TMI Blog2024 (1) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... he same were stopped as per orders of the Supreme Court, were also illegal. Decision concerning leases was delivered in the year 2014. Till that time neither the assessee nor the Assessing Officer had knowledge that such leases were illegal after 22.11.2007. When assessee was not knowing, there was no occasion for him to make disclosure to that effect. In Mr. Teofilo Fernando Antonio Pinto Vs Union of India and anr. [ 2023 (9) TMI 625 - BO MBAY HIGH COURT ] the Coordinate Bench of this Court while considering all the earlier decisions including decisions in case of Aroni Commercial Limited [ 2014 (2) TMI 659 - BOMBAY HIGH COURT] and CIT Vs Kelvinator India Limited 2010 (1) TMI 11 - Supreme Court ] observed that twin conditions must be satisfied when the reopening is beyond the period of four years. Justification offered while rejecting objections of the petitioner cannot be regarded as valid defence of the impugned notice. Such justification/reason given for the first time at the time of disposal of the objections filed by the assessee objecting to reopen the assessment. Such reasons must exist and recorded at the time of issue of notice under Section 147/148 of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r dated 9.7.2019 while deciding the group of petitions reads thus:- 28. The following petitions, Writ Petition Nos. 141 and 233 of 2015, 198, 199, 262, 264, 265, 271, 272, 879, 880, 881, 882, 883 of 2016 are all petitions where reopening notices contained additional reasons involving issue under Section 10B of the Act or Section 14A of the Act or commission paid to foreign agents or other reasons. These petitions deserve to be detagged from the group of petitions to be disposed of by this order. 2. Accordingly, present petitions along with others were listed together. However, present two petitions were finally heard. Learned counsel for respective parties would submit that since additional grounds in other petitions are involved independently, present two petitions could be disposed of whereas remaining petitions be detagged. 3. Accordingly, Writ Petition Nos. 141 of 2015, 196, 199, 264, 265, 271, 272, 879, 880, 881 and 882 of 2016 are detagged. 4. We have heard learned Senior Counsel Mr S. S. Kantak along with learned Counsel Mr P. Rao, Mr P. Talaulikar, Mr. K. Ceasar Simoes, Mr. R. Vazarkar, Ms N. Kholkar and Mr A. Parrikar for the petitioners and Ms S Linhare, l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under Section 10B, before the Commissioner of Income Tax (Appeals) (hereafter called as CIT(A) for short). On 20.12.2012, appeal of the petitioner was partly allowed in favour of the petitioner thereby holding that the petitioner is entitled to claim exemption under Section 10B of the Act, in connection with activities coming within the definition of production. Since appeal was partly allowed, the petitioner challenged such order before the Income Tax Appellate Tribunal (for short ITAT ). On 28.3.2014, the ITAT upheld the claim of the petitioner under Section 10B of the Act. The Revenue then challenged such order before this Court wherein appeal was admitted. 9. On 24.10.2014, the petitioner received another notice under Section 148 of the Act seeking to reopen the returns for the Assessment Year 2008-09. Petitioner requested reasons for such reopening, which were furnished on 29.12.2014. The petitioner also received notice under Section 142(1) of the Act from respondent no. 2 requesting the petitioner to submit details/information as contained in notice dated 7.1.2015. The petitioner immediately filed a detailed objections raising a question of jurisdiction of respondent n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t be treated as returns filed in response to the impugned notice under Section 148 of the Act. On 8.1.2016, respondent no. 1 furnished reasons for issuing notice under Section 148 of the Act. On 27.1.2016 objections were filed by the petitioner challenging validity of reassessment proceedings. Vide order dated 25.7.2016, respondent no. 1 rejected the objections, which are impugned in the present proceedings. 13. Respondents by filing their reply/affidavit objected to the prayers in the petition on the ground that opening of reassessment has been properly carried out and there are reasons to believe which have been recorded. SUBMISSIONS OF THE PETITIONERS. 14. Learned Senior Counsel Mr Kantak and Mr Pardiwala would submit that first of all the Coordinate Bench of this Court in the earlier bunch of petitions have clearly held that reasons for reopening on the basis of the third report of Justice Shah Commission is not available to the Revenue. They specifically relied upon the finding on this aspect. Learned Senior Counsel would then submit that in both these matters another notices were issued on different counts by taking recourse to Section 10B of the Act and Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and fences of the concerned officer. 20. Learned Senior Counsel Mr S. S. Kantak for the petitioner- Sociedade De Fomento Industrial Pvt. Ltd. relied upon following decisions:- 1. The Commissioner of Income Tax Vs M/s Sociedade de Fomento Industrial Pvt. Ltd. Spl. Leave to Appeal (C) No(s). 6730/2021 dated 25.1.2022 2. The Commissioner of Income Tax Vs M/s Sociedade de Fomento Industrial Pvt. Ltd. Tax Appeal Nos. 23 and 25 of 2023 dated 22.10.2020 3. Fomento Resources Pvt. Limited and anr. Vs Union of India and others Writ Petition Nos. 606 of 2014 and other connected matters decided on 2.7.2019 4. Commissioner of Income Tax, Gujarat Vs A. Raman and Co. 1967 SCC online SC 49 5. Aroni Commercials Ltd Vs Dy. Commissioner of Income Tax 2014 SCC Online, 6. M/s S. Ganga Saran and Sons Pvt. Ltd Vs Income tax Officer and others (1981) 3 SCC 143. 7. Mr. Teofilo Frenando Antonio Pinto Vs Union of India and others Writ Petition No. 1099 of 2023(filing) decided on 6.9.2023, 21. Learned Senior Counsel Mr. Pardiwala for the petitioner Shantilal Khushaldas Brothers Pvt. Ltd. relied upon following decisions:- 1. Principal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke to discussed at the relevant stage. 26. Before considering the facts of each case, it is clear that the common ground in both these petitions is the third report of Shah Commission by which it was observed that there were illegal export particularly by means of under invoicing on the part of mining lessees and the exporters. 27. In Sociedade De Fomento Industrial Pvt. Ltd. (Writ Petition No. 233 of 2015), notice under Section 148 of the Act is dated 20.10.2014. The concerned officer claimed that he has reason to believe that the income of the petitioner chargeable to tax for the Assessment Year 2008-09 has escaped assessment within the meaning of Section 147 of the said Act. He, therefore, proposed to reassess the income and called upon the petitioner to deliver the returns in prescribed form within a period of 30 days. The petitioner vide their letter dated 20.11.2014 called upon the concerned officer to furnished reasons for reopening. Vide letter dated 29.12.2014, the copy of the reasons for reopening is furnished to the petitioner. 28. Reasons for reopening contains in all five grounds. Ground no. 1 is under invoicing of export. In the said ground it is claimed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome escaped assessment for the said year. She would submit that no detailed reasons or material collected during the inquiry is required to be given to the petitioner at that stage. 31. In Shantilal Khushaldas and Brothers Pvt. Ltd, (Writ Petition No 883 of 2016), the petitioner received notice under Section 148 of the Act dated 24.7.2015 wherein authority claimed that it had reason to believe that the income of the petitioner chargeable to tax for the Assessment Year 2011-12 has escaped assessment within the meaning of Section 147 of the Act. Accordingly, the petitioner was called upon to deliver returns within a period of 30 days. Petitioner then asked for the reasons, which were supplied vide revenue letter dated 8.1.2016. There are basically two reasons for reopening of the assessment for the Assessment Year 2011-12. 32. The first reason discloses that some new facts came to the light regarding under invoicing of exports of iron ore. Such information was received from the Directorate of Revenue, Intelligence (DRI), Mumbai through the office of the Principal Commissioner of Income Tax, Panaji. The details were obtained from the local office DRI. As per these information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aking any independent inquiry so as to arrive at prima facie conclusion that there was any under invoicing as far as income tax is concerned. 35. Ms S. Linhares, appearing for the Revenue would submit that the material was received from the DRI which is also a Government department and an agency authorized to conduct investigation. There was no doubt with regards to such investigation as the petitioner paid additional custom charges and therefore, it is clear that the petitioner was involved in under invoicing. According to her, such reason is sufficient for the officer to believe that there was under invoicing and that such material was not available at the time of assessment of the returns. The reopening on this ground is, therefore justified. 36. Both the learned Senior Counsel would submit that the Assessing Officer practically relied upon the report of different authorities and failed to independently assess and therefore, such action on the part of the concerned officer is in fact illegal. 37. As far as Shah Commission Report is concerned, both the learned Senior Counsel placed reliance on the findings of the Coordinate Bench of this Court wherein (S. C. Gupte, J) di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Industrial Pvt. Ltd. (Writ Petition No. 233 of 2015) practically believed on the third report of Shah Commission and the figures mentioned therein. We say so for the reasons that Mr. Kantak placed before us report of Shah Commission wherein figures mentioned in the ground no. 1 of the reasons are found at different places against different assesees. What the officer did is only compiling it in one format and pasted it in ground no. 1 of the reasons. 41. We also found that apart from the statements below chart as quoted earlier, there is only a bare statement that the office independently made inquiries. The word this office , nowhere specifies as to whether the concerned officer who issued notice, himself carried out any independent inquiry. Similarly the details of such inquiry and material collected during such inquiry is not part and parcel of the reasons. The purpose of disclosing reasons is to give an opportunity to the assessee to meet such reasons effectively or to accept it for the purpose of reopening. If the assessee is unable to accept such reasons, he is entitled to file objections. Thus merely saying that the office conducted independent inquiry apart from the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g reliance only on the information received from DRI Mumbai, the Assessing Officer has no jurisdiction to reopen the assessment. 45. We clearly observed that apart from material received from the office of DRI Mumbai and quoting some part of it in the reasons, the Assessing Officer nowhere disclosed about any independent inquiry conducted by him or his office to arrive at the opinion. There is no other tangible material except report from DRI Mumbai which could have been considered as reason to believe of the income escaped from assessment. 46. The main contention of the petitioner/assessee is that there is no belief on the part of the Assessing Officer that the income escaped and that there is no reason of any failure on the part of the assessee to make such disclosure fully and truly. It is claimed that the Assessing Officer cannot simply make a bald assertion that escapement of the income is due to the result of failure on the part of the Assessee to fully and truly disclose all the material facts. He must indicate though briefly what is it that was not disclosed and which gives the Assessing Officer reason to believe that such income has escaped assessment. 47. In both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment. Besides the power to reassess is not a power to review. Further reopening must be on the basis of tangible material. If all facts are available on record and particular opinion is formed, then merely because there is change of opinion on the part of the Assessing Officer, notice under Sections 147/148 of the Act is not permissible. Such powers cannot be exercised to correct the errors/mistakes on the part of the Assessing Officer while passing the original order of assessment. There is a sanctity bestowed on the order of assessment and the same can be disturbed by exercise of powers under Section 147/148 of the Act, only on the satisfaction of the jurisdictional requirements. At the time of issuance of notice under Section 148 of the Act to reopen a concluded assessment, satisfaction of the Assessing Officer is of primary importance. It must be prima facie satisfaction of having a reason to believe that the income chargeable to tax has escaped assessment. At this stage the officer is not required to establish beyond doubt that the income indeed had escaped assessment. 51. Various other decisions on the same propositions have been relied upon. However, we need not disc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formed in the context of material obtained that there is an escapement of income. Otherwise no meaning is being given to words to believe as found in Section 147 of the Act. The words whatever reasons in Rajesh Jhaveri Stock Borkers (P) Ltd s case (supra), only means 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. 53. 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. 54. In Shodiman Investment (P) Ltd, the Cordinate Bench of this Court further observed in paragraph 12 which reads thus:- Paragraph 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur mind with regard to such observations which are settled propositions of law and thus such observations are clearly applicable to the matters in hand. 58. It is further well settled propositions of law whatever reasons the Assessing Officer, formed, must be disclosed in the reasons before reopening assessment, as per Section 148 of the said Act. Any clarification thereafter while deciding objections or before appellate authorities, cannot be looked into. This is precisely so, a contention raised by Ms Razaq while inviting our attention to the order dated 30.1.2015 passed while rejecting the objections raised by Sociedade de Fomento Industrial Pvt. Ltd. She unsuccessfully tried to claim that the reasoning found in the rejection of objections could be looked into as the reason to believe, which we are afraid to accept as it is well settled proposition that reasons must be disclosed and formed on the basis of tangible material before issuing notice of reopening and such reasons must be disclosed to the assessee before he is allowed to raise objection to such notice. 59. In the case of A. Raman and Company (supra), the Apex Court observed thus:- The condition which invests ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has information for which it may be said, prima facie, that he had reason to believe that income chargeable to tax has escaped assessment, it is not open to the High Court, exercising powers under Section 226 of the Constitution of India, to set aside or vacate the notice for reassessment on a reappraisal of evidence. 61. In the case of Reynolds Shirting Ltd (supra), the Coordinate Bench of this Court sitting at the Principal Seat had an occasion to consider the scope of Section 147 of the Act. In that case Reynolds received a notice under Section 148 of the Income Tax Act stating that the Assessing Officer has reason to believe that the income chargeable to tax for the Assessment Year 2012-13 has escaped assessment. Copy of the reasons annexed to the notice discloses that the Assessing Officer received information from DDIT (Investigation) about certain entity entering into suspicious/ questionable transactions. The entire information received from DDIT was reproduced in the reasons. In such scenario, the Coordinate Bench observed that the information/material received is not further linked by any reason to come to the conclusion that the petitioner has indulged in any activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions, the Coordinate Bench of this Court has already concluded that observations in the Shah Commission Report are merely opinion and same cannot formed the basis alone for the purpose of reopening of the assessment which were already finalised. We see no reason to take another/other view in the present matters. 65. It is also claimed that apart from reason to believe, the Assessing Officer must disclose that the material was available with the assessee however, he failed to disclose truly and fully. Mr. Pardiwala and Mr. Kantak would submit that the reason in the reopening notice is that since the Apex Court found that mining activities or leases were illegal from 2007, it was presumed by the Assessing Officer that after 23.11.2007, all activities becomes illegal and therefore, the assessee ought to have declared that such activities or income derived therein was from the illegal activities. 66. First of all it is necessary to note here that the decision of the Supreme Court dated 21.4.2014 in case of Goa Foundation Vs. Union of India in Writ Petition (C) No. 435 of 2012 observed that mining leases in Goa expired in 1997 and thereafter renewal could have been granted on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nderassessed or escaped assessment; the second is that he must have reason to believe that such escapement or underassessment was occasioned by reason of the assessee s failure to disclose fully and truly all material facts necessary for the assessment of that year. Both these conditions are conditions precedent to be satisfied. 70. Further by relying on decision of Calcutta Credit Corporation Ltd Vs ITO (1971) 79 ITR 483(Cal) was observed that the assessee must be aware of those facts which are not disclosed before it can be said that there is any omission or failure on his part to disclose the same. In the case of CIT vs. Balvantrai S. Jain [1969] 72 ITR 59, the Bombay High Court held that the assessee cannot be said to have failed to disclose the facts in question as he had no knowledge of those facts. It interpreted Section 34(1)(a) of the Indian Income Tax Act, 1922, which is in pari materia with the present Section 147(a) and held that Section 34(1)(a) covers only the cases where the assessee, knowing all the material facts, deliberately withholds information. The section cannot apply to a case where the assessee was not aware of the facts which he was supposed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission Report without independently assessing or recording reasons by the Assessing Officer is itself considered to be jurisdictional error on the part of such officer. Secondly when the notice was issued beyond period of four years, conditions regarding disclosure to be made fully and truly is also not established for the simple reason that the fact that such lease was illegal beyond 22.11.2007 was not to the knowledge of the assessee while submitting returns for the Year 2008-09 and also for the year 2011-12. The Apex Court in the year 2014 for the first time declared that the mining leases in Goa beyond 22.11.2007 were illegal. Thus prior to 2014 i.e. declaration by the Apex Court neither the assessee nor the Assessing Officer had knowledge that such leases were illegal, the question of making such declaration in the year 2008-09 or 2011-12 while submitting returns would not arise. 74. For the above reasons, we hold that notice for reopening failed to satisfy twin conditions and therefore, both these notices under Section 147 of the Act need to be quashed and set aside. 75. Rule is made absolute in the above terms. 76. Petitions stand disposed of. - - TaxTMI - TMITa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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