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TMI Blog2021 (8) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... cation of principles with reference to the facts and circumstances of the case are of paramount importance. Even the respondents have not seriously disputed on the principles relied upon, but perusal of the reasons furnished, objections raised and the disposal of objections by the authority competent are sufficient enough to meet out the mandatory requirements as contemplated under Section 147 of the Act and thus, the reassessment proceedings are to be allowed and the said proceedings are to be concluded as expeditiously as possible. WP dismissed. - W.P.No.31962 of 2017 And W.M.P.No.35112 of 2017 - - - Dated:- 10-8-2021 - Honourable Mr.Justice S.M.Subramaniam For the Petitioner : Mr.Srinath Sridevan For the Respondents : Mr.A.P.Srinivas Senior Standing counsel [For Income Tax] ORDER The writ on hand is instituted, questioning the legal validity of the notice issued under Section 148 of the Income Tax Act, 1961 [hereinafter referred to as the 'Act'] to the petitioner and also the order, disposing of the objections filed by the writ petitioner in proceedings dated 25.10.2017. 2. The petitioner is a Private Limited company engaged in the business of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing authority, while initiating reopening proceedings under Section 147 of the Act. Secondly, the materials relied upon including the Audit party objection for the purpose of reopening of assessment, is nothing but change of opinion. Thirdly, the audit objection perse cannot be a reason for reopening of assessment. In the present case, the audit objection verbatim is taken into consideration for the purpose of reopening of assessment, which amounts to non-application of mind and further, impermissible under the provisions of the Act. Thus, the jurisdictional notice issued under Section 148 of the Act is untenable. 6. To substantiate the said grounds, the learned counsel for the petitioner drawn the attention of this Court with reference to the notice issued under Section 141(1) of the Act and the details regarding the scrutiny assessment proceedings in the case of the petitioner assessee. 7. In respect of deduction claimed under Section 10A and 10AA of the Act for the Assessment Year 2011-12, the Assessing authority sought for details from the petitioner in proceedings dated 24.09.2014. In the said letter, there is a specific query on the point that in earlier Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning of assessment. They have extracted the objections and has stated simply that the income chargeable to tax has escaped assessment and therefore, the reopening proceedings are to be continued. In the absence of any independent opinion for reopening of assessment, the proceedings itself is untenable as the mandatory requirements contemplated under Section 147 of the Act is to be complied with. In the present case, the pre-requisite condition contemplated has not been complied with by the respondents. Contrarily, they have relied upon the audit objections and further, the materials already adjudicated and considered by the Assessing Officer at the time of passing the original assessment order and reopened the assessment and therefore, the exercise in entirety is bad in law. 10. In support of the contentions, the learned counsel for the petitioners relied on the judgments in the case of Income Tax Officer Vs. Techspan India Private Limited and another , reported in (2018) 6 SCC 685 , wherein it is held as follows: 14. The language of Section 147 makes it clear that the assessing officer certainly has the power to reassess any income which escaped assessment for any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.06.2015, addressed the Director (RA), office of the C AG of India, New Delhi, stating that the audit objection made by their Department has not been accepted by the Ministry (Ministry of Finance) for the reasons given in Annexure-A to the said letter dated 10.06.2015. The Annexure-A is a note submitted by the assessing officer of the petitioner. In the said Annexure, the assessing officer has clearly stated as to how the claim of the Revenue audit that ₹ 323.53 crore was to be treated as a revenue receipt is not correct and unacceptable. Thus, the matter should have been allowed to rest at that stage, but however, the assessing officer thought fit to issue the impugned notice under Section 148 of the Act. The petitioner sought for reasons for re-opening vide letter dated 03.03.2017. On such request, the assessing officer furnished the reasons for reopening vide communication dated 10.03.2017. 5.What is interesting to note is that the reasons for reopening is verbatim repetition of the audit objections filed by the audit party. This position was clearly demonstrated by the learned counsel for the petitioner by comparing the audit objection and the reasons for re-opening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 996, the block assessment was framed, which was ultimately set aside. Parallelly, the regular scrutiny assessments were done under Section 143(3) of the Act and thereafter the CIT exercised his power under Section 263 of the Act and passed an order, which was also set aside. 37. Therefore, the material, which was already placed on record, and considered in earlier two rounds of litigation can hardly be a reason to reopen the assessment and all that we can say is that the attempt of the Department is to reopen a settled issue solely based upon change of opinion. The Department is silent and has not disclosed as to what is the tangible material, which is now available with them more than those that were available with the Department in the earlier two rounds of litigation. Therefore, we can safely hold that what the Department seeks to do is not to reopen the assessment, but to review the earlier orders, which had attained finality. That apart, the tax case appeals filed by the assessee having been allowed by judgment dated 03.12.2013, the decision is binding upon the Department and the same reasons, for which, the CIT exercised his power under Section 263 of the Act, cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to give a finding, which is to be construed as new material and the effect and consequences under the Act finally and if these three are satisfied, then the reopening is to be held as valid and rest of the grounds raised are to be adjudicated during the course of the proceedings. 14. The learned Senior Standing counsel emphasized that the complete adjudication of facts at the stage of reopening in a writ proceedings may not be proper and the assessee has to avail the opportunity and establish his case on merits before the Assessing Officer. Once the Assessing Officer has 'reason to believe', such reasons are within the ambit of Section 147 of the Act, then it is sufficient for the purpose of the continuance of reopening proceedings and rest of the grounds on merits are to be adjudicated by the Assessing Officer during the course of proceedings for forming a final opinion and to pass assessment / reassessment orders. 15. The objections submitted by the petitioner would reveal that they have not raised any vital grounds, except by stating that the reasons are change of opinion and the audit objections verbatim relied upon and there is no application of mind on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 148. Issue of notice where income has escaped assessment .- (1) Before making the assessment, reassessment or re-computation 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 other particulars as may be prescribed, and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under Section 139: *** (2) The assessing officer shall, before issuing any notice under this section, record his reasons for doing so. 17. Relying on the above judgment, the learned Senior Standing counsel contended that the Income Tax officer must determine for himself what is the effect and consequences of law mentioned in the audit note and whether any consequences, which is now comes to his notice and the income has escaped assessment. Therefore, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation of proceedings, it is seen that the petitioner admittedly earned income solely from interest on fixed deposits and intercorporate deposits and debited significant amount of expenditure. The Assessing Officer has taken a stand, prima facie, that the expenditure debited to the profit and loss account under various heads is not incidental to the earning of interest income. Therefore the stand taken by the second respondent that he has reason to believe that certain income chargeable to tax escaped assessment, cannot be said to be vague, irrational or devoid of any basis. 31. In any event, the petitioner is only at the threshold. Once it is found that the Assessing Officer had reason to believe that there was income escaping assessment, it is not open to this court to make a roving enquiry, since the reasons are not justiciable. All that can happen, by allowing the proceedings to continue, is that the Assessing Officer may pass an order of assessment or reassessment. The petitioner would then have a spate of statutory remedies. Therefore, the case on hand, in my opinion, is not one that warrants interference at this stage. 20. Relying on the above judgments, the le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .07.2016 didn't change the content or meaning of the reasons to believe formed by the erstwhile officer. Thus, as the notice was issued and the reasons for reopening were formed by the erstwhile officer there is no lack of 'reason to believe'. The successor is duty bound to continue the assessments initiated by his predecessors and thus the objection of the assessee is rejected. 23. The petitioner submitted their objections and the objections were disposed of by the authority in proceedings dated 25.10.2017. The reasons furnished would reveal that perusal of the records revealed that as per Section 115JB(6), provisions of Sec.115JB will not apply to the income from business carried on by an entrepreneur in an SEZ. Claiming deduction u/s 10AA or opting out of benefit of sec.10AA is not a criterion to enforce this section. 24. Therefore, the Assessing Officer has considered the issue relating to the claiming of deduction under Section 10AA and based on the informations collected from the records, he forms an opinion that claiming of deduction under Section 10AA or opting out of benefit of Section 10AA is not a criterion to enforce this section. Further, he proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment already completed. The findings are given with reference to the reasons furnished for reopening of assessment. Further, the findings in the order impugned proceeds by stating that it is clear that the reassessment is permissible, when Assessing Officer did not form opinion on any issue during first assessment and if any reason to believe is formed for escapement of income chargeable to tax that itself is sufficient enough to initiate reassessment proceedings. Recording the findings, the respondents came to the conclusion that the ground raised regarding change of opinion is untenable. Regarding the second ground raised by the petitioners, reassessment proceedings based on audit objections is bad in law, the objections are recorded and the respondents arrived a conclusion that the assessee's objection is carefully considered, however, it is not accepted as the reopening was initiated on the basis of factual information and the same had been communicated to the assessee vide letter dated 14.07.2016. In this regard, the Revenue relied on the judgment of the Hon'ble Supreme Court of India in the case of CIT Vs. PVS Beedies P Ltd (SC), 237 ITR 3 , wherein the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above discussion, the said objection was also rejected. 29. Regarding the other ground raised that reasons on reopening has not been provided within a reasonable time that was also not substantiated. The learned counsel for the petitioner states that the findings in this regard are vague. However, this Court is of the considered opinion that the order, disposing of the objections, cannot be construed as a final order of assessment and the mandatory requirement of 'reason to believe' if satisfied with reference to Section 147 of the Act, then the authority shall be allowed to continue the reassessment proceedings. The reasons to the satisfaction are contemplated and the 'sufficiency' of the reasons need not be gone into by the High Court. Thus, if the Revenue could able to establish that the Assessing Officer has 'reason to believe' that the income chargeable to tax has escaped assessment, the same would be sufficient for reopening of assessment and rest of the grounds on merits may be adjudicated elaborately during the course of proceedings. Thus, High Court cannot conduct an elaborate enquiry in respect of such disputed facts and circumstances relata ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d for the purpose of setting aside the entire reopening proceedings. The learned Senior Standing counsel has made a submission that though such paragraph is unnecessary, recording the same would not cause any prejudice and therefore, the writ petitioner has not established that the said ground affected the right of the assessee. 31. This Court is of the considered opinion that the 'reason to believe' has contemplated if complied with or not, is to be examined with reference to the reasons furnished and once, the reasons furnished based on certain informations or materials, then it is sufficient for the continuance of reopening proceedings. The sufficiency of the reasons need not be gone into at the stages of reopening. Thus, if prima facie the Revenue could able to establish that the Assessing Officer has 'reason to believe' and such reasons are sufficient enough, then this Court is of the considered opinion that the assessee must co-operate for the completion of reassessment proceedings. The other grounds raised on merits are to be adjudicated elaborately by the authority competent and High Court cannot venture into an adjudication of those disputed facts i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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