TMI Blog2011 (10) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... tralia and is a subsidiary of Cairn Energy PLC based in Edinburgh. The Company is stated to be engaged in the business of exploration and production of oil and gas in India since 1996. In the return filed for the assessment year 2003-04 on 24.11.2003, the assessee declared Nil total income under the normal provisions of the Act and book profit of ₹ 195,14,29,385/- under Section 115JB of the Act. The assessee states that it filed the tax audit report under Section 44 AB of the Act. The assessee's case was selected for scrutiny by issuance of notice under Section 143(2) of the Act. In the enquiry conducted, the assessee is stated to have filed replies and materials in support of its various claims starting from its letter dated 19.09.2005 to end on 16.02.2006. 4. Thus, a perusal of the records produced before this Court show that for nearly 8 months or so, the assessment proceedings were going on seeking various information and materials and clarification from the assessee. Ultimately, on 20.02.2006, the respondent-Income Tax Department completed the assessment under Section 143(3) of the Act. As regards the disallowance made against certain claims of the assessee in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment and (3) there was no jurisdiction to reopen assessment. The petitioner stated that there was no allegation that there had been any failure on the part of the assessee to disclose fully or truly all material facts necessary for the assessment. Hence, in the absence of valid materials, proceedings under Section 148 of the Act are totally without jurisdiction. In view of the proviso to Section 147 of the Act, the proceedings are barred by limitation. 7. In support of its contention on the aspect of jurisdiction, the assessee relied on the following decisions of this Court, Delhi High Court as well as the Supreme Court :- (1) Haryana Acylic Manufacturing Co. Vs. CIT (308 ITR 38 (Del) (2) CIT Vs Tarachand Khusiram 303 ITR 298 (MP) (3) Thiagarajar Mills (P) Ltd Vs. Deputy Commissioner of Income Tax (2009) 26 DTR 50 (Mad) (4) Fenner India Ltd., Vs. DCIT (241 ITR 672 (Mad) (5) Well Intertrade Pvt Ltd Vs. ITO (308 ITR 22 (Del.) (6) Duli Chand Singhania Vs. Assistant Commissioner of Income Tax (269 ITR 192 (P H) (7) CIT Vs. Elgi Finance Ltd (155 Taxman 124) (8) CIT Vs. Former France (264 ITR 566 (SC)) (9) Former France Vs. CIT (247 ITR 436 (All) (10) Bapalal and Company Vs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Commissioner of Income Tax Vs. (1)Kelvinator Of India LTd (2)Eicher Ltd, learned Senior Counsel pointed out that even after the amendment to Section 147 in 1989, the Officer concerned has to record his reason that the income had escaped assessment. To arrive at such a view, the Officer concerned must have valid and necessary materials providing live link for the formation of the belief. In the absence of any materials disclosed in the notice or even subsequently thereto, the question of assuming jurisdiction under Section 147 does not arise. Placing reliance on the proviso to Section 147 of the Act, he submitted that on the facts thus disclosed in the notice, no action could be taken after the expiry of four years from the end of the relevant assessment year. Even to fall under any of the clauses in Explanation (2) from (a) to (c), the respondent is duty bound to show that his reasons rested on materials in his possession. In the absence of any such materials disclosed, the reassessment proceedings has to fail. 10. Referring to the reply filed at the time of the original assessment proceedings, in respect of TDS made both under Section 44AB of the Act as well as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the officer resorting to Section 147 of the Act. Learned Standing Counsel pointed out that the mere fact that the assessee had given certain details would not automatically fall under the phrase that there was 'true and full disclosure of all material facts'. The Assessing Officer has recorded his reasons to believe that the income of the assessee company had escaped assessment. Rightly, the proceedings were initiated to reopen the assessment to bring to tax the income that had escaped assessment. 13. In support of his contention, learned Standing Counsel for the Income Tax Department placed reliance on the decision of this Court in the case of Tamil Nadu Petroproducts Ltd Vs. Commissioner of Income Tax reported in (2011) 11 Taxmann 311 (Mad), in the case of Ankita Deposits and Advances (P) Ltd Vs. Commissioner of Income Tax reported in (2010) 235 CTR(HP) 273, in the case of Honda Siel Power Products Limited Vs. The Deputy Commissioner of Income Tax And Another reported in (2011) 197 Taxman 415 (Del) in W.P.No.9036 of 2007 dated 14.02.2011. Relying on the decision of the Delhi High Court, learned Standing Counsel for the Revenue contended that the proceedings initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so 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 an in-built test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there in tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Our view gets support from the changes made to Section 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 139 or in response to a notice issued under Sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year. Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. A reading of the said provisions thus show that when an assessment is made under Section 143(3), a proceeding taken to reopen the assessment under Section 147 must first satisfy that the income chargeable to tax has escaped assessment by reason of (1) failure to make a return under Section 139 or in response to Section 141(1) or Section 148 or (2) to disclose fully and truly all material facts necessary for the assessment. Thus, the fundamental aspect of reopening is that the order of assessment suffers under-assessment on account of want of material facts and such a situation has arisen on account of the assessee not placing fully and truly all material facts necessary for assessment and but for which, the occasion to reopen would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er reported in 308 ITR 22 (Del), (3) Duli Chand Singhania Vs. Assistant Commissioner of Income Tax reported in 269 ITR 192 (P H), (4) Fenner India Ltd Vs. DCIT reported in 241 ITR 672 (Mad) and (5) the unreported decision of the Delhi High Court dated 31.05.2011 in W.P.No.7789 of 2010 etc. It is no doubt true that under Explanation 2, Sub clause (c) narrates the instances which enables the Officer to assume jurisdiction under Section 147 of the Act viz., (i) where the income chargeable to tax has been underassessed ; (ii) income has been assessed at too low a rate ; or (iii) income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed. Even to come under any of the clauses referred to above, unless and until the department is in a position to show tangible material' leading to an inference that there is income escaping assessment, as the Apex Court pointed out unless the reasons have a live link to the formation of belief, the mere belief that the income chargeable to tax is the subject of excessive relief or under assessment, per se, would not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d would be vitiated. 22. In the light of the above said enunciation of law, there being no allegation that the assessee had not disclosed truly and fully the material facts, on the mere allegation that the claim would not fall under Section 44BB of the Act, the Officer could not review his order in the guise of exercise of power under Section 147 to reopen the assessment and there cannot be any assumption of jurisdiction under Section 147 of the Act. 23. As to the decisions relied on by the petitioner already referred to above, I do not think that it is necessary to deal with each of the decisions referred to by the learned counsel independently since all of them are as regards the same enunciation of law. 24. As regards the decision in the case of Tamil Nadu Petroproducts Ltd Vs. Commissioner of Income Tax reported in (2011) 11 Taxmann 311 (Mad) rendered in W.P.Nos.28457 of 2008 and 19260 of 2009 dated September 17, 2010 relied on by learned Standing Counsel for the Revenue is concerned, the same has to be seen in the light of the facts therein. This Court pointed out that the reassessment proceedings were initiated based on the information available on record relating t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on going through the records, the authorities came to the conclusion that the holding of shares was by way of stock in trade. In the light of the factual finding, the Himachal Pradesh High Court upheld the notice issued by the Assessing Officer and held that the Assessing Officer was justified in reopening the assessment. 26. As far as the decision of the Delhi High Court in the case of Honda Siel Power Products Limited Vs The Deputy Commissioner of Income Tax and another reported in (2011) 197 Taxman 415 (Delhi) relied by the Revenue is concerned, the said decision rests on the facts of the case. The issue therein related to the claim of the Revenue that the income chargeable to tax amounting to ₹ 98.46 lakhs was found to have escaped assessment by reason of the assessee not disclosing the details fully and truly. The Revenue pointed out that the Tax Audit Report mentioned a sum of ₹ 1,07,69,936/- as the amount written back under Section 41 of the Act. A sum of ₹ 9,23,471/- was specifically added in the profit and loss account under the head 'other income' leaving ₹ 98.46 lakhs and was added back under different heads, but was not separately in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the assessment called for proportionate disallowance under Section 40(a)(i) of the Act. In the light of the fact that the assessee had specifically dealt with the same in its reply given and the accounts produced, there being no other materials disclosed on a view held by the Assessing Officer the proceedings deserved to be quashed by this Court. As regards the second view taken by the Officer in the notice that there was no TDS found to have been made on the payment of reimbursement of actual expenses and time cost charges to its associated enterprises abroad, the notice does not disclose any materials on the formation of belief, consequently, I have no hesitation in rejecting the plea of the Revenue. 29. As already pointed out even though the assessee has an alternative remedy to canvass the merits of reassessment under the various provisions of Statute, a reading of the notice leaves no manner of doubt that it is more in the nature of review of the assessment made than in the nature of reopening. 30. In the light of the above, on the ground of relevant materials not being there to justify the formation of belief as to the escapement of income, there being, no allegation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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