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TMI Blog2013 (5) TMI 417X X X X Extracts X X X X X X X X Extracts X X X X ..... 961 (hereinafter referred to as 'the said Act') indicated that the Assessing Officer felt that income had escaped assessment in respect of three items. The first item being the claim of loss on account of foreign exchange fluctuation. The second item being the claim of expenditure under the head "data usage charges", which, according to the Assessing Officer, was not of a revenue nature and had to be treated as being of a capital nature. The third point on which the reopening was contemplated, according to the learned counsel for the appellant, was the question of determination of an Arm's Length Price in relation to the international transactions between the respondent/assessee and its associated enterprises. The notice under Section 148 was issued to the respondent/assessee on 11.09.2008. The purported reasons for reopening were also furnished to the respondent/assessee. Those purported reasons, which have been recorded by the Assessing Officer, were as under:- "M/s Cheil Communications India Private Limited A.Y. 2006- 2007 Reasons for reopening the case u/s 147/148 of the I.T. Act, 1961. Return of income in this case was filed on 4/12/2006 declaring income of Rs.31611079/-. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 503613184/- Total assessed Income Rs 1547244423/- Rounded Off Rs 1547244420/- Assessed at income of Rs 1547244420/-. Credit of prepaid taxes given. Demand notice and challan issued. Interest charged as per the provisions of the I.T. Act 1961.Penalty proceedings u/s 271(1)(e) of the I.T. Act have been initiated separately. (P. K. Sharma) Asstt. Commissioner of Income-tax Circle-3(1), New Delhi. Copy to the Assessee. Sd/- ACTT, Circle 3(1), New Delhi." 4. It would be apparent from the above computation of the total income that no addition had been made with regard to the claim of foreign exchange loss. No addition had also been made in respect of data usage charges. However, an addition with regard to the issue of Arm's Length Price to the extent of Rs 1,20,20,160/- had been made. An addition had also been made on account of the deemed income on account of short receipts declared in the profit and loss account to the extent of Rs150,36,13,184/-. It is pertinent to note that the last item, that is, deemed income on account of the short receipts declared in the profit and loss account had not even been mentioned in the purported reasons which had been recorded. 5. The Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d reasons that the point raised by the respondent / assessee seeking support from Ranbaxy Laboratories Limited (supra)could be accepted. The learned counsel appearing for the revenue reiterated that the Tribunal had completely ignored this aspect of the matter by not even mentioning that the reasons had specifically referred to the requirement for determination of the Arm's Length Price. The learned counsel for the appellant also referred to Section 92CA of the said Act and submitted that a reference to the Transfer Pricing Officer had been made by the Assessing Officer pursuant to the notice for reopening the ITA No.578/12 Page 8 of 22 assessment and after following the prescribed procedure, the Transfer Pricing Officer had determined the Arm's Length Price on the basis of which the addition to the extent of Rs 1,20,20,160/- had been made by the Assessing Officer. He submitted that the Tribunal ought not to have cancelled the entire addition on the ground that the re-assessment proceedings themselves were without jurisdiction. 7. The learned counsel for the respondent / assessee submitted that if the purported reasons were to be examined, there were, in fact, only two reasons. On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. 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 to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) where an assessment has been made, but- (i) in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (supra) was a decision of reopening of an assessment which had earlier been completed under Section 143(3) of the said Act, Orient Craft (supra) was a case of reopening where there was an intimation under Section 143(1) and, in that decision, this court had held that the criteria laid down and the pre-conditions stipulated for invoking Section 147 were the same whether it was a case of reopening of an assessment under Section 143(3) or a case of intimation under Section 143(1) of the said Act. 9. The learned counsel for the respondent also referred to the Bombay High Court decision in the case of CIT v. Jet Airways: 331 ITR 236 (Bom) for the proposition that the expression "and also" had a definite meaning and that in the absence of the assessment or re-assessment of the income indicated to have escaped assessment in the reasons, no other income could be assessed or re-assessed independently. The said decision in Jet Airways (supra) also examined the effect of the Explanation 3 to Section 147 which was introduced by the Finance (No.2) Act of 2009 with retrospective effect from 01.04.1989. He submitted that the Bombay High Court in Jet Airways (supra) held that the effect of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . One of the methods prescribed is the transactional net margin method. Insofar as the present case is concerned, a look at Form No.3CEB which was filed alongwith the return by the respondent / assessee would indicate that the transactional net margin method had been followed as the most appropriate method. 12. We may point out that Form No.3CEB is nothing but the report from the accountant to be furnished under Section 92E relating to international transactions and the same form is prescribed under Rule 10E of the Incometax Rules, 1962. The said form, as pointed out above, had been filed alongwith the return and, therefore, there was compliance on the part of the respondent / assessee with the provisions of Section 92E. Under the normal circumstances, under a regular assessment, if the Assessing Officer, on the basis of the material and information or document in his possession, was of the opinion that the price charged or paid in an international transaction had not been determined in accordance with sub-sections (1) and (2) of Section 92C or any information and document relating to an international transaction had not been kept and maintained by the assessee in accordance with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review ; he has the power to reassess. But reassessment has to be based on fulfilment of certain pre ITA conditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alternative. On the contrary, the correct interpretation would be to regard those words as being conjunctive and cumulative. It is of some significance that Parliament has not used the word 'or'. The Legislature did not rest content by merely using the word 'and'. The words 'and' as well as 'also' have been used together and in conjunction." xxxx xxxx xxxx xxxx xxxx ".....Evidently, therefore, what Parliament intends by use of the words 'and also' is that the Assessing Officer, upon the formation of a reason to believe under section 147 and the issuance of a notice under section 148(2) must assess or reassess : (i). 'such income' ; and also (ii) any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under the section. The word 'such income' refer to the income chargeable to tax which has escaped assessment and in respect of which the Assessing Officer has formed a reason to believe that it has escaped assessment. Hence, the language which has been used by Parliament is indicative of the position that the assessment or reassessment must be in respect of the income in respect of which he has forme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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