TMI Blog2012 (3) TMI 211X X X X Extracts X X X X X X X X Extracts X X X X ..... iginal assessment order, chose not to give any finding in this regard, that cannot give him or his successor in office a reason to reopen the assessment. It is a mere formation of second opinion on the selfsame materials without any “tangible material” - Decided in favor of assessee - SPECIAL CIVIL APPLICATION No. 15067 of 2011 - - - Dated:- 12-3-2012 - MR.BHASKAR BHATTACHARYA, MR.JUSTICE J.B.PARDIWALA, JJ. MR RK PATEL for Petitioner. MR MANISH R BHATT, SR. ADVOCATE WITH MS MAUNA M BHATT for Respondents. CAV JUDGMENT (Per : HONOURABLE THE ACTING CHIEF JUSTICE MR.BHASKAR BHATTACHARYA) 1. By this application under Article 226 of the Constitution of India, the writ-petitioner, an assessee under the Income Tax Act, 1961 [the Act, for short hereafter], has prayed for issue of mandamus to quash and set aside the notice dated 1st March 2011 under section 148 of the Act, which is Annexure C to the writ-application. It has also prayed for quashing the preliminary order dated 3rd October 2011 passed by the Assessing Officer which is Annexure G to the writ-application. 2. The facts leading to the filing of the above petition under Article 226 of the Const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r in filing the return or full furnishing of the particulars. 4. The respondent committed grave error in rejecting the objection of the petitioner by relying upon the inapplicable judgment of the jurisdictional High Court in the case of DISMAN PHARMACEUTICALS which is concerned with deemed dividend and the applicability of section 2(22)(e) of the Act. 5. The respondent also wrongly relied upon the ratio of the judgment in the case of RAJESH JHAVERI STOCK BROCKERS in his support since the said case dealt with the reopening under section 148 of the Act in an intimation order under section 143(1) of the Act. There was no scrutiny order under section 143(3) of the Act in that case. 6. The entire exercise of reopening was undertaken by the respondent on an assumption of fact contrary to the assessment record itself since the petitioner already maintained separate account as required and the land taken from the landowner was also transferred in the name of the petitioner. The capital gains tax was also reflected in the land owner s Income Tax Returns. 7. The entire initiation of jurisdiction under section 147 read with section 148 of the Act is contrary to the ratio of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he petitioner, it claimed deduction by giving wrong particulars about its status by claiming as a developer though it was only a works contractor and thus, the petitioner has failed to disclose fully and truly all the material facts necessary for its assessment. 5. At the time of passing the original assessment order, the Assessing Officer had not discussed anything on deduction under section 80IB(10) of the Act. The clarification in this regard was also introduced in the Act with retrospective effect from 1st April 2001, and, therefore, it is very much clear that the assessee is not entitled to the said deduction. 6. A further-affidavit was also filed by the respondent No.1 thereby pointing out that the assessee had not furnished any separate Profit and Loss Account for both the eligible businesses. Along with letter dated 14th November 2008, the petitioner only provided details regarding receipt from IPBP Project and Housing Project and corresponding expenditure and profit from the said project as per Exhibit-II attached to the said letter. In the light of said exhibit, the assertions made in paragraphs (vii) and (viii) of the reasons recorded are correct inasmuch as no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nning Scheme No. 38 of Thaltej under the development agreement registered under Sl. No. 9753 dated 25.9.2006 registered with sub-registrar, Ahmedabad-3, Memnagar for Rs.9,94,50,717/-. [iii]. The entire cost of Rs.9,94,50,717/- has been debited to P L account under Schedule 17, expenses of residential projects direct expenses . [iv]. As per condition No. 3,4 of the development agreement, the owners of the land had agreed to execute the conveyance deeds of the housing units to be completed therein by the assessee in favour of the prospective purchasers as may be authorized by the assessee. Also vide condition No. 9.2 of the agreement, the owners have agreed to extend full co-operation for getting benefit u/s 80IB(10) of the Act by the assessee. [v]. The development permission for construction of 39 residential units only as against 122 units (bungalows) proposed to be executed by the assessee has been given by the Ahmedabad Urban Development Authority under No. PRM/107/5/05 on 24.7.06 with construction area of 5325.45 sq. mtrs. However, the development permission had been issued in the favour of land owner and not in favour of the assessee. [vi]. During the year, the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (10) of the Act. If an issue has not been examined in correct perspective in the initial assessment proceedings, nothing prevents the assessing officer to take a suitable remedial action by way of re-opening the assessment. Accordingly, the assessee company is not eligible to for claim u/s. 80IB (10) of the Act. More so, in the light of the Explanation inserted below Section 80-1B (10) by the Finance Act (No.2), Act 2009 with retrospective effect from 01.04.2000, deduction u/s 801B(10) shall not be admissible to a contractor in respect of works contract awarded by any person. In view of the above, I have reasons to believe that the Income chargeable to tax to the extent of Rs.11, 38, 83,650/- has escaped assessment. 8. In order to appreciate the aforesaid question, it will be profitable to refer to the provisions contained in Section 147 of the Act, which is quoted below. Income escaping assessment. "147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e subject of the excessive relief under this Act; or [iv] excessive loss or depreciation allowance or any other allowance under this Act has been computed. Explanation 3.-- For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section [2] of section 148." 9. In the case before us, the assessee having challenged the notice of reassessment in a proceeding under Article 226 of the Constitution, before proceeding further, we propose to deal with the scope of interference in such a matter. 10. The Supreme Court in the case of THE COMMISSIONER OF INCOME TAX, GUJARAT V. M/S. A. RAMAN AND CO. reported in AIR 1968 SC 49 had the occasion to deal with such a question. We may appropriately refer to the following observations made by a three-judge-bench in the above matter by relying upon the majority view taken in an earlier decision of that court taken by a benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. If he has that information, the Income-tax Officer may commence proceedings for assessment or reassessment. To commence the proceeding for reassessment it is not necessary that on the materials which came to the notice of the Income-tax Officer, the previous order of assessment was vitiated by some error of fact or law. 6. The High Court exercising jurisdiction under Article 226 of the Constitution has power to set aside a notice issued under Section 147 of the Income-tax Act, 1961, if the condition precedent to the exercise of the jurisdiction does not exist. The Court may, in exercise of its powers, ascertain whether the Incometax Officer had in his possession any information: the Court may also determine whether from that information the Income-tax Officer may have reason to believe that income chargeable to tax had escaped assessment. But the jurisdiction of the Court extends no further. Whether on the information in his possession he should commence a proceeding for assessment or reassessment, must be decided by the Income-tax Officer and not by the High Court. The Income-tax Officer alone is entrusted with the power to administer the Act; if he has information from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not take recourse to Section 147 (a) to remedy the error resulting from his own oversight and that therefore the notice under Section 148 should be quashed. 13. In the case of Nawab Mir Barkat Ali Khan Bahadur, Hyderabad (supra), the Supreme Court even went to the extent that non-production of the documents at the time of the original assessments cannot be regarded as non-disclosure of any material facts necessary for the assessment of the respondent for the relevant assessment years, where such documents conform to the documents already filed by the assessee in material particulars. The following observations are in this connection relevant and are quoted below: Non-production of the documents executed in 1957 at the time of the original assessments cannot therefore be regarded as non-disclosure of any material fact necessary for the assessment of the respondent for the relevant assessment years. The High Court was right in holding that the Income-tax Officer had no valid reason to believe that the respondent had omitted or failed to disclose fully and truly all material facts and consequently had no jurisdiction to reopen the assessments for the four years in question. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words reason to believe but also inserted the word opinion in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words reason to believe , Parliament reintroduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the assessing officer. 8. We quote hereinbelow the relevant portion of Circular No. 549 dated 31-10- 1989, which reads as follows: 7.2. Amendment made by the Amending Act, 1989, to reintroduce the expression reason to believe in Section 147. A number of representations were received against the omission of the words reason to believe from Section 147 and their substitution by the opinion of the Assessing Officer. It was pointed out that the meaning of the expression, reason to believe had been explained in a number of court rulings in the past and was well settled and its omission from Section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended Section 147 to rei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regarding the allowability or otherwise of deduction u/s 80IB (10) of the Act is not a ground of invoking Section 147 of the Act. 20. In the case of CIT VS. EICHER LTD. reported in (2007) 294 ITR 310(DELHI), which was also the subject-matter of appeal before the Supreme Court in the case of Commissioner of Income tax vs. Kelvinator of India Ltd. (supra), Delhi High Court dealt with the similar point as would appear from the following observations quoted below: Applying the principles laid down by the Full Bench of this court as well as the observations of the Punjab and Haryana High Court, we find that if the entire material had been placed by the assessee before the Assessing Officer at the time when the original assessment was made and the Assessing Officer applied his mind to that material and accepted the view canvassed by the assessee, then merely because he did not express this in the assessment order, that by itself would not give him a ground to conclude that income has escaped assessment and, therefore, the assessment needed to be reopened. On the other hand, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee sh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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