TMI Blog2014 (5) TMI 1003X X X X Extracts X X X X X X X X Extracts X X X X ..... – the information does not seem to be restricted only to A.Y. 2010 – 2011 - Material on record shows that petitioner company has debited the order procurement charges in the AY 2010 – 2011 and the deduction of the amount was claimed u/s 37(1) of the Act as business expenditure - The information received to the AO from the statement of Anil Asarkar is sufficient to draw a prima facie inference that Anil Asarkar (H.U.F.) might not have worked for the petitioner company and further that it was receiving the cheques from the petitioner company and giving them the cash back from the financial year 2006 – 2007 - the information which was received to the AO was sufficient for him to reasonably believe that the income had escaped assessment for the respective assessment years. The reasons recorded by the AO nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year - the reasons are required to be read as they were recorded by the AO - No substitution or deletion is permissible - No additions can be made to those reasons - No inference can be allowed to be drawn based on reasons no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lds Limited and South Eastern Coalfields Limited. 4. Petitioner company had filed income tax return for the assessment year 2010 2011 under Section 139(D) of the Act showing taxable income Rs.80,54,340/for the said year. The said return was processed under Section 143(1) of the Act and subsequently it was also subjected to scrutiny under Section 143(3) vide order dated 20/3/2013 passed by the Assessing Officer. In the scrutiny so carried out, the Assessing Officer disallowed the expenditure of Order Procurement Charges (OPC), being commission paid to agents, amounting to Rs.1,62,92,870/. As averred in the petition the said expenditure was disallowed by the Assessing Officer holding that no services were rendered by the agents and no such services were ever required in the course of business of the petitioner company. The said Assessing Officer thereafter issued notice dated 28/3/2013 under Section 148 of the Act calling upon the petitioner to deliver the return in prescribed form for the A.Y. 2006 2007. Similar notice of the even date was also issued for A.Y. 2008 2009. The petitioner company gave reply to the said notices and also requested the respondents to clarify f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us doubts about the validity of the reasons so provided and there is every reason for the petitioner to believe that reasons so supplied were tailored to substantiate the contents of the notices dated 28/3/2013. (iii) that the impugned notices are the outcome of different opinion formed by the Assessing Officer issuing notices and mere change of said opinion cannot be a ground for reopening the assessment. (iv) That the facts revealed to the Assessing Officer during the assessment proceedings for the A.Y.2010-2011 is not an information as contemplated under Section 147 of the Act on the basis of which assessment for A.Y. 2006-2007 and A.Y. 2008-2009 can be reopened. (v) that the impugned notices are based on the suspicion and not on any 'reasonable belief'. (vi) that there is no direct nexus or live link between the material coming to the notice of the Assessing Officer for the assessment 2010 2011 and the formation of 'belief' relating 'the escapement of income for the assessment year 2006 2007 and 2008 2009', in absence of which the reasons put forth by the Assessing Officer cannot be the basis for reopening the assessment. (vii) that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scaped assessment for the asst. yr. 1991-92. 10. The learned counsel submitted that in the instant petitions only a four line notice dated 28/3/2013 came to be served upon the petitioner without any reasons in support thereof. The learned counsel further submitted that the reasons supplied to the petitioner on 08.08.2013 did not carry any date and also do not show signature of the officer who recorded it. The learned counsel brought to our notice that only after a demand made by the petitioner through his Chartered Accountant that the reasons were supplied to it for reopening of the assessment for A.Y.2006 2007 and 2008 2009. Learned counsel further submitted that reasons were supplied to the petitioner undisputedly after four months of the issuance of notices under Section 148 of the Act. The learned counsel submitted that though the respondents have attempted to explain the delay occurred in supplying the reasons for reopening the assessment, the reasons so given are apparently unacceptable and unconscionable. The learned counsel further submitted that from the record there is every reason to believe that no reasons were recorded before issuance of the notices dated 28/3/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner on 8/8/2013 i.e. after the period of more than four months. Section 148(2) of the Act requires that the Assessing Officer shall before issuing any notice under said Section record his reasons for doing so. Respondents have placed on record the copy of screen shots along with their further additional affidavit filed on 3/4/2014. In the said affidavit sworn by respondent no.1 he has clarified that prior to issuance of the impugned notices under Section 148 of the Act the reasons were recorded on I.T.D. system i.e. on line system of Income Tax Department. It has been further explained that since reasons were on line recorded there is no signature below the reasons so recorded. The respondents have further clarified that the Assessing Officer has to record the reasons for reopening the assessment both manually as well as on I.T.D. system. It is further clarified that the approval of the higher authorities is also obtained on line. It is further mentioned that the notice under Section 148 is also generated on line. We have carefully perused the copies of screen shots placed on record as Annexures A and B which clearly demonstrate that they were generated on 28/3/2013. The petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing on the assessment. The learned counsel submitted that in the aforesaid matter the petitioners therein had sought to impeach the validity of the notice under Section 148 on two grounds : (1) that the information which is relied upon by the I.T.O. for issuing the notice under s. 148 must be information which he has obtained aliunde and not merely by looking at his own order made in proceedings for a subsequent year; and (2) that the information on which the issue of the said notices is founded must relate to the particular year to which the notices themselves relate. The learned counsel submitted that both the grounds canvassed by the petitioner in the said case were accepted by the Court and the notices impugned in the said case were set aside and quashed. The learned counsel submitted that in view of interpretation given by the Hon'ble Apex Court of the expression 'information', the facts used in the instant case for issuance of notice under Section 148 of the Act cannot be held as 'information' since it is not the 'information' extrinsic or from elsewhere but from looking to his own order passed by the Assessing Officer in the proceedings for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... adras (1961) 42 ITR 547 (Mad) a division Bench of the Madras High Court interpreting the scope of the words 'information which has come into his possession' found in Sec. 34 of the Indian Income Tax Act, observed thus: We are unable to accept the extreme proposition that nothing that can be found in the record of the assessment which itself would show escape of assessment or underassessment, can be viewed as information which led to the belief that there has been escape from assessment or underassessment. Suppose a mistake in the original order of assessment is not discovered by the Income Tax Officer himself on further scrutiny but it is brought to his notice by another assessee or even by a subordinate or a superior officer, that would appear to be information disclosed to the Income Tax Officer. If the mistake itself is not extraneous to the record and the informant gathered the information from the record, the immediate source of information to the Income Tax Officer in such circumstances is in one sense extraneous to the record. It is difficult to accept the position that while what is seen by another in the record is `information' what is seen by the Income Tax Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive authority like the audit department cannot constitute information for the purpose of section 147(b) of the Act for initiating reassessment proceedings. 19. Having regard to the law laid down by the Hon'ble Apex Court in the case of Associated Stone Industries V/s. Commissioner of Income Tax, Jaipur (cited supra) and considering the legal position as explained by the Gujarat High Court referred to hereinabove, we have no hesitation in holding that the facts which were revealed to the Assessing Officer who carried out the assessment for A.Y. 2010 2011 was the 'information' as is contemplated by Section 147 of the Act leading the said officer to form a belief that the income had escaped the assessment for the A.Y. 2006 2007 and 2008 2009. 20. Now, it has to be seen whether the information received to the Assessing Officer is relating to A.Y. 2006-2007 and 2008-2009. Relying on two decisions of this Court both of the Division Bench, first in the matter of Ramkrishna Ramnath V/s. Income Tax Officer (supra) and the other in the case of Rabo India Finance Ltd v Deputy Commissioner of Income Tax and others, reported at (2012) 346 ITR 528 (Bom), the learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laid down in the Judgments relied upon by the learned counsel for the petitioner, it is difficult to agree with the submissions made on behalf of the petitioner. On perusal of the reasons given by the respondents for reopening the assessment for A.Y. 2006 2007 and 2008 2009, it cannot be said that there was no information with the Assessing Officer relating to the said assessment years. No doubt the information is received to the said officer during the course of the assessment proceedings for A.Y. 2010 2011. However the said information does not seem to be restricted only to A.Y. 2010 2011. Material on record shows that petitioner company has debited the order procurement charges amounting to Rs.1,16,92,870/in the assessment year 2010 2011 and the deduction of the said amount was claimed under Section 37(1) of the Act as business expenditure. In the scrutiny, since the Assessing Officer did not find the claim so made by the petitioner acceptable, he conducted further enquiry, recorded statements of some of the witnesses under Section 131 of the Act, collected certain other necessary information and while doing so it was noticed by him that the names of persons to whom th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P.C. to the tune of Rs.1,12,60,843/and Rs.1,19,59,063/have escaped the assessment for the respective years merely on the basis of the fact that in the opinion of the Assessing Officer who assessed the income for the A.Y. 2010 2011 the said agents did not render any services to the petitioner. 25. The reasons supplied by the respondents for reopening of the assessment of A.Y. 2006 2007 and 2008 2009 reveal that during the assessment proceedings for A.Y. 2010 2011 it was seen that assessee has debited the Order Procurement Charges of Rs.1,62,92,780/. This Order Procurement Charges were paid to 34 persons for procuring orders from W.C.L. and S.E.C.L. Out of these 34 persons 5 persons/representatives outrightly denied that they had rendered services to the assessee company. Even in the case of other agents, who are stated to have provided services to the company, it was found that there were lot of discrepancies in their statements. These persons do not hold any expertise or qualification for procuring orders. It was also noted that on verification from M/s. W.C.L. It was found that the mode of order procurement claimed by the agents was completely wrong. Para 3 of the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Q.10. Please give the name of these persons. Ans. I do not know the name of these persons. Q.11. For how many years you have been receiving cheques from DSPl and giving them back the cash. Ans. As I remember, we started this practice from F.Y. 2006 07. 27. The information, received to the Assessing Officer from the statement of Anil Asarkar as reproduced hereinabove, is sufficient to draw a prima facie inference that Anil Asarkar (H.U.F.) might not have worked for the petitioner company and further that it was receiving the cheques from the petitioner company and giving them the cash back from the financial year 2006 2007. We do not wish to make any comment on the veracity of the statement so given by said Shri Asarkar. We have reproduced the said statement only for the limited purpose that some information became available to the Assessing Officer relating to the assessment year 2006 2007 and 2008 2009. It appears to us that the information, which was received to the Assessing Officer as above, was sufficient for him to reasonably believe that the income had escaped assessment for the respective assessment years. 28. The information which the Assessing Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for A.Y. 2010 2011 was prima facie sufficient to believe that the income chargeable to tax for the concerned years had escaped assessment. The Assessing Officer has firmly recorded his said opinion for issuing the notices under Section 148 of the Act and as held by the Hon'ble Supreme Court in the case of Commissioner of Income Tax V/s. A. Raman and Company the notice so issued cannot be set aside by the High Court on reappraisal of the evidence so received to the Assessing Officer. Secondly, as held by the Hon'ble Supreme Court in I.T.O. Vs Lakhmani Mewal Das, reported at 1976 CTR (SC) 220, the Court cannot go into the sufficiency or adequacy of the material and substitute its own opinion for that of the ITO on the point whether action should be initiated for reopening assessment. In the instant case we reiterate that Assessing Officer has expressed his satisfaction over the material received to him during the assessment proceedings for the A.Y. 2010 2011 for reopening the assessment of A.Y. 2006 2007 and 2008 2009. It is not the case of the petitioner that the reason for formation of the belief by the concerned Assessing Officer is not in good faith or for some e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 falling which, we are afraid, s.147 would gave arbitrary powers to the AO to reopen assessments on the basis of mere change of opinion , which cannot be per se review and power to reassess. The AO has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain precondition 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 inbuilt test to check abuse of power by the AO. Hence, after 1st April, 1989, 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 to s. 147 of the Act, as quoted the belief. Our view gets support form 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 als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er procurement for the assessee, was there before the Assessing Officer and was considered by him at the time of framing the original assessment and that later a different view has been taken by the said officer. Both the Judgments therefore cannot lend the petitioner any assistance. Insofar as the decision of the Hon ble Apex Court in the case of Commissioner of Income Tax Vs Kelvinator of India Ltd is concerned, the discussion therein is purely academic and not on facts. 34. It was also argued by Shri Dawda the learned counsel for the petitioner that the respondents have attempted to supplement the reasons recorded by the AO by filing affidavits subsequently. The learned counsel pointed out that the reasons which were provided to the petitioner were unsigned and undated and subsequently an effort has been made to provide the necessary explanation by filing certain affidavits. The learned counsel further submitted that in the affidavits subsequently filed the respondents have attempted to provide some material particulars which were lacking in the notice served upon the petitioner and the reasons supplied to it. He submitted that such course is impermissible To substantiate his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he view taken by the Division Bench as above may also not be of any help to advance the case of the petitioner further. The Devision Bench of this Court set aside the impugned notices in the said cases on the ground that the reasons recorded by the A.O. were nowhere stating that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year and the second reason for setting aside the notices was that the impugned notices were beyond the period of 4 years from the end of A.Y. 1996-1997. It was also recorded by the Court that the A.O. had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under Section 143(3) of the Act. In the present matters we have already noticed that the reasons which were communicated to the petitioner along with covering letter dated 8/8/2013 contain sufficient particulars. Moreover, in the reasons so communicated, the A.O. has expressly mentioned that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of those assessment years. 35. The decision of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X
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