2017 (11) TMI 1355 - HC - Income Tax

Reopening of assessment - failure on the part of the assessee in bifurcating the receipts into outside India and inside India - Held that - The assessee has conducted the business in India with regard to its contract with ONGC during the year and has thus failed to tax the entire receipts in India as business income at maximum marginal rate as per the Income Tax Act. There was also failure on the part of the Assessing Officer in computing the income from outside India at a low rate. In the relevant assessment year, whether the receipts were taxed as business income, was never discussed by the Assessing Officer. For the relevant assessment year, the issue for taxation of entire revenue in India was not taken up by the Assessing Officer. Thus, according to the reasons assigned, there was tangible material for formation of belief by the Assessing Officer to reopen the assessment. It is in these circumstances, the notice u/s 148 of the Act was issued to the petitioner company on 28.3.2011. Thus it is not the change of opinion but the reassessment has been ordered on the basis of the tangible material placed on record necessitating the reassessment. Sufficient reasons have been assigned for reopening of the assessment. The objections raised by the petitioner company have been specifically dealt with by the respondent no.1. Impugned order dated 19.12.2011 passed by the respondent no.1 is detailed and reasoned and in conformity with the law - Decided against assessee.

Summary

Issues:
Challenge to notice and order dated 28.3.2011 and 19.12.2011 under Income Tax Act.

Analysis:
The petitioner, a Singapore-incorporated company providing services in mineral oils, filed a return of income in 2005. The Assessing Officer assessed the income at a different amount, leading to a notice for reassessment under section 148 of the Income Tax Act. The petitioner objected to the reasons for reassessment, but the objections were rejected by the respondent. The respondent found failures in the petitioner's tax reporting, specifically in bifurcating receipts and taxing income from business conducted in India. The respondent believed there was tangible material to support the reassessment, as the issue of taxing revenue in India was not addressed in the original assessment.

The judgment referred to the Supreme Court case 'Commissioner of Income Tax Delhi v. Kelvinator of India Ltd.,' highlighting that post-amendment in 1989, the assessing officer can reopen assessment if there is a reason to believe income has escaped assessment based on tangible material. The judgment emphasized that reassessment should not be based on a mere change of opinion but on tangible material. The Division Bench of Delhi High Court in 'Consolidated Photo & Finvest Ltd. V. Asst. CIT (Delhi)' held that reassessment can be initiated if income has escaped assessment due to failure to disclose material facts, even if the assessment order was silent on certain aspects. The judgment concluded that the reassessment in this case was based on tangible material, and the objections raised by the petitioner were duly considered and rejected in accordance with legal principles.

In summary, the petition challenging the notice and order dated 28.3.2011 and 19.12.2011 under the Income Tax Act was dismissed by the court. The judgment highlighted the importance of tangible material for reassessment and emphasized that reassessment should not be merely based on a change of opinion. The court found the reassessment in this case to be justified based on tangible material, and the objections raised by the petitioner were deemed insufficient to challenge the reassessment.