2013 (7) TMI 224 - HC - Income Tax

Reopening of assessment Substitution on section 11(4A) vide Finance Act, 1983 and vide Finance (No.2) Act, 1991 Assessee asserted that notice of reassessement is merely because of change in opinion whether the show cause notices are beyond the period of limitation as per the amended provisions of the Act Held that - From 1st April, 1989 onwards, any action for opening or reopening an assessment for the asst. yr. 1988-89, and earlier assessment years will have to be taken in accordance with the amended provisions Provisions of amended Act would be applicable only in those cases where the limitation in respect of old law has not expired. In the case of the assessee, the power could have been exercised under the repealed section as well as the amended section. The matter with regard to the applicability of the repealed section is merely an academic argument, however, in view of the fact that the power of reopening was existing in respect of escaped assessment prior to 1st April, 1989, therefore, it cannot be said that any new right has been acquired by the ITO or the said amendment has effected any vested right of the assessee. Re assessment proceedings could be initiated within the time limits prescribed under the un amended Section 149 of the Act subject to the fulfilment of certain conditions. If such conditions are satisfied, the revenue has right to initiate proceedings for reassessment. Such right cannot be curtailed by subsequent amendment, when no specific provision was made to curtail the period of limitation for initiating such proceedings. The amending Act changing the period of limitation for issuance of notice for reassessment has not made provision of the amending Act applicable retrospectively. Though the limitation is a provision dealing with procedure and all amendments in respect of procedure are retrospective but where the amendment has the effect to curtail a right vested, then the amended provisions cannot be applicable to the vested rights Since the intimation of the assessment was given to the assessee, it cannot be said that the Assessing Officer has examined the return which may bar the Assessing Officer to reopen the assessment. Work in connection with the business is mainly carried on by the beneficiaries of the Trust. The trustees are running the newspaper and cannot be the beneficiaries of the Trust. The trustee and the beneficiary have the conflicting interest and thus, one person cannot be a trustee and a beneficiary Balance sheets produced by the petitioner do not show that separate books of accounts were maintained in respect of charitable activities undertaken by the petitioner. Reason for re assessment is that the Assessing Officer has not examined; the question whether the Trust fulfilled the condition laid down in Section 13 read with Section 11 of the Act and whether the income earned from the business is exempt from Tax as it has been utilized for the beneficiaries and by keeping separate accounts. Since the question was not examined by the Assessing Officer while framing assessment under Section 143(3) of the Act, and that the assessment framed was in ignorance of the statutory provisions and thus, the test that the income has escaped assessment on the basis of return filed stands satisfied. - Following decisions of Chandi Ram Vs. Income Tax Officer & another 1995 (12) TMI 6 RAJASTHAN High Court , T. Kaliamurthi v. Five Gori Thaikkal Wakf 2008 (8) TMI 789 - SUPREME COURT and Yeshwantrao Laxmanrao Ghatge Vs. Baburao Bala Yadav 1978 (2) TMI 203 - SUPREME COURT Decided in favour of Revenue.

Summary

Issues Involved:
1. Validity of show cause notices under Sections 147 and 148 of the Income Tax Act, 1961.
2. Applicability of amended provisions of the Income Tax Act.
3. Examination of whether the reassessment is based on a mere change of opinion.
4. Compliance with procedural requirements for reassessment.
5. Limitation period for issuance of reassessment notices.

Detailed Analysis:

1. Validity of Show Cause Notices Under Sections 147 and 148:
The petitioners challenged the show cause notices for reassessment under Sections 147 and 148 of the Income Tax Act, 1961. The notices were issued for various assessment years ranging from 1984-85 to 1992-93. The basis for these notices was the insertion of sub-section (4A) in Section 11 of the Act by the Finance Act, 1983, effective from 01.04.1984, and its subsequent substitution by the Finance (No.2) Act, 1991, effective from 01.04.1992. The court examined the statutory provisions before and after the insertion/substitution and found that the notices were issued to verify whether the trust fulfilled the conditions laid down in Section 11(4A) and Section 13 of the Act.

2. Applicability of Amended Provisions of the Income Tax Act:
The court analyzed whether the amended provisions of the Act, particularly those introduced by the Finance Act No.2 of 1991, applied retrospectively to the assessment years in question. The court referred to Section 6 of the General Clauses Act, 1897, which protects vested rights unless a different intention appears in the amending statute. The court concluded that the right to reassess income under the un-amended provisions of Section 149 of the Act could not be curtailed by subsequent amendments, as the amendments did not explicitly apply retrospectively.

3. Examination of Whether the Reassessment is Based on a Mere Change of Opinion:
The petitioners argued that the reassessment was based on a mere change of opinion, particularly for the assessment years 1984-85, 1985-86, 1986-87, and 1990-91, which were finalized under Section 143(3) of the Act. The court noted that the original assessments were completed without examining whether the trust fulfilled the conditions laid down in Section 13 read with Section 11 of the Act. The court held that the reassessment notices were not based on a mere change of opinion but were issued due to the non-examination of material facts by the original Assessing Officer.

4. Compliance with Procedural Requirements for Reassessment:
The court examined whether the procedural requirements for reassessment were met, including the recording of reasons for issuing notices under Section 148. The court found that the reasons recorded for reassessment were identical for all assessment years and were based on the failure to examine whether the trust fulfilled the conditions for exemption under Section 11(4A). The court held that the procedural requirements were complied with, and the reassessment notices were valid.

5. Limitation Period for Issuance of Reassessment Notices:
The petitioners contended that the reassessment notices were beyond the period of limitation as per the amended provisions of the Act. The court referred to the Central Board of Direct Taxes Circular No.549 dated 31.10.1989, which clarified that the amended provisions of Sections 147 to 152 have retrospective effect unless the amending statute provides otherwise. The court held that the right to reassess income under the un-amended provisions of Section 149 was protected and could not be curtailed by subsequent amendments. The court concluded that the reassessment notices were issued within the permissible limitation period.

Conclusion:
The court dismissed the writ petitions, holding that the reassessment notices were valid and within the jurisdiction of the Assessing Officer. The court found that the reassessment was not based on a mere change of opinion but was necessitated by the non-examination of material facts relating to the application of income for charitable purposes. The court upheld the validity of the reassessment notices and directed the Assessing Officer to examine the factual questions regarding the application of income for charitable purposes.