TMI Blog2017 (8) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... eopening the assessment under Section 148 of the said Act would not at all be justified. - Decided in favour of assessee. - Writ Petition No. 678 & 679 of 2013 - - - Dated:- 25-7-2017 - F.M. Reis And Nutan D. Sardessai, JJ. J. Mistry, Senior Advocate, S. Karpe, Nishant Thakker and Ms. Asmita Tirodkar, Advocates for the Petitioner Ms. Susan Linhares, Junior Central Govt. Standing Counsel for the Respondent. JUDGMENT ( Per F. M. Reis, J. ) Heard Mr. J. Mistry, learned Senior Counsel appearing for the petitioner and Ms. Susan Linhares, learned Counsel appearing for the respondents No.1 to 4. 2. The petitioner in the above petitions prays for a writ of certiorari or any other writ or appropriate orders, to set aside the Notices dated 28th March, 2012 and 29th March, 2012 and also to quash and set side the impugned Order dated 27/09/2013. 3. It is the case of the petitioner that the petitioner is a citizen of Canada from 1992 and a permanent resident of Dubai, since 2001 and he is a Non-Resident Indian. Under the Income Tax Act, 1961 ( Act for short) for the Assessment Year 2005-06, the petitioner is entitled to the benefit of the Double Tax Avoidance Ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by an order dated 24.12.2007 under Section 143(3) of the said Act, making no addition to the income declared by the petitioner. But, however, on 29/03/2012, the petitioner received a notice under Section 148 of the said Act for escapement of income and more so, from the respondent No.3. The petitioner responded to the said notice and requested the respondent No.3 to consider the original returns filed by him on 26/07/2005, as returns in response to the impugned notice and further requested the respondent No.3 to furnish the reasons for re-opening the assessment. After a lapse of 9 months, the petitioner was surprised to receive a notice under Section 142(1) of the said Act from the respondent No.3, disclosing reasons recorded and called upon the petitioner to produce copies of his passport and substantiate his claim for the benefit under the DTAA. But, however, no reasons were in fact enclosed along with such notice. Thereafter, the petitioner, through his Chartered Accountant, once again requested the respondent No.3 to furnish to him the reasons recorded by him prior to issuance of the notice dated 28/2/2013, so as to enable the petitioner to make proper submissions. But, howeve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vide letter dated 18th March, 2013 and also on 22/3/2013. It is further pointed out that the contention that the change of opinion cannot be accepted as no opinion itself was formed by the Assessing Officer regarding the petitioner's residency status in UAE. It is further contended that the first notice dated 28/3/2012 was issued to the petitioner on Marine Drive, Mumbai address which was available with the respondents. Thereafter, another notice dated 29th March, 2012 was addressed to the petitioner at his Margao address which was served on 2/4/2012. The relevant provisions under the DTAA have been pointed out in the reply filed by the respondents. It was further pointed out that reopening of the assessment has been made on sound reasonings and not on mere suspicion as contended. The respondents, accordingly prayed that the petitions be rejected. 5. The petitioner, thereafter, filed rejoinder disputing the allegations made in the affidavit-in-reply filed by the respondents. 6. We have heard the learned Senior Counsel appearing for the petitioner, as well as the learned Counsel appearing for the respondents. The learned Senior Counsel appearing for the petitioner has rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch material to avail of the benefit of DTAA between India and UAE. The learned Senior Counsel further submits that the requirement to furnish the Tax Residency Certificate was introduced w.e.f. 01/04/2013 which has no application to the assessment year under consideration 2005-06. In support of the contention that there was no failure to fully and truly disclose the primary facts, the learned Senior Counsel has relied upon a Judgment reported in 294 ITR 101, in the case of Sesa Goa v. JCIT Ors.. It is further pointed out that the records clearly disclose that the petitioner has been frequently moving to Dubai and other places and, as such, meets the requirement to avail of the benefit. 7. On the other hand, the learned Counsel for the respondents-Revenue has pointed out that the petitioner during the course of regular assessment had only disclosed details of his stay abroad, but did not provide the material facts of being a resident of UAE and, as such, there was failure to disclose fully and truthfully all the material facts which are required for reopening the assessment. It is further pointed out that in terms of Article 1 of the DTAA, the concerned Government has to issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the reopening of assessment cannot be considered as change of opinion . Perusal of the said reasons clearly show that the only reason which led to reopening of the assessment is because the Tax Residency Certificate or any other details were not supplied by the petitioner. It is to be noted that the requirement to produce the Tax Residency Certificate was introduced in the Finance Act, 2012 with effect from 1st April, 2013. The present proceedings are in connection with the Assessment Year 2005-06 and there was no need of producing such certificate as on that date. Besides that, the requirement of stay in UAE for a period of six months, has been introduced in Article 4(b) of the amended DTAA between Indian and UAE which came into effect only from 28/11/2007. As already pointed out herein above, the subject Assessment Year is 2005-06 and, as such, the question of applying the said requirement for the subject assessment would not at all arise. In fact, it was pointed out that the details of residence were being sought to examine whether the petitioner would meet the requirement as provided in the DTAA between India and UAE. 9. Apart from that, on perusal of the original Retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those reasons alone that the validity of the notice for re-opening an assessment can be sustained. The reasons cannot be allowed to grow with age and ingenuity by devising and/or supplementing additional reasons in replies and affidavits not envisaged in the reasons recorded for re-opening the assessment. To put it simply, the validity of a notice under section 148 of the Act has to be tested on the basis of the reasons recorded for initiating the re-assessment proceedings. The reasons recorded cannot be supplemented by affidavits and other material. In this regard, Mr. Murlidharan's reliance upon the judgment of this Court in the case of Hindustan Lever Ltd. v. R.B. Wadkar, Asst. CIT (No.1) (2004) 268 ITR 332 is well founded. At pages 337 and 338, this Court held as under:- The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs under the section. The first proviso to section 147 has no application in the facts of this case. The basic postulate which underlies section 147 is the formation of the belief by the Assessing Officer that any income chargeable to tax has escaped assessment for any assessment year. The Assessing Officer must have reason to believe that such is the case before he proceeds to issue a notice under section 147. The reasons which are recorded by the Assessing officer for reopening an assessment are the only reasons which can be considered when the formation of the belief is impugned. The recording of reasons distinguishes an objective from a subjective exercise of power. The requirement of recording reasons is a check against arbitrary exercise of power. For it is on the basis of the reasons recorded and on those reasons alone that the validity of the order reopening the assessment cannot be allowed to grow with age and ingenuity, by devising new grounds in replies and affidavits not envisaged when the reasons for reopening an assessment were recorded. The principle of law, therefore, is well settled that the question as to whether there was reason to believe, within the meaning of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nds was clearly disclosed and specifically brought to the attention of the Assessing Officer. After taking these disclosures into account, the Assessing Officer passed his assessment order under section 143(3) of the Act on 31st March, 2003 and which can be found at page 147 of the paper-book. In this assessment order, the Assessing Officer specifically refers to the names of the aforesaid three mutual funds, the number of units purchased by the Petitioner and the dividend received therefrom. In the computation of income, the Assessing Officer has specifically recorded that the dividend income of ₹ 3,38,45,293/- is exempt from tax. It is on this basis that the total income computed by the Assessing Officer came to ₹ 6,81,54,960/-. All this material would clearly show that the Assessing Officer, during the regular assessment proceedings under section 143(3) of the Act, had specifically applied his mind to the dividend income earned by the Petitioner during the A.Y. 2000-2001 and on due consideration of these facts, he passed his assessment order under section 143(3) of the Act forming an opinion that the dividend income earned by the Petitioner was exempt from tax. This ..... X X X X Extracts X X X X X X X X Extracts X X X X
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