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TMI Blog2016 (9) TMI 1529X X X X Extracts X X X X X X X X Extracts X X X X ..... ication of mind. 3. Details of relevant Assessment Year (hereinafter referred to as "A.Y.) in respective writ petitions and date of notice etc. are stated as herein: Serial no. Writ petition no. A.Y. Date of notice under Section 148 Date of order passed on objection filed by Assessee against reassessment notice 1 682 of 2006 2009-10 29.03.2016 10.08.2016 2 184 of 2016 2010-11 30.11.2015 08.01.2016 3 182 of 2016 2011-12 30.11.2015 08.01.2016 4 237 of 2016 2012-13 30.11.2015 08.01.2016 5 183 of 2016 2013-14 30.11.2015 08.01.2016 4. Basic facts are common. As agreed by learned counsel for parties, we have taken up Writ (Tax) no. 682 of 2016 and Writ (Tax) no. 182 of 2016 as leading cases for the purpose of referring pleadings therefrom. Parties also agreed that though counter affidavit has been filed only in three cases i.e. Writ Tax no. 182 of 2016, Writ Tax no. 183 of 2016 and Writ Tax no. 184 of 2016, but pleadings therein may be read in remaining two writ petitions. 5. By notification dated 24.04.2001, issued under Section (3) of Uttar Pradesh Industrial Development Act, 1976 (hereinafter referred to as 'UPIDA, 1976'), a statutory body namely ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to A.Y. 2009-10 was submitted by YEIDA on 28.04.2016. DCIT then sent letters/notices dated 16.12.2015 under Section 143(2)/142(1), similarly worded in respect to all A.Ys. except A.Y. 2009-10 enclosing questionnaire. 9. Since reasons for issuing notice under Section 148 of Act 1961 were not communicated to YEIDA, DCIT, subsequently, on an application submitted by YEIDA, communicated "reasons for believe" that Income has Escaped Assessment. The reasons appended as 'AnnexureA' show date mentioned by DCIT was 20.11.2015 but communicated to YEIDA along with letters dated 16.12.2015 referring to YEIDA's application dated 14.12.2015. 10. The aforesaid letters dated 20.11.2015, containing reasons forthe purpose of Section 147/148 of Act 1961, are almost similarly worded in respect to all A.Y.'s except A.Y. 2009-10. Five paragraphs in all four letters except for A.Y. 2012-13 where it had six paragraphs. In order to show similarity of reasons given in all letters, Para 5 in respect to A.Y.'s 2010-11, 2011-12, 2013-14 and Para 5 and 6 in respect to A.Y. 2012-13 are reproduced as under: A.Y. 201011 5. "On perusal of Income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed u/s 40(a)(ia). (ii) Advertisement expenses of Rs. 2,00,95,431/ this year compared to Rs. 2,31,65,429/ last year. If the same was executed through contract, TDS is deductible u/s 194C of the I.T. Act, 1961. The same needs to be verified. (iii) Consultancy Expenses of Rs. 3,33,33,898/ this year compared to Rs. 4,85,36,284/ last year. The same is liable for TDS u/s 194J of the I.T. Act, 1961 and needs to be verified. (iv) The sundry creditors have decreased to Rs. 3933.63 Crores as compared to 2827.83 crores last year which needs verification. (v) The assessee has claimed depreciation on electrical equipment @ 15% instead of 10% during the relevant previous year which is prima facie inadmissible." A.Y. 2012-13 5. "On perusal of Income and Expenditure A/c and Balance sheetfor A.Y. 2012-13 it is seen that the assessee has debited expenses totaling Rs. 3,20,21,98,370/ and shown income of Rs. 2,44,79,44,943/ only resulting in deficit of Rs. 75,42,53,427/for the A.Y. 2012-13. On further examination the following issue emerges: 6. (i) The Assessee has not deducted TDS on interest of payment of 3,80,12,68,874/ as repo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .58 Crores as compared to 3617.41 crores last year which needs verification. (v) The assessee has claimed depreciation on electrical equipment @ 15% instead of 10% during the relevant previous year which is prima facie inadmissible." 11. In respect to A.Y. 2009-10, YEIDA received the document dated 15.03.2016 along with letter dated 16.05.2016 issued by DCIT containing reasons for initiating proceedings under Section 148 of Act 1961 and para 5 thereof reads as under: A.Y. 2009-10 5. "On examination of Balance Sheet and Income and Expenditure A/c for A.Y. 2009-10, the following issues emerge: (i) "On perusal of Income and Expenditure A/c for A.Y. 2009-10 it is seen that the assessee has declared Rs. 1,57,36,299/ as expenditure over income for the relevant previous year. (ii) Advertisement expenses of Rs. 1,47,64,131/ has been shown this year compared to Rs. 10,17,011/ last year. If the same was executed through contact, TDS is deductible u/s 194C of the I.T. Act, 1961. If no TDS was deducted and paid the expenses are liable to be disallowed u/s 40 (a) (ia). (iii) Consultancy Expenses of Rs. 22, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajesh Jhaveri Stock Broker Pvt. Ltd. If he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. It the Assessing Officer has cause or justification to know or suppose that income had escaped 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." In view of above, I hold that the AO was well within his rights to invoke the proviso to section 147 of the I.T. Act. Likewise other objections relating to other reasons are rebutted as they lack assertion and logically futile. In light of above, the AO has sufficient reasons to believe that the income of the assessee has escaped assessment and therefore the jurisdiction assumed u/s 147 is legally and factually sound. With this the objections raised by the assessee are disposed off and it is directed to comply with the proceedings as per the due process of law." 15. The respondents have filed counter affidavit sworn by Sri Rajesh Kumar, DCIT, Circle& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that, though the judgment dated 28.02.2011 was in respect to NOIDA but status, nature of activities, nature of income etc. of NOIDA, YEIDA and Greater New Okhla Industrial Development Authority i.e. NOIDA are similar, hence whatever has been hold in the case of NOIDA shall hold good for YEIDA also. 17. Petitioner ought to have filed Return of Income within due date, as per Section 139(1) of Act 1961, but it failed. It is only in response to notice issued under Section 142(1) of Act 1961 on 07.08.2014, that Returns in respect to aforesaid Assessment Years were submitted by YEIDA. The Return Forms, however are virtually blank. Except name of petitioner, address, PAN and Assessment Year, almost everything has been left blank. Assessment proceedings under Section 147 of Act 1961, by issuing notice under Section 148 were initiated validly, after obtaining prior approval of competent authority as prescribed under Section 151 of Act 1961. Notices were issued after recording reasons. The objections filed petitioners have been rejected by a detailed order. 18. Sri Balbir Singh, learned counsel for petitioners, vehemently contended that there was no Escaped Assessment and there is total no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x has escaped assessment for any Assessment Year. This power of reassessment however, is subject to provisions of Section 148 to 153. Section 147 and 148 reads as under: "Income escaping assessment. 147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, 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 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 subsection (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 failur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under subsection (2) of section 148.] Explanation 4.-For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. Issue of notice where income has escaped assessment. 148. [(1)] Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, [* * *] as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided by majority of 3/2. Court held, while it is duty of Assessee to disclose full and true, all primary relevant facts, the inference, to be drawn therefrom is the duty of Revenue. Assessee cannot be expected to assisst Revenue for deciding as to what inference on facts should reasonably be drawn or what inference ultimately be drawn. Thus, it would be a material bearing on the question of underassessment and it would give a jurisdiction to Assessing Officer to issue notice under Section 34 for reassessment. Whether grounds, are not adequate would not be examined by Court for the reason that non disclosure of material facts gives sufficient reason to confer jurisdiction. Similarly if Assessee intends to challenge a notice of reassessment, he has to establish that Assessing Officer had no material at all before him to believe that there had been any non disclosure. The jurisdiction of reassessment would be available to Assessing Officer only when he has "reason to believe" that income, profits or gains chargeable to income tax have been under assessed. It therefore, held that existence of material to form opinion of escaped assessment is a jurisdictional issue. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer has not power to review, he has power to reassess. But reassessment has to be based on fulfillment of certain precondition and if the concept of "change of opinion" is removed, then, in the garb of reopening the assessment, review would take place. Court said that "change of opinion", if introduced in the context of Section 147, it would confer arbitrary powers upon Assessing Officer to review assessment at any stage and at any point of time. Court observed "one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, 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 to reopen." Thus in order to show that there was a reason to believe, an Assessing Officer must have a "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 belief. 26. In Phool Chand Bajrang Lal And Anr. vs IncomeTax Officer, (1993) 4 SCC 77, referring to Section 147 and 148, Court said as under: "From the plain phraseolog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation. Only to that limited extent, Court may look into the conclusion arrived at by Incometax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by Incometax Officer and further whether that material had any rational connection or a live link for the formation of requisite belief. 28. In Assistant Commissioner of Income Tax Vs Rajesh Jhaveri Stock Brokers Pvt. Ltd., 2008 (14) SCC 208, Court said that the word "reason" in the phrase "reason to believe" would mean cause or justification. If Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have "reason to believe" that an income had escaped assessment. The expression cannot be read to mean that Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. Final outcome of the proceeding is not relevant. Only for the purpose of initiation stage, what is required is "reason to believe', but not the es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay only refer to those judgments i.e. Assistant Commissioner of Income Tax Vs Greater Noida Industrial Development Authority (2015) 379 ITR 14 (All); Greater Noida Industrial Development Authority Vs Commissioner of Income Tax (Writ Tax no. 985/2015order dated 23.12.2015); Ishwar Chandra Vs Union of India & others. (decided by Hon'ble Allahabad High Court on 04.02.2015); Indra Prastha Chemicals Pvt. Ltd. & others Vs Commissioner of Income Tax & another (2004) 271 ITR 113 (All); Aroni Commercials Ltd. Vs Deputy Commissioner of Income Tax & another (2014) 362 ITR 403 (Bom); Asian Paints Ltd. Vs Deputy Commissioner of Income Tax & another (2008) 296 ITR 90 (Bom); Commissioner of Income Tax Vs TCP Ltd. (2010) 323 ITR 346 (Mad); 31. In the light of above exposition of law, when we go through various reasons in respect to orders dated 08.01.2016, passed in all A.Ys. except 2009-10, we find that there is either a statement of fact as to what has been disclosed by YEIDA in Returns submitted by it and documents appended thereto or there is guesswork that either TDS was deductable and if not deducted, then there is default which has to be verified. This in itself shows that author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent expenses. (c) Nondeduction of TDS on consultancy expenses under Section 194J. 35. For all the aforesaid allegations of nondeduction of TDS, Assessing Authority after referring to the same has said that the matter requires verification with respect to deduction of TDS on interest payment it has also referred to an order passed by ACIT (TDS) under Sections 201(1) and 201(1)(a) of Act, 1961 on 27.03.2015. 36. Without looking into the question, whether Assessee was liable for deduction of TDS and deposit with Tax Authorities and whether he was liable to face consequences under Section 201 of Act, 1961 for failure to deduct or pay TDS, for us, it is sufficient to mention that Assessing Authority admits disclosure of various payments and expenses incurred by YEIDA on different heads i.e. payment of interest, advertisement and consultancy. These three expenses are disclosed in the documents filed along with return since this is evident from the reasons given by Assessing Authority that on the examination of Balancesheet, Income and Expenditure Account these facts are evident. If that be so, every material was before the Authority concerned, nothing new has come, n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt at the rate of 15% instead of 10%, which is prima facie inadmissible, is also unsustainable for the reason that it is a clear case of change of opinion. Assessee at the time of filing Return was not found incorrect but now a different opinion is being formed that depreciation should be lesser than that actually claimed. 41. In order dated 10.08.2016, height of non application of mind is evident from the fact that Assessing Authority while rejecting objection has observed that here is a case of seizure operation though admittedly there was no search and seizure matter. This clearly shows that while passing order dated 10.08.2016, competent authority did not care even to go through relevant record and apply its mind. When confronted, learned Additional Solicitor General has nothing to offer except his regret accepting that here is a clear case of non application of mind on the part of authority concerned. 42. In the entirety of facts and circumstances as discussed above, we are satisfied that the so called reasons mentioned by authority concerned, for all Assessment Years in question, for justifying reassessment proceedings under Section 147/148 of Act 1961, are illegal, showin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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