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TMI Blog2021 (8) TMI 243X X X X Extracts X X X X X X X X Extracts X X X X ..... on those findings of the appellate authorities for the purpose of forming an opinion with reference to the facts. This Court is of the considered opinion that the assessee is bound to furnish further details or the documents or materials so as to establish the expenditure, which are all now considered as the reason for the purpose of reopening of assessment. This Court cannot go into the factual details now furnished by the petitioner at the time of original assessment nor made a comparison with reference to the original explanations or submissions along with inferences drawn by the Assessing Officer for reopening of assessment. Reasoning furnished for reopening of assessment would reveal that there is no indication either in the return of income or the accompanying statement or the details filed that the assessee had deducted tax on the above payments. If at all the Assessing Officer s finding in this regard is not in consonance with the facts and circumstances, it is for the assessee to place all materials and at any stage, there is a possibility of dropping of further proceedings by the Assessing Officer if he is satisfied. Therefore, the petitioner need not shy away from partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed to the petitioner after a lapse of more than one year and the learned senior counsel by drawing an inference with reference to the conduct of the respondent made a submission that no reason was available, thus there was a delay. It is contended that it is a classic case of change of opinion. Once all the materials, books of accounts, details, informations, clarifications provided by the petitioner were considered by the Assessing Officer and after passing of the assessment order, reopening must be done strictly in accordance with the ingredients contemplated under Section 147 of the Act. Thus, the respondent have no option to change their opinion with reference to the materials already considered and the finding made in the original assessment order. The learned senior counsel resorted to differentiate the reason to believe and the change of opinion. It is contended that no reasons were recorded prior to the issuance of notice under Section 148 of the Act in the present case. The reasons communicated are recorded at later point of time and therefore, the impugned order providing reason is in violation of Section 148(2) of the Income Tax Act. Sub-clause (2) contemplates "the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t there was no proper application of mind on the part of the respondent in dealing with the objections and the grounds placed before the respondent were not even looked into. 5.The learned senior counsel relied on catena of judgments mainly to establish the legal proposition what amounts to change of opinion and what is reason to believe as contemplated under the Act. The judgments relied upon would show that the processes through which a decision is to be arrived in respect the reopening of proceedings under Section 147 of the Act. Curiously more than hundred judgments are cited. This Court also heard the learned senior counsel patiently with reference to the principles laid down in those judgments and some of the judgments are in support of the petitioner so as to establish that the authorities competent must have tangible materials and the phraseology 'reason to believe' must be interpreted pragmatically so as to ensure that there is a connection between the reason as well as the reopening. It is not as if every opinion can be construed as belief. The reason to believe indicates that such belief must be based on certain records or informations which would provide an opp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the purpose of achieving the objectives of the statute. In normal circumstances, one would not prefer to pluck the flower at the budding stage unless it is infected. Thus, the intervention during the initial stage is to be exercised sparingly and if there is a blatant violation of the Act. 9.The learned senior counsel relied on various judgments of the High Court of Delhi and High Court of Madras to establish that the Courts have interfered in reopening of proceedings, more specifically, when there is a formation of opinion that it is change of opinion. 10.Certain judgments referred on behalf of the petitioner are disputed by the respondent on the ground that some judgments of the High Court of Madras relied on by the petitioner are against the tax case appeals challenging the order passed by the Income Tax Appellate Tribunal and therefore, those judgments cannot be relied upon as far as the present writ petition challenging the very reopening proceedings itself. It is further contended that the other judgments, the revenue has already preferred appeals and the said appeals are pending. However, this Court is of the considered opinion that all those judgments relied on are also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel referred Section 40(a) of the Act and the petitioner has not produced any details regarding the consulting fees and other expenditures stated. Regarding these particulars, reopening of assessment is imminent and therefore, there is no irregularity or otherwise in respect of the notice issued under Section 148 of the Act. Thus the writ petitions are to be dismissed. 13.The learned senior standing counsel relied on the judgments in the case of Kalyanji Mavji & Co. vs. Commissioner of Income Tax [(1976) 102 ITR 287 (SC)] and said that the principle No.4 laid down by the Apex Court would be applicable in respect of the present case. The said principle is that "where the information may be obtained even from the record of the original assessment from an investigation of the materials on record, or the facts disclosed thereby or from other enquiry or research into facts or law". Relying on the said principle which was not expunged by the Hon'ble Supreme Court in the subsequent case. The learned senior standing counsel said that even certain informations culled out from the record of the original assessment would be sufficient for reopening of assessment if the power under Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of culling out the truth or otherwise in respect of the informations provided by the petitioner. 16.Let us now consider the scope of Section 147 of the Act though this Court has considered on several occasions. The very scheme of the Act under Chapter XIV of the Income Tax Act pertains to the procedures for assessment. Section 139 deals with return of income. Thus the entire assessment proceedings are undertaken under Chapter XIV of the Income Tax Act based on the return of income filed by the respective assessment. In other words, the return of income filed by the assessee is to be trusted upon in all circumstances except where there is a possibility of doubt which should be on the basis of some reasoning and materials. Therefore, the assessment proceedings at the first instance is done based on the informations provided by the assessee in their return of income. The Department has no knowledge about the particulars and informations provided in the return of income at the first instance. Those return of income would provide a cause for reopening of assessment if there has been a reason to believe that the assessee has not produced certain materials or certain informat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be liable to be set aside. 18.With reference to Section 147 of the Act, if the Assessing Officer has reason to believe that any income chargeable to tax 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. 19.The wider scope provided for reopening of assessment under Section 148 of the Act is undoubtedly vibrant if the Assessing Officer has reason to believe. The reason to believe has been defined in umpteen number of judgments and in this context the reason to believe must be based on certain materials or informations and such informations or materials should have life link and therefore, the Assessing Officer is not empowered to reopen in all circumstances. The reason to believe cannot be change of opinion. The change of opinion is also defined in number of judgments. Normally the change of opinion wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer may be a ground for reopening of assessment if the Assessing Officer has reason to believe that some materials which were not adjudicated are newly emerged or identified after passing of the assessment order. Therefore, even in respect of materials considered or scrutinized the Assessing Officer may cull out certain materials or informations for the purpose of reopening of assessment under section 147 of the Act. Explanation (2) to Section 147 of the Act stipulates for the purposes of section 147, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment. Sub-clause (c) where an assessment has been made, but (i) income chargeable to tax has been under assessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. 22.Sub-clause (c)(i) states that income chargeable to tax if under assessed then also reopening under Section 147 is permissible. However, such an under assessment is made in the absence of consideration of any material alone would pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pointed out that the reasons communicated to the petitioner would reveal that the reasons to believe that income chargeable to tax has escaped assessment in the case of the petitioner was recorded by the predecessor of the order passed in letter dated 05.10.2007. Such reasons are furnished by one Shri.C.Vatchala, Assistant Director of Income Tax [International Taxation], Chennai. The said Officer has clearly stated that the reasons to believe were recorded by her predecessor and such reasons were communicated to the petitioner. Under these circumstances, this Court has no reason to believe that the reasons were recorded subsequently unless the petitioner establishes the contrary with proof. A mere statement in this regard would be insufficient to form an opinion. 27.In this backdrop, this Court has to consider the reasons furnished for the purpose of reopening of assessment which reads as under: "It is seen from Clause 15 of Notes to the Financial Statements accompanying the return of income that the assessee had incurred expenditure during the period relevant for the above assessment year in foreign currency under the following heads: (i) Interest ₹ 2.4 Crores (ii) P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r with reference to the documents relied on by the petitioner. 30.This Court is of the considered opinion that what is under challenge is the initiation of reopening proceedings under section 147 of the Act. The High Court is not expected to conduct a rowing enquiry in respect of facts and circumstances as narrated by the respective parties to the lis on hand. It is improper on the part of the Courts to form an opinion with reference to the disputed facts at this point of time as several alternate and efficacious remedies are available to the assessee under the provisions of the Income Tax Act and only after exhausting all those remedies the High Court can rely on those findings of the appellate authorities for the purpose of forming an opinion with reference to the facts. In other words, it would be premature to form an opinion as accounting technicalities and intricacies are to be considered by the authorities competent while proceeding with the reopening of assessment. The endeavour of the High Court is to ensure that reopening of assessment is made by following the procedures contemplated or not, but not otherwise. The confinement of the scope of judicial review under Article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is no indication either in the return of income or the accompanying statement or the details filed that the assessee had deducted tax on the above payments. If at all the Assessing Officer's finding in this regard is not in consonance with the facts and circumstances, it is for the assessee to place all materials and at any stage, there is a possibility of dropping of further proceedings by the Assessing Officer if he is satisfied. Therefore, the petitioner need not shy away from participation and to explain before the Assessing Officer that the reasons to believe is incorrect as the petitioner is having materials to establish the contrary. 33.Thus the reasons for reopening as stated has got sum and substance and the said differences or inferences are to be answered and explained by the assessee by participating in the process of re-assessment. Contrarily the High Court cannot form an opinion with reference to the doubt raised by the Assessing Officer in the impugned orders and made a finding with reference to the documents relied on by the petitioner. This being the scope of the provisions of Sections 147/148 of the Act, this Court has no hesitation in forming an opinion ..... X X X X Extracts X X X X X X X X Extracts X X X X
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