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TMI Blog2012 (4) TMI 494X X X X Extracts X X X X X X X X Extracts X X X X ..... casts an obligation on the petitioner, as it is also contained a warranty clause providing for warranty of performance, in respect of the equipments supplied by the petitioner, including the service performance. Under the warranty clause, the petitioner was bound to reimburse the customers to the extent of the loss caused by the reason of breach of warranty. The petitioner s liability under the warranty clause continued to exist during the period specified in it. The claim under the warranty clause could be enforced by the customers concerned. 4. It has been further stated that, in view of the liability cast on the petitioner, due to the warranty clause, certain protective provisions had been provided to cover such liability on the basis of professional advise, by making a provision base in its accounting, based on the warranty clause contained in the contract. Under the accounting policy, notes and accounting annexed to and forming part of the balance sheet, the petitioner had made the following specific statements of policy, under the head of 'warranty and guarantee claims', which is as follows: "The company's liability for warranty and guarantee claims are accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t assessment years 1997-98 and 1998-99. The assessment had been completed on identical basis. The returns for the said years had also been accompanied by similar statements, including the published accounts. The accounts and all other connected records were examined in detail, at the time of the finalisation of the assessment. The published accounts for the financial years 1996-97 and 1997-98, relating to the assessment years 1997-98 and 1998-99, had also contained the full particulars of the warranty and guarantee claims, relating to the respective years, under the schedule. It was also duly explained in the accounting policy followed by the petitioner. 7. It had been further stated that the petitioner has been following uniform and consistent method of accounting, in respect of the maintenance of accounts, as well as with regard to the submissions of the return, for the purpose of assessment. The petitioner is a public limited company and its accounts had been duly passed at the Annual General Body Meeting relating to the respective years. The petitioner's accounts had also been accepted by the income tax authorities, over a number of years. The petitioner had disclosed a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble, other than those which are already on record and considered by the assessing authorities concerned, for the assessment made during the respective years. Accordingly, the respondent had issued notices, under section 148 of the Income Tax Act, 1961, in respect of the assessment years 1995-96 and 1996-97, stating that there were reasons to believe that the petitioner s income, chargeable to income tax, as estimated assessment for the aforesaid assessment years, within the meaning of Section 147 of the Income Tax Act, 1961, and therefore, the respondent had proposed to re-assess the income for the above said assessment years. The petitioner was required to submit its return, pursuant to the said notices, in the prescribed form, for the aforesaid assessment years. 9. The main contention of the learned counsel for the petitioner is that it is not open to the respondent to reopen the assessment, in respect of the assessment years 1995-96 and 1996-97, by way of notices issued under section 148 of the Act, as the said notices had been issued, on 22.3.2002, beyond the period of four years, as prescribed under the relevant provisions of Section 147 of the Act. 10. The lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessing authority and therefore, it cannot be sustained in the facts and circumstances of the case. As such, the impugned notices issued by the respondent, in respect of the assessment years 1995-96 and 1996-97, cannot be sustained in the eye of law. 14. The learned counsel appearing on behalf of the petitioner had relied on the following decisions: 14.1. In T.S.SANTHANAM Vs. EXPENDITURE TAX OFFICER, COMPANY CIRCLE II (1), MADRAS (1973 VOL.87 I.T.R.582), this Court had held that the essential principle as to the rule of finality of an assessment is that the assessing officer cannot change the mood and to try to reopen a closed state of affairs. 14.2. In PARASHURAM POTTERY WORKS CO.LTD Vs. INCOME-TAX OFFICER, CIRCLE I, WARD A, RAJKOT (1977 VOL.106 I.T.R.1), the Supreme Court had held that, when an income tax officer relies upon his own records, for determining the amount of depreciation allowable to the assessee, and makes a mistake in doing so, the responsibility for such a mistake cannot be ascribed to an omission or failure on the part of the assessee. 14.3. In INDIAN OIL CORPORATION Vs. INCOME-TAX OFFICER, CENTRAL CIRCLE V. CALCUTTA, AND ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In ANUP ENGINEERING LTD., Vs. COMMISSIONER OF INCOME TAX (2001 VOL.247 I.T.R.458), the Gujarat High Court had held that the income accrues only when the assessee gets a right to receive the same. If the right to receive is not established, no income would accrue or arise in favour of the assessee. 14.8. In IPCA LABORATORIES LTD., Vs. G.MEENA, DY. C.I.T. (NO.2) (BOM.) (2001 VOL.251 I.T.R.416), the Bombay High Court had held that a reassessment cannot be based on change of opinion, when no materials were available to indicate that there was a failure on the part of the assessee to disclose fully and truly all material facts. 14.9. In SHREE THARAD JAIN YUVAK MANDAL Vs. INCOME TAX OFFICER (1999) 107 TAXMAN 498 (GUJ), the Gujarat High Court had held that reopening and reassessment of the assessment after a period of four years on the basis of audit objections cannot be held to be valid. 14.10. In COMMISSIONER OF INCOME TAX AND ANOTHER Vs. FORAMER FRANCE (2003 VOL.264 ITR 566), the Supreme Court had held that, when there was no failure on the part of the assessee to file the return or disclose, fully and truly, all materials facts, the notice for reassessment, is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Division Bench of this Court had followed the decision of the Supreme Court, dated 12.5.2009, in C.A.Nos.3506 to 3510 of 2009 etc., batch, wherein the Supreme Court had held that the provision made for warranty, in respect of the good in question would be entitled to deduction on the gross deductions, under Section 37 of the Income Tax Act, 1961, and that it would depend on the data systematically maintained by the assessee. 15. A counter affidavit has been filed on behalf of the respondent, denying the averments and allegations made in the affidavit filed in support of the writ petition. 16. It has been submitted that the in return of income filed by the assesee, for the assessment year 1999-2000, the assessee had not furnished the details for the reversal of warranty provision. It is only after the assessing officer had called for the objections of the assessee against its proposal to add the provisions of warranty, as it is not an ascertained liability, the assessee had furnished the details, vide letter, dated 15.3.2002. Therefore, there was a failure on the part of the petitioner in disclosing fully all the relevant facts needed for the assessment. The av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons for the reopening of the assessments, the assessee has made the averment that the reopening of the assessment is only based on a change of opinion. 19. It had been further submitted that the presumption of the assessee that the reopening of the assessments, by the respondent, is sought to be made only in respect of the provisions for the warranties and guarantees is not correct. In fact, the assessee did not seek the reasons for the reopening of the assessment, by the assessing officer. Therefore, the assessee could not have known the reasons for the reopening of the assessment. The reasons recorded by the assessing officer for the reopening of the assessment, for the assessment year 1995-96, vide order sheet note, reads as follows: "(i) in the P&L A/c, Rs.1,73,21,04,956 has been credited by way of sale of goods. Projectwise details of such sales are not available on record to verify the claim of commission payments from the details of sales furnished for the FY 95-96 in the course of asst proceedings for AY 96-97 it is seen that only a sum of Rs.26,14,692 has been credited by way of sales to ACC, Kymore project. Similarly, a sum of Rs.2,51,79,161 has been credited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding with the assessment in respect of the above said five assessment years. 22. The learned counsel for the respondent had also relied on the decision of this Court made in its order, dated 17.9.2010, made in W.P.No.28457 of 2008 and W.P.No.19260 of 2009, wherein it has been held as follows: "The proceedings initiated for re-assessment cannot be quashed at the threshold. It is open to the petitioner to produce records and satisfy the authority that there is no necessity for re-assessment and there was no suppression or non-disclosure of true and full accounts while submitting the returns for the original assessment and it is for the authority to consider all aspects and pass final orders. If any final order is passed after placing all the records and if that order is adverse to the petitioner, it is always open to the petitioner to file appeal before the appellate authority as well as before the Income Tax Appellate Tribunal and thereafter, approach this Court. Thus, there are remedies available to the petitioner and the writ petition filed challenging the notice and overruling of objection for reassessment cannot be entertained in the light of the judgment o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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