Judgment:
These two appeals by the revenue are directed against separate orders both dated 12-9-2003, passed by the learned Commissioner (Appeals) for assessment years 1997-98 and 1998-99 in not upholding the action of the assessing officer in reopening the assessments under section 147 of the Income Tax Act, 1961.
Briefly stated, the facts of the case are that original assessment in this case was completed under section 143(3). Perusal of record showed that the assessee suffered loss from business during assessment year 1996-97 and brought forward loss of Rs. 7,14,663 was allowed to be carried forward to be set off against the business income of the subsequent year. The assessing officer found that in both the years, i.e., assessment years 1997-98 and 1998-99, the assessee had not shown any sale from own wool combing business and just declared income from interest and job work charges and reducing the same by brought forward loss of assessment year 1996-97. The assessing officer further observed that since the assessee was not having any business activity during assessment years 1997-98 and 1998-99, its action was not admissible under law of setting off income for these years against brought forward business loss of assessment year 1996-97. He, therefore, reopened the assessment framed under section 143(3) by issuing notice under section 148, dated 19-2-2002. The assessee, when confronted regarding set off of brought forward business loss against income of the current year being not admissible, filed a written reply stating that though it had closed business of combing temporarily due to recession, the entire plant and machinery were retained, and the assessee had no intention to close the unit permanently. It was further contended that the assessee only advanced money out of surplus funds with an intention to earn interest out of such business funds. It was further submitted that the assessee was executing job work for different parties by using its assets as evident from its statement of accounts. However, the assessing officer, not being satisfied with the submissions, observed that interest income earned by the assessee was to be treated as income from other sources against which no brought forward loss was to be set off.
Aggrieved, the assessee went in appeal before the Commissioner (Appeals) wherein it was submitted that the assessing officer was not justified in view of the merits of the case whereas the original assessment had already been completed under section 143(3) in the same Central Circle and the assessee had carried out job work for various parties. The observations of the assessing officer that the assessee had closed down its business activities was not based on material evidence, as the assessee was using its assets for job work carried out for various parties. The assessee also filed details which had already been filed before the assessing officer, such as details of combing charges, details of electricity charges paid month-wise, details of purchase of rice husk which was required for running the boiler and without which no job work could be carried out. The assessee also pointed out that it had been further mentioned in the order that the machinery was also used for part of the year and assessment under section 143(3) was completed on the basis of audited books of account and after taking into consideration P&L a/c and giving benefit of brought forward loss. The assessee also submitted that the assessing officer was grossly unjustified in taking the activities of the company as income from non-business activity since the assessee had duly disclosed the interest income in P&L a/c and TDS had been claimed for which certificate in Form No. 16A had been filed. It was, therefore, submitted that all the details having been filed at the time of original assessment under section 143(3), the assessing officer was not justified while reopening the case under section 148 only on the basis of change of opinion which was not permitted in law as by doing so no finality to assessment could be achieved. The assessee also rebutted the finding of the assessing officer that the boiler, generator or any other machinery was sold during the year. It was submitted that no machinery or boiler was sold during the year except scrap. It was only during the year 2001 that certain machinery had been sold. Therefore, the assessing officer was not justified in using such facts pertaining to assessment year 2001-2002 for earlier years.
The Commissioner (Appeals) after considering the submissions of the assessee, observed that the assessing officer had applied the finding of a latter year during the period under consideration when there was no closure of business and no sale of boiler, generator or any other machinery were made. The Commissioner (Appeals) also observed that the assessee during the year under appeal had actually carried out job work, which is evident from the order of the assessing officer passed under section 143(3). It was, therefore, observed by Commissioner (Appeals) that the alleged suspension/closure of the business, as observed by the assessing officer, was not justified since job work was carried out during the year and the assessing officer made his observations by reproducing P&L a/c for a later period, i.e., asst, yrs. 1999-2000, 2000-2001 and 2001-2002, which was not at all justified. The Commissioner (Appeals) further observed that there had been merely a change of opinion on the part of the assessing officer while observing that brought forward loss had wrongly been adjusted against non-business income, especially when interest income had duly been disclosed in P&L a/c and TDS claimed in Form No. 16A were submitted during the course of assessment proceedings under section 143(3). The Commissioner (Appeals), therefore, considering the above facts and circumstances of the case and after analysing various aspects of the case, quashed the action of the assessing officer in reopening the case under section 148.
Before us, learned Departmental Representative could not controvert the, finding of the Commissioner (Appeals) except relying on the order of the assessing officer. It was further submitted that since there was no sale from the combing business during the year under appeal, the assessing officer rightly observed that the assessee had discontinued its business activities and brought forward loss was wrongly allowed to be set off against the current, year's income. It was, therefore, pleaded that the assessing officer was justified in reopening the case under section 148.
On the other hand, learned authorised representative strongly supported the order of the Commissioner (Appeals) and reiterated the submissions made before him .Learned authorised representative pleaded that from perusal of the paper book filed, it was evident that the assessee had its combing activity in the form of job work and the assets were being used for the same under both the years under appeal learned authorised representative further submitted that from perusal of pp. 4-39 of the paper book, chart pertaining to trading account and P&L a/c and balance sheet, details of expenditure, details of job charges, etc., and the correspondence with the assessing officer, it was evident that the assessee had all sorts of activities' during both the years, which suggested that the assessee-company was well engaged in using its assets by doing job work for different parties and using its surplus money. It was further contended that all the facts and details were there before the assessing officer at the time of original assessment under section 143(3) and he reopened the case based only on change of opinion which was not permissible in law, as there was no failure on the part of the assessee to disclose the material facts during assessment under section 143(3). Hence, the action of the assessing officer under section 148 was not justified. In support of his contention, learned authorised representative relied on order of the Tribunal in the case of Jt. CIT v. Groz Backert Asia Ltd. reported in (2003) 86 ITD 291 (Chd), wherein it was held that where the assessee had filed the balance sheet and other documents which were accepted by the assessing officer in assessment under section 143(3) and so this reopening was a case of mere change of opinion. He also placed reliance on the decision of the Hon'ble jurisdictional High Court in the case of CIT v. Amritsar Swadeshi Woollen Mills (1989) 180 ITR 144 (P&H), wherein it was held that even if original assessment was erroneous, action under section.148 was not the remedy as all the relevant material was before the assessing officer at the time he made the original assessment. He further relied on the decision of the Delhi High Court in the case of Delhi Fanning & Construction (P) Ltd. v.Assn. CIT & Ors. (1999) 240 ITR 127 (Del), wherein it was held that merely because the assessing officer failed to apply correct principles of law because of his ignorance or casual attitude at the time of original assessment., he cannot be permitted to later take recourse to the then section 147(a) to correct his inaction. Learned authorised representative also placed reliance on the decisions of the Delhi High Court in the cases of Jindal Photo Films Ltd. v. Dy. CIT (1998) 234 ITR 170 (Del) and CIT v. Kelvinator India Ltd. (2002) 256 ITR 1 (Del)(FB), wherein it was held that an assessment cannot be reopened on a mere change of opinion as it has been held that the assessing officer does not have any jurisdiction to review his own order. He further drew our attention to the fact that the Commissioner (Appeals) rightly quashed the reopening of the case relying on various case law cited by the assessee before him. It was, therefore, concluded by learned authorised representative that the Commissioner (Appeals)'s order be upheld, observing the facts and circumstances of this case.
We have given our, careful thoughts to the rival, submissions, perused the orders of the tax authorities and gone through the material available on record', the paper book and the case law cited by the learned authorised representative. We find that the assessing officer while reopening the case under section 148, has observed that, since the assessee had closed down its business activity and was doing only job work and having interest income which clearly showed that it was generating income from non-business process and reopened the original assessment passed under section 143(3) but we find that such observation of the assessing officer was not based on any substantive ground, in view of the fact that since the assessee had furnished all the details pertaining to job work and interest income along with audited trading and P&L a/c, depreciation chart, electricity bills, details of purchase of rice husk required for running of boiler, etc.
at the time of regular assessment under section 143(3), we are of the view that the assessing officer was not justified in reopening the case just on the basis of another fact that the machinery was sold in the year 2001 which led to an observation by the assessing officer to backtrack its finding for the earlier year, which is not permissible in law.
The case law relied upon by the learned authorised representative also vitiates the order of the assessing officer, which says that once the assessment was framed under section 143(3) and there was no failure on the part of the assessee to disclose material facts, the action of the assessing officer in reopening the case on the basis of same material facts available at the time of original assessment was not justified.
We further find that the initiation of proceedings by the assessing officer under section 148 was also not justified in view of a recent decision of the Calcutta High Court in the case of Biswanath Tea Co.
Ltd. v. Dy. CIT (2004) 267 ITR 687 (Cal), wherein it has been held as under : " ....... a careful perusal of the reasons recorded by the assessing officer showed that he had not reached his satisfaction that the reasons for reopening the assessment were due to the failure on the part of the assessee to make return under section 139 or to disclose material facts necessary for assessment. There could not be any failure on the part of the assessee as along with the returns, the audit reports were furnished. Audit report is a part of the returns. The CIT had not recorded anywhere that there was a failure on the part of the assessee to disclose material facts necessary for assessment. The notices under section 148 were not valid and were liable to be quashed." We, therefore, based on the above facts and circumstances of the case and following the case law cited above, find that the action of the assessing officer in reopening the case under section 148 was not justified, as the original assessment under section 143(3) was made by the assessing officer on the basis of relevant material facts and documents placed before him and there was no failure on the part of the assessee to disclose or furnish any other requirement asked for by the assessing officer during such original assessment. Since there was no omission or failure on the part of the assessee to disclose material facts necessary for assessment and the assessee had disclosed all primary facts at the time of original assessment under section 143(3) and it was not shown by the assessing officer as to what other primary facts were required to be disclosed, the action of the assessing officer in initiating reassessment proceedings under section 147 was not valid, as the same was based on mere change of opinion, as evident from the above observations. We, therefore, in view of the above facts, are of the considered view that the Commissioner (Appeals) while quashing the order of the assessing officer in reopening the case under section 148, has passed a well-reasoned and speaking order, which does not need any interference from our side. We, therefore, uphold the same and reject the ground raised by the revenue for both the years.