TMI Blog2006 (10) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... stating that it is also extending its service to several customers outside India and earning commission from foreign publishers in convertible foreign exchange for such service. The assessing authority apart from finding that the petitioner had received commission from foreign enterprises for services rendered outside India, had also found that it had specialised in marketing scientific and technical knowledge and has developed several database with the help of advance computers concerning various research projects, activities, books, periodicals, corporate publications, technical reports, patents and standards for use by its foreign clients and has received commission in convertible foreign exchange in U. S. dollars and U. K. pounds. The claim was accepted and the deduction u/s 80-O of the Act was accordingly allowed. In respect of the assessment years 1993-94 and 1994-95, the assessing authority did not dwell in the matter in detail but mentioned that the claim is in respect of commission earned for the services rendered outside India as in the past. Thus, it cannot be said that the petitioner had not made full and true disclosure of all material facts in the assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reby quashed. However, the notice dated September 4, 2000, issued for the assessment year 1997-98 is upheld. - R. K. Agrawal And Vikram Nath JJ. For the Petitioner : Vijay Bahadur Singh and Shakeel Ahmad For the Respondent : A. N. Mahajan JUDGMENT R. K. Agrawal J. 1. By means of the present writ petition filed under article 226 of the Constitution of India, the petitioner, M/s. Universal Sub- scription Agency Private Limited, seeks the following reliefs : (i) issue a writ, order or direction in the nature of certiorari quashing the notices dated October 25, 2000, and September 4, 2000, (annexures - IV, V, VI and IX), issued under section 147/148 of the Act for the assessment years 1992-93, 1993-94, 1994-95 and 1997-98. (ii) to issue a writ, order or direction in the nature of mandamus restraining the respondent not to proceed further in pursuance of the impugned notices dated October 25, 2000, and September 4, 2000, (annexures IV, V, VI and IX), issued under section 147/148 of the Act for the assessment years 1992-93, 1993-94, 1994-95 and 1997-98. (iii) issue any other suitable writ, order or direction as this hon'ble court may deem fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he net commission earning from the services rendered to foreign enterprises at Rs. 9,95,616 and relief under section 80-O of the Act was allowed at 50 per cent. amounting to Rs. 4,97,808. So far as the assessment year 1997-98 is concerned, according to the petitioner, it had not received any notice under section 143(2) of the Act. However, an intimation under section 143(1)(a) of the Act was received. 5. The Joint Commissioner of Income-tax, Special Range, Kanpur, the sole respondent, issued notices dated October 25, 2000, under section 147/148 of the Act for the assessment years 1992-93, 1993-94 and 1994-95 proposing to assess the escaped income. In respect of the assessment year 1997-98, notice under section 147/148 had been issued on September 4, 2000. The respondent had also supplied the reasons recorded by him for forming the belief that the income has escaped assessment during the aforesaid assessment years. According to the respondent, the petitioner was not entitled to get deduction under section 80-O of the Act and the wrongful claim has resulted into an escaped assessment to the extent of relief allowed in each of the assessment years. All the notices are under challen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussion has been made in the assessment order passed for the assessment years 1993-94 and 1994-95. The claim has been allowed without verifying the fact and further, it was not made at the time of filing of the return but the claim was made during the course of the assessment proceedings by filing a letter. The assessing authority had not made enquiries and had simply accepted the claim. For the assessment year 1992-93, the claim was made for the first time on October 7, 1993, and the assessment was made on October 28, 1993. It has further been stated that the source of income of the petitioner was commission from the foreign publishers. Deduction under section 80-O of the Act was admissible in respect of any income by way of royalty and commission, etc., received by the assessee from the Government of a foreign State or a foreign enterprise for the services rendered or agreed to be rendered outside India even if it is rendered from India. The petitioner has not furnished full details segregating the services rendered or agreed to be rendered outside India and within India. The claim having been wrongly allowed, the proceeding under section 147 of the Act have been initiated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that the claim made by the petitioner under section 80-O of the Act had rightly been allowed by the assessing authority. The action of the respondent in seeking to disallow the claim is on an erroneous interpretation of the said provision. In support of his various pleas, he has relied upon the following decisions : (i) Jindal Photo Films Ltd. v. Deputy CIT [1998] 234 ITR 170 (Delhi) ; (ii) CIT v. Kelvinator of India Ltd. [2002] 256 ITR 1 (Delhi) [FB] ; (iii) CIT v. Foramer France [2003] 264 ITR 566 (SC) ; and (iv) Parikh Petrol Chemical Agencies P. Ltd. v. Asst. CIT [2004] 266 ITR 196 (Bom). 11. Sri A. N. Mahajan, learned standing counsel, on the other hand, submitted that the petitioner had not claimed the deduction under section 80-O of the Act in the return of the income which it had filed for the assessment years 1992-93, 1993-94 and 1994-95. It was made only by means of a letter filed before the assessing authority during the course of the assessment proceeding. Such a claim could not have been entertained at all in view of the decision of the apex court in the case of Goetze (India) Ltd. v. CIT [2006] 284 ITR 323. According to him if the claim itself wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is reproduced below : The assessee is also extending its services to several customers outside India earning commission from foreign publishers in convertible foreign exchange for extending services to customers outside India. The assessee qualified for deduction under section 80-O of the Income-tax Act, 1961 in respect of commission earned Rs. 9,95,618.85 from foreign publishers for extending services to customers outside India. However, at the time of filing of return of income for the assessment year 1992-93 inadvertently, the assessee forgot to claim the said deduction. It is now being claimed on the basis of a certificate of a chartered accountant attached. We request you to very kindly consider the claim of deduction of Rs. 4,97,808 (50 per cent. of Rs. 9,95,616.85) under section 80-O and allow the same in accordance with the provisions of law. In case your good self feel that we should file revised return for claim of deduction under section 80-O we may be advised accordingly. 16. The assessing authority referred to section 80-O of the Act and dealt with the claim in the following words : 7.1 Section 80-O as it exists for this relevant assessment year wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the assessee gets a deduction of Rs. 4,97,808 (at the rate of 50 per cent. of Rs. 9,95,616) under section 80-O of the Act. 17. In respect of the assessment years 1993-94 and 1994-95, the assessing authority while passing the assessment orders under section 143(3) of the Act had allowed the claim in the light of the chartered accountant certificate. 18. It is not clear from the record of the writ petition or from the counter affidavit or the rejoinder affidavit as to whether the claim under section 80-O of the Act in respect of the assessment years 1993-94 and 1994-95 was made by the petitioner in the return of income filed for those years or by means of subsequent letter. However, as the return of income for those years had been filed by the petitioner after it had claimed deduction under section 80-O of the Act by means of the letter dated October 7, 1993, in the course of the assessment proceeding for the assessment year 1992-93, we are proceeding on the premise that the claim must have been made in the return. 19. In respect of the assessment year 1997-98, no assessment has been made under section 143(3) of the Act and only an intimation has been sent under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany is an escaped assessment by Rs. 4,97,808. Issue notice under section 148 read with section 147 of the Income-tax Act, 1961. 20. Except for the figures and dates, the reasons for the other years are also the same. 21. The question is as to whether on these facts proceedings under section 147(a) have rightly been initiated or not. 22. For ready reference, section 147 of the Act is reproduced 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 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 ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case may be, for the relevant assessment year. Explanation 2 provides for a deeming fiction in treating the income chargeable to tax has escaped assessment under various circumstances. Sub-clause (a) provides that if no return of income has been furnished by the assessee although his total income in respect of which he is assessable under the Act during the previous year, exceeded the maximum amount which is not chargeable to Income-tax shall be deemed to be a case where the income chargeable to tax has escaped assessment. Clause (b) provides that where a return of income has been furnished by the assessee but no assessment has been made or where it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return, then such cases have also to be deemed where the income chargeable to tax has escaped assessment. Under clause (c) where an assessment has been made but income chargeable to tax has been underassessed or it has been assessed at too low a rate or it has been made the subject of excessive relief under the Act or excessive loss or depreciation allowance or any other allowance under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f assessment the order dated February 28, 1994, passed by the Commissioner of Income-tax (Appeals) was before the Assessing Officer. That order stands till today. What the Assessing Officer has said about the order of the Commissioner of Income-tax (Appeals) while recording reasons under section 147, he could have said even in the original orders of assessment. Thus, it is a case of mere change of opinion which does not provide jurisdiction to the Assessing Officer to initiate proceedings under section 147 of the Act. 26. In the case of Kelvinator of India Ltd. [2002] 256 ITR 1 the Full Bench of the Delhi High Court has held that section 147 of the Act does not postulate conferment of power upon the Assessing Officer to initiate reassessment proceeding upon a mere change of opinion. 27. In the case of Foramer France [2003] 264 ITR 566 the apex court has dismissed the civil appeals filed by the Commissioner of Income-tax against the judgment and order in the case of Foramer v. CIT [2001] 247 ITR 436 wherein this court has held that the assessment could not be reopened under section 147 of the Act on a mere change of opinion and this position remains the same even after the am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment because of the omission or failure of the assessee to disclose true and full facts during the assessment proceedings, he cannot reopen the assessment. The observations in Burlop' s case [1971] 79 ITR 609 (SC), noticed above, were made in the peculiar fact-situation of that case and cannot be construed to be of universal application irrespective of the facts and circumstances of the particular case. It had further held that from a combined review of the judgments of this court, it follows that an Income-tax Officer acquires jurisdiction to reopen an assessment under section 147(a) read with section 148 of the Act, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to Income-tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation allowance or there has been under-assessment or assessment at a lower rate or for applying other provisions of Explanation 2, it must be material and it should have nexus for holding such opinion contrary to what has been expressed earlier. The scope of section 147 of the Act is not for reviewing its earlier order suo motu irrespective of there being any material to come to a different conclusion apart from just having second thoughts about the inferences drawn earlier. 32. The aforesaid decision was followed subsequently by the Gujarat High Court in the case of Birla VXL Ltd. v. Asst. CIT [1996] 217 ITR 1. 33. In the case of Rakesh Aggarwal v. Asst. CIT [1997] 225 ITR 496, the Delhi High Court has held as follows (page 501) : The section provides that 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. The new section not only merges clauses (a) and (b) of the pre-amended section 147 but also brings about a significant cha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssumption that the assessee s claim for exemption was correct and now the Assessing Officer has recorded, cogent reasons for issuing notices, because it transpires that exemptions under section 10(23A) or 10(23C)(iv) were not admissible and as has been recorded in the notice in respect of the assessment years for which exemption under section 11 is claimed, even the application for registration was not found. 35. In the case of Praful Chunilal Patel v. Makwana (M. J.)/Asst. CIT [1999] 236 ITR 832, the Gujarat High Court has held as follows (page 838) : Under section 147 of the said Act, within four years from the end of the relevant assessment year, the Assessing Officer, where he had reason to believe that any income chargeable to tax has escaped assessment for any assessment year, may assess or reassess such income. However, after four years, the proviso would be attracted and no action can be taken under this section unless such income has escaped assessment by reason of the failure on the part of the asses see to make a return under section 139 or in response to a notice under section 142(1) or section 148 of the said Act, to disclose fully and truly all material facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dings on finding or discovering such cases and no debate whether they constitute cases of escapement of income, would be permissible. 36. In the case of Pradeep Kumar Har Saran Lal v. Assessing Officer [1998] 229 ITR 46, this court has considered the question whether the failure of the Assessing Officer in having issued the notice under section 143(2) of the Act precluded the Assessing Officer from issuing the notice under section 148 after the proceedings under section 143(1)(a) have been completed. This court referred to the following reasons given by the Calcutta High Court in the case of Jorawar Singh Baid v. Asst. CIT [1992] 198 ITR 47, 51 (page 57 of [1998] 229 ITR) : Simply because the return of the assessee has been accepted without scrutiny and in good faith, the Assessing Officer is not precluded from initiating a proceeding satisfying the conditions therefor where the income has escaped assessment. There is nothing either in section 143 or in section 147 that can support such a view. The pro visions of a tax statute should be interpreted in a manner leading to the result that everybody pays his due tax . . . . In our view, a return after its acceptance, whether i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43(3) of the Act, reassessment can be initiated after four years from the end of the assessment year only where any income chargeable to tax has escaped assessment for such assessment year by reason of 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 the assessment for that assessment year and shall also apply in cases which are covered and treated to be deemed escaped assessment under the various clauses of Explanation 2 to section 147 of the Act ; and (v) proceeding for reassessment can be initiated even where assessment has been made under section 143(1)(a) of the Act provided preconditions mentioned in section 147 are fulfilled. 38. Applying the aforesaid principles to the facts of the present case, we find that in respect of the assessment years 1992-93, 1993-94 and 1994-95 the notices under section 148 of the Act have been issued on October 25, 2001, i.e., much after the expiry of the period of four years from the end of the relevant assessment year. It can be justified only if there has been failure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95 appear to have been issued only on the basis of mere change of opinion and are wholly illegal and without jurisdiction. The principles laid down by the apex court in the case of Phool Chand Bajrang Lal [1993] 203 ITR 456 would, therefore, not apply in the present case as there is no information on record to show that the claim made by the petitioner was false. 39. So far as the notice dated September 4, 2000, issued under section 148 of the Act for the assessment year 1997-98 is concerned, it is within four years from the end of the relevant assessment year. In this case, the assessment has not been made under section 143(3) of the Act and only an intimation under section 143(1)(a) of the Act has been sent to the petitioner. The claim of deduction under section 80-O of the Act had only been processed without there being any application of mind. The reasons recorded by the respondent, insofar as the assessment year 1997-98 is concerned, cannot be said to be based on mere change of opinion. The principles laid down by this court in the case of Pradeep Kumar Har Saran Lal [1998] 229 ITR 46 is squarely applicable in the present case. They are based on relevant consideration and, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
