TMI Blog2013 (6) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... he law and of the jurisdictional condition prescribed by the proviso to section 147. - Decided in favor of assessee. - Writ Petition (L) No. 57 of 2013 - - - Dated:- 8-2-2013 - DR. D.Y. CHANDRACHUD AND A.A. SAYED, JJ. For the Petitioner Dr. K. Shivram and Rahul Hakani. For the Respondent Ms. S.V. Bharucha. JUDGMENT:- Dr. D.Y. Chandrachud, J. - Rule, by consent made returnable forthwith. Counsel appearing for the Respondents waives service on behalf of the Respondents. By consent, the Petitions are taken up for hearing and final disposal. 2. In the four Writ Petitions that are before the Court, the Petitioner has challenged the validity of notices issued under section 148 of the Income-tax Act, 1961 on 29 March 2012 purporting to re-open the assessments for Assessment Years 2005-06, 2006-07, 2007-08 and 2008-09. The re-opening of assessments for A.Ys. 2005-06 and 2006-07 has taken place beyond the period of four years of the relevant assessment years. The re-opening for A.Ys. 2007-08 and 2008-09 is within four years. The reasons on the basis of which the assessments are sought to be re-opened are similar. 3. The Petitioner is a manufacturer of grills, diffuser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is information on 7 June 2007 stating that the manufacturing unit was set up in the financial year 2003-04 and that commercial operations commenced on 23 October 2003. The Petitioner enclosed details of the new machinery purchased in F.Y. 2004-05, copies of electricity bills and monthwise details of employees. The Assessing Officer was informed that for A.Y. 2004-05 the claim for a deduction under section 80IB was duly verified when an order of assessment was passed under section 143(3). A further notice was issued by the Assessing Officer on 14 June 2007 in connection with the assessment proceedings under section 143(3) for A.Y. 2005-06 in which the following details were sought:- "1. Complete details of salary register monthwise - (a) Contractor workers (b) Workers on payroll with name and address of the contractors. 2. Complete details of production register monthwise - (a) Vapi Unit - Valsad (b) Parth Industrial Estate Unit , Dadra. 3. Who is Mr.Haria, proprietor of Developers at Vapi. Why some electric bills are in the name of Mr.Haria. 4. Please give complete details of manufacturing units ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... being procured from outside which according to the Assessing Officer amounted to a trading activity. Moreover, for A.Y. 2009-10, the Assessing Officer has found that the assessee has received certain income as Contract Income for installation work which is not eligible for deduction under section 80IB. 7. On 29 March 2012 the Assessing Officer sought to re-open the assessment under section 147 for A.Y. 2005-06 to 2008-09. The reasons on the basis of which the assessment is sought to be re-opened have been disclosed to the assessee. The basis on which the assessments are sought to be re-opened is that though the assessment for those years was made under section 143(3), "the actual manufacturing operation has not been duly verified to understand that whether the assessee is actually manufacturing or is just doing some misc work." The Assessing Officer noted that an air-conditioning system requires various parts which when assembled together become a cooling system; and from the details furnished, it would appear that the assessee purchased certain parts from out of India and other raw-materials from local suppliers. The Assessing Officer held that it appears 'from a perusal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e: (I) The re-opening having taken place beyond a period of four years, the jurisdictional requirement under the proviso to section 147 is that there must be a failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for that year; (ii) All the orders of assessment were passed under section 143(3); ex facie, the reasons for the re-opening of the assessment do not even purport to state that there has been any failure on the part of the assessee to fully and truly disclose all material facts; (iii) As the record would indicate, during the course of the assessment for A.Y. 2005-06, there was a full disclosure by the assessee; and the Assessing Officer had fully applied his mind as is evident from the fact that two questionnaires were issued to the assessee which were duly replied; (iv) The reasons for the re-opening of the assessment would indicate that the assessments are sought to be re-opened on the basis of material which has been furnished by the assessee which itself would indicate that there was no suppression on the part of the assessee. 11. An affidavit-in-reply has been filed by the Assessing Officer. Apart from suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or A.Ys. 2005-06 and 2006-07 do not indicate that there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. On the contrary, the reasons refer inter alia to the items mentioned by the assessee and are based upon a perusal of the submission of the assessee. If the basis for re-opening an assessment beyond four years is founded on the material produced by the assessee, the clear inference is that there is no suppression of facts material to the assessment by the assessee. The attention of the Assessing Officer was drawn to this aspect when the assessee submitted its objection to the re-opening of the assessment. Yet, he disregarded them. 14. Such objections to the reopening of an assessment are not an idle formality. That, however, is what Assessing Officers are reducing the exercise to. Treating the exercise as a meaningless formality would be a serious breach of the law laid down by the Supreme Court. The Supreme Court has now mandated that reasons must be disclosed to the assessee; that the assessee must have an opportunity to file its objections and that those objections must be disposed of by the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egarded as a typographical error. 15. Hence, we are of the view that the Assessing Officer has in purporting to re-open the assessment for A.Ys. 2005-06 and 2006-07 acted in clear breach of the mandate of the law and of the jurisdictional condition prescribed by the proviso to section 147. 16. That apart, it is evident that during the course of the assessment proceedings under section 143(3) for A.Y. 2005-06, the Assessing Officer brought his mind to bear upon all relevant facts and circumstances bearing upon eligibility of the assessee to a deduction under section 80IB. The assessee had filed a Tax Audit Report together with a return of income-tax, besides form 10CCB. The detailed nature of the inquiry that was carried out by the Assessing Officer is evident from two questionnaires that were issued to the assessee during the course of the assessment proceedings on 24 April 2007 and 14 June 2007 (exh. 'I' and 'K') when the assessment was pending. It was after the assessee had furnished a reply to the questionnaires that the Assessing Officer passed an order under section 143(3). In the order of assessment, the Assessing Officer noted that the assessee had produced books of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... garb of reopening the assessment, review would take place. One must treat the concept of 'change of opinion' as an inbuilt test to check abuse of power by the AO. Hence, after 1st April, 1989, the AO has power to reopen, provided there is 'tangible material' to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to s. 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words 'reason to believe' but also inserted the word 'opinion' in s. 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 AO. .." The attempt on the part of the Assessing Officer to reopen the assessments for A.Ys. 2007-08 and 2008-09 would amount to a change of opinion and would be unsustainable. This is particularly so having regard to the fact that the re-opening of the assessment for the earlier years has been held ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
