2015 (10) TMI 542 - HC - Income Tax

Reopening of assessment - depreciation claim on dealer network and vendor network was not dwelt with during the original assessment under Section 143(3) - Held that - Petitioner did not file any objections to the reasons for the reopening of the above assessments. Thus in the absence of any objection to the reopening, the question of disposing the objections by passing a speaking order before proceeding with the assessment as contemplated by the Apex Court in the case of GKN Driveshafts 2002 (11) TMI 7 - SUPREME Court does not arise. On the other hand the Petitioner having participated in the re-assessment proceedings in pursuant to issuance of notices u/s 143(2), the impugned orders were passed u/s 143(3) read with section 147 in accordance with law. In this regard, it is worthwhile to refer to the decision of this Court, in the case of DR. C.M.K. Reddy vs. Settlement Commission and Ors 2008 (4) TMI 242 - MADRAS HIGH COURT by following the decisions of the Apex Court in Jai Narain Parasrampuria vs. Smt. Pushpa Devi Saraf (2006 (8) TMI 527 - SUPREME COURT OF INDIA) as held having so participated and obtained an adverse order, now it is not open to him to turn around and contend that in the absence of the report of the CIT under s. 245D(1), the order non-suiting the petitioner for settlement is a procedural irregularity and liable to be set aside. The same is hit by the principle of acquiescence. Also as as against the impugned proceedings, the petitioner is having efficacious remedy of appeal under Section 246A of the Act before the Commissioner of Income Tax (Appeals) and without exhausting the same, the petitioner has approached this Court and hence, the present writ petitions are not maintainable - Decided against assessee.

Issues Involved:
1. Violation of procedure for reopening of assessment.
2. Failure to disclose material facts.
3. Lack of tangible material for the reason to believe that income has escaped assessment.
4. Jurisdiction to initiate reopening proceedings.
5. Basis of reassessment on audit objection.
6. Invoking writ jurisdiction under Article 226.
7. Reopening assessment beyond four years without failure to disclose material facts.

Detailed Analysis:

1. Violation of Procedure for Reopening of Assessment:
The petitioner contended that there was a violation of procedure for reopening the assessment as no written reasons for reopening were furnished. The court noted that the petitioner did not file any objections to the reasons for reopening the assessments and participated in the reassessment proceedings. Therefore, the question of disposing of objections by passing a speaking order did not arise, as per the precedent set by the Supreme Court in "GKN Drivershafts (India) Ltd. versus Income Tax Officer and others."

2. Failure to Disclose Material Facts:
The petitioner argued that there was no failure on their part to disclose fully and truly all material facts for the relevant assessment years. The court observed that the reopening of the assessment was based on the belief that the income had escaped assessment due to the depreciation claim on dealer and vendor networks. The court referenced "Fenner (India) Ltd. Versus DCIT" which emphasizes that mere escape of income is insufficient for action after four years unless there is a failure to disclose material facts.

3. Lack of Tangible Material for Reason to Believe:
The petitioner claimed there was no tangible material for the respondent to form a 'reason to believe' that the income had escaped assessment, which amounted to a change of opinion. The court referred to "CIT v Kelvinator of India" which held that a change of opinion cannot justify reopening an assessment unless there is tangible material indicating income escapement.

4. Jurisdiction to Initiate Reopening Proceedings:
The petitioner argued that the respondent lacked jurisdiction to initiate reopening proceedings as the issue of depreciation was already considered during the original assessment. The court noted that the reopening was initiated because the issue of depreciation on dealer and vendor networks was not dealt with during the original assessment.

5. Basis of Reassessment on Audit Objection:
The petitioner contended that the reassessment was based on an objection by the internal audit party, which is impermissible. The court did not specifically address this issue in detail but focused on the procedural aspects and participation of the petitioner in the reassessment proceedings.

6. Invoking Writ Jurisdiction under Article 226:
The petitioner invoked writ jurisdiction under Article 226, arguing that the proceedings were erroneous, arbitrary, and contrary to settled law. The court held that the petitioner had an efficacious remedy of appeal under Section 246A of the Income Tax Act and should have exhausted this remedy before approaching the court. The court cited "CIT v Chhabil Dass Agarwal," emphasizing that writ petitions should not be entertained when an effective alternative remedy is available.

7. Reopening Assessment Beyond Four Years:
The petitioner argued that the reopening of the assessment for the year 2008-09 was initiated beyond four years despite no failure to disclose material facts. The court reiterated that the reopening was based on the belief that the income had escaped assessment and the petitioner had participated in the reassessment proceedings without raising objections.

Conclusion:
The court dismissed the writ petitions, stating that the petitioner should avail the statutory remedy of appeal under Section 246A of the Income Tax Act. The appellate authority was directed to entertain the appeal without considering the limitation period if approached within two weeks from the date of receipt of the court's order. The court emphasized the importance of exhausting alternative remedies before invoking writ jurisdiction.

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