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Case of Nokia India P. Ltd – reassessment in case of original assessment u.s. 143.1- need reconsideration because facts were not properly considered and precedence were not referred and considered.

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Case of Nokia India P. Ltd – reassessment in case of original assessment u.s. 143.1- need reconsideration because facts were not properly considered and precedence were not referred and considered.
By: CA DEV KUMAR KOTHARI
June 7, 2019
All Articles by: CA DEV KUMAR KOTHARI       View Profile
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2019 (4) TMI 633 - SUPREME COURT  -PR. COMMISSIONER OF INCOME TAX -6 VERSUS NOKIA INDIA PVT. LTD. CIVIL APPEAL No. 3450 OF 2019 (Arising out of S.L.P.(C) No.32222 of 2017)  Dated: - 08 April 2019

2017 (5) TMI 484 - DELHI HIGH COURT  PR. COMMISSIONER OF INCOME TAX-6 VERSUS NOKIA INDIA PVT. LTD. ITA 854/2016  Dated: - 21 April 2017

2016 (6) TMI 374 - ITAT DELHI  NOKIA INDIA PVT. LTD. VERSUS DCIT CIRCLE-13 (1) , NEW DELHI I.T.A. No. 1870/DEL/2010, I.T.A .No. 2147/DEL/2010  Dated: - 03 June 2016.

Precedence not considered:

228 ITR (ST.) 156 ITO v. Master Keshav Suri – in this case SLP of revenue was dismissed on issue of reassessment in case of assessment u/s 143.1 when relevant information was available in the Return of Income.

Relevant provisions:

Section 143 , 147, 148, 115JA etc. and related provisions and Rules.

Facts:

Assessment year 1999-2000 relevant to previous year ended 31.03.1999. At that time physical Return of Income was filed and in this case Tax Audit Report (TAR) and audited accounts and other relevant documents including computation of income and computation of book profit must have been filed by assesse.  Therefore,  the A.O. had sufficient information at the time of issuing intimation and decision making as to whether the return of income  need to be scrutinized.

Original  return of income showed taxable income as 'Nil' after setting off of business income of ₹ 12,97,86,402 against unabsorbed business losses and depreciation.

Book profits were also  'Nil, the Assessee's case was that no tax was payable under Section 115JA of the Act.

 The Assessee filed a revised return on 30th November 2000 showing nil total income after showing  slightly lower  business income of ₹ 12,97,44, 989 and setting off unabsorbed business losses.

 There was no scrutiny of the return and an intimation under Section 143 (1) of the Act was issued to the Assessee.

Therefore, it can be said that a view was taken by the assessing officer that the ROI need not scrutiny.

Audited accounts:

When Return of Income is supported by Tax Audit Report and Audited Accounts, one can rely on them about reasonable accuracy and accounts being in accordance with generally accepted accounting policies and accounting standards. Accounts have to be prepared as per method of accounting which also includes following prudential norms of accounting and reasonable estimates can also be made. This is also in accordance with notifications issued u/s 145 and 145A. Reasonable estimates, as on closing  date of accounts in accordance with facts and circumstances prevailing then is a recognized method for preparation of accounts.

In this case a computation u/s  S.115JA was also made, therefore, assesse should have filed prescribed form of computation duly audited by a CA. Therefore, there was also an authenticate basis of no book profit.

When a Return is supported by audited accounts and other reports of CA and are available to the Assessing Officer (AO) , it is duty of the AO to consider the same and take steps for issue of intimation and in case he find that Return requires scrutiny, to issue notice for scrutiny of return.

In such situation if no notice u/s 143.2 is issued and limitation lapses, it can be said that the AO had considered the ROI and other records and found that a scrutiny of ROI is not required and he has formed an opinion in this regard.

Furthermore, in case of Nokia, it was only based on documents available in assessment records that revenue audit party had raised some objections. The AO had not accepted those objections. Furthermore, at first instance for reassessment, on filing of objections by the assesse, the AO had dropped notice but again notice u.s. 148 was issued and reassessment was made. On appeal against reassessment order Ld. CIT. A  held reassessment to be valid but he allowed some relief and confirmed some additions.

On further appeal of the assesse Tribunal considered all aspects and held that there was change of opinion and therefore reassessment was invalid.

As noticed earlier, there was a physical ROI which was supported by audited accounts computation of income ,  computation of book profit etc.  On the basis of which, if AO had considered it expedient to scrutinize the ROI he should have issued notice u.s. 143.2.

Furthermore, AO has also noted that there is no evidence that liability claimed were not ascertained liabilities requiring addition to book profits.

Precedence not referred and considered:

It appears that the following precedence by way of dismissal of SLP of revenue was not considered and  was also not referred by counsels.

In such circumstances, an action u.s. 147 / 148 is not desirable in view of the following ruling:

FROM OUR REPORTER AT THE SUPREME COURT.

228 ITR (ST.) 156

ITO v. Master Keshav Suri

Reassessment

Original assessment exempting foreign exchange remittances : Notice for reassessment : High Court on writ petition permitting proceedings to continue but staying recovery:

3-10-1997 : Their Lordships S.C. Agrawal and S. Rajendra Babu, JJ. Dismissed the special leave petition filed by the Department against the judgment dated 24-2-1997, of the Delhi High Court in C.M. No.1162 of 1997, in Civil Writ No.664 of 1997 on the question whether action permissible under section 143(2) on the basis of the information available in the return but not taken and in respect of which limitation expired, cannot legally be taken under section 147/148 of the Income-tax Act, 1961, if the Assessing Officer had reason to believe that income chargeable to tax had escaped assessment, ITO v. Master Keshav Suri : C.C. No.7725 of 1997.

Unquote:

Therefore, if an information is available to the AO when he made intimation and did not issue notice u.s. 143.2, on that information an action of reassessment  u.s. 147 /148 for re- computation or re assessment of income is not permissible.

In this regard it is also worth to note that if based on information available in ITR the AO consider that the ROI need to be scrutinized to check that in any manner the assesse had not claimed excessive relief or has paid lower tax or claimed higher refund etc. then the AO is duty bound to issue notice u.s. 143.2 because mandatory  words used are “shall serve on the assesse a notice requiring  ….”.

  Therefore, the judgment of the Supreme Court in case of Nokia India P. Ltd need to be reviewed. In any case , as the matter has been restored to the High Court, the assesse company may  take proper plea before the High Court to make out case that reassessment was not permissible.

 

By: CA DEV KUMAR KOTHARI - June 7, 2019

 

 

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