Emphasis supplied) The petitioner submitted that Section 34 of Income Tax Act,1922, which is pari-materia to section 147 of the Income Tax Actonly provides special jurisdiction. In the Income Tax Act, thereis no concept of any other assessment other than the assessmentor reassessment and that too on specified pre-requisite of Section 147 of the Act. The petitioner submitted that Section 34 of Income Tax Act,1922, which is pari-materia to section 147 of the Income Tax Actonly provides special jurisdiction. In the Income Tax Act, thereis no concept of any other assessment other than the assessmentor reassessment and that too on specified pre-requisite of Section 147 of the Act. (g) Explanation (1) to Section 147 of the Act isinapplicable:It is submitted that in the present case, complete facts inrespect of production bonus was disclosed in the books ofaccount and also in the original assessment proceedings and assuch, Explanation -1 of section 147 cannot be invoked. It issubmitted that in fact, in the original assessment proceedingsquery in respect of difference between the amount of productionbonus claimed and stated in statement was raised which was dulyexplained in the reply of the petitioner and after beingsatisfied with the reply/evidence, no adverse view was formed inthe order of assessment. As such, it is not a case of merefiling of the details, but is a case, where respondent after dueenquiry has accepted the claim. There is no fresh material totake a contrary view. The petitioner has cited below judgmentswherein the scope of the provisions of Explanation (1) tosection 147 has been explained. It has been held in thesejudgments that if the details have been filed and in theoriginal assessment proceedings and the issue has been dulyexamined by the Assessing Officer, then provision of Explanation1 does not get attracted: i. CIT Vs. Schwing Stetter India (P) Ltd., [2015] 378 ITR380 (Madras) “15. The reliance placed by the learned standingcounsel appearing for the Revenue on Explanation 1 tosection 147 of the Income-tax Act cannot be pressedinto service by the Department in the instant casebecause the details of such claim has been revealed inthe tax audit report and apparently, the same has beenconsidered by the Assessing Officer at the time ofpassing an order under section 143(3) of the Income-taxAct. Therefore, Explanation 1 does not get attracted tothis case. Explanation 2(c)(i) and (iii) to section 147of the Income-tax Act, which is sought to be invoked inthe present case, can arise only in a case where theDepartment is able to establish that there is incomeescaping assessment and the proviso to section 147 getsattracted. In this case, we find that the finding ofthe Commissioner of Income-tax (Appeals) and theTribunal is that the proviso to section 147 of theIncome-tax Act did not get attracted and it is a caseof mere change of opinion of the Assessing Officer.” ii. CIT Vs. Baer Shoes (India) (P) Ltd., [2011] 331 ITR 435 (Madras) “8. In our considered view, the said explanationalso does not apply to the present case on hand. Aperusal of the said explanation would show that a mereproduction of accounts books and other evidence couldhave been discovered by the Assessing Officer would notamount to disclosure within the meaning of theprovision. Therefore, the said Explanation-1 should beconsidered in the context of the provision, inasmuch asthe same is applicable only for the production of therecords and other evidence. Hence, we are of theopinion that the same will not be applicable to thecase of filing of a return with adequate particularsfully disclosing all the materials for the purpose ofassessment.” iii. Asianet Star Communications (P) Ltd. Vs. AssistantCommissioner of Income-Tax [2020] 422 ITR 47 (Madras) “Where benefit of proviso is claimed by revenue,it would first have to satisfy condition under provisoand validate assumption of jurisdiction beyond fouryears and only thereafter revenue can seeks applicationof Explanation to Section 147.” iv. MBI Kits International Vs. Income Tax Officer [2018] 408ITR 1 (Madras) iii. Asianet Star Communications (P) Ltd. Vs. AssistantCommissioner of Income-Tax [2020] 422 ITR 47 (Madras) “Where benefit of proviso is claimed by revenue,it would first have to satisfy condition under provisoand validate assumption of jurisdiction beyond fouryears and only thereafter revenue can seeks applicationof Explanation to Section 147.” iv. MBI Kits International Vs. Income Tax Officer [2018] 408ITR 1 (Madras) “18. Every non disclosure of material facts willnot or cannot be a justifiable reason for reopeningsustainable under judicial scrutiny. On the other hand,such non disclosure of a material fact must be of suchnature that, but for such non disclosure, the income,relatable to such material fact, would not have escapedassessment. In other words, it should lead to anirrebuttable conclusion that by the conduct of theassessee, either by providing wrong or incorrectparticulars or by not providing the full and correctparticulars, he should have made the Assessing Officernot to bring a particular income to tax, which isotherwise liable to be taxed. If this test is applied tothe present case, I am of the view that the Revenue hasto fail.” v. CIT vS. Arvind Remedies Ltd., [2015] 378 ITR 547 (Madras) “Explanation 1 to section 147 of the Income-tax Actcannot be pressed into service by the Department in theinstant case because the details of such claim has beenrevealed during the regular assessment and completedetails have been provided before the Assessing Officer.If the Assessing Officer has not considered the same at the time of passing an order under section 143(3) of theIncome-tax Act, the assessee cannot be fastened with anyliability for the same. Therefore, Explanation 1 tosection 147 does not get attracted to this case. In thiscase, we find that the finding of the Tribunal is thatthe proviso to section 147 of the Income-tax Act doesnot get attracted since it is clear from the order ofthe Tribunal that it was failure on the part of theAssessing Officer to consider the material and theassessee had placed all the materials before theAssessing Officer during the regular assessment.” vi. EL Forge Ltd., Vs. DCIT / [2014] 224 Taxman 222 (Madras)“7. The facts of the case show that there was nodenial of the fact that the assessee had disclosed thedetails as regards the carry forward of the losses aswell as the income computed and all these details werevery much there before the Assessing Officer; thatthere is no denial of the fact that there was nofailure on the part of the assessee in disclosing thefacts necessary for assessment and that there is nosuch allegation that the escapement of income was onaccount of the failure of the assessee in notdisclosing fully and truly all material facts. In thecircumstances, applying the Supreme Court decisionreferred to above, we have no hesitation in acceptingthe plea of the assessee that the assumption of thejurisdiction beyond four years is hit by limitation asprovided under Section 147 proviso. Even though, on themerits of the assessment, the assessee's case has tofail, yet, on the limited question as regards thejurisdictional time limit as provided for under Section147 of the Income Tax Act, the assessee is entitled tosucceed. Since limitation is the fundamental aspect ofthe assessment, we have no hesitation in setting asidethe order of the Tribunal, thereby allowing theappeal.” vii. Commissioner of Income-tax vs. Sonitpur SolvesLtd., 352 ITR 305 (Gau)viii. SAK Industries (P) Ltd., Vs. Deputy Commissionerof Income Tax (Judgment of Hon'ble Delhi High Court inWP(C).No.1884/2012 dated 16.07.2012) para 9-13(Del) ix. Ranbaxy Laboratories Ltd., Vs. Deputy Commissionerof Income-tax [2013] 351 ITR 23 (Delhi) x. SMCC Construction India ltd., Vs. AssistantCommissioner of Income-tax [2014] 220 Taxman 125 (Delhi) (MAG) vii. Commissioner of Income-tax vs. Sonitpur SolvesLtd., 352 ITR 305 (Gau)viii. SAK Industries (P) Ltd., Vs. Deputy Commissionerof Income Tax (Judgment of Hon'ble Delhi High Court inWP(C).No.1884/2012 dated 16.07.2012) para 9-13(Del) ix. Ranbaxy Laboratories Ltd., Vs. Deputy Commissionerof Income-tax [2013] 351 ITR 23 (Delhi) x. SMCC Construction India ltd., Vs. AssistantCommissioner of Income-tax [2014] 220 Taxman 125 (Delhi) (MAG) xi. Canon India Private Limited Vs. ACIT WP(C).No.2768/2012 dated 31.07.2012 HC Delhi. (h) Change of opinion: The petitioner further submittedthat though a statutory amendment had been made in section 148of the Income Tax Act w.e.f.01.04.1989, however, the Apex Courtin 320 ITR 561, while affirming the judgment of Delhi High Courtin the case of CIT Vs. Kelvinator of India Ltd., reported in 256ITR 1 (FB) held as under: “On going through the changes, quoted above, madeto Section 147 of the Act, we find that, prior to theDirect Tax Laws (Amendment) Act, 1987, reopening couldbe done under the above two conditions and fulfilmentof the said conditions alone conferred jurisdiction onthe assessing officer to make a back assessment, butin Section 147 of the Act (with effect from 1-4-1989),they are given a go-by and only one condition hasremained viz. that where the assessing officer hasreason to believe that income has escaped assessment,confers jurisdiction to reopen the assessment.Therefore, post-1-4-1989, power to reopen is muchwider. However, one needs to give a schematicinterpretation to the words “reason to believe”failing which, we are afraid, Section 147 would givearbitrary powers to the assessing officer to reopenassessments on the basis of “mere change of opinion”,which cannot be per se reason to reopen. We must alsokeep in mind the conceptual difference between powerto review and power to reassess. The assessing officerhas no power to review; he has the power to reassess.But reassessment has to be based on fulfilment ofcertain precondition and if the concept of “change ofopinion” is removed, as contended on behalf of theDepartment, then, in the garb of reopening theassessment, review would take place. One must treatthe concept of “change of opinion” as an in-built testto check abuse of power by the assessing officer.Hence, after 1-4-1989, the assessing officer has powerto reopen, provided there is “tangible material” tocome to the conclusion that there is escapement ofincome from assessment. Reasons must have a live linkwith the formation of the belief. Our view getssupport from the changes made to Section 147 of theAct, as quoted hereinabove. Under the Direct Tax Laws(Amendment) Act, 1987, Parliament not only deleted thewords “reason to believe” but also inserted the word“opinion” in Section 147 of the Act. However, onreceipt of representations from the companies againstomission of the words “reason to believe”, Parliamentreintroduced the said expression and deleted the word“opinion” on the ground that it would vest arbitrarypowers in the assessing officer. We quote hereinbelow the relevant portion of Circular No. 549 dated 31-10-1989, which reads as follows: the relevant portion of Circular No. 549 dated 31-10-1989, which reads as follows: “7.2. Amendment made by the Amending Act, 1989,to reintroduce the expression ‘reason to believe’ inSection 147.—A number of representations were receivedagainst the omission of the words ‘reason to believe’from Section 147 and their substitution by the‘opinion’ of the Assessing Officer. It was pointed outthat the meaning of the expression, ‘reason tobelieve’ had been explained in a number of courtrulings in the past and was well settled and itsomission from Section 147 would give arbitrary powersto the Assessing Officer to reopen past assessments onmere change of opinion. To allay these fears, theAmending Act, 1989, has again amended Section 147 toreintroduce the expression ‘has reason to believe’ inthe place of the words ‘for reasons to be recorded byhim in writing, is of the opinion’. Other provisionsof the new Section 147, however, remain the same.” (emphasis supplied) (i) The petitioner however adds that the Division Bench ofHigh Court of Delhi in its judgment reported in 256 ITR 1 hadheld as under: “We, however, may hasten to add that if “reason tobelieve” of the Assessing Officer is founded on aninformation which might have been received by theAssessing Officer after the completion of assessment,it may be a sound foundation for exercising the powerunder section 147 read with section 148 of the Act. We are unable to agree with the submission of Mr.Jolly to the effect that the impugned order ofreassessment cannot be faulted as the same was based oninformation derived from the tax audit report. The taxaudit report had already been submitted by theassessee. It is one thing to say that the AssessingOfficer had received information from an audit reportwhich was not before the Income-tax Officer, but it isanother thing to say that such information can bederived by the material which had been supplied by theassessee himself. We also cannot accept the submissionof Mr. Jolly to the effect that only because in theassessment order, detailed reasons have not beenrecorded an analysis of the materials on the record byitself may justify the Assessing Officer to initiate aproceeding under section 147 of the Act. The saidsubmission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section143 or sub-section (3) of section 143. When a regularorder of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raisedthat such an order has been passed on application ofmind. It is well known that a presumption can also beraised to the effect that in terms of clause (e) ofsection 114 of the Indian Evidence Act judicial andofficial acts have been regularly performed. If it beheld that an order which has been passed purportedlywithout application of mind would itself conferjurisdiction upon the Assessing Officer to reopen theproceeding without anything further, the same wouldamount to giving a premium to an authority exercisingquasi-judicial function to take benefit of its ownwrong.”(Emphasis supplied) (j) The petitioner submitted that recently the Apex Court inthe case of ITO Vs. Techspan India Pvt limited, reported in 404ITR 10, in para 12 has held that there would be a change ofopinion when either specifically or by necessary implication are-look is being made. In the instant case this is where therespondent has attempted to. (j) The petitioner submitted that recently the Apex Court inthe case of ITO Vs. Techspan India Pvt limited, reported in 404ITR 10, in para 12 has held that there would be a change ofopinion when either specifically or by necessary implication are-look is being made. In the instant case this is where therespondent has attempted to. “Before interfering with the proposed reopening ofthe assessment on the ground that the same is basedonly on a change in opinion, the court ought to verifywhether the assessment earlier made has eitherexpressly or by necessary implication expressed anopinion on a matter which is the basis of the allegedescapement of income that was taxable. If theassessment order is non-speaking, cryptic orperfunctory in nature, it may be difficult to attributeto the assessing officer any opinion on the questionsthat are raised in the proposed reassessmentproceedings. Every attempt to bring to tax, income thathas escaped assessment, cannot be absorbed by judicialintervention on an assumed change of opinion even incases where the order of assessment does not addressitself to a given aspect sought to be examined in thereassessment proceedings”.(Emphasis supplied) (k) The Apex Court in its judgment in the case of ACIT Vs.ICICI Securities Primary Dealership Ltd., reported in 348 ITR299 at Pg.301 has while upholding the judgment of Bombay HighCourt which reads as under: petitioner when called upon. Thereafter the assessmentwas completed under Section 143(3) of the Income TaxAct. Now, on a mere relook, the officer has come to theconclusion that the income has escaped assessment andhe is of course justified in his analysis. In our view,this is not something which is permissible under theproviso to Section 147 of the Income Tax Act whichspeaks about a failure on the part of the assessee tomake a proper return. In the present case, no such caseis made out on the record. In the circumstances, weallow this petition in terms of Prayer (a) and quashand set aside the notice dated 27-3-2006 directingreopening of the assessment for the year 1999-2000. It thus held as under: “Leave granted. We have heard learned counsel on both sides.The assessee had disclosed full details in thereturn of income in the matter of its dealing in stocksand shares. According to the assessee, the lossincurred was a business loss, whereas, according to theRevenue, the loss incurred was a speculative loss.Rejection of the objections of the assessee to the re-opening of the assessment by the assessing officer videhis order dated 23-6-2006, is clearly a change ofopinion. In the circumstances, we are of the view thatthe order re-opening the assessment was notmaintainable.” (Emphasis supplied) (l) It is significant to be noted that their Lordshipsconsidered in its judgment that where a petitioner hadchallenged the initiation of proceedings u/s 148 of the Act andfiled objections, the Assessing Officer was required bylaw toconsider such objections, to enable the Court to examine whetherit is a case of change of opinion or otherwise. It is submittedthat if the aforesaid principles of law as laid down iscomplied, it is evident that an order on objection deserves tobe examined by the Court before expressing its discretion underArticle 226 of Constitution of India. (m) It is submitted that there is difference between theconcept of inferential facts and material facts. It is submittedthat in the instant case if the reasons recorded as extractedabove, are closely read, there has been no failure on the partof the petitioner to have disclosed fully and truly all materialfacts and the reassessment proceedings have been initiatedmerely on a change of opinion as in the original proceedings,the respondents after duly verifying all the facts had not drawnany negative inference with respect to the production bonus paidby the petitioners. https://hcservices.ecourts.gov.in/hcservices/ (m) It is submitted that there is difference between theconcept of inferential facts and material facts. It is submittedthat in the instant case if the reasons recorded as extractedabove, are closely read, there has been no failure on the partof the petitioner to have disclosed fully and truly all materialfacts and the reassessment proceedings have been initiatedmerely on a change of opinion as in the original proceedings,the respondents after duly verifying all the facts had not drawnany negative inference with respect to the production bonus paidby the petitioners. https://hcservices.ecourts.gov.in/hcservices/ (n) Reasons to believe has been formed on the basis of wrongfacts, as such assumption of jurisdiction is bad in law: It issubmitted in the present case, the petitioner had claimed adeduction of Rs.33,95,84,064/- on account of production bonus,whereas in the reasons to believe, the respondent is of the viewthat the petitioner was entitled to the deduction only to theextent of Rs.20,32,78,482/- and thus, the assessee had claimedexcessive liability on bonus in the AY 2006-07 to the extent ofRs.13,63,05,582/-. It is submitted that the petitioner in theobjections as well as in the present writ petition have providedthe facts relating to the claim of the production bonus. Infact, during the course of the assessment proceedings undersection 143(3) of the Act, a specific query regarding the claimof production bonus of Rs.33 crores as against the sum ofRs.10.67 crore debited in the profit and loss account wasraised. The petitioner in response to the aforesaid query filedits explanation and clarified the basis of such claim. Therespondents being satisfied by the explanation, and books ofaccount, accepted the aforesaid claim. As such, there is nofailure to disclose any material facts. In fact, proceedingshave not even been initiated on the ground that there was anyfailure on the part of the petitioner to disclose fully andtruly all material facts but has been initiated merely on theground that petitioner has been allowed excessive productionbonus of Rs.13,63,05,582/- and the same has escaped assessment.It is submitted that while forming the reasons to believe, therespondents have committed factual error, which has formed thebasis of the assumption that excessive claim of production bonushas been made. It is submitted that it has been assumed thatproduction bonus was claimed in AY 2004-05, whereas the fact ofthe matter is that no amount was paid in AY 2004-05. It issubmitted that petitioner claimed, production bonus only onpayment basis, and opening balance of the instant AY wasRs.25,36,29,564/- and addition of production bonus during theyear was of Rs.9,21,14,449/- as such total production bonuspayable was of Rs.34,57,44,013/- and out of the said sum, a sumof Rs.33,95,84,064/- was paid and remaining sum ofRs.61,59,949/- was carried forward. It is submitted that if thefact that no production bonus was paid in AY 2004-05, if hadbeen correctly noted by the respondent, then he would have beenfound that there was no escapement of the income. It issubmitted that this factual error had led the respondent toassume that there was excessive claim of production bonus duringthe year. It is submitted that such factual error has beendemonstrated in the objections filed by the petitioner, and samehas not been even disputed by the respondent in the order,disposing of the objections. It is submitted that if the reasonsto believe proceeds on the wrong facts, assumption ofjurisdiction is unsustainable in law as has been held in the following decisions: i. Akshar Builders & Developers Vs. ACIT [2019] 411 ITR 602 (Bombay) following decisions: i. Akshar Builders & Developers Vs. ACIT [2019] 411 ITR 602 (Bombay) “6. It is thus emerges from the record that theAssessing Officer has merely acted upon the informationsubmitted to him by the investigation wing that thereis material to suggest that Mudra had paid cash amountto AB&D whereas, the material collected during thesurvey against Mudra prima faice suggests such cashpayment to AD. This would demonstrate total lack ofapplication of mind on the part of the AssessingOfficer. If he had perused the material supplied to himby the investigation wing, he would have immediatelynoticed that material referred would suggest cashpayment to AD and not AB&D i.e. the present petitioner. 7. Even in a case where the return filed by theassessee is accepted without scrutiny, as per thesettled law, the Assessing Officer can issue a noticeof reopening of assessment provided he has reason tobelieve that income chargeable to tax has escapedassessment. The Assessing Officer cannot proceedmechanically and also on erroneous information that mayhave been supplied to him. In fact, we note that in thepresent case the Assessing Officer had issued a noticeto a wrong person. The impugned notice is, therefore,set aside.” ii. Ankita A.Choksey Vs. ITO W.P.3344 of 2018 dated10.01.2019 HC (Bom) “7. Thus, we are of the view that even in caseswhere the return of income has been accepted byprocessing under Section 143(1) of the Act, re-openingof an assessment can only be done when the AssessingOfficer has reason to believe that income chargeable totax has escaped assessment. The mere fact that thereturn has been processed under Section 143(1) of theAct, does not give the Assessing Officer a carte blancto issue a re-opening notice. The condition precedentof reason to believe that income chargeable to tax hasescaped assessment on correct facts, must be satisfiedby the Assessing Officer so as to have jurisdiction toissue the re-opening notice. In the present case, theAssessing Officer has proceeded on fundamentally wrongfacts to come to the reasonable belief conclusion thatincome chargeable to tax has escaped assessment.Further, even when the same is pointed out by thePetitioner, the Assessing Officer in its orderdisposing off the objection does not deal with factual position asserted by the Petitioner. Thus, it wouldsafe to conclude that the Revenue does not dispute thefacts stated by the Petitioner. On the facts as found,there could be no reason for the Assessing Officer tobelieve that income chargeable to tax has escapedassessment.” iii. Mumtaz Hazi Mohmad Memon Vs. ITO 408 ITR 268 (Guj) “These reasons are interconnected and interwoven.In fact, even if these reasons are seen as separate andseverable grounds, both being factually incorrect,Revenue simply cannot hope to salvage the impugnednotice.” (o) There is no failure to disclose fully and truly allmaterial facts: It is submitted that from the facts demonstrated above, thatcomplete facts has been disclosed. Further, on the basis of samefacts reasons to believe has been formed and there is no whispermuch less any allegation that income has escaped on account offailure on the part of the assessee to disclose fully and trulyall material facts, as such in view of first proviso to section147 of the Act assumption of jurisdiction is contrary to law. Insupport, the petitioner relied on the following judgments: (SC) i. New Delhi Television Ltd., Vs. DCIT (2020) 424 ITR 607 (o) There is no failure to disclose fully and truly allmaterial facts: It is submitted that from the facts demonstrated above, thatcomplete facts has been disclosed. Further, on the basis of samefacts reasons to believe has been formed and there is no whispermuch less any allegation that income has escaped on account offailure on the part of the assessee to disclose fully and trulyall material facts, as such in view of first proviso to section147 of the Act assumption of jurisdiction is contrary to law. Insupport, the petitioner relied on the following judgments: (SC) i. New Delhi Television Ltd., Vs. DCIT (2020) 424 ITR 607 “In our view the assessee disclosed all theprimary facts necessary for assessment of its case tothe assessing officer. What the revenue urges is thatthe assessee did not make a full and true disclosure ofcertain other facts. We are of the view that theassessee had disclosed all primary facts before theassessing officer and it was not required to give anyfurther assistance to th