9911796707
TMI Blog2012 (6) TMI 238X X X X Extracts X X X X X X X X Extracts X X X X ..... d the fact that ratio of the judgment of the Hon'ble Apex Court in the case of M/s Southern Switchgear Vs. CIT 232 ITR 359 is applicable in the case of the assessee. 4. The appellant craves leave to add, to alter or amend any grounds of appeal raised above at the time of the hearing of the appeal. 2. Adverting first to ground nos. 2 and 2.1 in the appeal, facts, in brief, as per relevant orders are that return declaring nil income after claiming set off of unabsorbed depreciation of Rs.37,17,130/- & book profits of Rs.76,86,377/- in terms of provisions of sec. 115JA of the Income-tax Act, 1961 (hereinafter referred to as the Act), filed on 28.11.2000 by the assessee, manufacturing wiring harness for automobile and other sectors, after being processed on 19.6.2001 u/s 143(1) of the Act, was selected for scrutiny with the service of a notice u/s 143(2) of Act, issued on 27.11.2001. Subsequently, assessment was completed u/s 143(3) of the Act on nil income vide order dated 24.3.2003. Thereafter, the Assessing Officer[AO in short] reopened the assessment u/s 147 of the Act, after recording the following reasons in writing:- "1. The assessee filed its return of income on 28.11.2000 d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rness in India for automobile and other sectors in terms of agreement dated 21st October, 1997. The AO treated the said amount capital in nature in the light of aforesaid decision in Southern Switchgear Ltd.(supra). 3. On appeal, the assessee questioned the validity of initiation of proceedings u/s 147 of the Act. The ld. CIT(A) after considering the submissions of the assessee, quashed the reassessment order in the following terms:- "3.6 I have carefully considered the submissions made on behalf of the appellant company and the reasons recorded by the learned AO before issue of notice u/s 147/148 of the IT Act, 1961. I have also carefully gone through the documents filed in the course of appellate proceedings, particularly, the notices issued by the learned AO and the replies filed by the appellant company at the time of original assessment. On a careful consideration, I find that the issue of payment of royalty was specifically raised by the learned AO, vide notice u/s 142(1) dated 21.01.02 and the same was duly replied by the appellant company, vide its letter dated 17.01.2003. Therefore, I am unable to agree with the learned AO that there was any failure on the part of the ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Pvt. Ltd. Vs. CIT and Another in CWP No.6205 of 2010 and decision dated 14.2.2011 in Honda Siel Power Products Ltd. Vs. DCIT and another in CWP no.9036 of 2007 submitted that the ld. CIT(A) was not justified in quashing the reassessment proceedings. To a query by the Bench, the ld. DR did not attribute any failure on the part of assessee in disclosing fully and truly the relevant material facts during the course of original assessment proceedings. On the other hand, the ld. AR on behalf of the assessee relied upon the findings of the ld. CIT(A). 5. We have heard both the parties and gone through the facts of the case as also the decisions relied upon by the ld. DR. As is apparent from the facts narrated in the impugned orders and the reasons recorded by the AO before reopening the assessment, the assessment for the year under consideration in this case was initially completed on 24.3.2003 u/s 143(3) of the Act on nil income after set off of unabsorbed depreciation of 37,17,130/-even when the decision of the Hon'ble Apex Court, which formed the basis for initiation of reassessment proceedings, was already available, having been rendered on 11.12.1997. As pointed out by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jurisdiction under section 147(a), two conditions were required to be satisfied- firstly the AO must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement occurred due to reason of either omission or failure on the part of the taxpayer to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the AO could have jurisdiction to issue notice under section 148 read with section 147(a).But under the substituted section 147, existence of only the first condition suffices. In other words if the Assessing Officer, for whatever reason, has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment. However, both the conditions must be fulfilled if the case falls within the ambit of the proviso to section 147. Since in the case under consideration, notice u/s 148 had been issued only on 29.3.2007 that is after four years from the end of relevant assessment year, apparently, the issue that arises for our consideration is as to wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ull and truthful disclosure of all primary facts? In our opinion, the answer to this question must be in the negative. Once all the primary facts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else far less the assessee-to tell the assessing authority what inferences, whether of facts or law, should be drawn." 5.1 Again in the case of Patidar Oil Cake Industries Vs. DCIT, 270 ITR 347(Guj), Hon'ble Gujrat High Court held "In the light of the fact that the assessments have been sought to be reopened after a period of four years from the end of each of the assessment years in question, the provisions of section 147 of the Act mandate that the Assessing Officer shall be vested with the jurisdiction to initiate reassessment proceedings only in case there is any omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for the year under consideration and such failure should result in income chargeable to tax escaping assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt found that there was no allegation in the reasons recorded by the AO that the assessee had failed to file its return or that it had failed to disclose fully and truly all material facts in its return nor was there any allegation by the Assessing Officer that the assessee had failed to disclose fully and truly all material facts in its return of income nor even there was any allegation regarding escapement of income. In these circumstances, Hon'ble High Court upheld that findings of the Tribunal that notice u/s 148 of the Act, having been issued after four years, the reopening of the assessment was not valid. 5.7 In CIT & Another Vs. Foramer France, 264 ITR 566 (SC), Hon'ble Apex Court upheld the order of the Hon'ble Delhi High Court in concluding that when there was admittedly no failure on the part of the assessee to make a return or to disclose fully and truly all material facts necessary for the assessment, the proviso to the new section 147 of the Act squarely applied, and the impugned notices were barred by limitation mentioned in the proviso. 5.8 In Supreme Travels (P) Ltd. vs. DCIT, 182 Taxman 216(Bom.), Hon'ble Bombay High Court held that the Assessing Officer can reo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osure in the form of a note regarding transfer of its undertaking, it cannot be said that the petitioner is guilty of not making full and true disclosure and, therefore, notice under s. 148 issued after the expiry of four years from the end of the relevant assessment year is quashed and set aside. 5.14 Similar view was taken in decision dated 28.11.2011 in CIT vs. Purolator India Limited in ITA no. 489/Del./2011 and decision dated 1.12.2011 in BLB Limited vs. ACIT in WPC 6884/2010, JSRS Udyog Limited & Another vs. ITO, 313 ITR 321(Del.); Wel Intertrade Private Limited vs. ITO, 308 ITR 22(Del.) and in a recent decision dated 11.11.2011 in ITA no.87 /2010 in Atma Ram Properties Pvt. Ltd. vs. DCIT by the Hon'ble jurisdictional High Court. 5.15 In Haryana Acrylic Manufacturing Co., 308 ITR 38 (Del.)., Hon'ble jurisdictional High Court, inter alia, concluded as under: "20. In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but only Rs.9.23 lacs on account of provision for warranties no longer required was shown under other income and remaining amount of Rs.98.46 lacs was not offered to tax .Besides the assessee claimed gross dividend income exempt instead of net dividend income and expenses relating to tax free income were not offered to tax. Accordingly, the Hon'ble High Court upheld the reopening of assessment on the ground that there was failure on the part of the assessee during the assessment proceedings in not offering to tax expenses in relation to tax free income by virtue of provisions of sec. 14A of the Act. But such are not the facts in the instant case before us, since no such failure as is envisaged under proviso to sec. 147 of the Act, has been alleged in the reasons or even ascribed to the assessee before us. The ld. DR did not demonstrate before us as to how these decisions are applicable in the facts and circumstances of the case before us. After perusing these decisions and with respect, we are of the opinion that the decisions relied upon by the ld. DR were rendered on the facts of their own and ratio laid down in these decisions is not germane to the issue before us. Therefore, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Hon'ble Supreme Court, in the following terms: "4. We are not able to countenance the said submission made by the learned standing counsel for the appellant. In the present case on hand, the assessee at the time of filing return for the assessment year 1999-2000 has disclosed all the materials before the Assessing Officer and claimed deduction under Section 80HHC. Even before the earlier proceedings initiated under Section 147, it is not the case of the Revenue that the assessee has not disclosed the materials. Therefore, on a consideration of the materials available on record, the Assessing Officer passed an order on the earlier two occasions. Thereafter, the Assessing Officer has sought to reopen the assessment once again invoking the power under Section 147 of the Act, which, in our considered opinion, is not permissible in law on the facts of the case. 5. The judgment rendered by the Hon'ble Supreme Court is an expression of opinion on the interpretation of statute. The power under Section 147 will have to be invoked by the Assessing Officer in accordance with the said provision. In other words, merely because a judgment has been rendered, the same cannot be a ground f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n aforesaid decisions of the Hon'ble jurisdictional High Court and other Courts, considering the facts and circumstances of the case, we are of the opinion that there is nothing to suggest that all the primary facts were not disclosed by the assessee at the time of original assessment completed u/s 143(3) of the Act nor any failure on the part of the assessee to disclose fully and truly all the material facts has been ascribed in the circumstances narrated before us. It cannot be said that the assessee suppressed any material facts. It is well-settled that if a notice under section 148 of the Act has been issued without the jurisdictional foundation u/s 147 of the Act being available to the AO, the notice and the subsequent proceedings will be without jurisdiction and thus, liable to be struck down . In view thereof, we have no hesitation in upholding the findings of the ld. CIT(A) in quashing the reassessment order. Consequently, ground nos. 2 & 2.1 in the appeal are dismissed. As a corollary, ground nos. 3 & 3.1 in the appeal of the Revenue do not survive for our adjudication and are, therefore, treated as infructuous. 7. Ground no.1 in the appeal being general in nature, does n ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
