TaxTMI 
TaxTMI 
2015 (4) TMI 341
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....pute the loss or the depreciation allowance or any other allowance, as the case may be, for the relevant assessment year. The first proviso to Section 147 speaks of such reopening of assessment after expiry of four years from the end of a relevant assessment year. That can be done only for reason of failure on the part of the assessee to make a return under Section 139 or failure to respond 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 the assessment. Issue of notice to proceed under Section 147 has to be under Section 148 and Section 149 prescribes the time limit for notice. Under clause (d) of sub-section (1) of Section 149, no notice under Section 149 can be issued beyond six years from the relevant assessment year. 3. In the instant case, Section 147 of the IT Act is sought to be invoked after four years but within six years on the ground that the assessee has failed to disclose fully and truly all material facts. The exemption granted has to be withdrawn for absence of such disclosure and assessment made afresh of the income returned. 4. The petitioner is the Subsidiary Company o....
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....tion granted under Section 10A is wrong. 9. The assessee had, on receipt of the notice, replied, seeking that the return filed under Section 139(1) of the Act, be treated as the return filed pursuant to the notice and also sought for detailed reasons on the basis of the decision of the Hon'ble Supreme Court in GKN Driveshafts (India) Ltd. v. I.T.O. [(2003) 259 ITR 19 (SC)]. The said reasons were supplied by the Income Tax Officer by the various communications produced in the writ petitions, which are similar, and Exhibit P8 in W.P.(C).No.27373 of 2011 is referred to herein. 10. The reason for issuing the notice under Section 147, according to the Assessing Officer, was that the BCA No.001/99 dated 31.10.1999 between the assessee and their Holding Company indicated that the assessee's business came into existence only with the takeover of the entire infrastructure facilities, employees and all pending orders of the Holding Company, which later Company had been in existence for the last three years. The business thus having been formed, by splitting up or the reconstruction of the business already in existence and also by transfer to a new business, of machinery or plant pr....
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....t avail of the extended time till six years for reason of there being no absence of full and true disclosure of material facts. 13. Both sides have placed decisions of the Hon'ble Supreme Court and the various High Courts to substantiate their contentions. I have heard both counsel elaborately on facts and on the law disclosed from the provisions and dilated upon in the decisions. 14. The learned counsel for the assessee relied on Calcutta Discount Co. Ltd. v. Income Tax Officer [(1961) 41 ITR 191] to contend that the satisfaction arrived at, that the exemption was granted only for the default of the assessee in not having truly and fully disclosed the material facts, cannot be sustained. It was also pointed out that the exemption had been granted in the year 2001-02 and had been continued on all the subsequent years. The assessee has also relied on a number of decisions to buttress their alternate plea, that the present attempt, to decline exemption under Section 10A, is a mere change of opinion, which may not be relevant, as would be noticed later; and hence not referred to. 15. Learned Senior Counsel for Government of India (Taxes) Sri.P.K.R. Menon supported the order of t....
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....e dismissed 'prima facie' as a mere change of opinion. 19. What is relevant for consideration of the aforesaid case is the issue whether there was a contumacious conduct on the part of the assessee; who could be deemed to have not fully and truly disclosed the material facts. A reference to Explanation 1 to Section 147, though not applicable, would be apposite. Explanation 1 takes in situations where the assessee, for example, does not disclose a chargeable income in his return, though the same could be discerned from a detailed and scrupulous examination of the books of accounts which have been produced before the Assessing Officer. Such a suppression made could definitely be considered as escaped assessment merely for reason of there being no full and true disclosure of facts. 20. Here, it would be worthwhile to notice the decision in Calcutta Discount Co. Ltd. v. Income Tax Officer [(1961) 41 ITR 191]. Therein, the original assessments of the Company for three years was sought to be revised on the ground that the profits realised by the Company, by sale of shares were not assessed to tax. The reassessment was proposed on the ground that at the time of assessment, the a....
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....tation of the taxing enactment, the proper tax leviable" (sic.) [at page 200]. In the said case, the sale of shares having been disclosed, whether it be a business profit as distinguished from change in the form of investment, was held to be an inference which had to be drawn by the Assessing Officer from the material facts taken in conjunction with the surrounding circumstances. 23. The Revenue, in that case on a specific query made by the Court; as to which was the fact that was not disclosed, raised two contentions, one that the sale had not been disclosed and the other the Memorandum of Articles of Association of the Company had not been shown. The first contention was repelled on the claim made by the Income Tax Officer itself that the disclosure of sale of shares was made; but on the professed intention of change in form of investment. As to the aspect of non-production of Memorandum of Articles of Association, it was held that the Income Tax Officers could not have concluded the proceedings without reference to such documents. The Company had claimed to be an investment Company and the question whether the sales were in the nature of trade or in the nature of change of inve....
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....on of the reopening having been attempted after four years. (c). (1984) 147 ITR 599 (Cal.) and (1985) 154 ITR 109 (Raj.) were on the issue of no return having been filed. In the former, on notice being issued under Section 148, the assessee contended that a duplicate return filed, should be treated as return filed under Section 148 and in the latter a delayed return was sought to be treated as one properly filed. These do not at all apply to the instant case. (d). (2006) 286 ITR 553 (Ker.) dealt with a deduction claimed of penal interest, which liability had accrued in the earlier years, and not in the previous year relevant to the assessment year. The Assessing Officer was aware that the assessee was following the mercantile system of accounting and that the liability of earlier years would not be entitled for deduction in a subsequent year. But the fact remained that, the liability of penal interest for non-payment of sales tax being of the previous year, was not disclosed by the assessee, though discernible from the books of account. (e). (1971) 82 ITR 555 (SC) is placed to refute the contention of the assessee that the exemption granted in the earlier years would stand again....
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.... of the assessment order having not disclosed any consideration on the aspect of exemption under Section 10A. In the said case, the assessee was granted the entire deduction claimed towards interest paid, without noticing that there was diversion of interest-free loans to sister concerns. Hence, the reopening was proposed to disallow proportionate interest attributable to interest-free loans granted to sister concerns. The appeal filed by the assessee before the C.I.T. (Appeals) was allowed and the challenge made to it by the Revenue before the Tribunal was rejected. The Division Bench specifically noticed that there was no discussion in the assessment order, by the Assessing Officer, as to the allowance of the claim. Deduction was merely allowed in terms of the claim and it was held that, hence, there could be no ground urged of change of opinion being the basis of such reopening. The Full Bench of the Delhi High Court in CIT v. Kelvinator of India Ltd. [(2002) 256 ITR 1] was specifically noticed to hold that the said decision is no longer good law in view of the decision of the Hon'ble Supreme Court in Asst. CIT v. Rajesh Jhaveri Stock Brokers (P.)Ltd. [(2007) 291 ITR 500]. T....
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....essment years, one Ms. R.Dolly, Deputy Commissioner of Income-tax, Circle-1(1) had carried out the assessment and granted the exemption. The notices under Section 148 were issued by one Mr.Abdul Hakeemn.M., Assistant Commissioner of Income-tax, Circle-1(1) in the previous year of the assessment year 2011-12. 30. It is pertinent that in the first of the assessment years where Section 147 proceedings were initiated; i.e., 2004-05, the very same Assessing Officer (Ms.Dolly) passed an assessment order with respect to the Holding Company, just a day previous to that of the assessment carried out in the case of the assessee Company. Exhibit P4 is the assessment order of the assessee Company for the year 2004-05 dated 27.12.2006 and Exhibit P5 is the assessment order of the Holding Company for the very same assessment year dated 26.12.2006. The assessment of both the assessee and the Holding Company were carried out by the very same Assessing Officer, Ms.R.Dolly. True a wrong assessment made with respect to the Holding Company cannot be relied on by the Subsidiary Company, so as to perpetrate that wrong in the latter's assessment too. But here, the assessee has also, by I.A.No.2445 o....
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....5 can only be a default of the Assessing Officer and there could be no allegation of lack of full and true disclosure of material facts. The Department also admits in its statement that the assessment years from 2001-02 to 2003-04 were not reopened for reason of it being beyond the six year period provided under Section 153. 33. We are not concerned with the earlier assessment years, in which the exemption was claimed and allowed. Nor is it permissible for the Department to reopen the said assessments; for reason only of such proceedings being hit by limitation. We are specifically concerned with the exemption granted from the year 2004-05 onwards. The proceedings initiated under Section 147 is on the ground that there is reason to believe that there is escapement of income for reason of an ineligible deduction being granted and the grant of such deduction is alleged to be on the assessee not fully and truly disclosing material facts before the Assessing Officer. The adequacy of the reasons or the eligibility to deduction cannot be gone into by this Court. But the ground of absence of full and true disclosure of material facts stands demolished. 34. Even with respect to the grant....