TaxTMI 
TaxTMI 
2025 (5) TMI 892
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.... learned counsel appearing for the respondents-revenue. [2] Petitioner has sought quashing of notice under Section 148 of the Income Tax Act, 1961 vide DIN & Notice No. ITBA/AST/S/148/2020-21/1032094963(1) dated 31.03.2021 issued by the Deputy Commissioner of Income Tax for the assessment year 2014-2015 and the order dated 21.02.2022 rejecting the objection of the petitioner vide letter No. ITBA/AST/F/17/2021-22/1039954650(1) issued by the Additional/Joint/ Deputy/Assistant Commissioner of Income Tax Department. He also prayed for a direction upon the respondents not to proceed further on the basis of the notice under Section 148 of the Act of 1961 and drop the proceedings after considering the objection dated 21.02.2022. Petitioner also prayed for an interim stay of the impugned notice. [3] When the matter was taken up earlier before the Co-ordinate Bench of this Court on 29.03.2022 while issuing notices the proceedings initiated against the petitioner under Section 148 of the Income Tax Act 1961 were kept in abeyance. Therefore, the re-assessment proceedings have not been concluded. Respondents filed their counter affidavit on 01.08.2022. When the matter was taken up on 27.....
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....ndisclosed income in the hands of the present petitioner. After the search operation was completed, a detailed appraisal report was prepared by the department containing the search details and other details of Shri Swapan Kumar Paul along with eight other assessees connected with Shri Swapan Kumar Paul including the present Petitioner i.e. Shri Abhijit Paul. Based on such disclosure of Shri Swapan Kumar Paul and the appraisal report prepared by the department, notice under Section 142 (1) of the Act was served upon the petitioner. The petitioner was directed to file his return of income for the assessment year 2014-15. Accordingly, petitioner filed his return on 25.11.2015 showing the total income at Rs. 64,17,120/- [6] It is the case of the respondent-revenue that based on such information gathered from the appraisal report as well as the disclosure of Shri Swapan Kumar Paul and also after considering the return filed by the petitioner pursuant to the notice issued under Section 142 (1) of the Act, the Assessing Authority completed the assessment of the petitioner after complying with all the required provisions of law and passed the assessment order dated 29.03.2016 whereby th....
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....r dated 21.02.2022, the Assessing Authority disposed of the said objection filed by the petitioner holding that the proceedings were initiated as per provisions of the Act which was valid and justified. Being aggrieved, the Petitioner preferred this writ petition before this Court under Article 226 of the Constitution of India seeking interference of the said action of the respondents in initiating the said proceedings under Section 147 of the Act. [8] Petitioner challenged the said proceedings initiated under Section 147 of the Act mainly on four grounds: (i) It is barred by limitation as the notice was issued after the expiry of the period prescribed under Section 149 (1) (b) of the Act. (ii) The matter is still sub-judice before the Appellate Tribunal in respect of additions made by the Assessing Authority while passing the initial assessment order. (iii) There was no new or fresh material which came up to the notice of the Assessing Authority to initiate a proceedings under section 147 of the Act and (iv) The proceedings were initiated based on borrowed satisfaction of a different authority i.e. the audit wing of the department and not of ....
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....t cannot be ordered based on objection raised by audit. Such reassessment should not be valid as the Assessing Officer has no reason to believe on his own that the income of assessee had escaped assessment on ground of erroneous computation. Learned counsel for the petitioner has placed reliance upon decision of the Apex Court in case of Commissioner of Income Tax, Delhi Versus Kelvinator of India reported in (2010) 2 SCC 723 at paragraph No. 7 wherein it was held that one must treat the concept of "change of opinion" as in in-built test to check abuse of power by the assessing officer. Hence, after 01.04.1989, the assessing officer has power to re-open provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Under the Direct Tax Laws (Amendment), Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe" Parliament reintroduced the said expression and deleted the word "opinion" on ....
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....rt of original assessment report. [12] He has also placed reliance upon a decision of the Apex Court in case of M/S Indian & Eastern Newspaper Society, New Delhi versus Commissioner of Income Tax, New Delhi, reported in (1979) 4 SCC 248 and submits that the Apex Court in the said case has held that opinion of an internal audit party of Income Tax Department on a point of law cannot be regarded as an information within the meaning of Section 147 of Income Tax Act. Notice under Section 148 IT Act issued on 01.04.2021 after expiry of 6 years from the relevant assessment year 2014-2015 is not permissible under the un-amended Act which was applicable till 31.03.3021. [13] Mr. S. Chetia, learned counsel for the respondents-revenue submits that the submission of the petitioner that in view of Section 149 (1) (b) of the Act, the notice dated 31.03.2021 issued under Section 148 of the Act was time barred, is not legally correct. The respondent No. 5 has formed his 'reason to believe' that the income of the petitioner had escaped assessment on account of 'net profit' for the period 01.04.2013 to 22.08.2013. The petitioner had not disclosed his income fully and truly in ....
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....tain finality as the appeal filed by the department is still pending before the Learned Income Tax Appellate Tribunal. Both are altogether on a different footing i.e. issues before the Appellate Authority and the Tribunal were 'undisclosed investment' and 'undisclosed income' of the petitioner and the present proceedings initiated under Section 147 of the Act was in respect of escapement of tax because of non-disclosure of actual profits by the petitioner. Therefore, there is no bar under the Income Tax Act, 1961 to Initiate any proceedings under Section 147 of the Act for reassessment of the petitioner which was escaped assessment during the original assessment and which came to the notice of the respondent No. 5 subsequently after the original assessment order was passed. [16] As regards the submission made by the petitioner that no new or fresh material came up to the notice of the Assessing Authority to initiate proceedings under section 147 of the Act, it is stated that subsequent to the assessment order dated 29.03.2016 passed by the Assessing Officer, it has come to the notice of the respondent No. 4 that certain income chargeable to tax of the petitioner ....
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....er should have finally ascertained the fact by legal evidence or conclusion. Section 147 authorizes and permits the assessing officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the assessing officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the assessing officer should have finally ascertained the fact by legal evidence or conclusion. The function of the assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. [19] Learned counsel for the respondents-revenue has also relied upon a decision of the Apex Court in case of Raymond Woollen Mills Limited vs. Income Tax Officer, reported in (2008) 14 SCC 218 and submitted that the Apex Court at paragraph 3 of the said judgment held that it has to see whether there was prima facie some material on the basis of which the de....
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....tax has escaped 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 2.-For the purposes of this section, the fo....
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....ended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012. 148. (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 : Provided that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified i....
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.... of section 147 shall apply as they apply for the purposes of that section. (2) The provisions of sub-section (1) as to the issue of notice shall be subject to the provisions of section 151. (3) If the person on whom a notice under section 148 is to be served is a person treated as the agent of a non-resident under section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year. Explanation.-For the removal of doubts, it is hereby clarified that the provisions of sub-sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012 Xxxxxxxx 151. Sanction for issue of notice. (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is sa....
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....tion 147 with effect from 01.04.1989 the only one condition that remained for the Assessing Officer to reopen assessment proceedings was where the Assessing Officer had reason to believe that income has escaped assessment. The Apex Court, however, cautioned that it needs to be given a schematic interpretation to the words "reason to believe", otherwise Section 147 would give arbitrary powers to the Assessing Officer to reopen assessment on the basis of "mere change of opinion" which cannot be per se reason to reopen. [24] The Apex Court in case of Commissioner of Income Tax, Delhi versus Kelvinator of India Limited, reported in (2010) 2 SCC 723 at paragraphs No.6 and 7 has explained the change in the law as regards the basis to reopen the concluded assessment only on the basis of 'reason to believe' and not on the basis of 'change in opinion' after the amendment made with effect from 01.04.1989 which reads as under: "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 ....
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....nd full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. Paragraph 25 of the judgment rendered in this context is quoted hereunder: "25. From a combined review of the judgments of this Court, it follows that an Income Tax Officer acquires jurisdiction to reopen assessment under Section 147(a) read with Section 148 of the Income Tax Act, 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of tho....
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....either be ignored or watered down. All the requirements stipulated by Section 147 must be given due and equal weight. [27] In a recent judgment rendered by the Apex Court in case of M/S Mangalam Publications Kottayam, versus Commissioner of Income Tax, Kottayam, reported in (2024) 10 SCC 433, the Apex Court had the occasion to once again examine the perennial question which arises in income tax jurisprudence i.e. whether reopening of a concluded assessment i.e. reassessment under Section 147 of the Income Tax Act, 1961 following issuance of notice under Section 148 of the Act is legally sustainable or is bad in law. The Apex Court in Mangalam Publication (supra) extensively dealt with the position in law as it existed prior to the amendment to Section 147 and post amendment introduced by Direct Tax Laws (Amendment) Act, 1989 and also the decisions rendered by the Apex Court in case of Kelvinator of India Limited (supra); Phool Chand Bajrang Lal (supra) and Sri Krishna Private Limited (supra). [28] The Apex Court also dealt with the Constitution Bench judgment rendered in case of Calcutta Discount Company Limited versus Income Tax Officer, Companies District Calcutta & another....
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....ed during the search and seizure operation which included the ledger/cash book of different years in the tally data of the petitioner. It showed huge amount of undisclosed investment, negative cash and undisclosed withdrawal. The assessee failed to explain the difference and was also unable to produce any counter documentary evidence during the hearing. Therefore, the amount of difference of Rs. 9,62,33,682/- was added back into the income of the assessee under Section 68 as undisclosed investment. Penalty proceedings under Section 271 (i) (c) were initiated for furnishing inaccurate details and concealment of income. Further, on the basis of loose sheets which are statements showing the details of pendency with FCI towards different dispatching point in respect of amount receivable by Abhijit Paul and Subhajit Paul as on 17.04.2013 and 13.04.2013 and also the details of liability against such receivable, the assessee could not explain the surplus of Rs. 2,72,33,682/- by producing any counter documentary evidence. Therefore, the difference of Rs. 2,72,33,682/- after considering depreciation of Rs. 35,36,591/- was added back into the income of the assessee as undisclosed investment.....
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....efore the amount of Rs.46,23,851/- being the difference in net profit should have been added as undisclosed income of the assessee. This resulted in underassessment of income of Rs.46,23,851/- In this context, you are, required to submit in writing as to why the above amount of Rs. 46.23.851/- should not be added back to your income and taxed accordingly. Note. Please provide the necessary documents/evidences in support of the details furnished by you in response to the above questionnaire." [34] The approval under Section 151 of the Income Tax Act by the PCIT, Shillong is at (Annexure-11). Thereafter, petitioner filed his objection against initiation of proceedings on 30.01.2022 (Annexure-19). The same has been rejected by the order dated 21.02.2022 (Annexure-20) which is also impugned in the present writ petition. It holds that the assessee had not disclosed the material facts truly and fully and therefore income chargeable to tax had escaped assessment. Therefore, the provisions of Section 147 and 148 of the Act are correctly invoked. The objection as to the authority of the PCIT to grant permission was also rejected as untenable. [35] During course of he....
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....ts crave leave of this Hon'ble Court to produce the complete 'Appraisal Report' before this Hon'ble Court on the next date of hearing." [36] The appraisal report is also enclosed at page 75 and 87 to 92 of the writ petition concerning the petitioner as supplied by the revenue. Perusal of the appraisal report shows that undisclosed income was found during search and seizure operation in the tally data of Abhijit Paul on the basis of profit and loss account. It showed difference in the different financial year in net profit when compared to the net profit shown in the audit report or P&L so prepared. For the relevant year 2013 it showed net profit of Rs.96,89,209/-. It is not in dispute that this appraisal report was available before the Assessing Officer during the assessment. The assessment order was passed based on the materials seized during search and seizure operation including ledger, cash book of different years found in the tally data of the petitioner and in the wake of the fact that the assessee had failed to produce any books of accounts, ledgers, bills, vouchers and any other supporting evidence substantiating his cause. Evidently, the materials were p....
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....ived 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, after satisfying the twin conditions prescribed in Section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and, therefore, income chargeable to tax had escaped assessment. [40] In the facts of the present case, the assessment was carried out at the first instance on the basis of the materials collected during search and seizure operation including the ledgers/cash book of different years found in the tally data of the petitioner and also the appraisal report based thereupon. The Appraisal report was placed be....
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.... effect from 01.04.2021, the Principal Commissioner of Income Tax was fully competent to accord permission for reopening of assessment beyond the period of four years as prescribed under Section 149 (1) (b). Petitioner has laboured under a misconception of law in that regard. Therefore, the issue is answered in favour of the revenue. [43] Now coming to the last question as to whether the notice under Section 148 uploaded on the portal on 01.04.2021 was beyond the period of limitation as the Assessing Officer was bound to issue notice for reopening assessment till 31.03.2021 and as such the same is bad in law, we may usefully refer to a decision on this point rendered by a Division Bench of the Jharkhand High Court in which one of us (Aparesh Kumar Singh, CJ) was a party. The matter relates to the period of limitation prescribed under Section 153 in case of Prakash Lal Khandelwal versus Commissioner of Income Tax and another in WP(T) No.1901 of 2022. The issue involved in the said case was whether if the DIN number was generated on 01.04.2022 and the order was uploaded on 03.04.2022, was it barred in time as the limitation to initiate proceedings expired on 31.03.2022. [44] In....
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....e case of CIT versus Mohammed Meeran Shahul Hameed, reported in (2022) 1 SCC 12 while interpreting Section 263 of the Income Tax Act, 1961 which uses similar expression like Section 153 (3) was also referred to and relied upon. The learned Court after going through the provisions of the Act, the opinion of the Apex Court, dispelled the contention of the petitioner that though the assessment order was dated 31.03.2021 but since it was uploaded on the next day i.e. 01.04.2022 the same was barred by limitation. It opined that different expression used by the Legislature at different places has certainly a different objective. Making of the order and communication of the order are two different things. Even the circular No.19 of 2019 dated 14.08.2019 relevant to the issue in the said case and relied upon by the assessee stipulated communication of the order and not making of the order as it said that every communication relating to assessment, appeal, order, etc. shall have a DIN on the body of the order. On facts, in the present case, it is undisputed that the Assessing Officer had digitally signed the notice under Section 148 of the Act on 31.03.2021 at 7.01 p.m. As such, it was not ....