2009 (5) TMI 24 - HC - Income Tax

Legal propriety of notices issued u/s 148 - once the basic or primary facts have been disclosed, the burden to prove that amounts represents undisclosed income of the assessee is on the Revenue there was no new material in the hands of the Revenue leading to the view that there was reason to believe that income had escaped assessment. Instead, the case is a classic instance of a change of opinion. Consequently, the Writ Petitions are allowed and the impugned Notice u/s 148 is quashed

Summary

Issues:
1. Legal propriety of notices issued under Section 148 of the Income Tax Act, 1961.
2. Change of opinion as a reason for reopening assessments under Sections 147/148 of the Act.
3. Analysis of relevant case laws and judgments regarding the reopening of assessments.
4. Requirement of new material to justify the issuance of notice under Section 148.
5. Burden of proof on the Revenue once basic facts are disclosed.
6. Action taken under Section 147 in respect of interest earned on Vikas Cash Certificate.
7. Application of legal principles in the context of the facts presented.

Issue 1: Legal propriety of notices issued under Section 148:
The judgment addresses the legal propriety of notices issued under Section 148 of the Income Tax Act, 1961 concerning the assessment orders of Jal Hotels Company Ltd. The court emphasizes that the Assessing Officer is not obligated to discuss every argument or issue in the assessment order. The Respondent's notice under Section 148 mentions the agreements and reasons to believe that income has escaped assessment through the Permanent Establishment. However, the court scrutinizes the necessity of cogitation upon the agreements by the Assessing Officer.

Issue 2: Change of opinion for reopening assessments:
The judgment delves into the concept of change of opinion as a reason for reopening assessments under Sections 147/148 of the Act. The Petitioners argue that a change of opinion is not a sufficient reason for reopening assessments. The court refers to various judgments and case laws, including the Full Bench decision in Kelvinator, to analyze the validity of the Respondent's actions and the defense presented by the Revenue.

Issue 3: Analysis of relevant case laws and judgments:
The judgment extensively discusses and analyzes various case laws and judgments related to the reopening of assessments, including Kelvinator, Calcutta Discount Co. Ltd. Vs. Income Tax Officer, and Sita World Travels (India) Ltd. vs. CIT. The court evaluates the conflicting views presented by different cases and emphasizes the importance of considering new material for justifying the issuance of a notice under Section 148.

Issue 4: Requirement of new material for notice under Section 148:
The judgment highlights the necessity for new material to come to light to justify the issuance of a notice under Section 148. Despite citing relevant case laws like Techspan India P. Ltd. Vs. Income Tax Officer, the Respondent's conclusion is deemed contrary to the requirement of new material. The court scrutinizes the presence of new material in the case at hand and refers to precedents like CIT vs. P.V.S. Beedies Pvt. Ltd. to support its analysis.

Issue 5: Burden of proof on the Revenue:
The judgment refers to the case of M/s. Kishanchand Chellaram vs. CIT, emphasizing that once basic facts are disclosed, the burden to prove undisclosed income lies with the Revenue. Applying this principle to the case, the court concludes that there was a change of opinion without new material justifying the reopening of the assessment.

Issue 6: Action under Section 147 regarding interest earned:
The judgment discusses an appeal concerning the legal propriety of action taken under Section 147 in respect of interest earned on Vikas Cash Certificate. The court refers to relevant case laws and the factual position to conclude that resorting to Sections 147/148 was unwarranted due to the availability of material with the Assessee.

Issue 7: Application of legal principles to the facts:
The court dismisses the appeal, stating that no substantial question of law arises for consideration. The judgment reflects the application of legal principles to the facts presented in the case, emphasizing the unwarranted nature of the actions taken under Section 147 in light of the available material.