2017 (9) TMI 669 - HC - Income Tax

Reopening of assessment - without prior approval of the higher authority - return to certificate holders - Held that - Such ground was considered by the assessing officer in his order of assessment. In fact, he had required further evidence and documents from the assessee prior to the order of assessment to which the petitioner had replied furnishing the same. The assessing officer had taken a particular view on the subject. Although no appeal is pending against the portion of the order with regard to return to certificate holders, in my view, the reasons, not specifying the tangible new materials available with the department to allege that the petitioner is guilty of not making a true and proper disclosure, is not sufficient to reopen the assessment. In absence of such material, the authorities have incorrectly applied the principles laid down in Calcutta Discount Pvt. Ltd. (1960 (11) TMI 8 - SUPREME Court) and followed subsequently for the purpose of reopening the assessment order on that ground. Reopening the assessment is commission, incentive and other payment made to the field officers. The petitioner had claimed the same as an expenditure in its return. Such claim was disallowed by the assessing officer in the order of assessment. An appeal is pending against such portion of the order of assessment. The appeal is yet to be disposed of. Therefore, on the parity of reasoning for the first ground as noted above, and in addition thereto, in view of the fact that, if Section 148 is allowed to continue, it may result in conflict in decision between the assessing officer and the appellate authority on the same head, it would be appropriate to hold that the invocation of Section 148 for the same is improper. Therefore the reasons for invocation of Section 148 of the act of 1961 on the second ground also fails. Treatment of the suspense account - Held that - The claim made on this head was disallowed by the assessing officer to the extent of 50%. Again the assessing officer before passing the order of assessment had called upon the petitioner to furnish information with regard thereto. The petitioner had furnished such information in its reply. In addition, the petitioner had written a letter dated January 17, 2002 to the assessing officer. In such factual matrix it cannot be said that, the department has any new tangible material to hold that the petitioner did not make a true and faithful disclosure in its account before the assessing officer. The fourth ground for reopening as given in the reasons is deferred obligation. Claim as an expenditure made on this account before the assessing officer was disallowed in its entirety. Therefore again on the parity of reasoning as noted in respect of the earlier grounds, the reason fails. The contention of the department that, the order of assessment being made subsequent to the invocation of Section 148 and that in respect of such order of assessment, the petitioner having a statutory alternative remedy available, the writ petition should be dismissed. This is the view expressed in Chhabil Dass Agarwal (2013 (8) TMI 458 - SUPREME COURT). However the fact scenario in the present case is different than that in obtaining Chhabil Dass Agarwal (supra). In that case, the Supreme Court notices that two notices under Section 148 of the Act of 1961 for two different assessment years went unrepresented and unreplied to by the assessee. Notices under Section 143(2) in respect of those assessment years were also not attended to by the assessee. It is after receipt of the orders of assessment that, the assessee sought to approach the Writ Court under Article 226 questioning the validity and legality of the notices under Section 148 as also the order of assessment. In such context, the Supreme Court is of the view that, once an order of assessment is passed and the assessee has a statutory alternative remedy, the Writ Court need not interfere therein, unless it is established that, there is a breach of fundamental right of the petitioner or that authorities have acted wholly without jurisdiction. In the present case, the writ petitioner approached the Writ Court immediately upon receipt of the order dated September 22, 2006. The order of assessment is much later. It is dated December 29, 2006. The department claims that, the interim order passed in the writ petition permitted the department to pass an order of assessment and so it has done so. The writ petitioner claims that, the writ petitioner was not served with the notice under Section 143(2) of the Act of 1961. The department contends that the appropriate notice was served upon the assessee. The fact remains that, the writ petition was filed immediately after the order dated September 22, 2006. The writ petition is pending since then. As noted above, the department did not have necessary material before it to invoke Section 148 of the Act of 1961 in respect of the assessment year concerned.

Issues Involved:
1. Legality of the notice under Section 148 of the Income Tax Act, 1961.
2. Validity of the reasons for reopening the assessment year 1999-2000.
3. Compliance with procedural requirements, including approval from higher authority.
4. Allegation of change of opinion by the assessing officer.
5. Relevance of pending appeals and potential conflicts in decisions.
6. Adequacy of material facts disclosure by the assessee.
7. Jurisdictional authority of the assessing officer.
8. Availability of statutory alternative remedies.

Issue-wise Detailed Analysis:

1. Legality of the Notice under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice under Section 148, asserting it was issued without prior approval from a higher authority. The court examined the original records and confirmed that the authorities obtained necessary permission on March 22, 2006. Therefore, the contention that the notice lacked due approval was found to be baseless.

2. Validity of the Reasons for Reopening the Assessment Year 1999-2000:
The petitioner contested the reasons provided by the department for reopening the assessment. The court analyzed four primary grounds:

- Return to Certificate Holders: The court noted that this ground was already considered in the original assessment. Since no new tangible material was presented, reopening on this basis was deemed improper.
- Commission, Incentive, and Other Payments: This claim was disallowed in the original assessment, and an appeal was pending. Reopening on this ground could lead to conflicting decisions, thus deemed inappropriate.
- Suspense Account: The assessing officer had already disallowed 50% of this claim in the original assessment. No new material was presented to justify reopening.
- Deferred Obligation: This claim was entirely disallowed in the original assessment. Reopening on this ground was also found to be unjustified.

3. Compliance with Procedural Requirements, Including Approval from Higher Authority:
The petitioner argued that the notice under Section 148 was issued without higher authority approval. Upon reviewing the records, the court confirmed that the required approval was obtained, dismissing this argument.

4. Allegation of Change of Opinion by the Assessing Officer:
The court referred to several precedents, including *Calcutta Discount Co. Ltd.* and *Kelvinator of India Ltd.*, which establish that reopening an assessment based on a mere change of opinion is not permissible. The court found that the department's reasons for reopening did not involve new tangible material, but rather a change of opinion, thus invalidating the reopening.

5. Relevance of Pending Appeals and Potential Conflicts in Decisions:
The court highlighted that reopening the assessment while an appeal on the same grounds was pending could result in conflicting decisions. This was particularly relevant for the second ground (commission, incentive, and other payments), leading the court to deem the reopening improper.

6. Adequacy of Material Facts Disclosure by the Assessee:
The court emphasized that the assessee had a duty to disclose all material facts necessary for the assessment. In this case, the court found that the petitioner had made all relevant disclosures, and the department had no new material to suggest otherwise.

7. Jurisdictional Authority of the Assessing Officer:
The court evaluated whether the assessing officer had the jurisdiction to reopen the assessment. Based on the lack of new tangible material and the improper grounds for reopening, the court concluded that the assessing officer did not have the requisite jurisdiction.

8. Availability of Statutory Alternative Remedies:
The department argued that the petitioner had a statutory alternative remedy available and that the writ petition should be dismissed. However, the court noted that the petitioner approached the writ court immediately after the order dated September 22, 2006, and the assessment order was passed later. Given the improper invocation of Section 148, the court found it appropriate to intervene.

Conclusion:
The court set aside the impugned notice dated March 22, 2006, and the impugned order dated September 22, 2006, along with all consequential steps taken pursuant thereto. The writ petition was disposed of without any order as to costs.

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