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TMI Blog2018 (5) TMI 444X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment. As is apparent from the record, the issue was not considered at the time of assessment. There was no occasion for the A.O. to make further inquiry with regard to EDC. There cannot be any quarrel with the proposition that the assessee has no control over the framing of an assessment order. There can be cases where after discussion the A.O. may be satisfied on the issue and does not find it appropriate to discuss the same in the assessment order. This is not the case here. The petitioner has failed to establish that there was any discussion or adjudication on the said issue. In such circumstance, there would be no occasion for the petitioner to argue that merely because the said issue has not been discussed in the assessment order, it will not mean that it was not considered. - CWP No. 26125 of 2017 (O&M) - - - Dated:- 27-4-2018 - MR. S. J.VAZIFDAR, CJ. AND MR. AVNEESH JHINGAN, J. For The Petitioner : Ms. Radhika Suri, Senior Advocate with Mr. M.S. Kanda, Advocate For The Respondent : Mrs. Urvashi Dhugga, Senior Standing Counsel ORDER AVNEESH JHINGAN, J. The petition has been filed for quashing an order dated 27.11.2012 disposing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Current liabilities as per detail given in point no.8 40,112,657.12 Other liabilities 1. Miscellaneous Accounts, 1,780,897.00 2. External Development charges (From Land Developers) 4,556,731,248.00 3. Change of land use (From Developers). 0.00 4. DD PO Civil Dispensary 2,995,199.00 5. Director Water Resources Environment 0.00 6. Urban Development Fund 8,545,979.00 7. EDC Under Papra Act 75,397,249.00 8. License fee payable to Punjab Government. 2,526,174,188.00 9. Chq. Issued but not presented for payment. 9,699,299.01 10. Security fee plots 1,286,016.00 11. Pollution Control Board 1,187,500.00 12. Security Building Plan 87,954,012.65 TOTAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lopment Works and other related jobs. In light of the above, it is observed that both the receipts as well as the expenditure related to External Development Charges (EDC) are clearly revenue in nature as they are attributable to the regular business of the assessee and are also a routine, regular and re-occurring phenomenon. Accordingly, the assessee was required to credit the receipts of External Development Charges to its P L Account and debit the expenses incurred on account of the same. Since, the assessee is following Cash System of accounting, therefore, the net amount received by the assessee during the year as External Development Charges was required to be brought to the ambit of tax by crediting the receipts earned during the year and debiting the expenses incurred on account of external development work and other related jobs. However, the assessee had failed to do so and has rather shown the External Development Charges (EDC) received as a liability in its Balance Sheet. The said failure on the part of the assessee has led to escapement of taxable income as the net income earned on account of the External Development Charges has escaped the ambit of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under this section, 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 subsection (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-matter of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1 .- Production before the Assessing Officer of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... caped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the assessing officer should have finally ascertained the fact by legal evidence or conclusion. The function of the assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court) in Central Provinces Manganese Ore Co. Ltd. v. ITO (1991) 191 ITR 662] for initiation of action under Section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is reason to believe , but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the assessing officer is within the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eve that income chargeable to tax has escaped assessment; and ( ii) He must also have a reason to believe that such escapement occurred by reason of failure on the part of the assessee either: ( a) to make a return of income under section 139 or in response to notice issued under sub-section (1) of section 142 or section 148; or ( b) to disclose fully and truly all material facts necessary for his assessment for that purpose. The aforementioned requirements of law must be held to be conditions precedent for invoking the jurisdiction of the Assessing Officer to reopen the assessment under section 147 of the Act in cases which are covered by the proviso. Both the conditions are cumulative and must co-exist. Thus, in cases where assessment has been made under section 143(3) of the Act and action under section 147 is sought to be taken after the expiry of four years from the end of the relevant assessment year, it is necessary that condition No. (i) and either of conditions Nos. (ii)(a) or (ii)(b) must co-exist. In case, any of the said two conditions is not satisfied, the very initiation of proceedings under section 147 of the Act shall be wholly without jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 fulfillment of certain precondition 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 1-4-1989, 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 of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words reason to believe but also inserted the word opinion in Section 147 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessees duty to enumerate the possible interference that arise or may arise therefrom. (A) In Calcutta Discount Co. Ltd. v. Income Tax Officer, AIR 1961 SC 372, the Supreme Court held:- (12) It may be pointed out that the Explanation to sub-section has nothing to do with inferences and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income-tax Officer, could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section by casting a duty on the assessee to disclose inference to draw the proper inferences being the duty imposed on the Income-tax Officer. 13-14) We have therefore come to the conclusion that while the duty of the assessee is to disclose fully and truly all primary relevant facts, it does not extend beyond this. (B) In Commissioner of Income Tax, Calcutta Versus Burlop Dealers Ltd. 79 ITR 609 SC, the Supreme Court held:- We are of the view that under Section 34(1)(a) if the assessee has disclosed primary facts relevant to the assessment, he is under no o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the language of Section 147(a) being identical with that of Section 34(1)(a), the ratio of the decision in Burlop Dealers case must govern the decision of the present case. We must, therefore, hold that there was no failure on the part of the respondent to disclose fully and truly all material facts necessary for its assessment and the condition for the applicability of Section 147(a) was not satisfied. (D) In Winsome Textile Industries Ltd. v. Union of India and others (2005) 278 ITR 470 (P H), this Court held:- The limitation of four years provided in the proviso to section 147 has been made applicable only to cases where assessments have already been completed under sub-section (3) of section 143 or under section 147. There is a specific purpose behind it. Where the return is processed under section 143(1)(a), the Assessing Officer has no jurisdiction to examine the genuineness of the claims made in the return of income. He has only limited powers of making adjustments on the basis of information available in the return. However, when an assessment is made under section 143(3) of the Act, the Assessing Officer has very wide power to examine the genuineness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Court observed that an assessed has no control over the way an assessment order is drafted. It was observed that generally, the issues which are accepted by the Assessing Officer do not find mention in the assessment order and only such points are taken note of on which the assessee's Explanations are rejected and additions/disallowances are made. We agree. Applying the principles laid down by the Full Bench of this Court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the assessed before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessed, then merely because he did express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, Therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessed should be made to suffer the consequences of that lapse. xx xx xx xx It is, therefore, clear from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contentions raised by the Petitioner in his final assessment order, it cannot be said that he had not applied his mind when all the material was placed before him To a similar effect is the decision of the Full Bench of Delhi High Court in the matter of Commissioner of Income Tax v. Kelvinator of India Ltd.Reported in 256 ITR 1 and the division bench of Gujarat High Court in the matter of CIT v. Nirma Chemical Works reported in 309 ITR 67. In view of the above, the submission of the Revenue that the reopening is not on account of change of opinion as no opinion was expressed in the order of Assessment dated 18th. December 2006 must be negatived. 15. The mere absence in the assessment order of a reference to the EDC received by the petitioner is not conclusive. What is important is the reason for its absence. In our view it was on account of the assesses failure to disclose fully and truly all material facts. The words all material facts are significant . Moreover, section 147 requires the assessee to declare the material not merely fully but also truly . In our view these requirements were not met either in the return or in the answer to the query relating to EDC. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... portion of the reply dated 05.12.2012. Paragraph-8 thereof had the caption Detail of sundry creditors is given as under:- . The table below had two columns, namely, headed Current Liabilities and Year 31.03.2010 Amount (In Rs ) Below the heading of the first column of the table Current Liabilities was a list of 8 Creditors and Payables . EDC was not referred to in paragraph-8. Paragraph-9 of the reply had the caption Detail of Current Liabilities is given as under:- The table below had two columns with the headings Current Liabilities and Year 31.03.2010 Amount (In Rs .. ). Below the heading of the first column were two headings/items, the first heading Current Liabilities as per the detail given in point No.8 and the second heading Other Liabilities . There are no items mentioned under the first heading. However, EDC is referred to in items 2 and 7 of the second heading Other Liabilities . Thus, reading paragraphs 8 and 9 together gives the impression that the current liabilities were as stated in Point No.8/para-8. As noted earlier, paragraph-8 purported to furnish the details of sundry creditors; the table thereunder had the column current liabilities below w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not affect the right to reassess. (A) In R.K. Malhotra, ITO, Group Circle v. Kasturbhai Lalbhai (HUF) AIR 1977 SC 2129, the Supreme Court held as under: Jurisdiction of the Income-tax Officer to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment. That information, must, it is true, have come into the possession of the Income-tax Officer after the previous assessment, but even if the information be such that it could have been obtained during the previous assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the Income-tax Officer is not affected. 11. The Court further observed that 'information' means instruction or knowledge derived from an external source. But the words external source cannot be construed as implying that the source must be outside the record. The 'information' may be gathered from the assessment record itself. .... ( emphasis supplied) (B) In Phool Chand Bajrang Lal and ano ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment and therefore income chargeable to tax had escaped assessment. The High Courts which have interpreted Burlop Dealer's case (1971) 79 ITR 609 (SC) as laying down law to the contrary fell into error and did not appreciate the import of that judgment correctly. 28. We are not persuaded to accept the argument of Mr. Sharma that the question regarding truthfulness or falsehood of the transactions reflected in the return can only be examined during the original assessment proceedings and not at any stage subsequent thereto. The argument is too broad and general in nature and does violence to the plain phraseology of Sections 147(a) and 148 of the Act and is against the settled law laid down by this Court. We have to look to the purpose and intent of the provisions. One of the purposes of Section 147, appears to us to be, to ensure that a party cannot get away by wilfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say you accepted my lie, now your hands are tied and you can do nothing . It would be travesty of justice to allow the assessee that latitude. ( emphasis supplied) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee had disclosed to the Income-tax Officer, the surplus price realised by it over and above the written down value of the assets sold or in the alternative if it had informed the Income-tax Officer the price realised as well as the written down value of the assets sold, then it could have been said that the assessee had done its duty and it was for the Income-tax officer to draw any inference on the facts placed before him. (emphasis supplied). 24. This case goes a step further. There was material even outside the record with the Assessing Officer which requires consideration. There are detailed provisions regarding the EDC. The Act deals with the liabilities to pay EDC. It also deals with the nature of the charge. The statutory agreements to be entered into and declarations to be filed with the authorities also referred to the payment of the EDC. EDC has been the subject matter of litigation before this Court. None of this was before the Assessing Officer in the assessment proceedings. Thus apart from the material on record, there was other tangible material that was not considered during the assessment proceedings. There is no question in the facts of the present case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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