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TMI Blog2015 (2) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... ad with the reassessment proceedings, in view of the fact that he raised the query as to why the unutilized Cenvat credit should not be included in the closing stock. He was aware fully regarding the accountability of the Cenvat credit, its utilization and the fact that no wrong benefit was availed of by the assessee. He still preferred not to make any addition on account of the accountant ability of such credit and, hence, he must be held to have formed an opinion and this exercise is nothing but an attempt to review its own order, which is impermissible under the law. -Decided in favour of assessee. - SPECIAL CIVIL APPLICATION NO. 2463 of 2013 - - - Dated:- 22-4-2013 - MR. AKIL KURESHI AND MS SONIA GOKANI, JJ. FOR THE APPELLANT : MR RK PATEL, ADVOCATE FOR THE RESPONDENT : MRS MAUNA M BHATT, ADVOCATE JUDGMENT Ms. Sonia Gokani J.- This writ petition under article 226 of the Constitution of India is preferred by the petitioner being engaged in the business of manufacturing and sale of seamless and welded pipes and tubes, seeking the following reliefs : (A) Issues a writ of certiorari and/or a writ of mandamus and/or any other writ directi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls showing accounting of indirect taxes, rates appli cable and statement showing that the accounting system does not affect the profit of the company, etc., and note on accounting is attached as per 'Encl 2'. (which is reproduced hereunder). Name of the tax Applicable rate of tax Note of accounting During financial year 2007-08 Up to 28-02-2008 From 01-03-2008 Central excise duty On sales 16.48% 14.42% Sales is accounted including sales tax and excise duty. Purchase is accounted net of VAT and excise duty. Tax credit availed of on purchase is accounted as receivable and difference between tax collected and tax credit availed of on purchase is accounted as expenses. The unutilized credit of tax is reflected as receivables. Closing stock is valued net of tax. A statement showing that accounting system does not affect the profit of the company attached herewith. On purchase 16.48% 14.42% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssued a notice to the petitioner under section 148 of the Act for reopening of the assessment of the assessment year 2008-09 on the ground that the income had escaped assessment within the meaning of section 147 of the Act. 4. The petitioner-assessee made a request on April 5, 2012, for providing a copy of the reasons recorded for initiating such proceedings. 4.1 On receipt of such communication, the reasons recorded for initiating the reassessment proceedings have been furnished to the petitioner, vide communication dated February 15, 2013. The reasons recorded require to be profitably reproduced in toto : This has reference to your letter dated April 10, 2012, in connection with the notice under section 148 of the Act issued by this office on March 12, 2012. 2. As desired by you, the relevant extract of the reasons recorded for initiating the reassessment proceedings under section 147 of the Act is reproduced, as under for your reference : On verification of the case records, it is noticed that the assessee is following the exclusive method of accounting for CENVAT. From the financial accounts of the assessee, it is noticed that the CENVAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment, in the absence of any opinion having been formed by the Assessing Officer in the original assessment, no interference at this stage in the writ petition is desirable as the notice under section 148 is valid and legal. It is not being disputed that the return of the petitioner was duly processed under section 143(1) of the Act and on scrutiny assessment, the assessment has been finalized. It is further not being disputed that the notice under section 143(2) was issued on August 26, 2009, which had been replied to exhaustively. However, it is being contended that on verification of the case record, when it is realized that the assessee is following the exclusive method of CENVAT and that the CENVAT receivables as on 1st April, 2007, was of ₹ 88,03,406 and as on March 31, 2008, was of ₹ 5,57,57,871, the difference of ₹ 4,69,54,465 was required to be included in the closing stock of the assessee but the same since has not been included by the assessee as required under section 145A of the Act, this resulted into escapement of income, and, therefore, reassessment notice is legally and validly issued. 8. We have heard learned counsel Shri R. K Patel for the pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement has been furnished reflecting that the accounting system would not affect the profit of the company. As could be note from the assessment order passed for the relevant assessment year 2008- 09, in which though having provided disallowances totalling worth ₹ 7.90 crores (rounded off), the Assessing Officer has not chosen to say anything with regard to the issue raised in its letter dated August 16, 2010. 10.1 Later on, by the impugned notice dated March 12, 2012, it has sought to reopen the assessment on the very ground. We are of the opinion that it would not be permitted to raise the very ground, even within the period of four years, inasmuch as he has scrutinized this very issue, as that would otherwise amount to change of opinion on the part of the Assessing Officer. 10.2 This court in the case of Lanxess ABS Ltd. v. Deputy CIT (Special Civil Application No. 17530 of 2011 dated April 11, 2012) had dealt with an identical issue in a writ petition. The court, after a detailed reasonings, held in similar circumstances that the notice was illegal for having been issued without any tangible material to exercise the jurisdiction under section 147 of the Act. Pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent) Act, 1987, Parliament not only deleted the words reason to believe but also inserted the word opinion in section 147 of the Act. However, on receipt of representations from the companies against omission of the words reason to believe , Parliament reintroduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549, dated October 31, 1989 ([1990] 182 ITR (St.) 1, 29), which reads as follows : 7.2. Amendment made by the Amending Act, 1989, to reintroduce the expression 'reason to believe' in section 147.-A number of representations were received against the omission of the words 'rea son to believe' from section 147 and their substitution by the 'opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, 'reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied to the satisfaction of the Assessing Officer vide letters dated August 18, 2009, and August 24, 2009, informing that as on March 31, 2006, there was no cenvat credit out standing and remaining unadjusted in the profit and loss account. It was also explained to the Assessing Officer that all credits have been accounted in RG 23 of the excise records and the value of purchases of raw materials is correspondingly reduced. Thus, what we find is that the Assessing Officer was aware of the fact regarding the accountability of cenvat credit, its utilization and the fact that no dual benefits were obtained by the petitioner. After being satisfied with the materials produced by the petitioner and the explanation, the Assessing Officer did not make any addition on account of accountability of unutilized cenvat credit. Thus, it can be easily said that the requisite details were made available to the Assessing Officer and, therefore, the opinion was already formed by way of scrutiny assessment. In absence of any other tangible material, the successor-in-office could not have formed his own independent opinion based on the same material that the petitioners have unaccounted sum of ₹ 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B] but also against the above case of CIT v. Eicher Limited (supra) as both were heard analogously. We shall also look into and deal with the judgment of the Supreme Court in the case of PVS Beedies Private Ltd. [1999] 237 ITR 13 (SC) which has been heavily relied upon by learned advocate Mr. Parikh appearing for the Revenue. Ongoing through the entire judgment, we find that in the said case, the original assessment got completed on June 21, 1977. There were various other proceedings which ended in the Tribunal. The Tribunal, after considering all the aspects of the cases, remanded the cases back to the Income-tax Officer for passing a fresh order in accordance with law. One of the points raised before the Income-tax Officer was that of justification for reopening of the assessment. At that point of time, it was pointed out that reopening was on the basis of the report made by the audit department. The Tribunal took the view that reopening under section 147(b) of the Act was not permissible on the basis of a report given by the audit department. We have also noticed the facts of the case. The reopening was done because in the original assessment donations made on body know ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ific query in this regard, which was answered by the assessee to the satisfaction of the Assessing Officer on the basis of which the Assessing Officer did not make any addition on account of accountability of unutilized Cenvat credit. There is one more reason why the ratio as propounded by the Supreme Court in the case of PVS Beedies P. Ltd. (supra) would not be applicable in the present case. We have noticed that PVS Beedies P. Ltd. (supra) was a case, dealing with section 147(b) of the Act, as it stood prior to the Amendment Act, 1987, which came into force with effect from April 1, 1988. Section 147(b) of the Act as it stood prior the 1987 Amendment reads as under : '(b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Income-tax Officer has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment for any assessment year.' Section 147, in force as on today and applicable to the present case, reads as under : '147. If the Assessing Officer has reason to believe that any income chargeable to tax ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this court divorced from the context of the question under consideration and treat it to be complete law decided by this court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this court.' In the present case, it is only the difference of opinion of the successor-in-office which has been the basis for reopening of the assessment. Therefore, we are of the view that the judgment of the Supreme Court in the case of PVS Beedies P. Ltd. (supra) would not save the situation for the Revenue and is not helpful in any manner. On the other hand, we have to our profit a three-Judge bench decision of the Supreme Court in the case of Kelvinator of India Ltd. (supra), wherein the Supreme Court in clear terms has stated that the meaning of the expression 'reason to believe' needs to be given a schematic interpretation, otherwise 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , numerous exemptions and deductions. If the Assessing Officer is burdened with the responsibility of giving reasons for several claims so made and accepted by him, it would even otherwise cast an unreasonable expectation which within the short frame of time available under law would be too much to expect him to carry. Irrespective of this, in a given case, if the Assessing Officer on his own for reasons best known to him, chooses not to assign reasons for not rejecting the claim of an assessee after thorough scrutiny, it can hardly be stated by the Revenue that the Assessing Officer cannot be seen to have formed any opinion on such a claim. Such a contention, in our opinion, would be devoid of merits. If a claim made by the assessee in the return is not rejected, it stands allowed. If such a claim is scrutinized by the Assessing Officer during assessment, it means he was convinced about the validity of the claim. His formation of opinion is thus complete. Merely because he chooses not to assign his reasons in the assessment order would not alter this position. It may be a non-reasoned order but not of acceptance of a claim without formation of opinion. Any other view would give ar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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