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2015 (7) TMI 953 - KARNATAKA HIGH COURT

2015 (7) TMI 953 - KARNATAKA HIGH COURT - TMI - Reopening of assessment - reopening based on information that two Horses Tuscan and Brave Act were purchased at ₹ 1,38,729/- and ₹ 10,09,641/- was actually ₹ 5,32,784/- and ₹ 2,16,96,697/- respectively as detected by Directorate of Revenue Intelligence and customs duty of ₹ 1,87,540/- and ₹ 58,54,471.68 having been paid - Held that:- Bare reading of Section 147 of the Act would indicate that it empowers the asses .....

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, Construction House, Ballard Estate, Mumbai that assessee had indulged in under invoicing its imports and consequent to investigation, the suppressed customs duty payable by the assessee has been quantified at ₹ 89,43,152/-.

On issuance of show cause notice by the Directorate of Revenue Intelligence, the jurisdictional assessing Officer has formed an opinion about there being escapement of income of the assessee chargeable to tax. As to whether the said "reason to believe" of s .....

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ence, the substantial questions of law framed hereinabove have to be answered in favour of the revenue.

Perusal of records that the jurisdictional assessing Officer in the reassessment order dated 21.07.2006 has arrived at the value of "Brave Act" horse at ₹ 2,16,96,697/- and that of "Tuscan" horse at ₹ 5,32,784/- which undisputedly was not the value determined by the Settlement Commission while accepting the claim of the assessee for arriving at a settlement and directing .....

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ss and legality of the order passed by the Income Tax Appellate Tribunal, Bangalore Bench in ITA No.1122/Bang/2008 dated 31.03.2009whereunder order passed by the CIT (Appeals) dated 04.06.2008 reversing the order of assessment dated 21.07.2006 passed under Section 143(3) r/w Section 147 of the Income Tax Act, 1961 (hereinafter referred to as the Act' for brevity) which was pursuant to the notice issued under Section 148 of the Act for re-opening the assessment concluded on 29.10.2004. 2. The .....

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,54,471.68 having been paid cannot be treated as information for the purpose of reopening assessment and bringing the same to tax, in view of the judgment of the Apex Court in Coca Cola Export Corporation 231 ITR 200? 2) Whether the Appellate Authorities have failed to take into consideration that the order passed by the Settlement Commission, which had quantified the customs duty based on the detection made by the Revenue Intelligence and the value of Horses would clearly show that income liabl .....

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7; 2,34,80,483/-. Thereafter, assessment came to be concluded on 21.07.2006 making additions in regard to investments on the ground that such investments were made outside the books and out of undisclosed sources. 4. The assessing Officer had issued notice under Section 148 of the Act to re-open the assessment concluded on 29.10.2004 on the ground that he was in receipt of information that the Directorate of Revenue Intelligence has established that undisclosed payments had been made by the asse .....

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opinion that the assessee has not disclosed his true and correct income and that income chargeable to tax has escaped assessment by relying upon the judgment of Hon'ble Apex court in the case of COCO COLA EXPORT CORPORATION ETC. vs INCOME TAX OFFICER AND ANOTHER reported in (1998) 231 ITR 200 (SC). 5. Revenue pursued the matter before the Tribunal by filing an appeal and the appellate Tribunal as already noticed hereinabove, affirmed the order of the CIT (Appeals) by reiterating its order da .....

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ing that re-opening of assessment based on the show cause notice issued to the assessee by the Directorate of Revenue Intelligence cannot be treated as information for the purposes of re-opening assessment by relying upon the judgment of the Hon'ble Apex Court in COCO COLA's case referred to supra inasmuch as, the said judgment was rendered in the context of unamended provision of Section 147 of the Act and the assessing Officer is empowered to re-open the assessment if he has reason to .....

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the issue in favour of the assessee after concluding that for alleged violation of Customs Law, the income tax authorities cannot re-open the concluded assessment and same cannot be the basis for formation of opinion. Hence, she prays for dismissal of the appeal by answering the substantial questions of law in favour of the assessee. In support of her submission, she has relied upon the judgment of Hon'ble Apex Court in COCO COLA EXPORT CORPORATION ETC. vs INCOME TAX OFFICER AND ANOTHER repo .....

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sputedly based on the return of income filed by the assessee for the year 2003-04, same was sought to be re-opened under Section 147 of the Act and as such, a notice under Section 148 of the Act came to be issued to the assessee on 12.05.2005. The records would indicate that the jurisdictional assessing officer before issuance of such notice has opined as under to re-open the concluded assessment: "The assessee M/s United Racing & Bloodstock Breeders Ltd., has filed return of income for .....

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fied at ₹ 89,43,152/-. The assessee thought has appealed against such quantification, paid the duty. Under theses circumstances, there is investment made by the assessee outside the books towards such under invoiced portion while importing horses. The following two purchases of horses made in November 2002 & February 2003, relate to A.Y 2003-04. 1. Tuscan 2. Brave Act Consequent to receipt of this information which was not furnished by the assessee either in the return filed or during .....

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nt for the year 2003-04 on 29.10.2004 has issued the notice for its re-opening and the reason assigned as could be discerned from the order sheet was on account of the information which has been secured from the Directorate of Revenue Intelligence, Mumbai Zonal Unit, I floor, Construction House, Ballard Estate, Mumbai that assessee had indulged in under invoicing its imports and consequent to investigation, the suppressed customs duty payable by the assessee has been quantified at ₹ 89,43, .....

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pay differential customs duty of ₹ 35,69,994.68 and interest @ 18% from 15.04.2005 to 25.04.2005 on ₹ 8,90,391/-. 13. Section 147 of the Act prior to its amendment which was undisputedly from 01.04.1989 is substantially different from what it existed after amendment. The scope and effect of the amendment to Section 147 came to be considered by the Hon'ble Apex Court in ASSISTANT COMMISSIONER OF INCOME TAX vs. RAJESH JHAVERI STOCK BROKERS (P) LTD., reported in (2007) 291 ITR 500 .....

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escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Delhi High Court in Central Provinces Manganese Ore Co. Ltd. v. ITO (1991) 98 CTR (SC) 161: (1991) 191 ITR 662 (SC), for initiation of action under Section 147(a) (as .....

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terials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. Selected Dalurband Coal Co. Pvt. Ltd. [(1996) 132 CTR (SC) 162: (1996) 217 ITR 597 (SC)]; Raymond Woollen Mills Ltd. v. ITO [(1999) 152 CTR (SC) 418: (1999) 236 ITR 34 (SC). 17. The scope and effect of section 147 as substituted with effect from 1st April, 1989, as also Sections 148 to 152 .....

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aped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under Section 148 read with Section 147(a). But under the substituted Section 147 existence of only the fi .....

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(supra) which was also referred to by the appellate authorities has contended that, though Section 147 of the Act has been amended with effect from 01.04.1989, the twin conditions existing in the pre-amended Section 147 of the Act is not wiped out in its entirety and in the substituted Section 147 of the Act, the first condition as it was existing has still remained namely, assessing Officer should have "reason to believe" for re-opening the assessment already concluded and he cannot r .....

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be proved at that stage itself. Our view is supported by the judgment of Hon'ble Apex Court in RAJESH JHAVERI's case referred to supra whereunder it has been held that the function of the assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to tax payers. At the stage of issuance of notice, the assessing officer would not be concerned with the final outcome of the proceedings and such exercise is alien to Section 147 of .....

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objections and thereafter assessing officer is required to pass a speaking order and dispose of the objections filed by the assessee. In fact, in the present case on hand, the assessee after receipt of notice dated 12.05.2005 has filed its return of income on 09.06.2005 along with a covering letter whereunder assessee has not called upon the assessing Officer to furnish the reasons for re-opening the concluded assessment. Records also do not disclose about assessee having sought for reasons from .....

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rmed an opinion about there being escapement of income of the assessee chargeable to tax. As to whether the said "reason to believe" of such escapement of income to tax by the assessee is justifiable or not, would not be an exercise which can be undertaken by the assessing Officer at the stage of issuing of notice. In that view of the matter, contention of the assessee cannot be accepted. 18. The judgment of Hon'ble Apex Court in COCO COLA's case very heavily relied upon by the .....

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ion on these counts had been permitted than permissible as stipulated in these two letters, which undisputedly was clear from the very letters that the Government had reviewed such remittance facilities on different counts which was afforded to the assessee (therein) in the past and had decided that continuance of remittance facilities to the appellant would now be subject to conditions set out in the paragraphs indicated in the said letter and subject to acceptance in writing of the appellant. .....

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ficer had held that he has "reason to believe" that income of assessee chargeable to tax had escaped assessment. Hence, we are of the view that said judgment would not come to the rescue of the assessee. 19. In that view of the matter, we are of the considered view that CIT(Appeals) as well as the Appellate Tribunal were not justified in arriving at a conclusion that re-opening the assessment under Section 147 of the Act by issuance of notice under Section 148 by the assessing Officer .....

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