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TMI Blog2012 (1) TMI 381X X X X Extracts X X X X X X X X Extracts X X X X ..... At the outset, it is to be noticed that these assessments were concluded by the Assessing Authority and by reopening the earlier assessments and by issuing of notices under Section 10 of the Act on the premise that interest attributable to what is known hire purchase transactions which the assessee-company had not been brought to tax in the corresponding assessment years, though the assessee had filed returns of chargeable interest and assessment orders had also been passed, but had escaped assessment due to the reasons of non-disclosure of true and precise interest component or interest income from hire purchase transactions, which the assessee claimed it had carried on. 3. Interestingly, the amount of chargeable interest, which, in the opinion of the Assessing Authority, had escaped assessment, was the amount which the assessee had in respect of each of these assessment years indicated to be the income from hire purchase transactions, in the following manner: Assessment year Amount in rupees 1992-93 1,16,50,000 1993-94 5,09,35,000 1994-95 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his order dated 20-6-2001. 7. Sri E I Indra Kumar, learned senior counsel appearing for the appellant-revenue has made available a copy of the order sheet indicating the reasons as recorded by the Assessing Authority on 20-6-2011, reading as under: 20/06/01 During the year, 'a' earned income from Hire Purchase amounting to Rs. l 16.50 lacs. This was not disclosed in the Interest Tax return as chargeable interest. This was on the plea that it was doing true hire purchase business and not financing transaction camouflaged as hire purchase transaction. During the course of Income Tax proceedings for A.Y. 1998-99, assessee claimed allowance of bad debt on such transactions on the plea that it was doing finance transactions. This stand was taken in the Interest Tax proceedings for A.Y. 1998-99 also and after detailed discussions, assessee. admitted in writing, in both the proceedings that it was not doing true hire purchase activity but financing activity camouflaged as hire purchase transactions (see letter dated 7/3/01) filed by 'a' in respect of I.T. and Interest Tax proceedings for A.Y. 1998-99). On this basis, finance income earned by the 'a from hire pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... even disclosure of the interest changeable attributed to the hire purchase transactions and therefore it was a fit case to reassess or assess the escaped interest amount and accordingly rejected the claim of the assessee and assessed to lax the income as had been disclosed by the assessee attributable to hire purchase transactions as chargeable interest. From the assessment orders, it is indicative that the transaction was treated as a finance transaction called hire purchase finance transaction and therefore the income attributable to its activity was taken to be interest chargeable to tax under the Act. 10. The assessee appealed to the Commissioner of Income tax [appeals] and met with success. The commissioner did not merely accepted the claim of the assessee, but even held out a brief for the assessee in recording the following findings: Notices u/s 10 for all the assessment years have been issued, on' 26:6.2001 by the Assessing Officer. The assessee has asked for the reasons for reopening assessments which was communicated by the Assessing Officer's letter dtd. 29.1.2002. Briefly the reasons read as under: The assessee had failed to disclose the Income earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, but not examining the issue from the angle of legality or otherwise of the reopening aspect. 11. The Appellate Authority also being of the view that the Assessing Authority had invoked provisions of Section 10(b) of the Act, which was a situation for reopening only if the Assessing Officer had in his possession any information throwing light on any chargeable interest having escaped assessment and in the absence of any such fresh information and virtually indicating, that the departmental representative had conceded the case of the revenue on the question of availability of any fresh information and allowed the appeals, being of the view that the very notice issued is beyond the period for reopening assessments invoking the provisions of Section 10(b) of the Act and is bad in law and therefore no further proceedings could have taken placed thereon. 12. However, for the assessment year 1996-97, the Appellate Commissioner supplemented a further reason that insofar as the reopening is concerned, notice being not specific, as to whether it is under Section 10(a) or 10(b) of the Act and as there was no omission on the part of the assessee, in the sense of a omission in law or o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent years. 17. It is submitted that the Appellate Authorities holding that reopened assessments are barred by limitation is an erroneous conclusion based on an erroneous assumption which assumption could not have been made on the facts and circumstances of the case and as revealed from the record. It is also submitted that further assumption that reopening is as a result of change of opinion in itself was really begging the question and it is on such erroneous assumption or presumption, the appellate authorities have proceeded to examine the legality or otherwise of the reopening on the touchstone of provisions of section 10(b) of the Act; that the entire approach of the Appellate Authorities is totally erroneous and is a case of invoking an inapplicable statutory provision and therefore holding the orders are not sustainable. 18. With reference to the assessment order passed by the Assessing Authority after issue of notice under section 10 of the Act, learned senior counsel appearing for the revenue has not only drawn our attention to the record of the assessing authority, particularly, the record relating to noting of the reason for reopening before the issue of notice unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o disclose fully and truly all material facts necessary for his assessment for any assessment year, chargeable interest for that year has escaped assessment or has been under-assessed or has been made the subject of excessive relief under this Act, or (b) notwithstanding that there has been no omission or failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has, in consequence of information in his possession, reason to believe that chargeable interest assessable for any assessment year has escaped assessment or has been under-assessed or has been the subject of excessive relief under this Act, he may, in cases falling under clause (a), at any time, and in cases falling under clause (b), at any time within four years of the end of that assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under section 7, and may proceed to assess or re-assess the amount chargeable to interest-tax and the. provisions of this Act shall, so far as may be, apply, as if the notice were a notice issued under that section. is attracted and therefore submits that the premise and the basis on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction of evidence before the Income Tax Officer was not enough, that there may be omission or failure to make a true and full disclosure, if some material for the assessment lay embedded in the evidence which the Revenue could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the Assessing Authority. The assessee knows all the material and relevant facts - the assessing authority might not. In respect of the failure to disclose, the omission to disclose may be deliberate or inadvertent. That was immaterial. But if there is omission to disclose material facts, then, subject to the other conditions, jurisdiction to reopen is' attracted. It is sufficient to refer to the decision of this court in Calcutta Discount Co.'s case [1961] 41 ITR 191 [SC] where it had been held that if there are some primary facts from, which a reasonable belief could be formed that there was some non-disclosure or failure to disclose fully and truly all material facts, the Income-tax Officer has jurisdiction to reopen the assessment This position was again reiterated by this court in Malegaon Electricity Co. P. Ltd., v. CIT [1970] 78 ITR 466 [SC]. Furtherm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 in section 147[a] of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and, therefore, income chargeable to tax had escaped assessment. The High Courts which have interpreted Burlop Dealers' case [1971] 79 ITR 609 [SC] as laying down the law to the contrary fell into an error and did not appreciate the import of that judgment correctly. We are not persuaded to accept the argument of Mr. Sharma that the question regarding the truthfulness or falsehood of the transactions reflected in the return can only he examined during the original assessment proceedings and not 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 mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact, made a full and true disclosure of the material or primary facts which were essential for the purpose of passing an assessment order under the provisions of the Act; that it was open to the Assessing Officer to have ascertained if any part of the income attributable to the hire purchase transaction was having any element of interest in that and if the assessing officer had not examined such aspect, but it had proceeded to conclude the assessment bringing to tax the other chargeable interest as had been revealed by the assessee in respect of transactions other than the hire purchase transaction, it was nothing but a clear case of the assessing officer having a second opinion on the very available material which is not permitted in a case where the assessee had made full and true disclosure of all material facts and all primary facts, were made available. It is therefore submitted that the appellate authorities are fully justified in taking the view that this being a case of change of opinion on the part of the Assessing Officer, the limitation as stipulated under the provisions of section 10(b) of the Act is clearly attracted and the notice for reopening the assessment issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is neither sustainable nor permitted in law as it only constituted a mere change of opinion and therefore the Appellate Authorities have rightly set aside the assessment order and the law on the question of change of opinion being not permitted for reopening of a concluded assessment is too well settled and in this regard has drawn our attention to the recent -Judgment of the Supreme Court in the case of CIT v. Kelvinator of India Limited [2010] 320 ITR 561/ 187 Taxman 312. 27. Learned counsel for the assessee submits that the Supreme Court while confirmed the full Bench decision of the Delhi High Court, the present situation being merely one of change of opinion, the appellate authorities were fully justified in setting aside the reopened assessment order. 28. It is also submitted that the law as laid down and declared by the Supreme Court in K.L. Johar Co. v. Dy. Commercial Tax Officer 1965 AIR 1082 is one nearer home to the present situation and is required to be applied to ascertain the nature of the transaction; that the assessee's activities insofar as the hire purchase activity are concerned, being in the nature of a true hire purchase activity, it cannot be cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the record of the revenue and the reasons recorded and the assessment order clearly indicates that the Assessing Authority had proceeded on the premise that there was some non-disclosure on the part of the assessee in not offering its chargeable interest attributable to hire purchase transactions to tax. A conjoint reading of the recording of reasons for reopening, notice and orders passed leaves one with no doubt that this is a clear case of reopening within the scope of section 10(a) of the Act and definitely not within the scope of section 10(b) of the Act. 34. A reopening under the provisions of section 10(a) of the Act it is per se not a situation attracting the provisions of section 10(a) of the Act, it can definitely be opined so. But we definitely cannot either appreciate or understand the attitude of the appellate authorities in relegating the reopening to be a situation as one that can be under section 10(b) of the Act and examining the question from that angle. In fact, it is only because of this the Appellate Authorities, both the Appellate Commissioner and the Tribunal have gone off at a tangent by focusing their attention on the concept of 'change of opin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a situation under clause [a]. 39. The language of section 10(a) of the Act indicates that a reopening is permitted in a situation where there is some failure to disclose fully and truly all material facts necessary for the assessment year. 40. In our understanding, this is a situation where an assessee has not placed such material, such information, such facts which by themselves could have enabled the Assessing Officer to pass an assessment order without calling upon the assessee for any further information. It is only a situation where the material/data/information which is already available should be in itself complete for the purpose of passing an assessment order which alone goes out of the scope of the provisions of section 10(a) of the Act. 41. There is a compulsion in law on the part of every assessee to file a return disclosing fully and truly all material facts which enables the Assessing Officer to pass an assessment order. Any situation which falls short of enabling an Assessing Officer to proceed to assessment order, always-comes within the scope of section 10(a) of the Act. 42. The discussion as referred to in Calcutta Discount's case (supra) Phoo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n are both flawed as concept of change of opinion is never attracted to the present situation and therefore the period of limitation of four years from the end of the assessment order is also not attracted and it is in this background, the first question is answered in the negative and against the assessee. The second question being merely another facet of the same question and being covered by our answer to the first question, need not be separately answered. 44. It is at this stage we have to consider one more submission of the learned counsel for the assessee that the assessee's stand being one of no chargeable interest and that stand having been consistently pursued by the assessee, even assuming that the view taken .by the Appellate Authorities is erroneous, on' the question of reopening and change of opinion, the assessee can sustain result by the argument that there was never any chargeable interest which was not revealed or suppressed by the assessee, particularly, as the assessee's transactions was only in the nature of a hire purchase or a true hire purchase transaction not generating any interest etc. 45. Insofar as this argument is concerned, we are un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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