9911796707
TMI Blog2024 (2) TMI 1522X X X X Extracts X X X X X X X X Extracts X X X X ..... he same not being pursued by the AO or leading to an addition being made must necessarily be rendered finality and a quietus. This it observed since it found that even if the view taken by the AO in that respect were erroneous or prejudicial to the interest of the Revenue, it did not stand deprived of a right to adopt corrective measures including those provisioned for in Section 263 of the Act. However, it was held that such a contingency would not justify the power of reassessment being exercised. Fresh or new factual information that may come to light pursuant to an order of assessment made subsequently - The Full Bench in Usha International held that if new information comes to the knowledge of the AO in the course of undertaking an assessment for a subsequent period, the same could be validly taken into consideration and would not amount to a change of opinion. It observed that an opinion which may have been formed originally, if established to be based on wrong or incorrect facts, would not stand insulated or rendered immunity from review. It thus held that factual information or material which was either not available at the time of original assessment or which comes to lig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here the AO, though conscious and cognizant, chose not to make any additions, draw any adverse inference or doubt the stand which was taken by the writ petitioner. The discussion on this aspect, however, must be prefaced with the observation that it is not the case of the respondent that what was disclosed by the petitioner in the earlier assessment had been found to be incorrect or wrong. It is also not their case that the material and information that came to light in the subsequent AY casts a doubt on the correctness or credibility of the responses which were submitted. It is these aspects which convince us to hold that the "four new issues" neither constituted fresh information nor could have validly formed the basis for commencement of action under Section 147 of the Act. In our considered opinion, this was at best a case where the respondents could have perhaps only alleged that the AO had failed to correctly appreciate and apply the appropriate legal provisions or give shape to a liability under the Act despite adequate disclosures having been made. A reading of the reasons assigned establishes that the AO has not even made a token or superficial attempt to evaluate the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to tax had escaped assessment was thus provided separately on 18 April 2016. 4. The aforesaid reasons which form part of our record read as under: "Reason for issue of Notice n/s 148 for the A.Y. 2009-10 in the case of Maruti Suzuki India Ltd Background 1. The company electronically filed its return of income on 26.09.2009 for the assessment year 2009-10 declaring income of Rs. 1319,47,29,675/-. Revised return was filed on 29.03.2011 at an income of Rs. 1262,60,79,909/-. The case was selected for scrutiny for the A.Y. 2009-10 and assessed u/s 143 (3) of the Income Tax Act, 1961 at Rs. 2071,04,18,575/- vide order dated 29.03.2014. Directions to take remedial measures 2. A letter dated 22.04.2014 had been received from the office of Addl. CIT, Range 16, stating that four new issues have been identified in A.Y. 2010-11. These issues have not been examined by the AO during the course of assessments in the earlier assessment years. The issues cited in reference to this case are as under: i) It has been held that the assessee company is a PE of M/s Suzuki Motor Corporation and thus it was liable to deduct TDS amounting to Rs. 11,29,40,00,000/- on purchase made from M/s Suzu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Suzuki Motor Corporation [SMC] and thus being liable to deduct tax at source [Tax Deducted at Source [TDS]] amounting to INR 11,29,40,00,000/- in respect of purchases made from SMC. b. Share transactions are stated to have given rise to a Short Term and Long-Term Capital Gains. c. Deductions under Section 35(2AB) were liable to be disallowed; and d. Claim of warrant provision liable to be disallowed treating them as a contingent liability. 6. As is apparent from a perusal of the reasons extracted hereinabove, the aforesaid issues which were decided against the petitioner in the assessment pertaining to AY 2010-11 are stated to have been communicated to the AO in terms of a letter dated 22 April 2014 issued by the Additional Commissioner of Income-Tax [ACIT], Range-16. The reasons to believe in unequivocal terms allude to these aspects as "four new issues" which had been identified in the course of assessment for AY 2010-11. The AO further records that the communication of the ACIT requires it to examine the assessment orders of the earlier period and to take remedial measures if deemed fit. It is this directive which is then reiterated in Para 4.3 of the reasons to believ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be "issued" on the date of its due despatch and not on the date the notice is drawn up. 25.5. It would be useful to refer to the judgments relied upon by the petitioners, which clearly bring out that for an authority to contend that a notice has been issued, the same must be duly despatched by the issuing authority. The first instructive judgment on this point is Delhi Development Authority (supra) at paragraphs 5, 13 and 15, which reads as under : ".. . 5. The substituted clause (ii) in para 2, in O. M. dated September 14, 1992, is as under : '(ii) Government servants in respect of whom a charge-sheet has been issued and the disciplinary proceedings are pending ; and' 13. The context in which the word 'issued' has been used, merely means that the decision to initiate disciplinary proceedings is taken and translated into action by despatch of the charge-sheet leaving no doubt that the decision had been taken. The contrary view would defeat the object by enabling the Government servant, if so inclined, to evade service and thereby frustrate the decision and get promotion in spite of that decision. Obviously, the contrary view cannot be taken.. . 15. The mea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gned on March 31, 2021, the same should be considered as the date of issue, notwithstanding the fact that the same had not been despatched, was categorically rejected by the Madras High Court in Smt. Parveen Amin Bhathara (supra) following the judgment of Gujarat High Court in Kanubhai M. Patel (supra). The Gujarat High Court, dealing with a notice issued in paper form, at paragraphs 13 and 16 observed as under (page 31 of 334 ITR) : "Whereas, on behalf of the Revenue, it has been contended that the notices were actually signed on March 31, 2010, hence, the said date would be the date of issue and as such, the impugned notices have been issued within the time limit prescribed under section 149 of the Act.. .. Thus, the expression 'to issue' in the context of issuance of notices, writs and process, has been attributed the meaning, to send out ; to place in the hands of the proper officer for service. The expression 'shall be issued' as used in section 149 would therefore have to be read in the aforesaid context. In the present case, the impugned notices have been signed on March 31, 2010, whereas the same were sent to the speed post centre for booking only on Apr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at mere signing of notice by the respondent on March 31, 2018 amounts to issuance of notice under section 149 of the Act and therefore, the same is within the limitation period.... In Kanubhai M. Patel v. Hiren Bhatt or his successors to office [2011] 334 ITR 25 (Guj), it was held by the Gujarat High Court that 'date of issuance of notice under section 148 of the Income-tax Act has to be reckoned not from the date when it was issued, but on the date when it was actually delivered on the assessee'.. . Thus, it is apparent from the aforesaid decisions that the issuance of notice under section 149 is complete only when the same is issued in the manner as prescribed under section 282 read with rule 127 of the Income-tax Rules prescribing the mode of service of notice under the Act. The signing of notice would not amount to issuance of notice as contemplated under section 149 of the Act. In other words, the requirement of issuance of notice under section 149 is not mere signing of the notice under section 148, but is sent to the proper person within the end of the relevant assessment year.. ." (emphasis supplied) In the said judgment the Division Bench of the Madras High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce of notice under section 148 read with section 149 of the Act, 1961. In view of the discussion made above, we hold that mere digitally signing the notice is not the issuance of notice. Since the impugned notice under section 148 of the Act, 1961 was issued to the petitioner on April 6, 2021 through e-mail, therefore, we hold that the impugned notice under section 148 of the Act, 1961 is time barred. Consequently, the impugned notice is quashed." (emphasis supplied) 25.11. In the subsequent judgments of the Allahabad High Court in the case of Santosh Krishna (supra) and Mohan Lal Santwani (supra) the High Court summoned the details of date and time of triggering of e-mail by the Income Tax Business Application e-mail software system to determine the date of issuance of the e-mail attaching the notice. The High Court held the said date of triggering of e-mail to be the date of issue of section 148 notice for the purpose of section 149 of the Act of 1961. 25.12. The review of the aforesaid judgments of the Supreme Court and the several High Courts shows that all courts have consistently held that the expression "issue" in its common parlance and its legal interpretation me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispense with the legal requirement of the Department to ensure due despatch of the section 148 notice to satisfy the test of section 149 of the Act of 1961. The contention of the Department that upon generation of the notice on the Income Tax Business Application screen simplicitor (even before its despatch) is to be held to be issued does not persuade the court and is contrary to the judgment relied upon by the said party. 25.15. This court in the case of Court on its Own Motion v. CIT [2013] 352 ITR 273 (Delhi), while dealing with section 143(1) of the Act of 1961, has held that the law requires that, the intimation under section 143(1) should be communicated to the assessee. The uncommunicated orders or intimations cannot be enforced and are not valid. The relevant extract of the aforesaid decision is reproduced herein under (page 295 of 352 ITR) : "The second grievance of the assessee is with regard to the uncommunicated intimations under section 143(1) which remained on paper/file or the computer of the Assessing Officer. This is serious challenge and a matter of grave concern. The law requires intimation under section 143(1) should be communicated to the assessee, if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration was section 35E(3) of the Central Excises and Salt Act, 1944 ("Act of 1944"), which reads as under : ".. . Sub-section (3) of section 35E of the Act which deals with the limitation for exercise of the powers under sub-sections (1) and (2) of the Act and which is the relevant provision for consideration in this appeal reads as follows : 'No order shall be made under sub-section (1) or sub-section (2) after the expiry of one year from the date of the decision or order of the adjudicating authority.'. . ." The court in the aforesaid judgment deliberated with reference to the phrase "no order shall be made" in section 35E(3) of the Act of 1944 and concluded that the date on which the order was made by the adjudicatory authority by signing it is a relevant date for determining if it was passed within limitation. As is evident, the expression used in section 35E(3) of the Act of 1944, is "no order shall be made" which is distinct from the expression used in section 149 of the Act of 1961 which reads as "no notice under section 148 shall be issued". The two statutory provisions are materially different and the ratio of the said judgment can have no beari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f document identification number would automatically constitute issuance of the notice. Relevant extract from the aforementioned circular is reproduced as under (page 140 of 416 ITR (St.) : ".. . However, it has been brought to the notice of the Central Board of Direct Taxes (the Board) that there have been some instances in which the notice, order, summons, letter and any correspondence (hereinafter referred to as 'communication') were found to have been issued manually, without maintaining a proper audit trail of such communication. 2. In order to prevent such instances and to maintain proper audit trail of all communication, the Board in exercise of power under section 119 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act'), has decided that no communication shall be issued by any Income-tax authority relating to assessment, appeals, orders, statutory or otherwise, exemptions, enquiry, investigation, verification of information, penalty, prosecution, rectification, approval etc. to the assessee or any other person, on or after October 1, 2019 unless a computer-generated document identification number (DIN) has been allotted and is duly quoted i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch were despatched on April 1, 2021, or thereafter, would not meet the test of "issued" under section 149 of the Act of 1961 and would be time barred, unless saved by the judgment of the Supreme Court in Ashish Agarwal, (supra). 25.24. With respect to impugned notices falling in category "A", there is an additional factor which evidence that the said notices were admittedly not issued on March 31, 2021. The said notices were digitally signed on April 1, 2021, or thereafter. The note appearing at the foot of each notice clearly declares that the date of the affixation of digital signature shall be treated as the date of the notice. The note reads "if digitally signed, the date of signature may be taken as date of document". In these notices therefore, the date of the notice itself is determined by the date of affixation of digital signature and not the date of generation. The contention of the Department that, the said note appearing at the footer of the notice has no basis in law and should be ignored by this court, cannot be accepted. The Department cannot deny the contents of its own notice and it is bound by the said contents. 25.25. In this regard it will also be useful to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of issuance following the judgment of the Supreme Court in the case of R. K. Upadhyaya (supra). Illustratively, in W. P. (C) No. 11010 of 2021, the notice dated March 31, 2021 was booked for despatch through speed post on June 10, 2021, in this case, the notice can be said to have been issued only on June 10, 2021, i. e., when it was booked for despatch through speed post. 25.27. With respect to the impugned notices sent by e-mail and forming subject matter of category "C" the Department has raised an additional defence that though the e-mails were admittedly despatched on April 1, 2021 or thereafter, the same was due to the time taken by the Income Tax Business Application e-mail software system to trigger the e-mails, this delay in despatch should not be attributed to the jurisdictional Assessing Officer for despatch and the notices should be "deemed" to have been issued on March 31, 2021. This contention of the Department is specifically dealt with in answer to question No. (III)." 8. On a more fundamental plane, Mr. Vohra contended that the reasons as recorded would clearly evidence that the reassessment is essentially a "change of opinion" which had already been formed du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the person from whom purchases / sales have been made. xxx xxx xxx 28. Furnish Employee wise/ Director wise detail of salary and Traveling expenses as under, whose gross salary exceeded Rs. 2,00,000/- during the previous year: xxx xxx xxx 35. Furnish the details of payment made in foreign currency during the year under consideration in the following format:... (b) Explain as to why the applicable payments should not be disallowed under section 40(a)(i) as the TDS has not been deducted. 36. Furnish the reconciliation of receipts shown in the TDS Certificates with the receipts credited in the P&L account. xxx xxx xxx 44. With respect to Foreign Travelling expenses, furnish the following details: (i) Furnish the copy of passport and produce the original for verification highlighting the endorsement of the foreign exchange and VISA taken. (ii) Date of departure and arrival, (iii) Countries visited (iv) Name, address and designation / relation of the persons, who have accompanied the assessee. (v) Nature of Visa taken viz. tourist, social, business. (vi) Foreign exchange as per passport and its value in Indian Rupees. (vii) Copy of report/ if any, submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been regular in filing all the TDS returns related to all foreign/domestic payments made by it before the due date of filing of respective returns and acknowledgement copies of all the relevant returns are enclosed for your honor's reference in Pages 21 to 35of this submission. xxx xxx xxx Query No. 35: Furnish the details of payment made in foreign currency during the year under consideration in given format (a). (b) Explain as to why the applicable payemts should not be disallowed under section 40(a)(i) as the TDS has bot been deducted. In this regard kindly refer to our response to Query no.25 above. Query No. 36: Furnish the reconciliation of receipts shown in the TDS Certificates with the receipts credited in the P&L account. The Incomes related to the amounts for which TDS certificates have been claimed have been credited to the Profit & loss account in the current assessment year. xxx xxx xxx Query No.25: Furnish month-wise sales and purchases. Furnish the quantity-wise and value-wise details of purchases and sales exceeding Rs. 10 lakhs along with the name and address of the person from whom purchases/sales have been made. The information of month-wise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provided the following information with respect to short term capital gain/loss and long term capital gain/loss as would be evident from the following extracts of its reply: "Query No. 20: Complete details regarding the unrealized forex gain/loss. In this regard it is submitted that Gain/Loss on valuation on account of forex derivatives are excluded in the Income Tax Return Filed by MSIL (Refer point 5(e) of Computation of Total INCOME) pursuant to CBDT Circular Dated 5th April 2010 xxx xxx xxx Query No. 47: Details with supporting evidence in respect of short term capital gain/loss and long term capital gain/loss. Details of Short term capital gain/loss and Long term Capital gain/Loss is enclosed in Annexure A9 with this spiral book submission in pages 34-41." 15. Disclosures in respect of share transactions, according to Mr. Vohra, were also duly set out in Schedule CG of the computation of income and more particularly Item 7 thereof [at pages 229 and 232 of the digital record]. Mr. Vohra submitted that the petitioner had as per Annexure-9 to the Statement of Tax on Total Income also provided scrip-wise details in respect of the long and short term capital gains. Simi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd tax auditors and reviewed and duly approved by the Secretary, DSIR, Ministry of Science and Technology, Govt of India. Accordingly, the expenditure has been rightfully claimed by the assessee in compliance with the provisions of the Income Tax Act, 1961 and hence should be allowed." The aforesaid stand as taken by the writ petitioner is liable to be further appreciated alongside the documents which appear at pages 229, 642 and 725 of our record. 18. The petitioner also relied upon the Office Note prepared by the AO in the course of the original assessment proceedings and which reads as follows: "OFFICE NOTE (NOT FOR ASSESSEE) * Case has been selected by CASS with the following reasons - "Examine the Long term capital gain as regards sale consideration and indexed cost of acquisition. Examine the disallowance u/s 14A. Examine the deductions u/s 35, 35(2AA), 35(2AB). Examine the claim of higher rates (80%/100%) of depreciation. All the above issues have been examined. * ITS details have been examined. * No addition on account of "excess consumption claimed" and "disallowance u/s 35DDA" has been made like the earlier assessment year as these issues were not relevant for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made as false, untrue or even misleading. 22. Refuting those submissions Mr. Chandra, learned counsel appearing for the respondent, on the other hand submitted that in the course of assessment for AY 2010-11, the AO had noted that no disallowance under Section 40(a)(ia) of the Act was made in respect of payments remitted to SMC. It was contended that the aforesaid information was received by the AO much after the original assessment proceedings for AY 2009-10 had been concluded and it was this information which prompted the issuance of the notice under Section 148. 23. Mr. Chandra contended that Courts have in unambiguous terms held that material which comes to light subsequent to completion of assessment can be validly relied upon for the purposes of forming an opinion as to whether income had escaped assessment. Learned counsel sought to draw sustenance for the aforesaid submission from the following decisions: a. Clagett Brachi Co. Ltd. vs. CIT (1989) 177 ITR 409 (SC) b. Phool Chand Bajrang Lal and Anr. vs. ITO (1993) 4 SCC 77 c. Ess Kay Engineering Co. (P) Ltd. vs. CIT (2001) 10 SCC 189 d. CIT vs. Velocient Technologies Ltd. (2015)376 ITR 131 (Del-HC) 24. Insofar as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, in that sense, is not really concerned with Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, the original notice being deemed to be one referrable to Section 148A (b) or surviving period and which were aspects which the Supreme Court dealt with in Rajeev Bansal in light of the impact of its decision in Ashish Agarwal. It is for the aforesaid reasons that we come to the conclusion that the principles enunciated in Suman Jeet Agarwal would apply and lead us to answer this question in favour of the petitioner. 28. While this would have been sufficient to dispose of the writ petition, learned counsels for respective sides had addressed elaborate submissions relating to the material which was taken into consideration for formation of opinion that reopening was warranted and whether the same amounted to a change of opinion. It is in the aforesaid backdrop that we proceed further to rule on the rival submissions which were addressed on this score. 29. As was noted hereinabove, it was Mr. Vohra's contention that the petitioner had made a full, complete and candid disclosure pertaining to all transactions with SMC as well as the aspects pertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Usha International Ltd. 2012 SCC OnLine Del 4995. The scope of the power to reassess was succinctly encapsulated by the Full Bench in the following words: "13. It is, therefore, clear from the aforesaid position that: (1) Reassessment proceedings can be validly initiated in case return of income is processed under section 143(1) and no scrutiny assessment is undertaken. In such cases there is no change of opinion. (2) Reassessment proceedings will be invalid in case the assessment order itself records that the issue was raised and is decided in favour of the assessee. Reassessment proceedings in the said cases will be hit by the principle of "change of opinion". (3) Reassessment proceedings will be invalid in case an issue or query is raised and answered by the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the assessment records also and it is not necessary that the same may come from a third person or source, i.e., from source other than the assessment records. However, in such cases, the onus will be on the Revenue to show that the assessee had stated incorrect and wrong material facts resulting in the Assessing Officer proceeding on the basis of facts, which are incorrect and wrong. The reasons recorded and the documents on record are of paramount importance and will have to be examined to determine whether the stand of the Revenue is correct. A decision of this court in Writ Petition (Civil) No. 6205 of 2010, dated September 26, 2011-since reported in Dalmia P. Ltd. v. CIT (2012) 348 ITR 469 (Delhi) and a decision of the Bombay High Court in Writ Petition No. 1017 of 2011, dated November 8, 2011, Indian Hume Pipe Co. Ltd. v. Asst. CIT (2012) 348 ITR 439 (Bom) are two such cases. In the first case, the Assessing Officer in the original assessment had made addition of Rs. 19,86,551 under section 40(1) on account of unconfirmed sundry creditors. The reassessment proceedings were initiated after noticing that unconfirmed sundry creditors, of which details, etc., were not furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , a presumption could be raised that the order was passed after application of mind. Reference was made to clause (e) to section 114 of the Indian Evidence Act, 1872. The contention if accepted would give premium to the authority exercising quasi-judicial function to take benefit of its own wrong, i.e., failure to discuss or record reasons in the assessment order. The aforesaid observations have been made in the context and for explaining the principle of "change of opinion". The said principle would apply even when there is no discussion in the assessment order but where the Assessing Officer had applied his mind. A wrong decision, wrong understanding of law or failure to draw proper inferences from the material facts already on record and examined, cannot be rectified or corrected by recourse to reassessment proceedings. The assessee is required to disclose full and true material facts and need not explain and interpret law. Legal inference has to be drawn by the Assessing Officer from the facts disclosed. It is for the Assessing Officer to understand and apply the law. In such cases resort to reassessment proceedings is not permissible but in a given case where an erroneous orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duction or the entry, and, therefore, it is the case of "change of opinion". When at the first instance, in the original assessment proceedings, no opinion is formed, the principle of "change of opinion" cannot and does not apply. There is a difference between change of opinion and failure or omission of the Assessing Officer to form an opinion on a subject-matter, entry, claim, deduction. When the Assessing Officer fails to examine a subject-matter, entry, claim or deduction, he forms no opinion. It is a case of no opinion." 36. Of equal significance are the following principles which the Full Bench culled out from the various precedents rendered by the Supreme Court in the context of Sections 147 and 148: "34. The Supreme Court thereafter referred to the subsequent decision in Indian and Eastern Newspaper Society v. CIT (1979) 119 ITR 996 (SC) wherein it was observed that some of the observations made in Kalyanji Mavji (supra) were far too wide and the statute did not permit reappraisal of material considered by the Assessing Officer during the original assessment. The observations in Kalyanji Maviji (supra) that reopening would cover a case "where income has escaped assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er that Kalyanji Maviji's case (1976) 102 ITR 287 (SC) outlines four situations in which action under section 34(1)(b) can be validly initiated. The Indian Eastern Newspaper Society's case (1979) 119 ITR 996 (SC) has only indicated that proposition (2) outlined in this case and extracted earlier may have been somewhat widely stated ; it has not cast any doubt on the other three propositions set out in Kalyanji Mavji's case. The facts of the present case squarely fall within the scope of propositions 2 and 4 enunciated in Kalyanji Maviji's case (1976) 102 ITR 287 (SC). Proposition (2) may be briefly summarised as permitting action even on a 'mere change of opinion'. This is what has been doubted in the Indian and Eastern Newspaper Society case (1979) 119 ITR 996 (SC) and we shall discuss its application to this case a little later. But, even leaving this out of consideration, there can be no doubt that the present case is squarely covered by proposition (4) set out in Kalyanji Maviji's case (1976) 102 ITR 287 (SC). This proposition clearly envisages a formation of opinion by the Income-tax Officer on the basis of material already on record provided the fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the light of the same legal aspects to which his attention had been drawn earlier, he comes to a conclusion that an item of income which he had earlier consciously left out from the earlier assessment should have been brought to tax. In other words, as pointed out in Indian and Eastern Newspaper Society's case (1979) 119 ITR 996 (SC), it also ropes in cases of a 'bare or mere change of opinion' where the Income-tax Officer (very often a successor officer) attempts to reopen the assessment because the opinion formed earlier by himself (or, more often, by a predecessor Income-tax Officer) was, in his opinion, incorrect. Judicial decisions had consistently held that this could not be done and the Indian and Eastern Newspaper Society's case (1979) 119 ITR 996 (SC) has warned that this line of cases cannot be taken to have been overruled by Kalyanji Mavji (1976) 102 ITR 287 (SC). The second paragraph from the judgment in the Indian and Eastern Newspaper Society's case (1979) 119 ITR 996 (SC) earlier extracted has also reference only to this situation and insists upon the necessity of some information which make the Income-tax Officer realise that he has committed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax Officer at the time of the original assessment, it is difficult to take the view that the Income-tax Officer had not at all applied his mind to the question whether the surplus is taxable or not. It is true that the return was filed and the assessment was completed on the same date. Nevertheless, it is opposed to normal human conduct that an officer would complete the assessment without looking at the material placed before him. It is not as if the assessment record contained a large number of documents or the case raised complicated issues rendering it probable that the Income-tax Officer had missed these facts. It is a case where there is only one contention raised before the Income-tax Officer and it is, we think, impossible to hold that the Income-tax Officer did not at all look at the return filed by the assessee or the statements accompanying it. The more reasonable view to take would, in our opinion, be that the Income-tax Officer looked at the facts and accepted the assessee's contention that the surplus was not taxable. But, in doing so, he obviously missed to take note of the law laid down in G. R. Ramachari and Co. [1961] 41 ITR 142 (Mad) which there is noth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Section 148, and where it be asserted that it essentially amounts to a change of opinion, have to bear in mind that the power to reassess would be wholly unjustified in a case where the assessment order itself reflects that an issue was raised and duly examined. Usha International further lays emphasis on the assessment record and the various queries that may have been addressed by the AO for eliciting information. It thus held that if the record of the reassessment proceedings were to evidence a query being specifically addressed and answered by the assessee and the same not being pursued by the AO or leading to an addition being made must necessarily be rendered finality and a quietus. This it observed since it found that even if the view taken by the AO in that respect were erroneous or prejudicial to the interest of the Revenue, it did not stand deprived of a right to adopt corrective measures including those provisioned for in Section 263 of the Act. However, it was held that such a contingency would not justify the power of reassessment being exercised. 38. That then takes us to the aspect of fresh or new factual information that may come to light pursuant to an order of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an issue having been examined by the AO and consequently precluding it from resorting to the power to reopen as conferred under the Act. 42. It is on a balanced application of the aforenoted precepts that the challenge raised in this writ petition would have to be evaluated. However, and before we proceed to do so, we also deem it apposite to notice the following illuminating passages which appear in New Delhi Television Ltd. v. Deputy CIT 2020 SCC OnLine SC 446 and where the Supreme Court had an occasion to also notice Claggett Brachi Co. Ltd. v. CIT 1989 Supp (2) SCC 182 and Phool Chand Bajrang Lal v. Income Tax Officer (1993) 4 SCC 77, two decisions which had been cited by Mr. Chandra for our consideration. 43. While dealing with information that may come to light subsequently and post closure of the original assessment proceedings, the Supreme Court in New Delhi Television Ltd. observed as follows: "22. A perusal of the aforesaid judgments clearly shows that subsequent facts which come to the knowledge of the Assessing Officer can be taken into account to decide whether the assessment proceedings should be re-opened or not. Information which comes to the notice of the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bonds. It has been urged that these are bogus companies, but we are not concerned with that at this stage. The issue before us is whether the Revenue can take the benefit of the extended period of limitation of 6 years for initiating proceedings under the first proviso to section 147 of the Act. This can only be done if the Revenue can show that the assessee had failed to disclose fully and truly all material facts necessary for its assessment. The assessee, in our view had disclosed all the facts it was bound to disclose. If the Revenue wanted to investigate the matter further at that stage it could have easily directed the assessee to furnish more facts." 44. Reverting then to the facts of our case, we find that the petitioner had unmistakeably placed copious material on the record during the original assessment proceedings and which would have been relevant and determinative of the "four new issues" which constitute the basis for invoking Section 147. The respondents, therefore, cannot justifiably urge that the petitioner had failed to make a full and true disclosure. Whether it be with regard to remittances to SMC, TDS, long or short term capital gains, the petitioner had not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts which convince us to hold that the "four new issues" neither constituted fresh information nor could have validly formed the basis for commencement of action under Section 147 of the Act. In our considered opinion, this was at best a case where the respondents could have perhaps only alleged that the AO had failed to correctly appreciate and apply the appropriate legal provisions or give shape to a liability under the Act despite adequate disclosures having been made. But that, as the decision in Kelvinator explains, cannot in law form a basis for invocation of Section 147. 47. In New Delhi Television Ltd. the Supreme Court was faced with a case where fresh material had come to light in a subsequent AY and which cast an indelible cloud upon the truthfulness and adequacy of the disclosures that had been made in the previous AY. It was in that backdrop that their Lordships had held that such information constituted tangible material justifying the exercise of powers conferred by Section 147. Concededly, that is not the position which either obtains here or one which was canvassed by the respondents for our consideration. 48. We also find merit in the submission of Mr. Vohra, le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant found to be taxable under the Income-tax Act at 10 per cent. of the contractual receipts. The assessing authority found that the appellant had permanent establishment in India in the concerned assessment years. The appeal of the appellant is possibly pending disposal." "38. As held by the High Court, it is well settled that the principle that res judicata is not applicable to Income-tax proceedings because assessment for each year is final only for that year and does not cover later years." "39. Whether the appellant had permanent establishment or not, during the assessment year in question, is a disputed factual issue, which has to be determined on the basis of the scope, extent, nature and duration of activities in India. Whether project activity in India continued for a period of more than nine months, for taxability in India in terms of the Agreement for Avoidance of Double Taxation, is a question of fact, that has to be determined separately for each assessment year. * (2010) 327 ITR 456 (SC)." 19. In order to appreciate what the Supreme Court held in National Petroleum, it would be apposite to notice the more elaborate discussion which appears in the judgment of thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is pending before the appellate authorities. The petitioner, obviously, disputes the finding of the respondent as erroneous and misplaced, on the ground that for the assessment year 2015-2016, the first appellate authority following the decision of this court in the petitioner's own case, has held that the petitioner has no permanent establishment in India. Be that as it may, for the assessment years 2016-2017 and 2017-2018, this question has been determined against the petitioner. It is well-settled proposition that in tax jurisprudence, the principle of res judicata is not applicable to income tax proceedings. "In matters of recurring annual tax a decision on appeal with regard to one year's assessment is said not to deal with eadem questio as that which arises in respect of an assessment for another year and consequently not to set up an estoppel". [Ref : New Jehangir Vakil Mills Co. Ltd. v. CIT, (1963) 49 ITR 137 (SC)]. "It is well settled that in matters of taxation there is no question of res judicata because each year's assessment is final only for that year and does not govern later years, because it determines only the tax for a particular period". [Ref : Insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 2018. The court only considered the contract dated September 30, 2016 as noted in para-1 of the said decision. There is thus, a distinguishing feature - the R-series contract has not been considered by this court in its order dated May 9, 2017. Moreover, in the instant case, the reasons record that the two contracts are indivisible, and the petitioner cannot divide the contractual receipts in two categories, viz., inside India and outside India services. The installation permanent establishment will come into existence, if "project or activity continues for a period of more than 9 months" under Indo-UAE Double Taxation Avoidance Agreement. This question of fact will have to be determined separately for each assessment year, and we are informed that for the assessment year 2016-2017 and the assessment year 2017-2018, the determination is presently against the petitioner. We cannot accept the petitioner's contention that the assessment proceedings for the assessment years 2007-2008, 2008-2009 and 2009-2010 have already determined this question in favour of the petitioner and there is no change in any circumstances. This question would require to be determined and finding of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e referred under Section 66(2) of the Income Tax Act." 22. The position of a PE being a facts-specific issue and thus liable to be examined against the backdrop of what obtained in a particular tax period is one which is underscored even by the OECD Commentary on Article 5 and the relevant part whereof is reproduced hereunder:- "8. It is also important to note that the way in which business is carried on evolves over the years so that the facts and arrangements applicable at one point in time may no longer be relevant after a change in the way that the business activities are carried on in a given State. Clearly, whether or not a permanent establishment exists in a State during a given period must be determined on the basis of the circumstances applicable during that period and not those applicable during a past or future period, such as a period preceding the adoption of new arrangements that modified the way in which business is carried on." 23. It is in the aforesaid backdrop that the observations of the Supreme Court in CIT v. Gupta Abhushan (P) Ltd. also assume significance and where it was unambiguously held that a survey report pertaining to a particular tax period can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts" is clearly being misconstrued and read out of context. Learned counsel sought to contend that the said decision is an authority for the proposition that an AO could reopen basis an "assumption" of facts that may have obtained in a particular AY remaining unchanged. The said contention ignores the basic facts on which that decision was founded, namely, of the AO there having found that the assessee was charging to its profit and loss account fiscal duties "during the year" resulting in undervaluation of inventories and understatement of profits. The observation with respect to an assumption being reached is liable to be appreciated in the aforesaid light. The reassessment action is thus liable to be set aside on this short score alone. 26. We accordingly allow the instant writ petitions and quash the following impugned notices issued under Section 148..." 50. However, a reading of the reasons assigned establishes that the AO has not even made a token or superficial attempt to evaluate the issue from that perspective. The decision to reopen thus clearly appears to have been predicated solely on the basis of what the AO came to hold in AY 2010-11. We thus and for all the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
