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Karti P. Chidambaram, Srinidhi Karti Chidambaram, P. Chidambaram Versus The Assistant Commissioner of Income Tax And Nalini Chidambaram Versus The Assistant Commissioner of Income Tax, The Joint Commissioner of Income Tax, The Principal Commissioner of Income Tax

2017 (11) TMI 921 - MADRAS HIGH COURT

Reopening of assessment - obligation on the part of the assessee does not extend beyond fully and truly disclosing all primary facts - Held that:- On a mere reading on the reasons for reopening clearly show that there is no allegation against the petitioner that there has been omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that year. The so called reason to believe that income chargeable to tax has escaped assessment is .....

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It is for the Assessing Officer to take an inference on facts and law based on such disclosure. If according to the respondent, his predecessor did not come to a proper inference on the facts disclosed, it is no ground to reopen the assessment, as if permitted and it would amount to a clear case of change of opinion. In the light of the above discussion, the first issue framed for consideration is answered in favour of the petitioner and against the revenue. - On 29.12.2016, the petitioner .....

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ited [2002 (11) TMI 7 - SUPREME Court]. The rebuttal dated 30.08.2016 cannot taken as an order required to be passed on the objections given by the petitioner for reopening the assessment and the manner in which the impugned assessment order has been passed is wholly illegal and the entire proceedings are flawed. The respondent while issuing the rebuttal dated 30.08.2016 did not attach any finality to the proceedings but gave an opportunity to the petitioner to make further submission. On accoun .....

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Section 148 of the Act has been issued for reopening the assessment beyond four years of the relevant assessment years for the reason that sale proceeds of coffee seeds after drying and pulping in effect amounts to sale of cured coffee seeds, in how may cases the Department construed that an assessee who has sold raw coffee after pulping and drying and has disclosed in the return that the coffee was subjected to pulping and drying disclosing the expenditure incurred thereon and claimed exemptio .....

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ned supra and there is no case in the concerned ward where application of Rule 7B(1) of the Rules has been levied by the Assessing Officer. The above facts would clearly establish that the reopening proceedings are clearly discriminatory. Accordingly this issue is answered in favour of the petitioner and against the revenue. - W.P.Nos.1589, 1590, 1843 and 1855 of 2017 and W.M.P.Nos.1556 to 1559, 1833, 1851 and 1852 of 2017 W.P.No.1589 of 2017 - Dated:- 13-11-2017 - T. S. Sivagnanam, J. For the P .....

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te of Karnataka, the writ petitions were heard together and disposed of by this common order. 2.W.P.No.1855 of 2017 is taken up as a lead case and it would suffice to refer to the facts therein as the facts in the other cases are identical. The petitioner's case is that he grows coffee and after pulping and drying, sells the coffee as raw coffee and the process of pulping and drying is completely different from curing and mere pulping and drying the coffee seeds does not result in cured coff .....

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s accepted under Section 10(1) of the Act. The petitioner would state that there are several hundreds of coffee growers including the petitioner whose income has been exempted. However, the respondent chose to issue notice under Section 148 of the Act for the subject assessment year on the ground that income chargeable to tax has escaped assessment as the petitioner has failed to disclose fully and truly all the material particulars. 3.The petitioner challenges the notice issued by the responden .....

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tioner's claim for exemption and completed the assessment which is sought to be reopened by the respondent by issuing the impugned notice on the ground that the petitioner sold the cured coffee and hence 25% of the total receipts from sale of coffee is exigible to tax. This according to the petitioner is a case of change of opinion which is not permissible under Section 147 of the Act. The petitioner would further submit that he was obliged to disclose only primary facts and not obliged to i .....

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bunal (ITAT) in the case of ITO vs. TC Abraham, ITA No.1132(MDS)/2013 dated 18.09.2015 dealing with sun dried coffee which decision was re-considered by the ITAT and the matter has been remanded to the Assessing Officer for fresh consideration. It is further submitted that without disposing of the petitioner's objections to the reopening of assessment and without passing a speaking order, the assessment could not have been completed and this is in violation of the law laid down by the Hon .....

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ith the submissions made by the petitioner and in case the petitioner wants to provide further submissions in support of his claim, the petitioner was directed to provide the same by 08.09.2016. The petitioner's authorized representative addressed the respondent by letter dated 07.09.2016 requesting for extension of time without prejudice to their challenge of the jurisdiction of the respondent to invoke Section 147 of the Act. Subsequently, a detailed submission was made on 29.09.2016 throu .....

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speaking order is passed on the objections given by the objections given by the petitioner for reopening the assessment by following the decision in the case of GKN Drive Shafts (India) Limited, however, the assessment order came to be passed which is impugned in this writ petition. 6.Mr.Sathish Parasaran, learned senior counsel appearing for the petitioner after elaborately referring to factual matrix as set out in the preceding paragraphs submitted that after receiving the reasons for reopenin .....

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petitioner. However, the respondent sent a reply to the petitioner dated 30.08.2016 styled as a rebuttal to the objection for reopening of assessment. It is submitted that this rebuttal cannot be treated as a speaking order on the objections given by the petitioner for reopening as the respondent has given further opportunity to the petitioner to make submissions in support of their claim and also afforded an opportunity of personal hearing. Thus, the mandate in terms of the judgment of GKN Driv .....

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mmissioner of Income Tax, Delhi vs. Kelvinator of India Limited reported in (2010) 2 SCC 723, Mr.Sathish Parasaran, learned senior counsel for the petitioner submitted that the concept of change of opinion is an in-built test to check abuse of power by the Assessing Officer and from the reasons for reopening, it is clear that it is a change of opinion and nothing else. Further, it is submitted that in the absence of any tangible material to come to the conclusion that income chargeable to tax ha .....

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is no other case where reopening of assessment has been done in respect of the assessment year 2009-2010 and the respondent may be called upon to disclose as to whether they have issued notices to any other similarly placed person for reopening the assessment for the relevant year. 8.Reliance was placed on the decision of the Hon'ble Supreme Court in the case of Calcutta Discount Company Limited vs. Income Tax Officer, Companies District I Calcutta and another reported in AIR 1961 SC 372 wi .....

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n the decision of this Court in the case of M/s.Jayanthi Natarajan vs. Assistant Commissioner of Income Tax in W.P.No.1905 of 2017 dated 14.09.2017. 9.M/s.Hema Muralikrishnan, learned Senior Panel Counsel for the revenue submitted that the rebuttal which was issued by the respondent vide letter dated 30.08.2016 to the objections filed by the petitioner for reopening the assessment is a speaking order and a perusal of the same would clearly show that elaborate reasons have been given dealing with .....

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e of scrutiny assessment and no opinion having been formed on the said issue, it is not a case of change of opinion. It is further submitted that the reopening is not barred by limitation in the light of the fact that in the Profit and Loss Account, agricultural income form part but the Assessing Officer did not form an opinion and therefore, the petitioner should file an appeal against the impugned assessment order. To support her contentions, the learned Senior Panel Counsel referred to the fi .....

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rused the materials placed on record. 11.Broadly three issues fall for consideration in this writ petition, namely, 1)Whether the impugned notice issued under Section 148 of the Act is on account of change of opinion of the Assessing Officer when the petitioner's case is that he has fully and truly disclosed all the details at the time of scrutiny assessment and whether any tangible material was available with the Assessing Officer to come to a conclusion that income chargeable to tax has es .....

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e growers whose claim for exemption has not been questions or reopened? 12.In the decision in the case of Commissioner of Income Tax vs. Dinesh Chandra H.Shah and others reported in 1971 (82) ITR 367 ITR, the matter arose under the Income Tax Act, 1922 pertains to an action under Section 34(1)(b) of the 1922 Act (which is in paramateria with Section 147 of the Income Tax Act, 1961). The question which was referred to the High Court was whether on the facts and circumstances of the case, the Trib .....

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the Income Tax Officer changes his opinion subsequently or the fact that he fails to notice a palpable or glaring matter earlier should not be treated as additional information coming to his notice subsequent to the assessment order and accordingly the question was answered against the revenue. The Hon'ble Supreme Court while dismissing the appeal filed by the revenue held that a mere change of opinion regarding the chargeability of income on the part of the reassessing Officer, different fr .....

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and if the concept of "change of opinion" is removed, then in the garb of reopening the assessment, review would take place. It was further pointed out that the concept of change of opinion should be treated as an in-built test to check abuse of power by the Assessing Officer. Hence, after 01.04.1989 the Assessing Officer has the power to reopen, provided there is tangible material to come to the conclusion that there is an escapement of income from assessment. The reasons must have a .....

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cts are before the assessing authority, he requires no further assistance by way of disclosure. It is for him to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. It is not for somebody else - far less the assessee - to tell the assessing authority what inferences whether of facts or - law should be drawn. Indeed, when it is remembered that people often differ as regards what inferences should be drawn from given facts, it will be mean .....

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re the Assessing Officer, he would require no further assistance by way of disclosure and he has to decide what inferences of facts can be reasonably drawn and what legal inferences have ultimately to be drawn. Thus, if from the primary facts more than one inferences can be drawn, it would not be possible to say the assessee should have drawn a particular inference nor can he be charged for any failure. 15.Having steered clear of the legal position, we need to apply the same to the facts of the .....

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jurisdiction on the respondent. Further, the respondent should record his reasons before initiating proceedings under Section 148(2) of the Act; before issuing the notice after the expiry of four years from the end of the relevant assessment year. The assessee is expected to make a true and full disclosure of the primary facts. It is thereafter for the respondent to draw an inference from those primary facts. If on a further examination either by the same officer or by a successor, the inferenc .....

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he reasons for reopening vide representation dated 13.04.2016. The respondent by communication dated 19.04.2016 furnished the reasons for reopening. On a perusal of the reasons, I find that the respondent on verification of the assessment records and the order sheet entries inferred that the Assessing Officer on scrutiny had failed to examine and deliberate on the correctness of the income reported under the head agricultural income. Further, the respondent would state that even though the asses .....

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lure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that year. The so called reason to believe that income chargeable to tax has escaped assessment is on the ground that the Assessing Officer at the time of scrutiny assessment did not examine as to whether the entire agricultural income was completely exempted or not. This can hardly be a reason to believe that income chargeable to tax has escaped assessment as it is a clear case of change .....

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case of change of opinion. In the light of the above discussion, the first issue framed for consideration is answered in favour of the petitioner and against the revenue. 17.The second issue is whether the respondent has complied with the directives in the case of GKN Drive Shafts (India) Limited. The Hon'ble Supreme Court pointed out that if the assessee desires and seeks for reasons for reopening, the Assessing Officer is bound to furnish reasons within a reasonable time and on receipt of .....

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t should have undertaken is to pass a speaking order on the objections. Unfortunately, the respondent did not do so, but sent a communication to the petitioner dated 30.08.2016 terming it as a rebuttal for objections for reopening the assessment. 18.The revenue's case is that the communication dated 30.08.2016 is an order with reasons and it is a speaking order and the respondent has complied with the directives in the case of GKN Drive Shafts (India) Limited. While it may be true that the r .....

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dent himself did not attach any finality to it. The petitioner sought for extension of time to make further submissions and accordingly the same was made on 29.09.2016. This submission appears to be an elaborate submissions bringing out the distinction between pulping and drying of coffee and curing of coffee. Further it was pointed out that the Assessing Officer erred in referring to the decision of ITAT in the case of TC Abraham as one of the reasons for reopening when the said order was modif .....

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nately, the respondent committed a mistake in the assessment order compelling him to issue a corrigendum. On 29.12.2016, the petitioner through its authorized representative appeared before the respondent and submitted a written request to keep the notice under Section 143(3) of the Act in abeyance till a speaking order is passed on the petitioner's further representation dated 29.09.2016. However, on 30.12.2016 without any opportunity to the petitioner, the impugned assessment order has bee .....

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inality to the proceedings but gave an opportunity to the petitioner to make further submission. On account of this, the petitioner had no opportunity to challenge the rebuttal dated 30.08.2016. This is one more ground to state that the proceedings are in violation of principles of natural justice. Accordingly this issue is answered in favour of the petitioner and against the revenue. 19.The third issue is whether there has been discrimination. The petitioner in the affidavit filed in support of .....

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affidavit filed by the petitioner to the counter affidavit filed by the respondent in paragraph No.20 therein, the petitioner has referred to an application filed under the Right to Information Act by one Mr.Radhakrishnan who had made an application on 25.01.2017 requesting information as to in how many cases notice under Section 148 of the Act has been issued for reopening the assessment beyond four years of the relevant assessment years for the reason that sale proceeds of coffee seeds after d .....

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