TaxTMI 
TaxTMI 
2013 (4) TMI 479
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....y legal ground and do not require any investigation of facts, the same are therefore, admitted for adjudication. 3. The preliminary issue of validity of reopening of assessment under Section 147 which goes to the very jurisdiction of the 148 proceedings are being taken up first for adjudication. The relevant facts for adjudication of this issue are that, the assessee is a company, which had filed its return of income u/s. 139 (1) on 30-11-1996 for the assessment year 1996-1997 wherein 'Nil' Income was declared. The said return was duly processed under Section 143(1)(a), whereby the return of income was accepted. Subsequently, the case was reopened under section 147 by issuance of notice under Section 148, dated 7-3-2000 on the following reasons :- "During the course of assessment proceedings in the case of the assessee company for A.Y. 1997-1998, it was found that the assessee has taken loan from Virtuous Finance Ltd. All the conditions as stipulated u/s. 2(22)(e) was found satisfied. The loan taken during the year 1997-1998 was treated as dividend as per provisions of section 2(22)(e). From the records it is seen that the period relevant to A.Y. 1996-1997 also assessee ha....
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....ns of the assessee has been summarized at page 2 of the impugned assessment order dated 26-3-2004. The Assessing Officer rejected the said objections on the ground that there are sufficient 'reasons to believe' that the income chargeable to tax has escaped assessment, as the assessee has received loans and advances from the three group companies, which fulfils all the criteria of 'deemed dividend' in the hands of the assessee company in terms of section 2(22)(e). Accordingly, he completed the assessment at an income of `.26,94,479/-, exactly on the same pattern and on the same income as was made in the earlier assessment order dated 28-3-2002, passed under Section 147/143(3). 5. In the first appeal, learned CIT(A) rejected the assessee's grounds not only on the validity of assessment but also confirmed the additions on account of deemed dividend and disallowance made on deduction under Section 80M. 6. Learned AR on behalf of the assessee submitted that the second time reopening is wholly erroneous and invalid, firstly, on the ground that in the "reasons recorded", there is no mention about assessee's failure to disclose fully and truly all material facts necessary for the ass....
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....nding given by the CIT(A) as well as by the Assessing Officer. 8. We have carefully considered the rival submissions and perused the material placed on record. As stated in the foregoing paragraphs, the reopening of the assessment was done in the first round vide notice dated 7-3-2000 issued under section 148 on the ground that provisions of section 2(22)(e) are attracted and accordingly assessment order was passed u/s. 143/147 vide order dated 28.3.2002. Such a reopening and the "reasons recorded" have been found to be based on incorrect facts in the first appeal and accordingly, the reopening itself was held as invalid and assessment order passed under section 143(3)/147 was quashed from the stage of CIT(A) itself and that matter attained finality. In the second round, the reopening has been done vide notice dated 10.2.2003, issued under section 148, which is beyond the period of four years from the end of the relevant assessment year. Thus, the conditions given in first proviso to section 147 gets squarely applicable as the earlier assessment was passed under Section 143(3) read with Section 147. 8.1 It is settled law that the conditions laid down under Section 147 for the....
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....ot, one has to see from the "reasons recorded" itself. From the perusal of the "reasons recorded" as have been incorporated in foregoing paragraph 4, it is amply evident that the Assessing Officer has nowhere recorded his satisfaction that there was failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment. Such an assignment of failure in the "reasons recorded" is mandatory to acquire the jurisdiction under Section 147. It cannot be inferred from anywhere else or any other document. The "reasons recorded" must disclose that the assessee has failed to disclose fully and truly all material facts necessary for the purpose of assessment. The word 'failure' should not be inferred, it must be categorically spelled out. It is then the courts will examine whether there was any failure on the part of the assessee or not. Thus, in the present case, the "reasons recorded" by the Assessing Officer do not clothe him with the jurisdiction to proceed under Section148 and reopen the case as there is no failure on the part of the assessee to disclose fully and truly all material facts in view of the first proviso to section 147. This proposit....
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....rt of the assessee to disclose fully and truly all material facts necessary for his assessment. The present is not a case where the assessee had omitted or failed to file the return. Question then arises as to what has been omission or failure on the part of the assessee to make a full and true disclosure. There is nothing before us to show that in the return filed by the assessee-appellant the particulars given were not correct. xxx xxx xxx xxx It has been said that the taxes are the price that we pay for civilization. If so, it is essential that those who are entrusted with the task of calculating and realizing that price should familiarize themselves with the relevant provisions and become well-versed with the law on the subject. Any remissness on their part can only be at the cost of the national exchequer and must necessary result in loss of revenue. At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that stale issue should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi-judicial controversies as it must in ....
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....e assessment year. Such escapement must be by reason of the failure on the part of the assessee either to file a return referred to in the proviso or to truly and fully disclose the material facts necessary for the assessment. Whenever a notice is issued by the Assessing Officer beyond a period of four years from the end of the relevant assessment year, such notice being issued without recording the reasons for his belief that income escaped assessment, it cannot be presumed in law that there is also a failure on the part of the assessee to file the returns referred to in the proviso or a failure to fully and truly disclose the material facts. The reasons referred to in the main paragraph of section 147 would, in cases where the proviso is attracted, include reasons referred to in the proviso and it is necessary for the Assessing Officer to record that any one or all the circumstances referred to in the proviso existed before the issue of notice under section 147." After an assessment has been made, in the normal circumstances, there would be no reason for anyone to doubt that the assessment has been made on the basis of all relevant fact. If the Assessing Officer chooses to ....
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....s, there is nothing to indicate that reopening is sought on the ground of the failure on the part of the petition to disclose fully and truly all-material facts." (419) (v) Oil and Natural Gas Corporation Ltd. vs. Dy. CIT & Ors. (Uttaranchal) reported in (2003) 262 ITR page 648. The proviso to section 147 of the Income-tax Act, 1961, provides that reopening of the assessment after the expiry of four years' from the assessment year would be permissible only if there is failure on the part of the assessee to disclose fully and truly material facts necessary for assessment. The duty of the assessee does not extend beyond making a true and full disclosure of primary facts. Once he has done that his duty ends. It is for the Income-tax Officer to draw the correct inference from the primary facts. It is no responsibility of the assessee to advise the Income-tax Officer with regard to the inference which he should draw from the primary facts. If an Income-tax Officer draws an inference which appears subsequently to be erroneous, mere change of opinion with regard to that inference would not justify initiation of action for reopening of assessment. xxx xxxx xxxx xx....
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.... squarely apply to the facts of the instant case and on the pretext that there was no conscious consideration of the pointed facts at the time of the assessment, reopening of the assessment is not legally permissible by virtue of the proviso to section 147 of the Act. In McDermott Internation Inc. v. Addl. CIT (2003) 259 ITR 138 (Uttaranchal) to which one of us (Hussain J.) was a party, this court has recently held that an assessment could not be reopened when there was no failure on the part of the assessee to make a full and true disclosure of all material facts. It was reiterated that a reassessment can not be initiated on the basis of a change of opinion and that it was reiterated that a reassessment can not be initiated on the basis of a change of opinion and that Explanation 2 to section 147 of the Act permits reassessment within the permissible period under section 147 whereas to carry reassessment beyond a period of four years, the conditions under the proviso have to be fulfilled. It was thus observed (page 142); "According to learned counsel, the information as envisaged under the Explanation would also be decision of superior authorities and includes true and corre....
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.... case, we are not inclined to dismiss the petition in limine because the reasons now disclosed by the Assessing Officer, on the face of it, show that there is nothing in the reasons to indicate failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. In the case of IPCA Laboratories Ltd. (2001) 251 ITR 416, this court has held that in view of the proviso to section 147 of the Income-tax Act, no action for reopening after four years could be taken unless the Assessing Officer has reason to believe that income has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Admittedly, the period of four years has expired. Hence, we are not inclined to dismiss the petition in limine. Further as stated above, even the reasons do not disclose a finding, viz., that the petitioner had failed to disclose fully and truly all material facts necessary for assessment. In fact, the reasons show that from the case record itself certain conclusions are sought to be drawn. Hence, we are not inclined to dismiss the petition in limine. We may clarify that this judg....
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....eturn as required or any failure or omission in relation to any material fact necessary for the purposes of assessment as required under the proviso to section 147 of the Act. Therefore, the Revenue having failed to discharge the onus under the proviso to section 147 of the Act, no case is made out for the assessment years 1982-83 to 1985-86 being disturbed and the notices for the said four assessment years are quashed. It is held that the reassessment proceedings are bad in law. (71) (ix) Mahavir Spinning Mills Ltd. Vs C.I.T. reported in(2004) 270 ITR Page 290 (Punjab & Haryana H.C) : A bare perusal of the above shows that the entire thrust of the observations recorded by the Assessing Officer is to justify his satisfaction about escapement of income. There is not even a whisper of an allegation that such escapement had occurred by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment. As held in Duli Chand Singhania's case [2004] 269 ITR 192 ( P & H), absence of this finding makes the action of the Assessing Officer wholly without jurisdiction. Since the illegality of notice under section 148 of the Act....
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....s, the impugned notice having been issued beyond four years from the last date of the relevant assessment year without alleging any failure to disclose full and true material facts is liable to be set aside. It is not in dispute that the Assessing Officer on September 15, 2003, had himself carried the file to the Commissioner of Income-tax and on the very same day, rather the same moment in the presence of the Assessing Officer, the Commissioner of Income-tax granted approval. As a matter of fact, while granting approval it was obligatory on his part to verify whether there was any failure on the part of the assessee to disclose full and true relevant facts in the return of income filed for the assessment of income of that assessment year. It was also obligatory on the part of the Commissioner to consider whether or not power to reopen is being invoked within a period of four years from the end of the assessment year to which they relate. None of these aspects have been considered by him which is sufficient to justify the contention raised by the petitioner that the approval granted suffers from non-application of mind. In the above view of the matter, the impugned notices and c....
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....l conditions laid down under section 147 and the proviso thereto are satisfied, the notice under section 148 can be issued only after the Assessing Officer has recorded his reasons for doing so under sub-section (2) of section 148 and has further obtained the necessary sanction for issuance of the notice as required under section 151 of the Act. Such notice is also required to be issued within the time limit prescribed under section 149 of the Act. Section 149 of the Act, in our opinion, does not relax the restriction of our years prescribed in the proviso to section 147 of the Act for issuance of a notice under the proviso to section 147. The restriction of four years would be applicable unless the income chargeable to tax has escaped assessment by reason of failure of the assessee to make a return under section 139 or in response to a notice under section 142 or 148 of the Act or the failure of the assessee to disclose fully and truly all material facts. If the reassessment is required to be made on account of the failure of the assessee to disclose fully and truly all material facts necessary for his assessment, obviously, the restriction of four years put under the proviso to s....
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....ef and to that limited extent the opinion is open to challenge in the court of law. Paragraph Nos.2 and 3 of the reasons recorded by the Income-tax Officer state the reason for the belief of the Assessing Officer that income had escaped assessment. (113) xxx xxx xxx xxx "In our opinion, a subsequent decision of a court cannot justify the reopening of an assessment after a period of four years as the subsequent decision does not mean failure on the part of an assessee to disclose fully and truly all material facts. We are fortified in our view the decision of the Calcutta High Court in Indra Co Ltd. v. ITO [1971] 80 ITR 559 at pages 562 to 565, and the Gujarat High Court, rendered in Arvind Mills Ltd. v. Deputy CIT [2000] 242 ITR 173 and CIT v. Gujarat Ginning and Mfg. Co. Ltd. reported in [1994] 205 ITR 40 to which our attention was drawn by Mr. Dastur. He also relied upon a decision of the Calcutta High Court reported in Simplex Concrete Piles (India) Ltd. v. Deputy CIT [2003] 262 ITR 605. In the case of Simplex Concrete Piles (India) Ltd. [2003]262 ITR 605, the Division Bench of the Calcutta High Court, after considering the law as it stood prior to the amendment ....