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

2015 (9) TMI 1124 - MADRAS HIGH COURT

2015 (9) TMI 1124 - MADRAS HIGH COURT - [2016] 382 ITR 582 - Reopening of assessment - Held that:- 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, 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 therefor .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 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 th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ngs, 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.Sivaraman For The Respondents : Mr.Pramod Kumar Chopda in both W.Ps. Mr.Rajkumar Jabhak ORDER The petitioner company is a public limited company engaged in the business of infrastructure and development. It is assessed to Income Tax on the file 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

t. 1961 (in short, the Act) and it was selected for scrutiny and a notice under Section 143(2) was issued, calling for the details. Pursuant to the same, the petitioner filed all the details called for by the respondents from time to time. During the scrutiny of the assessment, having considered the materials placed before them, the respondents had completed the assessment under Section 143(3) of the Act on 31.12.2010, determining the total income at ₹ 415,20,26,520/-. Thereafter, it appea .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

itioner company at ₹ 365,77,16,292/-, thereby allowing the unabsorbed loss and depreciation. It is stated that the petitioner had also filed an appeal against the assessment order passed under Section 143(3) of the Act, dated 31.12.2010 before the CITA (A)-V in ITA No.605/13-14(A)-V. While so, after a period of four years, the respondent, by notice dated 10.2.2013 issued under Section 148 of the Act, sought to re-open the concluded assessment under Section 143(3), which according to the pe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

014 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 .....

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 Act. However, according to the petitioner, without deciding the jurisdictional issue, the respondent passed order, dated 12.1.2015, holding that the proceedings under Section 147 have been rightly initiated and rejected the objections raised by the petitioner. 3. It appears that along with the above said rejection order, dated 12.1.2015, the respondent had issued a show cause notice dated 12.1.2015, calling upon the petitioner to file their objections on or before 19.1.2015 to complete the r .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r, later it came to know that the re-assessment order was passed on 21.1.2015 and dispatched to the petitioner by speed post. 4. According to the petitioner, the respondent, without giving any opportunity of being heard, passed the impugned order on 20.1.2015 itself, whereas the notice of demand was issued on 21.1.2015, wherein, it was stated that the re-assessment was passed on 20.1.2015. The respondent dispatched the impugned order dated 10.1.2015 by speed post on 22.1.2015 at about 3.14 p.m. .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

re communicated to the petitioner. Pursuant to the same, the petitioner filed objections, which were considered and disposed of by a speaking order. Thereafter a show cause notice was issued, calling for explanation on the proposed 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 believ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ed 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 and hence, the writ petition in W.P.No.1626 of 2015 challenging the impug .....

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 head of income specified in Chapter IV of the Act and therefore, the petitioner is not entitled to set off and carry forward of losses as under Section 72 of the Act. This has been clarified by insertion of a specific section namely Section 115BBE. The above said aspect was not adjudicated in the assessment order and therefore, the question of change of opinion as contended by the petitioner is not valid and is only self service statement. It is also pertinent to note that the CIT (A) has up .....

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 assessment by reason of failure on the part of the petitioner to disclose fully and truly all material facts necessary for the assessment which is a precondition for reopening the assessment, which is untenable and that the notice merely stated that the Assessing Officer has reason to believe that the income chargeable to tax for the assessment year 2008-09 has escaped assessment and such ground is available only if the notice is within four years of the assessment year. According to learned s .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ation in the present case is pertaining to assessment year 2008-09 and hence, Section 115BBE will not apply to the facts of the present case. In support of her contentions, the learned senior counsel relied upon the following decisions, viz., i) CIT versus DRM Enterprises reported in (2015) 55 Taxmann.com 181 (Bombay) Once the audit party raised objections, one of which was not accepted, then, the Assessing Officer was expected and in the given facts and circumstances to record reasons for his b .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

to be opened beyond a period of four years from the end of relevant assessment year, two jurisdictional conditions have to be cumulatively satisfied: a) there must be reason to believe that income chargeable to tax has escaped the assessment and (b) such escapement of income should have arisen on account of failure on the part of the assessee to fully and truly disclose all material facts necessary for the assessment. The exercise of jurisdiction has to be examined on the basis of the reasons r .....

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, had examined the claim in detail after raising queries which were fully answered by the assessee, such action of reopening cannot be sustained in such circumstances. iv) Jagat Jayantilal Parikh versus DCIT (2013) 355 ITR 400 v) Fenner (India) Ltd. Versus DCIT (2000)241 ITR 672 (Mad) Mere escape of income is insufficient to justify the initiation of 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

he 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 reco .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

however, later on request of the petitioner, reasons were intimated in conformity the provision of Section 147 of the Act and after considering the objections raised by the petitioner, the impugned proceedings were issued. 9. A notice under Section 148 of the Act, dated 10.12.2013 has been issued to the petitioner proposing to re-assess the income for the assessment year 2008-09 by the respondent, since the respondent has reason to believe that the income in respect of the said assessment year h .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ourse of the proceedings under this section, or re-compute the loss of or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year) : Provided that where an assessment under Sub-section (3) of Section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the e .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

een assessed at too low a rate; or (iii) such 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. 148. Issue of notice where income has escaped assessment.-(1) Before making the assessment, reassessment or recomputation under Section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

uing any notice under this section, record his reasons for doing so. 149. Time limit for notice.-(1) No notice under Section 148 shall be issued for the relevant assessment year,- (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under Clause (b); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amoun .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dent under Section 163 and the assessment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of two years from the end of the relevant assessment year. 10. It is no doubt true that an assessment order once made is ordinarily final. Section 154 of the Act confers a power of rectification of mistakes apparent from the record. Section 147 of the Act empowers the Asse .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rom 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 producti .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ions must exist, viz., (i) The Assessing Officer must have a reason to believe that any income chargeable to tax has escaped assessment for the any assessment year. The expression "reason to believe" does not mean a purely subjective satisfaction on the part of the Assessing Officer. The reason must be held in good faith. It cannot be merely a pretence. It is open to the court to examine whether the reasons for the formation of the belief has a rational connection with or a relevant be .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ssued under Section 142(1) or 148 of the Act, or (c) to disclose fully and truly all the material facts necessary for his assessment of income for that year. 11. Therefore, it is clear that both the aforementioned conditions imposed must co-exist to confer jurisdiction on the Assessing Officer to reopen the assessment under Section 147. Sub-section (2) of Section 148 of the Act makes it imperative for the Assessing Officer to record his reasons before initiating proceedings. Where a notice under .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

so to that section. However, after the expiry of four years from the end of the relevant 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 prescribe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 assessment under Section 147 of the Act do not exist it would not be competent for the Assessing Officer to issue a notice under Section 148. Even where the jurisdictional facts prescribed under Section 147 exist and all 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

restriction of four years prescribed in the proviso to Section 147 of the Act for issuance of a notice under the proviso to Section 147. The restriction of four years would be applicable unless the income chargeable to tax has escaped assessment by reason of failure of the assessee to make a return under Section 139 or in response to a notice under Section 142 or 148 of the Act or the failure of the assessee to disclose fully and truly all material facts. If the reassessment is required to be m .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

kely to have escaped assessment is less than ₹ 50,000 or ₹ 1,00,000, as the case may be, is not to permit reopening of the assessment where the tax liability would not be significant as compared with the efforts that would be required for reopening of an assessment after a passage of seven or ten years, as the case may be. To repeat, the time-limit imposed under Section 149 of the Act for issuance of the notice is not in derogation of and is not for enlarging the time restriction imp .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

,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, sin .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

; 164,97,15,480/- as against original demand for ₹ 187,31,76,820/-. Later, a notice under Section 148 of the Act, dated 10.12.2013 has been issued by the respondent proposing to reopen the assessment. It is to be noted that by proceedings, dated 8.12.2014, the respondent has narrated and communicated the reasons for re-opening the assessment under Section 147 of the Act for the assessment year 2008-09, which are extracted hereunder: The scrutiny assessment was completed under Section 143(3 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

69 A is deemed income of the assessee and does not come under any heads of income specified in Chapter IV of the Income-tax Act, 1961 and hence brought forward business loss and depreciation cannot be set off against this as per Section 72. 15. Therefore, a perusal of the above, it indicates that the Assessing Officer has a reason to believe that the income, viz., unabsorbed depreciation and business loss and depreciation, which was allowed to be set off by the respondent in revision proceeding .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

icipated in the said proceedings and by proceedings, dated 12.01.2015, the respondent has issued impugned show cause notice by way of a final opportunity, calling for explanation as to why the additions made under Sections 68 and 69A of the Act, should not be taxed separately 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

l. 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 subject matter of the proceeding .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

pondent on 6.9.2011. In such circumstances, since the original returns filed by the petitioner got merged with the rectification order, dated 6.9.2011, the period of four years has to be calculated not from the end of the relevant assessment year, but should be from the date on which, the petitioner has filed a rectification petition under Section 154 of the Act, i.e. on 25.1.2011 wherein, as already stated, for the first time, brought the subject material, viz., unabsorbed depreciation and busi .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

an embargo on the assessing officer to make reassessment beyond four years on the account of failure on the part of the assessee to fully and truly disclose all material facts necessary for assessment. Hence, the issuance of the impugned proceedings, viz., show cause notice under Section 148 of the Act, dated 10.12.2013 and the reassessment order, dated 20.1.2015 by the respondent on the ground that he has reason to believe that the income, which is chargeable to tax for the assessment year 200 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

assessment 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 aud .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rger 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. .. 18. In view of my 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 car .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

arwal, (2014) 1 SCC 603, at page 611, wherein, it has been held as under: 15. Thus, while it can be said that this Court has recognised some exceptions to the rule of alternative remedy i.e. where the statutory authority has not acted in accordance with the provisions of the enactment in question, or in defiance of the fundamental principles of judicial procedure, or has resorted to invoke the provisions which are repealed, or when an order has been passed in total violation of the principles 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

grievances, a writ petition should not be entertained ignoring the statutory dispensation. 16. In the instant case, the Act provides complete machinery for the assessment/reassessment of tax, imposition of penalty and for obtaining relief in respect of any improper orders passed by the Revenue Authorities, and the assessee could not be permitted to abandon that machinery and to invoke the jurisdiction of the High Court under Article 226 of the Constitution when he had adequate remedy open to hi .....

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