TaxTMI 
TaxTMI 
2024 (7) TMI 148
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....ideration filed return declaring its net taxable income of Rs.1,01,50,780/- after claiming deductions of Rs.43,50,332/- under Section 80IC of the Act vide return of income filed on 28.09.2013. 4. The case of the petitioner-company was selected for scrutiny and the same was assessed vide order dated 28.03.2016 passed under Section 143(3) of the Act after making an addition of Rs.95,000/- to the taxable income of the petitioner-company at Rs.1,02,45,775/-. The petitioner-company was thereafter issued notice dated 30.03.2021 under Section 148 of the Act requiring it to file return of income within a period of 30 days. 5. The petitioner-company after filing return of income applied for the copy of reasons so recorded and accordingly the same was supplied to the petitioner-company. This led to filing of detailed objections by the petitioner-company regarding reopening of the case on both legal and factual aspects vide its submissions dated 06.02.2022 constraining the petitioner-company to file the instant petition seeking therein the following substantive reliefs : "a) This Hon'ble Court may be pleased to issue a writ in the nature of certiorari and the notice issued unde....
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....riate approval as envisaged under the Act. The notice was issued after fulfilling all statutory requirements of the Act. 9. The petitioner-company filed rejoinder wherein it is averred that the respondents have not placed anything on record to show that it had concealed or did not disclose true and correct particulars, as were required under Sections 147 and 148 of the Act. It is further averred that the rejection of the objections and reopening of the case by the respondents are amenable to the writ jurisdiction of this Court. 10. On merits, it has been averred that the objections raised by the petitioner-company have been rejected in a mechanical way without actually taking into consideration the objections so filed. It is further averred that the income derived from the damaged goods claim, discounts received and rounded off are not attributable to manufacturing activities of the petitioner-company and as such the Assessing Officer had rightly allowed deductions under Section 80IC while passing the order under Section 143(3) of the Act. 11. As far as the import made outside India is concerned, it is averred that the petitioner-company had not imported any machinery but ....
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....caped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. * * * Explanation 3.--For the purpose of assessment or reassessme....
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.... qualifies a fact ‟ or averment as correct, exact, actual, genuine or honest. The word "full‟ means complete. True disclosure of concealed income must relate to the assessee concerned. Full disclosure, in the context of financial documents, means that all material or significant information should be disclosed. Therefore, the meaning of "full and true disclosure‟ is the voluntary filing of a return of income that the assessee earnestly believes to be true. Production of books of accounts or other material evidence that could ordinarily be discovered by the assessing officer does not amount to a true and full disclosure." 17. The law postulates a duty on every assessee to disclose fully and truly all material facts for its assessment. The disclosure must be full and true. Material facts for initiating action under Section 147 of the Act would essentially mean those facts, if taken into account, would have an adverse effect on the assessee by the higher assessment of income than the one actually made. They ought to be proximate and not have any remote bearing on the assessment. Omission to disclose could be deliberate or even inadvertent. However, this is not at ....
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.... and 4 of the order which read as under : "3.1. A perusal analysis of the information in para-2 above reveals that there was failure/omission on the part of the assessee to disclose fully and truly all necessary facts essential for its assessment, as a result of which the provisions of Section-147 of the Income Tax Act, 1961 shall apply in this case. 4. In view of the above, I have reason to believe that due to failure/omission on the part of the assessee to disclose fully and truly all necessary facts essential for his assessment, income to the extent of Rs.64,43,745/- [Rs.4,66,896+Rs.59,76,849] has escaped assessment under Section 147 of the Income Tax Act, 1961 for the A.Y. 2013-14." 22. As regards observations in para 3.1 of the order, the petitioner-company after placing reliance on various judgments of the Hon'ble Supreme Court submitted as under: "3.4. Your Honour, it is submitted that the assessee was issued notice dated 30/03/2021 under Section 148 of the Act saying that there are reasons to believe that income of the assessee is chargeable to tax for A.Y. 2013-2014 has escaped assessment within the meaning of Section 147 of the Act. Since the....
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.... proper inferences being the duty imposed on the Income Tax Officer. Therefore, it can be concluded that while the duty of the assessee is to disclose fully and truly all primary relevant facts, it does not extend beyond this." 23. The objections so filed by the petitioner-company were rejected by according the following reasons : "6. Even if it is presumed, without admitting that all the information/details were placed before the Assessing Officer during the original assessment proceedings, the Assessing Officer is not precluded from reopening the case on the basis of material already on record provided the formation of such opinion is consequent on "information" in the shape of some light thrown on aspect of facts or law which the AO was not earlier conscious of . In this regard reliance is placed on the decision in the case of A.L.A. Firm vs. Commissioner of Income-Tax (1991) 55 Taxman 497 (SC). Hence, on this account also assessee's contention that there was no failure to disclose fully and truly all material facts at the time of assessment is not acceptable. 7. With regard to the contention that the reopening is based on change of opinion, it needs to be v....
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.... that the assessment in the case of the petitioner-company was framed under Section 143(3) for the year under consideration vide order dated 28.03.2016 and during the assessment proceedings by the Assessing Officer, the requisite information/details as per the questionnaire had been furnished which included the claim of deduction under Section 80IC and the deduction was allowed by the Assessing Officer (DCIT) after full verification of documents furnished by the petitioner-company during those proceedings and are distinctively so recorded in para-2 of the assessment order. 26. It is further averred that the letter dated 28.07.2017 was issued by the respondents to the petitioner-company wherein the objections were raised by the Audit Party seeking further clarification post assessment and the petitioner-company was asked to submit clarification on certain issues raised by the Audit Party. These objections were duly replied to the concerned Officer by furnishing detailed written submissions with cogent and corroborative documentary evidence in the form of invoices at that point of time. It is well settled that the objections so raised by the Audit Party somehow are the root cause ....
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.... Tax Act, 1922 and highlighted two conditions which would have to be satisfied before issuing a notice to reopen an assessment beyond four years but within eight years (as was the then limitation). The first condition was that the income tax officer must have reason to believe that income, profits or gains chargeable to income tax had been underassessed. The second condition was that he must have also reason to believe that such under-assessment had occurred by reason of either (i) omission or failure on the part of the assessee to make a return of his income under Section 22, or (ii) omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. It was emphasized that both these were conditions precedent to be satisfied before the income tax officer could have jurisdiction to issue a notice for the assessment or re-assessment beyond the period of four years but within the period of eight years from the end of the year in question. The words used in the expression "omission or failure to disclose fully and truly all material facts necessary for his assessment for that year" would postulate a duty on every a....
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....ruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income Tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income Tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income Tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income Tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if on the basis of subsequent information, the Income Tax Officer arrives at a conclusion....
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....effect from 01.04.1989, the above two conditions have been given a go-by in Section 147 and only one condition has remained, viz, that where the assessing officer has reason to believe that income has escaped assessment, that would be enough to confer jurisdiction on the assessing officer to reopen the assessment. Therefore, post 01.04.1989, power to reopen assessment is much wider. However, this Court cautioned that one needs to give a schematic interpretation to the words "reason to believe", otherwise 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. 35.1. This Court also referred to Circular No.549 dated 31.10.1989 of the Central Board of Direct Taxes (CBDT) to allay the apprehension that omission of the expression "reason to believe" from Section 147 and its substitution by the word "opinion" would give arbitrary powers to the assessing officer to reopen past assessments on mere change of opinion and pointed out that in 1989 Section 147 was once again amended to reintroduce the expression "has reason to believe" in place of the expression "for reason....
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.... difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed reassessment proceedings." 29. It is not in dispute that the original assessment by the Assessing Officer in this case was framed vide assessment order dated 28.03.2016 and during the course of these proceedings, entire books of accounts, bills and vouchers have been duly perused by the then Assessing Officer. It is after perusal of the books of accounts, bills and vouchers that the Assessing Officer had formed a view that the parts imported from Majesty Packaging International Ltd. were used in the manufacturing of product. Therefore, reopening of the case, that too, on the ground that expenditure of Rs.59,76,849/- was incurred for acquisition of capital, is not liable to be treated as revenue expenditure, is absolutely wrong as admittedly what was imported was perfume pumps to be installed for packing and sale of the product of the petitioner-company and the same could not have been held to be capital expenditure at all and the same, therefore, has rightly been booked as revenue expenditure. 30. As regards an amount of Rs.4,66,896/- towards earned receipt of damaged....
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....rect a stale issue which has already been examined during the course of regular assessment pursuant to which the assessment order was passed on 28.03.2016. 36. As regards maintainability of the writ petition, this question need not detain us any longer in view of the judgment rendered by the Constitution Bench of the Hon'ble Supreme Court in Calcutta Discount Co. Ltd.'s case (supra) whereby a similar contention as raised herein was rejected in the following manner: "Mr. Sastri next pointed out that at the stage when the Income-tax Officer issued the notices he was not acting judicially or quasi-judicially and so a writ of certiorari or prohibition cannot issue. It is well settled however that though the writ of prohibition or certiorari will not issue against an executive authority, the High Courts have power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority acting without jurisdiction subjects or is likely to subject a person to lengthy proceedings and unnecessary harassment, the High Courts, it is well settled, will issue appropriate orders or directions to prevent such cons....