TMI Blog2013 (9) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... o certain pre conditions as provided in the Act being satisfied. The argument that failure to respond to a notice under Section 142(1) of the Act calling upon the assessee to produce a document will lead to satisfaction of the proviso to Section 147 of the Act, to enable the Assessing Officer to take action to reassess after the expiry of four years from the end of the relevant assessment year is not acceptable. No Form 3 CEB as required under Section 92E of the Act had been filed by the petitioner with the Assessing Officer in respect of the Assessment Year 2006-07 prior to issue of penalty notice under Section 271AB of the Act - Moreover, it was clear that Section 92E of the Act mandates making disclosure by filing of Form 3 CEB - Therefore, there was a failure to disclose all material facts on the part of the petitioner for the Assessment Year 2006-07. Relying upon Siemens Information Systems Ltd. v/s. CIT [2012 (2) TMI 281 - Bombay High Court] - Assessment Order passed in a subsequent Assessment Year could well form the basis for obtaining tangible material to reach the belief that income chargeable to tax had escaped assessment - keeping in mind the fact that the pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Office Ward (1)( 1) at Mumbai and obtained acknowledgment for the same; (c) The Petitioner's return for the Assessment Year 2006-07 filed electronically on 29 November 2006 was accepted by the Assessing Officer under Section 143(1) of the Act; (d) On 30 March 2011, a notice was issued by the Assessing Officer under Section 148 of the Act, proposing to reassess the petitioner's income for the Assessment Year 2006-07. The above notice dated 30 March 2011 under Section 148 of the Act was issued on the ground of alleged escapement of income on account of having been granted/allowed deduction under Section 10A of the Act; (e) During the course of reassessment proceedings for Assessment Year 2006-07, the Assessing Officer by notice dated 14 December 2011 called upon the petitioner to inter alia submit Form 3 CEB i.e. Accountant's report under Section 92 E of the Act; (f) In response to notice dated 14 December 2011, the petitioner did not file Form3 CEB as called for. However, by letter dated 19 December 2011 the petitioner informed the Assessing Officer that they have filed Writ Petition (L) No.2785 of 2011 in this Court, challenging the notice dated 30 March 2011 issued under S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of issuing the notice dated 3 May 2012 under Section 148 of the Act; (k) On 21 June 2012, the Assessing Officer furnished the following reasons to the petitioner as the reasons recorded for reopening the assessment for the Assessment Year 2006-07 under Section 148 of the Act: The case of the assessee was reopened by issue of notice u/s. 148 dated 30.3.11 to withdraw excessive deduction allowed u/s. 10A of the I. T. Act. In the course of reassessment proceedings u/s. 147 of the Act, it was noticed that the assessee did not file the requisite Audit Report in Form No.3CEB. Hence, vide notice u/s. 142(1) of the I. T .Act dated 14.12.2011, the assessee was asked to furnish a copy of the report in Form no. 3 CEB. However, the assessee did not produce the same. The assessee kept on harping that they had filed a writ petition against the reassessment proceedings but did not comply with the requirements of notice u/s. 142(1). As the reassessment proceedings were getting barred by limitation on 31.12.2011, under constraint to conclude the proceedings u/s. 147/148 of the I.T. Act, assessment order was passed u/s. 143(3) on 31.12.2011. As the assessee had failed to furnish the mandatory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er, the Form 3CEB report was filed on 30 November 2006 at Centralized place in Aayakar Bhavan, Mumbai and, therefore, acknowledgment bears the stamp of ITO ward 1 (1)(1). It was also stated that material information with regard to the petitioner's International Transactions was already made available on record. Therefore, it was submitted that there was no failure to disclose material facts necessary for the purpose of assessment on the part of the petitioner. It was also submitted that in spite of the fact that the Assessing Officer was aware that there were International Transactions entered into with associated persons took a decision not to make a reference to the Transfer Pricing Officer (TPO). Consequently, the basis of the present notice was only a change of opinion and the same would not warrant the reopening of the assessment. In view of the above, petitioner objected the same and prayed for setting aside/withdrawal of notice dated 3 May 2012; (m) On 25 July 2012, the Assessing Officer passed an order disposing of the petitioner's objections to the reopening of the assessment for Assessment Year 2006-07. The Assessing Officer held that the audit report in Form 3 CEB, was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is placed upon the Affidavit dated 14 May 2012 of the petitioner's Chartered Accountant. (ii) In any event, disclosure of International Transactions was done by them in their Accounts as filed. Thus mere nonfiling of Form 3 CEB does not result into nondisclosure. (b) In the present facts, there is no reason to believe that any income for the Assessment Year 2006-07 has escaped assessment. The only reason stated in the notice for believing that income has escaped assessment for the Assessment Year 2006-07 was that for the Assessment Year 200809, the TPO had made an adjustment of Rs. 9.9 Crores on account of arm's length price in respect of International Transactions entered into by the appellant with its Associated Enterprises. Thus, it is submitted that there is no reason to believe that income has escaped assessment for the Assessment Year 2006-07 as for immediately preceding and succeeding Assessment Years to the assessment year under consideration, i.e. 200506 and 200708, the TPO had accepted the arm's length price declared by the petitioner in respect of its International Transactions with Associated Enterprises. Therefore, the basis of reopening is only reason to suspec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpress provisions of the statute i.e. Sections 147 and 148 of the Act. The policy of law is that there must be a finality to all legal proceedings including assessments and therefore, completed assessment can only be reopened if all the conditions prescribed by the Act for reopening of assessment are satisfied. The Supreme Court in the matter of CIT v/s. Kelvinator of India 320 ITR 561 has held that there is a conceptual difference between the power to review and the power to reassess. The Act gives no power to the Assessing Officer to review an assessment but only a power to reassess. However, this power can only be exercised subject to certain pre conditions as provided in the Act being satisfied. 7 In the present case, it is an undisputed position that the impugned notice for reopening of Assessment under Section 148 of the Act was issued only on 3 May 2012 relating to the Assessment Year 2006- 07. Therefore, the notice has been issued after expiry of four years from the end of the relevant Assessment Year i.e. 2006-07. In such cases, the jurisdiction to reassess the assessee under the Act can only arise if the conditions specified in Section 147 of the Act i.e. the main porti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year. The first proviso to Section 147 of the Act specifically restricts this power to reassess only in cases where the assessee fails to make a return inter alia, in response to notice under Section 142(1) of the Act. Thus, the nonfiling of document viz: Form 3 CEB in response to notice under Section 142(1) of the Act will not by itself without anything more entitle the Assessing Officer to take action to reassess an assessee in respect of an assessment year after the expiry of four years from the end of the relevant assessment year. 9 In the light of the above, the petitioner's submission that the notice dated 3 May 2012 is without jurisdiction as it was issued beyond the period of four years from the end of the Assessment Year 2006-07 when all material facts necessary for Assessment had been disclosed by the assessee is to be examined. Before us, it was contended that Form 3 CEB required to be filed before the Assessing Officer, had been filed before Income Tax Officer, Ward No.1 (1)(1) on 30 November 2006 only because the department had directed Centralized filing of all the tapal on 30 November 2006. In support of the same, an affidavit dated 14 May 2012 by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts and tax audit reports also sets out that they were having International Transactions with its holding Company. In view of the above, it is stated that the Assessing Officer had full knowledge of the fact that the petitioner had entered into International Transactions with its Associated Enterprises and, therefore, the same could have been referred to by the Assessing Officer to the TPO in terms of Section 92 CA(1) of the Act. The disclosure to be made by the Assessing Officer for the purpose of satisfying the requirements of having made full and true disclosure of all material facts necessary for the Assessment is to be meaningful so as to invite the attention of the Assessing Officer to the same. Mere furnishing of the information in the audited annual accounts of International Transactions would not per se invite/draw the attention of the Assessing Officer about the related party transactions and the requirements of the same being referred to the TPO. It is mandatory requirement under Section 92E of the Act that wherever there are International Transactions during the previous year, then assessee has to obtain a report from an accountant in respect of these transactions. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only lead to a reason to suspect and cannot be a reason to believe. However, it is well settled at the stage of issuing a notice under Section 148/ 147 of the Act is concerned, the Assessing Officer does not need to have a cast iron case, but only a prima facie view that there is reason to believe that income has escaped assessment. An order passed for subsequent Assessment Year could form the basis of the material i.e. tangible material leading to a reasonable belief that income chargeable to tax has escaped assessment. This belief has to be of the Assessing Officer. The submission of Mr. Pardiwala, learned Senior Counsel for the Petitioner is that for the Assessment Years 200506 and 200708, the TPO did not disturb the assessment of the arms length price declared by the petitioner and in view thereof, the Assessing Officer could have no reason to believe that income chargeable to the tax has escaped assessment for Assessment Year 2006-07. This Court in the matter of Siemens Information Systems Ltd. v/s. CIT 343 ITR 188 has held that Assessment Order passed in a subsequent Assessment Year could well form the basis for obtaining tangible material to reach the belief that income char ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment Year 2006-07 which were initiated by notice dated 30 March 2011, the Assessing Officer by letter dated 14 December 2011 called upon the petitioner to furnish Form 3 CEB. The Petitioner chose not to furnish the form as called for and instead filed a Writ Petition bearing Writ Petition (L) No.2785 of 2011 in this Court. On 21 December 2011, this Court granted adinterim stay of the reassessment proceedings. Advocate for the petitioner communicated the same to the Assessing Officer and promised to produce a copy of the order of this Court before 3.00 p.m. on 31 December 2011 before the Assessing Officer. However, same was not produced. The Assessing Officer being of the opinion that he had to pass an order before 31 December 2011 in view of constraint of limitation, passed an order reassessing the appellantassessee to an income of Rs.4.28 Crores disallowing the deduction claimed under Section 10A of the Act. On 24 January 2012, when Writ Petition (L) No.2785 of 2011 for Assessment Year 2006-07 came up for hearing before this Court, the petitioner simplictor withdrew the petition. The petitioner made no grievances about the fact that the Assessing Officer passed an order in spite o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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