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Karamchand Appliances P. Ltd., S.C. Johnson Products Pvt Ltd & Another, Formerly Karamchand Appliances P. Ltd. & Another Versus Deputy Commissioner of Income Tax

2017 (11) TMI 1033 - DELHI HIGH COURT

Reopening of assessment - “reasons to believe" - change of opinion - Held that:- What is the “tangible material” which compelled the AO, in all these four cases, to issue the impugned reassessment notices? None absolutely. This is not a case of the kind visualized, in Phoolchand (1993 (7) TMI 1 - SUPREME Court), where something relating to a past year comes to light in the course of assessment in a later assessment year; nor is the revenue arguing that some new and significant information about .....

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n 263. That such jurisdiction cannot be exercised for some reasons, would not entitle the revenue to resort to reassessment, which in this case, is nothing but impermissible review. Considering that the reassessment is premised on reasons which were explicitly gone into (evident from queries to the assessee during the original assessment) for previous years, in the three writ petitions, the notices are clearly unsustainable. - Non issue of notice - As far as one year, goes additionally, the .....

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- S. Ravindra Bhat And Sanjeev Sachdeva, JJ. For the Petitioner : C.S. Aggarwal, Sr. Advocate with Sh. Prakash Kumar, Advocate For the Respondent : Sh. Ashok. K. Manchanda, Sh. Raghvendra Singh and Sh. Anand. K. Chaudhuri, Advocates ORDER Mr. Justice S. Ravindra Bhat 1. In these proceedings under Article 226 of the Constitution of India, the assessee has questioned orders issued by the Assessing Officer (AO) proposing to re-open completed assessments for previous years. For AY 2000-01 (which is .....

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Impex (P) Ltd. (2003) 259 ITR 403 (Mad.) and by Kerala High Court in the case of CIT Vs Cochin Refineries Ltd. (1982) 135 ITR 278 (Ker) that the used of the term "derived from" in the relevant provision of the Act indicates the restricted meaning to cover only the profits and gains directly accruing from the conduct of business undertaking. 5. The interest income of ₹ 1,73,09,543/- is in the nature of "income from other sources" and it has not been derived from the ind .....

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ed in that section, for the purpose of computing deduction under that section, the amount of income of that nature as computed in accordance with the provision of this Act ( before making any deduction under this chapter) shall alone be deemed to be the amount of income of that nature which is derived or received by the assessee and which is included in his gross total income. 7. The assessee incorrectly claimed chapter VI-A deductions on income which included income from other sources i.e. inte .....

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scrutiny assessments) was issued. The notice for AY 2003-04 observed that the return was filed, disclosing an income at ₹ 26,93,63,940/-; it had claimed deduction under Section 80-IB of the Act at ₹ 77,89,40,725/ The assessee manufactures mosquito repellants and has also traded, during the year in aerosols, oil spray, hand pumps, mats and coils. It had claimed deduction u/s 80-IB in respect of three units. The AO stated, in the impugned notice that: (a) in Para- (i) of notes of unit .....

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of production cost and clearance made by each unit and further, in the Notes that various expenses have been allocated on the basis of domestic sales. However, there were certain expenses claimed in consolidated Profit and Loss Account which catered to the needs of all units uniformly since there is one business of the Assessee Company and are not unit specific. Such expenses are advertisements and sales promotion ₹ 29,45,33,370/-. These expenses have to apportion according to sales which .....

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profit and loss accounts led to excess deduction under Section 80IB to the extent of ₹ 1,73,77,558/-. In this petition, it is urged that the notice under Section 143 (2) was issued on 28.07.2006, but was not pursued. The assessment, therefore, was time-barred. Consequently reassessment is impermissible. Learned counsel relied on Principal Commissioner v. Silver Line (2016) 383 ITR 455 (Delhi)(HC) in this regard. 4. In the three writ petitions, the assessee argues that without any new or t .....

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khmani Mewal Dass (1976) 103 ITR 437 (SC) holds that reasons for the formation of the belief must have a rational connection with or relevant bearing on the formation of the belief. Rational connection postulates that there must be a direct nexus or live link between the material coming to the notice of the Income Tax Officer and the formation of his belief that there has been escapement of the income of the assessee from assessment in the particular year because of his failure to disclose fully .....

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aterial that came to the knowledge of the AO. Therefore, the reassessment notices were unsustainable. 6. In W.P.(C) 8177/2008, the reassessment notice issued to the assessee by the revenue on 31.03.2008 (for AY 2001-2002) premises itself on the circumstance that in the original assessment, the assessee had claimed interest income as part of its exempt income, miscellaneous income and interest income, to the extent of ₹ 1,02,59,261/- which was not permissible, given the language of Section .....

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in the original proceeding. Learned senior counsel relied upon the decision of Supreme Court in Commissioner of Income Tax v Kelvinator (India) Ltd (2010) 320 ITR 561, to say that in the absence of fresh tangible material the revenue is precluded from a second look at the assessment order as it would amount to an opinion. It is also argued that for the year 2005-06 the decision in Principal Commissioner v. Silver Line (2016) 383 ITR 455 (Delhi)(HC) is squarely applicable, because notice under Se .....

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me Court held as follows: "27. Since the belief is that of the Income- tax Officer, the sufficiency of reasons for forming the belief, is not for the Court of judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non- specific information. To that limited extent, the court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any m .....

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w. Whenever income escapement comes to light, the AO can look into the records to see whether the disclosure made was full and contained material particulars. Learned counsel relied on the decision of this court in Commissioner of Income Tax v Usha International 348 ITR 485 (Del), particularly the following observations: If new facts, material or information comes to the knowledge of the Assessing Officer, which was not on record and available at the time of the assessment order, the principle o .....

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ilable should relate to material facts. The expression material facts' means those facts which if taken into account would have an adverse affect on the assessee by a higher assessment of income than the one actually made. They should be proximate and not have remote bearing on the assessment. The omission to disclose may be deliberate or inadvertent. The question of concealment is not relevant and is not a precondition which confers jurisdiction to reopen the assessment. 17. Correct materia .....

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d below: "147. - Income Escaping Assessment - If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any oth .....

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nt year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Explanation 1.-Production before 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 a .....

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d that the mere disclosure of that transaction at the time of original assessment proceedings, cannot be said to be disclosure of the "true" and "full" facts in the case and the I.T.O. would have the jurisdiction to reopen the concluded assessment in such a case. That decision had taken note of Lakhmani Mewal Dass (supra) and Calcutta Discount Ltd. v. ITO [1961] 41 ITR 191. In Calcutta Discount Co. (supra) it was held that the assessee s prime obligation is to disclose fully .....

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