TaxTMI 
TaxTMI 
2012 (5) TMI 133
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....is a company engaged in the business of manufacturing ABS resins and SAN resins, trading of polycarbonate and wind power generation. 2. The petitioner filed return of income for the Assessment Year 2006-07 declaring the total income of Rs.28,56,42,112=00. The said return was accompanied by a statement of total income, Form No.1, 3CD and 3CD, audit report obtained under Section 44AB of the Act and the audited balance-sheet. 3. The Assessing Officer for the Assessment Year 2006-07 selected the case for scrutiny and issued notices under Section 142(1) of the Act, calling for various details. Explanation was also called for as to why unutilized cenvat credit should not be included in the value of closing stock. The notices issued by the Assessing Officer were replied by the writ-petitioner. 4. The Assessing Officer, after being satisfied with the details and information provided by the writ-petitioner, passed an order under Section 143(3), allowing the claim of the writ-petitioner relating to the concerned issue amongst others. 5. After a period of about three years at the end of the Assessment Year 2006-07, a notice dated 29 th March 2011 under ....
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....e of reasons including such belief. 4. The respondent sought to reopen the assessment under Section 147 of the Act by issuing a notice under Section 148 of the Act notwithstanding the fact that there is no valid reason to issue such notice. 5. The reasons recorded for issue of notice under Section 148 of the Act indicate mere change of opinion of the Assessing Officer on the selfsame issue, which was processed in the original assessment. There was no failure on the part of the petitioner either in filing the return or full furnishing of the particulars. 6. The Assessing Officer, vide letter dated 6 th August 2009 at Point No.28, raised a specific query as to "justification note as to why unutilized cenvat credit should not be included in the value of closing stock". Thereafter, vide letters dated 18 th August 2009 and 24 th August 2009, it was replied to the said queries, "we confirm that as on 31 st March 2006 there was no cenvat credit outstanding and remaining unadjusted in the P and L account. All credits have been accounted in RG 23 of Excise Records. The value of purchases of raw materials is correspondingly reduced". So the Assessing Officer was....
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....asis of change of opinion, which is not even borne out by the record. 5. That in the guise of reassessment, assessment made under Section 143(3) is sought to be reviewed. The respondent is seeking to apply his mind on the same set of facts which were already there at the time when the original assessment was made. No new fact or material has been brought on record for the formation of reason to believe that the income of the petitioner has escaped assessment. There was no material, which has nexus with the forming of the requisite belief. The writ-application is opposed by the Revenue by filing affidavit-in-reply, thereby opposing the prayer of the writ-petitioner and the defence of the Revenue may be epitomized thus: 1. The writ-petition filed by the petitioner is a premature one inasmuch as only a notice under Section 148 of the Act has been issued and in the event the petitioner is aggrieved by the reassessment order to be passed, the statutory remedy of appeal under the provisions of the Act is available. 2. Mr.K.M.Parikh, learned counsel appearing on behalf of the Revenue contended that all that is necessary for the purpose of invoking S....
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....pra) has not disturbed the ratio as laid down in PVS Beedies (supra). He lastly contended that the Assessing Officer had valid reason to believe that income has escaped assessment and, therefore, after formation of such belief the Assessing Officer recorded reasons and issued the impugned notice which cannot be said to be, in any manner, unjustifiable or illegal as there is no change of opinion. Therefore, the only question that arises for determination in this writ-application is, whether the Assessing Officer was justified in issuing the notice under Section 148 of the Act in the facts of the present case. In order to appreciate the question involved in this petition, we first propose to deal with the reasons for initiating proceedings under Section 147 of the Act as disclosed by the Assessing Officer. The reasons assigned by the Assessing Officer are quoted below: 1. It is noticed that the assessee company followed mercantile system of accounting. Purchase, sales and closing stock were accounted net of excise duty (exclusive method). As per annexure to Item No.22(a) of the CA's report in Form 3CD the details of cenvat credit availed on raw materials....
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.... year]: Provided that where an assessment under sub-section [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 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 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 ....
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....Income-tax Officer from proceeding to reassess the income when the conditions precedent do not exist. At p. 207, K.C. Das Gupta, J., delivering the majority judgment of the Court observed: "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. The High Court may, therefore, issue a high prerogative writ prohibiting the Income-tax Officer from proceeding with reassessment when it appears that the Income-tax Officer had no jurisdiction to commence proceeding. 5. The condition which invests the Income-tax Officer with jurisdiction has two branches: (i) that the Income-tax Officer has reason to believe that income chargeable to tax has escaped assessment; and (ii) that it is in consequence of....
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....the Constitution, to set aside or vacate the notice for reassessment on a re-appraisal of the evidence. 7. The High Court in this case was apparently of the view that the information in consequence of which proceedings for reassessment were intended to be started, could have been gathered by the Income-tax Officer in charge of the assessment in the previous years from the disclosures made by the two Hindu undivided families. But that, in our judgment, is wholly irrelevant. Jurisdiction of the Income-tax Officer to reassess income arises if he has in consequence of information in his possession reason to believe that income chargeable to tax has escaped assessment. That information must, it is true, have come into possession of the Income-tax Officer after the previous assessment, but even if the information be such that it could have been obtained during the previous assessment from an investigation of the materials on the record, or the facts disclosed thereby or from other enquiry or research into facts or law, but was not in fact obtained, the jurisdiction of the Income-tax Officer is not affected." (Emphasis supplied). At this stage, we propose to refer t....
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.... supplied). At this stage, we may rather aptly refer to a latest three-judge-bench decision of the Supreme Court in the case of Commissioner of Income Tax v/s. Kelvinator of India Limited, reported in (2010) 2 SCC 723, where the said court after taking into consideration the effect of Direct Tax Laws (Amendment) Act, 1987 on section 147 made the following observations while dismissing the appeals preferred by the Revenue: "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 from1-4-1989), 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,....
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.... him in writing, is of the opinion'. Other provisions of the new Section 147, however, remain the same." (emphasis supplied) 9. For the aforestated reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs." (Emphasis given by us). Bearing in mind the aforesaid principles, we now propose to consider the case before us. After hearing the learned counsel for the parties and after going through the aforesaid materials on record, we find that the main reason for opening the assessment is that the assessee company followed mercantile system of accounting . Purchase, sales and closing stock were accounted net of excise duty and CA's report in Form 3CD disclosed the details of cenvat credit availed on raw materials and utilized by the company during the previous year relevant to the Assessment Year 2006-07, showing that the assessee had opening balance of cenvat credit on raw material amount to Rs.3,95,18,316=00 and the unutilized cenvat credit as on 31 st March 2006 was to the tune of Rs.6,87,99,812=00 as reflected in the balance sheet as on 31 st March 2006 as loans and advances. Acco....
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....al before the Supreme Court in the case of Kelvinator of India Limited (supra), the Delhi High Court dealt with the similar point as would appear from the following observations quoted below: "Applying the principles laid down by the Full Bench of this court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did not express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequences of that lapse. In so far as the present appeal is concerned, we find that the assessee had placed all the material before the Assessing Officer and where there was a doubt, even that was clarified by the assessee in its lette....
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....s pointed out by the internal audit party that recognition which had been granted to the PVS Memorial Charitable Trust had expired on 22 nd September 1972, suggestive of the fact that it had expired before 1 st April 1973. Therefore, in the relevant years of account the charitable trust was not a recognized charitable trust. Therefore, the donations to PVS Memorial Charitable Trust did not qualify for deduction under Section 80G of the Act as a donation made to a recognized charitable trust. The Supreme Court in this factual background took the view that the Tribunal and the High Court were in error in holding that the information given by the internal audit party could not be treated as information within the meaning of Section 147(b) of the Act. The Supreme Court took the view that the audit party merely pointed out the facts which were overlooked by the Income Tax Officer in the assessment. The Supreme Court also noticed the fact that recognition granted to the charitable trust had expired on 22 nd September 1972 and this fact was overlooked by the Income Tax Officer. Allowing the appeal of the Revenue, the Supreme Court held that the case was not one of information on a questio....
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....uch 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 recompute 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 sub-section (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 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 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." It was in context with Section 147(b) that the Supreme Court held that reopening of the case on the basis of information provided by the audit party as r....