Niko Resources Ltd v. Assistant Director Of Income Tax

C/SCA/7307/2013 CAV JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 7307 of 2013 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MS JUSTICE SONIA GOKANI ================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ?the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ?judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ?to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ NIKO RESOURCES LTD....Petitioner(s) Versus ASSISTANT DIRECTOR OF INCOME TAX....Respondent(s) ================================================================ Appearance: MR SAURABH SOPARKAR, SR. ADV. with MR B S SOPARKAR, ADVOCATE for the Petitioner(s) No. 1MR MR BHATT, SR. ADV. with MRS MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 1 NOTICE SERVED for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE M.R. SHAH andHONOURABLE MS JUSTICE SONIA GOKANI Date : 25/07/2014 CAV JUDGMENT (PER : HONOURABLE MS JUSTICE SONIA GOKANI) 1.This petitioner challenges the notice of reopening dated 30.3.2012 issued by respondent for reopening under section 148 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). The petitioner is the non-resident company registered under the laws of Canada and derives income from the business of exploration, prospecting, production and marketing of natural gas and mineral oil. It entered into an agreement dated 23.9.1994 with GPCL, a company incorporated under the laws of India for production sharing contracts with the Government of India for exploration and extraction of mineral oil and natural gas in certain fields situated in the State of Gujarat. The petitioner, therefore, earned income that accrues and arises in India and is subject to taxation in India. 2.The return of income under section 139 of the Act was filed by the petitioner on 29.10.2005 for the assessment year 2005-06 declaring total income as “nil” along with Tax Audit Report. The petitioner paid tax under section 115JB of the Act. 3.The return of the petitioner was taken under scrutiny assessment under section 143(1) of the Act and notice issued under section 143(2) was duly served upon the assessee. The questionnaire was supplied along with notice under section 142(1) to the petitioner and pursuant to such notice, requisite details were furnished by the petitioner. A letter was issued dated 8.1.2007 requiring the petitioner to furnish all details of depreciation claimed along with items purchased and put to use. Petitioner replied to such specific query as also stated that any supporting document that may be called for at the time of hearing shall be produced being voluminous in nature. 4.The respondent passed the assessment order under section 143(3) of the Act on 30.12.2008 where various deductions claimed by the petitioner assessee were considered, disallowing the depreciation claimed on well and pipelines and allowing the rest of the claims of depreciation. 5.It appears that respondent issued the impugned notice under section 148 dated 30.3.2012 seeking to reopen the assessment of the petitioner assessee for the Assessment Year 2005-06. 4.The respondent passed the assessment order under section 143(3) of the Act on 30.12.2008 where various deductions claimed by the petitioner assessee were considered, disallowing the depreciation claimed on well and pipelines and allowing the rest of the claims of depreciation. 5.It appears that respondent issued the impugned notice under section 148 dated 30.3.2012 seeking to reopen the assessment of the petitioner assessee for the Assessment Year 2005-06. 6.The reasons for reopening on asking were supplied to the petitioner on 26.12.2012, nearly 9 months after the issuance of the notice. Such grounds are as under: “Assessee a non-resident company filed its return of income on 31/10/2005 declaring ‘nil’ income and paid tax under section 115JB of the Act. The case was completed under section 143(3) of the Act on 30/12/2008 determining total income for Rs.15,18,91,760/-. It was observed from the depreciation chart filed along with Form 3CD that assessee had claimed and was allowed depreciation of Rs.25,97,14,874/- @ 25% on construction of “offshore Platform” valued Rs. 1038859497/-, depreciation at the rate of 25% was admissible for Plant and Machinery. According to Section 32 read with Rule 5 of Income Tax, depreciation on Plant & Machinery is admissible @ 15% whereas on Building @ 10% from A.Y. 2006-07. Offshore Platform is not exclusively a plant and machinery. It is raised area/stage on which plant and machinery alongwith various monitoring and dwelling units are installed. Three key features tend to make an offshore platform are :(1) The Modules-large pre-built units that include accommodation, production and drilling zones, (2) The Jacket- An intricate ‘spiders web’ of steel piles, beams and triunions combine to provide a formidable foundation which the entire platform sits and (3) Derrick-Usually the highest point on the platform. In this area the drilling is carried out. Offshore Platforms are also not ‘oil rig’. It is usually termed as oil platform or offshore platform/offshore installation for the structure as a whole. Oil Rig actually means the part of the platform where the drill crew operates from, whereas there is a lot more to the structure than just the derrick area. This being due to the fact that an offshore platform is usually one that is permanently fixed to the sea bed. Thus, Offshore Platform is not a plant and machinery in itself. It consists of dwelling units, production units and drilling area. The plant and machinery are installed on such Offshore Platform. Offshore Platform could therefore, correctly be classified under the Block of assets “Building” only. Thus, depreciation was correctly allowable on Offshore Platform @ 10% applicable to “Building”. Accordingly, the assessee was entitled for depreciation of Rs.103885950/-(10% of Rs.1038859497/-) and this excess depreciation of Rs.155828924/- resulted in underassessment of income of Rs.155828924/-. Therefore I have reason to believe that income to the tune of at least Rs.155828924/- has escaped assessment in case of the assessee for AY 2005-06. Issue notice u/s 148 read with section 147 of the IT Act 1961.” 7.Objections were raised by the petitioner, objecting to the reopening of the assessment, contending inter alia that the assessment beyond the period of 4 years from the end of the relevant assessment year is not permitted statutorily when the assessee has disclosed fully and truly all material facts necessary for the assessment. It is also further contended that the original assessment was completed on scrutiny assessment and admittedly as the assessment was completed on 31.3.2006, the case of the assessee company falls under 1st proviso to section 147 of the Act, for such reopening is on expiry of 4 years period from the end of the relevant assessment year. On merits, it was contended as under:- 7.Objections were raised by the petitioner, objecting to the reopening of the assessment, contending inter alia that the assessment beyond the period of 4 years from the end of the relevant assessment year is not permitted statutorily when the assessee has disclosed fully and truly all material facts necessary for the assessment. It is also further contended that the original assessment was completed on scrutiny assessment and admittedly as the assessment was completed on 31.3.2006, the case of the assessee company falls under 1st proviso to section 147 of the Act, for such reopening is on expiry of 4 years period from the end of the relevant assessment year. On merits, it was contended as under:- “1.5The primary information on depreciation claimed under section 32 was submitted with the return of income along with the Tax Audit Report (TAR). More so this information was specifically called for during the course of assessment proceedings. The following may please be noted:- *In the Return of Income, vide annexure 2, it has been mentioned that tax depreciation claim has been made as per Section 32 of the Act and the amount of depreciation claim as per Clause 14 of the TAR. *Clause 14 of TAR refers to Enclosure II wherein under the ‘Fixed Assets’ caption entry of ‘Offshore Platform’ is distinctly and separately mentioned with Nil opening balance an addition of Rs.1,038,859,497 along with other numbers corresponding to their respective details like deletion during the year, total as on 31 March 2005, depreciation rate, total depreciation and closing written down value (WDV). The total depreciation claimed on offshore platform of Rs.157,867,098 is also mentioned in the line entry. *During the course of assessment, the assessing officer has in his notice dated 8 Jan 2007 vide point no.5 asked for the full details of depreciation claimed alongwith items purchased and put to use. *In reply to the notice dated 8 Jan 2007, the company in its submission dated 6 July, 2007 has mentioned vide point no.5 that the company has made the depreciation claim as per Annexure 3 and additions to asset are as per Annexure 4. It would be pertinent to note that Annexure 4 was fieldwise depreciation in which fieldwise particulars of all assets like the opening block, additions/deletions made during the year, total depreciation claimed and the closing WDV were tabulated.” 8.These objections were rejected by a detailed order dated 26.2.2013 essentially on the ground that Explanation 1 to section 147 notes that production of accounts books or other evidence from which material evidence with due diligence have been discovered by the Assessing officer, would not amount to disclosure. It also further notes that mere production of accounts and other documents since cannot be termed as disclosure, the Assessing Officer cannot be said to have formed any opinion based on the facts that documents containing entries about the issue under consideration were not filed during the course of assessment proceedings. Thereafter on 15.3.2013, a draft of proposed reassessment order was prepared. 9.Aggrieved petitioner has preferred present petition, seeking the following prayers :- “7(aa) To quash and set aside the impugned assessment order under section 144C(1) r.w.s. 147 r.w.s. 143 at Annexure A1” 7(bb) Pending the hearing and final disposal of the petition to stay the implementation and operation of the order at Annexure A1 and refrain the respondent from initiating recovery proceedings against the petitioner pursuant to the said order.” 10.On issuance of notice, the respondent filed the affidavit- Thereafter on 15.3.2013, a draft of proposed reassessment order was prepared. 9.Aggrieved petitioner has preferred present petition, seeking the following prayers :- “7(aa) To quash and set aside the impugned assessment order under section 144C(1) r.w.s. 147 r.w.s. 143 at Annexure A1” 7(bb) Pending the hearing and final disposal of the petition to stay the implementation and operation of the order at Annexure A1 and refrain the respondent from initiating recovery proceedings against the petitioner pursuant to the said order.” 10.On issuance of notice, the respondent filed the affidavit- in-reply through the Deputy Director of Income-tax (International Taxation), inter alia, contending that there is an alternative efficacious remedy available by way of appeal to the Commissioner of Income Tax (Appeals) and thereafter to the Income-Tax Appellate Tribunal as per the provisions of the Act, therefore, present petition is not maintainable. 10.1 It is further contended that submissions made by the assessee on 6.7.2007 does not refer to the depreciation on specific items nor had the Assessing Officer raised an query on depreciation of any specific items in the notice referred to by the petitioner. Moreover, Annexure-3 attached to the reply of the assessee referred to the depreciation chart in Tax Audit Report. However, that itself did not contain details of depreciation. Therefore, it will be wrong to say that the Assessing Officer applied his mind at the stage of assessment proceedings. As also to the reply submitted by the assessee, the Assessing Officer also does not contend any discussion of depreciation on offshore platform. In short, it is contended that when the issue of depreciation on offshore platform was never examined by the Assessing Officer, during the course of assessment proceedings, the Assessing Officer cannot be said to have applied his mind at the stage of assessment proceedings. 10.2 It is further contended that the issue of depreciation on offshore platform was never examined at any stage of assessment. The detailed submission in relation to the depreciation was only the chart as per the Tax Audit Report, listing the items on which different rates were applied. It would not be possible to comment on correct rate of depreciation on an asset as offshore platform was a complex issue, unless fully examined by the Assessing Officer after all the necessary details are furnished. From the Finance Act, 2003, building, furniture and fixtures have been excluded from the meaning of the term plant under section 43(3) of the Act. Therefore, from Assessment Year 2004-05 onwards, buildings were excluded from the definition of the term plant as the offshore platform is a complex structure having residential units also for operations on Board. It is not correct to say that all these material facts were disclosed by the assessee at the time of assessment. Therefore, it is denied that the Assessing Officer at the time of scrutiny assessment under section 143(3) of the Act had already examined this issue. 10.3 It is therefore contended that no opinion was formed by the Assessing Officer during the assessment proceedings and hence, notice of reopening is not on account of any change of opinion. The assessee, in fact, according to the respondents, has presumed on the basis of the facts that the documents were supplied during the assessment proceedings and, therefore, the Assessing Officer must have considered it. Reliance is placed on the decision of Delhi High Court rendered in the case of Commissioner of Income-Tax vs. Usha International Ltd reported in [2012] 348 ITR 485 (Delhi) wherein on a particular subject matter entry or claim had not been examined by the Assessing Officer, it was held that there cannot be deemed formation of opinion. 10.3 It is therefore contended that no opinion was formed by the Assessing Officer during the assessment proceedings and hence, notice of reopening is not on account of any change of opinion. The assessee, in fact, according to the respondents, has presumed on the basis of the facts that the documents were supplied during the assessment proceedings and, therefore, the Assessing Officer must have considered it. Reliance is placed on the decision of Delhi High Court rendered in the case of Commissioner of Income-Tax vs. Usha International Ltd reported in [2012] 348 ITR 485 (Delhi) wherein on a particular subject matter entry or claim had not been examined by the Assessing Officer, it was held that there cannot be deemed formation of opinion. 11.Affidavit-in-rejoinder has been filed denying all these contentions. It is emphasized that there was no failure on the part of the petitioner to disclose truly and fully all material facts. 11.1 According to the petitioner it had specifically provided the details of depreciation vide communication dated 6.7.2007 as is evident from Annexure-C. This annexure refers to the claim of depreciation as per the clause 14 of the Tax Audit Report, which was also before the respondents at the time of original assessment. It is further contended that in the original assessment order, the respondent disallowed the depreciation claimed on wells and pipelines. Therefore, it can be assumed that he had applied his mind. The petitioner has disclosed fully and truly all material facts pertaining to the depreciation in response to the specific queries and, therefore, the respondent has exercised his jurisdiction in an unjustified and illegal manner. The offshore platform is nothing but a plant and machinery and separate part of plant and machinery cannot be singled out for the purpose of depreciation. It is highly technical plant and machinery consisting of different parts. 11.2 It is further contended that the petitioner has sought extension of time to make submissions on merits. However, the respondent finalized the assessment and passed an order under section 144C(1) read with section 143(3) and section 147 of the Act. It is alleged to be in breach of principles of natural justice. 12.We have heard learned Senior Counsel Mr. Saurabh Soparkar for the petitioner assessee. He fervently urged that the petitioner company during the original assessment as well as in the scrutiny assessment has disclosed fully and truly all material facts. The reasons recorded by the Assessing Officer also do not contain any such allegations that there is any failure on the part of the assessee to disclose truly and fully any material facts. He urged that the impugned notice was sought to reopen the assessment beyond the period of 4 years. The law on the subject is absolutely clear. It is not even alleged in the reasons recorded that there was any failure on the part of the assessee. He has heavily relied upon the decision of this Court rendered in the case of Gujarat Lease Financing Limited vs. Deputy Commissioner of Income-tax Circle-4, Ahmedabad reported in [2013] 219 Taxmann 70 (Gujarat), wherein extensively the law on the subject is detailed, after discussing the law at length. 12.1 Learned counsel further submitted the reasons recorded 12.1 Learned counsel further submitted the reasons recorded for reopening of the assessment do not reveal anywhere that there is any failure on the part of the assessee to disclose fully and truly any material facts. What is mentioned is that the assessee has claimed and has allowed the depreciation at the rate of 25% on construction of offshore platform and depreciation at the rate of 25% was admissible on plant and machinery and according to section 32 of the Act read with Rule 5 of the Income Tax Rules,1962(hereinafter referred to as “the Rules”), depreciation on plant and machinery is admissible at the rate of 15% whereas on building, it would be at the rate of 10% for Assessment Year 2006-07. Offshore platform since is not exclusively on plant and machinery on which various monitoring or dwelling units were installed, three key features would make the offshore platform (1) the Modules- large pre-built units that include accommodation, production and drilling zones (2) The Jacket- an intricate ‘spiders web’ of steel piles, beams and triunions combine to provide a formidable foundation on which the entire platform sits and (3) Derrick is usually the highest point on the platform wherefrom drilling is carried out. It further mentioned that the offshore platform which is not a plant and machinery in itself consists of dwelling units and three drilling areas and thus plant and machineries are installed on offshore platform. Therefore, offshore platform can be classified under the block of assets ‘building’ only and the depreciation correctly allowable was only 10%, applicable to the buildings. Therefore, it is depreciation according to the petitioner. 12.2 Learned counsel further argued that if there was any further query, the Assessing Officer could have raised the same while finalizing the scrutiny assessment during the course of assessment, the Assessing Officer in his notice dated 8.1.2007 had asked for full details of depreciation claimed along with items purchased and put to use and the company had made the submissions disclosing all the details and field-wise depreciation at Annexure-4 was furnished which gave particulars of all assets like opening block, additions/deletions made during the year, total depreciation claimed and the closing WDV etc. Thus all primary facts were disclosed for claiming depreciation under section 32 in the submission made to the Assessing Officer during the course of scrutiny assessment. Therefore, the question of non-disclosure of primary facts in respect of deduction claimed under section 32 would not arise. He further urged that this is not the case where from the production of account books and other material evidence with due diligence material evidence could not have been discovered by the Assessing Officer. 13.Per contra, learned Senior Advocate Mr.Bhatt appearing for the Department has urged that nomenclature of offshore platform would not be sufficient disclosure. Attention of the Assessing Officer was not drawn by the petitioner as to what exactly offshore platform contains. This being a highly technical subject and when huge amount of tax has escaped the assessment for not having exclusive knowledge on the part of the assessee as he alone would be in a position to state as to for what purpose it is being used, the Assessing officer would not be in a position to make out intricacies. He has relied upon the decisions rendered in the following cases:- 1.Calcutta Discount Co.Ltd. vs. Income-Tax Officer, Companies District-I, Calcutta and another reported in [1961] 41 ITR 191(SC). 2.Indo-Aden Salt Mfg. & Trading Co.P.Ltd. vs. Commissioner of Income-Tax, Bombayreported in [1986]159 ITR 624. 3.Dishman Pharmaceuticals and Chemicals Limited vs. Deputy Commissioner of Income-Tax (OSD) (No.1) reported in [2012]346 ITR 228(Guj). 4.Associated Stone Industries (Kotah) Ltd. vs. 1.Calcutta Discount Co.Ltd. vs. Income-Tax Officer, Companies District-I, Calcutta and another reported in [1961] 41 ITR 191(SC). 2.Indo-Aden Salt Mfg. & Trading Co.P.Ltd. vs. Commissioner of Income-Tax, Bombayreported in [1986]159 ITR 624. 3.Dishman Pharmaceuticals and Chemicals Limited vs. Deputy Commissioner of Income-Tax (OSD) (No.1) reported in [2012]346 ITR 228(Guj). 4.Associated Stone Industries (Kotah) Ltd. vs. Commissioner of Income-Tax reported in [1997] 224 ITR 560 (SC). 14.In affidavit-in-rejoinder, learned Senior Advocate Mr. Soparkar urged that pursuant to the notice issued during the scrutiny assessment, if the Assessing Officer did not have sufficient details and was desirous to get more details, he could have directed to furnish more details when he allowed the assessee’s claim. However, while so doing, he rejected the depreciation on wells and other pipelines. There is sufficient application of mind on the part of the Assessing Officer and, therefore, any subsequent notice in respect of the very same assessment is nothing but change of opinion. 14.1 Learned Senior Counsel urged that out of the total amount of depreciation, Rs.25.97 crores of depreciation was only of this item. It is unlikely that such huge amount would escape the attention of the Assessing Officer. In absence of any further query with regard to offshore platform, this must be held as a review of his own decision and in absence of any averment with regard to non-disclosure of material facts fully and truly at the time of original assessment, the assessee cannot be put to any jeopardy and no jurisdiction would be available with the Assessing Officer, who has sought reopening of assessment beyond the period of four years from the relevant assessment year. 15.Upon thus having heard both the sides, prior to adverting to the specific case of the petitioner assessee, the law on the subject requires a closer scrutiny. Sections 147 and 148 of the Act reads as follows:- “147.If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereinafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section(1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. Provided further that nothing contained in the first proviso shall apply in case where any income in relation to any asset ( including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Provided further that nothing contained in the first proviso shall apply in case where any income in relation to any asset ( including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. “148.(1)Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139: Provided that in a case- (a)where a return has been furnished during the period commencing on the 1[st] day of October, 1991 and ending on the 30[th] day of September, 2005 in response to a notice served under this section, and (b)subsequently a notice has been served under sub-section(2) of section 143 after the expiry of twelve months specified in the proviso to sub-section(2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002(20 of 2002) but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section(2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case- (a)where a return has been furnished during the period commencing on the 1[st] day of October, 1991 and ending on the 30[th] day of September, 2005, in response to a notice served under this section, and (b)subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section(2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice. (2)The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.” reassessment in the event of his having reasonable belief that any income chargeable to tax has escaped assessment for any assessment year. As per the 1[st] proviso to section 147 of the Act, assessment can be reopened under section 147 of the Act after expiry of 4 years only if (1) the assessee failed to make a return under section 139 of the Act or in response to notice issued under section 142(1) or under section 148 of the Act, he failed to disclose truly and fully all material facts necessary for the assessment. Once all primary facts are before the assessing authority, no further assistance is required by way of disclosure. All inference of facts and legal inference need to be drawn by the Assessing Officer. It is not for any one to guide the Assessing Officer in respect of inference “ factual or legal”, which requires to be drawn by him alone. 17.Once the case of the assessee is covered by the 1[st ]proviso to section 147 of the Act, the reassessment proceedings beyond the period of 4 years from the end of the relevant assessment year would be without any jurisdiction and bad in law, if all material facts are furnished and there remained no omission or failure on the part of the assessee to disclose truly and fully all material facts. This Court, after extensively discussing law on the issue in case of Gujarat Lease Financing Limited (supra), has held thus: “10.It can be clearly noted from the reasons recorded that there is no mention at all of the assessee having not disclosed fully or truly material facts which were necessary for the purpose of computing the income of the assessee. Assuming that in the notice for reopening, such wordings are not specifically mentioned and they can be supplemented either while rejecting the objections or by way of affidavit of the Assessing Officer, then also, the revenue has failed to point out as to in what manner there has been non-disclosure on the part of the assessee.” 18.Delhi High Court in the case of Commissioner of Income-Tax vs. Usha International Ltd (supra), has held that the reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situation, it should be accepted that the issue was examined by the Assessing Officer, who did not find any ground or reasons to make additions or he forms an opinion, rejecting the stand of the assessee. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment made, though he had not recorded his reasons. “The expression “change of opinion” postulates formation of opinion and then a change thereof. In the context of assessment proceedings, it means formation of belief by an Assessing Officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection. A distinction mustbedrawnbetweenerroneous application/interpretation/understanding of law and cases where fresh or new factual information comes to the knowledge of the Assessing Officer subsequent to the formation of opinion and then a change thereof. In the context of assessment proceedings, it means formation of belief by an Assessing Officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection. A distinction mustbedrawnbetweenerroneous application/interpretation/understanding of law and cases where fresh or new factual information comes to the knowledge of the Assessing Officer subsequent to the passing of the assessment order. If new facts, material or information comes to the knowledge of the Assessing Officer, which was not on record and available at the time of the assessment order, the principle of “change of opinion” will not apply. The reason is that “opinion” is formed on facts. “Opinion” formed or based on wrong and incorrect facts or which are belied and untrue do not get protection and cover under the principle of “change of opinion”. Factual information or material which was incorrect or was not available with the Assessing Officer at the time of original assessment would justify initiation of reassessment proceedings. The requirement in such cases is that the information or material available should relate to material facts. The expression “material facts” means those facts which if taken into account would have an adverse effect on the assessee by a higher assessment of income than the one actually made. They should be proximate and not have a remote bearing on the assessment. The omission to disclose may be deliberate or inadvertent. The question of concealment is not relevant and is not a precondition which confers jurisdiction to reopen the assessment. Correct material facts can be ascertained from the assessment records also and it is not necessary that the same come from a third person or source, i.e., from the source other than the assessment records. 7.The words “opinion” is derived from the latin word “opinari” which means “to believe”, “to think”. The word “opinion” as per the Black’s Law Dictionary means a statement by a judge or a court of a decision reached by him incorporating cause tried or argued before them, expounding the law as applied to the case and, detailing the reasons upon which the judgment is based. Advanced Law Lexicon by P.Ramanatha Aiyar (third edition) explains the term “opinion” to mean “something more than mere retaining of gossip or hearsay; it means judgment or belief, that is, a belief or a conviction resulting from what one thinks on a particular question... An opinion is a conviction based on testimony... they are as a result of reading, experience and reflection”. 10.We may note that the said decision was not dealing with section 147 of the Act, as amended with effect from April 1, 1989, but was with reference to section 147(b) of the Act under which an Assessing Officer could reopen assessment on the basis of “information”. The term “to inform” it was observed means to impart knowledge and it does not means mere availability. It gets transmuted into an item of information only when its existence is realized and its implications are recognized. However, it is not possible to agree with the observations made in paragraph 16, which have been underlined. The reason is that experience shows that the Assessing Officers do examine several aspects and raise queries but when the written opinion is expressed in the form of the assesment order, there is no discussion or elucidation on certain aspects and issues decided or held in favour of the assessee. The assessee is not the author of the assessment order and has no control over what the Assessing Officer wants to state or mention. It is in this context that the Delhi High Court in CIT v. Eicher Ltd. [2007] 294 ITR 310 (Delhi), observed as under (page 315): “In Hari Iron Trading Co. vs. CIT[2003] 263 ITR 437 (P&H), a Division Bench of the Punjab and Haryana High Court observed that an assessee has no control over the way an assessment order is drafted. It was observed that generally, the issues which are accepted by the Assessing Officer do not find mention in the assessment order and only such points are taken note of on which the assessee’s explanations are rejected and additions/disallowances are made. We agree. “In Hari Iron Trading Co. vs. CIT[2003] 263 ITR 437 (P&H), a Division Bench of the Punjab and Haryana High Court observed that an assessee has no control over the way an assessment order is drafted. It was observed that generally, the issues which are accepted by the Assessing Officer do not find mention in the assessment order and only such points are taken note of on which the assessee’s explanations are rejected and additions/disallowances are made. We agree. Applying the principles laid down by the Full Bench of this court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequences of that lapse.” 13.It is, therefore, clear from the aforesaid position that: (1)Reassessment proceedings can be validly initiated in case return of income is processed under section 143(1) and no scrutiny assessment is undertaken. In such cases there is no change of opinion. (2)Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by the principle of “change of opinion”. (3)Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons.” 19.Andra Pradesh High Court in the case of GVK Gautami Power Limited vs. Assistant Commissioner of Income- tax (OSD) and another reported in [2011] 336 ITR 451 (AP) extensively examined various case laws and adduced the principles governing the exercise of jurisdiction to reopen the assessment. Relevant portion of the judgment is reproduced as under:- “(viii) The Assessing Officer has no power to review. He has the power only to reassess. The concept of “change of opinion” must be treated as an in-built test to check abuse of power by the Assessing Officer (Kelvinator of India Ltd. [2010] 320 ITR 561 (SC)). (ix)The Income-tax Officer acquires jurisdiction to reopen assessment under section 147 read with section 148 of the Act only if, on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reason, which he must record, to believe that any part of the assessee’s income has escaped assessment. (x)The words “ has reason to believe” in section 147 are stronger than the words “ is satisfied”(Ganga Saran and Sons P. Ltd. [1981] 130 ITR 1(SC)). (xv)Every disclosure is not, and cannot be treated to be, a true and full disclosure. A disclosure may be false or true. It may be a full disclosure or it may not. A partial disclosure may very often be misleading. What is required is a full and true disclosure of all material facts necessary for making assessment for that year (Sri Krishna Pvt. Ltd. [1996] 221 ITR 538(SC)). (x)The words “ has reason to believe” in section 147 are stronger than the words “ is satisfied”(Ganga Saran and Sons P. Ltd. [1981] 130 ITR 1(SC)). (xv)Every disclosure is not, and cannot be treated to be, a true and full disclosure. A disclosure may be false or true. It may be a full disclosure or it may not. A partial disclosure may very often be misleading. What is required is a full and true disclosure of all material facts necessary for making assessment for that year (Sri Krishna Pvt. Ltd. [1996] 221 ITR 538(SC)). (xvi) The disclosure must not only be true but must be full-” Fully and truly”. A false assertion, or statement, of material fact attracts the jurisdiction of the Income-tax Officer under section 147 (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)). (xvii) The expression “material facts” refers only to primary facts which the assessee is duty bound to disclose. There is no duty cast on the assessee to indicate or draw the attention of the Income-tax Officer to the inferences which can be drawn from the primary facts disclosed (Calcutta Discount Co.Ltd. [1961] 41 ITR 191(SC) and Associated Stone Industries (Kotah) Ltd. [1997] 224 ITR 560 (SC). (xviii)What facts are material, and necessary for assessment, will differ from case to case ( Calcutta Discount Co.Ltd. [1961] 41 ITR 191 (SC)). (xix) The duty of disclosing all primary facts, relevant to the decision on the question before the assessing authority, lies on the assessee. It is the assessee’s duty to disclose all primary facts which could have been discovered by the assessing authority from the documents and other evidence disclosed (Calcutta Discount Co.Ltd. [961] 41 ITR 191(SC)). (xx)The assessee’s obligation, to disclose all material facts necessary for his assessment fully and truly, is in the context of the two requirements-called conditions precedent- which must be satisfied before the Income-tax Officer gets jurisdiction to reopen the assessment under section 147/148. This obligation can neither be ignored nor watered down (Sri Krishna Pvt. Ltd. [1996] 221 ITR 538(SC)). (xxi) Finality of proceedings is certainly a consideration but that avails one who has fully and truly disclosed all material facts necessary for his assessment for that year- and not to others (Sri Krishna Pvt. Ltd. [1996] 221 ITR 538 (SC)). xxx xxx xxx (xxii) All the requirements stipulated by section 147 must be given due and equal weight (Sri Krishna Pvt.Ltd.[1996] 221 ITR 538 (SC)). 20.In the case of VXL India vs. Assistant Commissioner of Income-tax reported in [1995]215 ITR 295, Division Bench of this Court held as under:- (xxi) Finality of proceedings is certainly a consideration but that avails one who has fully and truly disclosed all material facts necessary for his assessment for that year- and not to others (Sri Krishna Pvt. Ltd. [1996] 221 ITR 538 (SC)). xxx xxx xxx (xxii) All the requirements stipulated by section 147 must be given due and equal weight (Sri Krishna Pvt.Ltd.[1996] 221 ITR 538 (SC)). 20.In the case of VXL India vs. Assistant Commissioner of Income-tax reported in [1995]215 ITR 295, Division Bench of this Court held as under:- “The essential requirement for initiating proceedings under section 148 of the Act is that the Assessing Officer must have reason to believe that any income chargeable to tax has escaped assessment for any assessment year. Explanation 2 to section 147 of the Act as appended to newly substituted section 147 makes certain provisions where, in certain circumstances, the income is deemed to have escaped assessment giving jurisdiction to the Assessing Officer to act under the said provision. Another requirement which is necessary for assuming jurisdiction is that the Assessing Officer shall record his reasons for issuing notice. This requirement necessarily postulates that before the Assessing Officer is satisfied to act under the aforesaid provisions, he must put in writing as to why in his opinion or why he holds the belief that income has escaped assessment. “Why” for holding such belief must be reflected from the record of reasons made by the Assessing Officer. In a case where the Assessing Officer holds