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TMI Blog2024 (7) TMI 148X X X X Extracts X X X X X X X X Extracts X X X X ..... le of the product of the petitioner-company and the same could not have been held to be capital expenditure at all and the same, therefore, has rightly been booked as revenue expenditure. As regards an amount towards earned receipt of damaged goods that was claimed by the petitionercompany, there was nothing on record to suggest that the sale of damaged stock had not been derived from an industrial activity and, therefore, not admissible for deduction u/s 80IC. Here again, while framing initial assessment of the petitioner-company, the AO had made independent analysis of the books of accounts and other relevant material. As a matter of fact, a detailed notice had been issued to the petitioner-company on 28.03.2021 qua this very aspect of the matter to which detailed written submissions along with cogent and corroborative documentary evidence in the form of invoices etc. had been duly supplied by the petitioner-company. Record reveals that the objections were raised only by the Audit Party and, therefore, reasons have been recorded on borrowed satisfaction of the Audit Party and not that of the respondent-department. A perusal of the reasons for reopening the case would make it evid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable income of Rs.1,01,50,780/- after claiming deductions of Rs.43,50,332/- under Section 80IC of the Act vide return of income filed on 28.09.2013. 4. The case of the petitioner-company was selected for scrutiny and the same was assessed vide order dated 28.03.2016 passed under Section 143(3) of the Act after making an addition of Rs.95,000/- to the taxable income of the petitioner-company at Rs.1,02,45,775/-. The petitioner-company was thereafter issued notice dated 30.03.2021 under Section 148 of the Act requiring it to file return of income within a period of 30 days. 5. The petitioner-company after filing return of income applied for the copy of reasons so recorded and accordingly the same was supplied to the petitioner-company. This led to filing of detailed objections by the petitioner-company regarding reopening of the case on both legal and factual aspects vide its submissions dated 06.02.2022 constraining the petitioner-company to file the instant petition seeking therein the following substantive reliefs : a) This Hon ble Court may be pleased to issue a writ in the nature of certiorari and the notice issued under Section 148 of the Income Tax Act, 1961 dated 30.03.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lling all statutory requirements of the Act. 9. The petitioner-company filed rejoinder wherein it is averred that the respondents have not placed anything on record to show that it had concealed or did not disclose true and correct particulars, as were required under Sections 147 and 148 of the Act. It is further averred that the rejection of the objections and reopening of the case by the respondents are amenable to the writ jurisdiction of this Court. 10. On merits, it has been averred that the objections raised by the petitioner-company have been rejected in a mechanical way without actually taking into consideration the objections so filed. It is further averred that the income derived from the damaged goods claim, discounts received and rounded off are not attributable to manufacturing activities of the petitioner-company and as such the Assessing Officer had rightly allowed deductions under Section 80IC while passing the order under Section 143(3) of the Act. 11. As far as the import made outside India is concerned, it is averred that the petitioner-company had not imported any machinery but the raw material required in the production of the manufacturing which has been duly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n under Section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. * * * Explanation 3.--For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee concerned. Full disclosure, in the context of financial documents, means that all material or significant information should be disclosed. Therefore, the meaning of full and true disclosure‟ is the voluntary filing of a return of income that the assessee earnestly believes to be true. Production of books of accounts or other material evidence that could ordinarily be discovered by the assessing officer does not amount to a true and full disclosure. 17. The law postulates a duty on every assessee to disclose fully and truly all material facts for its assessment. The disclosure must be full and true. Material facts for initiating action under Section 147 of the Act would essentially mean those facts, if taken into account, would have an adverse effect on the assessee by the higher assessment of income than the one actually made. They ought to be proximate and not have any remote bearing on the assessment. Omission to disclose could be deliberate or even inadvertent. However, this is not at all relevant provided there is omission or failure on the part of the assessee. The latter confers jurisdiction to reopen the assessment. 18. The decision of the Hon ble Constitu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts essential for its assessment, as a result of which the provisions of Section-147 of the Income Tax Act, 1961 shall apply in this case. 4. In view of the above, I have reason to believe that due to failure/omission on the part of the assessee to disclose fully and truly all necessary facts essential for his assessment, income to the extent of Rs.64,43,745/- [Rs.4,66,896+Rs.59,76,849] has escaped assessment under Section 147 of the Income Tax Act, 1961 for the A.Y. 2013-14. 22. As regards observations in para 3.1 of the order, the petitioner-company after placing reliance on various judgments of the Hon ble Supreme Court submitted as under: 3.4. Your Honour, it is submitted that the assessee was issued notice dated 30/03/2021 under Section 148 of the Act saying that there are reasons to believe that income of the assessee is chargeable to tax for A.Y. 2013-2014 has escaped assessment within the meaning of Section 147 of the Act. Since the notice has been issued after the expiry of 4 years from the relevant assessment year and assessee has already been assessed under Section 143(3) of the Act, the proviso to Section 147 as it was then existing on the Statute Book, would apply. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iled by the petitioner-company were rejected by according the following reasons : 6. Even if it is presumed, without admitting that all the information/details were placed before the Assessing Officer during the original assessment proceedings, the Assessing Officer is not precluded from reopening the case on the basis of material already on record provided the formation of such opinion is consequent on information in the shape of some light thrown on aspect of facts or law which the AO was not earlier conscious of . In this regard reliance is placed on the decision in the case of A.L.A. Firm vs. Commissioner of Income-Tax (1991) 55 Taxman 497 (SC). Hence, on this account also assessee s contention that there was no failure to disclose fully and truly all material facts at the time of assessment is not acceptable. 7. With regard to the contention that the reopening is based on change of opinion, it needs to be verified whether the assessment made earlier has either expressly or by necessary implication expressed an opinion on a matter on the basis of which the assessment is sought to be reopened. In a case where the assessment order is non speaking cryptic or perfunctory in nature, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d which included the claim of deduction under Section 80IC and the deduction was allowed by the Assessing Officer (DCIT) after full verification of documents furnished by the petitioner-company during those proceedings and are distinctively so recorded in para-2 of the assessment order. 26. It is further averred that the letter dated 28.07.2017 was issued by the respondents to the petitioner-company wherein the objections were raised by the Audit Party seeking further clarification post assessment and the petitioner-company was asked to submit clarification on certain issues raised by the Audit Party. These objections were duly replied to the concerned Officer by furnishing detailed written submissions with cogent and corroborative documentary evidence in the form of invoices at that point of time. It is well settled that the objections so raised by the Audit Party somehow are the root cause of the current reassessment as per the reasons so recorded and provided to the petitioner-company again vide letter dated 04.01.2022 which almost is akin to the letter dated 28.07.2017 issued by the then Assessing Officer. 27. It is also averred that the so-called reasons have been recorded on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able to income tax had been underassessed. The second condition was that he must have also reason to believe that such under-assessment had occurred by reason of either (i) omission or failure on the part of the assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. It was emphasized that both these were conditions precedent to be satisfied before the income tax officer could have jurisdiction to issue a notice for the assessment or re-assessment beyond the period of four years but within the period of eight years from the end of the year in question. The words used in the expression omission or failure to disclose fully and truly all material facts necessary for his assessment for that year would postulate a duty on every assessee to disclose fully and truly all material facts necessary for his assessment though what facts are material and necessary for assessment would differ from case to case. On the above basis, this Court came to the conclusion that while the duty of the assessee is to disclose fully and truly all primary facts, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income Tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income Tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income Tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction 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. 34. This Court in the case of Srikrishna Private Limited Vs. ITO, Calcutta, (1996) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment is much wider. However, this Court cautioned that one needs to give a schematic interpretation to the words reason to believe , otherwise 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. 35.1. This Court also referred to Circular No.549 dated 31.10.1989 of the Central Board of Direct Taxes (CBDT) to allay the apprehension that omission of the expression reason to believe from Section 147 and its substitution by the word opinion would give arbitrary powers to the assessing officer to reopen past assessments on mere change of opinion and pointed out that in 1989 Section 147 was once again amended to reintroduce the expression has reason to believe in place of the expression for reasons to be recorded by him in writing, is of the opinion . This Court thereafter explained as under: 6. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfilment of certain precondition and if the concept of change of opini ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after perusal of the books of accounts, bills and vouchers that the Assessing Officer had formed a view that the parts imported from Majesty Packaging International Ltd. were used in the manufacturing of product. Therefore, reopening of the case, that too, on the ground that expenditure of Rs.59,76,849/- was incurred for acquisition of capital, is not liable to be treated as revenue expenditure, is absolutely wrong as admittedly what was imported was perfume pumps to be installed for packing and sale of the product of the petitioner-company and the same could not have been held to be capital expenditure at all and the same, therefore, has rightly been booked as revenue expenditure. 30. As regards an amount of Rs.4,66,896/- towards earned receipt of damaged goods that was claimed by the petitionercompany, there was nothing on record to suggest that the sale of damaged stock had not been derived from an industrial activity and, therefore, not admissible for deduction under Section 80IC. 31. Here again, while framing initial assessment of the petitioner-company, the Assessing Officer had made independent analysis of the books of accounts and other relevant material. As a matter of fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following manner: Mr. Sastri next pointed out that at the stage when the Income-tax Officer issued the notices he was not acting judicially or quasi-judicially and so a writ of certiorari or prohibition cannot issue. It is well settled however that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, will issue appropriate orders or directions to prevent such consequences. Mr. Sastri mentioned more than once the fact that the company would have sufficient opportunity to raise this question, viz., whether the Income-tax Officer had reason to believe that under assessment had resulted from nondisclosure of material facts, before the Income-tax Officer himself in the assessment proceedings and, if unsuccessful there, before the appellate officer or the appellate tribunal or in the High Court under section 66(2) of the Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X
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