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

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 01.09.2021CORAM THE HON'BLE MR.JUSTICE S.M.SUBRAMANIAM W.P.No.12359 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. For Petitioner : Mr.C.S.Agarwal Senior counsel Assisted by Mr.M.V.Swaroop For Respondent : M/s.Hema Muralikrishnan Senior Standing counsel [For Income Tax] O R D E R 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 inEdinburgh 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 28.10.2005, for the Assessment Year2005-06, declaring a total income of Rs.91,13,40,000/-. Thepetitioner states that the return of income was filed with trueand adequate 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 29.12.2008. 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. The petitioner submitted its detailedobjections on the reasons furnished and the respondents disposedof the objections by rejecting the same. Thus, the writpetitioner is constrained to move the present 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 of the 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 of the 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) The petitioner states that the 'reasons to believe'are not preliminary, 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)” 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)” (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 thus prays that if the reasons recordedare perused for the sake of convenience which are extractedhereinabove, it would be seen that; (i) There is no allegation that the petitioner had failed todisclose fully and truly all material facts. Indeed, it is anadmitted fact, on the contrary that the facts stated in thepurported note of satisfaction is from the return of incomefiled by the petitioner. (ii) It is further submitted that there has been no failureof the petitioner to have disclosed fully and truly all materialfacts. Indeed it is a case, where the AO while framingassessment had considered all such material facts, which are thebasis for initiating the proceedings u/s 147 of the Act. It thusamounts to review as per the judgment of the Apex Court in thecase of ACIT Vs. ICICI Securities Primary Dealership ltd.,reported in 348 ITR 299 at Pg.301 and dealt in para 19 below. (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 is https://hcservices.ecourts.gov.in/hcservices/ that the initiation of proceedings is without jurisdiction andas such deserves to be quashed. (v) The reasons had been recorded before initiating theproceedings under Section 147 of the Act. (vi) No sanction as is mandated under Section 151(1) of theAct had obtained by the AO from the Director of IncomeTax/Commissioner of Income Tax. (d) Scope of provisions of Section 147 of the Income TaxAct: The petitioner, at the outset, submitted that the Apex Courtin its judgment in the case of Calcutta Discount Co. Ltd., Vs.ITO reported in 41 ITR 191, examined the scope of provisions ofSection 34 of the Act and held at Pg.199 as under: https://hcservices.ecourts.gov.in/hcservices/ that the initiation of proceedings is without jurisdiction andas such deserves to be quashed. (v) The reasons had been recorded before initiating theproceedings under Section 147 of the Act. (vi) No sanction as is mandated under Section 151(1) of theAct had obtained by the AO from the Director of IncomeTax/Commissioner of Income Tax. (d) Scope of provisions of Section 147 of the Income TaxAct: The petitioner, at the outset, submitted that the Apex Courtin its judgment in the case of Calcutta Discount Co. Ltd., Vs.ITO reported in 41 ITR 191, examined the scope of provisions ofSection 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)” (e) 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. Further, there is not even an allegation to that effect as is also otherwise apparent fromProfit & Loss Account, which had been also considered andexamined before framing the assessment. In fact, withoutprejudice, even the reasons recorded and supplied to thepetitioner shows that such reasons are merely based on change ofopinion. The petitioner further submitted that in the saidjudgment of Calcutta Discount Co., Ltd., (Supra) at Pg.202-203,the Hon'ble Apex Court has held as under: an allegation to that effect as is also otherwise apparent fromProfit & Loss Account, which had been also considered andexamined before framing the assessment. In fact, withoutprejudice, even the reasons recorded and supplied to thepetitioner shows that such reasons are merely based on change ofopinion. The petitioner further submitted that in the saidjudgment of Calcutta Discount Co., Ltd., (Supra) at Pg.202-203,the Hon'ble Apex Court has held 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 severalother 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 the Respondent 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 ofSection 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 ofSection 147 of the Act. (f) The petitioner is citing below the following judgments,wherein the scope of the provisions of Explanation (1) tosection 147 has been explained. It has been held that if thereis no failure to disclose fully and truly all material facts,whatever may be the circumstances, the Assessing Officer is notempowered to initiate proceedings under Section 147 and thattoo, when the proceedings had been initiated beyond the periodof four year from the end of the assessment year. Reliance isplaced on the following decisions: i. Techman Buildwell (P) Ltd., Assistant Commissioner ofIncome Tax [2015] 370 ITR 771 (Delhi) “In the present case, the “reasons to believe”extracted above nowhere highlight what, if at all, wasthe material which the Assessing Officer came up orbecame aware of subsequent to the original assessment.In other words, what triggered the Assessing Officer'scuriosity to impel him to reexamine the files anddocuments pertaining to a completed assessment isunknown. Nor does the materials placed in theassessment show that the petitioner had unjustifiablysuppressed valid or relevant information which wasotherwise available. The advertence to the disallowanceof a provision for an unascertained liability points tothe Assessing Officer indulging in what amounts tonothing but a masked review. What appears to haveexcited the Assessing Officer's mind was that theoriginal assessment order was not framed properly as it overlooked certain materials which led to loss ofrevenue. The Assessing Officer in the first instancedid not perform his job properly for which the assesseecannot be faulted with. In Calcutta Discount Co.Ltd. v. ITO, [1961] 41 ITR 191 (SC) the Supreme Courthad pointedly observed that the assessee is required tofairly disclose what is expected of him “the primaryfacts” while submitting the returns. It is up to theAssessing Officer to draw the necessary inferences. Inthe present case, the Assessing Officer's omissionappears to have been the sole basis for issuing thereassessment notice and, consequently, proceeding tomake the impugned demand. ” ii. Indian and Eastern Newspaper Society Vs. Commissioner ofIncome-Tax, New Delhi, 119 ITR 996 (SC) at page 1004. overlooked certain materials which led to loss ofrevenue. The Assessing Officer in the first instancedid not perform his job properly for which the assesseecannot be faulted with. In Calcutta Discount Co.Ltd. v. ITO, [1961] 41 ITR 191 (SC) the Supreme Courthad pointedly observed that the assessee is required tofairly disclose what is expected of him “the primaryfacts” while submitting the returns. It is up to theAssessing Officer to draw the necessary inferences. Inthe present case, the Assessing Officer's omissionappears to have been the sole basis for issuing thereassessment notice and, consequently, proceeding tomake the impugned demand. ” ii. Indian and Eastern Newspaper Society Vs. Commissioner ofIncome-Tax, New Delhi, 119 ITR 996 (SC) at page 1004. “Now, in the case before us, the Income Tax Officerhad, when he made the original assessment, consideredthe provisions of Sections 9 and 10. Any different viewtaken by him afterwards on the application of thoseprovisions would amount to a change of opinion onmaterial already considered by him. The Revenuecontends that it is open to him to do so, and on thatbasis to reopen the assessment under Section 147(b).Reliance is placed on Kalyanji Mavji & Co. v. CIT [(1976) 1 SCC 985 : 1976 SCC (Tax) 111 : (1976) 102 ITR287] where a Bench of two learned Judges of this Courtobserved that a case where income had escapedassessment due to the “oversight, inadvertence ormistake” of the Income Tax Officer must fall withinSection 34(1)(b) of the Indian Income Tax Act, 1922. Itappears to us, with respect, that the proposition isstated too widely and travels farther than the statutewarrants insofar as it can be said to lay down that if,on reappraising the material considered by him duringthe original assessment, the Income Tax Officerdiscovers that he has committed an error in consequenceof which income has escaped assessment it is open tohim to reopen the assessment. In our opinion, an errordiscovered on a reconsideration of the same material(and no more) does not give him that power. That wasthe view taken by this Court in Maharaj Kumar KamalSingh v. CIT [AIR 1959 SC 257 : (1959) 35 ITR 1 :1959Supp 1 SCR 10] , CIT v. Raman & Co. [AIR 1968 SC 49 :(1968) 1 SCR 10 : (1968) 67 ITR 11] and Bankipur ClubLtd. v. CIT [(1972) 4 SCC 386 : 1974 SCC (Tax) 76 :(1971) 82 ITR 831] , and we do not believe that -thelaw has since taken a different course. Anyobservations in Kalyanji Mavji & Co. v. CIT [(1976) 1 SCC 985 : 1976 SCC (Tax) 111 : (1976) 102 ITR 287]suggesting the contrary do not, we say with respect,lay down the correct law. ” iii. Gemini Leather Store Vs. Income-Tax officer, B-Ward,Agra, And others 100 ITR 1 (SC) at page 4. SCC 985 : 1976 SCC (Tax) 111 : (1976) 102 ITR 287]suggesting the contrary do not, we say with respect,lay down the correct law. ” iii. Gemini Leather Store Vs. Income-Tax officer, B-Ward,Agra, And others 100 ITR 1 (SC) at page 4. “The law laid down in Calcutta Discount Companycase has been restated in several subsequent decisionsof this Court: CIT, v. Hemchandra Kar [(1970) 1 SCC 780: 77 ITR 1] , CIT, Gujarat v. Bhanji Lavji [AIR 1971 SC717 : 79 ITR 582] ; CIT, v. Burlop Dealers Ltd. [(1971)1 SCC 462 : 79 ITR 609] , to name only a few. In thecase before us the assessee did not disclose thetransactions evidenced by the drafts which the IncomeTax Officer discovered. After this discovery the IncomeTax Officer had in his possession all the primaryfacts, and it was for him to make necessary enquiriesand draw proper inference as to whether the amountsinvested in the purchase of the drafts could be treatedas part of the total income of the assessee during therelevant year. This the Income Tax Officer did not do.It was plainly a case of oversight, and it cannot besaid that the income chargeable to tax for the relevantassessment year had escaped assessment by reason of theomission or failure on the part of the assessee todisclose fully and truly all material facts. The IncomeTax Officer had all the material facts before him whenhe made the original assessment. He cannot now takerecourse to Section 147(a) to remedy the errorresulting from his own oversight. ” iv. Chemicals And Fibres of India Limited Vs. M.K.N.Pillaiand Another 146 ITR 280 (Bom) at Page 283 “It is clear that the assessee had made a claim onthe footing which has been accepted by several judicialtribunals. It had disclosed the primary facts which werenecessary for the purpose of making the assessment. Ifthere was any doubt, it was for the concerned officer tomake further inquiries. It is impossible to hold oraccept the conclusion that the assessee had failed todisclose fully or truly the necessary material facts orhad thereby caused the ITO to erroneously accept itsclaim u/s. 80-I and for higher development rebate. Ifthat be my conclusion, it must follow that the actiontaken u/s. 148 read with s. 147 of the I.T. Act isimproper, incompetent and the notices issued arerequired to be quashed. Similar result would follow inrespect of notices under the Surtax Act. ” v. Additional Commissioner of Income-Tax vs. Ganeshilal Lal Chand [1985] 154 ITR 274 [Rajasthan]“We have heard Mr. Surolia on behalf of theDepartment and Mr. Ranka on behalf of the assessee. Wehave perused the reasons recorded by the ITO forreopening the assessment. In our view, the ITO failedto give any reason that there was any failure oromission of the assessee to disclose fully and trulyall the material facts at the time of making theoriginal assessment. In the absence of such findingrecorded by the ITO, he had no jurisdiction to reopenthe assessment under s. 147(a) of the Act. It is wellsettled that even if there was any oversight or mistakeor inadvertence in making the original assessment, itdoes not empower any ITO to reopen the assessment unders. 147(a) of the Act. A catena of decisions have beencited by Mr. Ranka in support of the view taken above.They are: (1) Chhugamal Rajpal v. S.P. Chaliha[1971] 79 ITR 603(SC), (2) CIT v. Burlop Dealers Ltd.[1971] 79 ITR 609(SC), (3) Sheo Nath Singh v. AAC of IT[1971] 82 ITR 147(SC), (4) Gemini Leather Stores v. ITO[1975] 100 ITR 1(SC), (5) Parashuram Pottery Works Co. Ltd. v. ITO[1977] 106 ITR 1 (SC), (6) Indian and Eastern NewspaperSociety v. CIT[1979] 119 ITR 996 (SC), and (7) GeneralMrigendra Shum Sher Jung Bahadur Rana v. ITO[1980] 123ITR 329 (Delhi).” (AP) (1) Chhugamal Rajpal v. S.P. Chaliha[1971] 79 ITR 603(SC), (2) CIT v. Burlop Dealers Ltd.[1971] 79 ITR 609(SC), (3) Sheo Nath Singh v. AAC of IT[1971] 82 ITR 147(SC), (4) Gemini Leather Stores v. ITO[1975] 100 ITR 1(SC), (5) Parashuram Pottery Works Co. Ltd. v. ITO[1977] 106 ITR 1 (SC), (6) Indian and Eastern NewspaperSociety v. CIT[1979] 119 ITR 996 (SC), and (7) GeneralMrigendra Shum Sher Jung Bahadur Rana v. ITO[1980] 123ITR 329 (Delhi).” (AP) “In our opinion, the last portion of the passagequoted above has a bearing on the facts of this case,viz., that it was not for the assessee to point out thevarious possible inferences which could be drawn fromthe primary facts which he had disclosed. His duty isto disclose the primary facts and leave it to theIncome-tax Officer to draw the appropriate inference.If, at the time of the original assessment, the Income-tax Officer could have reached a different conclusion,i.e., different from the one which he actually reachedon the earlier occasion, it would not be open to him toresort to section 147(a) merely on the ground thatsubsequently he came to regard as erroneous theconclusion which he had earlier reached. The facts ofthecasein PoonjabhaiVanmalidasandSons v. Commissioner of Income-tax, [1974] 95 ITR 251(Guj) illustrate this aspect of the legalposition. It may be pointed out that, in the recentdecisionin ParashuramPotteryWorksCo.Ltd. v. Income-tax Officer, [1977] 106 ITR 1, theSupreme Court has reiterated the same legal position and it is clear from this latest decision that thelegal position is the same as was summarised by theFull Bench of the Gujarat High Court in PoonjabhaiVanmalidas and Sons v. Commissioner of Income-tax,[1974] 95 ITR 251. In Parashuram Pottery Works Co.Ltd. v. Income-tax Officer, [1977] 106 ITR 1 (SC), itwas held by the Supreme Court that where, in workingout the figures of depreciation for certain items ofcapital assets, the Income-tax Officer lost sight ofthe fact that the aggregate of the depreciation,including the initial depreciation allowed under thedifferent heads, could not exceed the original cost tothe assessee of these items of capital assets, theassessee cannot be held responsible for the remissnesson the part of the Income-tax Officer in not applyingthe law contained in proviso (c) to section 10(2)(vi)of the Indian Income-tax Act, 1922, and it cannot besaid that excess depreciation allowed because of themistake in the calculation of the depreciation, wasallowed and income escaped assessment because of theassessee's omission or failure to disclose fully andtruly all material facts and no action can be taken forreopening the assessment under section 147(a) of theIncome-tax Act, 1961, on the basis of detection of thatmistake alone after the expiry of four years from theend of the assessment year.” vii. CIT Vs. BhanjiLavji 79 ITR 582 (SC)The Income Tax Officer may, if he is satisfied,that on account of failure on the part of the assesseeto disclose fully and truly all material factsnecessary for the purpose of assessment, income hasescaped assessment, he may assess or re-assess theincome. But when the primary facts necessary forassessment are fully and truly disclosed, he is notentitled on change of opinion to commence proceedingsfor re-assessment. The Income Tax Officer was apprisedof all the primary facts necessary for assessment, andhe proceeded to “drop the assessment proceedings”. Hemay have raised a wrong legal inference from the factsdisclosed but on that account he was not competent tocommence re-assessment proceedings under Section 34(1)(a) for the two Assessment Years 1947-48 and 1948-49.”viii. Mohini Bai M.Sarda Vs. First ITO [1991] 190 ITR541 [Karnataka] “On the other hand, the law that is well settledis that the burden is on the Department to show thatthe escapement has occurred on account of the failureon the part of the assessee to disclose the fullparticulars of the income. The other aspect of the case is, whether the Income-tax Officer had reason tobelieve that the escapement had occurred on account ofthe omission or failure on the part of the assessee.The formation of belief must have a nexus to thefailure of the assessee to disclose true and fullparticulars as held by the Supreme Court in BhanjiLavji's case[1971] 79 ITR 582. It is sufficient if theassessee has disclosed all the primary facts and anyfurther enquiry or investigation that is called forshould be done by the Income-tax Officer. On the factsof the present case, it is clear that the informationfurnished by the petitioner in Part III of the returnswas sufficient for the Income-tax Officer to enquirefurther into the matter and to take steps to includethe income accruing to the minors in the assessment ofthe petitioner. This was a clear case of failure on thepart of the Income-tax Officer rather than theassessee.” (g) The petitioner further submitted that though astatutory amendment had been made in section 148 of the IncomeTax Act w.e.f.01.04.1989, however, the Apex Court in 320 ITR561, while affirming the judgment of Delhi High Court in thecase of CIT Vs. Kelvinator of India Ltd., reported in 256 ITR 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 the Department, 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 hereinbelowthe 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) (h) 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 bepassed 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) (i) 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: “In the facts of the present case, there isnothing new which has come to the notice of theRevenue. The accounts had been furnished by thepetitioner 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 case “In the facts of the present case, there isnothing new which has come to the notice of theRevenue. The accounts had been furnished by thepetitioner 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 case is 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) (j) 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. (k) 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 in para 10, are closely read, there has been no failure onthe part of the petitioner to have disclosed fully and truly allmaterial fact, available on record of the AO as is mandated bythe Apex Court in its judgment above, so obliged to haveexamined as to whether the tax deducted at source by thepetitioner was on such income and was subjected to tax in thehands of the recipient under Section 44BB or under Section 44Dof the Act. It is submitted that in so far as the present caseis concerned, undisputedly right from the inception i.e., fromthe assessment year even prior to AY 2002-03, petitioner hadbeen deducting tax at source on income which fell under Section44BB which had to be accepted by the AO. Incidentally, it issubmitted that the Apex Court in its judgment in Oil & NaturalGas Corporation Limited Vs. CIT reported in 376 ITR 306 datedJuly 01, 2015 has also held that such income is liable to betaxed under Section 44BB of the act and not under Section 44D of the Act as was opined in the reasons, as a result of change ofopinion by the respondent. Thus, the law declared by the ApexCourt is that such sum which had been remitted by its was onlyliable to be deducted tax at source under Section 44BB of theAct. That the petitioner had disclosed the amount remitted andthe amount of tax deducted at source which has also not beendenied by the respondent. In view thereof, without narrating thejudgments, the petitioner submitted that there has been noescapement of income and no failure on the part of the assesseeto have disclosed fully and truly all material facts and as suchthe assumption of jurisdiction under Section 147 of the Act bythe respondent per-se is without jurisdiction and is thusarbitrary. Indeed, it has not been stated by the respondent thatthe assessee had failed to disclose fully and truly all materialfacts. In support, the petitioner relied on the followingjudgments: 1. New Delhi Television Ltd., Vs. DCIT (2020) 424 ITR 607(SC) 2. Bharti Infratel Ltd., Vs. DCIT [2019] 101 taxmann.com 285 (Delhi) 3. CIT Vs. City Union Bank Limited (2019) 264 Taxman 204 (Mad) (HC) 4. PCIT Vs. L&T Ltd., (2020) 268 Taxman 390 (SC) (l) That even if for the sake of an arguments, it is heldthat an error had been committed by the respondent then too, thesame error would not allow the respondent to assume jurisdictionto initiate proceedings under Section 147 of the Act. It hasbeen held in the following judicial pronouncement that anyremissness, error, or mistake does not allow the respondent toassume jurisdiction under Section 147 of the Act, moreparticularly in the case wherein the proceedings have beeninitiated beyond a period of four years from the end of theassessment year. i.CIT Vs. BhanjiLavji 79 ITR 582 (SC) ii. Mohini Bai M.Sarda Vs. First ITO 190 ITR 541(Karnataka)iii. Fenner India Limited. Vs. DCIT 241 ITR 672(Mad) iv. CIT Vs. Indian Sugar & General Industries 303 ITR 155(Delhi) v. Gordon Woodroffe & Co.Ltd., Vs. ITO 51 ITR 12(Mad)vi. Gemini Leather Store. Vs. Income-Tax officer 100 ITR 1 (SC) vii. Parashuram Pottery Works Co., Ltd. Vs. ITO 106 ITR 1 (SC) viii. Techman Buildwell (P) Ltd., Vs. Assistant Commissionerof Income -Tax 370 ITR 771 (Delhi)ix. Indian And Eastern Newspaper Society, Vs. Commissionerof Income Tax, New Delhi – 119 ITR 996 (SC) x. Chemicals and Fibres of India Limited vs. M.K.N.Pillai and another 146 ITR 280 (Bom) xi. Addl.Commissioner of Incometax Vs. Ganeshilal Lal Chand154 ITR 274 (Rajasthan) xii. ITO Vs. Sirpur Papers Mills Ltd., 113 ITR 393 (AP) (m) The petitioner further submitted that on identical factsin the case of petitioner alone for the AY 2002-03 on identicalreason (pg.310 of Typed Set), the Hon'ble Madras High Court byits judgment dated 29.10.2011 (pg.32-43 of case law compilation)had quashed the initiation of proceedings inter-alia on theground that there had been no omission or failure to disclosefully and truly all material facts and otherwise too, theinitiation of proceedings under Section 147 of the Act wasbeyond jurisdiction. It is submitted the reasons to initiateproceeding in the said case are absolutely identical and thefacts are also identical. It is thus submitted that theallegation in the reasons to believe that there had been adeduction of tax @ 4% as against the higher rate of taxation maybe an opinion of the succeeding AO who is said to have recordedthe reasons to believe, but in the said reas