Trend Brands Ltd., v. ACIT, Cir 16(1),

ITA 2274/DEL/2007 | 1999-2000
Pronouncement Date: 18-02-2010 | Result: Allowed

Appeal Details

RSA Number 227420114 RSA 2007
Assessee PAN OFTHE1922A
Bench Delhi
Appeal Number ITA 2274/DEL/2007
Duration Of Justice 2 year(s) 9 month(s) 11 day(s)
Appellant Trend Brands Ltd.,
Respondent ACIT, Cir 16(1),
Appeal Type Income Tax Appeal
Pronouncement Date 18-02-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 18-02-2010
Date Of Final Hearing 09-02-2010
Next Hearing Date 09-02-2010
Assessment Year 1999-2000
Appeal Filed On 07-05-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H DELHI BEFORE SHRI K.G. BANSAL AND SHRI GEORGE MATHAN ITA NOS. 2274 2275 & 2276(DEL)/2007 ASSESSMENT YEARS: 1999-00 2000-01 & 2002-03 TRENT BRANDS LIMITED ASSIS TANT COMMISSIONER OF INCOME 306 ANSAL BHAVAN 16 VS. TAX CI RCLE 16(1) NEW DELHI. KG MARG NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : S/SHRI AJAY VOHRA SACHIT JOLL Y & GAURAV JAIN ADVOCATES RESPONDENT BY: S/SHRI V.K. TIWARI CIT DR & N.K. CHAND SR. DR ORDER PER K.G. BANSAL : AM ALL THESE APPEALS OF THE ASSESSEE INVOLVE COMM ON GROUNDS. THEREFORE THESE WERE ARGUED IN A CONSOLIDATE D MANNER BY THE LD. COUNSEL FOR THE ASSESSEE AND THE LD. DR. IN V IEW THEREOF A COMMON ORDER IS PASSED. ITA NO. 2274(DEL)/2007- A.Y. 1999-00 2. THE ASSESSEE HAS TAKEN UP THREE GROUNDS IN THE APPEAL CHALLENGING THE RE-OPENING OF THE ASSESSMENT U/S 147 OF THE INCOME-TAX ACT 1961 AND BRINGING THE PROPERTY INCOME TO TAX UNDER THE HEAD INCOME FROM ITA NOS. 2274 2275& 2276(DEL)/2007 2 HOUSE PROPERTY THEREBY DISALLOWING CLAIM OF D EPRECIATION ON BUILDING OF RS. 11 67 091/-. 2.1 IN REGARD TO THE RE-OPENING OF THE ASSES SMENT IT WAS SUBMITTED THAT THE ASSESSEE HAD FILED THE RETURN OF INCOM E ON 20.12.1999 DECLARING BOOK PROFIT AT RS. 8 51 53 020/- U/S 115JA OF T HE ACT. THE ASSESSMENT WAS COMPLETED U/S 143(3) ON 26.03.2002 AT TOTAL INCOME OF RS. 1 08 99 76 180/-. IN APPEAL THE INCOME WAS REDU CED TO RS. 11 82 01 943/-. THEREAFTER THE ASSESSMENT WAS RE-OPENED U/S 147 BY ISSUING A NOTICE U/S 148 ON 17.3.2005 FOR T HE REASON THAT THE ASSESSEE HAD DECLARED INCOME FROM PROPERTY AS PROFITS AN D GAINS OF BUSINESS. IN ASSESSMENT YEAR 2001-02 THE INCOME FROM THE PR OPERTY WAS ASSESSED UNDER THE HEAD INCOME FROM HOUSE PROPERTY LE ADING TO DENIAL OF THE CLAIM OF DEPRECIATION ON THE BUILDING. THIS A CTION WAS CONFIRMED BY THE LD. CIT(APPEALS). THEREFORE INCOME CHARGEABL E TO TAX AMOUNTING TO RS. 9 84 841/- ESCAPED ASSESSMENT FOR THIS YEAR. ACCORDINGLY THE NOTICE WAS ISSUED. THE ASSESSMENT WAS ALSO COMPLETED A CCORDINGLY AT RS. 11 93 08 280/-. THE LD. CIT(APPEALS) CONFIRMED THE REOPENING OF THE ASSESSMENT AS WELL AS BRINGING THE RENTAL INCOM E TO TAX UNDER THE HEAD INCOME FROM HOUSE PROPERTY. ITA NOS. 2274 2275& 2276(DEL)/2007 3 2.2 THE LD. COUNSEL DREW OUR ATTENTION TO PAGE 28 OF THE PAPER BOOK WHICH SHOWS THAT AN AMOUNT OF RS. 2 32 25 176/- WAS ADDED TO FIXED ASSETS ON 16.12.1998 BEING SPENCER PLAZA BUIL DING. THIS ASSET WAS PUT TO USE ON 5.3.1999. IN THE COURSE OF ORIGINA L ASSESSMENT THE AO HAD ASKED TWO QUESTIONS IN REGARD TO THIS ITEM NAMELY -(I) DETAILS OF ADDITION TO THE BUILDING AND PURPOSE FOR WHICH I T HAS BEEN USED; AND (II) DETAILS OF RENT RECEIVED AMOUNTING TO RS. 2 43 000/-. HIS LETTER DATED HAS BEEN 30.1.2002 PLACED IN THE PAPER BOOK ON PAGE 29. THESE QUESTIONS WERE ANSWERED BY THE ASSESSEE IN LET TER DATED 7.2.2002 AND IT WAS SUBMITTED THAT AFTER THE SALE OF TRADE-M ARK THE COMPANY INVESTED THE FUNDS IN VARIOUS KIND OF INVESTMENTS INCL UDING PURCHASE OF PROPERTY AT SPENCER PLAZA CHENNAI WHICH HAS BEEN LEASE D TO THE HOLDING COMPANY LEKME INDIA ( NOW KNOWN AS TRENT LTD. ). THIS REPLY HAS BEEN PLACED IN THE PAPER BOOK ON PAGES 30 TO 35. THE COST OF THE PROPERTY WAS MENTIONED AT RS. 2 32 26 176/- AND I T CONSISTED OF 6961 SQ. FT. SHOP AT SPENCER PLAZA CHENNAI. THE RENT OF RS. 2 43 635/- WAS RECEIVED FROM LEKME INDIA. THE CASE OF THE LD. COUNSEL AGAINST REOPENING WAS TWO-FOLD NAMELY THAT (I) THE ASSESSMENT WAS REOPENED MERELY ON CHANGE OF OPINION AND (II) NO ERROR OR OMISSION WAS ITA NOS. 2274 2275& 2276(DEL)/2007 4 ASCRIBED TO THE ASSESSEE IN DISCLOSING TRULY AND FULLY ALL MATERIAL FACTS RELATING TO THE ASSESSMENT. A NUMBER OF DECI SIONS WERE SOUGHT TO BE RELIED UPON IN RESPECT OF BOTH THE PROPOSITIONS. BY PLACING RELIANCE ON THOSE CASES IT WAS ARGUED THAT THE AO HAD NO JURISDICTION TO ISSUE NOTICE U/S 148. 2.3 IN REPLY THE LD. DR SUBMITTED THAT THE ASSESSMENT WAS RE- OPENED ON THE BASIS OF INFORMATION RECEIVED I N THE APPELLATE ORDER PASSED BY THE CIT(APPEALS) FOR ASSESSMENT YEAR 2001-02. THIS WAS A VALID SOURCE OF INFORMATION OF LAW ON THE GIVEN FACTS. HOWEVER HE WAS NOT ABLE TO CONTROVERT IN ANY MANNER THE ARGU MENT REGARDING ABSENCE OF THE ERROR OR OMISSION ON THE PART OF THE ASSESS EE TO FURNISH ALL MATERIAL FACTS RELATING TO ASSESSMENT. 2.4 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. SECTION 147 AS IT STANDS AFTER ITS AMENDMENT BY DIRECT TAX LAWS (AMENDMENT) ACT 1987 WITH EFFECT FROM 1.4.1989 CONTAINS A PROVISION TO THE EFFECT THAT IF THE AO HAS REA SON TO BELIEVE THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESS MENT HE MAY ASSESS OR RE-ASSESS SUCH INCOME. FURTHER THE FIRST PROV ISO TO THE SECTION CONTAINS ITA NOS. 2274 2275& 2276(DEL)/2007 5 A PROVISION THAT WHERE AN ASSESSMENT IS MADE U NDER SUB-SECTION (3) OF SECTION 143 NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESS MENT YEAR UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSE SSMENT BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THUS ON READING THE PROVISION AS A WHOLE IN THE CONTEXT OF THE FACTS OF THIS CASE IT BECOMES CLEAR THAT THE AO CAN ASSUME JURISDICTION IF TWO PRE-CONDITI ONS ARE SATISFIED NAMELY (I) HE HAS REASON TO BELIEVE THAT ANY INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT; AND (II) SUCH ESCAPEMENT HAS TAKEN PLACE BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT. IN ORDER TO CLARIFY THAT THESE PRE-CONDITIONS ARE APPLICABLE IT MAY BE MENTIONED THAT ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) ON 26.3.2 002 AND FOUR YEARS FROM THE END OF THE ASSESSMENT YEAR EXPIRED ON 31.03.2004. THUS NOTICE U/S 148 ISSUED ON 17.3.2005 WAS BEYOND THIS DATE. 2.5 AS HAS BEEN MENTIONED EARLIER TWO PRE-COND ITIONS HAVE TO BE SATISFIED CUMULATIVELY AND FAILURE TO SATISFY ANY OF THESE TWO CONDITIONS WOULD FRUSTRATE THE NOTICE U/S 148. WE HAVE A LREADY MENTIONED THAT THE ITA NOS. 2274 2275& 2276(DEL)/2007 6 FACTS ARE THAT THE ASSESSEE HAD SHOWN RENTAL INCOME FROM BUILDING AT SPENCER PLAZA CHENNAI UNDER THE HEAD PROFITS AND GAINS OF BUSINESS. THE FACTUM OF PURCHASE OF THIS BUILDING COM PRISING OF THE COMMERCIAL AREA OF 6961 SQ. FT. AT RS. 2 32 25 176/- ON 16.12.1998 WAS MENTIONED IN THE AUDIT REPORT WHICH ALSO MENTIONED THAT IT WAS PUT TO USE ON 5.3.1999. IN THE COURSE OF ORIGINAL PROCEEDINGS IT WAS EXPLAINED THAT THE BUILDING HAS BEEN LEASED TO LEKME INDIA T HE HOLDING COMPANY FROM WHOM RENT OF RS. 2 43 635/- HAS BEEN RECEIVED. THEREAFTER THE ONLY QUESTION LEFT TO BE DECIDED WAS- WHETHER THE IN COME WAS ASSESSABLE AS BUSINESS INCOME OR PROPERTY INCOME? AFTER CONSIDE RING THE SUBMISSIONS OF THE ASSESSEE THE AO CAME TO THE CONCLUSION THA T THE INCOME WAS ASSESSABLE AS BUSINESS INCOME. THE ASSESSMEN T OF SIMILAR INCOME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND ITS CONFIRMATION IN ASSESSMENT YEAR 2001-02 BY THE LD. CIT(A) DO NOT LEAD TO A CONCLUSION THAT THE ESCAPEMENT OF INCOME WAS BY REASON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY AL L MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. IN FACT THE LD. DR WAS NOT A BLE TO POINT OUT ANY FAILURE ON THE PART OF THE ASSESSEE IN DISCLOSING MATER IAL FACTS. HE WAS ALSO NOT ABLE TO REFER TO ANY SUCH AVERMENT MADE BY T HE AO IN THE REASONS RECORDED BY HIM FOR REOPENING THE ASSESSMENT ALTHOUGH IT IS MENTIONED ITA NOS. 2274 2275& 2276(DEL)/2007 7 THAT HE HAD REASON TO BELIEVE THAT INCOME OF R S. 9 84 841/- ESCAPED ASSESSMENT. A NUMBER OF CASES WERE REFERR ED TO BY THE LD. COUNSEL IN THIS MATTER. WE HAVE CONSIDERED ALL THESE DECISIONS BUT WE MAY DISCUSS ONLY TWO CASES HERE WITH A VIEW TO AVOID DUPLICATING THE SAME RATIO AGAIN AND AGAIN. IN THE CASE OF CIT VS. SHRI TIRATH RAM AHUJA (HUF) (2008) 306 ITR 173 (DEL) DECID ED BY THE JURISDICTIONAL HIGH COURT THE FACTS WERE THAT ORIGINAL ASSESSMENTS WERE COMPLETED FOR THREE YEARS U/S 143(3). SUBSEQUENTLY TH E AO CAME TO KNOW THAT RATABLE VALUE OF THE PROPERTY SITUATED AT AS AF ALI ROAD WAS DETERMINED AT A HIGHER VALUE BY THE MUNICIPAL CORPORATION OF DELHI THAN THE ACTUAL RENT RECEIVED. THEREFORE THE ASSESSMENTS WERE REOPENED BY ISSUING NOTICES U/S 148. THE HONBLE COURT MENTIONED THAT THE ASSESSEE CAN BE FASTENED WITH THE DUTY TO DISCLOSE ONLY SUCH FACTS WHICH WERE IN EXISTENCE AT THE RELEVANT POINT OF TIME. THE ORDER OF THE MUNICIPAL CORPORATION OF DELHI WAS NOT AVAIL ABLE AT THE TIME OF ORIGINAL ASSESSMENT. SINCE THE CASE FAL LS UNDER PROVISO TO SECTION 147 THE QUESTION OF NON-DISCLOSURE OF MATERIAL FACTS WOULD BECOME RELEVANT. THERE WAS NO DELIBERATE CONCEALMENT OF FACTS BY THE ASSESSEE. THE ASSESSMENT WAS REOPENED ON THE BASIS OF SUBSEQUENT INFORMATION RECEIVED FROM THE CORPORATION. IT WAS HELD THAT THE ITA NOS. 2274 2275& 2276(DEL)/2007 8 REQUISITE PRE-CONDITION STIPULATED IN SECTION 147 WAS NOT FULFILLED. WE MAY ALSO REFER TO THE DECISION OF HONBLE DE LHI HIGH COURT IN THE CASE OF CIT VS. INDIAN FARMERS FERTILIZER COOPERATIVE LTD. (2008) 171 TAXMAN 379 IN WHICH THE ASSESSMENT WAS REOP ENED ON THE BASIS OF ORDER PASSED BY THE TRIBUNAL. THERE WAS NO ALL EGATION IN THE REASONS THAT THE ASSESSEE FAILED TO DISCLOSE FULLY OR TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE HONBLE COURT HELD THA T THE QUESTION WAS PURELY A QUESTION OF FACT AND THERE WAS N O PERVERSITY IN THE CONCLUSION ARRIVED AT BY THE TRIBUNAL. THUS FROM THE DECI SIONS AFORESAID IT IS CLEAR THAT THE RECORDED REASONS SHOULD CONTAIN AVER MENT ABOUT FAILURE OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIA L FACTS RELEVANT FOR THE ASSESSMENT IN A CASE WHERE PROVISO TO SECTION 1 47 IS APPLICABLE. FURTHER IT HAS TO BE SHOWN BEFORE INITIATING THE RE-ASSESSMENT AS A MATTER OF FACT THAT THE ASSESSEE FAILED TO DISCLOSE ALL MATERIAL FACTS RELEVANT FOR THE ASSESSMENT. IN THE INSTANT CASE THE MATERIAL FACTS WERE THE PURCHASE OF PROPERTY AND ITS RENTING OU T. ALL FACTS IN THIS REGARD HAS BEEN DISCLOSED IN THE ORIGINAL ASSESSMENT . THUS THERE IS NO FAILURE ON THE PART OF THE ASSESSEE IN THIS MATT ER. THERE IS NO AVERMENT MADE IN THE RECORDED REASONS ABOUT THE FAILUR E ON THE PART OF THE ASSESSEE TO DISCLOSE RELEVANT FACTS. THUS THE ACTION IS LIKELY TO FALL ON ITA NOS. 2274 2275& 2276(DEL)/2007 9 BOTH THESE GROUNDS. THE ARGUMENT OF THE LD. DR THAT PASSIVE DISCLOSURE DOES NOT AMOUNT TO ACTUAL DISCLOSURE IS ALSO NOT ACCEPTABLE AS THE MATTER HAD BEEN INQUIRED INTO BY THE AO AND WRITTEN REPLY THERETO HAD BEEN FURNISHED BY THE ASSESSEE. THEREFORE IT IS HELD THAT THE AO DID NOT HAVE JURISDICTION TO ISSUE NOTICE U/S 148. IN VIEW OF AFORESAID DISCUSSION WE NEED NOT GO INTO THE CONTROVERS Y REGARDING THE MEANING OF THE WORDS REASONS TO BELIEVE. THUS GROU ND NO. 1 IS ALLOWED. 3. IN VIEW OF THE JURISDICTIONAL LACUNA IT IS NOT NECESSARY TO DECIDE GROUND NOS. 2 AND 3 REGARDING THE MERITS OF THE ADDITION. ITA NO. 2275(DEL)/2007-A.Y. 2000-01 4. THE GROUNDS TAKEN IN THIS APPEAL ARE SIMI LAR TO THE GROUNDS TAKEN IN ITA NO. 2274(DEL)/2007 EXCEPT FOR THE AMOU NTS INVOLVED. THE RENT RECEIVED IN THIS YEAR AMOUNTED TO RS. 6.00 LAKH AND DEPRECIATION CLAIMED ON BUILDINGS AMOUNTED TO RS. 22 11 088/-. 5. IN REGARD TO THE RE-OPENING OF THE ASSESSMEN T THE LD. COUNSEL SUBMITTED THAT THE RETURN FILED BY THE ASSESSEE ON 29.11.2000 WAS ITA NOS. 2274 2275& 2276(DEL)/2007 10 PROCESSED U/S 143(1) ON 15.6.2001. THEREAFTER NO NEW MATERIAL CAME TO THE NOTICE OF THE AO STILL ON RECEIPT OF THE APPELLATE ORDER OF THE CIT(APPEALS) FOR ASSESSMENT YEAR 2001-02 HE IN ITIATED PROCEEDINGS U/S 147 BY RECORDING REASONS WHICH WERE COMMUNICA TED TO THE ASSESSEE IN LETTER DATED 8.6.2005 ON ITS REQUEST. THE ASSESSEE HAD DISCLOSED ALL MATERIAL FACTS RELEVANT TO ASSESSMENT. IN VIE W THEREOF THE ASSESSMENT COULD NOT HAVE BEEN RE-OPENED MERELY ON CHANGE OF OPINION. 5.1 IN ORDER TO SUPPORT THE AFORESAID CONTENTION RELIANCE WAS PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN TH E CASE OF SHIPRA SRIVASTAVA VS. ASSTT. CIT (2009) 319 ITR 221 . IN THIS VERY CONNECTION RELIANCE WAS ALSO PLACED ON THE DE CISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. GOETZE INDIA LTD . 2010-TIOL-96-HC- DEL-IT DATED 20.01.2010 A COPY OF WHICH WAS P LACED IN THE PAPER BOOK NO. 2 ON PAGES 24 TO 27. THUS IT WAS ARGUED THAT IN SPITE OF THE AMENDMENT IN SECTION 147 EFFECTIVE FROM 01.04. 1989 THE CONCEPT OF CHANGE OF OPINION HAS NOT BEEN DISPLACED AND PR OCEEDINGS OF ASSESSMENT TAKEN U/S 147 ON CHANGE OF OPINION ARE BAD IN LAW. ITA NOS. 2274 2275& 2276(DEL)/2007 11 5.2 IN REPLY THE LD. DR RELIED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ACIT VS. RAJESH JHAVERI S TOCK BROKERS PVT. LTD. (2007) 291 ITR 500 IN WHICH IT WAS HELD THA T THE FORMATION OF BELIEF WAS WITHIN THE SUBJECTIVE SATISFACTION OF THE A O AND THEREFORE THE CONCEPT OF CHANGE OF OPINION WAS NOT APPLICAB LE UNDER THE AMENDED PROVISION. HE REFERRED TO THE DECISION OF THE A PEX COURT IN THE CASE OF KALYANJI MAVJI & CO. VS. CIT (1976) 102 ITR 287 DEALING WITH THE RE- OPENING OF THE ASSESSMENT U/S 34(1)(B) OF THE 1922 ACT IN WHICH IT WAS HELD THAT THIS PROVISION WOULD APPLY TO T HE CATEGORIES OF CASES NAMELY THAT (I) WHERE THE INFORMATION AS TO CO RRECT STATE OF LAW IS DERIVED FROM THE RELEVANT JUDICIAL DECISION; ( II) WHERE IN THE ORIGINAL ASSESSMENT THE INCOME LIABLE TO TAX HAS ESCAP ED ASSESSMENT DUE TO OVERSIGHT INADVERTENCE OR A MISTAKE COMMITTED BY THE ITO; (III) WHERE THE INFORMATION IS DERIVED FROM AN EXTERNAL SOU RCE OF ANY KIND AND SUCH EXTERNAL SOURCE WOULD INCLUDE DISCOVERY OF NEW AND IMPORTANT MATTERS OF KNOWLEDGE OR FRESH FACTS WHICH WERE NOT PRE SENT AT THE TIME OF ORIGINAL ASSESSMENT; AND (IV) WHERE THE INFORMATION MAY B E OBTAINED EVEN FROM THE RECORD OF THE ORIGINAL ASSESSMENT FROM AN INVESTIGATION OF THE MATERIAL ON RECORD OR THE FACTS DISCLOSED THE REBY OR FROM OTHER ENQUIRY OR RESEARCH INTO THE FACTS OR LAW. IT WAS ALSO HELD THAT IF THE ITO ITA NOS. 2274 2275& 2276(DEL)/2007 12 DOES NOT GET ANY SUBSEQUENT INFORMATION AND MER ELY PROCEEDS TO RE-OPEN THE ORIGINAL ASSESSMENT WITHOUT FRESH FACTS OR MATERIAL OR WITHOUT ANY ENQUIRY INTO THE MATERIALS WHICH FORM PART OF TH E ORIGINAL ASSESSMENT THIS PROVISION WILL HAVE NO APPLICATION. HE ALSO RE LIED ON THE DECISION OF APEX COURT IN THE CASE OF INDIAN & EASTERN N EWSPAPER SOCIETY VS. CIT (1979) 119 ITR 996. IN THIS CASE THE DECISI ON IN THE CASE OF KALYANJI MAVJI & CO. (SUPRA) WAS CONSIDERED AND IT WAS MENTIONED THAT WHEN THE INFORMATION IS REGARDING KNOWLEDGE AS TO LAW THE POSITION IS VERY COMPLEX. WHEN WE SPEAK OF LAW WE SPEAK AB OUT NORMS OR GUIDING PRINCIPLES HAVING LEGAL EFFECT AND LEGAL CONSE QUENCE. THEREFORE TO POSSESS LEGAL SIGNIFICANCE FOR THAT PURPOSE IT MUST EMANATE FROM COMPETENT AUTHORITY. THE LAW MAY BE THE STATUT ORY LAW OR THE JUDGE- MADE LAW. THE JUDGE-MADE LAW EMANATES FROM THE INTERPRETATION OF STATUTE WHICH CAN ONLY BE RENDERED BY COMPE TENT JUDICIAL OR QUASI- JUDICIAL AUTHORITY EMPOWERED TO DECIDE QUEST IONS OF LAW BETWEEN THE CONTENDING PARTIES. SUCH INTERPRETATION ITS ELF BEARS THE CHARACTER OF LAW. CONSEQUENTLY IT FOLLOWS THAT INFORMATION OF LAW MUST BE FROM A FORMAL SOURCE AND IT CANNOT BE A STATEMEN T BY A PERSON WHO IS NOT COMPETENT TO CREATE OR DEFINE LAW. COMING TO TH E STATUS OF INTERNAL AUDIT REPORT IT WAS MENTIONED THAT ITS PURPO SE WAS MERELY TO CHECK ITA NOS. 2274 2275& 2276(DEL)/2007 13 ARITHMETICAL ACCURACY COMPUTATION OF INCOME A ND DETERMINATION OF TAX. THIS WORK IS NOW ENTRUSTED TO THE RECEIPT AUD IT. UNDER THE RELEVANT RULES IT IS ENTITLED TO EXAMINE THE ACCOUNT S AND ASCERTAIN WHETHER RULES AND PROCEDURES HAVE BEEN FOLLOWED BUT IT CANNOT SUBSTITUTE ITSELF FOR THE REVENUE AUTHORITIES WHO ARE TO PERFOR M STATUTORY DUTIES. IT DOES NOT POSSESS THE POWER TO PRONOUNCE LAW ALTHOU GH IT MAY DRAW THE ATTENTION OF THE ITO TOWARDS IT. THEREFORE TH E OPINION OF THE AUDIT PARTY IN REGARD TO LAW CANNOT BE INFORMATION TO LEAD TO REASON TO BELIEVE BY GIVING IT THE COLOUR AND SIGNIFICANCE OF LAW. HE ALSO REFERRED TO THE DECISION OF FULL BENCH OF HONBLE DELHI HIGH COUR T IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD. (2002) 256 ITR 1 IN WHICH IT WAS MENTIONED THAT AN ORDER OF ASSESSMENT CAN B E MADE UNDER SUB- SECTION (1) OR SUB-SECTION (3) OF SECTION 143. WHEN THE ORDER IS PASSED UNDER SECTION 143(3) A PRESUMPTION IS RAISED THAT THERE HAS BEEN DUE APPLICATION OF MIND. IF IT IS TO BE HELD T HAT THE ORDER HAS NOT BEEN PASSED AFTER DUE APPLICATION OF MIND IT WOULD C ONFER JURISDICTION ON THE AO THEREBY PLACING A PREMIUM ON HIS NEGLIGENC E. THEREFORE IN SUCH A SITUATION HE CANNOT BE ALLOWED TO INITIATE RE -ASSESSMENT PROCEEDINGS MERELY ON CHANGE OF OPINION. IT WAS ARGUED THAT THE DECISION OF HONBLE SUPREME COURT IN THIS CASE IN CIVIL AP PEAL NO. 2009- ITA NOS. 2274 2275& 2276(DEL)/2007 14 2011/2003 AND 2520/2008 DATED 18.1.2010 PLACE D IN THE PAPER BOOK NO. 2 SHOULD BE READ IN THE CONTEXT OF THE FA CTS OF THAT CASE NAMELY THAT ORIGINAL ASSESSMENT WAS COMPLETED U/S 143(3) . SUCH WAS ALSO THE FACT IN THE CASE OF HAVELLS INDIA LTD. VS. DY. CIT IN WP(C) NO. 13431/2009 DATED 26.11.2009 PLACED IN THE PAPER BOOK NO. 2 ON PAGES 19 TO 23. IN THE CASE OF CIT VS. BATRA BHATTA CO. (2008) 174 TAXMAN 444 THE HONBLE DELHI HIGH COURT DEALT WITH THE JURISD ICTION U/S 147 WHEN THE RETURN WAS PROCESSED U/S 143(1)(A) INVOKED ON T HE GROUND THAT THE CLAIM OF THE ASSESSEE THAT THE LAND WAS AGRICULTURAL IN NATURE AND NOT A CAPITAL ASSET REQUIRED MUCH DEEPER SCRUTINY. IT W AS HELD THAT THERE WAS NO REASON TO BELIEVE THAT INCOME ESCAPED ASSESSME NT. THE RELIANCE PLACED BY THE LD. COUNSEL ON THESE CASES WAS MISPLACED AS NO BELIEF HAD BEEN FORMED IN THIS CASE. 5.3 IN THE REJOINDER THE LD. COUNSEL SUBMITTED THAT A HARMONIOUS INTERPRETATION IS REQUIRED TO BE MADE BETWEEN TH E PRINCIPLES OF REASON TO BELIEVE AND CHANGE OF OPINION AND FOR THIS PURPOSE RELIANCE WAS PLACED ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT GINNING & MANUFACTURING CO. LTD. (1994) 205 ITR 40 A CASE DECIDED U/S 147(A) IN WHICH IT WAS HE LD THAT SINCE ALL MATERIAL ITA NOS. 2274 2275& 2276(DEL)/2007 15 FACTS HAD BEEN DISCLOSED AT THE TIME OF FILING OF THE RETURN THE ACTION OF THE AO MERELY AMOUNTED TO CHANGE OF OPINION. 5.4 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SUBMISSIONS MADE BEFORE US. THE ASSESSEE HAS PLACED THE REASO NS RECORDED BY THE AO ON PAGE 4 OF THE PAPER BOOK NO. 2 WHICH IS A PA RT OF LETTER DATED 8.6.2005 ADDRESSED BY THE AO TO THE ASSESSEE IN CONNECTION WITH ITS REQUEST FOR SUPPLY OF REASONS. HOWEVER THIS LETTER PER TAINS TO ASSESSMENT YEAR 1999-00 AND NOT THIS YEAR. IT APPEARS THAT THE REASONS FOR BOTH THE YEARS ARE THE SAME. FOR THE SAKE OF COMPLETE NESS THE REASONS ARE REPRODUCED BELOW WITH THE REMARKS THAT THE AS SESSMENT PROCEEDINGS U/S 147 WERE INITIATED ON RECEIPT OF INFORMATION OF LAW ON THE SAME FACTS IN THE SAME CASE FOR ASSESSMENT YEAR 2001-02: - DURING THE COURSE OF ASSESSMENT PROCEEDING OF A. Y. 2001-02 IT WAS NOTICED THAT THE ASSESSEE COMPANY HAS C ONCEALED ITS INCOME BY RS. 9 84 841/- FOR THE A.Y. 1999-00. IT HAS BEEN FOUND THAT THE ASSESSEE COMPANY IS SHOWING RENT AL INCOME OF RS. 2.43 LAKHS FROM A BUILDING ON WHICH IT HAS CLAIMED DEPRECIATION OF RS. 11 67 091/- AS PER INCOME-TA X ACT. ON EXAMINATION OF DETAILS OF RENTAL INCOME AND BU ILDING ON WHICH ASSESSEE IS CLAIMING DEPRECIATION IT HAS BEEN FOUND THAT BUILDING ON WHICH DEPRECIATION CLAIMED BY THE ASSESSEE IS LOCATED AT F-91 FIRST FLOOR SPENCER PLAZA 769 ANNA SALAI CHENNAI. THIS PROPERTY WAS ACQUIRED BY THE ASSESSEE COMPANY IN 1999 AND GIVEN ON LEASE TO THE HOLD ING COMPANY ITA NOS. 2274 2275& 2276(DEL)/2007 16 @ RS. 50 000/- P.M. AND TOTAL RENT FROM THIS P ROPERTY DURING THE YEAR COMES TO RS. 6 00 000/- WHICH HAS BEEN S HOWN BY THE ASSESSEE COMPANY AS INCOME FROM BUSINESS. IN TH E RETURN OF INCOME FILED BY THE ASSESSEE RENTAL INCOME IS S HOWN AS BUSINESS INCOME AND THIS STAND OF THE DEPARTME NT HAS ALREADY BEEN CONFIRMED BY THE LD. CIT(A). 5.5 THE RELEVANT LAW APPLICABLE IN THE CASE OF INDIAN & EASTERN NEWSPAPER SOCIETY (SUPRA) HAS BEEN EXTRACTED B Y THE HONBLE COURT ON PAGE 1000 WHICH READS AS UNDER:- 147. IF- (A) THE INCOME-TAX OFFICER HAS REASON TO BEL IEVE THAT BY REASON OF THE OMISSION OR FAILURE ON THE PART OF AN ASSESSEE TO MAKE A RETURN UNDER SECTION 139 FOR ANY A SSESSMENT YEAR TO THE INCOME-TAX OFFICER OR TO DISCLOSE FUL LY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSE SSMENT FOR THAT YEAR INCOME CHARGEABLE TO TAX HAS ESCAPED AS SESSMENT FOR THAT YEAR OR (B) NOTWITHSTANDING THAT THERE HAS BEEN NO OMISSION OR FAILURE AS MENTIONED IN CLAUSE (A) ON THE PART OF THE ASSESSEE THE INCOME-TAX OFFICER HAS IN CONSE QUENCE OF INFORMATION IN HIS POSSESSION REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR AN Y ASSESSMENT YEAR HE MAY SUBJECT TO THE PROVIS IONS OF SECTIONS 148 TO 153 ASSESS OR REASSESS SUCH INCOME OR RECOMPUTED THE LOSS OR THE DEPRECIATION ALLOW ANCE AS THE CASE MAY BE FOR THE ASSESSMENT YEAR CONCERNED. . THE LAW APPLICABLE IN THE CASE OF THE ASSESS EE READS AS UNDER:- IF THE ASSESSING OFFICER HAS REASON TO BELIEV E THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT FOR ANY ASSESSMENT YEAR HE MAY SUBJECT TO THE P ROVISIONS OF SECTIONS 148 TO 153 ASSESS OR REASSESS SUCH INCOME AND ITA NOS. 2274 2275& 2276(DEL)/2007 17 ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH H AS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSE QUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION OR RECOMPUTED THE LOSS OR THE DEPRECIATION ALLOWA NCE 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 RELEVAN T 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 UNDE R THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END O F THE RELEVANT ASSESSMENT YEAR UNLESS ANY INCOME CHARGEABLE T O 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. 5.6 ON COMPARATIVE READING OF THE PRE-EXISTING LA W AND THE PRESENT LAW IT WILL BECOME CLEAR THAT THE PROVISIONS CON TAINED IN CLAUSE (A) AND CLAUSE (B) OF SECTION 147 WERE RE-STATED IN T HE SECTION AND THE FIRST PROVISO ALBEIT WITH SOME CHANGES. WE ARE N OT CONCERNED WITH THE POSITION OF LAW CONTAINED IN CLAUSE (A) OF SECTION 147 EARLIER AND PROVISO TO SECTION 147 NOW FOR THE SIMPLE REA SON THAT THERE IS NO ALLEGATION OF OMISSION OR FAILURE ON THE PART OF THE ASSESSEE AND REGULAR ASSESSMENT HAS NOT BEEN MADE U/S 143(3). THE L AW CONTAINED IN SECTION 147(B) EARLIER AND SECTION 147 NOW ARE SIMI LAR EXCEPT THAT THE ITA NOS. 2274 2275& 2276(DEL)/2007 18 PRESENT LAW DISPENSES WITH THE REQUIREMENT OF IN FORMATION. BOTH THE PROVISIONS CONTAIN THE EXPRESSION REASON TO BELIEVE. NONE OF THE PROVISION CONTAINS ANY MENTION ABOUT THE EXPRES SION CHANGE OF OPINION WHICH PRIMA-FACIE APPEARS TO BE APPLICABLE ONLY WHEN THERE HAS BEEN AN ALLEGATION THAT THERE WAS A FAILURE ON THE PAR T OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT IN A CASE WHERE ASSESSMENT WAS MADE U/S 143(3). A S MENTIONED EARLIER THE EARLIER LAW CONTAINS ADDITIONAL CONDITION OF INFORMATION. THE PROVISION CONTAINED IN SECTION 34(1)(B) OF 192 2 ACT WAS SIMILAR IN CONTENTS TO THE PROVISION CONTAINED IN SECTION 147(B) OF THE 1961 ACT. THEREFORE IF THIS CASE CAN STAND THE TEST LAID DOWN IN KALYANJI MAVJI & CO. AND INDIAN & EASTERN NEWSPAPER SOCIETY (SUPRA) THERE WILL BE NO REASON TO COME TO A CONCLUSION THAT ASSU MPTION OF JURISDICTION IN THIS CASE WAS BAD IN LAW. IN THE CASE OF KALYANJI MAVJI & CO.(SUPRA) A REFERENCE WAS MADE TO THE DECISION OF HONBL E BOMBAY HIGH COURT IN THE CASE OF CIT VS. H. HOLCK LARSEN (1972) 8 5 ITR 461 IN WHICH FOLLOWING OBSERVATIONS WERE MADE:- WHAT IS OBLIGATORY IN ORDER TO APPLY SECTION 34(1)(B) IS THAT HE MUST HAVE INFORMATION IN HIS POSSESSION IN CONSEQUENCE OF WHICH HE HAS REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSESSMENT OR IS UNDER-ASS ESSED ETC. THE DISTINCTION REALLY CONSISTS IN A CHANGE OF OPINION UNSUPPORTED BY SUBSEQUENT INFORMATION ON THE ONE HAND AND ITA NOS. 2274 2275& 2276(DEL)/2007 19 A CHANGE OF OPINION BASED ON INFORMATION SUBSE QUENTLY OBTAINED ON THE OTHER. IN THE FORMER CLASS OF CASES THE ASSESSMENT PROCEEDINGS ARE ATTEMPTED TO BE REOP ENED WITHOUT THE DISCOVERY OF AN ERROR AND WITHOUT RECEIVING ANY INFORMATION AS TO FACT OR LAW.. SUCH A REOPE NING IS BASED ON A MERE CHANGE OF OPINION AND IS WITH OUT JURISDICTION..IN THE LATTER CLASS OF CASES THE REOPENING IS BASED ON INFORMATION LEADING TO THE REQUIS ITE BELIEF AND IS THEREFORE WITHIN THE JURISDICTION OF THE OF FICER. THE HONBLE SUPREME COURT ON THE BASIS OF AFOR ESAID OBSERVATIONS MENTIONED THAT THE DECISION IS REALLY BASED ON THE QUESTION WHETHER IT IS OPEN TO THE ITO TO CHANGE HIS OPINION SU BSEQUENTLY ON SAME MATERIAL AND RE-OPEN THE ORIGINAL ASSESSMENT. W E ARE NO DOUBT INCLINED TO AGREE WITH THE VIEW EXPRESSED BY CHANDRCHUD J. IN THE AFORESAID CASE BUT AS THIS QUESTION IS NOT FREE FROM DIFFICULTY AS THERE IS SOME DIVERGENCE OF JUDICIAL OPINION ON THE SUBJECT WE WOULD REFRAIN FROM GIVING ANY DEFINITE DECISION ON THIS POINT PARTICULARLY WHEN IN THE VIEW WE TAKE IN THE INSTANT CASE THIS POIN T DOES NOT REALLY ARISE FOR DETERMINATION IN THIS CASE WHICH IS REALLY B ASED ON ANOTHER PRINCIPLE NAMELY THAT THE INFORMATION WAS DERIVED BY TH E ITO FROM FRESH FACTS AND CLEARLY COVERED BY PRINCIPLES LAID DOWN I N A. RAMAN & COMPANY (1968) 67 ITR 11. THUS THE APPEAL OF THE ASSESSEE WAS DISMISSED. IT MAY BE MENTIONED BY US HERE THAT IN THAT CAS E THE INFORMATION WAS RECEIVED BY THE ITO IN THE COURSE OF ASSESSMENT PROCEEDINGS OF THE ITA NOS. 2274 2275& 2276(DEL)/2007 20 SUBSEQUENT YEAR ON THE BASIS OF WHICH RE-ASSESS MENT PROCEEDINGS WERE INITIATED U/S 34(1)(B). THE INFORMATION WAS O F FACT NAMELY THAT THE MONEY BORROWED ON WHICH INTEREST WAS PAID AND CLAIMED WAS NOT WHOLLY UTILIZED FOR THE PURPOSE OF BUSINESS BUT ALSO DIVERTED TO THE PARTNERS. ON COMPARISON OF THE FACTS OF THESE CASES IT WILL BE SEEN THAT THE INFORMATION WAS DERIVED BY ANALYSIS OF THE EXISTING FACTS IN A SUBSEQUENT YEAR IN THE CASE OF KALYANJI MAVJI & CO.. HOWEVER IN THIS CASE INFORMATION OF LAW HAS BEEN RECE IVED FROM AN AUTHORITY COMPETENT UNDER THE ACT TO PRONOUNCE LAW NAMELY THE CIT(APPEALS) IN THE IMMEDIATELY SUCCEEDING YEAR. IN THE CASE OF INDIAN & EASTERN NEWSPAPER SOCIETY (SUPRA) THE HONBLE COURT MEN TIONED THAT THE INFORMATION COULD BE OF FACT OR OF LAW. HOWE VER WHEN IT IS AN INFORMATION OF LAW IT MUST EMANATE FROM A FO RMAL SOURCE COMPETENT TO PRONOUNCE THE STATE OF LAW. THE AUDIT P ARTY IS NOT SUCH A FORMAL SOURCE. HOWEVER IT IS CLEAR TO US THAT THE CIT (APPEALS) IS AN AUTHORITY UNDER THE INCOME-TAX ACT WHICH IS ENTRUSTED W ITH THE WORK OF DETERMINING FACTS AND POSITION OF LAW IN DISPU TE BEFORE HIM. SUCH QUASI-JUDICIAL AUTHORITY HAD PRONOUNCED THAT THE INCOME BY WAY OF RENT WAS REQUIRED TO BE TAXED UNDER THE HEAD INCOM E FROM HOUSE PROPERTY. THE AO BASED UPON THIS INFORMATION INITIATE D ASSESSMENT PROCEEDINGS ITA NOS. 2274 2275& 2276(DEL)/2007 21 U/S 147. THE CASE OF INDIAN & EASTERN NEWSPAP ER SOCIETY (SUPRA) SUPPORTS HIS ACTION EVEN UNDER THE MORE ST RINGENT PROVISION WHICH CONTAINED ADDITIONAL REQUIREMENT OF INFORMATIO N. IN SUCH A CIRCUMSTANCE THERE IS NO REASON TO HOLD THAT IN ABSENCE OF ANOTHER CONDITION AS AFORESAID ASSUMPTION OF JURIS DICTION WAS BAD IN LAW. THE ASSUMPTION OF JURISDICTION BY THE AO IN TH IS CASE FINDS DIRECT SUPPORT FROM THE DECISION OF HONBLE SUPREME COU RT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS (P) LTD. (SUPRA). AT PAGES 511 AND 512 THE HONBLE COURT MENTIONED THAT THE SCOPE AND EFFEC T OF SECTION 147 AS SUBSTITUTED WITH EFFECT FROM 1.4.1989 ARE SU BSTANTIALLY DIFFERENT FROM THE PROVISIONS AS THEY STOOD PRIOR TO SUCH SUB STITUTION. THEREAFTER THE COURT MENTIONED ABOUT PRE-EXISTING CLAUSES (A) A ND (B) WHICH WE HAVE ALREADY DEALT WITH. IT WAS ALSO MENTIONED TH AT FOR ASSUMPTION OF JURISDICTION U/S 147(A) TWO CONDITIONS WERE REQ UIRED TO BE SATISFIED (I) THE AO MUST HAVE REASON TO BELIEVE THAT INCO ME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT; AND (II) SUCH ESCAPEMENT HAS OCCURRED BY REASON OF EITHER OMISSION OR FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR T HE ASSESSMENT. HOWEVER UNDER THE SUBSTITUTED SECTION ONLY FIRST CONDITIO N WILL SUFFICE. IN OTHER WORDS IF THE AO HAS REASON TO BELIEVE THAT INC OME HAS ESCAPED ITA NOS. 2274 2275& 2276(DEL)/2007 22 ASSESSMENT IT CONFERS JURISDICTION TO RE-OPEN THE ASSESSMENT. HOWEVER BOTH THE CONDITIONS ARE TO BE SATISFIED IF T HE CASE FALLS WITHIN THE AMBIT OF THE FIRST PROVISO. AT PAGE 508 T HE HONBLE COURT ALSO OBSERVED THAT THE WORDS INTIMATION AND ASSESS MENT ARE DIFFERENT IN AS MUCH AS IN ASSESSMENT THE AO IS FREE TO MAKE ANY ADDITION AFTER GRANTING OPPORTUNITY TO THE ASSESSEE. NO ADD ITION IS PERMISSIBLE IN THE INTIMATION AND NO OPPORTUNITY IS TO BE GRANTED T O THE ASSESSEE. THEREFORE INTIMATION BEING NO ASSESSMENT THERE IS NO QU ESTION OF CHANGE OF OPINION. ACCORDING TO US THIS CASE CONCLUDES THE ISSUE IN FAVOUR OF THE REVENUE. HOWEVER WE MAY PROCEED TO FURTHER EXAMINE THE EMPHASIS LAID BY THE LD. COUNSEL ON THE ISSUE OF CHANGE OF OPINION. THE FACTS OF THE CASE OF SHIPRA SRIVASTAVA (SUPRA) WERE COMPLETELY DIFFERENT. THE AO WANTED TO BRING PROPERTY INCOME TO TAX ON T HE GROUNDS INTER-ALIA THAT SHE WAS OCCUPYING ACCOMMODATION PROVIDED BY THE EMPLOYER-HOSPITAL AND THE INTEREST PAID ON BORROWED CAPITAL FOR ACQUISITION OF THE PROPERTY WAS WRONGLY ALLOWED. THE HONBLE COURT POINTE D OUT THAT THE ASSESSEE WAS NOT STAYING IN DELHI AS SHE WAS EMPLO YED ELSEWHERE BECAUSE OF WHICH HER PROPERTY REMAINED VACANT AND THER EFORE ITS ANNUAL VALUE WAS TO BE TAKEN AT NIL. THEREFORE THERE IS A BSENCE OF REASON TO BELIEVE AS THERE WAS NO APPLICATION OF MIND BY THE AO TO ARRIVE AT HIS ITA NOS. 2274 2275& 2276(DEL)/2007 23 CONCLUSION. FIRSTLY NO MATERIAL WAS REFERRE D TO FOR COMING TO THE CONCLUSION AND IT WAS NOT A CASE WHERE MATER IAL FACTS HAD BEEN SUPPRESSED BY THE ASSESSEE. THUS THE CASE WAS DECIDED ESSENTIALLY ON THE GROUND THAT NO INFORMED PERSON COULD HAVE FORMED REASON TO BELIEVE THAT THE INCOME ESCAPED ASSESSMENT. T HE USE OF WORDS THE REASONS DO NOT REFER TO ANY MATERIAL WHICH H AS COME TO THE NOTICE OF THE OFFICER SUBSEQUENT TO FINALISATION OF ASSESSMEN T U/S 143(1) IS INCIDENTAL TO THE WHOLE CASE BECAUSE EVEN AT THE TIME OF ASSESSMENT THERE WERE NO SUCH FACT WHICH COULD HAVE LED TO DISALLOWANCE OF THE INTEREST WHOLLY OR PARTLY. HOWEVER IN THE INST ANT CASE THE AO INITIATED ASSESSMENT PROCEEDINGS U/S 147 BECAUSE OF AUTHORI TATIVE PRONOUNCEMENT BY THE CIT(APPEALS) UNDER THE LAW AND HIS ORDER HELD THE FIELD WHEN THE JURISDICTION WAS ASSUMED. INCIDENTALLY IT MAY BE MENTIONED THAT THE ORDER OF THE CIT(APPEALS) HAS BEEN ACCEPTED BY T HE ASSESSEE. COMING TO THE DECISION IN THE CASE OF KELVINATOR OF INDI A LTD. THE FACTS ARE MENTIONED IN THE DECISION OF HONBLE DELHI HIGH C OURT THAT THE ASSESSMENT FOR ASSESSMENT YEAR 1987-88 WAS COMP LETED U/S 143(3) AND THEREAFTER IT WAS RE-OPENED WITH A VIEW TO BRIN G TO TAX CERTAIN AMOUNTS AGGREGATING TO RS. 43 91 603/- COMPRISING OF INT EREST CLAIM OF RS. 41.28 LAKH GUEST HOUSE EXPENSES OF RS. 1.76 LAKH ADVERTISEMENT EXPENSES ITA NOS. 2274 2275& 2276(DEL)/2007 24 OF RS. 83 303/- AND CLUB EXPENSES OF RS. 4 300/-. THE ASSESSMENT WAS REOPENED U/S 147. THE ASSESSEE OBJECTED TO TH E REOPENING PARTICULARLY ON THE GROUND THAT THE TRIBUNAL HAD ALLOWED SI MILAR EXPENSES FOR ASSESSMENT YEAR 1986-87 ON APPEAL. THE HONB LE COURT EXAMINED THE PROVISIONS REGARDING REOPENING IN THE 1922 ACT AND IN THE 1961 ACT. THE HONBLE COURT ALSO EXAMINED THE REASONS RECORDED BY THE AO AND THE AFFIDAVIT FILED BY HIM. IT TRANSPIRED THAT THE AO STATED THAT HE WRONGLY ALLOWED THE DEDUCTIONS IN THE ORIGINAL ASSESSMENT AND THEREFORE HE WAS OF THE OPINION THAT INCOME HAD ESCAPED ASSESSMENT. ADMITTEDLY NOTHING HAD HAPPENED BETWEEN THE COMPLETION OF O RIGINAL ASSESSMENT AND FORMATION OF OPINION BY THE AO. THERE WAS NO C HANGE IN LAW AND NO NEW MATERIAL CAME ON THE RECORD. NO INFORMATION WA S RECEIVED. IT WAS MERELY A CASE OF FRESH APPLICATION OF MIND BY THE AO TO THE SAME SET OF FACTS. THE COURT WAS OF THE VIEW THAT IN ABSE NCE THEREOF THE AO DID NOT HAVE JURISDICTION TO REOPEN THE ASSESSMENT. THI S FINDING WAS CONFIRMED BY THE HONBLE SUPREME COURT. THE FACTS OF TH IS CASE ARE ALSO CLEARLY DISTINGUISHABLE. IN THE FIRST PLACE THE ASSESS MENT YEAR INVOLVED IN THE CASE BEFORE THE HONBLE COURT WAS ASSESSMENT YEA R 1987-88. IN THE SECOND NOTHING HAD HAPPENED IN THAT CASE AFT ER ORIGINAL ASSESSMENT WHILE THE AO IN THE CASE AT HAND HAD THE BENE FIT OF THE DECISION OF THE ITA NOS. 2274 2275& 2276(DEL)/2007 25 LD. CIT(APPEALS) IN RESPECT OF CORRECT HEAD OF INCOME. THEREFORE THERE WERE OTHER REASONS WHICH JUSTIFIED THE REOPE NING OF THE ASSESSMENT AND TAKING A CUE FROM THE DECISION IN THE CA SE OF KALYANJI MAVJI & CO. (SUPRA) IF THERE ARE OTHER REASONS ONE MAY NOT GO INTO THE QUESTION OF CHANGE OF OPINION. WE ARE AT PAINS TO STATE HERE THAT THERE IS ALSO NO QUESTION OF CHANGE OF OPINION AS NO ASSESSMENT WAS MADE U/S 143(3) IN THIS CASE. IN THE CASE OF HAVELLS INDIA LTD. (SUPRA) THE FACTS ARE THAT THE RETURN OF INCOME FOR ASSESSMENT YEAR 2003- 04 WAS FILED ON 19.11.2003. LATER ON THE RETURN WAS REVISED ON 30.10.2004 WHICH WAS PROCESSED U/S 143(1). THE ASSESSMENT WAS REOPENED ON THE GROUND THAT ON PERUSAL OF ASSESSMENT RECORD IT WAS FOUND THAT THE ASSESSEE CLAIMED ADDITIONAL DEPRECIATION OF RS. 28 24 676 /- WHICH WAS ALLOWED IN THE COURSE OF PROCESSING THE RETURN. THE ASSESS EE WAS REQUIRED TO FILE AUDIT REPORT FOR MAKING SUCH A CLAIM ALONG WITH THE ORIGINAL RETURN OF INCOME WHICH IN THIS CASE WAS DONE ALONG WIT H THE REVISED RETURN. THE HONBLE COURT MENTIONED THAT THE AUDIT REPORT FILED ALONG WITH THE REVISED RETURN HAD TO BE CONSIDERED AS IT COULD BE FILED ALONG WITH THE REVISED RETURN ALSO. IT WAS HELD THAT THE R EQUISITE DOCUMENTS WERE FILED ALONG WITH THE REVISED RETURN WHICH IN TU RN WAS FILED IN TIME. THUS THERE WAS NO REASON FOR REOPENING THE AS SESSMENT. WE ARE OF THE ITA NOS. 2274 2275& 2276(DEL)/2007 26 VIEW THAT THE FACTS OF THIS CASE ALSO DISTIN GUISHABLE. THE ESSENTIAL QUESTION IN THAT CASE WAS WHETHER ADDITIONAL DEPRECIATION COULD BE ALLOWED IN A CASE WHERE THE AUDIT REPORT IS FILED ALONG WITH THE REVISED RETURN AND NOT WITH THE ORIGINAL RETURN. THER E ARE PRECEDENTS TO THE EFFECT THAT IT COULD BE FILED WITH THE REVISED RETURN AND THUS THE VERY BASIS OF REOPENING FAILED. THERE IS NO SUCH FAILURE HERE. THE LD. CIT(APPEALS) HELD IN A SUBSEQUENT YEAR THAT T HE INCOME WAS TAXABLE UNDER THE PROPERTY HEAD A DECISION ACCEPTED B Y THE ASSESSEE. THEREFORE THE FOUNDATION OF THE REOPENING OF T HE ASSESSMENT REMAINS INTACT AND DOES NOT STAND DEMOLISHED FOR ANY REASON WHATSOEVER. IN THE CASE OF BATRA BHATTA CO. (SUPRA) THE ASSESSMENT WAS REOPENED BY MERELY STATING THAT THE ISSUE WHETHER THE LAND WAS AGRICULTURAL LAND OR NOT REQUIRED DEEPER SCRUTINY. THIS DOES NOT LEA D TO FORMATION OF BELIEF THAT INCOME ESCAPED ASSESSMENT. THE FACTS OF THIS CASE ARE ALSO DISTINGUISHABLE AS THE RE-ASSESSMENT PROCEEDINGS WERE INITIATED WITH A VIEW TO BRING ESCAPED INCOME TO TAX AND R EALLY SPEAKING THERE IS NO DISPUTE ABOUT THE FACTUM OF ESCAPEMENT OF INCO ME. IN THE CASE OF GUJARAT GINNING & MANUFACTURING CO. LTD. (SUPRA) T HE REAL QUESTION WAS AS TO WHETHER THERE WAS A FAILURE ON THE PART O F THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THE ITA NOS. 2274 2275& 2276(DEL)/2007 27 ASSESSEE HAD LET OUT CERTAIN GODOWNS IN RESP ECT OF WHICH DEDUCTION OF MUNICIPAL TAXES WAS CLAIMED BUT ANNUAL VALUE WAS NOT INCLUDED IN THE RETURN. THE ASSESSMENTS PERTAINED TO ASSESSMEN T YEARS 1966-67 AND 1967-68 I.E. PRIOR TO THE AMENDMENT IN THE SEC TION. THE ASSESSMENT WERE SOUGHT TO BE REOPENED U/S 147(A). THE HON BLE COURT MENTIONED THAT SO FAR AS THE ASSESSEE IS CONCERNED ALL M ATERIAL FACTS HAD BEEN DISCLOSED REGARDING POSSESSION OF GODOWNS ETC. THEREAFTER IT WAS FOR THE AO TO DRAW INFERENCE ABOUT THE TAXABILITY OF THE ANNUAL VALUE OF THE GODOWNS. WE HAVE ALREADY MENTIONED THAT THE IS SUE REGARDING CHANGE OF OPINION WILL HAVE A BEARING ON THE MATTER UNDER THE OLD SECTION 147(A) AS WELL AS UNDER PROVISO TO NEW SECTION 147. T HIS CASE IS NOT COVERED UNDER THE PROVISO AS PROCESSING WAS DONE U/S 14 3(1) AND NOTICE WAS ISSUED WITHIN FOUR YEARS OF THE END OF THE RELE VANT ASSESSMENT YEAR. THEREFORE WE ARE OF THE VIEW THAT RATIO OF TH AT DECISION IS NOT APPLICABLE. 5.7 WE HAVE CONSIDERED ALL OTHER DECISIONS CITED BY THE RIVAL PARTIES BUT ALL THE DECISIONS ARE NOT MENTIONED IN THIS ORDER FOR THE REASON THAT IT WILL AMOUNT TO REPEATING THE SAME RATIO AGAIN A ND AGAIN. HOWEVER IN A NUTSHELL WE ARE OF THE VIEW THAT IF THERE ARE OTHER REASONS FOR REOPENING ITA NOS. 2274 2275& 2276(DEL)/2007 28 THE ASSESSMENT THE QUESTION OF CHANGE OF OPINI ON MAY RECEDE INTO OBLIVION IN SO FAR AS THE MAIN PROVISION IS CON CERNED. ACCORDINGLY IT IS HELD THAT THE AO WAS JUSTIFIED IN ASSUMING JUR ISDICTION U/S147. 6. COMING TO THE MERITS IT IS AN ACCEPTED FA CT THAT THE ASSESSEE HAS LET OUT THE COMMERCIAL ASSET ACQUIRED BY IT IN THE IMMEDIATELY PRECEDING YEAR AND THE RENT HAS BEEN DERIVED QUA OWNER. THE ASSESSEE SOUGHT TO RELY ON THE DECISION OF A BENCH OF KOLKATA TR IBUNAL IN THE CASE OF PFH MALL & RETAIL MANAGEMENT LTD. VS. ITO (2007) 16 SOT 83. THAT ASSESSEE WAS SYSTEMATICALLY PROVIDING OTHER SE RVICES FACILITIES AND AMENITIES MENTIONED IN PARAGRAPH 4.1 OF THE ORDE R. IT WAS HELD THAT THE RENT RECEIVED AMOUNTED TO THE BUSINESS INCOME OF THE ASSESSEE. ON THE OTHER HAND THE LD. DR RELIED ON THE DECISIO N OF HONBLE KARNATAKA HIGH COURT IN THE CASE OF BHOOPLAM COMMERCIAL COMPLEX & INDUSTRIES (P) LTD. (2003) 262 ITR 517 IN WHICH THE FACT S WERE THAT ADMITTEDLY THE COMMERCIAL COMPLEX WAS CONSTRUCTED AND RENTA L INCOME WAS DERIVED BY THE ASSESSEE ALONE IN ITS OWN RIGHT AS OWNE R. THE HONBLE COURT CAME TO THE CONCLUSION THAT THE INCOME WAS TA XABLE U/S 22. WHILE COMING TO THIS CONCLUSION THE DECISION OF HONBL E SUPREME COURT IN THE CASE OF CIT VS. PODDAR CEMENT (P) LTD. (1977) 2 26 ITR 625 TO THE ITA NOS. 2274 2275& 2276(DEL)/2007 29 EFFECT THAT NOTWITHSTANDING THE FACT THAT ONE OF THE OBJECTS OF THE ASSESSEE COMPANY WAS TO DERIVE INCOME BY LEASING SITES AND CONSTRUCTION THEREON THE INCOME HAD TO BE NECESSARILY ASSE SSED U/S 22 BY TAKING GROUND REALITY INTO ACCOUNT WAS FOLLOWED. THE FACTS ARE THAT THE ASSESSEE IS THE OWNER OF THE PROPERTY AND SINCE I NCEPTION THE SAME HAS BEEN LET OUT TO THE HOLDING COMPANY. THE RENT IS ENJOYED QUA THE OWNER. THE DECISION OF THE LD. CIT(A) HAS BEEN ACCEPTE D BY THE ASSESSEE IN THE IMMEDIATELY PRECEDING YEAR. THEREFORE IT IS HELD THAT THE INCOME WAS TAXABLE UNDER THE HEAD INCOME FROM HOUSE PROPER TY. 6.1 THE NECESSARY CONCLUSION OF TAXATION OF THE RENT AS PROPERTY INCOME IS THAT THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION OF DEPRECIATION ON THE BUILDINGS. ITA NO. 2276(DEL)/2007- A.Y. 2002-03 7. THE ASSESSEE HAS TAKEN UP ONLY TWO GROUNDS R EGARDING TAXATION OF RENT UNDER APPROPRIATE HEAD AND DISALLOWANCE OF DEPRECIATION. IT WAS THE COMMON GROUND OF BOTH THE PARTIES THAT THESE ISSUES STAND COVERED IN ITA NO. 2275(DEL)/2007 FOR ASSESSMENT YEAR 2000 -01 (SUPRA). RELYING ITA NOS. 2274 2275& 2276(DEL)/2007 30 ON THAT ORDER IT IS HELD THAT THE RENTAL INCOME IS TAXABLE U/S 22 AND THE ASSESSEE IS NOT ENTITLED TO DEDUCT DEPRECIATION O N THE BUILDINGS. 8. IN THE RESULT THE APPEAL FOR ASSESSMENT YEAR 1999-00 IS ALLOWED AND THE APPEALS FOR ASSESSMENT YEARS 2000-01 AND 2002 -03 ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 18 FEBRUARY 2010. SD/- SD/- (GEORGE MATHAN) (K.G.BANSAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE OF ORDER: 18TH FEBRUARY 2010. SP SATIA COPY OF THE ORDER FORWARDED TO:- 1. TRENT BRANDS LTD. NEW DELHI. 2. ACIT CIRCLE 16(1) NEW DELHI. 3. CIT(A) 4. CIT NEW DELHI. 5. DR ITAT NEW DELHI. ASSISTANT REGISTRA R.