The Commissioner Of Income Tax vs Bhai Mohan Singh
2005 Latest Caselaw 390 Del

JUDGMENT

Madan B. Lokur, J.

1. The Income Tax Appellate Tribunal, Delhi Bench B (for short the ITAT) has referred the following question for our opinion:-

Whether on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the Income-tax Officer assumed jurisdiction u/s 147(b) of the Act merely on a change of opinion?

2. The assessed is an individual and the relevant accounting year ended on 31st March, 1972. The assessment for the year 1972-73 was completed on an income of Rs.95,871/-. In his return, the assessed had appended the following note:-

Interest on money held in Trust Rs.87,869.85 to be assessed in hands of Bhai Sunder Dass and his heirs as in the past.

3. While completing the assessment on 27th October, 1972, the Income-tax Officer (ITO) did not discuss the assess ability of the aforesaid amount either in the assessment order or in the proceedings before him.

4. Thereafter, on 9th July, 1977, the ITO reopened the assessment under Section 147(b) of the Income-tax Act, 1961 (for short the Act) giving the following reasons:-

In the assessment year 1973-74, the IAC u/s 144B has communicated to me in the month of September, 1976 that the debt due to creditor was not legally enforceable as having become barred by limitation and hence the liability for the payment of the aforesaid debt has become extinguished and at the same time the assessed had no intention of making the payment voluntarily. The deposits on which the interest has been earned stand in the name of the assessed and he alone has authority to operate the said count. The assessed has earned in interest on these deposits is clearly taxable in the hands of the assessed as he has not shown anything to show over-riding title is created. The facts of this case are the same as were of 1973-74. In consequence of his information in my possession, after the original assessment, I have reason to believe that income chargeable to tax to the tune of Rs.87,870/- has escaped assessment for the year 1972-73. I, therefore, reopen it u/s 147(b).

5. The assessed challenged the reopening of his assessment and contended that no fresh information was made available to the ITO after the original assessment was completed so as to entitle the ITO to reopen his assessment. The contention was rejected by the ITO by holding that the Inspecting Assistant Commissioner's directions under Section 144B of the Act for the assessment year 1973-74 on the taxability of the above amount constituted information for reopening the assessment.

6. On appeal, the Commissioner of Income-tax (A) confirmed the ITO's views and observed that information as contemplated by Section 147(b) of the Act meant instructions derived from any external source and, therefore, the instructions of the Inspecting Assistant Commissioner for 1973-74 constituted information.

7. In his second appeal, the assessed succeeded in having the assessment cancelled on the ground that the ITO had not validly assumed jurisdiction under Section 147(b) of the Act as there was no information but only a change of opinion on the part of the ITO. While doing so, the ITAT referred to certain documents and held that these documents showed that the authorities had applied their mind to the relevant facts from time to time. Consequently, the ITO was presumed to have come to the same conclusion and it was only on reappraisal of the same evidence that he had changed his opinion in the reassessment proceedings. Before the ITAT, it was contended by the Revenue that in the original assessment proceedings, the ITO had not at all applied his mind to the relevant facts. This contention was rejected by the ITAT, which also observed that the Inspecting Assistant Commissioner was not a formal source of law and, therefore, his direction did not constitute an instruction for reopening the assessment under Section 147(b) of the Act.

8. It has now been conclusively settled by a Full Bench decision of this Court in Commissioner of Income-tax vs. Kelvinator of India Ltd., (2002) 256 ITR 1 that a mere change of opinion by the ITO will not bring the provisions of Section 147 of the Act in to operation. In fact, the question that was sought to be referred in that case under Section 256(2) of the Act was more or less identical to the question that has been referred in the present case. The question sought to be referred in Kelvinator was s follows:-

Whether, the Income-tax Appellate Tribunal was correct in holding that the proceedings initiated under section 147 of the said Act were invalid on the ground that there was a mere change of opinion?

9. The Full Bench of this Court considered the expression reason to believe which appears in both clause (a) and clause (b) of Section 147 of the Act. In Indian and Eastern Newspaper Society vs. CIT, , the Supreme Court held that disclosure of a new fact may be information but that would not amount to realisation by the ITO that he has committed an error while making the original assessment. The Full Bench rejected the view that merely because during the assessment proceedings relevant material was on record or could have been discerned after due diligence by the ITO, it cannot be inferred that he must necessarily have deliberated over the material and formed an opinion in respect thereof. It was accordingly held that Section 147 of the Act does not postulate conferment of power upon the assessing officer to initiate reassessment proceedings upon his mere change of opinion.

10. In so far as the present case is concerned, the ITAT referred to the case of CIT vs. H.D. Denis, 133 ITR 1 wherein it was held by the Bombay High Court that an opinion expressed by the Inspecting Assistant Commissioner would not constitute information on a point of law within the meaning of Section 147(b) of the Act. Reference was also made to Indian and Eastern Newspaper Society to come to the conclusion that since the Inspecting Assistant Commissioner is not functioning as a judicial or a quasi judicial authority while issuing directions under Section 144B of the Act, his directions are more in the nature of instructions and guidance to the assessing authority and cannot constitute a source of law.

11. Even otherwise, the ITAT was of the view that it cannot be said that the ITO had received any new information. All that he did was to look at some of the old facts which were within his knowledge and to reach a different conclusion on the taxability of the interest amount. This is nothing but a mere change of opinion which is not permissible for reopening an assessment. It was not the case of the ITO that the information was not available at any point of time. Consequently, the ITO had seen the martial on record and he would have found it difficult to reopen the assessment under Section 147(b) of the Act on the same material.

12. We are of the view that on the above facts and position in law, there is no reason to differ with the view taken by the ITAT. Accordingly, we answer the reference in the affirmative, in favor of the assessed and against the Revenue and are of the view that the ITAT was justified in holding that the ITO assumed jurisdiction under Section 147(b) of the Act merely on a change of opinion.