# Distributors India (South) v. U.O.I. & Ors

- **Citation:** (2022) 4 ILRA 934
- **Court:** High Court of Judicature at Allahabad
- **Decided:** 2022-04-18
- **Case number:** Writ Tax No. 41 of 2022
- **Bench:** Devendra Kumar Upadhyaya, Subhash Vidyarthi
- **Source:** https://unisonlegal.in/judgment/allahabad-high-court/distributors-india-south-v-u-o-i-ors-48373
- **Pages:** 13

## Headnote

A. Tax Law - Reassessment - Uttar
Pradesh
Krishi
Evam
Prodyogik
Vishwavidyalaya
Adhiniyam,
1988
-
4 All. Distributors India (South) Vs. U.O.I. & Ors.
935
Income Tax Act,1962 - Sections 194 H,
194 J, 194 C, 148, 147 & 151 - At the
stage of the notice of reopening of the
assessment, the Court has only to see
whether
there
is
prima
facie
some
material on the basis of which the
Department could reopen the case. The
sufficiency or correctness of the material
is not a thing to be considered at this
stage. (Para 17)

B. It is settled law that the validity of any
order has to be adjudged on the basis of
the reasons mentioned in the order itself
and additional reasons, which are not
mentioned in the order itself, cannot be
supplied afterwards either to support the
order or to challenge it. Since the reasons for
issuing the notice u/s 148 stated by the A.O.
and approved by the approving authority do not
make any mention of the audit para, the
petitioner cannot assail the validity of the order
for issuance of the notice u/s 148 of the Act on
the said ground. (Para 22)

The A.O. had merely sent a report to the CIT
(Audit) and he did not have the authority to
take a decision regarding the audit objection.
Therefore, the ground taken by the learned
Counsel for the petitioner regarding letter dated
07-02-2020 sent by the A.O. not accepting the
audit objection, is without any force and the
same cannot be accepted. (Para 23)

C. The obligation on the assessee to
disclose the material facts -- or what are
called, primary facts -- is not a mere
disclosure but a disclosure which is full
and true. A false disclosure is not a true
disclosure. The disclosure must not only
be true but must be full -- "fully and
truly". (Para 29)

As material facts relevant for the assessment on
the issues under consideration were not
produced during the assessment proceedings,
the A.O. could not examine the issues and could
not form an opinion regarding the same during
the original assessment proceedings. (Para 30)

D. Words and Phrases - "change of
opinion" - The words "change of opinion"
imply formulation of opinion and then a
change thereof. In terms of assessment
proceedings, it means formulation of belief by
an assessing officer resulting from what he
thinks on a particular question. It is a result of
understanding, experience and reflection. (Para
31)

Before interfering with the proposed reopening
of the assessment on the ground that the same
is based only on a change in opinion, the court
ought to verify whether the assessment earlier
made has either expressly or by necessary
implication expressed an opinion on a matter
which is the basis of the alleged escapement of
income that was taxable.

Every attempt to bring to tax, income that
has
escaped
assessment,
cannot
be
absorbed by judicial intervention on an
assumed change of opinion even in cases
where the order of assessment does not
address itself to a given aspect sought t

## Text

_Characters 0–39,886 of 44,704. This is a partial read: ask again with offset=39886 for what follows._

934 INDIAN LAW REPORTS ALLAHABAD SERIES
compensation for unauthorised, arbitrary
and illegal detention of the truck of the
petitioner by the respondent authorities
would not only compensate the petitioner
for loss suffered by him but it would also
help in improving work culture and public
confidence in rule of law. The principles of
law aforestated also find support from the
law laid down by Hon'ble Supreme Court
in Lucknow Development Authority vs.
M.K. Gupta; (1994) 1 SCC 243 and N.
Nagendra Rao and Company vs. State of
Andhra Pradesh; (1994) 6 SCC 205.

11. In paragraph 46 of the writ
petition, the petitioner has stated that the
petitioner is facing recurring financial loss
due to detention of its truck since
14.10.2020.
In
paragraph
8
of
the
application dated 05.12.2020 submitted by
the petitioner before the respondent no.2, it
has been stated as under :-

"8. That due to keeping of the
said truck under custody my client is not
in a position to run his business and he is
paying salary to the driver and he is
bearing bank EMI. Taxes and Insurances
of that truck and in the manner aforesaid
he is suffering loss at least Rs.5,000/- per
day."

12. Thus, as per pleadings, the
petitioner is suffering financial loss of
Rs.5000/- per day since the date of detention
of truck, i.e. 14.10.2020. Since determination
of loss due to arbitrary, illegal and
unauthorised detention by the respondent
no.2, is a question of fact, therefore, we direct
the Commissioner of Commercial Tax, U.P.,
Lucknow to determine the financial loss of
the petitioner in respect of the truck in
question, within three weeks from today after
affording opportunity of hearing to the
petitioner and pay it to the petitioner within
next one week through account payee bank
draft.

13. For all reasons stated above, the
writ petition is allowed with cost. The
respondents are directed to release forthwith
the truck bearing registration no.HR 55 S
1171.

14. For grossly arbitrary, illegal and
unauthorised action of the respondent no.2 to
detain the truck in question even despite the
judgment of this Court dated 15.11.2021, we
impose
cost
of
Rs.5000/-
upon
the
respondents which shall be deposited by the
respondents with the High Court Legal
Services Committee, High Court, Allahabad
within three weeks from today.

15. With the aforesaid directions, the
writ petition is allowed.
----------
(2022)04ILR A934
ORIGINAL JURISDICTION
CIVIL SIDE
DATED: LUCKNOW 18.04.2022

BEFORE

THE HON'BLE DEVENDRA KUMAR
UPADHYAYA, J.
THE HON'BLE SUBHASH VIDYARTHI, J.

Writ Tax No. 41 of 2022

Distributors India (South) ...Petitioner
Versus
U.O.I. & Ors. ...Respondents

Counsel for the Petitioner:
Shailesh Verma

Counsel for the Respondents:
Manish Misra

A. Tax Law - Reassessment - Uttar
Pradesh
Krishi
Evam
Prodyogik
Vishwavidyalaya
Adhiniyam,
1988
-
4 All. Distributors India (South) Vs. U.O.I. & Ors.
935
Income Tax Act,1962 - Sections 194 H,
194 J, 194 C, 148, 147 & 151 - At the
stage of the notice of reopening of the
assessment, the Court has only to see
whether
there
is
prima
facie
some
material on the basis of which the
Department could reopen the case. The
sufficiency or correctness of the material
is not a thing to be considered at this
stage. (Para 17)

B. It is settled law that the validity of any
order has to be adjudged on the basis of
the reasons mentioned in the order itself
and additional reasons, which are not
mentioned in the order itself, cannot be
supplied afterwards either to support the
order or to challenge it. Since the reasons for
issuing the notice u/s 148 stated by the A.O.
and approved by the approving authority do not
make any mention of the audit para, the
petitioner cannot assail the validity of the order
for issuance of the notice u/s 148 of the Act on
the said ground. (Para 22)

The A.O. had merely sent a report to the CIT
(Audit) and he did not have the authority to
take a decision regarding the audit objection.
Therefore, the ground taken by the learned
Counsel for the petitioner regarding letter dated
07-02-2020 sent by the A.O. not accepting the
audit objection, is without any force and the
same cannot be accepted. (Para 23)

C. The obligation on the assessee to
disclose the material facts -- or what are
called, primary facts -- is not a mere
disclosure but a disclosure which is full
and true. A false disclosure is not a true
disclosure. The disclosure must not only
be true but must be full -- "fully and
truly". (Para 29)

As material facts relevant for the assessment on
the issues under consideration were not
produced during the assessment proceedings,
the A.O. could not examine the issues and could
not form an opinion regarding the same during
the original assessment proceedings. (Para 30)

D. Words and Phrases - "change of
opinion" - The words "change of opinion"
imply formulation of opinion and then a
change thereof. In terms of assessment
proceedings, it means formulation of belief by
an assessing officer resulting from what he
thinks on a particular question. It is a result of
understanding, experience and reflection. (Para
31)

Before interfering with the proposed reopening
of the assessment on the ground that the same
is based only on a change in opinion, the court
ought to verify whether the assessment earlier
made has either expressly or by necessary
implication expressed an opinion on a matter
which is the basis of the alleged escapement of
income that was taxable.

Every attempt to bring to tax, income that
has
escaped
assessment,
cannot
be
absorbed by judicial intervention on an
assumed change of opinion even in cases
where the order of assessment does not
address itself to a given aspect sought to
be
examined
in
the
reassessment
proceedings. (Para 31)

In the present case, at the time of making the
assessment originally, the AO had not formed
any opinion regarding the reasons on which the
notice u/s 148 of the Act has been issued. To
say it more particularly, the A.O. had not formed
any opinion regarding receipt of payments by
the petitioner u/s 194J, which had not been
shown in its P & L account, non-disclosure of
the amount of reimbursement of expenses
claimed by it, non-submission of the details of
expenses incurred by it for verification during
the assessment proceedings and non-production
of any ledgers, bills and vouchers of expenses
incurred on behalf of the Principal Companies
etc. Thus the petitioner did not make a "full and
true" disclosure of all the material facts which
resulted in an income of Rs. 1,07,24,386/-
having escaped assessment. Therefore, it is
not a case of "change of opinion" and
challenge to the notice u/s 148 of the Act
on the ground that it seeks to initiate
reassessment on the ground of change of
opinion, cannot be accepted. (Para 27, 32)

E. The Commissioner is required to apply
his mind to the proposal put up before him
for approval in the light of the material
relied upon by the A.O. (Para 33)
936 INDIAN LAW REPORTS ALLAHABAD SERIES
The order dated 23-03-2021 passed by the
approving authority u/s 151 of the Act has been
placed on record by the Department and the
detailed reasons recorded by the A.O. have
been annexed to, and made a part of the order.
The approving authority - the PCIT, has stated
that he agrees with the comments of the A.O.,
which were annexed with the order, and has
recorded his satisfaction that it was a fit case for
issuance of the notice u/s 148 of the Act. The
aforesaid order (dated 23.03.2021) does
not indicate non-application of mind by
the PCIT to the proposal made by the A.O.
(Para 35)

Writ petition dismissed. (E-4)

Precedent followed:

1. Raymond Woolen Mills Ltd. Vs I.T.O., (1999)
236 ITR 36 (SC) (Para 17)

2. Raymond Woollen Mills Ltd. Vs ITO, (2008)
14 SCC 218 (Para 18)

3. CIT Vs Rajan, 403 ITR 30 (Para 20)

4. Phool Chand Bajrang Lal Vs ITO, (1993) 4
SCC 77 (Para 28)

5. Srikrishna (P) Ltd. Vs ITO, (1996) 9 SCC 534
(Para 29)

6. CIT Vs Techspan India (P) Ltd., (2018) 6 SCC
685 (Para 31)

Precedent distinguished:

1. Aventis Pharma Ltd. Vs ACIT, (2010) 323 ITR
570 (Bom.) (Para 24)

2. Arun Gupta Vs U.O.I., (2015) 371 ITR 394
(All) (Para 25)

3. United Electrical Co. Ltd. Vs Commissioner of
Income Tax, (2002) 258 ITR 317 (Para 33)

Present petition challenges the validity of
notice dated 26.03.2021, issued by the
Income Tax Officer, Range-5, Ayakar
Bhawan, 5, Ashok Marg, Lucknow.

(Delivered by Hon'ble Subhash Vidyarthi, J.)

1. Heard Shri Desh Deepak Chopra,
Senior Advocate assisted by Sri. Shailesh
Verma, Advocate, the learned counsel for
the petitioner and Shri Manish Misra,
Advocate, the learned counsel for the
respondents.

2. By means of this writ petition filed
under Article 226 of the Constitution of
India, the petitioner has challenged the
validity of a notice dated 26.03.2021 issued
by the Income Tax Officer, Range-5,
Ayakar Bhawan, 5, Ashok Marg, Lucknow
under Section 148 of the Income Tax Act,
1961 (hereinafter referred to as 'the Act')
proposing
to
assess/reassess
the
income/loss for the assessment year 201314.

3. The petitioner's case is that it is a
registered partnership firm. It has entered
into
agreements
with
various
Pharmaceutical and FMCG (Fast Moving
Consumer
Goods)
Companies
for
providing
Carrying
and
Forwarding
Agents (C&F Agents) services. As per the
terms of the agreements, the petitioner
incurs various business expenses on
behalf of the principal companies and
while reimbursing the expenses, the
principal
companies
deduct
TDS.
However, the reimbursement of expenses
is not the petitioner's income and,
therefore, it is not reflected in the
petitioner's books of accounts as receipts
from
C&F
business.
Some
of
the
companies have deducted TDS under
different heads like Section 194 H of the
Act that is meant for income from
brokerage and commission and Section
194 J that is meant for fee for
professional and technical services.
4 All. Distributors India (South) Vs. U.O.I. & Ors.
937

4. During the assessment year 201314 the petitioner had shown the total
receipts of Rs.3,59,59,861/- in its Profit and
Loss (P&L) Account, which comprised of
commission income of Rs.3,47,58,295/-
and interest income of Rs.12,01,566/-. The
amount of TDS as per the statement in
Form 26 AS was Rs.32,14,869/-. The
petitioner filed its return for a total income
of Rs.9,77,090/-.

5. During scrutiny, the Assessing
Officer raised a query regarding high ratio
of refund to TDS and the petitioner was
asked to reconcile 26 AS with gross
receipts as per P&L Account.

6. On 12-02-2015, the petitioner
submitted a reply stating that it is making
several expenses on behalf of the Principal
Companies. The agreements are in the
nature of a contract and hence TDS should
be deducted @ 2% under Section 194 C of
the Act. However, the nomenclature used
for payments made to the petitioner is
commission and, therefore, the Companies
are deducting TDS @ 10% under Section
194 H. After taking into account all the
expenses, the petitioner's net margins are
such that the tax accrued is much less than
the TDS and hence a heavy refund results.
Every year the petitioner gets a certificate
for lower deduction of TDS, but for the
relevant year they got it very late and this
was the reason for high ratio of refund to
TDS. Again, on 27-02-2015, the petitioner
sent another letter reiterating its earlier
reply.

7. On 25-03-2015, the A.O. passed an
Assessment Order assessing the petitioner's
total income at Rs.11,42,428/-, after adding
Rs.1,65,338/- to the returned income of
Rs.9,77,090/- towards part of expenses
disallowed.

8. On 26-03-2021, the A.O. issued a
notice under Section 148 of the Act for the
Assessment Year 2013-14, stating that he
had reason to believe that the petitioner's
income chargeable to tax has escaped
assessment within the meaning of Section
147 of the Act. On 22.12.2021, the National
Faceless Assessment Centre provided the
reasons for re-opening of assessment. It
states that on examination of documents on
record and 26 AS, it is noticed that the
assessee has received payments under
Section 194 J also, but he has not shown
the said receipts and has not given any
explanation for the same. The assessee has
not disclosed the amount of reimbursement
of expenses claimed by it and the actual
amount
received
by
it
towards
reimbursement. It has not submitted the
details of expenses incurred by it for
verification
during
the
assessment
proceedings. It did not produce any ledger,
bills and vouchers of expenses incurred on
behalf of the Principal Companies. As per
26 AS, the assesse has received a total sum
of
Rs.4,66,84,247/-
and
TDS
is
Rs.32,14,869/-, whereas it has shown its
income at Rs.3,59,59,861/-. Thus the
assesse has shown its income short by
Rs.1,07,24,386/- and this income has
escaped assessment.

9. The notice further states that
although the assessee had produced the
books of account, annual report, P&L
account and balance sheet, but the requisite
material facts mentioned above were
embedded in such a manner that the
material facts could not be discovered by
the A.O. As all the material facts relevant
for the assessment on the issues under
consideration were not produced during the
assessment proceedings, the AO did not
examine the issues and, therefore, it is not a
case of change of opinion.
938 INDIAN LAW REPORTS ALLAHABAD SERIES

10. The petitioner submitted its
objections against the notice under Section
148 mainly on the grounds that in the letter
dated 20-10-2020 written to the CIT
(Audit), the A.O. had himself stated that the
audit objection was not accepted, yet he
initiated the action under Section 147
merely to safeguard the interest of
Revenue. Secondly, the notice under
Section 148 of the Act has been issued
without
bringing
any
fresh
tangible
material on record, on the basis of
information which was already available on
record, whereas the reassessment cannot be
done for matters already discussed. The
reasons recorded are based on a mere
change of opinion, which is not permissible
in law. The approval under Section 151 of
the Act has been given by the PCIT in a
routine manner, without application of
mind and without seeing the records and
the correspondence made with the revenue
authorities, which is not as per the law.

11. On 16-02-2022, the National
Faceless Assessment Centre has passed an
order rejecting the petitioner's objections
stating that there is no material to establish
that the case has been re-opened on the
basis of audit objections. Moreover, the
A.O. has no authority to accept or reject the
audit objection and the same has to be
decided by the Principal Commissioner of
Income Tax after taking into consideration
the
recommendations
of
the
Joint
Commissioner of Income Tax, as provided
in the Standard Operating Procedure for
handling audit cases contained in CBDT
Instruction no. 7 of 2017.

12. Dealing with the assessee's
objection that no new material was there to
justify reassessment, it has been stated that
on examining the difference between 26 AS
and the income admitted, it was revealed
that although the assessee claimed that
some
receipts
were
towards
reimbursements of expenses incurred on
behalf of the Principal companies, but the
assessee did not produce any material
evidence or ledger or books to prove this
and thus it did not make true and full
disclosure
of
all
the
material
facts
necessary for assessment.

13. The order further states that the
case has been reopened on the basis of
question of fact regarding the difference
between the total receipts and declared
income and not on any question of law and,
therefore, it is not a case of change of
opinion. After applying his mind to the
information available on record, the A.O.
has formed an opinion that he had reason to
believe that the income had escaped
assessment and this was not based on mere
suspicion, but was based on a belief formed
after examination of the material available
on record.

14. The respondents have brought on
record a copy of the approval under Section
151 of the Act, which indicates that the
Assessing Officer had made a proposal for
issuance of a notice under Section 148 of
the Act, annexing therewith the detailed
reasons for the proposal, the Range Head
recommended the proposal and the PCIT
expressed
his
agreement
with
the
comments of the AO and recommendation
of the Range Head and granted his approval
for issuance of a notice under Section 148
of the Act.

15. Before proceeding to examine the
rival contentions advanced on behalf the
parties, it would be appropriate to have a
look at the relevant provisions of the Act
and refer to some pronouncements of the
Hon'ble Supreme Court explaining the
4 All. Distributors India (South) Vs. U.O.I. & Ors.
939
scope of interference under Article 226 of
the Constitution of India while examining
the validity of a notice issued under Section
148 of the Income Tax Act.

16. The relevant provisions of
Sections 147 and 148 of the Act, as those
stood at the relevant time, are being
reproduced below: -

"147.
Income
escaping
assessment.-- If the Assessing Officer, has
reason to believe that any income
chargeable to tax has escaped assessment
for any assessment year, he may, subject to
the provisions of Sections 148 to 153,
assess or reassess such income and also
any other income chargeable to tax which
has escaped assessment and which comes
to his notice subsequently in the course of
the proceedings under this section, or
recompute the loss or the depreciation
allowance or any other allowance, as the
case may be, for the assessment year
concerned (hereafter in this section and in
Sections 148 to 153 referred to as the
relevant assessment year):

............

Explanation
1.--Production
before the Assessing Officer of account
books or other evidence from which
material evidence could with due diligence
have been discovered by the Assessing
Officer will not necessarily amount to
disclosure within the meaning of the
foregoing proviso."

"148. Issue of notice where
income has escaped assessment.-- (1)
Before
making
the
assessment,
reassessment
or
recomputation
under
Section 147, the Assessing Officer shall
serve on the assessee a notice requiring
him to furnish within such period, as may
be specified in the notice, a return of his
income or the income of any other person
in respect of which he is assessable under
this
Act
during
the
previous
year
corresponding to the relevant assessment
year, in the prescribed form and verified in
the prescribed manner and setting forth
such
other
particulars
as
may
be
prescribed; and the provisions of this Act
shall, so far as may be, apply accordingly
as if such return were a return required to
be furnished under Section 139:

Provided that .................

(2) The Assessing Officer shall,
before issuing any notice under this section,
record his reasons for doing so."

 (Emphasis supplied)

17. Thus after giving a notice under
Section 148 of the Act giving reasons for
doing so, the Assessing Officer can pass an
order for reassessment if he has reason to
believe that any income chargeable to tax
has escaped assessment for any assessment
year. The Hon'ble Supreme Court has
explained the scope of judicial review
while examining the validity of a notice
under Section 148 of the Act in Raymond
Woolen Mills Ltd. Versus I.T.O., (1999)
236 ITR 36 (SC), in which it has been held
that at the stage of the notice of reopening
of the assessment, the Court has only to see
whether there is prima facie some material
on the basis of which the Department could
reopen the case. The sufficiency or
correctness of the material is not a thing to
be considered at this stage.

18. Again, in Raymond Woollen
Mills Ltd. v. ITO, (2008) 14 SCC 218, the
Hon'ble Supreme Court reiterated that
while examining the validity of a notice
issued under Section 148 of the Income Tax
Act, "we do not have to give a final
decision as to whether there is suppression
of material facts by the assessee or not. We
have to see only whether there was prima
940 INDIAN LAW REPORTS ALLAHABAD SERIES
facie some material on the basis of which
the Department could reopen the case. The
sufficiency or correctness of the material is
not a thing to be considered at this stage."

19. We proceed to examine the rival
submissions advanced on behalf of the
parties
in
light
of
the
aforesaid
pronouncements of the Hon'ble Supreme
Court so as to ascertain as to whether there
was prima facie some material on the basis
of which the Department could reopen the
case, without going into the sufficiency or
correctness of the material.

20. Mr. Desh Deepak Chopra, the
learned Senior Advocate representing the
petitioner, has submitted that in the present
case the reassessment proceedings have
been initiated merely on the basis of an
audit objection raised by the revenue
auditor and there was no tangible material
with the A.O. suggesting that the income of
the petitioner has escaped assessment. In
the letter dated 07-02-2020 addressed to the
CIT (Audit), the A.O. had himself refused
to accept the audit para. Relying upon a
decision of the Bombay High Court in CIT
versus Rajan, 403 ITR 30, he has submitted
that if the A.O. has rejected the audit
objection, subsequent re-opening on the
same ground of audit objection will not be
valid, unless the A.O. shows that there was
separate application of mind, which is not
found in the present case.

21. Per contra, Sri. Manish Mishra,
the learned Counsel for the Income Tax
department, has submitted that as per the
circular dated 21-07-2017 issued by the
CBDT, the authority to accept or reject the
Revenue audit objection vests in the
Commissioner of Income Tax and the A.O.
had no power to reject the audit objection.
Therefore, the letter dated 07-02-2020
written by the A.O. to the CIT (Audit)
Revenue stating that the audit objection
was not acceptable to him, was not of any
consequence.

22. It is settled law that the validity of
any order has to be adjudged on the basis of
the reasons mentioned in the order itself
and additional reasons, which are not
mentioned in the order itself, cannot be
supplied afterwards either to support the
order or to challenge it. Since the reasons
for issuing the notice under Section 148
stated by the A.O. and approved by the
approving authority do not make any
mention of the audit para, the petitioner
cannot assail the validity of the order for
issuance of the notice under Section 148 of
the Act on the said ground.

23. Moreover, the petitioner has itself
annexed a copy of Instruction No. 07 of
2017 dated 21-07-2017 issued by the
CBDT, laying down the Standard Operating
Procedure for handling the audit objections
and Clause 5.2 thereof provides that the
PCIT shall, after calling for a report from
AO and Range Head, if needed, take a
decision as to whether or not the objection
is acceptable. The A.O. had merely sent a
report to the CIT (Audit) and he did not
have the authority to take a decision
regarding the audit objection. Therefore,
the ground taken by the learned Counsel for
the petitioner regarding the letter dated 0702-2020 sent by the A.O. not accepting the
audit objection, is without any force and
the same cannot be accepted.

24. Sri. Chopra has next submitted
that the proceedings under Section 147
have been initiated without bringing any
fresh tangible material on record, by merely
relying upon the documents that were
already placed before the A.O. at the time
4 All. Distributors India (South) Vs. U.O.I. & Ors.
941
of the original assessment proceedings.
Relying upon another decision of the
Bombay High Court in Aventis Pharma
Ltd. Versus ACIT, (2010) 323 ITR 570
(Bom) he has submitted that it is a settled
position
of
law
that
re-opening
of
assessment on the very same issue due to
change of opinion in the absence of any
fresh material is held to be invalid and bad
in law.

25. Relying upon the judgment in
Arun Gupta versus Union of India,
(2015) 371 ITR 394 (All), the learned
Counsel for the petitioner has submitted
that even if new facts are discovered from
the records already available before the
A.O., it would amount to a change of
opinion, since there is no fresh tangible
material from which the authority to reopen
the assessment has emerged.

26. The reasons recorded by the A.O.
for initiating the process of re-assessment
state that on examination of the documents
on record and 26 AS, it was noticed that the
petitioner has received payments under
Section 194 J also, but it has not shown the
said receipts in his P&L account and has
not given any explanation for the same. The
petitioner has not disclosed the amount of
reimbursement of expenses claimed by it
and the actual amount received by it
towards
reimbursement.
It
has
not
submitted the details of expenses incurred
by it for verification during the assessment
proceedings. It did not produce any ledger,
bills and vouchers of expenses incurred on
behalf of the Principal Companies. As per
26 AS, the total receipts of the assesse
under Sections 194 A, 194 C, 194 H and
194 J is Rs.4,66,84,247/- and TDS is
Rs.32,14,869/-, whereas it has shown its
income at Rs.3,59,59,861/-. Thus the
petitioner has shown its income short by
Rs.1,07,24,386/- and this income has
escaped assessment. Although the assesse
had produced the books of account, annual
report, P&L account and balance sheet, but
the requisite material facts mentioned
above were embedded in such a manner
that the material facts could not be
discovered by the A.O. This material which
came to light upon investigation conducted
subsequent to passing of the assessment
order, would certainly amount to a fresh
tangible material giving rise to reason to
believe that certain income has escaped
assessment necessitating initiation of reassessment proceedings.

27. From the reasons recorded by the
A.O. for initiating the process of reassessment, we find that the A.O. has
recorded his reasons to believe that the
petitioner had received payments under
Section 194 J also, but it had not shown the
said receipts in his P&L account and had
not given any explanation for the same. The
assesse had not disclosed the amount of
reimbursement of expenses claimed by it
and the actual amount received by it
towards
reimbursement.
It
had
not
submitted the details of expenses incurred
by it for verification during the assessment
proceedings. It did not produce any ledger,
bills and vouchers of expenses incurred on
behalf of the Principal Companies. Thus
the petitioner did not make a "full and true"
disclosure of all the material facts which
resulted in an income of Rs. 1,07,24,386/-
having escaped assessment.

28. In Phool Chand Bajrang Lal v.
ITO, (1993) 4 SCC 77, the Hon'ble
Supreme Court held that: -

"25. From a combined review of
the judgments of this Court, it follows that
an Income Tax Officer acquires jurisdiction
942 INDIAN LAW REPORTS ALLAHABAD SERIES
to reopen assessment under Section 147(a)
read with Section 148 of the Income Tax
Act, 1961 only if on the basis of specific,
reliable and relevant information coming to
his possession subsequently, he has reasons
which he must record, to believe that by
reason of omission or failure on the part of
the assessee to make a true and full
disclosure of all material facts necessary
for his assessment during the concluded
assessment proceedings, any part of his
income, profit or gains chargeable to
income tax has escaped assessment. He
may start reassessment proceedings either
because some fresh facts come to light
which were not previously disclosed or
some information with regard to the facts
previously
disclosed
comes
into
his
possession which tends to expose the
untruthfulness of those facts. In such
situations, it is not a case of mere change
of opinion or the drawing of a different
inference from the same facts as were
earlier available but acting on fresh
information. Since, the belief is that of the
Income Tax Officer, the sufficiency of
reasons for forming the belief, is not for
the Court to judge but it is open to an
assessee to establish that there in fact
existed no belief or that the belief was not
at all a bona fide one or was based on
vague,
irrelevant
and
non-specific
information. To that limited extent, the
Court may look into the conclusion arrived
at by the Income Tax Officer and examine
whether there was any material available
on the record from which the requisite
belief could be formed by the Income Tax
Officer and further whether that material
had any rational connection or a live link
for the formation of the requisite belief. It
would be immaterial whether the Income
Tax Officer at the time of making the
original assessment could or, could not
have
found
by
further
enquiry
or
investigation, whether the transaction was
genuine or not, if on the basis of
subsequent information, the Income Tax
Officer arrives at a conclusion, after
satisfying the twin conditions prescribed
in Section 147(a) of the Act, that the
assessee had not made a full and true
disclosure of the material facts at the time
of original assessment and therefore
income chargeable to tax had escaped
assessment."

29. In Srikrishna (P) Ltd. v. ITO,
(1996) 9 SCC 534, the Hon'ble Supreme
Court held that: -

"Now,
what
needs
to
be
emphasised is that the obligation on the
assessee to disclose the material facts -- or
what are called, primary facts -- is not a
mere disclosure but a disclosure which is
full and true. A false disclosure is not a
true disclosure. The disclosure must not
only be true but must be full -- "fully and
truly". A false assertion, or statement, of
material
fact,
therefore,
attracts
the
jurisdiction of the Income Tax Officer
under Sections 34/147. Take this very case:
the Income Tax Officer says that on the
basis of investigations and enquiries made
during the assessment proceedings relating
to the subsequent assessment year, he has
come into possession of material, on the
basis of which, he has reasons to believe
that the assessee had put forward certain
bogus and false unsecured hundi loans said
to have been taken by him from nonexistent persons or his dummies, as the
case may be, and that on that account
income chargeable to tax has escaped
assessment. According to him, this was a
false assertion to the knowledge of the
assessee. The Income Tax Officer says that
during
the
assessment
relating
to
subsequent assessment year, similar loans
4 All. Distributors India (South) Vs. U.O.I. & Ors.
943
(from some of these very persons) were
found to be bogus. On that basis, he seeks
to reopen the assessment. It is necessary to
remember that we are at the stage of
reopening only. The question is whether, in
the above circumstances, the assessee can
say, with any justification, that he had fully
and truly disclosed the material facts
necessary for his assessment for that year.
Having created and recorded bogus entries
of loans, with what face can the assessee
say that he had truly and fully disclosed all
material facts necessary for his assessment
for that year? True it is that Income Tax
Officer could have investigated the truth
of the said assertion -- which he actually
did in the subsequent assessment year --
but that does not relieve the assessee of his
obligation, placed upon him by the statute,
to disclose fully and truly all material
facts. Indubitably, whether a loan, alleged
to have been taken by the assessee, is true
or false, is a material fact -- and not an
inference, factual or legal, to be drawn
from given facts. In this case, it is shown to
us that ten persons (who are alleged to
have advanced loans to the assessee in a
total sum of Rs 3,80,000 out of the total
hundi
loans
of
Rs
8,53,298)
were
established to be bogus persons or mere
name-lenders
in
the
assessment
proceedings relating to the subsequent
assessment year. Does it not furnish a
reasonable ground for the Income Tax
Officer to believe that on account of the
failure -- indeed not a mere failure but a
positive design to mislead -- of the assessee
to disclose all material facts, fully and
truly, necessary for his assessment for that
year, income has escaped assessment? We
are of the firm opinion that it does. It is
necessary to reiterate that we are now at
the stage of the validity of the notice under
Sections 148/147. The enquiry at this
stage is only to see whether there are
reasonable grounds for the Income Tax
Officer to believe and not whether the
omission/failure and the escapement of
income is established. It is necessary to
keep this distinction in mind.

A recent decision of this Court in
Phool Chand Bajrang Lal v. ITO, we are
gratified to note, adopts an identical view
of law and we are in respectful agreement
with it. The decision rightly emphasises the
obligation of the assessee to disclose all
material facts necessary for making his
assessment
fully
and
truly. A
false
disclosure, it is held, does not satisfy the
said requirement. We are also in respectful
agreement with the following holding in the
said decision"

(Emphasis supplied)

30. As material facts relevant for the
assessment
on
the
issues
under
consideration were not produced during the
assessment proceedings, the A.O. could not
examine the issues and could not form an
opinion regarding the same during the
original assessment proceedings.

31. The meaning of the expression
"change of opinion" has been explained by
the Hon'ble Supreme Court in CIT v.
Techspan India (P) Ltd., (2018) 6 SCC 685,
in the following words: -

"16. To check whether it is a
case of change of opinion or not one has
to see its meaning in literal as well as
legal terms. The words "change of
opinion" imply formulation of opinion
and then a change thereof. In terms of
assessment
proceedings,
it
means
formulation of belief by an assessing
officer resulting from what he thinks on
a particular question. It is a result of
understanding,
experience
and
reflection.
944 INDIAN LAW REPORTS ALLAHABAD SERIES

17. It is well settled and held by
this Court in a catena of judgments and it
would be sufficient to refer to CIT v.
Kelvinator of India Ltd. wherein this Court
has held as under: (SCC p. 725, para 5-7)

"5. ... where the assessing officer
has reason to believe that income has
escaped assessment, confers jurisdiction to
reopen the assessment. Therefore, post-1-41989, power to reopen is much wider.
However, one needs to give a schematic
interpretation to the words "reason to
believe"....
Section
147
would
give
arbitrary powers to the assessing officer to
reopen assessments on the basis of "mere
change of opinion", which cannot be per se
reason to reopen.

6. We must also keep in mind the
conceptual difference between power to
review and power to reassess. The
assessing officer has no power to review;
he has the power to reassess. But
reassessment has to be based on fulfilment
of certain precondition and if the concept of
"change of opinion" is removed, as
contended on behalf of the Department,
then, in the garb of reopening the
assessment, review would take place.

7. One must treat the concept of
"change of opinion" as an in-built test to
check abuse of power by the assessing
officer. Hence, after 1-4-1989, assessing
officer has power to reopen, provided there
is "tangible material" to come to the
conclusion that there is escapement of
income from assessment. Reasons must
have a live link with the formation of the
belief."

18. Before interfering with the
proposed reopening of the assessment on
the ground that the same is based only on
a change in opinion, the court ought to
verify whether the assessment earlier
made has either expressly or by necessary
implication expressed an opinion on a
matter which is the basis of the alleged
escapement of income that was taxable. If
the assessment order is non-speaking,
cryptic or perfunctory in nature, it may be
difficult to attribute to the assessing officer
any opinion on the questions that are
raised
in
the proposed
reassessment
proceedings. Every attempt to bring to tax,
income that has escaped assessment,
cannot
be
absorbed
by
judicial
intervention on an assumed change of
opinion even in cases where the order of
assessment does not address itself to a
given aspect sought to be examined in the
reassessment proceedings."

 (Emphasis supplied)

32. In the present case, at the time of
making the assessment originally, the
Assessing Officer had not formed any
opinion regarding the reasons on which the
notice under Section 148 of the Act has
been issued. To say it more particularly, the
A.O. had not formed any opinion regarding
receipt of payments by the petitioner under
Section 194 J, which had not been shown in
its P&L account, non-disclosure of the
amount of reimbursement of expenses
claimed by it, non-submission of the details
of expenses incurred by it for verification
during the assessment proceedings and
non-production of any ledgers, bills and
vouchers of expenses incurred on behalf of
the Principal Companies etc. Therefore, it
is not a case of "change of opinion" and
challenge to the notice under Section 148
of the Act on the ground that it seeks to
initiate reassessment on the ground of
change of opinion, cannot be accepted.

33. Relying upon a decision of Delhi
High Court in United Electrical Co. Ltd.
Versus Commissioner of Income Tax,
(2002) 258 ITR 317, the learned Counsel
for the petitioner has submitted that the
4 All. Distributors India (South) Vs. U.O.I. & Ors.
945
Commissioner is required to apply his mind
to the proposal put up before him for
approval in the light of the material relied
upon by the A.O., but in the present case
the approval was casually given merely
relying upon the reasons to believe as
provided by the A.O., without going
through the previous records.

34. Section 151 of the Act, which
contains the provision for grant of approval
to a proposal for issuance of a notice under
Section 148 of the Act, is as follows: -

"151. Sanction for issue of
notice.-- (1) In a case where an assessment
under sub-section (3) of Section 143 or
Section 147 has been made for the relevant
assessment year, no notice shall be issued
under Section 148 by an Assessing Officer,
who is below the rank of Assistant
Commissioner or Deputy Commissioner,
unless the Joint Commissioner is satisfied
on the reasons recorded by such Assessing
Officer that it is a fit case for the issue of
such notice:

Provided that, after the expiry of
four years from the end of the relevant
assessment year, no such notice shall be
issued
unless
the
Principal
Chief
Commissioner or Chief Commissioner or
Principal Commissioner or Commissioner
is satisfied, on the reasons recorded by the
Assessing Officer aforesaid, that it is a fit
case for the issue of such notice."

35. The order dated 23-03-2021
passed by the approving authority under
Section 151 of the Act has been placed on
record by the Department and the detailed
reasons recorded by the A.O. have been
annexed to, and made a part of the order.
The approving authority - the PCIT, has
stated that he agrees with the comments of
the A.O., which were annexed with the
order, and has recorded his satisfaction that
it was a fit case for issuance of the notice
under Section 148 of the Act. The aforesaid
order does not indicate non-application of
mind by the PCIT to the proposal made by
the A.O. and we are not able to accept the
submission that the PCIT has granted
approval without application of mind to the
proposal put up by the A.O.

36.