TaxTMI 
TaxTMI 
2024 (1) TMI 1080
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....f this Court. While disposing of some of the petitions, Coordinate Bench of this Court (S. C. Gupte and Nutan D. Sardessai, JJ) vide order dated 9.7.2019, detagged the present petitions since some additional grounds were involved than the one which were decided by order dated 19.7.2019. Paragraph 28 of the order dated 9.7.2019 while deciding the group of petitions reads thus:- "28. The following petitions, Writ Petition Nos. 141 and 233 of 2015, 198, 199, 262, 264, 265, 271, 272, 879, 880, 881, 882, 883 of 2016 are all petitions where reopening notices contained additional reasons involving issue under Section 10B of the Act or Section 14A of the Act or commission paid to foreign agents or other reasons. These petitions deserve to be detagged from the group of petitions to be disposed of by this order." 2. Accordingly, present petitions along with others were listed together. However, present two petitions were finally heard. Learned counsel for respective parties would submit that since additional grounds in other petitions are involved independently, present two petitions could be disposed of whereas remaining petitions be detagged. 3. Accordingly, Writ Petition No....
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....exemption for the Assessment Year 1990-91 to 1994-95 and thus, exhausted the entire tax holiday granted to it and secondly the activities of the petitioner did not amount to production or manufacture within the meaning of Section 10B of the Act. On 19.4.2012, petitioner challenged such order rejecting exemption under Section 10B, before the Commissioner of Income Tax (Appeals) (hereafter called as "CIT(A)" for short). On 20.12.2012, appeal of the petitioner was partly allowed in favour of the petitioner thereby holding that the petitioner is entitled to claim exemption under Section 10B of the Act, in connection with activities coming within the definition of production. Since appeal was partly allowed, the petitioner challenged such order before the Income Tax Appellate Tribunal (for short "ITAT"). On 28.3.2014, the ITAT upheld the claim of the petitioner under Section 10B of the Act. The Revenue then challenged such order before this Court wherein appeal was admitted. 9. On 24.10.2014, the petitioner received another notice under Section 148 of the Act seeking to reopen the returns for the Assessment Year 2008-09. Petitioner requested reasons for such reopening, which were fur....
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....on 148 of the Act stating that he has reason to believe that income of the petitioner chargeable to tax for the Assessment Year 2011-12 has escaped assessment within the meaning of Section 147 of the Act. On 28.12.2015, the petitioner made a request that original returns filed under Section 139(1) of the Act be treated as returns filed in response to the impugned notice under Section 148 of the Act. On 8.1.2016, respondent no. 1 furnished reasons for issuing notice under Section 148 of the Act. On 27.1.2016 objections were filed by the petitioner challenging validity of reassessment proceedings. Vide order dated 25.7.2016, respondent no. 1 rejected the objections, which are impugned in the present proceedings. 13. Respondents by filing their reply/affidavit objected to the prayers in the petition on the ground that opening of reassessment has been properly carried out and there are reasons to believe which have been recorded. SUBMISSIONS OF THE PETITIONERS. 14. Learned Senior Counsel Mr Kantak and Mr Pardiwala would submit that first of all the Coordinate Bench of this Court in the earlier bunch of petitions have clearly held that reasons for reopening on the basis of the ....
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....consider any material and moreso, tangible material to issue notice by considering the aspect of under invoicing. He would submit that the Assessing Officer must record his reasons and reason to believe and such reasons to believe must be on the basis of tangible material. It cannot be only on the whims and fences of the concerned officer. 20. Learned Senior Counsel Mr S. S. Kantak for the petitioner- Sociedade De Fomento Industrial Pvt. Ltd. relied upon following decisions:- 1. The Commissioner of Income Tax Vs M/s Sociedade de Fomento Industrial Pvt. Ltd. Spl. Leave to Appeal (C) No(s). 6730/2021 dated 25.1.2022 2. The Commissioner of Income Tax Vs M/s Sociedade de Fomento Industrial Pvt. Ltd. Tax Appeal Nos. 23 and 25 of 2023 dated 22.10.2020 3. Fomento Resources Pvt. Limited and anr. Vs Union of India and others Writ Petition Nos. 606 of 2014 and other connected matters decided on 2.7.2019 4. Commissioner of Income Tax, Gujarat Vs A. Raman and Co. 1967 SCC online SC 49 5. Aroni Commercials Ltd Vs Dy. Commissioner of Income Tax 2014 SCC Online, 6. M/s S. Ganga Saran and Sons Pvt. Ltd Vs Income tax Officer and others (1981)....
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....78) 113 ITR 489(Calcutta) 2. Assistant Commissioner of Income Tax Vs Rajesh Jhveri Stock Brokers(P) Ltd. (2007) 161 Taxman 316(SC) 3. Income Tax Officer Vs Lakhmani Mewal Das (1976) 103 ITR 437(SC) DISCUSSIONS AND CONCLUSIONS 25. Various decisions have been cited, which we would like to discussed at the relevant stage. 26. Before considering the facts of each case, it is clear that the common ground in both these petitions is the third report of Shah Commission by which it was observed that there were illegal export particularly by means of under invoicing on the part of mining lessees and the exporters. 27. In Sociedade De Fomento Industrial Pvt. Ltd. (Writ Petition No. 233 of 2015), notice under Section 148 of the Act is dated 20.10.2014. The concerned officer claimed that he has reason to believe that the income of the petitioner chargeable to tax for the Assessment Year 2008-09 has escaped assessment within the meaning of Section 147 of the said Act. He, therefore, proposed to reassess the income and called upon the petitioner to deliver the returns in prescribed form within a period of 30 days. The petitioner vide their letter dated 20.11.2014 cal....
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....ular year. 30. Ms A. Razaq would submit that the figures mentioned in the said chart though adopted from the Shah Commission Report, the officer clearly disclosed that thereafter independently he made inquiries and thus such statement is sufficient to conclude that the material prima facie shows that income escaped assessment for the said year. She would submit that no detailed reasons or material collected during the inquiry is required to be given to the petitioner at that stage. 31. In Shantilal Khushaldas and Brothers Pvt. Ltd, (Writ Petition No 883 of 2016), the petitioner received notice under Section 148 of the Act dated 24.7.2015 wherein authority claimed that it had reason to believe that the income of the petitioner chargeable to tax for the Assessment Year 2011-12 has escaped assessment within the meaning of Section 147 of the Act. Accordingly, the petitioner was called upon to deliver returns within a period of 30 days. Petitioner then asked for the reasons, which were supplied vide revenue letter dated 8.1.2016. There are basically two reasons for reopening of the assessment for the Assessment Year 2011-12. 32. The first reason discloses that some new facts ca....
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....ity in India at the time of export. 34. Mr Pardiwala would therefore submit that all the reasons in ground no. 1 are from the investigation carried out by the DRI which in facts relates to the customs duty. The Income Tax Officer only lifted such material from DRI and pasted it in its reasons without making any independent inquiry so as to arrive at prima facie conclusion that there was any under invoicing as far as income tax is concerned. 35. Ms S. Linhares, appearing for the Revenue would submit that the material was received from the DRI which is also a Government department and an agency authorized to conduct investigation. There was no doubt with regards to such investigation as the petitioner paid additional custom charges and therefore, it is clear that the petitioner was involved in under invoicing. According to her, such reason is sufficient for the officer to believe that there was under invoicing and that such material was not available at the time of assessment of the returns. The reopening on this ground is, therefore justified. 36. Both the learned Senior Counsel would submit that the Assessing Officer practically relied upon the report of different authorit....
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....ason has a rational connection with or relevant bearing on the formation of the belief and it must not be extraneous or irrelevant for the purpose. 40. In both these matters, we have already recorded the reasons specifically in ground no. 1 and it shows that the Assessing Officer in Sociedade de Fomento Industrial Pvt. Ltd. (Writ Petition No. 233 of 2015) practically believed on the third report of Shah Commission and the figures mentioned therein. We say so for the reasons that Mr. Kantak placed before us report of Shah Commission wherein figures mentioned in the ground no. 1 of the reasons are found at different places against different assesees. What the officer did is only compiling it in one format and pasted it in ground no. 1 of the reasons. 41. We also found that apart from the statements below chart as quoted earlier, there is only a bare statement that the office independently made inquiries. The word "this office", nowhere specifies as to whether the concerned officer who issued notice, himself carried out any independent inquiry. Similarly the details of such inquiry and material collected during such inquiry is not part and parcel of the reasons. The purpose of d....
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....e submits that valuation of the ore sold by the petitioner is properly disclosed in the account and in returns and there is no under valuation. The petitioner has shown the exact price in the returns however, since there is no independent assessment or inquiry conducted by the Assessing Officer and placing reliance only on the information received from DRI Mumbai, the Assessing Officer has no jurisdiction to reopen the assessment. 45. We clearly observed that apart from material received from the office of DRI Mumbai and quoting some part of it in the reasons, the Assessing Officer nowhere disclosed about any independent inquiry conducted by him or his office to arrive at the opinion. There is no other tangible material except report from DRI Mumbai which could have been considered as reason to believe of the income escaped from assessment. 46. The main contention of the petitioner/assessee is that there is no belief on the part of the Assessing Officer that the income escaped and that there is no reason of any failure on the part of the assessee to make such disclosure fully and truly. It is claimed that the Assessing Officer cannot simply make a bald assertion that escapeme....
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....hargeable to tax has escaped assessment. The concept of reason to believe does not give arbitral power to reopen an assessment. 50. The concept of change of opinion is excluded/omitted from words reason to believe. Thus a change of opinion would not be reason to believe that income to tax has escaped assessment. Besides the power to reassess is not a power to review. Further reopening must be on the basis of tangible material. If all facts are available on record and particular opinion is formed, then merely because there is change of opinion on the part of the Assessing Officer, notice under Sections 147/148 of the Act is not permissible. Such powers cannot be exercised to correct the errors/mistakes on the part of the Assessing Officer while passing the original order of assessment. There is a sanctity bestowed on the order of assessment and the same can be disturbed by exercise of powers under Section 147/148 of the Act, only on the satisfaction of the jurisdictional requirements. At the time of issuance of notice under Section 148 of the Act to reopen a concluded assessment, satisfaction of the Assessing Officer is of primary importance. It must be prima facie satisfaction o....
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....t material must lead to formation of reasons to believe that income chargeable to tax has escaped assessment. Mere obtaining of material by itself does not result in reason to believe that income has escaped assessment. It can only be the basis of forming the belief. However, belief must be independently formed in the context of material obtained that there is an escapement of income. Otherwise no meaning is being given to words "to believe" as found in Section 147 of the Act. The words "whatever" reasons in Rajesh Jhaveri Stock Borkers (P) Ltd's case (supra), only means whatever the material, reasons recorded must indicate the reasons to believe that income has escaped assessment. This is so as reasons as recorded alone give the assessing officer power to reopen an assessment. 53. In Shodiman, the Assessing Officer in his reasons disclosed that it was intimated to him during the search action conducted under Section 132 of the IT Act that there were suspicious transactions in the bank account of the said company and related companies. The ITAT found that such reasons or material on the basis of which the Assessing Office recorded his reasons are borrowed from other department a....
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....d thus additional reasons that assessee though was aware, suppressed material facts while submitting the returns. 57. Observations of the Coordinate Bench in the case of Shodiman Investments (P.) Ltd (supra) are clearly applicable to the facts of these matters. We have absolutely no hesitation in our mind with regard to such observations which are settled propositions of law and thus such observations are clearly applicable to the matters in hand. 58. It is further well settled propositions of law whatever reasons the Assessing Officer, formed, must be disclosed in the reasons before reopening assessment, as per Section 148 of the said Act. Any clarification thereafter while deciding objections or before appellate authorities, cannot be looked into. This is precisely so, a contention raised by Ms Razaq while inviting our attention to the order dated 30.1.2015 passed while rejecting the objections raised by Sociedade de Fomento Industrial Pvt. Ltd. She unsuccessfully tried to claim that the reasoning found in the rejection of objections could be looked into as the reason to believe, which we are afraid to accept as it is well settled proposition that reasons must be disclosed ....
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....urisdiction of the Court extends no further. Whether on the information in his possession he should commence a proceedings for assessment or reassessment must be decided by the Income Tax Officer and not by the High Court. Income Tax Officer alone is entrusted with the powers to administer the Act; if he has information for which it may be said, prima facie, that he had reason to believe that income chargeable to tax has escaped assessment, it is not open to the High Court, exercising powers under Section 226 of the Constitution of India, to set aside or vacate the notice for reassessment on a reappraisal of evidence. 61. In the case of Reynolds Shirting Ltd (supra), the Coordinate Bench of this Court sitting at the Principal Seat had an occasion to consider the scope of Section 147 of the Act. In that case Reynolds received a notice under Section 148 of the Income Tax Act stating that the Assessing Officer has reason to believe that the income chargeable to tax for the Assessment Year 2012-13 has escaped assessment. Copy of the reasons annexed to the notice discloses that the Assessing Officer received information from DDIT (Investigation) about certain entity entering into sus....
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....Report that there was under invoicing of the export. 64. As we have already concluded that apart from borrowing some observations from third Shah Commission Report, there is no independent application of mind by the Assessing Officer for reopening of the settled assessment. While deciding bunch of petitions, the Coordinate Bench of this Court has already concluded that observations in the Shah Commission Report are merely opinion and same cannot formed the basis alone for the purpose of reopening of the assessment which were already finalised. We see no reason to take another/other view in the present matters. 65. It is also claimed that apart from reason to believe, the Assessing Officer must disclose that the material was available with the assessee however, he failed to disclose truly and fully. Mr. Pardiwala and Mr. Kantak would submit that the reason in the reopening notice is that since the Apex Court found that mining activities or leases were illegal from 2007, it was presumed by the Assessing Officer that after 23.11.2007, all activities becomes illegal and therefore, the assessee ought to have declared that such activities or income derived therein was from the ille....
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....eopen an assessment beyond the period of four years but within a period of eight years from the end of the relevant year, two conditions are required to be fulfilled : the first is that the Income-tax Officer must have reason to believe that the income, profits or gains chargeable to tax had been underassessed or escaped assessment; the second is that he must have reason to believe that such escapement or underassessment was occasioned by reason of the assessee's failure to disclose fully and truly all material facts necessary for the assessment of that year. Both these conditions are conditions precedent to be satisfied." 70. Further by relying on decision of Calcutta Credit Corporation Ltd Vs ITO (1971) 79 ITR 483(Cal) was observed that the assessee must be aware of those facts which are not disclosed before it can be said that there is any omission or failure on his part to disclose the same. In the case of CIT vs. Balvantrai S. Jain [1969] 72 ITR 59, the Bombay High Court held that the assessee cannot be said to have failed to disclose the facts in question as he had no knowledge of those facts. It interpreted Section 34(1)(a) of the Indian Income Tax Act, 1922, which is in ....