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2018 (5) TMI 444
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....to (viii) xx xx xx xx xx B. Other Liabilities: 1. xx xx xx 2. External Development Charges (From Land Developers) 3 to 6. xx xx xx 7. EDC Under Papra Act, 1995 8 to 12 xx xx xx xx Previous year Current year 31.03.2009 31.03.2010 Total Amount Total amount Rs.6,133,835,831.15 Rs. 7,311,864,244.78 3. The Assessing Officer (A.O.) by a letter dated 27.11.2012 issued a questionnaire item 9 whereof read: "Please provide details for each Account amounting to Rs. 7,31,18,64,244/-". The petitioner filed a reply dated 05.12.2012. The reply, regarding the said query read as follows:- "8. Detail of sundry creditors is given as under:- Current Liabilities Year 31.03.2010 Amount (In Rs.) > Creditors & Payables 1. Creditors for supplies 13,074,974.59 2. Creditors for construction 1,75,530.00 3. Other creditors 26,526,492.28 4. Payable to staff 181,701.23 5. Provident Fund (Contributory) (1,250,808.00) 6. Ex-Gratia payable 6,250.00 7. Stock payable 294,800.22 8. Works payable 1,103,717.00 TOTAL 40,112,657.12 9. Detail of Current Liabilities is given as under....
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....ure "External Development Charges" is supposed be used by the assessee for carrying on of External Development Works and other related jobs outside the land of the Land Developer/Colonizer/Real Estate Builder/Promoter who has paid the External Development Charges (EDC). Thus, it is seen that the receipt of External Development Charges by the asseseee is attributable to its regular business. Further, the receipt and expenditure of the said amount is a regular, routine and re-occurring phenomenon as External Development Charges are being regularly received by the assessee from Land Developers/Colonizers/Real Estate Builders/Promoters in every year and similarly these are being regularly expended/utilized/spent for the purpose of carrying out External Development Works and other related jobs. In light of the above, it is observed that both the receipts as well as the expenditure related to External Development Charges (EDC) are clearly revenue in nature as they are attributable to the regular business of the assessee and are also a routine, regular and re-occurring phenomenon. Accordingly, the assessee was required to credit the receipts of External Development Charges to its....
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....012 to the respondents' queries raised in their letter dated 27.11.2012. Section 147 of the Act is as follows:- "147. 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 153, assess or reassess such income and 5 of 28 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 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 r....
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....tant Commissioner of Income Tax Versus Rajesh Jhaveri Stock Brokers P. Ltd. 291 ITR 500( SC), the Supreme Court held:- "Section 147 authorizes and permits the assessing officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the assessing officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the assessing officer should have finally ascertained the fact by legal evidence or conclusion. The function of the assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court) in Central Provinces Manganese Ore Co. Ltd. v. ITO (1991) 191 ITR 662] for initiation of action under Section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the p....
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.... powerless to initiate reassessment proceedings even when intimation under Section 143(1) had been issued." (B) In Duli Chand Singhania v. Assistant Commissioner of Income Tax, (2004) 269 ITR 192 P&H, this Court held:- "...... In other words, in order to assume jurisdiction under section 147, in a case where assessment has been made under sub-section (3) of section 143 of the Act, two conditions are required to be satisfied, viz.: (i) The Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment; and (ii) He must also have a reason to believe that such escapement occurred by reason of failure on the part of the assessee either: (a) to make a return of income under section 139 or in response to notice issued under sub-section (1) of section 142 or section 148; or (b) to disclose fully and truly all material facts necessary for his assessment for that purpose. The aforementioned requirements of law must be held to be conditions precedent for invoking the jurisdiction of the Assessing Officer to reopen the assessment under section 147 of the Act in cases which are covered by the pro....
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....nditions 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 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, Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain precondition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of po....
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....his inferences of law viz. that EDC is revenue in nature. We do not for a moment suggest that the reasons draw the correct inferences. All that we say is that the Assessing Officer had reason to believe though not to hold that income on account of EDC had escaped assessment. 11. We will shortly deal with the question whether the reasons constituted a mere change of opinion. 12. Mrs. Suri also rightly submitted that once the relevant material has been disclosed and the Assessing Officer's attention thereto has been drawn, it is no part of the assessees' duty to enumerate the possible interference that arise or may arise therefrom. (A) In Calcutta Discount Co. Ltd. v. Income Tax Officer, AIR 1961 SC 372, the Supreme Court held:- "(12) It may be pointed out that the Explanation to sub-section has nothing to do with "inferences" and deals only with the question whether primary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligence the Income-tax Officer, could have discovered them from the facts actually disclosed. The Explanation has not the effect of enlarging the section by casting a duty on the a....
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....e hundis on the strength of which it had obtained loans from creditors as also entries in the books of account showing payment of interest and it was for the Income Tax Officer to investigate and determine whether these documents were genuine or not. The respondent could not be said to have failed to make a true and full disclosure of the material facts by not confessing before the Income Tax Officer that the hundis and the entries in the books of account produced by it were bogus. We do not see any distinction at all between Burlop Dealers case and the present one and the language of Section 147(a) being identical with that of Section 34(1)(a), the ratio of the decision in Burlop Dealers case must govern the decision of the present case. We must, therefore, hold that there was no failure on the part of the respondent to disclose fully and truly all material facts necessary for its assessment and the condition for the applicability of Section 147(a) was not satisfied." (D) In Winsome Textile Industries Ltd. v. Union of India and others (2005) 278 ITR 470 (P&H), this Court held:- "The limitation of four years provided in the proviso to section 147 has been made app....
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.... and raise queries but when the written opinion is expressed in form of the assessment order, there is no discussion or elucidation on certain aspects and issues decided or held in favour of the assessee. Assessee is not the author of the assessment order and has no control over what the Assessing Officer wants to state or mention. It is in this context that Delhi High Court in Commissioner of Income Tax v. Eicher Ltd., (2007) 294 ITR 310, observed as under: "In Hari Iron Trading Co. v. Commissioner of Income Tax, (2003) 263 ITR 437, a Division Bench of Punjab and Haryana High Court observed that an assessed has no control over the way an assessment order is drafted. It was observed that generally, the issues which are accepted by the Assessing Officer do not find mention in the assessment order and only such points are taken note of on which the assessee's Explanations are rejected and additions/disallowances are made. We agree. 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 assessed before the Assessing Officer at the time wh....
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....s raised for the purposes of reassessment. This very issue as raised by the counsel for the Revenue has been considered by this court in the matter of Idea Cellular Ltd. v. Deputy Commissioner of Income tax in 301 ITR 407 wherein it has been held as follows: "It was also sought to be contended that since the Assessing Officer had not expressed any opinion regarding this matter in his original assessment order, it could not be said that there was any change of opinion in this case. In our view, once all the material was before the Assessing officer and he chose not to deal with the several contentions raised by the Petitioner in his final assessment order, it cannot be said that he had not applied his mind when all the material was placed before him To a similar effect is the decision of the Full Bench of Delhi High Court in the matter of Commissioner of Income Tax v. Kelvinator of India Ltd.Reported in 256 ITR 1 and the division bench of Gujarat High Court in the matter of CIT v. Nirma Chemical Works reported in 309 ITR 67. In view of the above, the submission of the Revenue that the reopening is not on account of change of opinion as no opinion was expre....
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....t stood at the foot of the Schedule. 18. From a perusal of the order sheet of the A.O. it is evident that after the filing of the reply to the questionnaire, details were asked only regarding administrative expenses incurred office-wise, installments received of houses and details of houses and their costs, as to why CPF contribution may not be dis-allowed. This itself shows that there was no discussion or application of mind by the A.O. on the issue of EDC. 19. Moreover in answer to the queries the petitioner did not at least clearly show EDC to be a current Liability. We set out the relevant portion of the reply dated 05.12.2012. Paragraph-8 thereof had the caption "Detail of sundry creditors is given as under:-...." The table below had two columns, namely, headed "Current Liabilities" and "Year 31.03.2010 Amount (In Rs......)" Below the heading of the first column of the table "Current Liabilities" was a list of 8 "Creditors and Payables". EDC was not referred to in paragraph-8. Paragraph-9 of the reply had the caption "Detail of Current Liabilities is given as under:-..." The table below had two columns with the headings "Current Liabilities" and "Year 31.03.2010 Amount (....
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..... In such circumstances, the primary facts would have been before the A.O. It would have been for him to probe further, if so required. This is not the situation in this case. Hence, the reopening cannot be said to be without jurisdiction. 22. There is no requirement under Section 147 of the Act that the material forming the basis for reason to believe should be from an outside source. The material on record can also be the basis to re-open the assessment. We will assume that there was tangible material before the A.O. on record for formation of reason to believe that there was an under assessment. It would not affect the right to reassess. (A) In R.K. Malhotra, ITO, Group Circle v. Kasturbhai Lalbhai (HUF) AIR 1977 SC 2129, the Supreme Court held as under: "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 the 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 ass....
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....ed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income-tax Officer, at the time of making the original assessment could or could not have found by further enquiry or investigation, whether the transaction was genuine or not if, one the basis of subsequent information, the Income-tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment. The High Courts which have interpreted Burlop Dealer's case (1971) 79 ITR 609 (SC) as laying down law to the contrary fell into error and did not appreciate the import of that judgment correctly. 28. We are not persuaded to accept the argument of Mr. Sharma that the question regarding truthfulness or falsehood of the transactions reflected in the return can only be examined during the original assessment proceedings and not at any stage subsequent thereto. The argument is t....
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....rom his records. But that is not the same thing as saying that the assessee had placed before the Income-tax Officer truly and fully all material facts necessary for the purpose of assessment. The law casts a duty on the assessee to 'disclose fully and truly all material facts necessary for his assessment for that year'. Further, the Explanation to section 34(1) says : "Production before the Income-tax Officer of account-books or other evidence from which material facts could with due diligence have been discovered by the Income-tax Officer will not necessarily amount to disclosure within the meaning of this section". If the assessee had disclosed to the Income-tax Officer, the surplus price realised by it over and above the written down value of the assets sold or in the alternative if it had informed the Income-tax Officer the price realised as well as the written down value of the assets sold, then it could have been said that the assessee had done its duty and it was for the Income-tax officer to draw any inference on the facts placed before him." (emphasis supplied). 24. This case goes a step further. There was material even outside the record with the Asse....