Dalmia Pvt Ltd vs. CIT (Delhi High Court)

DATE: (Date of pronouncement)
DATE: September 28, 2011 (Date of publication)

Click here to download the judgement (dalmia_147_reopening_change_opinion.pdf)

S. 147: Despite specific & pointed queries in s. 143(3) assessment, AO cannot be said to have formed any opinion if explicit opinion not recorded

In the balance sheet enclosed with the ROI, the assessee disclosed sundry creditors of Rs. 1.66 crores. In the course of the s. 143 (3) assessment, the AO asked the assessee to submit the entire list of sundry creditors with their names and addresses etc. The assessee submitted confirmations to the extent of Rs. 1.13 crores and though it could not explain Rs. 33 lakhs, the AO assessed only Rs. 19.86 lakhs u/s 41(1) in respect of 7 creditors. The assessee filed an appeal on the issue. After the expiry of 4 years and pursuant to an audit objection, the AO issued a notice u/s 148 seeking to assess the balance of the creditors as well u/s 41(1). The assessee filed a Writ Petition challenging the reopening on the ground that (i) as the AO had consciously assessed only Rs. 19.86 lakhs though he was aware of the creditors’ figure being Rs. 1.66 crores, it was a case of “change of opinion” and (ii) as 4 years from the end of the assessment year had elapsed, reopening was not permissible as there was no failure on the part of the assessee to make a full and true disclosure of the material facts. HELD dismissing the Petition:

(i) The argument that as the AO had called for the details of Rs. 1.66 crores and confined the addition only to Rs. 19.66 lakhs, the reopening is on a “change of opinion” is not acceptable. The question of change of opinion arises when the AO forms an opinion and decides not to make an addition and holds that the assessee is correct. Here, though the AO had asked specific and pointed queries with regard to the sundry creditors of Rs. 1.66 crores, he had made an addition of only Rs.19.86 lakhs and there was no discussion, ground or reason why addition of Rs. 32.97 lakhs was not made in-spite of the assessee’s failure to furnish conformation and details to that extent. The argument that when the assessment order does not record any explicit opinion on the aspects now sought to be examined, it must be presumed that those aspects were present to the mind of the AO and had been held in favour of the assessee is too far-fetched a proposition to merit acceptance (Consolidated Photo vs. ACIT 281 ITR 394 (Del) followed);

(ii) The argument that there was a full and true disclosure of material facts is not acceptable because though in the regular assessment proceedings, the assessee was asked to furnish details with regard to all creditors, this was not done. The term “failure” on the part of the assessee is not restricted only to the income-tax return but extends also to the assessment proceedings. If the assessee does not disclose or furnish to the AO complete and correct information and details it is required and under an obligation to disclose, there is a failure on its part (Honda Siel Power Products vs. DCIT followed).

Note: Heavy reliance was placed on Consolidated Photo 281 ITR 394 (Del) in spite of it being held to be contrary to the Full Bench in Kelvinator 256 ITR 1 (Del) (FB) (affirmed in 320 ITR 561 (SC)) & “subversive of judicial discipline” in Eicher 294 ITR 310 (Del), KLM Royal Dutch 292 ITR 49 (Del) & Goetze 321 ITR 431 (Del). See also Ritu Investments vs. DCIT (Del) where it was held, following Gemini Leather Stores 100 ITR 1 (SC), that if the AO had all the material facts before him when he had framed the original assessment, he could not take recourse to s. 147 to remedy the error resulting from his own oversight.

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