TaxTMI 
TaxTMI 
2021 (8) TMI 1189
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.... has escaped assessment within the meaning of Section 147 of the Act. The other order which is challenged by the writ petitioner is the order passed by the 2nd respondent dated 25.10.2016 rejecting the writ petitioner's objection for reopening. 3. During the assessment proceedings in respect of the return of income filed by the writ petitioner for the assessment year 2009-10, the case of the writ petitioner was referred to the Transfer Pricing Officer under Section 92 CA (1) of the Act, for determination of arm's length price of international transaction done by the petitioner with its associated enterprises. 4. The petitioner participated in the assessment proceedings as well as in the proceedings before the Transfer Pricing Officer (TPO). The TPO vide order dated 27.12.2012 under Section 92 CA (3) of the Act accepted arm's length price of the international transactions done by the petitioner with the associated enterprises. 5. After considering the order of the TPO, the assessing officer independently examined the submissions/documents placed on record by the writ petitioner, completed the assessment vide order dated 25.02.2013 passed under 143(3) of the Act and assessed....
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....or obtaining loan of Rs. 2,200 crores for the purpose of setting up the facility for manufacture of commercial vehicles and the assessing officer further noted that the assessee company has not commenced production and during the pre-production period, expenditure incurred by the assessee such as interest on loans, commitment charges, project appraisal fee, loan processing fees, formed part of capital employed in industrial undertaking. Further the Assessing Officer noted the submission of the assessee that after the Hero group exited from the joint venture in 2009 and the Company became a wholly owned subsidiary of Daimler AG, it started its commercial production only in the financial year 2008-09, relevant to the assessment year 2009-10. 10. The Assessing Officer examined the case and found that disallowances under Section 14A requires to be made in accordance with 3rd limb of Rule 8 and accordingly computed the same. Therefore, while completing the scrutiny assessment, all materials were available with the Assessing Officer and they were considered and order was passed and the impugned proceedings is a clear case of change of opinion. 11. The reasons for reopening are that....
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....s. 15. The argument put forth by the learned Senior counsel for the respondent/writ petitioner before the learned Single Judge was that there is no failure on the part of the assessee to make full and true disclosure of all particulars relevant for assessment and the Assessing Officer on consideration of the materials placed before him had completed scrutiny assessment under Section 143 of the Act and present attempt of the 1st respondent is to reopen the same solely on account of change of opinion. The Assessing Officer in the course of regular assessment proceedings formed an opinion that the factory was under construction, commercial production had not commenced not withstanding that the business of the petitioner being a composite one had been set up, expenses for setting up of the plant for manufacturing operations had been capitalized. Reassessment proceedings is merely an attempt to reappraise the materials and evidences already on record, predicated on mere change of opinion, which is impermissible. 16. On the side of Revenue, it was argued that there is a clear failure on the part of the assessee in making full and true disclosure and while completing the scrutiny as....
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.... the assessee is to disclose fully and truly all primary relevant facts, it does not extend beyond this. (ix)If there were in fact, some reasonable grounds for thinking that there had been any non disclosure as regards any primary fact, which could have a material barring on the question of under assessment, that would be sufficient to give the income tax officer to issue notices for reopening. (x)Whether, these grounds were adequate or not for arriving at the conclusion that there was a non disclosure of material facts would not be open for the Courts investigation. (xi)It is the duty of the assessee, who wants the Court to hold that the jurisdiction was lagging, to establish that the ITO had no material at all before him for believing that there has been such non disclosure. 18. The legal principle from the decision of this Court in Fenner (India) Limited Vs. Deputy Commissioner of Income Tax, reported in 241 ITR 672 (Madras) was also drawn for reference wherein it is stated that when power is invoked under Section 147 after the expiry of four years from the end of the assessment year, further pre-condition for such exercise is imposed by the proviso....
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....ut that there was no tangible material available with the Assessing Officer except that which was disclosed in the return of income filed by the petitioner for the relevant assessment year. This has been held to be not a sound foundation for exercising power under Section 147 read with Section 148 of the Act and so this would be sufficient to set aside the impugned proceedings. 21. The learned Single Judge also discussed about the financial statements filed by the assessee/respondent which forms part of the return of income and held that the TPO specifically recorded that the commercial production proposes to start in the year 2012 and that this material was available and considered by the Assessing Officer as could be seen from para 2 of the scrutiny assessment order dated 24.01.2013. 22. While rejecting the arguments raised by the learned senior standing counsel for the Revenue, learned Single Judge held that assessment proceedings are not a one way proceedings and there is sufficient indication to show that the Assessing Officer considered the order passed by the TPO and the order passed by the TPO is binding on the Assessing Officer. 23. Pointing out that the writ peti....
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....sing officer to decide the merits of the issue. The learned Single Judge erred in not following the judgment of the Supreme Court in the case of A.L.A.Firm Vs. CIT reported in (1991) 55 Taxman 497, where the Supreme Court had affirmed the judgment of this Court and this court held that nothing can be found in the record of the assessment, which itself would show escape of assessment or under assessment, can be viewed as information which led to the belief that there has been escape from assessment or under-assessment. The learned Single Judge ought to have seen that the Supreme Court in the case of Kelvinator of India Ltd., held that there must be tangible material with the assessing officer to make a reassessment and the Supreme Court did not render any finding on whether such tangible material must be an independent material or a material that can be discovered from the books of accounts submitted at the time of original assessment. 26. Learned Senior Standing counsel for the appellant would submit that the appellant-Department had prima facie reason to believe that the assessee's income chargeable to tax for the assessment year 2009-10 had escaped assessment, within the m....
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....y scrutiny into it to notice the necessary material, it is quite possible that having regard to the nature of the documents, material evidence cannot be discovered from such records despite due diligence and the case will attract application of Explanation 2 to hold that mere production of the books of account or the documents, etc., without pointing out the relevant entries therein, does not amount to disclosure within the meaning of section 147(a). 28. Per contra, the learned Senior counsel appearing for the assessee/respondent would reiterate the factual submissions and laid emphasis on the notes to the accounts, stating that it is a very important document which was considered by the Assessing Officer, while completing the scrutiny assessment. There is no failure on the part of the assessee to make full and true disclosure of all particulars relevant for assessment. The Assessing Officer had completed scrutiny assessment under Section 143 of the Act and therefore, the impugned order passed by the 1st respondent, to reopen the same solely on account of change of opinion, cannot be sustainable. The assessee disclosed clearly the manner of computation of income under the Head P....
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....d needs to be capitalised, during the year, the assessee conpany has received other income of Rs. 4,14,99,995/- and the same has been written as 'Income from other sources' and this material fact has not been disclosed fully and truly during the course of assessment proceedings and therefore, reopening the assessment is based on definite reason to believe that income to the tune of Rs. 4,14,99,995/- escaped assessment. In this regard, the assessee was asked to file its objections. The assessee/respondent herein filed objections dated 17.05.2016 raising the following objections:- (i) Re-assessment of income beyond four years is bad in law where the cumulative conditions stipulated under Section 147 of the Act are not satisfied; (ii) the assessing officer must also have reason to believe that such income has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for that assessment year. (iii) Once the assessee has made full and true disclosure of primary facts, the Assessing Officer would not be empowered to reopen the assessment after a period of four years fr....
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....n the mere production of books of accounts by assessee before Assessing Officer, there should be no presumption that all books seen by the Assessing Officer, it is duty of assessee to show all relevant particulars in books of accounts, not mere production of books. (vi) The assessee knows all the material and relevant facts, the assessing authority might not. In respect of the material failure, the omission to disclose may be deliberate or inadvertent. That was immaterial. But if there is omission to disclose material facts, then subject to the other conditions, jurisdiction to reopen is attracted. If there are some primary facts from which reasonable belief could be formed that there was some non disclosure or failure to disclose fully and truly all material facts, the ITO has jurisdiction to reopen the assessment. (vii) In the instant case, the officer has applied his mind and has recorded the opinion with the belief that there lies an income that has escaped the assessment. When an income liable to tax has escaped assessment in the original assessment proceedings due to oversight or a mistake committed by the ITO, he has jurisdiction to reopen the assessment-Re....
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....actual as well as legal aspects and passed detailed order and given a finding that the impugned order passed by the 2nd appellant is not sustainable and set aside the impugned orders. In such circumstances, there is no merit in the present writ appeal. Already, the learned Single Judge discussed elaborately the grounds raised by the appellants/Revenue in the grounds of appeal and therefore there is no merit in the appeal and the appeal is liable to be dismissed. 35. A perusal of the records would go to show that the respondent is the assessee and it was engaged in manufacturing and sale of commercial vehicles and for the assessment year 2009-10, they filed the returns. Since the business of the respondent/assessee is in India and also overseas. For the overseas transaction, to fix the Arm's Length Price, after getting report from the Transfer Pricing Officer, after completing the formalities, the assessing officer passed the assessment order under Section 143(3) of the Act dated 25.02.2013. It is also not in dispute that on 24.03.2016, the 1st appellant sent a notice under Section 148 of the Act to the respondent/assessee to submit the returns in the prescribed form stating that....
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....ther the reasons stated in the notice u/s.148 of the Act dated 24.03.2016 and in the letter recording the reasons dated 04.05.2016 are valid in law? (iv)Whether the respondent/assessee can challenge the said reasons by way of writ petition? 38. As far as the first question is concerned, the appellants issued notice u/s.148 of the Act and on the request by the respondent herein/assesee seeking reason for reopening, reasons recorded was provided to assessee. Again the assessee raised objections and after considering the objections, 2nd appellant passed the order dated 25.10.2016 disposing the objections. So the answer is, each case shall be examined on its own merits keeping in view the scope of the judicial review while entertaining such matters. When a notice under Section 148 of the Act has been issued to the assessee for reopening the assessment, it shows it involved complex facts and circumstances and the same are to be adjudicated by producing documents and by adducing evidence by the assessee. 39. As far as the 2nd and 3rd questions that arise in this Writ Appeal are concerned, there is no dispute that the assessee who is doing business of Designing, manufacturi....
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.... assessee must cooperate for the scrutiny and for completion of the reassessment process. 41. On the last question referred by us, regarding the challenge of the impugned order by way of writ is concerned, there is no quarrel with the proposition of law laid down by the Honourable Supreme Court and various decisions of this Court, referred to by the learned counsel on both sides. The legal principles settled in this regard is that writ petition is maintainable in exercising the extra ordinary jurisdiction under Article 226 of the Constitution of India, in challenging the order, inter alia, either on the ground that it is malafide or arbitrary or that it is passed on irrelevant and extraneous consideration or if the same is in violation of any Statutory Rules in force. However, the point for consideration is as to whether the the respondent/assessee established its legally acceptable ground in seeking to quash the rejection order passed by the 2nd appellant and whether the reasons set out in the order passed by the learned Single Judge in quashing the impugned rejection order, is sustainable or not. We are of the considered view that the mixed question of law and facts, in respec....
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....er after finalization of discussions. Therefore, the entire issue can be decided only at the time of re-assessment. 44. The Income Tax Officer is assessing the tax based on the returns filed by the assessee and the Officer scrutinise the returns filed by the assessee. So, to deal with the cases, where there is evasion or suppression or otherwise by the Assessee, reassessment may arise on several grounds. There is no bar to reopen the assessment and the authority has invoked that power of reopening, after giving the opportunities to the assessee. Therefore, the questions raised as to whether the same is based on the change of opinion or not, whether the reopen is based on the available materials or not and whether fresh tangible material is available or not and whether the reopening of the assessment is barred by limitation are all matters subject to facts and circumstances of each case. In all the cases, uniform method cannot be adopted. Every case is based on the facts and circumstances depending on the merits of its relevant particulars and the same has to be decided by the fact finding authority. The scope of the writ is very limited. Unless it is shown that there is violatio....
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....of Section 148 to 153 of the Act, assess or reassess such income and also any other income chargeable to tax which as escaped assessment and which comes to his notice". Further, the respondent/assessee has got every chance to raise his objections in reassessment proceedings. Therefore, no prejudice would be caused to the respondent/assessee. The respondent has got statutory remedy after passing the re-assessment order. 47. There are chances and possibilities that the tax payer not filing the returns properly or the taxing authority due to oversight or mistake or various other reasons at the time of scrutinising the returns, not assessed properly. The tax payer by taking advantage of such error or omission, would evade payment of tax and it may lead to revenue loss. Therefore, the main purpose of reopening the assessment order is that in the original assessment, if the income liable to tax has escaped assessment due to oversight, inadvertence or any other mistake committed by the ITO, as per the provisions contained in section 147 of the Income Tax Act, 1961, if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment....