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TMI Blog2016 (12) TMI 1897X X X X Extracts X X X X X X X X Extracts X X X X ..... n input tax credit has been wrongly claimed, in which cases within the statutory period of four years it can make an assessment or reassessment of the tax payable by such dealer - In the first category, such reassessment can be made irrespective of whether the dealer has concealed, omitted or failed to disclose full and correct particulars of such sale or purchase or input tax credit, whereas in the second category there has been such a failure to disclose on the part of the dealer. The same would flow from the harmonious reading of the provisions of sub-section (1) with sub-section (2) of Section 31 of the Act, which obliges the prescribed authority in the second category of cases to impose by way of penalty the sum equal to three times of the amount of tax which is or may be assessed on the turnover of sale or purchase which escaped assessment, whereas in the first category there would be a mere reassessment of the under-assessed or escaped tax, etc. In the present matter, it is not in dispute at all that there has been no concealment, omission or failure to disclose full and correct particulars by the petitioners. Thus, the only issue is as to whether the assessing officer wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in Nokia's case would, on the same materials, amount to a mere change of opinion by the prescribed authority in the matter. Thus, any action on the said basis would clearly be without jurisdiction and therefore without authority of law. So far as the remaining eight matters are concerned, admittedly they are cases of deemed assessments on the basis of the provisions of Section 26 of the Act or assessment under Section 27. No doubt under Section 25 of the Act, the prescribed authority is required to look into and scrutinize the return filed under Section 24 (1) and (3) of the Act but that is not the same thing as making a proper assessment. If the assessing authority had no occasion to form an opinion during the course of such deemed assessment of the returns filed by the petitioner, and subsequently a notice was issued under Section 31 (1) of the Act, or assessment made under Section 27, albeit on the ground of decision rendered by the Supreme Court, it could not be said that there has been any change of opinion - so far as the remaining eight cases are concerned, the plea of the petitioners regarding change of opinion is not applicable. That being the position, consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. is engaged in the business of manufacture of consumers electronic IT and telecom products including mobile phones, electronic goods, home appliances etc. The other petitioners are dealers of, among other things, mobile phones. The petitioners had filed their returns for different assessment years. The stand of the petitioners is that a composite pack of mobile phone along with mobile charger and other accessories is sold by them and the commodities mentioned therein are mobile phones and chargers are supplied with the mobile phones to charge the battery which are provided free of cost along with the mobile phones. No separate payment is made for the charger but only for the mobile phone. Accordingly, tax under the VAT Act is paid on the mobile phone at the rate specified for Entry 68 of Part 1 of Schedule-III read with Entry 14 of Part-II of the said Schedule which is exigible to a lower rate of tax. Where the petitioners sell the battery charger an independent tax is paid upon it for non-specified goods. It is stated that out of 16 returns for different financial periods involved, in eight of them assessment/re-assessment has been made under Sections 31 or 33 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nit, i.e., mobile phone under Tariff Heading of Schedule-1 of the Customs Tariff Act. It is submitted by learned counsel for the petitioners that the case of the petitioners does not come within the purview of the decision of the Supreme Court in the case of Nokia India (supra) where there was an admission of the fact that the company had made information available on the website putting the mobile charger in the category of accessories which meant that in the common parlance also the mobile battery charger is understood as an accessory. It is submitted that the petitioners neither admitted nor on their website there is any admission that the charger is an accessory. It is, thus, submitted that the decision of the Apex Court in the case of Nokia (supra) was not directly applicable to the case of the petitioners and could not be blindly applied as has been done by the assessing officer. It is further urged that the principles of res judicata and constructive res judicata do not apply and points not taken in earlier proceedings can be raised subsequently and therefore, since the petitioners were not parties in Nokia‟s case (supra), they cannot be stopped from raising points ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Apex Court in the case of Commissioner of Income-tax, Delhi vs. Kelvinator of India Limited: (2010) 2 SCC 723, in paragraph Nos. 5 to 9 of which the law has been succinctly laid down in the following terms:- 5. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987 reopening could be done under the above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the assessing officer to make a back assessment, but in Section 147 of the Act (with effect from 1-4-1989), they are given a go-by and only one condition has remained viz. that where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1-4-1989, power to reopen is much wider. However, 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. 6. We must also keep in mind the conceptual difference be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismissed with no order as to costs. Reference is also made to three decisions of the Apex Court and a decision of the Rajasthan High Court to the same effect, i.e., in the case of Mepco Industries Limited, Madurai vs. Commissioner of Income Tax and another: (2009) 319 ITR 208 (SC), Mukesh Modi vs. Deputy Commissioner of Income-Tax, Central-1, Jodhpur: (2014) 45 Tax Man 468 (Rajasthan) and Binani Industries Limited, Kerala vs. Assistant Commissioner of Commercial Taxes,VI Circle, Bangalore and others: (2007) 15 SCC 435. Reliance has also been placed on the decision of a Division Bench of this Court in the case of Bhimraj Madan Lal vs. The State of Bihar and another: (1985) 58 STC 119 (Pat), in paragraph No.18 of which with reference to similar provisions of the Bihar Finance Act, 1981 under Section18 of the Act, it has been held as follows:- 18. The condition precedent for reopening a case under Section 18 (1) of the Act are these: (1) That there must be an information either from external source or from the record which has come into possession of the sales tax authority subsequent to the assessment order; and (2) That the sales tax authority is satisfied t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9) either the full amount or a part of the royalty amount is to be treated as capital expenditure. This has resulted in under assessment of the income to the extent of Rs.8741302/- which will be treated as capital expenditure. The assessee has submitted details of sundry creditors as on 31.03.2006. One of the items of the sundry creditors is accrued exchange profit‟ which has been shown as a negative amount at Rs. 1145902/-. No explanation of the assessee is available on record with regard to the nature of this credit amount. Prima facie it appears to be under assessment of income as the assessee company itself is mentioning it as exchange profit. 4. This is clear case of the notice having been issued only on a change of opinion or rather a difference of opinion. The entire facts pertaining to the issue had been disclosed on each and every stage of the proceedings. Indeed the material in this regard was sought by the Transfer Pricing Officer (TPO) as well as by the Assessing Officer (A.O.). The relevant material was furnished by the petitioner. The assessment order was clearly passed after taking the same into consideration. The following facts establish the same. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g charged by the petitioner. Learned counsel for the State, on the other hand, submits that the present matters are squarely covered by the decision of the Apex Court in the case of State of Punjab Ors. vs. Nokia India Pvt. Ltd.: Civil Appeal Nos. 11486-11487 of 2014, in which the law has been succinctly laid down in paragraph No.19 in the following terms:- 19. In view of the aforesaid facts, we find that the Assessing Authority, Appellate Authority and the Tribunal rightly held that the mobile/cell phone charger is an accessory to cell phone and is not a part of the cell phone. We further hold that the battery charger cannot be held to be a composite part of the cell phone but is an independent product which can be sold separately, without selling the cell phone. The High Court failed to appreciate the aforesaid fact and wrongly held that the battery charger is a part of the cell phone. It is further submitted that the case of the present petitioners is identical to that of Nokia (supra), and thus the same result would follow. With regard to the submission of change of opinion, it is urged by learned counsel that in the light of the judgment of the Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no force. 17. The jurisdiction under Article 226 of the Constitution while examining the validity of the notice issued under Section 148 is very limited. The court has to see as to whether the notice issued by the taxing authorities is on the basis of the reasons which have been recorded by them. If the reasons are in existence then sufficiency thereof even could not be examined. The assessee was informed vide letter dated June, 14, 1991, that the investment allowance is admissible only on machinery and plant used in the business of manufacture, production or construction of any article or thing which could not have been claimed in the return submitted by the assessee. Even if it is considered that at the time when the notice under Section 148 was issued, the judgment of the apex court was not pronounced, it will not make any difference because the Apex court only interprets the law as stated above and, therefore, the legal position as explained by the apex court has to be considered as always in existence. Besides this, it was also informed to the asseesee that the investment allowance reserve made in the assessment year 1987-88 has been transferred to the capital account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought before this Court and it is held that the taxing statute is valid, it may not be easy to hold that the decision on this basic and material issue would not operate as res judicata against the assessee for a subsequent year. That, however, is a matter on which it is unnecessary for us to pronounce a definite opinion in the present case. In this connection, it would be relevant to add that even if a direct decision of this Court on a point of law does not operate as res judicata in a dispute for a subsequent year, such a decision would, under Article 141, have a binding effect not only on the parties to it, but also on all courts in India as a precedent in which the law is declared by this Court. The question about the applicability of res judicata to such a decision would thus be a matter of merely academic significance. 15. The question in Radhasoami Satsang v CIT (also cited by the State of U.P.) was whether the Tribunal was bound by an earlier decision in respect of an earlier assessment year that the income derived by the Radhasoami Satsang, a religious institution, was entitled to exemption under Section 11 and 12 of the Income-tax Act, 1961. The Court said: (SCC p.6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) (a) The prescribed authority shall, in a case where the dealer has concealed, omitted or failed to disclose full and correct particulars of such sale or purchase or input tax credit, direct that the dealer shall, besides the amount of interest payable under sub-section (10) of Section 24, pay by way of penalty, sum equal to three times the amount of tax which is or may be assessed on the turnover of sale or purchase which escaped assessment. (b) The penalty imposed under clause (a) shall be in addition to the amount of tax, which is or may be assessed on the turnover of sale or purchase which escaped assessment. (c) No order shall be passed under this sub-section without giving the dealer a reasonable opportunity of being heard. (3) Any assessment or re-assessment made and any penalty imposed under this section shall be without prejudice to any action, which is or may be taken under section 81. It is evident from the aforesaid provisions that sub-section (1) of Section 31 although not very happily worded, but is on the same lines as the earlier provisions of the Income-tax Act, 1961 prior to its amendment in 1987. Taking into account the said Section as a w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it has to be held that reassessment cannot be made on a mere change of opinion. The next question is whether the decision of the Supreme Court subsequent to the assessments can be considered a mere change of opinion. The law on this point is also very much clear, as held in the several decisions cited including that of Simplex Concrete case (supra), a subsequent reversal of legal position by the judgment of the Supreme Court does not authorize the Department to reopen the assessment which stood closed on the basis of law at the relevant time. It is evident that in the first category of 8 writ petitions assessment/reassessment had been made earlier under the provisions of Section 31 and/or Section 33 of the Act. It is also evident from the notice issued under Section 31 of the Act that the sole reason for initiation of proceedings under Section 31 of the Act is the decision of the Supreme Court in the case of Nokia India (supra). There was no other material which has come into the possession of the Department which was already not known to it. The fact that there had been earlier assessment/reassessment under Section 31 or Section 33 of the Act goes to show that any further is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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