Income Tax Appeal v. Mr. Anjay Kothari, For The

INCOME TAX APPEAL No. 20 of 2006 C I T JODHPUR V/S SMT. JYOTI DEVI PRESENT HON'BLE SHRI N P GUPTA,J.HON'BLE SHRI KISHAN SWAROOP CHAUDHARI,J. Mr. KK BISSA, for the appellant. Mr. ANJAY KOTHARI, for the respondent BY THE COURT : (PER HON'BLE GUPTA,J.) This appeal has been filed by the Revenue againstthe judgment of the learned Tribunal dt. 24.9.2004. The appeal was admitted vide order dt. 9.3.2006by, framing the following substantial questions of law:- “1. Whether in the facts and circumstances of the casewhen for assessment year 1991-92 the originalassessment was made under Sec. 143-(1)(a), could resortto proceedings under Sec. 147 be termed as based onmere change of opinion. 2. Whether the resort to Sec. 147 could be taken if theassessing officer fails to make resort to regularassessment under Sec. 143 within the time permittedafter assessment was made under Sec. 143-(1)(a).” The necessary facts are, that the present assesseefiled a return on 12.7.1991, which was processed underSection 143(1)(a) on 27.9.1991, and a refund of Rs. 515/-was issued to the assessee. Subsequently on 26.3.1997, anotice under Section 148 was issued, as the assessingofficer was of the opinion, that there was under assessmentof income, inasmuch as the depreciation claimed by theassessee on tractor, which are agricultural implement, andwas allowed to the assessee, whereas it is agriculturalimplement, and any deduction whatsoever, if any admissible,is admissible against the agricultural income. In responseto this notice a return was filed, and the learnedAssessing Officer made best judgment vide order dt.22.12.1998, and held, that the assessee has claimeddepreciation on two tractors owned by her on the groundthat she has income from tractor hiring while there is noevidence that the tractor was ever plied for commercialpurposes, and that the tractor is an agricultural machinery, and the assessee having utilised the same foragricultural purposes, she is not entitled to depreciationagainst the other business income of the assessee.Consequently claim of depreciation was held to beinadmissible, and was disallowed. Against this order, appeal was filed before theCommissioner by the assessee, and the learned Commissioner in para 5.2 has found as under:- “The AO had briefly discussed the reasons forinitiating proceedings u/s 148 in the asstt. order. Ithas been mentioned by him that a notice u/s 148 wasissued on 26.3.1997 as he had found that there wasunder-assessment of income as much as depreciation onTractors, which are agricultural implement, was claimedand allowed to the appellant whereas any deductionwhatsoever if admissible, is admissible againstagricultural income.” The learned Commissioner referred to the judgmentof Hon'ble the Supreme Court, in C.I.T. Vs. Bhanji Lavji,reported in 79 I.T.R.-582, wherein it was held, that whenthe primary facts, necessary for assessment are fully andtruly disclosed, the ITO will not be entitled on change ofopinion to commence proceedings for reassessment.Similarly, if he has raised a wrong legal inference fromthe facts disclosed, he will not, on that account, becompetent to commence reassessment proceedings. Interalia on these premises it was found, thatthe I.T.O. was not justified in reopening the alreadycompleted assessment, and there did not exist any reasonwhatsoever for forming the belief, that there was anyincome chargeable to tax has escaped assessment. Full factsin respect of depreciation on tractors were disclosed inthe original return, which was processed under Section 143(1)(a), after compliance of deficiency letter, and that,merely after re-appreciation of relevant facts on record, Interalia on these premises it was found, thatthe I.T.O. was not justified in reopening the alreadycompleted assessment, and there did not exist any reasonwhatsoever for forming the belief, that there was anyincome chargeable to tax has escaped assessment. Full factsin respect of depreciation on tractors were disclosed inthe original return, which was processed under Section 143(1)(a), after compliance of deficiency letter, and that,merely after re-appreciation of relevant facts on record, which were already there while furnishing original return,had issued the notice under Section 148, which was nothingbut a change of opinion. Learned Commissioner also recordedthat he had seen the reasons given by the learned AO forinitiating re-assessment proceedings before issuance ofnotice under Section 148, and the learned Commissioner wasof the view, that the AO was not justified in reopening thealready completed assessment, as there was no reason forhim to take such an action, there were no sufficientreasons with the AO to hold, that income chargeable to taxhad escaped assessment. It was noticed that after filingoriginal return AO found some deficiencies, for whichdeficiency letter was issued, which was duly replied, andevidence was submitted. Then, after satisfied reasonably,processed the return; It goes to show, that thereby the AOwas satisfied with the claim of the assessee in respect ofdepreciation on tractors to be legally correct. Thereafterreopening exercise has been undertaken, only on the basisthat depreciation was wrongly claimed, and allowed, whichis but a change of opinion. On this basis initiation ofreassessment proceedings was not held to be justified.Learned Commissioner also relied upon the other judgments,including one of this Court also being Addl. CIT Vs.Ganeshilal Chand, reported in 154 I.T.R.-274. Consequently,the appeal was allowed, and the re-assessment proceedingwas quashed. Aggrieved of this order the Revenue filed appeal,and the assessee also filed protective appeal. The learnedTribunal by the impugned order found, that the AssessingOfficer was not justified in opening the already completedassessment in the absence of valid reasons for reopening.It was found, that there was no evidence on record, whichcould justify, that income chargeable to tax had escapedassessment, particularly when such depreciation was allowedin the past, and it was found that in subsequent years alsoit was allowed. Thus, it was found that reopening of theassessment, only on the basis for depreciation was wronglyclaimed and allowed, was nothing but a mere change ofopinion, which cannot be a basis for initiating actionunder Section 148. The learned Tribunal also relied uponthe judgment of Hon'ble the Supreme Court in CIT(A) Vs.Bhanji Lavji's case. Thus, the appeal of the Revenue wasdismissed, and the appeal of the assessee being onlyprotective, was also dismissed. Assailing the impugned order it was contended,that the question of sufficiency of reasons for initiationof reopening proceedings could not be gone into by thelearned Commissioner, and the learned Tribunal, as it was amatter of subjective satisfaction of the concernedAssessing Officer, and for this purpose reliance was placedon Phool Chand Bajrang Lal Vs. I.T.O., reported in 203 ITR-456. On the other hand, the learned counsel for theassessee supported the impugned order, and contended, asfound by the learned Commissioner, and the Tribunal, thatthere was no material on the basis of which any beliefcould be framed for initiating proceedings under Section148. We have considered the submissions, and have gonethrough the impugned order of the learned Commissioner, andthe learned Tribunal. Assailing the impugned order it was contended,that the question of sufficiency of reasons for initiationof reopening proceedings could not be gone into by thelearned Commissioner, and the learned Tribunal, as it was amatter of subjective satisfaction of the concernedAssessing Officer, and for this purpose reliance was placedon Phool Chand Bajrang Lal Vs. I.T.O., reported in 203 ITR-456. On the other hand, the learned counsel for theassessee supported the impugned order, and contended, asfound by the learned Commissioner, and the Tribunal, thatthere was no material on the basis of which any beliefcould be framed for initiating proceedings under Section148. We have considered the submissions, and have gonethrough the impugned order of the learned Commissioner, andthe learned Tribunal. Before proceeding further we would like to dealwith the judgment rendered in Phool Chand Bajrang Lal'scase. That is a case on its own facts, inasmuch as in thatcase, after completion of assessment for the assessmentyear 1963-64 to 1968-69, accepting the genuineness of theloan, and allowing deduction of the interest, the Incometax Officer having jurisdiction to assess the Calcuttacompany, informed the Income-tax Officer at Azamgarh, by aletter dated 7.7.1970, that the managing director of thatcompany had made a confession, to the effect, that thecompany was only a name-lender, and had never advanced anyloans to any person, and this was accepted in theassessments of the company for the assessment years 1962-63to 1964-65, and it was after receipt of this letter, thatthe Income-tax Officer, Azamgarh issued notices to the assessee for reassessment under section 147(a), on theground, that income had escaped assessment to tax, as aresult of the failure of the appellant to fully and trulydisclose material facts. On these facts it was found, thatthere it is not a case of mere change of opinion, or thedrawing of a different inference from the same facts, aswere earlier available, but acting on fresh informationcoming to the notice of the Assessing Officer subsequently,which led to form a requisite belief that the incomechargeable to tax had escaped assessment. In thisbackground it was held, that sufficiency of reasons forforming the belief is not for the court to judge. The precise question, therefore is, as to whetherin the present case, any subsequent information, ormaterial have come to the notice of the Assessing Officer,to enable him to form a requisite belief, that anyparticular income has escaped assessment, which was liableto be assessed, and apart from the fact, that as found bythe learned Commissioner, and the learned Tribunal, thatthere was no subsequent information, or fresh material, weagain pointedly asked the learned counsel for the Revenueto point out, as to how these findings are wrong, and toshow even to us, if there is any material, which might havecome to the notice of the Assessing Officer subsequently,but the learned counsel for the Revenue could not point outany one. That being the position, in our view, it wasrightly found by the learned Commissioner, and the learnedTribunal, that it was merely a change of opinion on thepart of the learned Assessing Officer, about admissibilityof claim of depreciation on tractors, and in view of thejudgment of Hon'ble the Supreme Court, in C.I.T. Vs. BhanjiLavji's case, the Assessing Officer could not initiate re-assessment proceedings. In view of the above, question no. 1 is answeredagainst the Revenue, and it is held, that in thecircumstances of the case, the resort to proceedings underSection 147, was out come of mere change of opinion. So faras question no. 2 is concerned, in our view it does notarise in the present case, because it is not a case here,that the Assessing Officer has failed to make regularassessment within the time permitted, after assessmentunder Section 143(1)(a). Thus, we do not find any force in the appeal, andthe same is, therefore, dismissed. ( KISHAN SWAROOP CHAUDHARI ),J. ( N P GUPTA ),J. /Sushil/