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TMI Blog2022 (9) TMI 1379X X X X Extracts X X X X X X X X Extracts X X X X ..... , who in turn filed his report, and based on the report of the TPO, the respondent passed the draft assessment order. Thereafter, the assessing officer, after having found that certain income had escaped assessment, reopened the assessment. Admittedly, the notice under section 148 was issued to the appellant within the period of limitation and the same was also not put to challenge by the appellant / assessee. But, what was challenged in the writ proceedings by the appellant is the rejection of their objections to the said notice by the respondent. While so, it cannot be said that the reassessment proceedings initiated by the assessing officer under section 147 of the Act, without completing the original assessment, is not proper. Further, there is no embargo under section 147 of the Act, to issue notice under section 148, where assessment order has not been passed, after starting scrutiny proceedings; and section 144C(4) only states that the assessing officer has to pass an assessment order in accordance with the provisions of the Act and it nowhere states that section 148 notice can be issued only after passing an assessment order. Therefore, the learned Judge has rightly conc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble income of Rs.196,13,24,550/-. Along with the same, they also enclosed Form No.3CEB disclosing the international transactions that they had during the previous year. On scrutiny of the return of income, as there were overseas transactions involved, the assessing officer referred the matter to the Transfer Pricing Officer (TPO) as contemplated under section 92CA(1) of the Income Tax Act (in short, the Act ) on 31.08.2015. The said Transfer Pricing Officer, in turn, issued a notice dated 08.09.2015 under section 92CA(2) calling upon the appellant to furnish certain information. In response, the appellant, through their representative, submitted the documents sought for by the Transfer Pricing Officer. (ii) The Transfer Pricing Officer, by his report dated 31.10.2016, recommended an upward adjustment of Rs.25,73,41,261/- towards international transactions effected by the appellant. On receipt of the same, the Assessing Officer passed a draft assessment order dated 30.12.2016, as required under Section 144C of the Act, which was served on the assessee on 03.01.2017. Even though the draft assessment order was received by the appellant, they did not file any objection before the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this court with the present intra court appeal. 4.1. The learned counsel appearing for the appellant submitted that based on the report of the Joint Commissioner of Income Tax, Transfer Pricing Officer-2, Chennai, under Section 92CA (3) of the Act, the respondent passed the draft assessment order on 30.12.2016 under Section 143(3) r/w section 92CA of the Act, to which, the appellant / assessee did not file any objection/appeal either to the assessing officer or to the Dispute Resolution Panel (DRP). In such circumstances, the Assessing Officer ought to have passed a final order of assessment on the basis of the draft assessment order, on or before 31.03.2017, being the end of one month from the end of the month, in which the period for filing objections under Section 144C(2) of the Act expires. Instead of doing so, the Assessing Officer issued the notice dated 27.03.2018 under section 148 of the Act to reopen the assessment to rectify his own failure in passing the final assessment order in accordance with the mandate of provisions of section 144C(2) within the time limit provided under section 144C(4). Elaborating further, the learned counsel submitted that the reasons for reop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for framing the then current assessment. If the assessment is not framed before the expiry of the period of limitation for a particular assessment year it would have to be assumed that since proceedings had not been opened under s.143 (2), the return had been accepted as correct. It may be argued that thereafter recourse could be taken to s.147, provided fresh material had been received by the O after the expiry of limitation fixed for framing the original assessment. So far as the present case is concerned we are of the view that it is evident that, faced with severe paucity of time, the AO had attempted to travel the path of s.147 in the vain attempt to enlarge the time available for framing the assessment. This is not permissible in law. (ii)In T. Manavedan Tirumalpad and another v. Commissioner of Income Tax [(1955) 28 ITR 615 (Mad)], in paragraph no.6, a Division Bench of this Court held as follows: 6.The third of the questions referred to this Court under s.66 (1) of the Act is easiest disposed of. It is true that the forest income amounting to Rs.29,853-15-3 was not taxed in the asst. yr.1941-42. But even on 28th Feb., 1942, the ITO knew that this item of inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the appellant for the assessment years in question under s.143 (3), but without completing the assessments he took recourse to reopen the assessments under s.147 by issuing the impugned notices under s.148 of the Act. In our view, the ITO has acted without jurisdiction in issuing the impugned notices. (iv)In Gemini Leather Stores v. ITO [1975 (100) ITR 1 (SC)], the Hon'ble Supreme Court held that taking recourse under Section 147 of the Act to cure the defect committed by the Assessing Officer in not completing the assessment within the period stipulated under the Act, is legally impermissible. The relevant paragraph of the said decision is extracted below: The law laid down in Calcutta Discount Co Ltd v. Income-tax Officer [1961 41 ITR 191 (SC) has been restated in several subsequent decisions of this Court : Commissioner of income tax vs. Hemachandra Kar (1970) 77 ITR 1 (SC), Commissioner of Income Tax v. Bhanji Lavji (1971) 79 ITR 582 (SC) and Commissioner of Income Tax vs. Burlop Dealers Ltd., (1971) 79 ITR 609 (SC), to name only a few. In the case before us the assessee did not disclose the transactions evidenced by the drafts which the Income Tax Officer dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wed, the judgment of High Court is set aside and the impugned notices are quashed. The parties in the circumstances shall bear their own costs throughout. (vi)In Trustees of H.E.H. the Nizam's Supplemental Family Trust v. Commissioner of Income Tax , [ 2000 (109) Taxman 193 (SC)] it was held by the Hon'ble Supreme Court as follows: 7.It is not disputed that the return filed with the refund application under section 237 is a valid return and the ITO can initiate proceedings for assessment on the basis of the return so filed. The only question that falls for consideration for us is ; if in the circumstance of the case it could be said that the note recorded by the ITO in his file on 10.11.1965 is an order, which concluded the assessment proceedings for the assessment year 1962-63 before he initiated proceedings under section 147. It is also not disputed that that this note/order of 10.11.1965 terminating the assessment proceedings for the assessment year 1962-63 was never communicated to the trustees till 16.07.1970 and that too in a reply to the letter sent by the trustees. According to the High Court, the note, which is an order, did terminate the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 144C(4), but issued the notice dated 27.03.2018 under section 148 for reopening the reassessment and also communicated the reasons for the same on 28.08.2018. Upon receipt of the same, the appellant did not challenge section 148 notice, but filed its objection on 14.09.2018 for reopening the assessment, which was rejected by order dated 11.10.2018. The said order of rejection was challenged by the appellant in WP.No.28176 of 2018, which was rightly dismissed by the learned Judge, by order dated 16.07.2021. 5.2. According to the learned senior standing counsel appearing for the respondent, section 153 (1) of the Act is to complete the assessment proceedings and pass an order under Section 143 or 144 within 21 months if referred to TPO under section 92CA and it shall be extended by 33 months under section 153 (3) of the Act. In case, no assessment order is passed within the prescribed time limit under section 153(1) r/w 153(3) and section 144C(4), the Assessing Officer can issue notice under section 148 to assess or reassess under section 147 for the reasons to believe that the income of the assessee had escaped assessment. In the present case, admittedly, a reference was made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so, the learned counsel submitted that taking note of all the aspects, the learned Judge rightly dismissed the writ petition filed by the appellant challenged the order rejecting the objections to the reassessment proceedings and hence, the same does not call for any interference by this court. 6.This court considered the submissions made by the learned counsel for both sides and perused the materials available on record. 7.The facts remain undisputed are that for the assessment year 2013- 2014, after filing the return of income by the assessee, as there were international transactions disclosed, the matter was referred to the TPO on 31.08.2015. The TPO, in turn, submitted his report dated 31.10.2016, based on which, the respondent passed a draft assessment order under section 143(3) r/w section 92CA of the Act, on 30.12.2016. Admittedly, the appellant did not question the said draft assessment order either by submitting their objections to the assessing officer or by preferring an appeal to the Dispute Resolution Panel (DRP). The Assessing Officer also did not pass final assessment order, within the period of limitation. However, the assessing officer sent a notice dated 27. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 147 of the Act with reference to the procedures contemplated under Section 92CA or under Section 144C of the Income Tax Act. Contrarily section 144C(4) states that the Assessing Officer shall notwithstanding anything contained in section 153 or section 153B pass an assessment order. Therefore there is a scope for reopening of assessment even in cases where no assessment order is passed under sub-clause (4) to section 144C of the Act. Undoubtedly, in the present case, the petitioner assessee had not raised any objection. Therefore, under sub-clause (4) the Assessing Officer is empowered to pass an order of assessment, however, he has not passed any orders and has chosen to reopen the assessment by invoking the powers conferred under section 147 of the Act. Section 147 of the Act provides power to assess or re-assess. The section did not contemplate the stages under which such assessment or re-assessment can be made. For this purpose, Chapter XIV of the Act is to be read cogently to form an opinion that the assessment or re-assessment shall be made at any point unless there is a specific prohibition contemplated under any of the clauses under Chapter XIV of the Act. When there is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ections would reveal that the respondent has considered the objections including the judgments relied on by the petitioner. The findings would reveal that merely on the ground that the reasons recorded by the Assessing Officer proceeded on the same basis on which the Assessing Officer initially desired to make additions but which failed on account of setting aside of the order of assessment, would not preclude the Assessing Officer from carrying out the exercise of reopening of the assessment . With reference to the reasons stated in proceedings dated 20.08.2018, the objections raised were considered by the authority and reasonings are also given. 29.This Court is of the considered opinion that the satisfaction of the reasons alone are to be considered by the High Court. The sufficiency of the reasons cannot be gone into by the High Court. The sufficiency of the reasons may differ from case to case, however, the principle is that the reasons as well as the findings would be sufficient to form an opinion that the Assessing Officer has reason to believe. If the reasons furnished passed the test, then the assessee is bound to co-operate for the re-assessment proceedings. Therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal. Thus, any such draft assessment order is subject to alteration or changes. In this view of the matter, the discrepancies or materials tangible culled out from and out of such draft assessment order that also is an acceptable ground for the purpose of reopening of assessment under section 147 of the Act as the Assessing Authority has reason to believe that tax chargeable to tax escaped assessment. The above order of the learned Judge dated 16.07.2021, is questioned in this appeal by the appellant / assessee. 9.At the outset, for the purpose of effective adjudication of the issues involved herein, it would be relevant to refer to the relevant provisions of the Act, which are as under: Income escaping assessment. 147. If any income chargeable to tax, in the case of an assessee, has escaped to the provisions of sections 148 to 153, assess or reassess such income or recompute the loss or the depreciation allowance or any other allowance or deduction for such assessment year (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year) Provided that where an assessment under sub-section (3) of section 143 or this section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d authority, has passed an order under clause (d) of section 148A to the effect that it is a fit case to issue a notice under this section. 149. (1) No notice under section 148 shall be issued for the relevant assessment year,____ (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of (i) an asset; (ii) an expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is sub-section shall have effect, as if for the words nine months , the words twelve months had been substituted. (3) Notwithstanding anything contained in sub-sections (1) and (2), an order of fresh assessment in pursuance of an order under section 254 or section 263 or section 264, setting aside or cancelling an assessment may be made at any time before the expiry of nine months from the end of the financial year in which the order under section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner. Provided that where the order under section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or 264 is passed by the Principal Commissioner or Commissioner on or after the 1st day of April 2019, the provisions of this sub-section shall have effect, as if for the words nine months , the words twelve months had been substituted. Section 144C(4) . The Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, was subjected to scrutiny. As there were international transactions involved, the case was referred to TPO, for determining the Arm's Length Price, who in turn filed his report, and based on the report of the TPO, the respondent passed the draft assessment order. Thereafter, the assessing officer, after having found that certain income had escaped assessment, reopened the assessment. Admittedly, the notice under section 148 was issued to the appellant within the period of limitation and the same was also not put to challenge by the appellant / assessee. But, what was challenged in the writ proceedings by the appellant is the rejection of their objections to the said notice by the respondent. While so, it cannot be said that the reassessment proceedings initiated by the assessing officer under section 147 of the Act, without completing the original assessment, is not proper. Further, there is no embargo under section 147 of the Act, to issue notice under section 148, where assessment order has not been passed, after starting scrutiny proceedings; and section 144C(4) only states that the assessing officer has to pass an assessment order in accordance with the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y issuing notice under section 148 to the assessee for rectifying the lapses of not passing the final assessment order under section 144C(4) of the Act. 15.At this juncture, it is pertinent to refer to the decision in the case of Krishna Developers and Company v. Deputy Commissioner of Income-tax, [(2017) 94 taxmann.com 166 (Guj)] , a Division Bench of the Gujarat High Court had an occasion to consider a case, where the assessee questioned the order of assessment on the ground that the notice of scrutiny assessment was never served before the end of relevant assessment year. The Appellate Authority without going into the merits of the case, allowed the appeal on the technical ground that no notice was served on the assessee under Section 143(2) of the Act. After the order was passed by the Appellate Authority, the Assessing Officer issued a notice for reopening the assessment. On appeal, the assessee contended that the original assessment having failed on the ground of non-issuance of mandatory notice for scrutiny, the assessing officer cannot resort to the process of reopening of the assessment to cure the defect or to save limitation which had already lapsed. The said con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t recorded by the Assessing Officer for issuing such a notice. On the same ground, the Revenue issued fresh notice of reopening which was challenged before the High Court. The High Court held that when the earlier order stood annulled on the ground of lack of fulfillment of the basic requirement under section 147 of the Act, there was no bar against reopening the assessment once again on the same grounds after following due procedure in accordance with law. .... 24.In case of CIT v. Vishal Gupta [2012] 22 taxmann.com 82 / 210 Taxman 65 (Mag) (Delhi), issue very similar to case on hand came up for consideration. It was a case where the assessment for the assessment years 1995-966 and 1996-1997 were quashed by the Tribunal on the ground that statutory notice under section 143(2) of the Act was not served on the assessee within the stipulated period. The Assessing Officer thereafter recorded his reasons and issued notice for reopening of the assessment. The orders of such assessment were set aside by the Tribunal on the ground that the original assessment was set aside; for want of service of notice under section 143(2) of the Act, reopening could not have been done. Reversi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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