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2021 (12) TMI 1215
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....ny filed its return of income under Section 139 (1) of the Income Tax Act, 1961 [hereinafter referred to as the 'Act'] on 28.10.2005, for the Assessment Year 2005-06, declaring a total income of Rs. 91,13,40,000/-. The petitioner states that the return of income was filed with true and adequate income of the petitioner along with the audited financial statements, Tax Audit Report as required under Section 44AB of the Act. The case of the petitioner was selected for scrutiny. Notice was issued. The petitioner submitted further documents, materials and answered the queries. The case of the petitioner was referred to Transfer Pricing Officer, who in turn, submitted a report on the Arm's length price. After completing the process of scrutiny, the assessment officer passed the final assessment order under Section 143(3) of the Act in order dated 29.12.2008. 4. While so, the respondent issued the impugned notice dated 29.03.2012 under Section 148 of the Act, which was received by the petitioner company on 03.04.2012. In response, the respondent company filed its return of income and requested to furnish reasons. The reasons were supplied to the petitioners. The initiation of r....
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....ds such as "reasonable cause to believe" or "has reason to believe" are commonly found when a Legislature or law-making authority confers powers on a minister or official. As Lord Radcliffe said [1980] 2 WLR 1, 22 (HL) : "However read, they must be intended to serve in some sense as a condition limiting the exercise of an otherwise arbitrary power. (Nakkuda Ali v. Jayaratne [1951] AC 66, 77 (PC)". These words do not make conclusive the officer's own honest opinion that he had reasonable cause for the prescribed belief. The grounds on which the officer acted must be sufficient to induce in a reasonable person the required belief before he can validly reopen a completed assessment under s. 147(a). In England, the majority in Liversidge v. Anderson [1942] AC 206 (HL) held that the belief entertained by the officer was not justiciable. Lord Atkin dissented. Now, it had been held by the House of Lords in the recent tax decision of IRC v. Rossminster Ltd. [1980] 2 WLR 1, 49 (HL), that Lord Atkin was right and that the majority were wrong. Lord Diplock has said : "..... I think the time has come to acknowledge openly that the majority of this House ....
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....of the Act. (vi) No sanction as is mandated under Section 151(1) of the Act had obtained by the AO from the Director of Income Tax/Commissioner of Income Tax. (d) Scope of provisions of Section 147 of the Income Tax Act: The petitioner, at the outset, submitted that the Apex Court in its judgment in the case of Calcutta Discount Co. Ltd., Vs. ITO reported in 41 ITR 191, examined the scope of provisions of Section 34 of the Act and held at Pg.199 as under: "To confer jurisdiction under this section to issue notice in respect of assessments beyond the period of four years, but within a period of eight years, from the end of the relevant year two conditions have therefore to be satisfied. The first is that the Income-tax Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under-assessed. The second is that he must have also reason to believe that such " under assessment " has occurred by reason of either (i) omission or failure on the part of an assessee to make a return of his income under s. 22, or (ii) omission or failure on the part of an assessee to disclose fully and truly all material facts nec....
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....ished from the intention to change the form of the investments is really an inference to be drawn by the assessing authority from the material facts taken in conjunction with the surrounding circumstances. The law does not require the assessee to state the conclusion that could reasonable drawn from the primary facts. The question of the assessee's intention is an inferential fact and so the assessee's omission to state his " true intentions behind the sale of shares " cannot by itself be considered to be a failure or omission to disclose any material fact within the meaning of s . 34 . Indeed, an assessee whose contention is that the shares were sold to change the form of investment and not with the intention of making a business profit cannot be expected to say that his true intention was other than what he contended it to be.. Dealing with this question the learned Chief Justice has said:- " The expression that the Respondent had failed to disclose " the true intention behind the sale of shares " may lack directness, but that deficiency of language is not sufficient to enable the Respondent to contend, in view of the circumstances alleged, that no failure to dis....
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....wance of a provision for an unascertained liability points to the Assessing Officer indulging in what amounts to nothing but a masked review. What appears to have excited the Assessing Officer's mind was that the original assessment order was not framed properly as it overlooked certain materials which led to loss of revenue. The Assessing Officer in the first instance did not perform his job properly for which the assessee cannot be faulted with. In Calcutta Discount Co. Ltd. v. ITO, [1961] 41 ITR 191 (SC) the Supreme Court had pointedly observed that the assessee is required to fairly disclose what is expected of him "the primary facts" while submitting the returns. It is up to the Assessing Officer to draw the necessary inferences. In the present case, the Assessing Officer's omission appears to have been the sole basis for issuing the reassessment notice and, consequently, proceeding to make the impugned demand. " ii. Indian and Eastern Newspaper Society Vs. Commissioner of Income-Tax, New Delhi, 119 ITR 996 (SC) at page 1004. "Now, in the case before us, the Income Tax Officer had, when he made the original assessment, considered the provisions of Sec....
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.... and it was for him to make necessary enquiries and draw proper inference as to whether the amounts invested in the purchase of the drafts could be treated as part of the total income of the assessee during the relevant year. This the Income Tax Officer did not do. It was plainly a case of oversight, and it cannot be said that the income chargeable to tax for the relevant assessment year had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts. The Income Tax Officer had all the material facts before him when he made the original assessment. He cannot now take recourse to Section 147(a) to remedy the error resulting from his own oversight. " iv. Chemicals And Fibres of India Limited Vs. M.K.N.Pillai and Another 146 ITR 280 (Bom) at Page 283 "It is clear that the assessee had made a claim on the footing which has been accepted by several judicial tribunals. It had disclosed the primary facts which were necessary for the purpose of making the assessment. If there was any doubt, it was for the concerned officer to make further inquiries. It is impossible to hold or accept the conclusion tha....
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.... reached a different conclusion, i.e., different from the one which he actually reached on the earlier occasion, it would not be open to him to resort to section 147(a) merely on the ground that subsequently he came to regard as erroneous the conclusion which he had earlier reached. The facts of the case in Poonjabhai Vanmalidas and Sons v. Commissioner of Income-tax, [1974] 95 ITR 251 (Guj) [FB] illustrate this aspect of the legal position. It may be pointed out that, in the recent decision in Parashuram Pottery Works Co. Ltd. v. Income-tax Officer, [1977] 106 ITR 1, the Supreme Court has reiterated the same legal position and it is clear from this latest decision that the legal position is the same as was summarised by the Full Bench of the Gujarat High Court in Poonjabhai Vanmalidas and Sons v. Commissioner of Income-tax, [1974] 95 ITR 251. In Parashuram Pottery Works Co. Ltd. v. Income-tax Officer, [1977] 106 ITR 1 (SC), it was held by the Supreme Court that where, in working out the figures of depreciation for certain items of capital assets, the Income-tax Officer lost sight of the fact that the aggregate of the depreciation, including the initial depreciation allowed under t....
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.... any further enquiry or investigation that is called for should be done by the Income-tax Officer. On the facts of the present case, it is clear that the information furnished by the petitioner in Part III of the returns was sufficient for the Income-tax Officer to enquire further into the matter and to take steps to include the income accruing to the minors in the assessment of the petitioner. This was a clear case of failure on the part of the Income-tax Officer rather than the assessee." (g) The petitioner further submitted that though a statutory amendment had been made in section 148 of the Income Tax Act w.e.f.01.04.1989, however, the Apex Court in 320 ITR 561, while affirming the judgment of Delhi High Court in the case of CIT Vs. Kelvinator of India Ltd., reported in 256 ITR 1 (FB) held as under: "On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment 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 1....
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....ast and was well settled and its omission from Section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended Section 147 to reintroduce the expression 'has reason to believe' in the place of the words 'for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new Section 147, however, remain the same." (emphasis supplied) (h) The petitioner however adds that the Division Bench of High Court of Delhi in its judgment reported in 256 ITR 1 had held as under: "We, however, may hasten to add that if "reason to believe" of the Assessing Officer is founded on an information which might have been received by the Assessing Officer after the completion of assessment, it may be a sound foundation for exercising the power under section 147 read with section 148 of the Act. We are unable to agree with the submission of Mr. Jolly to the effect that the impugned order of reassessment cannot be faulted as the same was based on information derived from the tax audit report. The tax audit report had already been s....
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....ion in terms of Prayer (a) and quash and set aside the notice dated 27-3-2006 directing reopening of the assessment for the year 1999-2000. It thus held as under: "Leave granted. We have heard learned counsel on both sides. The assessee had disclosed full details in the return of income in the matter of its dealing in stocks and shares. According to the assessee, the loss incurred was a business loss, whereas, according to the Revenue, the loss incurred was a speculative loss. Rejection of the objections of the assessee to the re-opening of the assessment by the assessing officer vide his order dated 23-6-2006, is clearly a change of opinion. In the circumstances, we are of the view that the order re-opening the assessment was not maintainable." (Emphasis supplied) (j) It is significant to be noted that their Lordships considered in its judgment that where a petitioner had challenged the initiation of proceedings u/s 148 of the Act and filed objections, the Assessing Officer was required bylaw to consider such objections, to enable the Court to examine whether it is a case of change of opinion or otherwise. It is submitted that ....
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....2020) 424 ITR 607 (SC) 2. Bharti Infratel Ltd., Vs. DCIT [2019] 101 taxmann.com 285 (Delhi) 3. CIT Vs. City Union Bank Limited (2019) 264 Taxman 204 (Mad) (HC) 4. PCIT Vs. L&T Ltd., (2020) 268 Taxman 390 (SC) (l) That even if for the sake of an arguments, it is held that an error had been committed by the respondent then too, the same error would not allow the respondent to assume jurisdiction to initiate proceedings under Section 147 of the Act. It has been held in the following judicial pronouncement that any remissness, error, or mistake does not allow the respondent to assume jurisdiction under Section 147 of the Act, more particularly in the case wherein the proceedings have been initiated beyond a period of four years from the end of the assessment year. i.CIT Vs. BhanjiLavji 79 ITR 582 (SC) ii. Mohini Bai M.Sarda Vs. First ITO 190 ITR 541(Karnataka) iii. Fenner India Limited. Vs. DCIT 241 ITR 672(Mad) iv. CIT Vs. Indian Sugar & General Industries 303 ITR 155(Delhi) v. Gordon Woodroffe & Co.Ltd., Vs. ITO 51 ITR 12(Mad) vi. Gemini Leather Store. Vs. Income-Tax officer 100 ITR 1 (SC) ....
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....The learned Senior Standing counsel reiterated that in the case of the petitioner, the Assessing Officer has 'reason to believe', in view of the fact that the income chargeable to tax escaped assessment. The conditions stipulated in the Proviso clause to Section 147 is also complied with and thus, the petitioner has to participate in the reopening proceedings. The learned Senior Standing counsel relied on the reasons recorded for reopening and the findings of the authority competent, while disposing of the objections filed by the petitioner. Relying on the said reasons as well as the disposal of objections, the learned Senior Standing counsel reiterated that the case of the petitioner is falling under the proviso clause to Section 147 of the Act and mere production of books of accounts and material evidences are insufficient and thus, the respondent must be allowed to proceed with the reopening proceedings. 7. Considering the arguments as advanced on behalf of the parties to the lis, notice under Section 148 of the Act was issued on 29.03.2012. The respondents have stated that they have 'reason to believe' that income chargeable to tax for the Assessment Year 200....
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....ies also fall within the category of assessees coming within the ambit of section 44BB. However, services which are covered by section 44D or section 115A or which fall within the definition of Fee for technical services under section 9(1) (vii) are not eligible for section 44BB and such exception has been provided for in the proviso to section 44BB. In the instant case, payment towards Geological Studies and Seismic data acquisition & processing is in the nature of fees for technical services. Charter hire charges, as decided by the jurisdictional Tribunal in the West Asia Maritime case, is in the nature of royalty. Therefore, the assessee has deducted lesser tax from the payment to the Non- Residents. The services in the subject case are different which do not fall within the ambit of section 44BB of the Act. Providers of such technical service are therefore are not entitled to lower deduction of tax and proportional disallowance under section 40(a)(i) is called for. However, the expenses so claimed have been allowed fully in the assessment. These excess deduction has resulted in escapement of income chargeable to tax. B] It is seen from the statement o....
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....he respondents in impugned proceedings dated 05.03.2013 would reveal that the objections raised by the petitioner and the case was relied upon by them were considered and they have made a finding in Paragraphs 4, 4.1, 4.2, 4.3, 4.4, 5, 6 & 7, which reads as follows: "4. The objection raised by you and the case laws relied upon by you in your favour has been considered and is not acceptable for the following: 4.1 The Hon'ble Supreme Court in the case of Honda Siel Power Products Ltd., has held that The Revenue authorities were justified in initiating reopening proceedings based on the Delhi High Court ruling that failure on the part of the tax payer to fully and truly disclose all material facts was not restricted only to disclosures made at the time of filing of the return of income but also extends to assessment proceedings. 4.2 Further, the Delhi High Court in the case of Consolidated Photo and Finvest Ltd., has also held that even where the tax official could have on investigation got necessary information from the records available with him, it cannot be said that the tax payer has been full and true disclosure of material facts. 4.3 Sect....
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....that the assessee must disclose fully and truly is not satisfied. 11. This Court is of the considered opinion that based on the return of income filed by the petitioner / assessee, the assessment order has been passed and subsequently certain new tangible materials were traced out for the purpose of reopening as the Assessing Officer has 'reason to believe' that income chargeable to tax has escaped assessment. Under these circumstances, the assessee cannot say that he has produced all the material facts and books of accounts etc., Even if such materials are produced, if the authorities formed an opinion that the tax escaped assessment, then they are empowered to initiate reopening proceedings. In the present case, the assessment is reopened beyond a period of four years and therefore, mere availability of tangible material would be sufficient for the purpose of invoking the powers under Section 147 of the Act. This failure on the part of the petitioner was considered for reopening of assessment and the finding is given that the assessee company has misleading the assessing authorities by furnishing incorrect particulars. However, this Court cannot arrive a finding in this regard....