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TMI Blog2014 (9) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... nd arises in India and is subject to taxation in India. 2. The return of income under section 139 of the Act was filed by the petitioner on 29.10.2005 for the assessment year 2005-06 declaring total income as "nil" along with Tax Audit Report. The petitioner paid tax under section 115JB of the Act. 3. The return of the petitioner was taken under scrutiny assessment under section 143(1) of the Act and notice issued under section 143(2) was duly served upon the assessee. The questionnaire was supplied along with notice under section 142(1) to the petitioner and pursuant to such notice, requisite details were furnished by the petitioner. A letter was issued dated 8.1.2007 requiring the petitioner to furnish all details of depreciation claimed along with items purchased and put to use. Petitioner replied to such specific query as also stated that any supporting document that may be called for at the time of hearing shall be produced being voluminous in nature. 4. The respondent passed the assessment order under section 143(3) of the Act on 30.12.2008 where various deductions claimed by the petitioner assessee were considered, disallowing the depreciation claimed on well and pipeline ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Building" only. Thus, depreciation was correctly allowable on Offshore Platform @ 10% applicable to "Building". Accordingly, the assessee was entitled for depreciation of Rs. 103885950/- (10% of Rs. 1038859497/-) and this excess depreciation of Rs. 155828924/- resulted in underassessment of income of Rs. 155828924/-. Therefore I have reason to believe that income to the tune of at least Rs. 155828924/- has escaped assessment in case of the assessee for AY 2005-06. Issue notice u/s 148 read with section 147 of the IT Act 1961." 7. Objections were raised by the petitioner, objecting to the reopening of the assessment, contending inter alia that the assessment beyond the period of 4 years from the end of the relevant assessment year is not permitted statutorily when the assessee has disclosed fully and truly all material facts necessary for the assessment. It is also further contended that the original assessment was completed on scrutiny assessment and admittedly as the assessment was completed on 31.3.2006, the case of the assessee company falls under 1st proviso to section 147 of the Act, for such reopening is on expiry of 4 years period from the end of the relevant assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 013, a draft of proposed reassessment order was prepared. 9. Aggrieved petitioner has preferred present petition, seeking the following prayers:- " 7(aa) To quash and set aside the impugned assessment order under section 144C(1) r.w.s. 147 r.w.s. 143 at Annexure A1" 7(bb) Pending the hearing and final disposal of the petition to stay the implementation and operation of the order at Annexure A1 and refrain the respondent from initiating recovery proceedings against the petitioner pursuant to the said order." 10. On issuance of notice, the respondent filed the affidavit-in-reply through the Deputy Director of Income-tax (International Taxation), inter alia, contending that there is an alternative efficacious remedy available by way of appeal to the Commissioner of Income Tax (Appeals) and thereafter to the Income-Tax Appellate Tribunal as per the provisions of the Act, therefore, present petition is not maintainable. 10.1 It is further contended that submissions made by the assessee on 6.7.2007 does not refer to the depreciation on specific items nor had the Assessing Officer raised an query on depreciation of any specific items in the notice referred to by the petitioner. Moreo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n [2012] 348 ITR 485 (Delhi) wherein on a particular subject matter entry or claim had not been examined by the Assessing Officer, it was held that there cannot be deemed formation of opinion. 11. Affidavit-in-rejoinder has been filed denying all these contentions. It is emphasized that there was no failure on the part of the petitioner to disclose truly and fully all material facts. 11.1 According to the petitioner it had specifically provided the details of depreciation vide communication dated 6.7.2007 as is evident from Annexure-C. This annexure refers to the claim of depreciation as per the clause 14 of the Tax Audit Report, which was also before the respondents at the time of original assessment. It is further contended that in the original assessment order, the respondent disallowed the depreciation claimed on wells and pipelines. Therefore, it can be assumed that he had applied his mind. The petitioner has disclosed fully and truly all material facts pertaining to the depreciation in response to the specific queries and, therefore, the respondent has exercised his jurisdiction in an unjustified and illegal manner. The offshore platform is nothing but a plant and mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rge pre-built units that include accommodation, production and drilling zones (2) The Jacket- an intricate 'spiders web' of steel piles, beams and triunions combine to provide a formidable foundation on which the entire platform sits and (3) Derrick is usually the highest point on the platform wherefrom drilling is carried out. It further mentioned that the offshore platform which is not a plant and machinery in itself consists of dwelling units and three drilling areas and thus plant and machineries are installed on offshore platform. Therefore, offshore platform can be classified under the block of assets 'building' only and the depreciation correctly allowable was only 10%, applicable to the buildings. Therefore, it is depreciation according to the petitioner. 12.2 Learned counsel further argued that if there was any further query, the Assessing Officer could have raised the same while finalizing the scrutiny assessment during the course of assessment, the Assessing Officer in his notice dated 8.1.2007 had asked for full details of depreciation claimed along with items purchased and put to use and the company had made the submissions disclosing all the details and fieldwise dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment is nothing but change of opinion. 14.1 Learned Senior Counsel urged that out of the total amount of depreciation, Rs. 25.97 crores of depreciation was only of this item. It is unlikely that such huge amount would escape the attention of the Assessing Officer. In absence of any further query with regard to offshore platform, this must be held as a review of his own decision and in absence of any averment with regard to non-disclosure of material facts fully and truly at the time of original assessment, the assessee cannot be put to any jeopardy and no jurisdiction would be available with the Assessing Officer, who has sought reopening of assessment beyond the period of four years from the relevant assessment year. 15. Upon thus having heard both the sides, prior to adverting to the specific case of the petitioner assessee, the law on the subject requires a closer scrutiny. Sections 147 and 148 of the Act reads as follows:- "147. If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other incom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd (b) subsequently a notice has been served under subsection( 2) of section 143 after the expiry of twelve months specified in the proviso to sub-section(2) of section 143, as it stood immediately before the amendment of said subsection by the Finance Act, 2002(20 of 2002) but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in subsection( 2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of subsection (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section(2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice. (2) The Assessing Officer shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion in the assessment order. In such situation, it should be accepted that the issue was examined by the Assessing Officer, who did not find any ground or reasons to make additions or he forms an opinion, rejecting the stand of the assessee. The reassessment will be invalid because the Assessing Officer had formed an opinion in the original assessment made, though he had not recorded his reasons. "The expression "change of opinion" postulates formation of opinion and then a change thereof. In the context of assessment proceedings, it means formation of belief by an Assessing Officer resulting from what he thinks on a particular question. It is a result of understanding, experience and reflection. A distinction must be drawn between erroneous application/interpretation/understanding of law and cases where fresh or new factual information comes to the knowledge of the Assessing Officer subsequent to the passing of the assessment order. If new facts, material or information comes to the knowledge of the Assessing Officer, which was not on record and available at the time of the assessment order, the principle of "change of opinion" will not apply. The reason is that "opinion" is for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to agree with the observations made in paragraph 16, which have been underlined. The reason is that experience shows that the Assessing Officers do examine several aspects and raise queries but when the written opinion is expressed in the form of the assesment order, there is no discussion or elucidation on certain aspects and issues decided or held in favour of the assessee. The assessee is not the author of the assessment order and has no control over what the Assessing Officer wants to state or mention. It is in this context that the Delhi High Court in CIT v. Eicher Ltd. [2007] 294 ITR 310 (Delhi), observed as under (page 315): "In Hari Iron Trading Co. vs. CIT [2003] 263 ITR 437 (P&H), a Division Bench of the Punjab and Haryana High Court observed that an assessee has no control over the way an assessment order is drafted. It was observed that generally, the issues which are accepted by the Assessing Officer do not find mention in the assessment order and only such points are taken note of on which the assessee's explanations are rejected and additions/disallowances are made. We agree. Applying the principles laid down by the Full Bench of this court as well as the observat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 320 ITR 561 (SC). (ix) The Income-tax Officer acquires jurisdiction to reopen assessment under section 147 read with section 148 of the Act only if, on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reason, which he must record, to believe that any part of the assessee's income has escaped assessment. (x) The words " has reason to believe" in section 147 are stronger than the words " is satisfied" (Ganga Saran and Sons P. Ltd. [1981] 130 ITR 1(SC)). (xv) Every disclosure is not, and cannot be treated to be, a true and full disclosure. A disclosure may be false or true. It may be a full disclosure or it may not. A partial disclosure may very often be misleading. What is required is a full and true disclosure of all material facts necessary for making assessment for that year (Sri Krishna Pvt. Ltd. [1996] 221 ITR 538(SC)). (xvi) The disclosure must not only be true but must be full-" Fully and truly". A false assertion, or statement, of material fact attracts the jurisdiction of the Income-tax Officer under section 147 (Sri Krishna Pvt. Ltd., [1996] 221 ITR 538 (SC)). (xvii) The expression "material facts" refers only to pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asons for issuing notice. This requirement necessarily postulates that before the Assessing Officer is satisfied to act under the aforesaid provisions, he must put in writing as to why in his opinion or why he holds the belief that income has escaped assessment. "Why" for holding such belief must be reflected from the record of reasons made by the Assessing Officer. In a case where the Assessing Officer holds the opinion that because of excessive loss or depreciation allowance the income has escaped assessment, the reasons recorded by the Assessing Officer must disclose by what process of reasoning he holds such belief that excessive loss or depreciation allowance has been computed in the original assessment. Merely saying that excessive loss or depreciation allowance has been computed without disclosing reasons which led the assessing authority to hold such belief, in our opinion, does not confer jurisdiction on the Assessing Officer to take action under sections 147 and 148 of the Act. We are also of the opinion that, howsoever wide the scope of taking action under section 148 of the Act, it does not confer jurisdiction on change of opinion on the interpretation of a particular p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, if the Assessing Officer did not apply his mind and committed a lapse, there is no reason why the assessee should be made to suffer the consequence of that lapse." 22. In the case of Ketan B. Mehta vs. Assistant Commissioner of Income-Tax reported in [2012] 346 ITR 254 (Guj), the notice of reassessment was issued after the period of 4 years in wake of dissenting opinion of the two learned Members of the Bench. The matter was referred to the third judge. It has been held that with regard to the question of availability of alternative remedy in a previously framed assessment, the Court held that when the reopening notice was without jurisdiction in absence of any allegations of non-disclosure of material facts fully and truly. It was held that the petitions cannot be dismissed merely on the ground of availability of alternative remedy. It is held and observed that through a series of decisions it has been well settled that where there is likelihood of absence of jurisdiction in the authority, alternative remedy, even if available would not be a bar to entertain a writ petition. In case of Garden Finance vs. ACIT reported in 268 ITR 48, it has been so held by the Court examining c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l, if the Assessing Officer was of the opinion that any further inquiry was necessary to examine the nature of such investments and to ascertain whether the investment was made for the sole purpose of earning dividend income or was predominantly or exclusively for the purpose of acquiring controlling shares of the Mastek Limited, it was open to the Assessing Officer to make further inquires. To my mind, nothing is pointed out to suggest that the assessee owed such a duty to disclose further facts in this regard. 129. Whether the certain expenditure is made wholly and exclusively for the purpose of earning dividend income is to be judged in the light of provisions of Section-57(iii) of the Act. It may be that by virtue of the decision of the Division Bench in the case of Virmati(supra), it was arguable whether the assessee had made such investments for the sole and exclusive purpose of earning income or whether with the dominant or sole purpose of acquiring controlling shares of the Company. However, this is not in the same as to suggest that beyond disclosing the investments made, the borrowings for making such investment, the interest paid and the dividend earned, the assessee ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeals concluded that the amount for services rendered became payable when the credit note was issued by the Russian Agencies in Moscow and it accordingly directed the Assessing Officer to allow deduction under section 80(o) only if the amount was brought to India within six months from the issuance of the credit note by Russian Government. On verification, such claim of the assessee was allowed. The reopening of the assessment to deny deduction under section 80(o) was held not permissible in absence of any material on record to show that there was any failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Notice was held not valid and was quashed. 26. In the case of Sita World Travels (India) Ltd. vs. Commissioner of Income-Tax and another reported in [2005] 274 ITR 186, the Delhi High Court was dealing with notice under section 148 beyond the period of 4 years. The tour operator had claimed deduction under section 80HHD of the Act. On scrutiny assessment, the same was allowed after expiry of more than 4 years when the notice was issued under section 148 of the Act stating that the Assessing Officer had reason to believe t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of such assessment. The onus is on the assessee to reveal the primary facts and to draw the inferential facts would be the responsibility of the Assessing Officer. Once having revealed from the record that the assessee disclosed full and complete facts and on scrutiny, at the time of original assessment all these details are examined, no change of opinion is permissible merely because there was some error earlier on the part of the Assessing Officer himself or because he chose not to opine on the issue or even when he changes his mind and interprets the material or law otherwise than what was done by him. 28. In the instant case, in background of this legal position, the facts shall have to be examined closely. 29. It is to be noted hereinabove that the notice issued under section 148 for reopening of case of the petitioner for Assessment Year 2005-06 dated 26.12.2012 directed the petitioner to produce accounts and documents as also the information in respect of the concerned assessment year. The reasons for reopening under section 147 does not say anyw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-4, the claim towards the depreciation had been made by the company. Annexure-IV had indicated field wise depreciation where the particulars of all assets like, building, block, addition/deletion made during the year, total depreciation claimed and closing written down value (WDV) were tabulated. As could be noted from the information called for under section 142(1) on 8.1.2007 the Point No.5 reads thus:- "5. The full details of depreciation claimed by you. The description of the items purchased and or put to use on the date may be clarified with supporting evidences. Also details of any assets sold or discarded may be furnished." 32. Out of the total claim of depreciation for the year under question of Rs. 56,77,66,844/- (Rs. 56.77 crores rounded off), the depreciation for offshore platform is 50% of the total amount, which is Rs. 25,97,14,874/- (Rs. 25.97 crores rounded off). 33. In the return of income in Form-3CD under Rule 6G(2) of the Rules, the statement of particulars to be furnished under section 44AB, point no. 14 required the particulars of depreciation allowable in respect of each asset or block assets to be furnished. Enclosure-II of clause 14 under various heads o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings. 37. In the assessment order passed on 30.12.2008, nowhere there is any reference of non-compliance of the direction of the Assessing Officer. It also does not mention anywhere the absence of production of record ensured to be done at the time of assessment proceedings. Those documents either were produced for perusal and scrutiny or the Assessing Officer, who deemed it fit not to call for them, at the time of assessment, though specifically offered by the assessee. It dealt with the issue of depreciation at length. Disallowed the amount of Rs. 90,32,567/- and also allowed the depreciation to the tune of Rs. 9,15,41,627/- at the time of final assessment. In such circumstances, in absence of any specific averment in the reasons recorded for reopening of the assessment, that there was any failure on the part of the assessee to disclose fully and truly all material facts, it would not be possible for the Court to allow the notice under section 148 to be sustained,which is wholly without any backing of law. Contentions of the respondent that no opinion was formed during the assessment proceedings is not finding favour of the Court. 38. The question that still deserves attention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee in fully and truly not disclosing the material facts, indicated that all facts necessary for framing the assessment with respect to the issue under question was very much before the Assessing Officer when he previously took the return of the assessee for scrutiny assessment. The detailed exercise was undertaken by the Assessing Officer with respect to the claim of the assessee under question before coming to the final conclusion, it was therefore, held that notice of reopening was invalid and required to be quashed. 42. At the cost of reiteration, it is essential to note that offshore platform as per the reasons recorded consisted of module, jacket and derrick. If there was any clarification that was further needed after the description of the items purchased and put to use, was particularly replied to by the assessee on 6th July, 2007, it was open for the Assessing Officer to further raise the queries and call for more documents. In the event of the Assessing Officer not being satisfied with the reply, he could have denied the depreciation as a claim made in the particular year by the assessee which was almost 50% of the total amount of claim of deprecation which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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