TaxTMI 
TaxTMI 
2016 (12) TMI 1097
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....o categories. CWJC Nos. 5119/2015, 4845/2015, 4826/2015, 4994/2015, 4868/2015, 4709/2015, 3968/2015 and 3997/2015 are cases wherein original assessments under Section 31 or Section 33 of the Act had been framed earlier. The remaining eight writ petitions belong to the category where there was no previous assessment either under Sections 31 or Section 33 of the Act and they would be cases of deemed assessments under Section 26 thereof. All the petitioners are registered dealers under the Act. The petitioner Samsung India Electronics Pvt. Ltd. is engaged in the business of manufacture of consumers electronic IT and telecom products including mobile phones, electronic goods, home appliances etc. The other petitioners are dealers of, among other things, mobile phones. The petitioners had filed their returns for different assessment years. The stand of the petitioners is that a composite pack of mobile phone along with mobile charger and other accessories is sold by them and the commodities mentioned therein are mobile phones and chargers are supplied with the mobile phones to charge the battery which are provided free of cost along with the mobile phones. No separate payment is m....
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....ntention of the petitioners is to sell and the customer is to buy the mobile phone which is a cell phone. The said phones are sold in a retail packaging which includes the battery, charger and other products. The package only carries big photos and model number of the mobile phone. Nothing is advertised on the cardboard box or the package that any other item, except the mobile phone is being sold to the customer. It is further stated for the purpose of customs duty at the time of import the mobile phone package is assessed as a single unit, i.e., mobile phone under Tariff Heading of Schedule-1 of the Customs Tariff Act. It is submitted by learned counsel for the petitioners that the case of the petitioners does not come within the purview of the decision of the Supreme Court in the case of Nokia India (supra) where there was an admission of the fact that the company had made information available on the website putting the mobile charger in the category of accessories which meant that in the common parlance also the mobile battery charger is understood as an accessory. It is submitted that the petitioners neither admitted nor on their website there is any admission that the char....
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....d, if the authority is in possession of any tangible material on the basis of which it has reason to believe that any sale or purchase of goods chargeable to tax has been under-assessed or has escaped assessment. Change of opinion cannot form a "reason to believe" and the judicially evolved safeguard to exercise of powers of re-assessment under the Income Tax Act, 1961 will equally apply to initiation of proceedings under Section 31 of the Bihar Value Added Tax Act, 2005. In support of the same, learned counsel relies upon a decision of the Apex Court in the case of Commissioner of Income-tax, Delhi vs. Kelvinator of India Limited: (2010) 2 SCC 723, in paragraph Nos. 5 to 9 of which the law has been succinctly laid down in the following terms:- "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 from 1-4-1989), they are given a go-by and only one condition has rema....
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....urt rulings in the past and was well settled and its omission from Section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended Section 147 to reintroduce the expression „has reason to believe‟ in the place of the words „for reasons to be recorded by him in writing, is of the opinion‟. Other provisions of the new Section 147, however, remain the same. 9. For the aforesaid reasons, we see no merit in these civil appeals filed by the Department, hence, dismissed with no order as to costs." Reference is also made to three decisions of the Apex Court and a decision of the Rajasthan High Court to the same effect, i.e., in the case of Mepco Industries Limited, Madurai vs. Commissioner of Income Tax and another: (2009) 319 ITR 208 (SC), Mukesh Modi vs. Deputy Commissioner of Income-Tax, Central-1, Jodhpur: (2014) 45 Tax Man 468 (Rajasthan) and Binani Industries Limited, Kerala vs. Assistant Commissioner of Commercial Taxes,VI Circle, Bangalore and others: (2007) 15 SCC 435. Reliance has also been placed on the decision of a Divisi....
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....as follows:- "3. At the petitioner‟s request the reasons for initiating the proceedings under Section 147 were furnished. The relevant reasons read as under: "The case was finalized under section 143 (3) of the Income Tax Act, 1961 vide order dated 20.11.2009 at an income of Rs. 172794009/-. It is noticed from the P & L Account that the assessee is making payment of royalty at Rs. 8741302/- for technology transfer and patent licence. The assessee has claimed the entire payment as revenue expenditure. In view of the judgment of the Hon‟ble Supreme Court in the case of M/s. Southern Switch Gears (232 ITR 359) either the full amount or a part of the royalty amount is to be treated as capital expenditure. This has resulted in under assessment of the income to the extent of Rs. 8741302/- which will be treated as capital expenditure. The assessee has submitted details of sundry creditors as on 31.03.2006. One of the items of the sundry creditors is „accrued exchange profit‟ which has been shown as a negative amount at Rs. 1145902/-. No explanation of the assessee is available on record with regard to the nature of this credit amount. Prima facie ....
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....tioner had filed its return and paid tax on battery chargers as per the correct understanding of law as it existed on that date and Section 31 of the Act cannot be invoked in absence of concealment, omission or failure to disclose full and correct particulars of any sale made with an intent to evade payment of tax. It is also contended by learned counsel that best judgment can only be resorted to in a case where the dealer has concealed, omitted or failed to disclose full and correct particulars of sale and in absence of such allegation, arbitrary values could not have been assigned to the battery chargers for which no separate consideration is being charged by the petitioner. Learned counsel for the State, on the other hand, submits that the present matters are squarely covered by the decision of the Apex Court in the case of State of Punjab & Ors. vs. Nokia India Pvt. Ltd.: Civil Appeal Nos. 11486-11487 of 2014, in which the law has been succinctly laid down in paragraph No.19 in the following terms:- "19. In view of the aforesaid facts, we find that the Assessing Authority, Appellate Authority and the Tribunal ....
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.... and in the said circumstances the writ applications ought not to be entertained. In support of his different propositions, learned counsel relies upon a decision of the Rajasthan High Court in the case of Chandi Ram vs. Income Officer and another dated 22.12.1995, in paragraph Nos. 16 and 17 of which it has been held as follows:- "16. The Income-tax Officer would be free to take the proceedings in accordance with law. It may also be observed that the initial assessment in this case was made under Section 143 (1) and not under Section 143 (3) of the Income-tax Act, and, therefore, the contention of learned counsel for the petitioner that the proceedings of reassessment are based on change of opinion has no force. 17. The jurisdiction under Article 226 of the Constitution while examining the validity of the notice issued under Section 148 is very limited. The court has to see as to whether the notice issued by the taxing authorities is on the basis of the reasons which have been recorded by them. If the reasons are in existence then sufficiency thereof even could not be examined. The assessee was informed vide letter dated June, 14, 1991, that ....
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....not lay down the law correctly and is hereby overruled." On the strength of the aforesaid decision, it is submitted by learned counsel that the law declared by the Supreme Court must be treated as an external source of information and it is not a mere change of opinion on the same. Learned counsel also relies upon the decision of the Apex Court in the case of Bharat Sanchar Nigam Ltd. (supra) relying upon paragraph Nos. 12 and 15 of the said judgment, which are as follows:- "12. After considering various earlier authorities on the issue, it was held that : (SCR p.188) "If, for instance, the validity of a taxing statute is impeached by an assessee who is called upon to pay a tax for a particular year and the matter is taken to the High Court or brought before this Court and it is held that the taxing statute is valid, it may not be easy to hold that the decision on this basic and material issue would not operate as res judicata against the assessee for a subsequent year. That, however, is a matter on which it is unnecessary for us to pronounce a definite opinion in the present case. In this connection, it would be relevant to add that even if a direct decisio....
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....dealer a notice in the form and in the manner prescribed, proceed to assess or re-assess, as the case may be, the tax payable by such dealer within four years from the expiry of the year during which the original order of assessment or re- assessment was passed, in a case where the dealer has concealed, omitted or failed to disclose full and correct particulars of such sale or purchase of input tax credit, and the provisions of this Act shall, so far as may be, apply accordingly as if the notice under this sub-section was a notice under Section 27. Provided that the amount of tax shall be assessed or re-assessed after allowing such deductions as were allowable during the said period and at the rates at which it would have been assessed had the turnover not escaped assessment. (2) (a) The prescribed authority shall, in a case where the dealer has concealed, omitted or failed to disclose full and correct particulars of such sale or purchase or input tax credit, direct that the dealer shall, besides the amount of interest payable under sub-section (10) of Section 24, pay by way of penalty, sum equal to three times the amount of tax which is or may be assessed on the ....
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....ent under Section 31 of the Act with regard to the periods in issue. As stated earlier, the provisions of the Act are on similar lines as the un-amended provisions of Section 147 of the Income Tax Act and that they provide for two categories of cases; but even the provisions of Section 147 of the Income-tax Act amended in the year 1989 make it clear that there must be reason to believe that there has been under-assessment or escaped assessment, etc. and as has been held in the case of Kelvinator (supra) by the Apex Court, it should not be a mere change of opinion, otherwise it would amount to arbitrary exercise of power by the assessing officer to reopen the assessment. The said law emphatically laid down by the Supreme Court in Kelvinator‟s case (supra) is squarely applicable in the present matter also and it has to be held that reassessment cannot be made on a mere change of opinion. The next question is whether the decision of the Supreme Court subsequent to the assessments can be considered a mere change of opinion. The law on this point is also very much clear, as held in the several decisions cited including that of Simplex Concrete case (supra), a subsequent reversa....