TaxTMI 
TaxTMI 
2020 (5) TMI 263
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....ome Tax Act, 1961 [in short "IT Act"] on 06.03.2009. 2.2. The case was reopened under Section 148 of the IT Act on 26.08.2010 by issuance of notice and in response to the same, the respondent/assessee has sent a letter dated 14.09.2010 stating that the Return of Income already filed by him be treated as Return filed by him in compliance of Notice issued under Section 147 of the IT Act dated 26.08.2010. 2.3. Personal hearing was afforded and details were also called for from time to time. The Assessing Officer finalized the assessment under Section 143(3) r/w. Section 147 of IT Act as follows: Total Income Computation: Rs. Total Income admitted 23,92,137 Add:1.Disallowance u/s 14A 14,602 2.Depreciation 10,979 3.Donation 100 25,681 ----------------------------------- Total Income determined 24,17,818 ----------- Tax, S.C. & E.C. 8,13,83 Less : TDS 16,16,214 ------------ Refund 8,02,377 Add: 244-A Interest 96,285 ------------ Total Refund 8,98,662 Less: Refund already issued 9,08,420 ....
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....l Income as per Order dt.25.11.2011 Rs. 24,17,818.00 Add: Deemed Dividend U/s.2(22)(e) Rs. 2,29,00,539.00 ---------------------- Assessed Total Income Rs. 2,53,18,357.00 Balance Tax Payable Rs. 1,09,30,440.00 2.8. The respondent/assessee, aggrieved by the said Assessment Order, filed an appeal in ITA.No.55/CIT(A)-15/15-16 dated 25.05.2016 before the Commissioner of Income Tax (Appeals) -15, Chennai-600 034. The appellant/assessee before the CIT (Appeals) contended among other things that the notice under Section 148 of the IT Act was issued after 4 years from the Assessment Order despite the fact that there was no failure on the part of the assessee to furnish truly and fully all material facts necessary for assessment. The appellant/assessee also took a stand that reopening of the assessment is purely on account of audit objections for which the Assessing Officer himself sent a reply that there is no justification for raising objections and the assessment can be reopened only if the Assessing Officer is in possession of tangible materials /facts on the basis of which, he had reason to believe that income had escaped assessment. The appellant/as....
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....nthil Kumar, learned counsel appearing for the Revenue made the following submissions: ➔ In the audit objection, it was pointed out that the assessee debited only the expenditure incurred such as Salary etc., without any profit / commission and it was only a system/colourable device adopted by the assessee to reduce the tax liability, for which the balance amount of Rs. 6,01,84,164/- is to be treated as Net Profit and it had to be taxed under Section 69 of the IT Act. ➔ The Audit Party has also considered the reply submitted by the Assessing Officer and found that RSC is making reimbursement for expenses incurred by the assessee company year after year and if that is so, RSC would have reimbursed the exact expenses incurred by the respondent/assessee and not any additional amount year after year and that apart, RSC did not make payment for rendering services and the entire amount was required to be brought to tax and therefore, the balance amount of Rs. 6,01,84,164/- is required to be brought to tax and reiterated the said fact. ➔ The Assessing Officer had submitted his response dated 04.03.2014 reiterating their earlier stand for whi....
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....nd it virtually amounts to change of opinion and it is totally impermissible under Law. ➔ It is not even the case of the Assessing Officer that the respondent/assessee had failed to disclose truly and fully the materials facts necessary for assessment and in the absence of any such reason, the notice for reopening of assessment under Section 143(3) r/w. 147 of the IT Act cannot be recorded as a valid material. ➔ Admittedly, notice under Section 148 of IT Act came to be issued after 4 years from the end of the Assessment Year and the Assessing Officer has also failed to furnish reasons for issuance of notice under Section 148 and only after the representation was submitted, reasons were furnished that too after the completion of the assessment. ➔ As regards the deemed dividend, the credit balance in the account of RSC cannot be treated as deemed dividend under Section 2(22)(e) of the IT Act for the reason that RSC had enlisted the services of the assessee for the purpose of selling road safety equipments which are basically insurance products to promote road safety and the said amount has been advanced to the assessee without any inter....
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....res jurisdiction to issue notice under section 148 in respect of an assessment beyond the period of four years but within a period of eight years from the end of the relevant year, viz., [1] the Income-tax Officer must have reason to believe that income chargeable to tax has escaped assessment, and [2] he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee [a] to make a return under section 139 for the assessment year to the Incometax Officer, or [b] to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must co-exist in order to confer jurisdiction on the Income-tax Officer. It is also imperative for the Income-tax Officer to record his reasons before initiating proceedings as required by section 148[2]. Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice. We may add that the duty which is cast upon the assessee is to make a true and fu....
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.... challenge in a court of law. [See observations of this Court in the cases of Calcutta Discount Co.Ltd Vs. Income-tax Officer [1961] 41 ITR 191 [SC] and S.Narayanappa V. Commissioner of Income Tax [1967] 63 ITR 219 [SC], while dealing with the corresponding provisions of the Indian Income Tax Act, 1922]." 8. In New Excelsior Theatre Pvt. Ltd. v. M.B.Naik, Income Tax Officer and Others [1990 Vol.185 ITR 159 (Bom.)], the Writ Court while quashing the notice issued under Section 147(a) of the IT Act has held that the condition for reopening of assessment was that formation of belief that income had escaped assessment must be by reason of either the assessee's omission to file a return of income or non-disclosure of full and material facts necessary for assessment and having taken note of the fact that the assessee had furnished full particulars, had quashed the notice. 9. In Commissioner of Income-Tax v. Akbarali Jummabhai [1992 Vol.198 ITR 69], Gujarat High Court had considered the reference made by ITAT under Section 256(2) of the IT Act for answering the following Questions of Law: "1. Whether, on the facts and in the circumstances of the case, the Income Tax App....
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.... can be reasonably drawn from the primary facts, and what legal inferences must ultimately be drawn from the primary facts and other facts inferred from them. The assessee is not bound to tell the assessing authority what inferences, whether of fact or law, should be drawn and his failure to communicate to the assessing authority the proper and correct inferences to be drawn from the primary facts cannot be regarded as failure to disclose "material facts". The assessee is required to disclose only primary facts and the primary facts to be disclosed by him must be material or relevant to the decision of the question before the assessing authority so that the non-disclosure of such facts would have a material bearing on the question of escapement of income from assessment. If the assessee has disclosed the primary facts which are material and necessary for the purpose of his assessment, his assessment cannot be reopened by the Income-tax Officer by resorting to section 147[a], but, if there is omission or failure on the part of the assessee to disclose any material or relevant primary facts and, in consequence, there is escapement of income from assessment, such income can be got tax....
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.... (i) omission or failure on the part of the assessee to make a return of his income under Section 139 of the Act for any assessment year or (ii) failure to disclose fully and truly all material facts necessary for his assessment for that year, are not present in the new main section but the crucial expression "reason to believe" still exists in the new provision. The amended Section 147 provides that where the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may apply the provisions of Sections 148 to 153 and assess or re-assess the income which has escaped assessment. For the present purpose, only Sections 148 and 151 are relevant. Cub-section (2) of Section 148 of the Act mandates that before issuing notice to the assessee under Subsection (1), for filing the return, the Assessing Officer shall record his reasons for doing so. Therefore, formation of reason to believe and recording of reasons are imperative before the Assessing Officer can re-open the completed assessment. Proviso to Sub-section (1) of Section 151 of the Act provides that after the expiry of four years from the end of th....
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....tax, Bangalore, (1967) 63 ITR 219). 15. Explaining the scope of the expression "information", in the background of Section 132 of the Act, which logic is equally applicable to a case under Section 147 of the Act, in L.R. Gupta v. Union of India, (1992) 194 ITR 32, a Division Bench of this Court observed thus: "The expression "information" must be something more than a mere rumour or a gossip or a hunch. There must be some material which can be regarded as information which must exist on the file on the basis of which the authorising officer can have reason to believe that action under Section 132 is called for any of the reasons mentioned in Clauses (a), (b) or (c). When the action of issuance of an authorisation under Section 132 is challenged in a Court, it will be open to the petitioner to contend that on the facts or information disclosed, no reasonable person could have come to the conclusion that action under Section 132 was called for. The opinion which has to be formed is subjective and, therefore, the jurisdiction of the Court to interfere is very limited. A Court will not act as an Appellate Authority and examine meticulously the information in order to ....
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....er Section 143(3); (ii) section 153 related to the passing of an order of assessment and not to the issuing of a reassessment notice under Section 147/148 (iii) the direction or finding contemplated by Section 153(3)(iii) had to be a finding in relation to the particular assessee and the particular year and to be a finding it had to be directly involved in the disposal of the case; (iv) on the facts, the notices issued under Section 148 on November 20, 1998; to the assessee for reopening the original assessments for the assessment years 1988-89, 1989-90 and 1990-91, on the basis of the Appellate Tribunal's decision rendered in the case of Boudier Christian relating to the assessee's technicians deputed to India, the income of the assessee was to be treated as fee for assessments for those assessment years, were without jurisdiction as they were barred by limitation in view of the proviso to section 147, as amended by the Direct Tax Laws (Amendment) Act, 1987, as that was the provision that was applicable on November 20, 1998, when the reassessment notices were issued, and admittedly there was no failure on the part of the assessee to disclose full....
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....e available under section 147 in clause (a) and clause (b). This distinction has now been taken away by the Amendment Act. Previously, the line of distinction was a limitation period of four years and the limitation period exceeding four years. The Assessing Officer would reopen a back assessment within a period of four years as long as he had reason to believe in consequence of any information, that income has been underassessed or income has escaped assessment. In the case of limitation, providing for a period exceeding four years, there should have been a failure on the part of the assessee to disclose fully and truly all material facts leading to the escapement of income. But as a result of the amendment brought with effect from April 1, 1989, the above distinction had been obliterated and the Assessing Officer could reassess the income as long as he had reason to believe that income chargeable had escaped assessment. The new law has inserted a proviso to section 147 in the following words: '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 af....
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....ssion 'information' means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or after hearing on the assessment. We are of the clear view that on the basis of information received and if the assessing officer is satisfied that reasonable ground exists to believe, then in that case the power of the assessing authority extends to re-opening of assessment, if for any reason, the whole or any part of the turnover of the business of the dealer has escaped assessment or has been under assessed and the assessment in such a case would be valid even if the materials, on the basis of which the earlier assessing authority passed the order and the successor accessing authority proceeded, were same. The question still is as to whether in the present case, the assessing authority was satisfied or not." It was also observed from the materials that the Assessing Officer had to issue notice on the ground of directions issued by the audit party and not on his personal satisfaction which is not permissible under law and accordingly, allowed the appeal filed by the assessee. 16. In ICICI Home Finance Co. Ltd. v. Assistant Com....
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....ar Ltd v. Deputy Commissioner of Income tax reported in 301 ITR 407 has held that once all the material with regard to particular issue is before the Assessing Officer and he chooses not to deal with the same, it cannot be said that he had not applied his mind to all the material before him. Further, as observed by the Full Bench of Delhi High Court in the matter of C.I.T. v. Kelvinator of India Ltd. Reported in 256 ITR 1, when the entire material is placed before the Assessing Officer at the time of original assessment and he passes an assessment order under Section 143(3) of the Act a presumption can be raised that he applied his mind to all the facts involved in the assessment." The appeal filed by the assessee was allowed by the Bombay High Court in the said decision. 17. In M/s Global Business Solutions India Pvt. Ltd. v. Principal Commissioner of Income Tax-3 [(2018) 409 ITR 560], a Division Bench of Delhi High Court, after taking note of the above quoted judgment of the Hon'ble Apex Court in Commissioner of Income Tax v. Kelvinator of India Ltd. [320 ITR 561] wherein it was held that review of the completed scrutiny can be done only if tangible material is made ava....
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....iting the attention of this Court to sub-para No.3 to Para 4 of Circular No.8/2016 dated 17.03.2016 that such an exercise was contemplated by the Principal Commissioner of Income Tax / Commissioner of Income Tax and whereas the order for reopening of the assessment was passed by the Assessing Officer / Income Tax Officer and as such, the said instructions will not apply to the facts of this case. 22. It is also pointed out by the learned Senior Standing Counsel appearing for the Revenue that the Assessing Officer, after reopening of the assessment, had recorded a categorical finding that the credit balance as on 31.03.2007 amounting to Rs. 5,30,99,960/- is treated as deemed dividend in the hands of the respondent/assessee and it is an independent finding recorded dehors the contents of the audit objections and the Tribunal, in the impugned common order, had failed to deal with the said issue and merely recorded a finding that the Assessing Officer did not apply his mind as to the income escaping assessment. The Assessing Officer, after application of mind, found that there was no escapement of income and also requested the Audit Wing to dropping proceedings did change his mind a....
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....ure that the Income Tax Officer, namely S.Krishna Kumar, in his response dated 31.01.2015 to the audit objections would also state that after examining the details of the expenses incurred by the respondent and RSC during the financial year 2006-07 and it is relevant to extract the same: The balance amount for this year amounting to Rs. 2,39,16,129/- and the opening credit balance amounting to Rs. 2,91,83,830/- together amounting to Rs. 5,30,99,959/- is shown as creditor for services in the books of SKI Retail Capital Limited. [Schedule "G" is Rs. 5,30,99,959/- + other creditors amounting to Rs. 6,01,84,164/- copy of relevance materials enclosed]. - "D" The very same official, in the above cited order dated 30.01.2015, had concluded that the amount in Schedule "G" of Rs. 5,30,99,959/- [Rounded off to Rs. 5,39,99,960/- in the said order of assessment should be treated as deemed dividend. 27. The primordial submission of the learned Senior Standing Counsel appearing for the Revenue is that the reasons recorded by ITO, in the order dated 30.01.2015 as to the treating of the amount of Rs. 5,30,99,960/- as on 31.03.2007 came into being on an independent application of min....