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TMI Blog2019 (5) TMI 1061X X X X Extracts X X X X X X X X Extracts X X X X ..... that the taxations are done properly and the assessees are made to pay the income tax in accordance with the provisions of the Income Tax Act. The amended phraseology of reason to believe must be interpreted that the Assessing Officer on receipt of any such new material or materials in relation to the non furnishing of fact by the assessee has made out a prima facie opinion that it is the case for reopening of the assessment, then he can issue notice u/s 148 and thereafter, the procedure of furnishing the reasons, receiving objections and conducting scrutiny and all other procedures contemplated under the provisions of the Act will suit as follow. As the present case falls u/s 149(1)(b), the period of limitation prescribed is six years. In view of the fact that the notice has been issued within a period of six years, the ground of limitation raised on behalf of the writ petitioners, fails. As far as the ground in relation to the change of opinion, it is premature on the part of the writ petitioners to come to such a conclusion whether it is a change of opinion or the reopening is made based on the new or additional material available with the Income Tax Department, the same can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The learned Senior Counsel Sri.A.L Somayaji appearing on behalf of the writ petitioners, mainly relied on the grounds that the very issuance of notice by the respondents are without jurisdiction and they have no authority to issue the notice. This apart, the notice was issued after the expiry of the time limit prescribed under the statute and therefore, the notice impugned is liable to be scrapped on these grounds: To substantiate the above legal grounds, the learned Senior Counsel made a submission that the assessment orders relevant for the purpose of considering the present writ petitions for 1995-1996, 1996-1997 and 1997-1998. The writ petitioners had submitted their returns in time, which were properly assessed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961 and therefore, the same were scrutinized and finalized by the Income Tax Department. The block assessment made in this regard were also quashed by the ITAT and therefore there is no "reason to believe", which is contemplated under the Act for initiation of proceedings for reassessment by invoking the powers conferred under Sections 147 to 153 of the Income Tax Act. The learned Senior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts and circumstances of the case, the Tribunal was right in treating the reassessment under Section 147, as time barred?" The question of law has been answered by his lordship Justice P.P.S. Janarthana Raja, while speaking for the change as follows in paragraphs 9 and 10 of the judgment: "9. In the present case, the question is whether the assessee-company had disclosed fully and truly all the material facts necessary for the assessments and with particular reference to computation of depreciation allowance. The assessee company had filed full set of accounts before the Assessing Officer comprising of profit & loss account, balance sheet and schedules thereto. The assessee-company had furnished the details regarding the acquisition of various machineries and assets and the details regarding the leasing out of those machineries and items to other parties. The assessee had also furnished the details of lease rent received out of those lease agreements. The assessee had also furnished the detailed computation of depreciation mentioning therein the written down value of machineries and assets before and after claiming the depreciation allowance for the impugned assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... file a return referred to in the proviso or to truly and fully disclose the material facts necessary for the assessment. Whenever a notice is issued by the Assessing Officer beyond a period of four years from the end of the relevant assessment year, such notice being issued without recording the reasons for his belief that income escaped assessment, it cannot be presumed in law that there is also a failure on the part of the assessee to file the returns referred to in the proviso or a failure to fully and truly disclose the material facts. The reasons referred to in the main paragraph of section 147 would, in cases where the proviso is attracted, include reasons referred to in the proviso and it is necessary for the Assessing Officer to record that any one or all the circumstances referred to in the proviso existed before the issue of notice under section 147. After an assessment has been made, in the normal circumstances, there would be no reason for anyone to doubt that the assessment has been made on the basis of all relevant facts. If the Assessing Officer chooses to entertain the belief that the assessment has been made in the background of the assessee's failure to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee to make a true return which is would be permissible after the expiry of four years. In the instant case, nothing of the kind has happened. 7. Mr.Kotangale, learned counsel for the respondents, has drawn our attention to a judgment of the Apex Court in Srikrishna (P) Ltd. v. ITO². In this case, what is held by the Apex Court is that where certain loan transactions were relied upon and which were subsequently discovered to be false, reassessment proceedings were validly initiated. What is however material to note is that in that particular case the Court has given a clear finding that the assessee had created and recorded bogus entries of loan and, therefore, the Court held that the assessee could not say that it had truly and fully disclosed all material facts necessary for the assessment for the year concerned." 6. Relying on the above findings of the Apex Court, the learned Senior Counsel states that the present case on hand, is also akin to that of the case decided by this Court. In the present writ petitions, the returns submitted by the assessee were approved and concluded. Thus, the block assessment made by the authorities were quashed. Thus, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cases where the proviso is attracted, include reasons referred to in the proviso and it is necessary for the Assessing Officer to record that any one or all the circumstances referred to in the proviso existed before the issue of notice under section 147... The duty of an assessee is limited to fully and truly disclosing all the material facts. The assessee is not required thereafter to prepare a draft assessment order. If the details placed by the assessee before the Assessing Officer were in conformity with the requirements of all applicable laws and known accounting principles, and material details had been exhibited before the Assessing Officer, it is for the Assessing Officer to reach such conclusions as he considered was warranted from such data and any failure on his part to do so cannot be regarded as the assessee's failure to furnish the material facts truly and fully. Any lack of comprehension on the part of the Assessing Officer in understanding the details placed before him cannot confer a justification for reopening the assessment, long after the period of four years had expired. On the facts of this case, it is clear that the escapement of income, if any, on this a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stablish that the assessee had not furnished any information which all are required to be furnished or suppressed any material facts at the time of filing original assessment. Both the conditions are not satisfied in respect of the facts and circumstances of the present writ petitions. Thus, the impugned notices are liable to be scrapped as not maintainable. 13. The learned Senior Central Government Standing Counsel appearing on behalf of the Income Tax Department disputed the entire contentions raised on behalf of the writ petitioners by stating that, the writ petitions are not maintainable and liable to be dismissed in limine. What is under challenge in these writ petitions are notices issued under Section 148 of the Income Tax Act. The contentions of the notice impugned, reveals that the returns filed for the assessment years had escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961. In view of the fact that the escaped assessment is noticed by the authorities or any information received in this regard then the competent authorities are empowered to invoke the pweres conferred under Sections 147 to 153 of the Act and initiate proceedings for reopening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it their objections/explanation and file documents and that the adjudication process is to be undertaken by the Assessing Officer and thereafter, a decision would be taken by the authorities competent by passing the final assessment order. This being the procedure contemplated and now being followed by the Income Tax Department, the present writ petitions deserve no merit consideration and accordingly liable to be rejected. 15. In support of the said contentions, the learned Senior Standing Counsel for the Income Tax Department cited the judgment of the honorable Single Judge of this Court in W.P.No.27598 of 2008 dated 29.01.2018, the said judgment is submitted to repudiate the judgment submitted by the learned Senior Counsel dated 11.10.2007 in W.P.No.18411 of 2004. The learned Senior Counsel for the petitioner relying on the judgment dated 11.10.2017 said that the notice impugned in the present writ petitions are liable to be scrapped on the ground that it is a change of opinion and not the reason to believe. It is pertinent to note that both the judgments were delivered by the Honorable Mr.Justice T.S.Sivagnanam. The learned judge has taken a view that the petitioner appears to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years." The procedures prescribed by the Supreme Court of India in G.K.N.Driveshafts (India) Limited case, are to be followed by the Competent Authorities scrupulously. 27. The learned counsel for the respondents also has not disputed the proposition and reiterated that the Authorities Competent are following the principles laid down by the Apex Court and with reference to the present writ petition on hand, the same procedure has been followed. 28. This Court has elaborately conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y wide in nature. If it is restricted, then the very purpose and object of the Income Tax Act will be defeated. The wide power provided to the authorities competent to reopening of the assessment and to ensure that all external materials and the informations received from various sources should also be dealt in accordance with the provisions of Law. Thus, it does not mean that the Income Tax Authorities may reopen at any point of time. In order to protect the Assessees a definite time limit has been provided under the Act itself. Thus in the event of receiving any informations or materials from any other sources can be a ground for reopening of the assessment and the period of limitation is four years and six years respectively and in respect of the present writ petitions, it is six years. 98. The procedure of reopening of the assessment is contemplated under Sections 148 to 153 of the Act. Once again looking into the spirit of Section 147, it is unambiguously enumerated that "assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this Section, or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been furnished by the Assessee but no assessment has been made and it is noticed by the Assessing Officer that the Assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return. 102. The circumstances are narrated wherein certain materials and informations are provided by the Assessee at the time of filing of the returns and if the same has not been assessed by the Assessing Officer during the relevant assessment year and if it is subsequently noticed, then also the Assessing Officer is empowered to reopen the assessment in respect of the escaped assessments. 103. On a perusal of various circumstances incorporated under Section 147 of the Act, for reopening of the escaped assessment, this Court is of an opinion that it is certainly flexible and wider power has been provided, enabling the Assessing Officer to reopen the assessment in the interest of revenue and to ensure that the Assessees pay the correct tax with reference to the provisions of the Act. 104. This Court is of a firm opinion that where certain doubts in respect of the reasons or otherwise have been raised by the Assessee, such benefit of doubt should be held in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat latitude." 112. On careful consideration of all the judgments, cited supra, this Court is of an undoubted opinion that if the Assessing Officer has reason to believe that income has escaped assessment, it confers jurisdiction to reopen the assessment. It is however, to be noted that the conditions stipulated in the Act must be fulfilled if the case falls within the ambit of Section 147. 113. Considering the fact that there are some materials on record and the informations with the Department of Income Tax, the reopening of the assessment in the writ petitions with reference to Sections 147 to 153 of the Act, is in accordance with law and there is no infirmity, as such. Thus, the writ petitioner is bound to respond to the Assessing Officer for the purpose of arriving a conclusion and for taking a decision. In the event of passing an order of assessment or reassessment, then the writ petitioner is entitled to prefer an appeal contemplated under the provisions of the Act. Contrarily, based on the preliminary informations gathered by the Assessing Officer, the notices issued for the purpose of reopening of the assessment would not provide a cause of action for filing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the provisions of the Income Tax Act, 1961, without causing any undue delay. 33. With the above observations, the writ petitions stand dismissed. However, there shall be no order as to costs. Consequently, connected miscellaneous petitions are also dismissed. 17. Considering the arguments of the learned Senior Counsel for the petitioners as well as the leaned Senior Standing Counsel for the respondents, this Court is of an opinion that the legal principles in this regard are settled in the case of Dayanidhi Maran vs The Assistant Commissioner of Income Tax also. 18. Issuance of notice under Section 148 of the Income Tax Act is nothing but initiation of the proceedings for reopening of the assessment already concluded. Undoubtedly, such reopenings are to be done cautiously and the reasons for reopening is also mandatory. In the absence of any substantial reason, the Assessing Officer is not empowered to re-open the assessment, which were closed already. 19. The very object of the provision under the Income Tax Act is to ensure that the suppressed materials or facts and the new availability of materials to the Department are also to be dealt with for the purpose of taxation. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... specifically, Sections 147 and 148 of the Act, is to ensure that the assessees, who have suppressed the fact are not provided the information at the time of filing of the returns or if the Department is in possession of certain new materials in respect of assessment of a particular year, then the assessee must be informed about the decision taken by the Department to reopen the assessment and after such information is provided, the procedures contemplated must be followed for the purpose of concluding the reassessment by reopening the proceedings. 25. Admittedly, in the present writ petitions, the reopening proceedings have not reached finality. It is only an initiation of the proceedings under Sections 147 and 148 of the Act. The very initiation cannot be interfered with by the Court in a routine manner. Judicial review against such initiations under the provisions of the Act, is certainly limited. The Court cannot intervene on such initiations in a routine manner in the absence of any valid and acceptable legal grounds. Thus, the exercise of judicial review in such matters regarding the initiation of the proceedings are to be exercised cautiously and in order to ensure that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Department rejected the application during the year 2002. 29. However, the learned Senior Standing Counsel, now fairly made a submission that in view of the judgment of the Supreme Court in the case of GKN Driveshafts (India) Ltd. vs. Income Tax Officer & others, now the Department is bound to provide the reasons for reopening the assessment and in the present case also the Assessing Officer will provide the same to the writ petitioners, soon after the disposal of the writ petitions and on receipt of the reasonings, the assessees/writ petitioners are entitled to submit their explanations/objections and thereafter defend their case in the manner prescribed. 30. In respect of the grounds raised by the learned Senior Counsel, on behalf of the writ petitioners that the notice is beyond the period of limitation of four years, the same cannot be accepted in view of the fact that the notice was issued within a period of six years. As the present case falls under Section 149(1)(b) of the Income Tax Act, the period of limitation prescribed is six years. In view of the fact that the notice has been issued within a period of six years, the ground of limitation raised on behalf of the w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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