Contact us   Feedback   Annual Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Extracts
Home List
← Previous Next →

2015 (6) TMI 497 - MADRAS HIGH COURT

2015 (6) TMI 497 - MADRAS HIGH COURT - [2015] 378 ITR 380 - Reopening of assessment - assessee had not furnished the details relating to working of MODVAT which resulted in failure on the part of the assessee by not disclosing fully and truly all material facts - Held that:- Having furnished the details of the working of the MODVAT Credit in Annexure 1(A) to the Tax Audit Report, which is a mandate as per the provisions of the Act and the Assessing Officer has considered the said issue in the or .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

essment on account of the failure of the assessee to disclose truly and fully all material facts necessary for assessment, the notice issued under Section 147 of the Income Tax Act beyond the period of four years was wholly without jurisdiction and cannot be sustained.Hence, we have no hesitation in holding that reopening is bad. Accordingly, we uphold the findings of the Tribunal that it is a case of mere change of opinion on the same material already available on record, which has been submitt .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Appellate Tribunal raising the following substantial question of law: 1. Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in upholding the order of the CIT(A) who held that the reassessment proceedings made was not valid? 2. Is not the finding of the Tribunal bad especially when the assessee had not furnished the details relating to working of MODVAT which resulted in failure on the part of the assessee by not disclosing fully and truly all material fa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

Act and subsequently assessment under Section 143(3) of the Income Tax Act was made by the Assessing Officer determining the total income at ₹ 1,40,40,250/-. Thereafter, the Assessing Officer had issued notice under Section 148 of the Income Tax Act for initiating proceedings under Section 147 of the Income Tax Act. In response to the said notice, the assessee filed a letter dated 16.4.2008 requesting to treat the original return filed as the return filed in response to the notice issued u .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

was actually payable after adjustment of MODVAT Credit was ₹ 3,73,70442/- and the same would be paid at the time of removal of finished goods and collected from purchasers. Hence, the Assessing Officer took the view that there was no question of adjustment of excise duty paid on finished goods upto the date of filing the return. Accordingly, the Assessing Officer issued show cause notice calling for explanation from the assessee as to why the excess claim made by the assessee to the tune .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

al but not removed from the factory. Thus, the Assessing Officer was of the view that the excise duty did not get crystallised as on 31st March and it would get crystallised only at the time of actual removal and based on the closing stock, no provision for payment of duty could be created and therefore, a sum of ₹ 22,60,275/- was added to the total income of the assessee. Accordingly, he made re-assessment disallowing the excess MODVAT Credit. 3. Aggrieved by the same, the assessee had fi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

IT V. Cholamandalam Investment and Finance Company reported in 309 ITR 110; CIT V. Tamilnadu Transport Development Finance Corporation Limited reported in 306 ITR 136 and CIT V. Kelvinator of India Ltd. reported in 320 ITR 561(SC). After hearing both sides, the Commissioner of Income Tax (Appeals) allowed the appeal in favour of the assessee holding as follows: 4.2. I have carefully considered the facts of the case and the submission of the ld. AR. I have also gone through the decisions relied o .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

at the AO has reopened the assessment to disallow the excess claim made by the appellant in respect of MODVAT Credit. The appellant has stated that the details of MODVAT credit was given in Annexure 1(A) of the Tax Audit Report. Further, the appellant itself has disallowed the amount in computing the total income for the year. Therefore, the ld. AR has stated that the addition made by the AO actual tantamount to duplication of disallowance. Regarding the reopening the appellant has relied on the .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

order u/s 143(3). The details of MODVAT working for the purpose of s.145A was provided by the appellant in Annexure 1(A) at point No.12(b) of the return of income. Therefore, as the details pertaining to MODVAT were already available to the AO during the assessment proceedings u/s 143(3), the reassessment proceedings have been initiated on mere change of opinion on the same material on record and, therefore, would amount to review of earlier assessment which is not permissible. This view is sup .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

T, Mumbai in the case of Modepro India Private Limited (supra) has allowed the appeal of the appellant under similar facts. In the above case the AO completed the assessment u/s 143(3). Subsequently, on the perusal of records the AO noticed that the assessee had failed to include Modvat credit in its closing stock in contravention of the provisions of section 145A. The AO issued notice u/s 148 after the expiry of four years from the end of the relevant assessment year and completed assessment af .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

red. The assessment flowing out of such time barred notice cannot stand and was therefore quashed. In view of the above precedents and the facts of the case, it is held that the reopening is not valid and hence the ground is allowed." 4. On the issue of disallowance of MODVAT credit on opening stock, the Commissioner of Income Tax (Appeals) held that it has become academic in nature, as he found that the reopening of assessment by the Assessing Officer was not valid. 5. Aggrieved by the sai .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

) on 02.01.2003 and subsequently assessment was framed under section 143(3) on 31.03.2004, whereas, notice under section 148 was issued on 28.03.2008, which period is beyond four years from the end of assessment year and no fresh material or evidence is found to have come in the possession of the Assessing Officer when reopening was done to disallow the excess claim made by the assessee in respect of MODVAT credit and the assessee has stated that the details of MODVAT credit are given in Annexur .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g for the purpose of section 145A was provided by the assessee in Annexure 1(A) at point No.12(b) of the return of income. So, the reassessment proceeding initiated in the absence of any fresh material or evidence coming into the possession of the Assessing Officer has rightly been held to be mere change of opinion on the same material already on record as held by the Hon'ble Jurisdictional High Court in the case of CIT v. Cholamandalam Investment and Finance Company Limited (supra). Therefo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Revenue tried to distinguish the decision of this Court in the case of CIT v. Cholamandalam Investment and Finance Company Limited reported in 309 ITR 110 by placing reliance on the decision of the Bombay High Court in the case of Dr.Amin's Pathology Laboratory V. P.N.Prasad, Joint Commissioner of Income Tax and others (No.1) reported in [2001] 252 ITR 673. He laid emphasis on this decision to state that the mere production of balance sheet and profit and loss account will not amount to .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

appreciation, we first consider the scope of Section 147 and the first proviso. The said provision reads as follows: "Income escaping assessment. 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 income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the co .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the relevant assessment year, unless any income chargeable to tax has escaped assessment. Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject-matter 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

mount 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) income chargeable to tax has been under assessed ; or (ii) such income has been assessed at too low a rate ; or (iii) such income has been made t .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

a period of four years. Admittedly, in the present case, the proceedings initiated is beyond the period of four years from the end of the relevant assessment year. It is not the case of the Department that the assessee has failed to file a return under Section 139 or failed to respond to the notice issued under Section 142 or Section 148 of the Income Tax Act . The only other issue is whether there was any failure on the part of the assessee to disclose fully and truly all material facts necess .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

by the learned AO was completed after obtaining all details required for the purpose of assessment. Hence, the assessment cannot be reopened. b. In this regard, the appellant relates to the decision of jurisdictional High Court in the case of CIT v. Cholamandalam Investment and Finance Company Limited 209 ITR 110 and case of CIT v. Tamil Nadu Transport Development Finance Corporation Limited 306 ITR 136. c. The assessment having been completed under scrutiny u/s 143(3), any further reopening wo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

en received after completion of assessment. 12. Having furnished the details of the working of the MODVAT Credit in Annexure 1(A) to the Tax Audit Report, which is a mandate as per the provisions of the Act and the Assessing Officer has considered the said issue in the order passed under Section 143(3) of the Income Tax Act, the Commissioner of Income Tax (Appeals) has given a clear finding that the details of MODVAT credit working were considered by the Assessing Officer during the assessment p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

me escaping assessment. 13. For the purpose of assumption of jurisdiction under Section 147 of the Income Tax Act, the Officer must have reason based on materials that there has been an income escaping assessment, which warranted assumption of jurisdiction under Section 147 of the Income Tax Act. A perusal of the assessment order shows that the Assessing Officer had not mentioned that there are materials for escapement of income. The Assessing Officer also did not record any reason that there wa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

47 of the Income Tax Act cannot be pressed into service by the Department in the instant case, because the details of such claim has been revealed in the Tax Audit Report and apparently, the same has been considered by the Assessing Officer at the time of passing an order under Section 143(3) of the Income Tax Act. Therefore, Explanation (1) does not get attracted to this case. Explanation (2)(c)(i) and (iii) to Section 147 of the Income Tax Act, which is sought to be invoked in the present case .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of Commissioner of Income Tax V. Kelvinator of India Ltd. reported in [2002] 256 ITR 1 (Del), wherein, the Delhi High Court held as follows: We also cannot accept the submission of Mr. Jolly to the effect that only because in the assessment order, detailed reasons have not been recorded an analysis of the materials on the record by itself may justify the Assessing Officer to initiate a proceeding under section 147 of the Act. The said submission is fallacious. An order of assessment can be pass .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ch has been passed purportedly without application of mind would itself confer jurisdiction upon the Assessing Officer to reopen the proceeding with out anything further, the same would amount to giving a premium to an authority exercising quasi-judicial function to take benefit of its own wrong. 17. The above said decision of the Full Bench of the Delhi High Court was upheld by the Supreme Court in the decision reported in [2010] 320 ITR 561 (SC) COMMISSIONER OF INCOME-TAX v. (1) KELVINATOR OF .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ortion of the said decision reads as follows: 6. On going through the changes, quoted above, made to section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfilment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act (with effect from 1st April, 1989), they are given a go-by and only one condition has remained, viz., tha .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 preconditions 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 a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d the words " reason to believe" but also inserted the word " opinion" in section 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 Assessing Officer. We quote hereinbelow the relevant portion of Circular No. 549 dated October 31, 1989 ([1990] 182 ITR .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

e past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression ' has reason to believe' in place of the words ' for reasons to be recorded by him in writing, is of the opinion' . Other provisions of the new section 147, however, remain the same." (emphasis supplied) .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

where 100 per cent. depreciation were claimed and the assessee had furnished the invoices for purchase of assets on which 100 per cent. depreciation were claimed, there was no failure on the part of the assessee and if at all there was any failure, according to the Commissioner of Income-tax (Appeals), it was on the part of the Assessing Officer, who made the original assessment without going behind the nature of the transactions accepting the details furnished by the assessee. The Tribunal als .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

72 (Mad) FENNER (INDIA) LTD. v. DEPUTY COMMISSIONER OF INCOME-TAX, wherein, it was observed as follows: The pre-condition for the exercise of the power under section 147 in cases where power is exercised within a period of four years from the end of the relevant assessment year is the belief reasonably entertained by the Assessing Officer that any income chargeable to tax has escaped assessment for that assessment year. However,when the power is invoked after the expiry of the period of four yea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cquire jurisdiction to initiate any proceeding under section 147 of the Act after the expiry of four years from the end of the assessment year. Thus, in cases where the initiation of the proceedings is beyond the period of four years from the end of the assessment year, the Assessing Officer must necessarily record not only his reasonable belief that income has escaped assessment but also the default or failure committed by the assessee. Failure to do so would vitiate the notice and the entire p .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

lose the material facts necessary for the assessment. Whenever a notice is issued by the Assessing Officer beyond a period of four years from the end of the relevant assessment year, such notice being issued without recording the reasons for his belief that income escaped assessment, it cannot be presumed in law that there is also a failure on the part of the assessee to file the returns referred to in the proviso or a failure to fully and truly disclose the material facts. The reasons referred .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

g Officer chooses to entertain the belief that the assessment has been made in the background of the assessee s failure to disclose truly and fully all material facts, it is necessary for him to record that fact, and in the absence of a record to that effect, it cannot be held that a notice issued without recording such a fact is capable of being regarded as a valid notice. As to whether the material facts disclosed by the assessee are full and true is always a question of fact and unless the fa .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ound also the notice issued would be vitiated. The reasons actually recorded and as set out by the officer in the counter affidavit are such that even after close scrutiny they do not establish even prima facie a failure on the part of the assessee to fully and truly disclose the material facts for the assessment. ......... The duty of an assessee is limited to fully and truly disclosing all the material facts. The assessee is not required thereafter to prepare a draft assessment order. If the d .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the Assessing Officer in understanding the details placed before him cannot confer a justification for reopening the assessment, long after the period of four years had expired. On the facts of this case, it is clear that the escapement of income, if any, on this account is not on account of any failure on the assessee s part to disclose the material facts fully and truly. The notice issued by the Assessing Officer in exercise of his power under section 147, therefore, cannot be sustained. 20. I .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t. Now, on a mere relook, the officer has come to the conclusion that the income has escaped assessment and he is of course justified in his analysis. In our view, this is not something which is permissible under the proviso to section 147 of the Income Tax Act which speaks about a failure on the part of the assessee to make a proper return. In the present case, no such case is made out on the record. 8. In the circumstances, we allow this petition in terms of prayer (a) and quash and set aside .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version