TMI Blog2014 (9) TMI 7X X X X Extracts X X X X X X X X Extracts X X X X ..... in any event, was not permissible. Also in RANBAXY LABORATORIES LIMITED Versus COMMISSIONER OF INCOME TAX [2011 (6) TMI 4 - DELHI HIGH COURT] – section 147 has the effect that the AO has to assess or reassess the income which escaped assessment and which was the basis of the formation of belief and if he does so, he can also assess or reassess any other income which has escaped assessment and which comes to his notice during the course of the proceedings - It is clear that no addition has been made on account of reason (a) - It is also clear that though the specific point was taken in reason (a) and it was one of the “reasons” to believe that income had escaped assessment yet, no addition was made - The proposition that by “mistake” or through “inadvertence” the Assessing Officer did not make the addition, cannot be accepted - when an AO raises a specific issue in the assessment proceedings and yet does not make any addition in the assessment order, it should be accepted that the AO did not find any ground or reason to make the addition - the AO consciously did not make any addition after examining the entire issue. The general statement at the end of the reassessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 29.03.2012 pertaining to the assessment year 2005-06. The writ petition also seeks the quashing of the entire re-assessment proceedings under Section 147/148 of the said Act as being without jurisdiction. 2. It is an admitted position that the original assessment was completed on 20.03.2006. The notice under Section 148 was issued in respect of the said assessment year 2005-06 on 29.03.2012 and, as such, the said notice was beyond the period of four years from the end of the relevant assessment year. Thereby, the provisions of the first proviso to Section 147 of the said Act would be invoked. Along with the notice under Section 148 dated 29.03.2012 the purported reasons for the re-opening were also furnished. The said reasons read as under:- Reasons for reopening the case u/s 147 of the Income Tax Act, 1961 in the case of M/s Oriental Bank of Commerce- A.Y. 2005-06 Return declaring an income of ₹ 174,45,44,140/- was filed on 29.10.2005. Assessment u/s 143(3) of the IT Act was made on 20.03.2006 at an income of ₹ 664,17,56,340/- and under section 154/154/154/143(3) was made on 28.03.2008 at an income of ₹ 583,65,72,060/- under normal provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed under Section 36(1)(viia) of the said Act. Thereafter, the assessment order dated 28.03.2013, which is impugned before us as being without jurisdiction, was passed. 4. The learned counsel for the petitioner took us through the said re-assessment order dated 28.03.2013 and submitted that no additions have been made in respect of the purported reasons [(a) and (b)] as indicated above. Furthermore, even the deduction of approximately ₹ 126 crores claimed under Section 36(1)(viia) in respect of the assessment year 2005-06 has been accepted. However, an addition has been made to the extent of ₹ 453,96,44,854/- on account of the opening balance pertaining to the assessment year 2005-06. The learned counsel for the petitioner drew our attention to paragraphs 3.3.1 and 3.3.2 of the said re-assessment order which read as under:- 3.3.1 In response thereto, the assessee submitted detail of deduction claimed U/s. 36(1)(viia). A perusal of detail shows that the opening balance of deduction U/s. 36(1)(viia) already claimed and allowed to the assessee as at 1/4/2014 is ₹ 453,96,44,854/- {both 10% of rural advances and 7.5% of total income}. A perusal of the details sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt of a questionnaire issued on 13.02.2006 by the Assessing Officer wherein question No.11 was as under:- 11. You have claimed ₹ 1040.55 Crs as aggregate advance pertaining to rural branches on which you have claimed 10% deduction U/s 36(i)(viia) of ₹ 104.05 Crs. Please demonstrate the method followed to work out the average aggregate advances made by the rural branches of the bank as per Sec. 36(i)(viia) r/w explanation (ia) of I.T. Act r/w Income Tax Rules 6ABA. 7. The learned counsel further submitted that the specific question was replied to on 28.02.2006 in the following manner:- 11) During the Assessment Year 2005-06, the bank has claimed deduction of ₹ 104,05,59,600/- towards Aggregate Average Advances pertaining to Rural Branches of the Bank under Section 36(1)(viiia) of the Income Tax Act, 1961. Certificate in this regard from Statutory Auditors of the bank is being enclosed for your kind perusal. Please note this certificate is issued by the auditors taking into consideration the criteria prescribed under Rule 6ABA as is evident from the certificate. 8. Thereafter, the Assessing Officer did not disallow the deduction so claimed. Conseq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at these provisions are for expenses incurred in the last month which could not be accounted for, thereby creating a provision. 2.1 The assessee being a large organization with more than 1000 branches and 30 regions stated that it is difficult to obtain even headwise break up of such expenses and provision for expenses. This claim of the assessee cannot be accepted as there must be at least a headwise breakup of such provision for expenses to enable the officer to examine the expenses claimed by the assessee. The expenses has shown head wise expenses of the Delhi Head Office amounting to more than ₹ 12 crores. Thus, the assessee could not account for the headwise details of expenses and the provision made thereon. 12. He submitted that though the Assessing Officer recorded his finding rejecting the pleas of the petitioner/assessee, through an inadvertence and by a mistake no addition has been made in the computation given at the end of the assessment order which, according to him, can be rectified under Section 154 of the said Act. The computation given in the assessment order is as under:- Based upon the above, the income of the assessee is re computed as under: 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it was based on the mistake on the part of theAssessing Officer. He submitted that though the reason mentioned that there was of a failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment, there is no specific indication as to which material was not fully and truly disclosed by the assessee which he was required to do for the purposes of assessment. All that the reasons indicate are that on account of a mistake on the part of the Assessing Officer the income had escaped assessment. He once again referred to the decision in Wel Intertrade Pvt. Ltd. (supra) to submit that a mistake on the part of the Assessing Officer is not sufficient to invoke the provisions of Section 147, particularly, in view of the first proviso thereof wherein one of the pre-conditions is that there must be failure on the part of the assessee to make a full and true disclosure of the material facts which would be necessary for making the assessment. Since there is no failure on the part of the assessee, the provisions of Section 147 could not at all have been invoked after the period of four years from the end of the assessment year. Insofar as the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escaped income chargeable to tax. As per Explanation 3 if during the course of these proceedings the Assessing Officer comes to conclusion that some items have escaped assessment, then notwithstanding that those items were not included in the reasons to believe as recorded for initiation of the proceedings and the notice, he would be competent to make assessment of those items. However, the legislature could not be presumed to have intended to give blanket powers to the Assessing Officer that on assuming jurisdiction under Section 147 regarding assessment or reassessment of escaped income, he would keep on making roving inquiry and thereby including different items of income not connected or related with the reasons to believe, on the basis of which he assumed jurisdiction. For every new issue coming before Assessing Officer during the course of proceedings of assessment or reassessment of escaped income, and which he intends to take into account, he would be required to issue a fresh notice under Section 148. 18. In Ranbaxy Laboratories Ltd.(supra), which was an appeal under Section 260A of the said Act, the question under consideration was as follows:- Whether on the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgeable to tax, which, according to his reason to believe , had escaped assessment for any assessment year, did not escape assessment, then, the mere fact, that the Assessing Officer entertained a reason to believe, albeit even a genuine reason to believe, would not continue to vest him with the jurisdiction, to subject to tax, any other income, chargeable to tax, which the Assessing Officer may find to have escaped assessment, and which may come to his notice subsequently, in the course of proceedings under section 147. The decision of the Rajasthan High Court in Dr Devendra Gupta (supra) followed the decision in Shri Ram Singh (supra). 20. We now come to the decision of the Supreme Court in Kelvinator of India Ltd. (supra) which was rendered in the context of the concept of change of opinion . The question before the Supreme Court was whether the concept of change of opinion stands obliterated with effect from 1st April, 1989, i.e., after substitution of Section 147 of the Income Tax Act, 1961 by the Direct Tax Laws (Amendment) Act, 1987? The Supreme Court held as under:- 6. On going through the changes, quoted above, made to Section 147 of the Act, we find tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee in original assessment proceedings but thereafter the Assessing Officer does not make any addition in the assessment order. In such situations it should be accepted that the issue was examined but the Assessing Officer did not find any ground or reason to make addition or reject the stand of the assessee. He forms an opinion. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment, though he had not recorded his reasons. 14. In the second and third situation, the Revenue is not without remedy. In case the assessment order is erroneous and prejudicial to the interest of the Revenue, they are entitled to and can invoke power under Section 263 of the Act. This aspect and position has been highlighted in CIT v. DLF Power Ltd. ITA No. 973 of 2011 decided on November 29, 2011 since reported in [2012] 345 ITR 446 (Delhi) and BLB Limited v. Asst. CIT Writ Petition (Civil) No. 6884 of 2010 decided on December 1, 2011 since reported in [2012] 343 ITR 129 (Delhi). In the last decision it has been observed (page 135): The Revenue had the option, but did not take recourse to Section 263 of the Act, in spite of audit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of this case, if no additions were made in respect of the said reasons (a) and/or (b), it was not open to the Assessing Officer to make additions on some other ground such as the disallowance of the deduction under Section 36(1)(viia) of the said Act without first issuing a notice under Section 148. Mr Sahni, appearing for the Revenue, argued that although no addition has been made in respect of reason (a), there is a finding against the assessee on that aspect. He, as pointed out above, referred to paragraphs 2 and 2.1 of the reassessment order to submit that the finding was recorded in favour of the Revenue. We are unable to agree with this. It is clear that no addition has been made on account of reason (a). It is also clear that though the specific point was taken in reason (a) and it was one of the reasons to believe that income had escaped assessment yet, no addition was made. The proposition that by mistake or through inadvertence the Assessing Officer did not make the addition, cannot be accepted. Reason (a) was one of only two reasons for reopening the assessment. How can it be accepted that the Assessing Officer was so callous or na ve (whichever expression is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stretch of imagination be regarded as a notice under Section 148. Where are the reasons to believe that income had escaped assessment and, more importantly, that such escapement was on account of the assessee s failure to disclose truly and fully all material facts necessary for assessment? By virtue of Section 148(2) the Assessing Officer is mandated to record his reasons before issuing any notice under Section 148. Moreover, as pointed out in Wel Intertrade Pvt. Ltd. (supra), in cases where the first proviso to Section 147 applies, in addition to the Assessing Officer having reason to believe that any income chargeable to tax has escaped assessment, it must also be established as a fact that such escapement of assessment has been occasioned by either the assessee failing to make a return under Section 139, etc., or by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, for that assessment year. This essential pre-condition is clearly missing in the present case even if we were, for the sake of argument, to assume, which we cannot, that the note-sheet entry of 16.03.2013 was a notice under Section 148 as also t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
