Case: The Commissioner of Income Tax-3 Vs. Reliance Industrial Infrastructure Limited

M.S. Sanklecha, J.This appeal under Section 260A of the Income Tax Act, 1961 (the Act) is filed by the revenue against the order dated 22/9/2009 of the Income Tax Appellate Tribunal (the Tribunal) relating to assessment year 2000-01 arising out of ITA No.6970/Mum./2006.2) Being aggrieved the appellant revenue has formulated the following question of law for consideration of this court.Whether on the facts and in the circumstances of the case and in law the Tribunal was justified in holding that the re-assessment notice issued within a period of four years from the date of completion of original assessment by the Assessing officer u/s. 148 of the Income Tax Act was bad in law as the assessee had disclosed all facts truly and fully during the course of the original assessment proceedings3) The brief facts leading to the present appeal are as under:a) For the assessment year 2000-01 the respondent assessee declared the total income of Rs.52.45 lacs under normal provisions and Rs.1.01 crores under the provisions of Section 115JA of the Act. In its return of income, the respondent-assessee had appended a note which reads as under:The long term investment in equity shares at the aggregate cost of Rs.12,00,00,000 held by company was sold during the year. The difference between the carrying amount and sale proceeds of Rs.29,52,96,000 is credited to Capital Reserve, since the shares were held by the company as participating promotors investment. The Company is of the opinion that such difference is not required to be credited to the Profit and Loss Account and treated as Capital Reserve.b) During the course of the assessment proceedings on specific query the respondent-assessee by its letter dated 7/3/2003 pointed out that the sale of shares has been correctly credited to the reserve account and further in view of the Apex Court decision in the matter of Apollo Tyres Ltd. v. CIT reported in 255 ITR 273 , the Assessing Officer for the purpose of computing book profit under Section 115JB cannot go behind the net profit shown in the profit or loss account as a starting point for computing book profit. The Assessing officer accepted the submission of the respondent assessee and completed the assessment under Section 143(3) Act and recorded a note not to the assessee which reads as under:The assessee has credited an amount of Rs.29.52 crores being the difference between the cost and sale proceeds of shares in Capital Reserve in the balance sheet. During the course of the assessment proceedings, the assessee was asked to explain why the same should not be added for computing the book profit u/s 115JA of the Act. In reply the assessee has submitted the explanation vide letters dated 7/3/2003 and 17/3/2003 giving reference to the decision of the Honble Supreme Court in the case of Apollo Typres Ltd. v. CIT (255 ITR 273) and stated that as per the law laid down by Supreme Court the book profit as arrived at has to be accepted except the adjustment provided under section 115JA itself. The explanation of the assessee is accepted and no addition in book profit is made on this account.c) On 20/12/2004, the Assessing officer issued a notice under Section 148 of the Act seeking to reopen the assessment for the assessment year 2000-01. In response to the request for reasons for reopening the assessment, the Assessing Officer informed the respondent-assessee that he was of the opinion that the income chargeable to tax had escaped assessment and on account of failure on the part of the respondent to fully and truly disclose all material facts necessary for making the assessment. Consequent thereto, on 10/2/12006 the Assessing officer passed an order under Section 143(3) read with Section 147 of the Act for assessment year 2000-01 holding that profit on sale of investment amounting to Rs.29.52 lacs should form a part of the profit and credited to the profit and loss account for the purpose of computing the book profit under Section 115JA of the Act.d) On appeal, the Commissioner of Income Tax (Appeals) on consideration of all the facts set aside the order of the Assessing Officer dated 10/2/2006 by holding that in view of the decision of the Supreme Court in the matter of Apollo Tyres Ltd. (supra) the Assessing officer could have no reason to believe that the income had escaped assessment. Further, he held that the profits as shown in the final profit and loss account which was approved by the company in its general meeting and filed before the Registrar of Companies as certified by the Auditors under the Companies Act has to be accepted for computing book profit under Section 115 JA of the Act.4) Being aggrieved, the appellant-revenue preferred an appeal before the Tribunal. The Tribunal by its order dated 22/9/2009 dismissed the revenues appeal by holding that reopening of the assessment by a notice dated 20/12/2004 is bad in law as the same was done merely on account of change in opinion. This was particularly so as during the assessment proceedings the respondent assessee had specifically addressed the Assessing officer with regard to the very query on which the assessment was now sought to be reopened. This response of the respondent-assessee was considered by the Assessing officer before accepting the same, as is evident from Note not to the assessee as reproduced above. Consequently, the Tribunal held that there has been no failure to disclose true and full particulars for the purpose of assessment and also further that the Assessing officer had duly applied his mind before accepting the contention of the respondent-assessee and passing the order dated 28/3/2003. In the circumstances, the Tribunal was of the view that the reopening of the assessment of the assessment year 2000-01 has been done merely on account of change of opinion.5) It is well settled that power to reopen an assessment is not a power to review an assessment as held by the Apex Court in the matter of Commissioner of Income Tax Vs. Kelvinator India Limited 320 ITR 561 . Under Section 147 of the Act the Assessing officer has power to reassess, however he has no power to review. The power to reassess has to be exercised only on fulfilment of certain pre conditions such as tangible material to come to a conclusion that there has been escapement of income. In the present notice, it is an admitted position that facts had been disclosed and the Assessing Officer passed his order of assessment on 28/3/2003 for the assessment year 2000-01. Further, the issue on which the assessment is being sought to be reopened was considered by the Assessing Officer and accepted by his order dated 28/3/2003. The present proceedings emanating from the notice dated 28/12/2004 under Section 147/148 of the Act is bad in law as the same is based on mere change of opinion. Further, there could be no reason to believe that income has escaped assessment as the view taken by the Assessing officer in his order dated 28/3/2003 is in accordance with the decision of the Apex Court in the matter of Apollo Tyres (supra).Consequently, no fault could be found with the concurrent finding of fact by the Commissioner of Income Tax (Appeals) and the Tribunal that there was no failure to disclose fully and truly all material facts on the part of the respondent assess and due consideration of the same was done by the Assessing Officer before passing the assessment order dated 28/3/2003.6) In the circumstances, no substantial question of law as formulated arises for consideration by this Court.

Decision:
0[ds]5) It is well settled that power to reopen an assessment is not a power to review an assessment as held by the Apex Court in the matter of Commissioner of Income Tax Vs. Kelvinator India Limited 320 ITR 561 . Under Section 147 of the Act the Assessing officer has power to reassess, however he has no power to review. The power to reassess has to be exercised only on fulfilment of certain pre conditions such as tangible material to come to a conclusion that there has been escapement of income. In the present notice, it is an admitted position that facts had been disclosed and the Assessing Officer passed his order of assessment on 28/3/2003 for the assessment yearFurther, the issue on which the assessment is being sought to be reopened was considered by the Assessing Officer and accepted by his order dated 28/3/2003. The present proceedings emanating from the notice dated 28/12/2004 under Section 147/148 of the Act is bad in law as the same is based on mere change of opinion. Further, there could be no reason to believe that income has escaped assessment as the view taken by the Assessing officer in his order dated 28/3/2003 is in accordance with the decision of the Apex Court in the matter of Apollo Tyres (supra).Consequently, no fault could be found with the concurrent finding of fact by the Commissioner of Income Tax (Appeals) and the Tribunal that there was no failure to disclose fully and truly all material facts on the part of the respondent assess and due consideration of the same was done by the Assessing Officer before passing the assessment order dated 28/3/2003.6) In the circumstances, no substantial question of law as formulated arises for consideration by this Court.