TaxTMI 
TaxTMI 
2014 (4) TMI 216
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.... 2012 was admittedly issued after the expiry of 4 years from the end of the A. Y. 2005 - 2006 and therefore bad in law for want of satisfaction of the following prerequisite conditions: ( a) there must be a reason to believe that the income chargeable to tax has escaped assessment; (b) there must be a failure on the part of the assessee to disclose fully and truly all material facts as a result of which income has escaped assessment; (c) the allegation of failure of the assessee to disclose fully and truly all material facts should be in the reasons as recorded for reopening the assessment; and (d) the belief that income has escaped assessment must not be on account of a change of opinion. According to the Petitioner, none of the aforesaid prerequisite conditions have been fulfilled and therefore no reassessment proceedings could be initiated for the A. Y. 2005 - 2006. 4. Before referring to the facts giving rise to the present controversy it is necessary to note certain aspects about the petitioner. The Petitioner, a company registered under the Companies Act, 1956, is fully owned by the Government of Maharashtra. The Petitioner has been appointed as the New T....
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....magnitude of the work involved in developing any area as a site for the new town, the time required for setting up new machinery for undertaking and completing such work of development, and the comparative speed with which such work can be undertaken and completed in the public interest, if the work is done through the agency of a corporation including a company owned, or controlled by the State or a subsidiary company thereof, set up with the object of developing an area as a new town, the State Government may, notwithstanding anything contained in subsection (2), require the work of developing and disposing of land in the area of a new town to be done by any such corporation, company or subsidiary company aforesaid, as an agent of the State Government; and thereupon, such corporation or company shall, in relation to such area, be declared by the State Government, by notification in the Official Gazette, to be the New Town Development Authority for that area;" 5. It is the case of the Petitioner that it maintains separate project accounts for each of the projects for which it is acting as a New Town Development Authority/Special Planning Authority. Insofar as the Navi Mumbai....
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....an agent of the Government of Maharashtra. 9. For the A. Y. 2005 - 2006 the case of the Petitioner was selected for scrutiny assessment. Respondent No. 1 by a notice dated 10th October 2007 sought various details including details regarding the Navi Mumbai Project. In turn, the Petitioner by its detailed reply dated 14th December 2007 gave a background of its appointment by the Government of Maharashtra as the New Town Development Authority for the development of Navi Mumbai and stated that it was a statutory agent of the Government of Maharashtra as per the provisions of section 113 (3A) of the MRTP Act. It was therefore stated that although in the return of income the Petitioner had offered some income to tax for the projects other than the Navi Mumbai Project, VasaiVirar Project & Waluj Project, the Petitioner was not chargeable to tax for any of the projects carried on by the Petitioner as the New Town Development Authority. The Petitioner filed a further reply dated 17th December 2007 wherein it was reiterated that the Petitioner, being an agent of the Government of Maharashtra, was not chargeable to tax. 10. After receiving the said replies, on 26th December, 2007 Respo....
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....ndent No. 1. In view of the aforesaid finding, Respondent No. 1 stated that since the surplus of Rs.41,571.15 lakhs of receipts over expenditure on account of the Navi Mumbai Project for the A. Y. 2005 - 2006, had not been offered to tax on the very same ground namely that the Petitioner was an agent of the Government of Maharashtra, he had reason to believe that the income of Rs.41,571.15 lakhs had escaped assessment within the meaning of section 147 of the Act. 14. By a letter dated 12th March 2012 the Petitioner filed its objections to the issuance of the notice under section 148 of the Act. The Petitioner's stand was that since the reassessment proceedings had been initiated beyond the period of 4 years: ( i) the reassessment proceedings could be initiated only if there was a failure disclose material facts by the Petitioner and in the present case there was not even an allegation in the reasons for reopening the assessment that there was any failure to disclose any material fact in the original assessment proceedings; (ii) that in fact there was no failure on the part of the Petitioner to disclose any material fact necessary for the assessment; (iii) Respondent....
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....t to certain limitations. The first proviso to the section inter alia provides as follows : " 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: 17. Admittedly, in the present case, an assessment had been made under section 143(3) for A.Y. 2005-06. It is also admitted that the reassessment proceedings initiated for A.Y. 2005-06 was after the expiry of four years from the end of the A.Y. 2005-06. In such a scenario, no action for initiation of reassessment proceedings for A.Y. 2005-06 could be initiated unless the income chargeable to tax had escaped assessment by a reason of failure on the part of the petitioner to d....
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.... establish the vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing an affidavit or making an oral submission, otherwise the reasons which were lacking in the material particular would get supplemented, by the time the matter reaches the Court on the strength of the affidavit or oral submissions advanced." (emphasis supplied) 19. After relying upon the judgement of Hindustan Lever (supra) another Division Bench of this Court in the case of Prashant S. Joshi v/s Income Tax officer and another, reported in (2010) 325 ITR 154 (Bom), held as follows : " 9. Section 147 provides that if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of sections 148 to 163, 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 the section. The first proviso to section 147 has no application in the ....
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....ns of section 10(20A) of the Income Tax Act, 1961. This section has been withdrawn by the Finance Act, 2002, thereby subjecting the income of the Corporation to be taxed under the provisions of the Income Tax Act. In view of this, a provision of Rs.65.34 lakh has been made towards Income Tax for the year, on the income earned on New Towns, whereas no provision has been made on the Income of Navi Mumbai Project as the Corporation is acting as an Agent of the Government of Maharashtra. The entire receipts have been credited to the Project Accounts as recovery of cost and are not treated as revenue in the Books of Accounts of the Corporation." (emphasis supplied) (B) In the Annual Report under the note after Schedule 9 (which related to the Navi Mumbai Project) specifically stated as follows : " 1. Navi Mumbai Project is being developed by for and on behalf of the Government of Maharashtra vide its Resolution No.CID2072U dated 11 th January 1974 and No.CID2084132016184/ UD4 of General Administration Department and Urban Development Department respectively of the Government of Maharashtra. 2. Accounts in the prescribed form were submitted to the government of Maharashtra....
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....rial facts were disclosed by the Petitioner in relation to its acting as an agent of the Government of Maharashtra for the Navi Mumbai Project. 24. We will presume that the above disclosure by itself is not sufficient to challenge successfully the proposed reassessment proceedings. It would make no difference. As we will now demonstrate, the Assessing Officer called for particulars and sought explanations from the Petitioner specifically on this issue viz. the Petitioner's claim that it acted as the agent of the Government of Maharashtra in respect of the Navi Mumbai Project. The Petitioner furnished the information and complied with all the requisitions. This establishes that the Assessing Officer's attention was focussed on the issue and that he applied his mind to the same before he made the Assessment Order. The facts in this regard are as follows : (A) By a notice dated 10th October 2007, the Petitioner was informed that the A.Y. 2005-06 was selected for scrutiny assessment proceedings. By the said notice, the petitioner was inter alia asked to furnish details in support of various claims of expenditure made in respect of the Navi Mumbai Project. (B) In reply ....
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....ning paragraph, the assessee has been entrusted with the task of development of Navi Mumbai in the Thane, Panvel and Uran Tehsils of the Thane and Raigadh Districts, by the Government of Maharashtra. The GR of the Urban Development Department provides for the details of development work relating to infrastructure work etc. the financial relationship between the Government and the assessee, and other issues. In this respect the Government of Maharashtra issued various GRs, the latest being the GR No.CID 2084/1320/CR 161/74 UD4 dated 2nd January 1985, issued by the Urban land Development Department. In view of the said G.R. (dated 2.1.1985), it is observed that the Government of Maharashtra gives / stipulates 'Terms Regulating Relationship of the assessee with the Government', so far as Navi Mumbai is concerned. The said G.R. Specifically stipulates that the activities of the assessee for Navi Mumbai project shall be carried out on behalf of the Government of Maharashtra. The assessee shall be agent of the state Government, as far as Navi Mumbai Project is concerned. It is also observed that no separate Profit and Loss Account is prepared by the assessee in respect of project....
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....t to the Navi Mumbai Project. The statements were made to justify the Petitioner not having made any provision for the income of the Navi Mumbai project. This itself shows that the Petitioner's assertion was that it acted as an agent and therefore made no provision for the income of the project. In any event, the Petitioner acted as an agent pursuant to its appointment as an agent. If it had not been appointed as an agent, it could not have acted as an agent. This argument is therefore rejected. 30. We also find force in the argument of Mr Dastur that the initiation of reassessment proceedings under section 147 of the Act was only based on a "change of opinion" which is impermissible under the Act. As set out in detail above, all disclosures were made by the Petitioner regarding its appointment as an agent of the Government of Maharashtra for developing the new town of Navi Mumbai. The Petitioner was appointed as a New Town Development Authority under section 113(3A) of the MRTP Act. Even in the scrutiny proceedings for the A.Y. 2005-06, all disclosures were made by the Petitioner regarding its appointment as the agent of the Government of Maharashtra for developing the new ....
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.... maintaining a profit and loss account for the Navi Mumbai Project. 36. As far as the judgements cited by Mr. Pinto are concerned, we fail to see how they support his case. Mr Agarwal who addressed us in rejoinder rightly submitted that the judgments do not support Mr Pinto's submission. 37. Mr Pinto relied upon a judgment of this Court in the case of Piaggio Vehicles (P) Ltd. v/s Deputy Commissioner of Income Tax and anr., reported in [2007] 290 ITR 377 (Bom.) Mr. Agarwal, rightly submitted that in the facts of that case, the Assessing Officer had proceeded on a totally wrong premise because of the failure to disclose as well as on the basis of a misrepresentation and therefore, the challenge to the notice issued under section 148 of the Act was negated. The Court in the facts of that case came to a categorical finding that it was difficult to accept that the assessee had made a full and true disclosure of all material facts. In that case, the Court found that though goodwill was acquired under the agreement dated 30th March 1998, in the return, the assessee claimed that it was effectively acquired on 1st April 1998. In response to the Assessing Officer's queries, th....
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....ing as the agent of the Government of Maharashtra. 40. We find this argument wholly without substance. The submission cannot be accepted for more than one reason. This contention has not been raised either (i) in the impugned notice dated 17th January 2012; (ii) the letter dated 20th February, 2012 providing the petitioner with the reasons for issuing the notice under section 148; (iii) the impugned order dated 22nd January 2013; or (iv) in the affidavit in reply filed to the present writ petition. Whether the Assessing Officer had sufficient time and opportunity to examine the issue is a question of fact. Merely because he had about six days, it cannot be presumed that he had not applied his mind to the issue. It would be unfair to the Assessing Officer who made the Assessment Order, to speculate that he was either incapable of applying, or did not apply his mind to the very aspects in respect of which he sought details within six days. It would also be unfair to the Petitioner to permit such a contention to be raised in the absence even of any pleading. Had this case been pleaded, the Petitioner would have had an opportunity of meeting it. There may, for instance, be cases whe....