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TMI Blog2014 (8) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... excess expenditure shown and that the excess payment should be treated as a deemed gift u/s 4(1)(c) of the Gift Tax Act on the basis of the same material is in our opinion a clear case of change of opinion - the AO has dealt with the audit report and justified his assessment order indicating in its order dated 4th July, 2000 that the issue pertaining to deemed gift and the purchase consideration was examined in detailed looking the business necessity for the petitioner company to acquire the copyright and held that the quantum of purchase consideration as disclosed by the petitioner was reasonable and was a true business transaction and that no gift appeared to be involved. Once the AO had made an assessment on the primary facts and documents placed before it, the AO could not at another point of time form another opinion on the same primary facts and arrive at a conclusion that he had committed an error or come to a conclusion that he has now reasons to believe that income had escaped assessment and reopen the assessment proceedings - on the basis of an audit report, notice u/s 148 of the Act could not be issued as such audit report cannot be regarded as "information" within th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15 crores as early as on 30.1.1995. The petitioner in its reply dated 7.1.1998 further gave its justification for the purchase of copyright and not charging any amount from other companies publishing Dainik Jagran. It was stated that under the agreement with the firm Jagran Publications, the petitioner had the sole rights of using copyright of Dainik Jagran against deposit of interest free security money with the said firm and necessary licence fees for the use of the said copyright were being paid regularly to the firm annually. The petitioner company had authorised the other companies i.e. Jagran Prakasan (Varanasi) Pvt. Ltd. to publish Dainik Jagran from Varanasi, Jagran Limited to publish Dainik Jagran from Meerut, Rohilkhand Publications Pvt. Ltd. to publish Dainik Jagran from Bareilly and Jagran Prakashan (Delhi) Pvt. Ltd. to publish Dainik Jagran from New Delhi and did not charge any amount towards copyright from these firms on account of the fact that the petitioner had retained its exclusive rights of advertisement booking in these firms/companies. Under this arrangement, the entire advertisement revenue generated by procuring booking orders for publishing the advertise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer by its order dated 4th July, 2000 justified his assessment order contending that the fixation of the purchase consideration of its quantum was examined in detail by the Assessing Officer and that the implication as well as the inferences drawn in the audit objection were palpably misconceived. The Assessing Officer held that the detailed inquiries in respect of the issue of valuation was made by him and only thereafter the assessment order was passed. For facility, the extract of the reply submitted by the Assessing Officer dated 4th July, 2000 is extracted hereunder:- Regarding the issue pertaining to deemed gift u/s 4(1)(c) of Gift Tax Act, the implications/ inferences drawn are palpably misconceived in as much as the fixation of purchase consideration and its quantum have been examined in detail looking to the dire business necessity for the assessee company to acquire such valuable copyright. In this regard you may kindly refer to my detailed office note dated 16.13.1998 on the subject wherein the 'quantum' of purchase consideration has been examined in detail........................................................... A perusal of the above ex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and, consequently, prima facie it shows that the expenses of ₹ 1,20,00,000/- had not been used wholly and exclusively for the purpose of assesse's business under Section 37(1) of the Act and, consequently, the assessee was not entitled to claim total expenses of ₹ 1,20,00,000/- as debited in his credit of loss account. The Assessing Officer further found that the assessee had paid some amount of TDS after due date on which interest under Section 201(1A) of the Act was to be paid, which had not been charged. On this basis, the Assessing Officer was of the opinion that there was reasons to believe that income had escaped assessment for the assessment year 1997-98. We have heard Sri V.K. Upadhya, the learned Senior Counsel assisted by Sri Ritvik Upadhya, the learned counsel for the petitioner and Sri Govind Krishna, the learned counsel for the respondents. The contention of the petitioner is, that the notice under Section 148 of the Act was without jurisdiction. The petitioner contends that the Assessing Officer having reasons to believe that the income of the petitioner had escaped assessment was patently illegal as it was not based on any fresh material for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1 : Production before the Assessing Officer of account books or other evidence fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it stood immediately before the amendment of said subsection by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case - (a) where a return has been furnished during period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) Subsequently a notice has been served under sub-clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice. [Explanation. - For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ghed with the Income Tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147 (a). It there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the income of the assessee had escaped assessment and such escapement was by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts and the notice issued by him would be liable to he struck down as invalid. In Sheo Nath Singh Vs. Appellate Assistant Commissioner of Income-Tax (Central), Calcutta and others, 82 ITR 147, the Supreme Court held :- In our judgment, the law laid down by this court in the above case is fully applicable to the facts of the present case. There can be no manner of doubt that the words reason to believe suggest that the belief must ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd which would have a material bearing on the question of under assessment. If there is no material for the formation of any belief or where the purported belief was nothing but a mere change of opinion, in that case, the Assessing Officer would have no jurisdiction to initiate proceedings u/s 147 and 148 of the Act. The Assessing Officer has the power to reopen the assessment where he has reasons to believe that income chargeable to tax has escaped assessment but such re-assessment cannot be initiated on a mere change of opinion to merely re-examine an issue on the basis of information or material which was already available to the Assessing Officer at the time of the completion of the original assessment. It is settled principle of law that reason to believe could never be an outcome of a change of opinion. Consequently, before taking any action, the Assessing officer is required to substantiate his satisfaction in the reasons recorded by him. If such reasons recorded discloses a mere change of opinion, in that event, the assessment proceedings could not be initiated. On the question of relevancy of material facts which is concomitant for the issuance of a notice u/s 147 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We are unable to agree with the submission of Mr. Jolly to the effect that the impugned order of reassessment cannot be faulted as the same was based on information derived from the tax audit report. The tax audit report had already been submitted by the assessee. It is one thing to say that the assessing officer had received information from an audit report which was not before the Income Tax Officer, but it is another thing to say that such information can be derived by the material which had been supplied by the assessed himself. We also cannot accept submission of Mr. Jolly to the effect that only because in the assessment order, detailed reasons have not been recorded on analysis of the materials on the record by itself may justify the assessing officer to initiate a proceeding under section 147 of the Act. The said submission is fallacious. An order of assessment can be passed either in terms of sub-section (1) of section 143 or sub-section (3) of section 143. When a regular order of assessment is passed in terms of the said sub-section (3) of section 143 a presumption can be raised that such an order has been passed on application of mind. It is well known that a pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income had escaped. In Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers P. Ltd., (2007) 291 ITR 500 (SC) the Supreme Court held that at the stage of issuance of notice under Section 148 of the Act the only question to be considered is whether there was relevant material on which a reasonable person could have formed the requisite belief. Whether the material would conclusively proof of escapement of income was not the concern at that stage. In the light of the aforesaid, we find that the reasons recorded by the Assessing Officer no where states that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. On the other hand, we find that in proceedings under Section 143(3) of the Act, the petitioner had disclosed all the primary facts relevant to the decision on the question of the consideration paid for purchase of copyright before the Assessing Officer. We also find that detailed discussion was made by the Assessing Officer and that he had recorded a detailed note on 16th March, 1998 wherein the quantum of purchase consideration was examined in detail. We also fi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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