TaxTMI 
TaxTMI 
2024 (5) TMI 167
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....EMENT 1. Heard learned counsel Mr. Percy Pardiwala, Senior Advocate with Mr. A. D. Bhobe, Ms. Farnaz Shah, Ms. Shaizeen Shaikh, Ms. Sonam Dessai and Ms. C. Mashelkar (through V.C.) Advocates for the Petitioners and Ms. S. Linhares, standing counsel for the Respondent Nos. 1 to 3 in WP. 262/2016; WP. 879/2016; WP. 880/2016 and Ms. Amira Razaq, standing counsel for the Respondent Nos. 1 to 3 in WP. 881/2016; WP. 264/2016; WP. 265/2016; WP. 882/2016; WP. 271/2016 & WP. 272/2016. 2. These group of petitions were earlier connected to Writ Petition No. 141/2015, however, the same were de-tagged vide order dated 09.07.2019 passed in Writ Petition No. 141/2015. 3. Similarly, Writ Petition No. 233/2015 and Writ Petition No. 883/2016 were disposed of vide Judgment dated 19.01.2024, are in respect of the dispute which is raised in the present petitions, except few grounds challenging re-opening of the assessment. In most of the above petitions, the issue involved is in connection with Justice M.B. Shah Commission Report and therefore, these petitions are taken together with consent. 4. In order to appreciate the facts of each matter, we would like to narrate in nutshell, the facts....
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....r received notice dated 24.12.2014 under Section 148 of the Income Tax Act disclosing that there is reason to believe that the income of the assessee chargeable to tax for the Assessment year 2011-12 has escaped assessment within the meaning of Section 147 of the Income Tax Act. The assessee was called upon to submit the returns for re-assessment. The Petitioner sought grounds on which the re-assessment was ordered and accordingly, the revenue department vide letter dated 04.01.2016, furnished the reasons. In all there are five reasons disclosed for re-opening of the Assessment. The first reason is under-invoicing of export. It is claimed that some new facts came to light regarding illegal extraction and export of iron ore together with under-invoicing of export of iron ore extracted in the mines in Goa. Such new facts are only on the basis of the observations found in Justice M.B. Shah Commission's Report. Ground no. 2 is again based on the decision of the Apex Court in which it was observed that the mining leases in Goa expired on 22.11.2007 and further activities were held to be illegal. The Revenue, therefore, observed that the income accrued during financial year 2010-11 remai....
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....port to the extent of commission paid to the foreign agents. This reason is based on the information received from the Directorate of Revenue Intelligence (DRI) Mumbai. The sixth reason is the deviation due to change in valuation method of stock and not giving effect in computation of income. The Petitioner filed detailed objections to the reasons for re-opening, however, an order is passed rejecting such objections and permitting to reopen the assessment vide order dated 01.02.2016 which is under challenge. FACTS IN WRIT PETITION NO. 271/2016 12. The Petitioner received notice under Section 148 of Income Tax Act dated 24.12.2014 stating there in that the revenue is having reason to believe that the income of the assessee chargeable to tax for assessment year 2011-12 has escaped assessment within the meaning of Section 147 of the said Act. The Petitioner sought grounds on which such notice was issued. Vide letter dated 04.01.2016, grounds for re-opening were furnished. In all there are 5 grounds. The first reason is under-invoicing of export based on Justice M.B. Shah Commission's Report. The second ground is regarding the illegal activities to be assessed as income from othe....
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..... The fourth reason is again based on observations of the Apex Court about the legality of the mining leases. The fifth reason is under-invoicing of export of Iron Ore to the extent of commission paid to the Foreign agents. This is based on the information received from Directorate of Revenue Intelligence (DRI), Mumbai. 15. The Petitioner filed detailed objections challenging/re-opening notices, however, the revenue by the impugned order dated 01.02.2016 rejected the objections of the Petitioner and directed them to file the returns for re-opening of assessment. FACTS IN WRIT PETITION NO. 879/2016. 16. The Petitioner received notice under Section 148 of Income Tax Act dated 10.08.2015 claiming there in that there is reason to believe that the income of the assessee chargeable to tax for assessment year 2010-11 has escaped assessment within the meaning of Section 147 of the said Act. The Petitioner sought reasons for re-opening which were provided vide letter dated 08.01.2016. In this case, the reasons for re-opening is that new facts came to light regarding under-invoicing of export of Iron Ore on the basis of information received from the Directorate of Revenue Intelligen....
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....n received from the Directorate of Revenue Intelligence (DRI), Mumbai. The Petitioner filed objections to such reasons, however, letter dated 25.07.2016, such objections were rejected which is challenged in the present petition. SUBMISSIONS OF PETITIONERS 20. Mr. Pardiwala, learned senior counsel submits that Writ Petition No. 265/2016 could be considered as lead petition as in this matter all the grounds which are raised in respective petitions are covered. 21. Mr. Pardiwala, while relying upon the decision of this Court in Writ Petition No. 141/2015 (Coram: S.C. Gupte and Nutan D. Sardessai, JJ.) decided vide order dated 09.07.2019 and the decision of this Court in Writ Petition No. 233/2015 with Writ Petition No. 883/2016 decided on 19.01.2024, would submit that the points raised in the present petition are fully covered. 22. Besides this, Mr. Pardiwala would submit that change in valuation shows the proof of increased income which has been disclosed truly and fully by the assessee in the returns and therefore, there is no reason to believe that the income has escaped assessment. He submits that while adopting the regular accounting method which has been done on a hi....
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....sing Officer, no interference is warranted. Learned standing counsel would submit that the Petitioner would get opportunity to produce the relevant material once the assessment is re-opened. 27. Ms. Razaq and Ms. Linhares appearing for the Revenue would then submit that there are subsequent developments in this proceedings wherein the suit was filed in the Singapore High Court clearly revealing such under-invoicing as well as commission paid to the agents and such additional information filed by way of additional affidavit is sufficient for reopening of assessment. 28. The learned standing counsel further submits that information received from Directorate of Revenue Intelligence (DRI), Mumbai cannot be faulted with as the information is received from another Government Department and therefore, there was no need for the Assessing Officer to conduct any further inquiry as such information from the Government Department could be sufficient to hold that the income escaped assessment. 29. We have gone through the reply/affidavit filed on behalf of Revenue which basically deals with information received from the report of Justice M.B. Shah Commission and also from Directorate o....
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.... 33. The facts of all the above matters are already disclosed in nutshell. In most of the matters re-opening notices were issued within four years except in Writ Petition Nos. 879/2016, 880/2016 and 882/2016 which are beyond four years. The reasons for re-opening within or beyond 4 years are having different effects. In the case of N. D. Bhatt Vs. IBM World Trade Corporation, 1995, ITR Volume 216 page 811, the Co-ordinate Bench of this Court and while placing reliance in the case of Indian Oil Corporation Vs. ITO (1986) 159 ITR 956, observed thus:- "to confer jurisdiction under clause (a) of Section 147 of re-opening assessment beyond the period of four years but within the period of eight years from the end of 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 under-assessed or escaped assessment; and the second is that he must have reason to believe that such escapement or under-assessment was occasioned by reason of the assessee's failure to disclose fully and truly all material facts necessary for the assessment of that year. Bot....
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....cause cum demand notice under the provision of 124 r/w section 18 of the Customs Act dated 08.08.2014 was issued by Directorate of Revenue Intelligence (DRI), Mumbai to the assessee. 38. The purpose of issuance of show cause notice was that intelligence was gathered by the officers of DRI Goa region that the assessee were evading export customs duty by under valuing and over shipments exported to various overseas buyers from different ports in India. The assessee were declaring lower FOB price to customs authorities then the price that was actually finalised between them and the overseas buyers. The difference between the declared and the actual FOB price was paid by their overseas buyers on behalf of the assessee directly to the overseas agents appointed by the assessee. As the customs duty on export of Iron Ore is levied as percentage of FOB value of the export consignments w.e.f 13.06.2008, the intelligence pointed to evasion of appropriate export duty of customs by the assessee by resorting to misdeclaration of the actual FOB price of the export goods. 39. The reasons further shows some chart with calculations as to the total escaped income on account of the under-invoici....
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....dicate the material (whatever reasons) which form the basis of re-opening assessment and its reasons which would evidence the linkage/nexus to the conclusion that the income chargeable to tax has escaped assessment. This is a settled proposition as observed by the Supreme Court in S. Narayannappa Vs. CIT (1967) 63 JTR 219, that it is open to examine whether the reason to believe has rational connection with the formation of the belief. To the same effect, the Apex Court in ITO Vs Lakhmani Merwal Das [1976] 103 ITR 437 had laid down that the reasons to believe must have rational connection with a relevant bearing on the formation of belief i.e. there must be a live link between material coming the notice of the Assessing Officer and the formation of belief regarding escapement of income. If the aforesaid requirement are not met, the Assessee is entitled to challenge the very act of re-opening of Assessment and assuming jurisdiction on the part of the Assessing Officer." 44. In Shodiman Investments Pvt. Ltd.(surpa), the Co-ordinate Bench of this Court sitting at the Principal Seat, while considering appeal under Section 260A of the Income Tax Act challenging the order passed by IT....
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....eans 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. 45. 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 and no independent assessment has been carried out to the satisfaction of the Assessing Officer that he has reason to believe that the income had escaped assessment. 46. The above observations of the Co-ordinate Bench of this Court as well as the Apex Court would clearly apply to the above three petitions wherein reason to believe is recorded only on the borrowed information from the Directorate of Revenue Intelligence (DRI), Mumbai. There is absolutely no reasoning as to how such information is having a live link or considered as a tangible material for the purpos....
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....essment is that firstly under-invoicing of export and failure on the part of assessee to disclose fully and truly all material and commission paid to the foreign agents. 51. We have already dealt with the reasons for re-opening of the assessment on the basis of material borrowed from DRI authorities and how it cannot be considered as tangible material having a live link for the purpose of forming independent opinion of the Assessing Officer, which is infact not formed in all the matters. Thus, as far as the re-opening on the basis of borrowed material from DRI is concerned, we are firm on our opinion that such material without application of mind of the Assessing Officer could not have been directly borrowed and used. 52. Other reasons basically deals with the report from Justice M.B. Shah Commission as well as the observations of the Apex Court in the case of Goa Foundation, thereby holding that the mining leases beyond 22.11.2007 in Goa, were illegal. 53. As far as the report of Justice M.B. Shah Commission is concerned, the Co-ordinate Bench of this Court (S.C. Gupte & N.D. Sardessai, JJ.) clearly observed that the third report of Justice M.B. Shah Commission contains m....
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.... 58. Thus, the Apex Court observed that from November 2007 all mining leases in Goa are required to be considered as illegal for the simple reason that there was no power to renew such leases beyond 20 years. The fact remains that these observations of the Apex Court are in connection with mining leases, however, the Apex Court no where expressed that till the date of such decision i.e. 21.04.2014, the mining activities carried on by the lease-holders were considered to be illegal. The illegality of the lease is one thing and carrying out business activities on assuming that such leases exists is another thing. Similarly, business activities were carried out and Iron Ore was extracted, sold, exported till all the activities came to a grinding hold. The lease-holders paid royalty, customs duty, other charges to the Government till such activities were stopped. Extraction of Iron Ore including export and payment of remaining charges to the concerned department till 2014 were not declared as illegal. Even this fact, that the mining leases beyond 2007 were not legal, was even not known to the Assessing Officer himself, till such declaration came from the Apex Court in the year 2014. Th....