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2015 (10) TMI 542 - MADRAS HIGH COURT

2015 (10) TMI 542 - MADRAS HIGH COURT - [2016] 380 ITR 170 - Reopening of assessment - depreciation claim on dealer network and vendor network was not dwelt with during the original assessment under Section 143(3) - Held that:- Petitioner did not file any objections to the reasons for the reopening of the above assessments. Thus in the absence of any objection to the reopening, the question of disposing the objections by passing a speaking order before proceeding with the assessment as contempla .....

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URT] by following the decisions of the Apex Court in “Jai Narain Parasrampuria vs. Smt. Pushpa Devi Saraf” (2006 (8) TMI 527 - SUPREME COURT OF INDIA) as held having so participated and obtained an adverse order, now it is not open to him to turn around and contend that in the absence of the report of the CIT under s. 245D(1), the order non-suiting the petitioner for settlement is a procedural irregularity and liable to be set aside. The same is hit by the principle of acquiescence.

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spondents : Mr.Pramod Kumar Chopda, Mr.Rajkumar Jabak ORDER Aggrieved over the Notices of demand issued by the respondent under Section 156 of the Income Tax Act, 1961 (in short, the Act ), in and by which, after completing the reassessment for the years 2008-09 and 2009-2010 respectively, demanding sum of ₹ 20,70,18,160/- and ₹ 49,29,42,170/-towards tax, the petitioner has come forward with these two writ petitions. 2. The petitioner is a company engaged in the business of manufactu .....

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es contracts, leasehold properties, after service parts business personnel, operation associated with the assets and such other rights or tangible and intangible properties relating to the CCP business for a total consideration of ₹ 425,25,00,000/-. 3. According to the petitioner, for the assessment year 2008-09, return of income was filed on 30.9.2008 declaring a total loss of an amount of ₹ 17,58,19,692/- and book profit under Section 115 JB of the Act, of an amount of ₹ 55,3 .....

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appears that the Revenue has objected the same, stating that the claim of the petitioner towards the value of Dealer network at ₹ 1,63,96,03,802/- and Vendor network at ₹ 1,364,260,000 and the depreciation on the same at 25%, do not come under the category of intangible assets since the Dealer network or Vendor network is not in the nature of commercial rights under intangible assets. Therefore, the depreciation claimed by the assessee for ₹ 75,09,65,951/- on Vendor network and .....

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- on Vendor network and dealer network was proposed to be withdrawn by resorting to re-opening of the assessment under Section dated 147 of the Act and a notice, dated 5.2.2014 under Section 148 of the Act was issued. 6. These proceedings were questioned in these writ petitions. 7. Ms.Anitha Sumanth, learned counsel appearing for the petitioner has made the following contentions, viz., i) that there is a violation of procedure for re-opening of assessment since no written reasons for reopening o .....

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ues raised by the respondent in the first instance itself, which amounts to a change of opinion and hence, not tenable in law; iv) that the respondent did not have the jurisdiction to initiate proceedings for reopening the assessment since the issue of depreciation on vendor and dealer network was already considered at the time of original assessment and the petitioner in pursuant to notice under Section 142(1), had placed all details including the furnishing of BTA before finalization of the or .....

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) that as regards the reopening of the assessment for the assessment year 2008-09 is concerned, it was initiated beyond four years despite the fact that there was no failure on the part of the petitioner in disclosing material facts. 8. In support of her contentions, the learned counsel relied upon the following decisions; viz., a) GKN Drivershafts (India) Ltd., versus Income Tax Officer and others reported in (259 ITR 19), wherein, it has been held as under: However, we clarify that when a noti .....

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s, the assessing officer has to dispose of the objections, if filed, by passing a speaking Order before proceeding with the assessment in respect of the abovesaid five assessment years. b) Fenner (India) Ltd. Versus DCIT (2000)241 ITR 672 (Mad) wherein, it has been held as under: 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 the assessee .....

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fficer 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, .....

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eason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of change of opinion must be treated as an in- built test to check the abuse of power. Hence, after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is tangible material to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of .....

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nd vendor network was not dwelt with during the original assessment under Section 143(3) of the Act. Accordingly, notice under Section 148 was issued since the respondent had a reason to believe that the income has escaped assessment. 12. A perusal of the record, it appears that after issuance of notice u/s 148, dated 10.03.2014 for the Assessment Year 2008-09, the petitioner filed its return of income. Subsequently notice u/s 143(2) for AY 2008-09 dated 05.08.2014 was issued. The Petitioner s a .....

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d on 30.09.2009 is to be taken as a return in response to notice u/s. 148. Since, the return has to be filed electronically, the petitioner was directed to file the return of income electronically under notice u/s. 142(1) dated 06.08.2014. In response to the same, the petitioner filed the return of income electronically on 30.08.2014. Thereafter notice u/s. 143 (2) dated 10.09.2014 was issued. The Petitioner s authorized representative as well as the AGM Finance, appeared before the Respondent a .....

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g of the assessment for both the assessment years, the petitioner did not file any objection to the issuance of notice u/s 148. Thereafter the Petitioner s representatives appeared on 10.11.2014 and once again details in respect of issue of allowance of depreciation on dealer network & vendor network and goodwill and other details relating to reopening of the assessment was called for. The Petitioner filed letter dated 19.11.2014 seeking adjournment to furnish details as they were in process .....

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n 31.12.2014 for both assessment years. 13. Therefore, the as rightly contended by the learned counsel for the respondent that the Petitioner did not file any objections to the reasons for the reopening of the above assessments. Thus in the absence of any objection to the reopening, the question of disposing the objections by passing a speaking order before proceeding with the assessment as contemplated by the Apex Court in the case of GKN Driveshafts does not arise. On the other hand the Petiti .....

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g so participated and obtained an adverse order, now it is not open to him to turn around and contend that in the absence of the report of the CIT under s. 245D(1), the order non-suiting the petitioner for settlement is a procedural irregularity and liable to be set aside. The same is hit by the principle of acquiescence. 14. Further, it is not in dispute that as against the impugned proceedings, the petitioner is having efficacious remedy of appeal under Section 246A of the Act before the Commi .....

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ispensation. In para 19, 20 and 21, the Hon ble Supreme Court has held as under: 19. Thus, while it can be said that this Court has recognized 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 prin .....

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ssal of grievances, a writ petition should not be entertained ignoring the statutory dispensation. 20. In the instant case, the Act provides complete machinery for the assessment/re15 assessment 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 .....

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