9911796707
TMI Blog2012 (2) TMI 407X X X X Extracts X X X X X X X X Extracts X X X X ..... d thus a change of opinion which is illegal and arbitrary there being no new material brought on record by the A.O. 2. Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in reversing the order of the CIT(A) on the basis of audit objection which is illegal and arbitrary and thereby wrongly concurring with the action of the A.O. in confirming the issuance of notice u/s 148 of the Income Tax Act, 1961 to a duly completed assessment u/s 143(1) of the Income Tax Act, 1961." 2. These appeals pertain to the returns filed by the appellant for the years 1997-98, 1998-99 and 2000-2001. Questions of law are same. Except for difference in dates facts being almost identical/similar, for the purpose of adjudication of these appeals, facts pertaining to the year 1997-98 are being referred to. Facts of I.T.A. No. 14 of 2007 3. Appellant is a partnership firm having an industrial undertaking, an oil mill unit in Damtal, within the State of Himachal Pradesh. It also has other businesses of petrol pumps, carriage contacts of Indian Oil Corporation, Kerosene oil and trading outlets in other parts of this State and also in the neighbourin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turn over of different units and worked out deductable expenses relatable to the oil unit, holding that assessment of the relevant amount in the relevant year as claimed by the appellant was excess and had escaped assessment on account of claiming excessive deduction under Section 80-IA of the Act. Thus on the original figure of profit amounting to Rs. 31,60,940/- being the net income on which deduction of Rs. 10,43,208/- to the extent of 25% as claimed by the assessee, the Assessing Officer restricted the deductions to the extent of Rs. 7,87,820/-, thereby making the total net income of the assessee to be Rs. 34,16,328/-. 5. Order of assessment dated 5.3.2004 passed by the Assessing Officer was assailed by the assessee in Appeal No. IT/31/04-05/PLP before the CIT (Appeals), Palampur, which was allowed vide order dated 9.8.2004 (Annexure A/2, pg. 49). Aggrieved thereof, Revenue filed Appeal No. ITA Nos. 1227/Chandi/2004 before the ITAT, Chandigarh Bench, Chandigarh, whereby in terms of order dated 12.12.2006, the order passed by the CIT(A) was set aside and the order passed by the Assessing Officer upheld. Hence the present appeal No. 14 of 2007. 6. For better appreciation and sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant that with regard to the year 1995-96 similar notice dated 5.7.1999 (Annexure A/6, pg. 120 of Appeal No. 14/2007), was issued by the Assessing Officer, informing that income from eligible undertaking had not been computed separately to facilitate the working out of the income eligible from the deductions under Section 80IA of the Act. Appellant immediately responded to the same in terms of letter dated 14.7.1999 (Annexure A/7, pg. 121 of Appeal No. 14/2007), clarifying that claim under Section 80IA sub-section (7) was rightly claimed and correctly allowed under Section 143(1)(a) of the Act only on the eligible business and income derived from the said eligible business. As per the statement showing computation of income, separate profit and loss account in respect of oil mills units, Damtal (H.P.) only eligible income was separated to deduction under the Act. Alongwith letter appellant again submitted statement of accounts to the said effect. Even though outcome of these proceedings was neither brought to the notice of the authorities below nor was it placed before this Court at the time of filing of the appeal, but, however, during the course of hearing learned counse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions to the effect that appellant has made full disclosure of all relevant facts and there was no new material which had come to the notice of Assessing Officer warranting re-opening of the assessment, which stood finalized under Section 143(1)(a) of the Act; No notice under Section 143(2) of the Act, with respect to the orders in question was ever issued to the assessee, therefore, assessment under Section 143(1)(a) had acquired finality and could not be re-opened; audit objection is not information and thus issuance of notice is bad in law; Mere change of opinion on same set of facts is impermissible in law particularly when proceedings with regard to earlier years i.e. 1995-96 and 1996-97 acquired finality. Hence principle of resjudicata would apply. 10. In rebuttal, Mr. Vinay Kuthiala and Mrs. Vandana Kuthiala, learned counsel for the Revenue, have argued that appellate authority has remanded the matter back to the Assessing Officer for adjudication of the matter on merits; for the years in question there was no assessment carried out under the provisions of Section 143(3); the Assessing Officer was well within his rights to re-open the assessment and it would not amou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under subsection (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to 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 subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. 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 following shall also be deemed to be cases where income chargeable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nformation. Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived 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 S. 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 ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of Section 148. It is in this background that the Apex Court while setting aside the judgment passed by the High Court upheld the order passed by the Assessing Officer. It held as under:- "19. Section 147 authorises 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. 21. The scope and effect of section 147 as substituted with effect from April 1, 1989, as also sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken in M.M. IPOH v. CIT [1968] 67 ITR 106 (SC), the Court clarified that where fundamental aspect permeating through different assessment years has been found as a fact one way or other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 21. In the said decision Court was dealing with the issue as to whether income derived from a religious institution was entitled to statutory exemptions under the Income Tax Act. Considering the long standing history of the Institution and the background in which its branches had been accorded such exemptions and were allowed to continue to avail such advantages constantly over a period of time, throughout various parts of the Country, the Court was of the view that income tax authorities could not be allowed to take a contradictory and conflicting view. 22. In M.M. IPOH (supra), the Apex Court held that "the doctrine of res judicata does not apply so as to make a decision on a question of fact or law in a proceeding for assessment in one year binding in another year. The assessment and the facts found are conclusive on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ware of the fact that strictly speaking res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year." [Emphasis supplied]" 24. The Constitutional Bench in Bharat Sanchar Nigam Ltd. v. Union of India [2006] 3 STT 245 (SC), has held that: "The decisions cited have uniformly held that res judicata does not apply in matters pertaining to tax for different assessment years because res judicata applies to debar Courts from entertaining issues on the same cause of action whereas the cause of action for each assessment year is distinct. The Courts will generally adopt an earlier pronouncement of the law or a conclusion of fact unless there is a new ground urged or a material change in the factual position. The reason why Courts have held parties to the opinion expressed in a decision in one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2006] 287 ITR 25/157 Taxman 289 (Mad.), Saurashtra Cement & Chemical Industries Ltd. v. CIT [1980] 123 ITR 669/[1979] 2 Taxman 22 (Guj.). 29. In Punjab Tractors Ltd. v. Jt. CIT [2002] 254 ITR 242/121 Taxman 54, High Court of Punjab & Haryana had to deal with a case where prior to passing of the order under Section 143(3), notice under Section 147/148 was issued to the assessee. The Court held that finalization of proceedings under Section 143 was not sine qua non for issuance of notice under Section 147/148 of the Act. 30. Reliance on the decision of the Apex Court in Rajesh Jhaveri Stock Brokers (P.) Ltd. (supra), by the Revenue is totally misconceived on facts. In the instant case, as has already been noticed herein earlier practice adopted by the assessee was accepted by the Revenue after issuance of notice under Section 143(2), in relation to proceedings pertaining to the year 1995-96 and also issuance of notice under Section 147 in relation to the proceedings pertaining to the year 1996-97, which action of the Assessing Officer to reopen the assessment and re-assess the income was set aside. 31. As to whether mere change of opinion would constitute information or not has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, then it is not open to the Revenue to challenge its correctness in the case of other assesses, 'without just cause'". 34. As to whether the opinion of internal audit party of the Income Tax department on the point of law can be regarded as 'information' within the meaning of Section 147-B of the Income Tax Act, 1961 (pre amended provisions) or not came up before the three Judge Bench of the Apex Court in Indian & Eastern Newspaper Society v. CIT [1979] 2 Taxman 197, wherein the Apex Court has held that: "13. In the present case, an internal audit party of the Income-tax Department expressed the view that the receipts from the occupation of the conference hall and rooms did not attract Section 10 of the Act and that the assessment should have been made under Section 9. While Sections 9 and 10 can be described as law, the opinion of the audit party in regard to their application is not law. It is not a declaration by a body authorised to declare the law. That part alone of the note of an audit party which mentions the law which escaped the notice of the Income-tax Officer constitutes 'information' within the meaning of Section 147 (b); the part which embodies the opinion o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns in Kalyanji Mavji & Co. v. Commr. of Income-tax (supra) suggesting the contrary do not, we say with respect, lay down the correct law. 15. A further submission raised by the Revenue on Section 147 (b) of the Act may be considered at this stage. It is urged that the expression 'information' in Section 147(b) refers to the realisation by the Income-tax Officer that he has committed an error when making the original assessment. It is said that, when upon receipt of the audit note the Income-tax Officer discovers or realizes that a mistake has been committed in the original assessment, the discovery of the mistake would be 'information' within the meaning of Section 147(b). The submission appears to us inconsistent with the terms of Section 147(b). Plainly, the statutory provisions envisages that the Income-tax Officer must first have information in his possession, and then in consequence of such information he must have reason to believe that income has escaped assessment. The realisation that income has escaped assessment is covered by the words 'reason to believe', and it follows from the 'information' received by the Income-tax Officer. The information is not the realisation, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing Officer could form a reasonable belief that income chargeable to tax had escaped assessment, it would be impermissible for the revenue to reopen the assessments. Facts of the instant case are similar to the one before the court in the said decision. 38. To this effect are also decisions of the other High Courts as reported in Asian Paints Ltd. v. Dy. CIT [2009] 308 ITR 195 (Bom.), CIT v. Chakiat Agencies (P.) Ltd. [2009] 314 ITR 200 (Mad.), Legato Systems India (P.) Ltd. v. Dy. CIT [2010] 187 Taxman 294 (Delhi), Aventis Pharma Ltd. v. Asstt. CIT [2010] 233 CTR (Bom.) 257, Satnam Overseas Ltd. v. Addl. CIT [2010] 188 Taxman 172 (Delhi), Carlton Overseas (P.) Ltd. v. ITO [2010] 188 Taxman 11 (Delhi) and CIT v. SFIL Stock Broking Ltd. [2010] 325 ITR 285 (Delhi). 39. In the instant case as has already been noticed earlier, statement of accounts of profit and loss and return submitted by the appellant were accepted by the Assessing Officer with regard to previous years after due scrutiny and application of mind, hence there was no error or question of fact involved. Question of law, whether appellant was entitled to deductions or not, already stood examined, considered and adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of past adjudication of the proceedings on merits, is factually incorrect.
43. In our view, fact that the assessment had been made and excessive depreciation allowance was computed or not was a question which already stood adjudicated by the very same Officer. There was no cogent reason to believe or new material on record enabling or entitling the officers to change his opinion.
44. In view of the above discussion question No. 1 as framed is partly answered in favour of the revenue and partly against the revenue and in favour of the assessee. As far as the issue of limitation is concerned the question is answered in favour of the revenue and it is held that the action taken by the Revenue was within limitation. However, in view of the above discussion, it has been found that there was no reason or new material on record to change the earlier opinion and therefore the second part of the question is answered against the revenue and in favour of the assessee. As far as second question is concerned the same is answered against the revenue and in favour of the assessee.
45. In view of the above discussion, the appeals are allowed and the impugned orders are set-aside. No costs. X X X X Extracts X X X X X X X X Extracts X X X X
|
