ITA No. 690 of 2009 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 690 of 2009 Date of Decision: 7.10.2010 Sewak Ram ....Appellant. Versus The Income Tax Officer ...Respondent. CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL. HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. PRESENT: Mr. K.L. Goyal, Senior Advocate with Mr. Sandeep Goyal, Advocate for the appellant. Ms. Savita Saxena, Advocate for the respondent. ADARSH KUMAR GOEL, J. 1. This appeal has been preferred by the assessee under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 26.6.2009 passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar, in ITA No. 27(ASR)/2007 in respect of assessment year 2000-01, proposing following substantial questions of law:- “(i) Whether on the facts and circumstances of the case, the Ld. Tribunal was justified in holding that the Assessing Officer had any reason to initiate proceedings u/s 147 of the Income Tax Act, 1961? (ii) Whether on the facts and cicumstances of the case, the finding of the Ld. Tribunal is perverse in nature to the extent that the assessee did ITA No. 690 of 2009 -2- not file the Balance Sheet, Trading and Profit & Loss Account and Capital Account with the original returns filed for assessment year 2000- 01?” 2. The income tax return of the assessee was processed under Section 143(1) and thereafter process of re-assessment was initiated, inter alia, on the following grounds:- i) In the capital account of the assessee, five gifts were received without giving details or filing documents in support thereof. The said amount represented undisclosed income of the assessee. ii) The assessee sold one bigha land but no capital gain was shown. iii) The assessee made huge investment in share account. iv) The assessee was a director in a company and has shown the liability to the company without showing any income. 3. After issuing a questionnaire and considering the view point of the assessee, order of reassessment was passed making additions of Rs.95,83,013/- to the declared income. On appeal, the CIT (A) set aside the reassessment order only on the ground that jurisdiction to reassess was not validly invoked. On further appeal, the Tribunal set aside the view taken by the CIT (A) and remanded the matter for fresh decision on merits. The finding recorded by the Tribunal is as under:- “Keeping in view the facts and circumstances in the present case and after hearing both the parties, we ITA No. 690 of 2009 -3- are of the considered opinion that the case law cited by the Ld. DR in the case of ACIT Vs. Rajesh Javeri Stock Brokers Pvt. Ltd. reported in 291 ITR 500 (SC) is applicable to the facts of the present case. As regards to the fresh material on which, the reassessment proceedings were initiated by the AO, we find that the A.O. has reopened the assessment on the sufficient reason which is mentioned at page 2 and para 2 of this order. As per paper book filed by the Ld. counsel for the assessee, he drew our attention towards copy of Trading, Profit & Loss, Capital Account and Balance Sheet relating to A.Y. 2000-01, which he placed at page 3 & 4 of the paper book. After considering the same, we are of the view that these documents, assessee has not filed with original returns. Assessee has filed these documents only at the time of reopening of the present case. As per sale deed for Rs.4,95,000/-, which the assessee had sold as alleged by the A.O., the A.O. has not made any addition in the re-assessment on this account. As regards to the reasons for re-opening the case of the assessee on the ground that the Director of the Company M/s Bhupindra Flour Mills Pvt. Ltd., the assessee has neither shown any income from the company nor shown any investment in it. As per record, the assessee has made huge ITA No. 690 of 2009 -4- investment in the shares of Rs.40,87,040/- and that income has been shown from these investments and dividend income from shares was exempted. In view of the judgment of Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Suresh Kumar, reported in 275 ITR 253 and various judgments rendered by the ITAT, in which they have discussed the validity of reassessment and held that even though the original assessment was made under section 143(1) and not under section 143(3) of the I.T. Act, assessee having made full disclosure of its income and AO was not justified in re-opening the assessment in the absence of any new material. They held that section 147 does not postulate conferment of power upon the AO to initiate reassessment proceedings upon a mere change of opinion. The Hon'ble Court also held that if the AO feels that issue requires much deeper scrutiny is not enough ground for invoking the provisions of section 147 of the Act, but in the present case, A.O. has sufficient reason to believe for re-opening of present case. We have already discussed that the Apex Court in the case of ACIT Vs. Rajesh Jhaveri Stock Brokers Pvt. Ltd. 291 ITR 500 (supra) has held that no opinion expressed by the AO that an assessment is framed under Section 143(1)(a) of the Act and as ITA No. 690 of 2009 -5- such, there is no change of opinion or invocation of section 147 of the Act. The AO has jurisdiction to issue notice u/s 148, if there was cause or justification to know or suppose that income has escaped assessment, it can be said to have reason to believe that income had escaped assessment. The reason to believe is mandatory pre-condition for assuming of jurisdiction u/s 147 of the Act. It has been further held that such 'reason to believe' must necessary to be based on relevant material and that relevant material must be such that a reasonable person on information of such material would have formed a requisite belief that income of the assessee has escaped assessment. In other words, reasonable must be based upon reasons, which should be on the basis of new material on record to justify the reason for reopening the case. After considering the facts and circumstances of the present case with the support of arguments advanced by both the parties, we are of the considered opinion that the AO was justified for reopening in the case of the assessee u/s 148 of the Act. Therefore, we are not agreed with the reasons mentioned by the Ld. first appellate authority for cancelling the reassessment proceedings made by the A.O. Accordingly, we cancel the same by ITA No. 690 of 2009 -6- allowing the appeal filed by the Department.” 4. We have heard learned counsel for the parties and perused the record. 5. Learned counsel for the assessee submits that the reasons for reassessment were not based on a new material but on the basis of the particulars in the return and reassessment amounted to change of opinion and initiating a roving enquiry was not permissible. Reliance has been placed on the following judgments:- Sr. No. Judgment Parties Name 1. [2007] 291 ITR 500 (SC) Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd. 2. [1999] 236 ITR 696 (SC) Ram Bai v. Commissioner of Income-Tax 3. [2008] 12 DTR (Del) 115 Commissioner of Income Tax v. Batra Bhatta Company 4. [1979] 118 ITR 1 (SC) Income Tax Officer and others v. Madnani Engineering Works Ltd. 5. [1971] 79 ITR 603 (SC) Chhugamal Rajpal v. S.P. Chaliha and others 6. [1976] 103 ITR 437 (SC) Income Tax Officer, I Ward, Distt. VI, Calcutta and others v. Lakhmani Mewal Das 7. [1981] 132 ITR 707 (Del) Asoke Kumar Sen v. Income Tax Officer, Special Circle-V, New Delhi and another 8. 255 ITR 220 (P&H) Vipan Khanna v. Commissioner of Income Tax and others 9. [2006] 287 ITR 337 (Del) Smt. Kamlesh Sharma v. B.L. Meena, Income Tax Officer and others 6. We are unable to accept the submission. After amendment of Section 147 w.e.f. 1.4.1989, reassessment can be initiated even if ITA No. 690 of 2009 -7- there is disclosure in the return if without considering the particulars of the return, processing is done under Section 143(1) or assessment is made under Section 143(3). No doubt, mere change of opinion by itself is not a ground for reassessment as held in the judgments relied upon on behalf of the assessee but if there are reasons to believe that tax has escaped, reassessment is permissible. Reasons can be even on the basis of particulars of the return without any new material. Even if proceedings under Section 143(2) are not taken, reassessment proceedings can be taken. 7. In the present case, the CIT (A) set aside the proceedings by wrongly holding that reassessment could not be initiated on the basis of material already disclosed in the return without going into the correctness of the reasons. 8. We find, prima facie, that the reasons for reassessment are not irrelevant. In any case, the same could have been gone into by the CIT (A) before reassessment was set aside as rightly held by the Tribunal. The judgments relied upon by learned counsel for the assessee, thus, have no applicability in the present case. In these circumstances, the view taken by the Tribunal cannot be held to be erroneous. No substantial question of law arises. 9. The appeal is accordingly dismissed. (ADARSH KUMAR GOEL) JUDGE October 7, 2010 (AJAY KUMAR MITTAL) gbs JUDGE