TaxTMI 
TaxTMI 
2019 (8) TMI 894
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....ion. Mr. D.V. Pathy, learned counsel for the petitioner has appeared for the petitioner. The respondents are represented by Mr. Rishi Raj Sinha, learned Senior Standing Counsel who appears with Ms. Shilpi Keshri, Junior Standing counsel. A preliminary objection was raised by the learned counsel for the respondents when this matter came up for consideration on 21.02.2019 on the plea of the alternative remedy of appeal available to the petitioner to question the assessment order but since according to Mr. Pathy, the assessment order so passed was de hors the statutory provisions under which it was exercised and also lacked foundation that we allowed the parties to address the issue on merits and when the matter has been heard with the view to final disposal at the stage of admission. Facts of the case as advanced by Mr. Pathy briefly stated is that the petitioner submitted his returns for the assessment year in question i.e. 2011-12 together with audit report on 30.03.2012, a copy of which is on record at Annexure- 1 series to the writ petition. It is the case of the petitioner that since after filing of the return under Section 139 of 'the Act' no objection was raised by the depa....
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....etitioner along with his original return at Annexure-1 series,a fabrication, has proceeded to disallow the claim towards agricultural income as well the claim on expenses under the head income from business and profession, to be added to his total income. It is on computation of the total income that the tax liability has been determined at Rs. 10,73,780/- vide the assessment order at Annexure 10 series and which is followed by a demand notice issued under Section 156 of 'the Act' which accompanies Annexure-10 which is put to question in this writ petition. Mr. Pathy, learned counsel for the petitioner has straightway taken this Court to the reasons so supplied to the petitioner by the respondent No.2 to reopen the proceedings under Section 147 of 'the Act', a copy of which is impugned at Annexure-5 to the writ petition. It is submitted that the petitioner has disclosed an income of Rs. 4,85,905/- as his agricultural income in his return which was accompanied with an audit report as well as balance sheet, the profit and loss account etc. It is submitted that the return of the petitioner was not subjected to scrutiny nor an assessment proceeding was held, which would allow the Inco....
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....losure of all primary facts. According to Mr. Pathy, the entire disclosure is present in the returns filed which was accompanied with audit report as well as the balance sheet and the profit and loss statement of the petitioner allowing him to hold whatsoever enquiry that the Assessing Officer wanted to do at that stage, but not having exercised such jurisdiction to hold assessment proceedings, when assessee was lawfully obliged to supply the particulars, this jurisdiction cannot be carried forward to a proceeding under Section 147/148 of 'the Act' (2) [1976]103 ITR 437 (SC)] (Income Tax Officer versus Lakhmani Mewal Das) placing reliance on the opinion expressed at paragraph 7 of the judgment, it is submitted that the legal position as to the exercise of jurisdiction under Section 147/148 of 'the Act' has been discussed. He submits that the Supreme Court while accepting that a duty is cast upon assessee to make true and full disclosure of the preliminary fact at the time of assessment further goes on to hold that the duty of assessee does not extent beyond such true and full disclosure and once he has done his part then his duty ends for it is no responsibility of the assessee to....
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....ncome was made by the petitioner at the stage of filing of the original return and no steps were taken by the Assessing Officer to doubt the return on its veracity as well as on the disclosure of agricultural income, this failure on the part of the Assessing Officer to carry out an exercise of verification as well as for demand of records in support of the disclosure so made, cannot be extended and stretched to a proceeding under Section 147 of 'the Act'. According to Mr. Pathy the illegality is perpetuated by the Assessing Officer in going beyond the reasons supplied by disallowing the expenses claimed by the petitioner under various heads to the tune of Rs. 12, 39,000/- to add it to the total income of the assessee, which is beyond the reasons supplied by the Assessing Officer. The writ petition is resisted by Mr. Rishi Raj Sinha, learned Senior standing Counsel for the Income Tax Department. Defending the exercise and the orders passed thereunder, he submits that the exercise is within the parameters of the statutory provisions and there is neither any default in jurisdiction nor the order is in excess of such jurisdiction. According to Mr. Sinha, the entire argument of Mr. P....
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....enings for assessee to question the proceedings, no such plea is entertainable since after the amendment was brought in Section 147 effective from 01.04.1989. Defending the disallowance of expenses, learned counsel refers to Explanation 3 attached to Section 147 to submit that no infirmity exists in the exercise. According to Mr. Sinha, the Assessing Officer was well within his jurisdiction to direct the assessee to produce the records supporting the agricultural income so claimed by the petitioner. Learned counsel has referred to Section 151 of 'the Act' to submit that a plain look at the letter of the Principal Commissioner enclosed at Annexure- B to the counter affidavit which also encloses the sanction accorded, would confirm that there is absolutely no infirmity in the exercise of reopening of assessment. Reverting back to provisions of Section 147 it is submitted that once an Assessing Officer on the materials on record has reasons to believe that any income chargeable to tax has escaped assessment, it is after issuing notice and hearing the assessee that the Assessing Officer can assess or reassess. According to Mr. Sinha, even if the reasons supplied by the Assessing Off....
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....l for the parties and we have perused the records. Although exhaustive arguments have been advanced by either side but it is the following issues which fall for consideration in the present case; (a) Whether the exercise under Section 147 of 'the Act' is barred by limitation so prescribed under Section 149 of 'the Act'; (b) Whether the Assessing officer in exercise of jurisdiction vested under Section 147 of 'the Act' can compel the assessee for production of records /documents/particulars in respect of any disclosure made in the returns; (c) Whether there was any tangible material available with the Assessing Officer to reopen the proceedings which was a live link in between the 'reasonable belief' and the order passed under Section 147 of 'the Act'; and (d) Whether the Assessing Officer could have travelled beyond the reasons to disallow the expenses claimed by the petitioner in his return to add to his total income, by relying on Explanation 3 attached to Section 147. In so far as the issue of limitation as raised by Mr. Pathy is concerned, considering the import of Section 149 of 'the Act' that the return were originally filed on 30.3.2012, the notice issued under Sec....
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....disclosure towards agricultural income is only for rate purposes. Paragraph 5 of the letter issues directions to the Assessing Officer to verify any error in data entry, to provide feedback based on such score where assessment is completed and to verify the claims where assessment proceeding is pending. Paragraph 6 again mentions about a list of cases in which agricultural income exceeding Rs. 1 crore has been claimed. We completely fail to appreciate as to how this advisory can lay the foundation for such exercise especially where there is no direction in the advisory to reopen any proceeding. Perhaps, the Assessing Officer in his exuberance has got misled by such advisory to issue notice for such proceeding and unfortunately even the Principal Commissioner has defaulted in not appreciating whether at all the case was a fit case for reopening especially where the Assessing Officer had failed to satisfy himself on the reasons for the belief that any part of income chargeable to tax had escaped assessment. Much reliance has been placed by Mr. Sinha to contest the proposition advanced by Mr. Pathy in reference to the parameters drawn for exercise of power vested in the Assessing ....
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.... 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. 7. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws(Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer." The Supreme Court taking note of the transitory change in Section 147 has in paragraph 7 concluded that a power to reopen would vest in the Assessing Offic....
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....e of powers under Section 142/143, such directions could have been issued for production of records and a failure of the petitioner to satisfy the Assessing Officer on such count could have led to a best judgment assessment under Section 144 at the stage of original assessment but having not done so, such recourse cannot be adopted by relying upon the statutory provisions of Section 147 of 'the Act'. Secondly such enabling powers is only to be exercised only where there is tangible material available at the hands of the Assessing Officer and not in absence thereof. The judgments relied upon by Mr. Pathy has been contested by Mr. Sinha on grounds that they relate to the preamended provisions of Section 147 but in our considered opinion, in view of the position settled by the Supreme Court in the case of Kelvinator of India (supra) after taking note of the transitory change in Section 147, the legal position as to the prerequisites for such exercise, has not undergone a change and which is that, there had to be tangible material at the disposal of the Assessing Officer for reopening of such proceedings and which power cannot be exercised for initiating a roving enquiry. Even if the ....