2024 (5) TMI 706
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...., transparent paper, cast iron pipes, fire bricks and cement through its different units i.e. Kesoram Textiles, Kesoram Rayon, Kesoram Spun Pipes, Kesoram Refractories, Kesoram Cement and Vasavadatta Cement. During the assessment year in question i.e. AY 1997-98, the respondent assessee shown "capital work in progress" relating to thermal power plant and expansion of project of the cement section at Basantnagar and Sedam. In item no.6 of Schedule 17 to the balance sheet, under the heading "Capital Work in Progress", the assessee also showed interest paid/payable Rs.28,89,56,752/-. The amount of work in progress was reduced by the assessee by Rs.2,89,68,884/- as interest received. The respondent assessee claimed the aforesaid interest paid/payable Rs.28,89,56,752/- as revenue expenditure. He added the aforesaid interest amount of Rs.2,89,68,884/- as revenue receipt. Vide original assessment order dated 27.03.2000 (paragraph 8) under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as 'the Act, 1961'], the assessing officer rejected the claim of the assessee and held that the amount of interest paid is capital expenditure. After holding so, in final computation, t....
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....rieved with the aforesaid reassessment order the assessee filed appeal No. 499/CIT (A)-XIX/ITO, Wd (4)/Kol/08-09 which was dismissed by order dated 16.12.2010 observing that the assessee himself had offered for taxation the interest receipt of Rs. 2,89,68,884/- as income in his return, therefore, merely for the reasons that the addition of income offered by the assessee was made by the assessing officer by issuing notice under Section 148 instead of rectifying it under Section 154 of the Act, 1961 does not mean that the aforesaid income was not taxable. Against this order of the CIT(A) the assessee filed an appeal being I.T.A. No. 346/Kol/2011 before the ITAT, "B" Bench, Kolkata which was allowed on the jurisdictional issue holding that to invoke the provision of Section 147 of the Act, the Assessing Officer was required to have some tangible material pin-pointing escapement of income from assessment and in the absence of any fresh material sufficient to lead inference of escapement of income, the Assessing Officer cannot exercise jurisdiction under Section 147 read with Section 148 to proceed with the reassessment. The ITAT further held that the jurisdiction to rectify the order u....
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....ssessment year 1997-98, copy of judgement of this Court dated 05.01.2009 in I.T.A. No. 322 of 2007 and copy of accompanying computation sheet of the income tax return filed by the assessee which were produced by learned Counsel for the respondent/assessee during the course of hearing of this appeal and which have not been disputed/objected by the learned Counsel for the appellant. 10. We find that from the original assessment order that the assessee filed his return of income in which the profit from business or profession as per P & L account was disclosed at Rs.45,95,97,148/-. To this profit the assessee added interest Rs.2,89,68,884/- as revenue receipt and claimed deduction interest paid Rs.28,89,56,652/- as revenue expenditure. The Assessing Officer disallowed the claimed revenue expenditure of Rs.28,89,56,652/- towards interest paid and accordingly did not add Rs.2,89,68,884/- in the income of the assessee. These facts are very much evident from paragraph 8 and the computation part of the original assessment order dated 27.03.2000. CIT(A) did not consider the jurisdictional issue of initiation of proceedings under Section 147 of the Act, 1961 and, instead held that the order....
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....to believe cannot be said to be the subjective satisfaction of the assessing Authority but means an objective view on the disclosed information in the particular case and must be based on firm and concrete facts that some income has escaped assessment. 30. In case of there being a change of opinion, there must necessarily be a nexus that requires to be established between the "change of opinion" and the material present before the assessing Authority. Discovery of an inadvertent mistake or non-application of mind during assessment would not be a justified ground to reinitiate proceedings under Section 21(1) of the Act on the basis of change in subjective opinion (CIT v. Dinesh Chandra H. Shah, (1972) 3 SCC 231; CIT v. Nawab Mir Barkat Ali Khan Bahadur, (1975) 4 SCC 360)." (emphasis supplied) 12. In the case of The Commissioner of Sales-Tax U.P. vs. M/s. Bhagwan Industries (P) Ltd., Lucknow, AIR 1973 SC 370 (Paras 9 & 10), Hon'ble Supreme Court has held as under: "9. The controversy between the parties has centered on the point as to whether the assessing authority in the present case had reason to believe that any part of the turnover of the respondent had escaped ass....
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....rt, while dealing with the validity of the re-assessment notice under Section 148 in Writ Tax No.874 of 2010 (M/S Parmarth Steel And Alloys Pvt. Ltd. vs. State of U.P. and Others, decided on 28.03.2022, held as under (Para 17): "17. It is settled principles of law that proceedings under Section 21 of the Act, 1948 can be initiated if the material on which the Assessing Authority bases its opinion, is not arbitrary, irrational, vague, distant or irrelevant. There must be some rational basis for the assessing authority to form the belief that the whole or any part of the turnover of a dealer has, for any reason, escaped assessment to tax for some year. If such a basis exists, the assessing authority can proceed in the manner laid down in Section 21 of the Act, 1948. If the grounds are of an extraneous character, the same would not warrant initiation of proceedings under the above section. If, however, the grounds are relevant and have a nexus with the formation of belief regarding escaped assessment, the assessing authority would be clothed with jurisdiction to take action under the section. Whether the grounds are adequate or not is not a matter which would be gone into by the Hig....
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....ng to the notice of the Incometax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully and truly all material facts. It is no doubt true that the court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the Income-tax Officer on the point as to whether action should be initiated for reopening assessment. At the same time we have to bear in mind that it is not any and every material, howsoever vague and indefinite or distant, remote and farfetched, which would warrant the formation of the belief relating to escapement of the income of the assessee from assessment. The fact that the words "definite information" which were there in section 34 of the Act of 1922 at one time before its amendment in 1948 are not there in section 147 of the Act of 1961 would not lead to the conclusion that action cannot be taken for reopening assessment even if the information is wholly vague, indefinite, farfetched and remote. The reason for the formation of the belief must be held in good faith and should not be a mere pretence....
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.... disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction. The important words under section 147 (a) are "has reason to believe" and these words are stronger than the words "is satisfied". The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with the Income Tax Officer in coming to the belief, but the Court can certainly examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice under section 147 (a). It there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the inc....
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....e thinks on a particular question. It is a result of understanding, experience and reflection. 17. It is well settled and held by this court in a catena of judgments and it would be sufficient to refer Commissioner of Income Tax, Delhi vs. Kelvinator of India Ltd. (2010) 320 ITR 561(SC) wherein this Court has held as under: (SCC p.725, para 5-7) "5....where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1-4-1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe"..... Section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. 6. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review, he has the power to reassess. But reassessment has to be based on fulfillment of certain precondition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the ass....
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....mstantial evidence but not on mere suspicion, gossip or rumour. His vague feeling that there might have been some escapement of income from assessment is not sufficient. The reasons for the formation of the belief must be based on tangile material and must be based on a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income-tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular assessment year. In other words, such material on which the assessing Authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. If the grounds for formation of "reason to believe" are of an extraneous character, the same would not warrant initiation of proceedings under Section 147 of the Act, 1961. (c) If, there are, in fact, some reasonable grounds for the assessing authority to believe that the whole or any part of income of the assessee has escaped assessment, it can take action under Section 147 of the Act, 1961. If the grounds tak....