TMI Blog2011 (3) TMI 1340X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee - T.C.(A) No.41 of 2008 - - - Dated:- 8-3-2011 - Mr. Justice ELIPE DHARMA RAO, Mr. Justice M. VENUGOPAL, JJ. For Appellant : Dr. Anita Sumanth For Respondents : Mr. K. Subramanian, Sr. Standing Counsel for Income-tax JUDGMENT ELIPE DHARMA RAO, J. The above Tax Case Appeal is filed against the order dated 15.10.2007 passed by the Income Tax Appellate Tribunal, Chennai Bench 'B' in I.T.A. No.1340 (MDS)/2006. 2. The brief facts necessary for the disposal of the case are that the assessee-Company had filed its return of income for the assessment year 1998-1999 on 30.10.1998 admitting 'Nil' income, which was processed under Section 143(1)(a) of the Income-tax Act, 1959 (hereinafter referred to as "the Act") on 10.5.1999. Subsequently, the assessee filed a revised return on 26.11.1999 admitting 'Nil' income by enclosing some more TDS certificates that were omitted to be enclosed along with the original return of income, which were also processed on 29.3.2001. Again a revised order was passed on 27.6.2002 giving credit to some more TDS certificates which resulted in an additional refund of Rs.8,86,226/-. 3. Thereafter, it was noticed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Account does not represent 'ascertained liability' and this is certainly liable for inclusion in book profit. But for such a claim which is not an ascertained liability the book profit would have been higher. By resorting to such claim, the assessee has clearly tried to suppress its income. 6. Further, the assessee has claimed that an accumulated royalty of Rs.2,61,18,013/- which was debited in the P L account for the Assessment Years 1991-92 to 1997-98 was written back to the P L Account for this assessment year since the royalty was waived by their Collaborator M/s. Kone OY Finland. The assessee considered this royalty written back in the 'P L Account Appropriation Account', instead of crediting the same in the P L Account. Since the royalty had been debited to P L Account from the accounting year ending 31.3.1991 onwards, the waiver of royalty is clearly a taxable income and has to be treated as income and the book profit u/s. 115JA of the Act has to be arrived at accordingly. 7. As against the said order, the assessee filed an appeal before the Commissioner of Income-tax (Appeals)-III and the said appeal was allowed by an order dated 17.2.2006, holding as fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t formulated the following substantial question of law:- " Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in holding that the issuance of notice under Section 148 of the Income-tax Act is valid in law when notice issued under Section 143(2) is pending consideration?" 10. Learned counsel appearing for the assessee submitted that the Income-tax Appellate Tribunal erred in holding that the proceeding under Section 148 of the Act has been validly initiated and that the assessment is not liable to be annulled on the ground of lack of jurisdiction. 11. The learned counsel also submitted that the Income Tax Appellate Tribunal failed to notice that the jurisdiction under Section 147 of the Act can be invoked only if the proceedings under Section 143 (2) of the Act has resulted in an assessment or in the alternative, proceedings for enquiry under Section 143(2) of the Act has not been initiated by issuing notice. Once a notice under Section 143(2) is issued, proceedings under Section 147 of the Act cannot be initiated, so long as the said notice has not fructified in an order under Section 143(3) of the Act. 12. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y stood prior to such substitution. Under the old provisions of section 147, separate clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under section 147(a) two conditions were required to be satisfied: firstly the Assessing Officer must have reason to believe that income, profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is, however, to be noted that both the conditions must be fulfi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.3.1991 onwards, the waiver of royalty is clearly a taxable income and has to be treated as income and the book profit u/s. 115JA of the Act arrived accordingly. 18. Considering the above reasons given by the Assessing Officer, we consider it appropriate to hold that it is not proper to accept the contention of the learned counsel for the assessee that there is no material before the Assessing Officer for coming to the subjective satisfaction that he has reason to believe that certain income assessable to tax has escaped assessment for the Assessment Year 1998-99. 19. As per the decision of the Hon'ble Supreme Court, once the Assessing Officer has come to the conclusion that the taxable amount has escaped assessment, two conditions were required to be satisfied on the basis of the materials placed before him. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under section 148 read with section 147(a). But under the substituted section 147 existence of the first condition alone is suffice. In other words if the Assessing Officer has reason to believe that certain income assessable to tax has ..... X X X X Extracts X X X X X X X X Extracts X X X X
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