TaxTMI 
TaxTMI 
2012 (2) TMI 407
X X X X Extracts X X X X
X X X X Extracts X X X X
....e and without any new material on record and thus a change of opinion which is illegal and arbitrary there being no new material brought on record by the A.O. 2. Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in reversing the order of the CIT(A) on the basis of audit objection which is illegal and arbitrary and thereby wrongly concurring with the action of the A.O. in confirming the issuance of notice u/s 148 of the Income Tax Act, 1961 to a duly completed assessment u/s 143(1) of the Income Tax Act, 1961." 2. These appeals pertain to the returns filed by the appellant for the years 1997-98, 1998-99 and 2000-2001. Questions of law are same. Except for difference in dates facts being almost identical/similar, for the purpose of adjudication of these appeals, facts pertaining to the year 1997-98 are being referred to. Facts of I.T.A. No. 14 of 2007 3. Appellant is a partnership firm having an industrial undertaking, an oil mill unit in Damtal, within the State of Himachal Pradesh. It also has other businesses of petrol pumps, carriage contacts of Indian Oil Corporation, Kerosene oil and trading outlets in ot....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ioned the deductable common expenses in the ratio of turn over of different units and worked out deductable expenses relatable to the oil unit, holding that assessment of the relevant amount in the relevant year as claimed by the appellant was excess and had escaped assessment on account of claiming excessive deduction under Section 80-IA of the Act. Thus on the original figure of profit amounting to Rs. 31,60,940/- being the net income on which deduction of Rs. 10,43,208/- to the extent of 25% as claimed by the assessee, the Assessing Officer restricted the deductions to the extent of Rs. 7,87,820/-, thereby making the total net income of the assessee to be Rs. 34,16,328/-. 5. Order of assessment dated 5.3.2004 passed by the Assessing Officer was assailed by the assessee in Appeal No. IT/31/04-05/PLP before the CIT (Appeals), Palampur, which was allowed vide order dated 9.8.2004 (Annexure A/2, pg. 49). Aggrieved thereof, Revenue filed Appeal No. ITA Nos. 1227/Chandi/2004 before the ITAT, Chandigarh Bench, Chandigarh, whereby in terms of order dated 12.12.2006, the order passed by the CIT(A) was set aside and the order passed by the Assessing Officer upheld. Hence the present ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....stant Commissioner of Income Tax, Palampur, u/s 143(3) of the Act 2000-2001 A/2 48 29.12.2004 Order passed by CIT (Appeals) in Appeal No. IT/33/04-05/PLP 2000-2001 A/1 43 24.6.2006 Order passed by ITAT, Chandigarh, in ITA No. 205/Chandi/2005 2000-2001 7. It is the contention of the appellant that with regard to the year 1995-96 similar notice dated 5.7.1999 (Annexure A/6, pg. 120 of Appeal No. 14/2007), was issued by the Assessing Officer, informing that income from eligible undertaking had not been computed separately to facilitate the working out of the income eligible from the deductions under Section 80IA of the Act. Appellant immediately responded to the same in terms of letter dated 14.7.1999 (Annexure A/7, pg. 121 of Appeal No. 14/2007), clarifying that claim under Section 80IA sub-section (7) was rightly claimed and correctly allowed under Section 143(1)(a) of the Act only on the eligible business and income derived from the said eligible business. As per the statement showing computation of income, separate profit and loss account in respect of oil mills units, Damtal (H.P.) only eligible income was separated to deduction under the Act. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cts necessary for assessment and re-opening of the assessment was bad in law. In this regard, appellant has placed on record order dated 25.5.2006 passed by Order of ITAT, Chandigarh in ITA No. 1072/Chandi/2004 (Annexure A-5, paged 111 of Appeal No. 14/2007). 9. Mr. Mukhi, learned counsel for the appellant has made submissions to the effect that appellant has made full disclosure of all relevant facts and there was no new material which had come to the notice of Assessing Officer warranting re-opening of the assessment, which stood finalized under Section 143(1)(a) of the Act; No notice under Section 143(2) of the Act, with respect to the orders in question was ever issued to the assessee, therefore, assessment under Section 143(1)(a) had acquired finality and could not be re-opened; audit objection is not information and thus issuance of notice is bad in law; Mere change of opinion on same set of facts is impermissible in law particularly when proceedings with regard to earlier years i.e. 1995-96 and 1996-97 acquired finality. Hence principle of resjudicata would apply. 10. In rebuttal, Mr. Vinay Kuthiala and Mrs. Vandana Kuthiala, learned counsel for the Revenue, have argue....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under subsection (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Explanation 1.- Production before the Assessing Officer of account ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge 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 enqu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nal return. Objections filed by the assessee alongwith fresh return, for initiation of reassessment proceedings were dismissed, which were challenged by the assessee. The High Court upheld the assessee's contention that in view of return having been accepted under Section 143(1) of the Act, the Assessing Officer had no jurisdiction to re-open the case under the provisions of Section 148. It is in this background that the Apex Court while setting aside the judgment passed by the High Court upheld the order passed by the Assessing Officer. It held as under:- "19. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ot a ground for dismissing the subsequent appeal on the principle of res judicata. 19. In CIT v. Brijlal Lohia & Mahabir Prasad Khemka [1972] 4 SCC 432, the Apex Court held that principle of res judicata does not apply in matters pertaining to tax for different assessment years. 20. But in Radhasoami Satsang v. CIT [1992] 60 Taxman 248 (SC) reiterating the view earlier taken in M.M. IPOH v. CIT [1968] 67 ITR 106 (SC), the Court clarified that where fundamental aspect permeating through different assessment years has been found as a fact one way or other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 21. In the said decision Court was dealing with the issue as to whether income derived from a religious institution was entitled to statutory exemptions under the Income Tax Act. Considering the long standing history of the Institution and the background in which its branches had been accorded such exemptions and were allowed to continue to avail such advantages constantly over a period of time, throughout various parts of the Country, the Court was....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lowing year, but ordinarily there is no bar against the investigation by the Income Tax Officer of the same facts on which a decision in respect of an earlier year was arrived at." [Emphasis supplied] 24. We are in agreement with the following observations of Ranganath Misra, C.J. in Radhasoami Satsang v. Commissioner of Income Tax, {(1992) 1 SCC 659 : JT 1991 (4) SC 313}; "16. We are aware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." [Emphasis supplied]" 24. The Constitutional Bench in Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 STT 245 (SC), has held that: "The decisions cited have uniformly held that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cisions rendered by various other High Courts in Dhansiram Agarwalla v. CIT [1996] 217 ITR 4/[1995] 81 Taxman 1 (Gau.), Asstt. CIT v. Gendalal Hazarilal & Co. [2003] 263 ITR 679/[2004] 134 Taxman 384 (MP) and Jai Hotels Co. Ltd. v. Asstt. DIT [2009] 184 Taxman 1 (Delhi), Bapalal & Co. Exports v. Jt. CIT (OSD) [2007] 289 ITR 37/[2008] 170 Taxman 131 (Mad.), Apollo Hospitals Enterprises Ltd. v. Asstt. CIT [2006] 287 ITR 25/157 Taxman 289 (Mad.), Saurashtra Cement & Chemical Industries Ltd. v. CIT [1980] 123 ITR 669/[1979] 2 Taxman 22 (Guj.). 29. In Punjab Tractors Ltd. v. Jt. CIT [2002] 254 ITR 242/121 Taxman 54, High Court of Punjab & Haryana had to deal with a case where prior to passing of the order under Section 143(3), notice under Section 147/148 was issued to the assessee. The Court held that finalization of proceedings under Section 143 was not sine qua non for issuance of notice under Section 147/148 of the Act. 30. Reliance on the decision of the Apex Court in Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra), by the Revenue is totally misconceived on facts. In the instant case, as has already been noticed herein earlier practice adopted by the assessee was accepted by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ecial Bench of ITAT was constituted to resolve the issue which also affirmed the view taken by the High Courts and the judgments/findings were never assailed by the Revenue before the Supreme Court but were in fact accepted with regard to different assessees, the Supreme Court held that : "If the Revenue has not challenged the correctness of the law laid down by the High Court and has accepted it in the case of one assessee, then it is not open to the Revenue to challenge its correctness in the case of other assesses, 'without just cause'". 34. As to whether the opinion of internal audit party of the Income Tax department on the point of law can be regarded as 'information' within the meaning of Section 147-B of the Income Tax Act, 1961 (pre amended provisions) or not came up before the three Judge Bench of the Apex Court in Indian & Eastern Newspaper Society v. CIT [1979] 2 Taxman 197, wherein the Apex Court has held that: "13. In the present case, an internal audit party of the Income-tax Department expressed the view that the receipts from the occupation of the conference hall and rooms did not attract Section 10 of the Act and that the assessment should have been made ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on a reconsideration of the same material (and no more) does not give him that power. That was the view taken by this Court in Maharaj Kumar Kamal Singh v. Commr. of Income-tax [1959 Supp 1 SCR 10], Commr. of Income-tax v. Raman and Co. [(1968) 67 ITR 11: AIR 1968 SC 49] and Bankipur Club Ltd. v. Commr. of Income-tax, (1971) 82 ITR 831 (SC), and we do not believe that the law has since taken a different course. Any observations in Kalyanji Mavji & Co. v. Commr. of Income-tax (supra) suggesting the contrary do not, we say with respect, lay down the correct law. 15. A further submission raised by the Revenue on Section 147 (b) of the Act may be considered at this stage. It is urged that the expression 'information' in Section 147(b) refers to the realisation by the Income-tax Officer that he has committed an error when making the original assessment. It is said that, when upon receipt of the audit note the Income-tax Officer discovers or realizes that a mistake has been committed in the original assessment, the discovery of the mistake would be 'information' within the meaning of Section 147(b). The submission appears to us inconsistent with the terms of Section 147(b). Plainly, t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... was permissible under law. 37. In Cartini India Ltd. v. Addl. CIT [2009] 179 Taxman 157 (Bom.), the High Court of Judicature at Bombay while dealing with the case where the Assessing Officer, after accepting the explanation furnished by the assessee had passed orders which were sought to be reopened by issuing notice under Section 148 of the Act, held that in the absence of existence of "tangible material" on the basis of which Assessing Officer could form a reasonable belief that income chargeable to tax had escaped assessment, it would be impermissible for the revenue to reopen the assessments. Facts of the instant case are similar to the one before the court in the said decision. 38. To this effect are also decisions of the other High Courts as reported in Asian Paints Ltd. v. Dy. CIT [2009] 308 ITR 195 (Bom.), CIT v. Chakiat Agencies (P.) Ltd. [2009] 314 ITR 200 (Mad.), Legato Systems India (P.) Ltd. v. Dy. CIT [2010] 187 Taxman 294 (Delhi), Aventis Pharma Ltd. v. Asstt. CIT [2010] 233 CTR (Bom.) 257, Satnam Overseas Ltd. v. Addl. CIT [2010] 188 Taxman 172 (Delhi), Carlton Overseas (P.) Ltd. v. ITO [2010] 188 Taxman 11 (Delhi) and CIT v. SFIL Stock Broking Ltd. [2010] 32....