TMI Blog2015 (9) TMI 1124X X X X Extracts X X X X X X X X Extracts X X X X ..... pening is permissible after audit party expresses on opinion on a question of law is now being considered by a larger Bench of the Supreme Court. There can be no dispute that the audit party is entitled to point out a factual error or omission in the assessment. Re-opening of the case on the basis of a factual error pointed out by the audit party is permissible under law. ..” In view of above conclusion that the re-opening of the assessment resorted to by the respondent is valid in law, all the other grounds raised on behalf of the petitioner, such as, unabsorbed depreciation of earlier years and carried forward losses can be set off against income computed under Sections 68, 69 and 69A of the Act, applicability of Section 115BBE and parallel proceedings under Sections 154 and 147 cannot be undertaken simultaneously, etc., in my opinion, are the subject matter of the appeal inasmuch as, as against the impugned proceedings, the petitioner is having an efficacious remedy. W.P. dismissed. - Writ Petition No. 1626 and 2057 of 2015 And M.P. Nos. 1 & 1 of 2015 - - - Dated:- 11-6-2015 - MR. S.VAIDYANATHAN, J. For The Petitioner : Mrs.Nalini Chidambaram, in both WPs. SC for Mr.R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lose fully and truly all the materials at the time of completion of the original assessment. It is seen that vide letter dated 19.12.2013, the petitioner company, requested the respondents to provide the reasons for re-opening of the assessment 2008- 09 after a period of four years. 2. In the meanwhile, the CIT (A), vide order in ITA No.605/13-14 dated 27.3.2014 deleted the addition of ₹ 377,71,78,316/- being on account of foreign direct investment (FD) and thus partly allowed the appeal filed by the petitioner company. Thereafter, vide order under Section 143(3) read with Section 254 of the Income Tax Act, 1961 dated 5.8.2014 gave effect to the order of the CIT(A)-V in ITA No.605/13-14 dated 27.3.2014 and revised the rectification order under Section 154 of the Act, dated 6.9.2011 and calculated the total taxable income at NIL and unabsorbed depreciation at ₹ 11,94,62,024/-. According to the petitioner, despite the rectification order under Section 154 and also giving effect order under Section 254, the respondents continued his parallel proceedings under Section 147 of the Act for the impugned assessment year and issued reasons for re-opening vide letter dated 8.12 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed additions. The petitioner has submitted the reply to the said show cause notice and after considering the same, the impugned order was passed. Therefore, before passing the impugned order, the petitioner was provided an opportunity. Since, there was a reason to believe that income has escaped assessment, the income chargeable to tax has escaped assessment within the meaning of Section 147 of the Act, a notice under Section 148 of the Act was issued and the reasons were recorded for reopening the assessment and the petitioner has participated in the said reassessment proceedings by filing objections and reply to the show cause notice. It is stated that though the assessment order was passed on 20.1.2015, the date on the demand notice was inadvertently mentioned as 21.1.2015 and there is no bar under the Act that the demand notice is also to be dated as that of the assessment order. It is only a typographical error which was set right by passing a corrigendum on 4.2.2015 and thereby denied that the order was ante dated as alleged by the petitioner. It is also stated that the impugned notice has merged with the re-assessment order, dated 20.1.2015 impugned in W.P.No.2057 of 2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d hence, it is not sustainable. She contended that parallel proceedings under Section 154 and 147 of the Act cannot be undertaken simultaneously and that the Assessing Officer ought not to have refused to set of unabsorbed depreciation of the year years and carried forward loss against deemed income under Sections 68 and 69A. She has further contended that the impugned proceedings were initiated only based on the audit report and the respondent has not applied his mind and only in circumstances where the audit party expresses its opinion on a question of law, re-opening of assessment based on audit objection is permissible. Therefore, the impugned notice under Section 148 of the Act based on an audit objection, which is not a valid ground to reopen a concluded assessment under Section 147 of the Act. She pointed out that the Assessing Officer has refused to set of unabsorbed depreciation of earlier years and carried forward losses against income computed under Sections 68, 69 and 69A of the Act by relying upon Section 115BBE, which was introduced by Finance Act, 2012 with effect from 01.04.2013 which cannot operate prospectively and since the issue under consideration in the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... action after the expiry of four years from the end of the assessment year. Such escapement must be by reason of the failure on the part of the assessee either to file a return referred to in the proviso or to truly and fully disclose the material facts necessary for the assessment. Unless, the condition in the proviso is satisfied, the Assessing Officer does not acquire 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 proceedings. If the Assessing 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 with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re the Assessing Officer of account books or other evidence from which material evidence could, with due diligence, have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.--For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely: (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to incometax; (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 underassessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empowers the Assessing Officer to assess or reassess the income in the circumstances mentioned therein. The power to reopen an assessment under Section 147 is in the nature of an exception to the general principle that an assessment order once made would be final. The power to reopen an assessment is not unbridled or unrestricted and it is subject to the proviso embodied in the section itself. The proviso prescribes restrictions on the power of reopening the assessment by limiting the time period to four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment by reason of failure on the part of the assessee (i) to submit a return under Section 139, or (ii) to respond to the notices issued under Section 142(1), or (iii) to respond to the notices issued under Section 148, or (iv) to disclose fully and truly all material facts necessary for the assessment of the income for that assessment year. Explanation 1 to Section 147 lays down that mere production of the books of account or other evidence from which the Assessing Officer could, with due diligence, have discovered certain facts would not amount to disclosure within the meanin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elevant assessment year, power of the Assessing Officer is restricted by the limitations imposed under the proviso, as stated earlier. 13. Section 147 of the Act is the source of power of the Assessing Officer for reopening of the assessment. Section 148 contains procedural restrictions for issuance of a notice for exercise of the power of reopening of an assessment conferred under Section 147. Section 149 prescribes the time limit for issuance of a notice under Section 148. Therefore, the conditions laid down under Section 147 of the Act for the purposes of reopening the assessment must be satisfied before the notice can be issued. The conditions laid down in Section 147 are the jurisdictional facts necessary for the purpose of exercise of the power under Section 147. The jurisdictional facts prescribed under Section 147 must exist before a notice under Section 148 can be issued. The time limit prescribed under Section 149 of the Act for issuance of a notice under Section 148 is in addition to and not in derogation with the necessary conditions required to be satisfied under Section 147 of the Act. In other words, if the basic jurisdictional facts required for reopening of an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f failure of the assessee to disclose fully and truly all material facts. 14. In the present case, it is not in dispute that the petitioner filed returns of income for the assessment year 2008-09, declaring loss of income at ₹ 14,07,72,863/- and later on 26.3.2009, revised returns were filed declaring loss of 17,47,251. Thereafter, the assessment under Section 143(3) of the Act for the year 2008-09 has been concluded on 31.12.2010 determining the total income at ₹ 415,20,26,520/- and the demand payable at ₹ 187,31,76,820/-. It is pertinent to note that in the original returns filed on 30.9.2008 as well as in revised returns on 26.3.2009, the petitioner had not disclosed the material regarding the unabsorbed depreciation and business loss of earlier years, which according to the petitioner, since it was a loss return, the petitioner did not claim the same. It is only on 25.1.2011, a petition was moved under Section 154 of the Act, seeking rectification on the ground that there were mistakes apparent from records relating to certain additions such as Fringe benefit tax(FBT), non-allowing of brought forward losses and depreciation of earlier years. By proceedings, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y without giving benefit of setting off the deemed income under Section 69A with brought forward business loss and unabsorbed depreciation. 16. The main contention of the petitioner is that there is no failure on the part of the petitioner in not disclosing fully and truly all materials facts necessary for the assessment year under consideration and in the absence of the same, the assumption of jurisdiction by the respondent under Section 147 of the Act, after expiry of four years from the end of the relevant assessment year, is illegal and invalid and thereby, the impugned proceeds cannot be sustained. This contention raised on behalf of the petitioner, in my considered opinion, is fallacious and has no force at all. It is curious enough to note that as observed above, in the original returns filed by the petitioner on 30.09.2008, the petitioner had not at all disclosed fully or truly all material facts regarding the income, viz., unabsorbed depreciation and business loss and depreciation, which the Assessing Officer has reason to believe that the same has escaped assessment within the meaning of Section 147 of the Act. Therefore, when admittedly, the material which is the subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of matter wherein, the reassessment has been resorted beyond the period of four years. 17. As regards the contention that the reassessment based on audit report without independent application of mind by the Assessing Officer is not sustainable, is concerned, I do not find any force in the said contention since the respondent has given cogent reasons in his speaking order, dated 12.1.2015 while rejecting the objections raised by the petitioner, for re-opening of the assessment and therefore, it cannot be stated that the respondent has not applied his mind and solely resorted to based on the audit report. In fact, the audit party is entitled to point out a factual error or omission in the assessment and it is settled law that re-opening of the case on the basis of a factual error pointed out by the audit party is permissible under law. It has been held so in the case of CIT versus P.V.S.Beedis reported in (237 ITR 13), wherein, the Hon ble Supreme Court has held as under: The dispute as to whether reopening is permissible after audit party expresses on opinion on a question of law is now being considered by a larger Bench of the Supreme Court. There can be no dispute that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitution when he had adequate remedy open to him by an appeal to the Commissioner of Income Tax (Appeals). The remedy under the statute, however, must be effective and not a mere formality with no substantial relief. In Ram and Shyam Co. v. State of Haryana40this Court has noticed that if an appeal is from Caesar to Caesar s wife the existence of alternative remedy would be a mirage and an exercise in futility. 17. In the instant case, neither has the writ petitioner assessee described the available alternate remedy under the Act as ineffectual and non-efficacious while invoking the writ jurisdiction of the High Court nor has the High Court ascribed cogent and satisfactory reasons to have exercised its jurisdiction in the facts of the instant case. In light of the same, we are of the considered opinion that the writ court ought not to have entertained the writ petition filed by the assessee, wherein he has only questioned the correctness or otherwise of the notices issued under Section 148 of the Act, the reassessment orders passed and the consequential demand notices issued thereon. 19. In view of the above discussion, the Writ Petitions fail and they are dismissed. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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