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2021 (7) TMI 1384 - HC - Income TaxValidity of reopening of assessment u/s 147 - as no assessment orders are passed under sub clause (4) to section 144C - Assessee case was referred to the TPO u/s 92CA and the TPO inturn, passed an order under section 92CA (3) - HELD THAT - The order of the TPO is independent and unconnected with the powers conferred on the Assessing Officer under section 147 of the Act. Therefore, the report of the TPO cannot be conclusive for the purpose of its acceptance by the Assessing Officer, who is empowered to go into the contents of such report and make an assessment and if any materials are available, he is at liberty to invoke section 147 of the Act. Reference to the Transfer Pricing Officer more specifically sub-clause (4) reveals that on receipt of the order under sub-section (3), the Assessing Officer shall proceed to compute the total income of the assessee under sub-section (4) to section 92C so as to determined by the Transfer Pricing Officer. The above provision unambiguously clarifies that on receipt of the order passed by the TPO, the Assessing Officer shall proceed to compute the total income of the assessee and in confirmity with the Arm's length price. Therefore, the Assessing Officer is empowered to pass draft assessment order with reference to section 144C by taking into consideration the report of the TPO and the other aspects of the matter. In other words, the draft assessment order is not confined actually to the report of the TPO and therefore, there is a scope for reassessment. As far as determination of Arm's Length Price or consideration of other disallowance, etc. in the draft assessment order are to be considered at the time of adjudication of reopening proceedings and the assessee is at liberty to raise any further ground in respect of those aspects which all are relatable to the merits and with reference to the documents and evidences to be scrutinized. Mere consideration of Arm's Length Price and other disallowance in the draft assessment order would not preclude the Assessing Authority for reopening of assessment under section 147/148 of the Act as the spirit of the above provisions are providing wider scope to reopen the assessment and the only object is to ensure that the income chargeable to tax escaped assessment is brought within the tax net. Thus the object plays a pivotal role in the matter of reopening proceedings and the other procedures contemplated in Chapter XIV of the Act must be read cogently along with the purpose for which such procedures are contemplated and any interpretation overlapping the provisions would defeat the object and thus, this Court is of the opinion that the power of reopening under section 147 of the Act cannot be restricted, even in such circumstances, the TPO submitted a report and a draft assessment order is passed, with reference to certain materials available, and the AO has reason to believe that the income chargeable to tax escaped assessment, then he is well within his powers to invoke section 147/148 of the Act. Accordingly, the issues raised are answered in favour of the revenue.
Issues Involved:
1. Validity of the reopening of assessment under Section 147 of the Income Tax Act. 2. Jurisdiction of the Assessing Officer to issue notice under Section 148. 3. Compliance with statutory procedures and time limits for passing the final assessment order. 4. Consideration of the Transfer Pricing Officer's (TPO) report and its impact on the reopening of assessment. 5. Interpretation of relevant legal provisions and case laws cited by the petitioner. Detailed Analysis: 1. Validity of the reopening of assessment under Section 147 of the Income Tax Act: The petitioner challenged the reopening of the assessment for the assessment year 2013-14, arguing that it was illegal and beyond the scope of jurisdiction. The petitioner contended that the reopening was not warranted as the procedures under the Income Tax Act were not followed. The court examined the provisions of Section 147, which allows the Assessing Officer to reopen an assessment if there is reason to believe that income chargeable to tax has escaped assessment. The court concluded that the scope of Section 147 is broad and permits reopening if the Assessing Officer has reason to believe that income has escaped assessment, regardless of the stage at which the reopening occurs. The court found that the reopening in this case was within the four-year period and thus permissible. 2. Jurisdiction of the Assessing Officer to issue notice under Section 148: The petitioner argued that the Assessing Officer lacked jurisdiction to issue a notice under Section 148 after failing to pass a final assessment order within the prescribed time. The court considered the provisions of Section 148, which allows the Assessing Officer to issue a notice before making an assessment, reassessment, or recomputation. The court held that since no final assessment order had been passed, the Assessing Officer was within his rights to invoke Section 147 and issue a notice under Section 148. The court emphasized that the issuance of the notice was in compliance with the procedures outlined in Sections 147 and 148. 3. Compliance with statutory procedures and time limits for passing the final assessment order: The petitioner contended that the Assessing Officer failed to pass a final assessment order within the time limit prescribed under Section 144C(4). The court acknowledged that the petitioner did not raise any objections to the draft assessment order, which necessitated the passing of a final assessment order within one month. However, the court found that the absence of a final assessment order did not preclude the Assessing Officer from reopening the assessment under Section 147. The court highlighted that the broader purpose of Section 147 is to ensure that income chargeable to tax does not escape assessment. 4. Consideration of the Transfer Pricing Officer's (TPO) report and its impact on the reopening of assessment: The petitioner argued that the reopening of the assessment was impermissible as the TPO had already determined the Arm's Length Price for international transactions. The court clarified that the TPO's report is not conclusive and does not restrict the Assessing Officer's powers under Section 147. The court noted that the draft assessment order, which included the TPO's report, was subject to alteration and could form the basis for reopening the assessment if the Assessing Officer had reason to believe that income had escaped assessment. 5. Interpretation of relevant legal provisions and case laws cited by the petitioner: The petitioner relied on various judgments to support their contention that the reopening of the assessment was invalid. The court examined these judgments and found that they did not apply to the specific facts of the case. The court reiterated that the sufficiency of the reasons for reopening an assessment cannot be questioned by the High Court, as long as the reasons provided meet the requirements of Section 147. The court emphasized that the broader purpose of reopening assessments is to ensure that all income chargeable to tax is brought within the tax net. Conclusion: The court dismissed the writ petition, holding that the reopening of the assessment under Section 147 was valid and within the jurisdiction of the Assessing Officer. The court found that the procedures followed were in compliance with the statutory provisions and that the broader purpose of the Income Tax Act was to ensure that income chargeable to tax does not escape assessment. The court upheld the issuance of the notice under Section 148 and rejected the petitioner's contentions regarding the invalidity of the reopening of the assessment.
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