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TMI Blog2017 (1) TMI 727X X X X Extracts X X X X X X X X Extracts X X X X ..... oner have derived a benefit which they were not entitled to. They claimed deduction which they were not entitled which fact came to the notice of the department only in 2010-11 when it was verified whether the petitioner had rural branches. This, according to us is a valid reason for reopening the assessment. Whether the assessment proceedings are valid and justifiable? - Held that:- This question, do not think this Court should be keen to answer especially when the petitioner has an appellate remedy available under the statute. In the said circumstances, this writ petition is dismissed with liberty to the petitioner to file appeal before the competent appellate authority. However, it is made clear that the period during which this writ petition was pending shall be excluded from the period of limitation prescribed for filing an appeal as per the statutory provision. X X X X Extracts X X X X X X X X Extracts X X X X ..... s Ext.P20. 4. The main contention urged by the petitioner is that the reasons furnished under Exts.P8 and P16 do not constitute sufficient grounds for sustaining the reopening of assessment under Section 147. For the same reason, Exts.P19 and P20 assessment orders are bad in law. It is contended that though detailed objection was filed to the reason stated in Exts.P8 and P16, without passing any order as held by the Apex Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer [(2002) 174 CTR (SC) 577], Exts.P19 and P20 orders were passed. It is further contended that when assessment under Section 143(3) has been completed and all details were explicitly available in the computation sheet filed along with the return of income and there is no lack of disclosure, a situation for reopening assessment does not arise. Further, notices for rectification of the proceedings itself were pending and without disposing of the same, further steps under Section 148 could not have been taken. It is contended that the only allegation in the notice is that while completing scrutiny assessment, the assessee have made wrong and excessive claim of deduction under Section 36(1)(viia) of the Act. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sioner of Income Tax v. Popular Kuries Ltd [(1995) 214 ITR 38] (KER) (ix) IL& FS Investment Managers Ltd v. Income Tax Officer & Others [(2008) 298 ITR 32 (Bom) (x) Comunidado of Chicalim v. Income Tax Officer, Goa and Others [(2001) 10 SCC 209)] (xi) Ranjit Projects Pvt. Ltd v. Deputy Commissioner of Income Tax (2014 (4) TMI 123 (Gujarat High Court) (xii) Duli Chand Singhania v. Assistant Commissioner of Income Tax [(2004) 188 CTR 90] (xiii) Universal Subscription Agency (P) Ltd v. Joint Commissioner of Income Tax [(2007) 207 CTR 62]. (xiv) Western Outdoor Interactive (P) Ltd v. A.K.Phute, Income Tax Officer and Others [(2006) 206 CTR 404]. 8. On the other hand, learned standing counsel appearing for the department placed reliance upon the following judgments:- (i) NA Malbary and Bros. v. Commissioner of Income Tax, Bombay North [1964 (L1) ITR 295]. (ii) Kantamani Venkata Narayana and Sons v. First Additional Income-Tax Officer, Rajahmundry [1967 (LXIII) ITR 638] (iii) Bihar State Road Transport Corporation v. Commissioner of Income Tax Bihar and Others [1976 (103) ITR 736]. (iv) Phool Chand Bajrang Lal and another v. Income Tax Officer and another [1993 (203) ITR 456]. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued under Section 148(1) in regard to the respective assessment years 2007-08 and 2008-09 wherein the officer had stated that "I have reasons to believe that your income chargeable to tax for the assessment year 2007-08 has escaped assessment". To Ext.P6, petitioner has given a reply as Ext.P7 to provide a certified copy of the reasons recorded. A similar reply was sent to Ext.P14 as Ext.P15. To Ext.P7, Ext.P8 is the reply and to Ext.P15, Ext.P16 is the reply. In Ext.P8, it is stated as under:- "It is seen that during the year you have claimed a deduction as provision for bad debts at the rate of 10% of the aggregate average advances made by rural branches. In fact, you do not have any rural branches that qualifying as per criteria stipulated in the explanation (a) to Section 36(1)(viia) of the I.T.Act." In P16, also, the same answer is given. 12. Petitioner gave a detailed representation to the aforesaid two notices. Exts.P9 and P17 are the replies. In Exts.P9 and P17, petitioner had taken a contention that while completing the assessment, no discrepancy or illegality was found in respect of the claim at the time of framing the assessment and the then assessing officer corr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for under Sections 143(2) and 142 are totally unconnected with the grounds disclosed to the assessee under Section 148 of the Act. 14. In Tolins Rubbers (supra), this Court placing reliance on GKN Driveshafts (India) Ltd. (supra) held that the assessing authority is bound to consider the objection and pass a speaking order. On an overall consideration of the law laid down in the matter, it is clear that when a notice is issued under Section 148 of the Act, the assessee is entitled to seek reasons for issuing notice in which the assessing officer is bound to furnish reasons within a reasonable time. On receiving such reasons, the noticee is entitled to file objections to such reasons and the assessing officer is bound to dispose of the same by passing a speaking order. 15. Now coming back to the facts of the present case, in respect of both the assessment years, petitioner sought for reason to believe which were provided to the petitioner for which the petitioner had given detailed reply. But, instead of passing an order on the reply given with respect to reason to believe, the assessing officer had straight away proceeded to pass the assessment orders as evident from Exts.P19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment before the commissioner (appeals), we direct the appellate authority to dispose of the same, expeditiously. With the above observations, the civil appeals are dismissed. No costs." 16. In this short judgment, the Apex court was considering an instance where notice under Sections 143(2) and 148 were challenged. The High Court held that all objections could be raised by filing a reply. The Apex Court observed that there is no reason to interfere with the impugned orders as during the pendency of the appeals in respect of two assessment years, assessment had been completed and the other five assessment years alone were the subject matter of appeals. Having observed that there is no reason to interfere with the order under challenge, a clarification has been issued by the Apex Court in regard to the proper course of action when a notice is issued under Section 148. Of course, a Division Bench of this Court as well as various other courts have followed the view that the reason to believe as contemplated under Section 147 has to be valid reasons and validity of the said reason is also subject to judicial review. It is also held that such an order has to be passed before pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caped assessment, and it comes to the notice of the assessing officer only subsequently, he is entitled to invoke Section 147 by issuing notice under Section 148. 21. According to the petitioner, in so far as the assessment for the concerned assessment year had been completed and no illegality or discrepancy was found in respect of the claim, on an interpretation of the statutory provision, the assessee was entitled to claim deduction. Merely on account of the fact that there is discrepancy noticed at a later stage does not call for a reassessment in terms of Section 147. It is contended that when all materials relevant for the assessment were placed before the assessing officer and the assessment was completed after scrutiny of the entire records, a reassessment initiated on matters which are already available on record is not maintainable. In N.A. Malbary and Bros. (supra), the Apex Court considered the question as to whether a second order of penalty issued against the very same assessee in regard to the very same assessment year was bad in law. It was held that the penalty order has to be co-related to the amount of tax which would have been evaded if the assessee had got away ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to tax has escaped assessment. It is further held that it would be immaterial whether the Income Tax Officer, at the time of making the original assessment, could or could not have found by further enquiry or investigation whether the transaction was genuine or not. If, on the basis of subsequent information, the Income Tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed under Section 147(a) that the assessee had not made a true and full disclosure of the material facts at the time of original assessment, and therefore, the income chargeable to tax had escaped assessment, proceedings can be taken. 25. In Popular Vehicles and Services Ltd. (supra), Division Bench of this Court held that if excessive deduction of interest is allowed under 36(1)(iii) of the Act, then certainly it is a case of income escaping squarely covered by Explanation 2 to Section 147 of the Act. It is further held that there is no presumption anywhere in the provisions of the Act to the effect tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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