TaxTMI 
TaxTMI 
2018 (10) TMI 872
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.... Act and the assessments were completed in respect of the returns. While-so, the impugned notice has been issued by the respondent in proceedings dated 30.3.2016 under Section 148 of the Act to reopen the assessment years 2009-2010. 4. The grievance of the writ petitioner is that the returns filed by the writ petitioner had been assessed under Section 143(1) of the Act and again as a special case under Section 143(3) by way of complete scrutiny of accounts. Under those circumstances, the completed assessments are sought to be reopened after a lapse of six years without any basis or reasons by the respondent. The writ petitioner by its letter dated 19.4.2016 sought for reasons for reopening of the assessments. The respondent by their letter dated 31.8.2016 furnished the writ petitioner with reasons for reopening of the assessments. The reasons cited for the reopening of the assessments, in brief, are:- (a) We have received money from South Asia Entertainment Holdings Limited in the name of share subscription along with share premium - Rs. 203.98 crores; (b) Shri Kalanithi Maran and his wife Mrs.Kaveri Kalanithi Maran were allotted shares only at Rs. 10 per share....
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....tionnaire during the course of original assessment had stated that the increase in share application money on premium was not disclosed. If according to the respondent if the same has not been disclosed, which is not true, then it is the duty of the respondent to record as from where such information was received. The alleged information for reopening was already available before the Assessing Officer during the course of scrutiny assessment and there was no fresh information for him to hold that the transaction as not genuine or a capital receipt has escaped assessment as income. Therefore, it was only a change of opinion that a capital receipt is an income as against the earlier decision in a validly concluded scrutiny assessment that the receipt of share application money on premium from M/s.South Asia Entertainment Holding Limited, was only a capital investment by a foreign legal entity in an Indian Legal Entity, going through a spate of approvals and legal channels, and hence accepted the income returned without making any adjustment on this issue; (e) The last alleged reason is that the transaction is not genuine and required to be assessed under Section 68 ....
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....tion 143(3) of the Act, after issuing a questionnaire which was answered and the returns were accepted. When entire investment is reflected in the financial accounts, which in fact was the reasons for issuing of questionnaire during the course of original assessment and the same being accepted, the present reasons for reopening of the assessment is nothing but change of opinion. 8. In support of the said submission, the petitioner has cited certain judgments which we will deal little later. The contention of the petitioner is that respondent deliberately failed to take into consideration the judgment with regard to the limitation provided under the Act for issuance of notice under Section 148 with reference to the Law of Limitation prescribed under the Act. 9. The learned Senior Counsel, appearing on behalf of the writ petitioner, forcibly contended that the impugned notice dated 30.3.2016 and the rejection of objections by the respondent are clearly barred by limitation prescribed under the provisions of the Income Tax Act, 1961. The failure on the part of the respondent in not producing the reasons along with the impugned notice caused a stigma and has got certain civil con....
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.... Section 143 of the Act, deals with "assessment". In the case of the writ petitioner, the assessment had been completed with reference to Section 143(3) of the Act. The Tax Questionnaire issued to the writ petitioners were answered properly and the Assessing Officer considered the same and concluded the assessment. This being the factum, there is no reason to believe for reopening of the assessments, which were closed. 14. At the outset, the learned Senior Counsel is of an opinion that "change of opinion" in the absence of any new material or suppression of fact is impermissible under the Act. The reopening of assessments and the notices under Section 148 of the Act, were issued in respect of four different Assessees. Therefore, the principles of "one income", "one tax" had not been considered by the Assessing Officer. Thus, the very action is mala fide, perverse and in violation of the provisions of the Act. 15. The learned Senior Counsel, with reference to the point raised by the Additional Solicitor General of India that the writ petition is not maintainable, contended that the Hon'ble Division Bench of this Court passed an order in the writ appeal in W.A.No.347 to ....
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....ng to this section the notice ought to be served within 6 years from the end of the asstt. year. The contention of the assessee is that Hon'ble Delhi High Court has held that if the reasons recorded by the AO for reopening of assessment has not been supplied or served within 6 years then it will be construed that no valid notice has been served upon the assessee within 6 years." 18. In the case of Haryana Acrylic Manufacturing Co. vs. Commissioner of Income Tax [(2008) 175 Taxman 262 (Delhi)], wherein the Hon'ble High Court of Delhi, in paragraphs-20 and 24, it has been held as follows:- "20. In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material ....
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....happened between 11-5-2004, when the petitioner sought the reasons, and 5-11-2007, when the said form annexed to the counteraffidavit was filed in this court, the validity of the notices under section 148 issued on 29-3-2004 and any proceedings pursuant thereto cannot be upheld." 19. In respect of exhausting the alternate remedy, the learned Senior Counsel for the writ petitioner relying on the case of Union of India vs. Ajit Jain [(2003) 129 Taxman 74 (SC)], wherein the Hon'ble Supreme Court held as follows:- "The availability of an alternative remedy is not an absolute bar to the entertainment of a petition under Article 226 of the Constitution, though on account of availability of statutory remedies Courts normally do not entertain the writ petitions but where an action is wholly without jurisdiction and results in the infringement of any fundamental right, the plea of alternative remedy is of no avail. The instant case did fall in that category." 20. In the case of Principal Commissioner of Income Tax vs. Meenakshi Overseas (P) Ltd [(2017) 82 Taxmann.com 300 (Delhi)], wherein the Hon'ble High Court of Delhi, in paragraphs 23, 24 and 26, held as follows:- ....
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.... India Ltd (now known as Whirlpool of India Ltd.) [(2010) 187 Taxman 312 (SC)], wherein the Hon'ble Supreme Court, in paragraph-4 of the judgment, held as follows:- "4. On going through the changes quoted, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under 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 1st April, 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 re- open the assessment. Therefore, post-1st April, 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 re-open 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 revie....
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....384 ITR 424 (Delhi)], wherein the Hon'ble Delhi High Court, in paragraph 10, held as follows:- "10. It is clear from the above, that the present case is one of change of opinion. The questionnaire and particularly question B.1 specifically raise the issue with regard to share capital. It requires the petitioner to give a list, source, genuineness, identity of the share holders along with confirmation copies of the ledger account of the party including confirmation of the mode, date, address and acknowledgement of return, etc. from the said party along with source and relevant bank entries. The said information was provided by the assessee. After receipt of the said information, Assessing Officer did not think it fit to make an addition and, under these circumstances, no addition itself amounts to forming an opinion as has been held in Usha International Ltd. (supra)." 23. In the case of Commissioner of Income Tax VI, New Delhi vs. Usha International Ltd [(2012) 253 CTR 113 (Delhi)], the term "change of opinion" has been explained in paragraph-6 as under:- "6. The questions of law at serial Nos. 1 to 3 referred to the Full Bench are interconnected. ....
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....asons. 14. In the second and third situation, the Revenue is not without remedy. In case the assessment order is erroneous and prejudicial to the interest of the Revenue, they are entitled to and can invoke power under Section 263 of the Act. This aspect and position has been highlighted in CIT vs. DLF Powers Limited, ITA 973/2011 decided on 29th November, 2011 and BLB Limited vs. ACIT Writ Petition (Civil) No. 6884/2010 decided on 1st December, 2011. In the last decision it has been observed: "13. Revenue had the option, but did not take recourse to Section 263 of the Act, inspite of audit objection. Supervisory and revisionary power under Section 263 of the Act is available, if an order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. An erroneous order contrary to law that has caused prejudiced can be correct, when jurisdiction under Section 263 is invoked." 25. Relying on the abovesaid judgment, the learned Senior Counsel for the writ petitioner, urged this Court by stating that in any angle, the impugned orders cannot sustain for want of legal support and accordingly liable to be scrapped. PLEADINGS OF THE RES....
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.... the assessment. The time limit provided under the Act is therefore, only for proper issue and service of notice which had been duly followed in the present cases. 30. The writ petitioner questioned the sufficiency of the reasons and the modus operandi of the investigation if any conducted which is not for the writ petitioner to question. The fact that scrutiny proceedings were conducted in a different entity does not absolve the writ petitioner of the proceedings being initiated against him in the light of the new information concerning the writ petitioner's case. Further, in the following cases, the Courts have held that the information received from the Investigation Wing would constitute material based on which reason to believe could be formed. [See AGR Investment Ltd vs. Additional CIT and Another [333 ITR 146 (Del); and Salimar Builtcon P. Ltd vs. ITO-ITAT, Jaipur [136 TTJ 701]. 31. The settled position of law regarding sufficiency of the reason is not up for questioning when the Assessing Officer has formed his belief for the same. Substantive proof for escapement of income in order to make any additions can only be made after verification of details during the....
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....etitioner would be given a fair opportunity for defending his case by submitting proof and arguments. In fact the Hon'ble Apex Court in a case reported in 103 ITR 437 has held that Court cannot go into adequacy of material if reason for information of believes has a rational connection with the formation of belief. 34. In the case of Raymond Woolen Mills reported in 236 ITR 34, the Hon'ble Supreme Court had reiterated the position that Courts can only consider whether there was a prima facie case for reassessment and that sufficiency of material or correctness of the material is not to be considered at that stage. 35. The learned Additional Solicitor General of India, at the first instance, made a submission that in respect of WP No.3405 of 2016, the order of assessment had already been passed by the Assessing Officer and the same has not given effect to on account of the pendency of the present writ petition. In respect of WP No.43944 of 2016, the order passed by the Assessing Officer is kept under the sealed cover, so also the assessment order passed with referrence to WP No.44311 of 2016 has not given effect to. 36. The learned Additional Solicitor General of....
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....r is empowered to assess or reassess such income and also any other income chargeable to tax which has escaped assessment. The intention of the Section is unambiguous that the Assessing Officer is empowered to make an assessment or reassess the assessment already reached finality. Thus, the fresh assessment in respect of certain materials is also permissible under Section 147 as well as reassessment is also permissible under the Act. When assessment as well as the reassessment is permissible and if the Assessing Officer has got a reason to believe that there are some materials for reopening of the assessment, then he can issue notice under Section 148 of the Act. 40. Explanation 1 to Section 147 states that "production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso". Explanation 1 to Section 147 enumerates that mere production of a document is not a ground to dispute the reopening of the assessment nor amount to a disclosure in respect of the escaped assessment. It clarifies t....
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....fact that the notice under Section 148 has been issued based on certain materials brought to the notice of the Assessing Officer. Thus, the Assessing Officer has every authority to cull out the truth behind such materials or informations made available to him. In the event of curbing the powers of the Assessing Officer, the Department will not be in a position to impose the tax in respect of all such escaped assessments and further the same will pave the way for the Assessees to avoid or evade payment of income tax as per the provisions of the Act. 44. Notice is a proposal mooted out by the Assessing Officer under Section 148 on coming to the conclusion that the authorities has got a "reason to believe" in respect of the materials available on record. Thus, the very notice will not provide a cause of action for the writ petitioner to file the present writ petition. This apart, the writ petitioner had already been responded to the notice and pursuant to the request made by the writ petitioner, the reasons recorded by the Assessing Officer were furnished to the writ petitioner, enabling him to submit his assessment as required under the provisions of the Act. As of now, there is n....
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....was no provision of appeal or revision under the Income Tax Act against an order of transfer. For the same reason, this Court distinguished and declined to follow an earlier judgment in S. Narayanappa v. CIT [AIR 1967 SC 523] where this Court on an interpretation of Section 34 of the Income Tax Act, 1922, opined to the contra. Section 34 provided for reopening of the assessment with the prior sanction of the Commissioner, if the Income Tax Officer has "reasons to believe" that taxable income had been underassessed. Dealing with the question whether the reasons which led the Commissioner to accord sanction for the initiation of proceedings under Section 34 are required to be communicated to the assessee, this Court held: (S. Narayanappa case [AIR 1967 SC 523] , AIR p. 525, para 4) "4. ... There is no requirement in any of the provisions of the Act or any section laying down as a condition for the initiation of the proceedings that the reasons which induced the Commissioner to accord sanction to proceed under Section 34 must also be communicated to the assessee." 16. We reject the submission of the appellant for the following reasons. Firstly, there is no e....
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....a High Court, in paragraphs 4 and 5, held as follows:- "4. We have thoughtfully considered the arguments/ submissions of learned counsel, but have not felt persuaded to agree with him that the jurisdiction of this court under article 226 should be exercised for quashing of the impugned notice and, in our opinion, the writ petition deserves to be dismissed as premature. It is not the petitioner's case that he has filed a return in pursuance of the impugned notice and any order prejudicially affecting his rights or interest has been passed by the concerned authority. In view of this, we do not find any justification to entertain the petitioner's prayer for quashingb of the notice issued under section 148 of the Act. 5. In view of this conclusion, we would have refrained from expressing any opinion on the merits of the reasons recorded by the Assistant Commissioner of Income-tax, Circlecum- New Assessees Circle, Bhatinda, for initiating proceedings under section 147 read with section 148 of the 1961 Act, but as Shri Mittal made repeated efforts to persuade us to nullify the notice solely on the ground that/the Special Judge, Delhi, has not framed cha....
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.... validity of initiation of reassessment proceedings, refusal to communicate the reasons becomes unsupportable". The following propositions are formulated that "while the recording of reasons as contemplated by sub-section (2) of Section 148 is obligatory, the reasons so recorded need not be communicated to the Assessee along with the notice under sub-section (1) of Section 148. It is also not open to the Assessee to straightaway call upon the Assessing Officer to disclose or communicate reasons to him, as soon as he receives the notice under Section 148(1). He must first file his return or a revised return, as the case may be, and if he raises a contention either that no reasons were recorded or that the reasons recorded are not relevant and germane, then the Assessing Officer has to communicate the reasons to him". 49. The abovesaid judgment also reiterates that it is mandatory on thepart of the Assessing Officer to communicate the reasons along with the notice issued under Section 148(1) of the Act. The Assessee has to respond to the notice at the first instance by filing his return. If there is no discrepancy, then the Assessing Officer can close the file. In the event of ....
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....chy of appeals provided by the statute the party must exhaust the statutory remedies before resorting to writ jurisdiction, especially income tax related matters, have exhausted the remedies available under the Statutes". 53. The learned Standing Counsel for the Income Tax Department contended that the Income Tax Department did not know the income of the Assessee. Only after filing of the return by the Assessee, the Department came to know the actual income of an Assessee. Thus, the officials competent are empowered to call for the sources if they have received any informations or materials both from the returns or through external sources. The power of reopening under the provisions of the Income Tax Act is wider and in the event of new material or suppression of fact, the reassessment can be dealt with under Sections 148 to 153 of the Act. Even during the course of the proceedings, if any new materials or informations are received by the Assessing Officer, even then powers are conferred upon him to proceed against such new materials or informations. Thus, Section 147 of the Act, is an enabling Section and in the presence of any tangible materials available on record, the Asses....
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.... would be certainly difficult for the Executives to reopen the cases as per the provisions of the Act. The procedures are contemplated under the Act, enabling the Assessee to avail the opportunity and defend their case in accordance with law. 58. Thus, certain aspects which is contemplated under the provisions of the Act, cannot be interpreted, so as to defeat the purpose for which such a provision was enacted by the Legislators. Constructive interpretation of the Act and the Rules are of paramount importance. The Rule of constructive interpretation requires that the possible object and the purpose to be achieved is met out by adopting not only the balancing approach, but also by providing all reasonable opportunities to the persons, who all are connected or aggrieved. 59. The purpose of the Income Tax Act, more specifically, Sections 147 and 148 of the Act, is to ensure that the Assessees, who have suppressed the fact at the time of filing of their income tax returns or if the Department is in possession of certain new materials in respect of the assessment of a particular year, then the Assessee must be informed about the decision to reopen the assessment and after such ....
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....essing Officer must be communicated to the Assessee in the very notice issued under Section 148 of the Act. 64. On a perusal of the impugned notice dated 27.3.2015, the Assistant Commissioner of Income Tax has stated that "whereas I have reason to believe that your income tax in respect of which you are assessable/chargeable to tax for the assessment year 2008-2009 as escaped assessment within the meaning of Section 147 of the Act. 65. Let us now examine whether such an information provided by the Assessing Officer is adequate and satisfying the requirements contemplated under Section 147 of the Income Tax Act, 1961. 66. The very concept of notice is that the authorities while issuing notice should not predetermine the issues or arrive a conclusion. In the event of stating the reasons elaborately, it is to be construed that such reasonsings are recorded without providing an opportunity to the Assessee and such a procedure now argued by the writ petitioner deserves no merit consideration. 67. Thus, the notice is issued based on certain materials available with the Department and on receipt of the notice, the Assessee has got right to seek for the reasons from the Departm....
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....ve satisfaction of the Assessing Officer and not for the purpose of communicating all the reasons even at the initial stage of issuance of notice to the Assessee under Section 148 of the Act. The provision is a check for the Income Tax Officials. Such a check provided under the Statute to the Officials, cannot be taken undue advantaqge by the Assessee. The word "reason to believe" incorporated is to indicate the Officials that, they cannot reopen the assessment in a routine and mechanical manner. The Assessing Officer in the event of receipt of any new material or information regarding the suppression, must have a reason to believe and the reasons must be recorded in the files and thereafter issue notice to the Assessee and the Assessee on receipt of the notice is entitled to seek the reasons or otherwise from the respondent, enabling him to adjudicate the matter in the manner known to law. This being the interpretation to be adopted, the arguments as advanced on behalf of the writ petitioner deserves no consideration at all. 72. In respect of exhausting the appellate remedy available under the provisions of the Act, this Court is of an opinion that the writ petitioner has to ex....
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....certain public businesses. When the corruption is spreading like a Cancer in our Great Nation, such provisions are to be interpreted constructively by not allowing the offenders to escape from the clutches of law. The scientific way of transactions by using the modern technologies are to be keenly addressed by the officials also. The corrupt activities are being injected deep into the system and it is very difficult for the authorities to cull out the modus operandi of such corrupt activities. Investigations are to be modernised and the method of investigations are to be improved, so as to match the level of corruption and the modus operandi of corruptions in certain areas. 76. The huge transactions like that of the present cases on hand, the authorities must be in a position to investigate the issues thoroughly and by using an intelligent way of investigation. Under these circumstances, the Courts cannot interfere in a routine manner in respect of the notice issued under Section 148 of the Act. Whenever such allegations are raised against the Assessee, who was holding a high position of Union Minister, then the Department shall be allowed to investigate the matter with all fair....
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.... Income Tax Act will be defeated. The wide power provided to the authorities competent to reopening of the assessment and to ensure that all external materials and the informations received from various sources should also be dealt in accordance with the provisions of Law. Thus, it does not mean that the Income Tax Authorities may reopen at any point of time. In order to protect the Assessees a definite time limit has been provided under the Act itself. Thus in the event of receiving any informations or materials from any other sources can be a ground for reopening of the assessment and the period of limitation is four years and six years respectively and in respect of the present writ petition, it is six years. 80. The procedure of reopening of the assessment is contemplated under Sections 148 to 153 of the Act. Once again looking into the spirit of Section 147, it is unambiguously enumerated that "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 this Section, or recompute the loss or the depreciation allowance". 81. The language employe....
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.... by the Assessing Officer that the Assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return. 84. The circumstances are narrated wherein certain materials and informations are provided by the Assessee at the time of filing of the returns and if the same has not been assessed by the Assessing Officer during the relevant assessment year and if it is subsequently noticed, then also the Assessing Officer is empowered to reopen the assessment in respect of the escaped assessments. 85. On a perusal of the various circumstances incorporated under Section 147 of the Act, for reopening of the escaped assessment, this Court is of an opinion that it is certainly flexible and wider power has been provided, enabling the Assessing Officer to reopen the assessment in the interest of revenue and to ensure that the Assessees pay the correct tax with reference to the provisions of the Act. 86. This Court is of a firm opinion that where certain doubts in respect of the reasons or otherwise has been raised by the Assessee, such benefit of doubt should be held in favour of the revenue and not in favour of the taxpayer. Contrariness is to be....
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....ion 148 of the Act. Section 148 speaks about "the issuance of notice where income has escaped assessment". Section 148(2) stipulates that "the Assessing Officer shall, before issuing any notice under this Section, record his reasons for doing so". Whether the said provision can be interpreted as if recorded reasons by the Assessing Officer should be communicated along with the notice. The very purport of the Act is to ensure that the Assessing Officers are acting with reasons and judiciously. The Statute provides that the Assessing Officer should record the reasons only with an object to ensure that the Assessing Officers/Competent Authorities cannot act with callousness and without any basis. 91. Every actions of the Authorities Competent must be on reasonings and the same must be recorded in files. The reasons to be recorded by the Assessing Officer for taking decision to reopen the escaped assessment does not mean that such reasons are to be communicated along with the notice itself. The notice directs the Assessee to submit his returns. If the Assessee is of an opinion that he requires the reasons recorded by the Assessing Officer for reopening of the assessment, then he can....