Vinod Chandran, J.
1. The appellant is before this Court aggrieved by the judgment of the learned Single Judge refusing to interfere with the reassessment proceedings under Section 147 of the Income Tax Act, 1961 [for brevity, 'IT Act']. The reassessment proceedings were issued specifically on four grounds:
* 'Prior period depreciation amounting to Rs.2,886,370/- had been debited to Profits and Loss Account (P&L Account) during the AY 2007-08. However the same had not been disallowed in the tax computation.
* Prepayment premium on IDFC Term Loan amounting to Rs.1,500,000 debited to P & L Account, being expenditure directly in relation to the capital base of the Company, is a capital expenditure but has not been disallowed in computing the total income.
* Excess depreciation amounting to Rs.875,240 had been claimed by the Company on Plant and Machinery. However, the same had not been disallowed in the tax computation.
* Excess depreciation amounting to Rs.2,541,250 had been allowed on the intangible asset 'Brand Name' by wrongly adopting the WDV as on the first day of the year of amalgamation of the Company instead of adopting the WDV as on the last day of the year of amalgamation.
2. The learned Counsel for the assessee, concerned for the assessment year 2007-08, submits that the assessment itself was completed under Section 143(3) on 31.12.2009 by Ext.P2. Later, the assessee had filed an application for rectification under Section 154, in which an order was passed on 09.04.2010, produced at Ext.P3. The assessee, aggrieved with Ext.P3 order, filed an appeal, which was allowed as per Ext.P4. The assessee, hence, contends that there is no scope for a reassessment under Section 147 especially since there was a rectification application filed by the appellant, which stood allowed in toto. It is also contended that at the time when the assessment was completed under Section 143(3), these issues were considered and, in fact, the issues were placed before the Assessing Officer (AO), after discussion by way of written objections as seen from Ext.P1. Hence, there is a clear disclosure of relevant materials and the AO has also come to a definite conclusion after looking at the materials produced by the assessee as also the objections filed as per Ext.P1. Various decisions were also relied on, which have been cited by the learned Single Judge also, to contend that in the present case there is only a mere change of opinion and there could be no reassessment proceedings taken. The learned counsel for the appellant relies on the Full Bench decision of the Delhi High Court reported in (2002) 256 ITR 1 [Commissioner of Income Tax v. Kelvinator of India Ltd.], which was followed in (2012) 348 ITR 485 [Commissioner of Income Tax v. Usha International Ltd.]. The decision in Kelvinator of India Ltd. (supra) Was upheld by the Full Bench of the Honourable Supreme Court in (2010) 320 ITR 561 [Commissioner of Income Tax v. Kelvinator of India Ltd.].
3. The learned Senior Counsel for Government of India (Taxes) seeks to sustain the order and argues that merely because certain dis-allowances, which ought to have been made, were allowed, it cannot be said that there was a clear conclusion arrived at by the Assessing Officer. The thrust of the arguments of the Revenue was that merely because the assessee had pointed out certain issues or that it was discussed would not necessarily lead to a conclusion that in allowing the deduction, the Assessing Officer (AO) had come to a conclusion as to the sustainability of the claim of deduction. Even a mistake committed by the AO, which is apparent from the face of the record, could be rectified and in such circumstances, there could also be re-assessment under Section 147 for reason of escapement of income. The learned Senior Counsel would rely on the decision of the Division Bench of the Madras High Court reported in (1961) 42 ITR 547 (Salem Provident Fund Society Ltd. v. Commissioner of Income Tax, Madras), which was followed by a Division Bench of this Court reported in (1967) 64 ITR 218 [United Mercantile Co. Ltd. v. Commissioner of Income Tax, Kerala]. Both these decisions were noticed with approval by a Constitution Bench of the Honourable Supreme Court in AIR 1968 SC 565 [Anandji Haridas and Co. (P) Ltd. v. S.P.Kasture and others].
4. On facts, the learned counsel for the appellant/assessee would specifically invite our attention to Ext.P1 wherein all the specific issues that have now been sought to be re-opened was specifically put forth before the AO. In Ext.P1, paragraph No.1 refers to prior period depreciation and paragraph No.2 refers to brand addition. Paragraph No.9 speaks on depreciation Schedule as per the Income Tax Rules. Prepayment premium on IDFC term loan is referred to in paragraph No.12. It is also admitted that there was no explanation called for from the assessee at the scrutiny stage other than the notice issued. But on discussion, certain points arose which was explained by the assessee through the aforesaid communication.
5. Since the depreciation Schedule as per the IT Rules was not available, the learned Senior counsel ensured that the AO is present in Court with the assessment files. We had the benefit of the AO, who was conversant with the files, at the time of hearing. The AO specifically took us through the returns, which indicated the claim for depreciation. The depreciation for the prior period is available in the profit and loss account itself, which an AO has to look into at the time of assessment and disallow. The pre-payment premium on IDFC term loan though not available in any of the records, which could be immediately scrutinized, was specifically referred to in Ext.P1. We find from the records that the communication at Ext.P1 is available in the records and so is the depreciation Schedule as provided in the IT Rules. The depreciation Schedule as per the IT Rules was shown to us by the AO as available in the records. It contains the depreciation for plant and machinery and brand name is shown separately in the said Schedule. The AO admits that on a careful scrutiny, definitely, dis-allowance ought to have been made by the person who carried out the original scrutiny assessment under Section 141(3). The learned Senior Counsel for the Revenue, supports the AO and points out that as per the decisions cited by him, even an error committed by the AO would come within the ambit of a re-opening on valid grounds of escapement of income. It is also argued that the allowances were not specifically granted and there is no reasoning available in the order; which alone would reveal a definite opinion having been formed by the AO.
6. Looking at the decisions, we see that in Kelvinator of India Ltd. (supra), the Full Bench of the Delhi High Court found that a mere change of opinion of the AO is not a ground for re-assessment. In that decision, the contention raised by the Department was that after the amendment of Section 147 in 1987, the requirement for (i) disclosure of full and true material facts or (ii) availability of information in the possession of the income tax officer to form an opinion as to escapement of assessment being the reason to believe, have been deleted. It was the argument that the present provision as available under Section 147 requires only a formation of opinion by the AO, and the same would obliterate the earlier requirement, and the concept of change of opinion would no more be valid for deciding whether a reassessment is possible or not. We also notice that the formation of opinion has now been amended to 'has reason to believe' from 1989 onwards. Usha International Ltd. (supra) also followed Kelvinator of India Ltd. (supra) and the principle laid down is to the effect that even with the amendment, the concept of 'change of opinion' survives and if there is an opinion formed by the AO at the earlier instance, necessarily, there cannot be a reassessment by the very same AO or a new incumbent in the office having a different opinion with respect to any of the aspects on which the assessment has already been completed.
7. Specific reference is made to Usha International Ltd. (supra) wherein Their Lordships have stated the broad principles in para 13, which is extracted herein:-
'It is, therefore, clear from the aforesaid position that:
(1) Reassessment proceedings can be validly initiated in case return of income is processed under Section 143(1) and no scrutiny assessment is undertaken. In such cases there is no change of opinion;
(2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by principle of "change of opinion".
(3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons.'
The learned counsel would emphasise on serial No.(3) in the above extracted paragraph.
8. We have noticed that, definitely, the aforesaid issue was placed before the AO by the assessee by way of Ext.P1 communication which we have also found in the records. However, it is not an answer to a query. The assessment order also does not show any discussion with respect to the aforesaid deductions claimed by the appellant. Before we proceed to decide on the specific question whether reassessment is possible, we have to notice that the order on rectification and the further appeal therefrom would not have any bearing on the issue to be decided here. The order on rectification is seen from Ext.P3. After the assessment order was passed, the assessee had applied for rectification with respect to the unabsorbed depreciation for earlier years and credit for unabsorbed business loss. The claim for unabsorbed depreciation was allowed. But, however, the other issue was rejected on rectification finding that the same would not fall within the scope of a rectification. An appeal was filed by the assessee in which Ext.P4 order was passed wherein the claim for credit of unabsorbed business loss was also allowed. None of these issues are now sought to be reopened by the AO. In such circumstances, we do not think that the rectification application filed by the assessee has any bearing on the issue of reassessment.
9. What we see is that the AO failed to look into the aspects as are now sought to be reopened on reassessment proceedings under Section 148. The instant assessment was under Section 143 (3) and hence the wide elbow room as available in Serial No. (1) of the above extract from Usha International Ltd. cannot be availed of in a reassessment. But the assessment order does not record that the issue was raised and answered in favour of the assessee. There is also no query raised and there is only placed an explanatory note before the Assessing Officer; the details of which are not seen or discussed in the assessment order. Hence there cannot be found any change of opinion as found in serial numbers (2) or (3) of the above extract from Usha International Ltd.
10. It is in these circumstances that we look at the issue based on the principles as laid down in the decisions cited by the Revenue. Salem Provident Fund Society Ltd. (supra) considered the provision for escapement of income as available in the Act, wherein the reassessment proceedings required a correlation of the discovery of escapement from assessment to a definite information which had come into the possession of the ITO. Therein, there was no outside information available to the ITO and escapement was sought to be brought to tax on a reexamination of the files and from which it was discerned that the original assessment had been erroneous. We quote two paragraphs from the aforesaid judgment available at pages 564 and 565.
'We should like to emphasise even at the outset that we are not dealing with a case of a change of opinion on the part of the assessing authority, but with an error in computation obvious on the face of the order of assessment itself. That the real deficiency or surplus in each of the relevant years was to be ascertained by subtraction and not addition of the deficiency for each of the two years could never be challenged. Whether the discovery of such a mistake, which in its turn led to the further discovery of escape from assessment or underassessment, constitutes information within the meaning of section 34(1) is what we have to decide in this case. We do not propose to cover any wider ground.
We are unable to accept the extreme proposition, that nothing that can be found in the record of the assessment, which itself would show escape of assessment or under-assessment, can be viewed as information which led to the belief that there has been escape from assessment or under-assessment. Suppose a mistake in the original order of assessment is not discovered by the Income Tax Officer himself on further scrutiny but it was brought to his notice by another assessee or even by a subordinate or a superior officer, that would appear to be information disclosed to the Income Tax Officer. If the mistake itself is not extraneous to the record and the informant gathered the information from the record, the immediate source of information to the Income Tax Officer in such circumstances is in one sense extraneous to the record. It is difficult to accept the position that while what is seen by another in the record is "information" what is seen by the Income Tax Officer himself is not information to him. In the latter case he just informs himself. It will be information in his possession within the meaning of section 34. In such cases of obvious mistakes apparent on the face of the record of assessment, that record itself can be a source of information, if that information leads to a discovery or belief that there has been an escape of assessment or under-assessment.'
11. The decision of the Madras High Court was followed by this Court in United Mercantile Co. Ltd. (supra) from which we quote the following paragraph.
"To inform" means "to impart knowledge" and a detail available to the Income Tax Officer in the papers field before him does not by its mere availability become an item of information. It is transmuted into an item of information in his possession only if, and only when, its existence is realised and its implications are recognised.'
We also notice that both these decisions were approved by the Hon'ble Supreme Court in AIR 1968 SC 565 [Anandji Haridas &
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Co. (P) Ltd Vs. S.P. Kasture]. In the instant case, we do not see any reason to find any information being in the possession of the ITO obtained after the assessment order was passed so as to attempt a re-assessment for escapement of income; which requirement as the provision exists now is also not mandatory. The provision as it stands during the subject year requires only recording of a reason to believe that there has been escapement of income in the earlier assessment order passed. As has been found by the Honourable Supreme Court in Kelvinator of India Ltd. (supra) the amendment does not alter the earlier position of the pre-amended provision; and a mere change of opinion will not be permitted even under the present Section 147. In this context, we again go to Ext.P2 assessment order passed, wherein there is no opinion formed with respect to any of the issues on which now a reassessment is attempted. True, the AO could have found the wrong claims made by the assessee from the profit and loss account as also the depreciation Schedule filed under the IT Rules. However, obviously, there is no discussion nor is there any finding entered into in the assessment order at Ext.P2. We do not see any of the issues having been discussed by the AO, nor is there an opinion expressed specifically with respect to the issues now sought to be reopened under Section 147. In such circumstances, it cannot be said that there was a mere change of opinion in initiating the reassessment proceedings under Section 147 within the four year period by the new incumbent AO. We hence, find no reason to interfere with the judgment of the learned Single Judge and reject the Writ Appeal. No costs.