2011 (11) TMI 242 - HC - Income Tax

Review petition dismissed, reassessment upheld. Legal principles emphasized. No costs awarded.

Dalmia Brothers (P) Ltd. Versus CIT and Anr.

The Court dismissed the review petition, upholding the legality of the reassessment proceedings and finding no merit in the petitioner's contentions. The ... Income escaping assessment - Where Assessing Officer in the original assessment order,made an addition of Rs. 19,86,551/- under Section 41(1) but not in respect of other unconfirmed creditors of Rs. 32,97,507/-. This was a factual lapse, which was pointed out in the audit objection and then examined by the authorities. This factual lapse was found to be correct and, therefore, reassessment proceedings were initiated. Initiation of the reassessment proceedings has been held to be proper in view of the decision of the Supreme Court in CIT versus P.V.S. Beedies Private Limited, (1997 - TMI - 5725 - SUPREME Court) and the Delhi High Court in News Light Trading Company vs Commissioner of Income Tax. - Decided against assessee. Issues Involved:1. Reliance on uncited decisions/judgments.2. Adverse commentary on previous Division Bench decision.3. Reliance on records not made available to the petitioner.4. Jurisdictional pre-conditions for reassessment proceedings.5. Whether the observations in Consolidated Photo and Finvest Limited are contrary to Kelvinator India Limited.Detailed Analysis:1. Reliance on uncited decisions/judgments:The petitioner contended that the Court relied on decisions/judgments not cited during the arguments. The Court clarified that it is permissible to rely on relevant judgments not cited during arguments if they pertain to the legal issues raised. The Court noted that the respondents had cited several decisions on change of opinion and failure to disclose material facts fully and truly. The Court found no merit in the petitioner's contention and rejected it, stating that the scope of review is circumscribed under Order XLVII, Rule 1.2. Adverse commentary on previous Division Bench decision:The petitioner argued that the decision in Consolidated Photo and Finvest Limited was adversely commented upon in subsequent cases and ran counter to the Full Bench decision in Kelvinator India Limited. The Court examined paragraphs 13, 15, and 16 of the decision dated 26th September 2011, which quoted observations from Consolidated Photo and Finvest Limited. The Court found that the principles laid down in these paragraphs were correct and not contrary to Kelvinator India Limited. The Court noted that the petitioner's counsel did not press submissions on these paragraphs, realizing they were consistent with legal principles.3. Reliance on records not made available to the petitioner:The petitioner claimed that the Court relied on records produced by the Revenue, which were not made available to them. The Court clarified that the records were produced and examined during the hearing on 13th September 2011, and the petitioner did not request to see them. The Court found it difficult to believe that the petitioner was unaware of the audit objections, as they were part of the assessment records and not treated as confidential by the Revenue.4. Jurisdictional pre-conditions for reassessment proceedings:The petitioner contended that the reassessment proceedings were based on a change of opinion and that they had made full and true disclosure of material facts. The Court referred to the legal position explained in the judgments cited, emphasizing that the Assessing Officer must have reasons to believe that income has escaped assessment, and there must be a nexus between the material before the Assessing Officer and the belief formed. The Court found that the reassessment proceedings were initiated after examining the audit note, which pointed out a factual lapse in the original assessment. The Court held that the initiation of reassessment proceedings was proper, citing decisions from the Supreme Court and Delhi High Court.5. Whether the observations in Consolidated Photo and Finvest Limited are contrary to Kelvinator India Limited:The petitioner argued that the observations in Consolidated Photo and Finvest Limited were too broad and wide. The Court noted that special leave was granted against the decision in Consolidated Photo and Finvest Limited, but the civil appeal was dismissed. The Court found that the factual findings in paragraphs 8 and 9 of the decision dated 26th September 2011 were crucial. These paragraphs detailed the factual lapse in the original assessment, where unconfirmed creditors were not fully added back. The Court concluded that the reassessment proceedings were justified based on these factual findings.Conclusion:The Court dismissed the review petition, finding no merit in the contentions raised by the petitioner. The reassessment proceedings were held to be proper, and the Court upheld the legal principles applied in the judgment. No costs were awarded.