The necessity of credible and tangible material for reopening an assessment and the impermissibility of reopening an assessment based on a change of opinion.

S. Muralidhar, J.

1. This appeal under Section 260A (1) of the Income Tax Act, 1961 (‘Act’) by the Assessee is directed against the impugned order dated 22nd May 2003 in ITA No. 92/Del/2002 for the Assessment Year (‘AY’) 1994-95.

2. While admitting this appeal on 28th February 2005, the Court framed the following question of law for consideration:

“Whether the Income Tax Appellate Tribunal was correct in law and on facts in upholding the action of Assessing Officer in reopening the assessment originally framed under Section 143 (3)?”

3. The facts leading to the filing of the present appeal are that the Appellant-Assessee, Kulbhushan Khosla, filed his return for the AY 1994-95 on 14th November 1994 declaring an income of Rs. 3,36,970. The Assessee showed income from salary, business and other sources during AY in question. The Assessee had also done export business.

4. The return was picked up for scrutiny, and enquiries were raised by the Assessing Officer (‘AO’) during the course of the assessment proceedings. Specific to the case on hand, the AO called for details of the foreign donors of gifts which were disclosed by the Assessee. Specific queries were raised by the AO about the donors of the gifts and whether such gifts had been received in the past as well. On 1st December 1995 a reply was furnished by the Assessee in which it was inter alia stated in para 5 as under:

“5. Details and confirmation of the foreign gifts of Rs. 5,65,000 received by the Assessee during the AY 1994-95 from the donors from their concerned Non-resident external account is hereby enclosed along with certificate from the bank maintaining the non-resident external account of the respective donors.”

5. A further reply was submitted by the Assessee pursuant to the hearing on 25th January 1996. In this reply he stated, with particular reference to the donors of the gifts, as under:

“1. The donors are family friends for the last several years.

2. The bank certificates certifying the payment from NRE Account of Donors have already been filed.

3. No documentary evidence can be filed to establish love and affection between persons.

4. Gifts whenever received have been declared as per requirement of the law.

5. As far as I know they come and stay with their friends and relations whose particulars I have never asked for.

6. These are not known to me. As far as their particulars are concerned I have got no records.

7. They do not stay with me.”

6. The foreign donors had also submitted affidavits before the Assessing Officer (‘AO’). Harjinder Singh, resident of Darmstadt, Germany confirmed that he had gifted a sum of Rs. 3,25,000 to the Assessee out of natural love and affection on different dates. This was an affidavit dated 27th December 1993. A letter of confirmation from Deutsche Bank, New Delhi Branch addressed to Vijaya Bank, Bhikaji Cama Place, New Delhi with whom the Assessee had an account confirming the clearance of the cheques issued to the Assessee in his favour from the NRE account of Harjinder Singh was also submitted. There is also an affidavit of Bajrang Bahadur Khare, resident of Nirestein, Germany dated 6th January 1996 regarding gift of Rs. 90,000 in favour of the Assessee to the NRE account maintained by him. The affidavit of Mr. Praveen Kumar Rai, resident of Battersea, London regarding the gift of Rs. 1,50,000 has also been submitted.

7. In the assessment order dated 6th February 1997 the assessment was completed at an income of Rs. 3,34,841. A perusal of the said assessment order reveals that the AO was satisfied with the explanation offered regarding the donors or the foreign donors of the gifts since there was no mention of that fact in the assessment order, although as noticed hereinbefore, detailed enquiries were made on that behalf.

8. On 9th February 2001, the AO addressed a letter to the Assessee informing him that the assessment was reopened on the basis of the valuation report received from the Departmental Valuation Offic