TMI Blog2018 (10) TMI 442X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer to reopen the assessment and on the other hand, it was purely out of his change of opinion on the material already existed. - Decided in favour of assessee. - W.P.No.7416 of 2017 And WMP No.8070 of 2017 - - - Dated:- 4-10-2018 - Mr. K. Ravichandrabaabu J. For the Petitioner : Mr.M.P.Senthilkumar For the Respondents : Mrs.Hema Muralikrishnan Senior Standing Counsel (I.T) ORDER The petitioner is aggrieved against the proceedings of the respondent dated 13.02.2017 in rejecting the objections filed by the petitioner against the reopening of the assessment under Section 148 of the Income Tax Act, in respect of the Assessment Year 2010-11. 2. The case of the petitioner is as follows: The petitioner is an assessee under the respondent. The petitioner firm was formed under Partnership Deed dated 20.03.2000 with an object to carry on the business of manufacturing and testing chemicals. The Madras Export Processing Zone issued a letter of permission dated 28.03.2000. The Government of India, Ministry of Commerce by letter dated 29.03.2000, granted permission to the petitioner to carry on its business of manufacturing of test kits used for checking io ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmed under Partnership Deed dated 20.03.2000. The petitioner had executed a legal agreement with MEPZ dated 28.03.2000, pursuant to the letter of permission granted by the said Authority on 28.03.2000. The petitioner was granted permission to carry on business by the Ministry of Commerce, Government of India, on 29.03.2000. The petitioner was granted permanent Registration Certificate by the Directorate of Industries and Commerce dated 31.05.2000. The petitioner commenced its business of production on 28.03.2000 and not on 25.05.2000, as claimed by the petitioner. The same is evidenced by the relevant entry in column No.7 of Annexure A to Form No.56G in support of claim of deduction under Section 10B for the assessment year 2010-11. The petitioner filed its return for the assessment year 2010-11 on 24.09.2010, claiming deduction under Section 10B to the tune of ₹ 97,34,667/-. The same was allowed incorrectly in the order under Section 143(3) dated 28.01.2013 due to failure on the part of the Assessing Officer to verify the relevant content of Form No.56G that relates to the date of commencement of production. Proceedings under Section 147 was initiated, since the relevant ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.2017, when the four years from the end of the assessment year 2010-11 fell on 31.03.2015. Even for assuming jurisdiction beyond four years on the ground of escaped assessment, the Assessing Officer has to ascertain any failure on the part of the assessee to make full and true disclosure of the facts and materials. The assessee had filed complete details in the return of income and therefore, the reopening after four years, is barred by limitation. The very fact that the respondent passed an order of assessment under Section 143(3) based on the return filed by the petitioner would show that the petitioner had filed and furnished full and complete details in the original assessment proceedings. The Assessing Officer had completed the assessment only after taking into consideration of all those details. Therefore, it cannot be said that the Assessing Officer had reason to believe that the income had escaped assessment. The reopening is merely on change of opinion in the absence of any fresh materials with the Assessing Officer to exercise jurisdiction under Section 147. In the order under Section 143(3) for the assessment year 2010-11, the Assessing Officer had disallowed exempt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment under Section 148 vide notice dated 03.01.2017, has not been challenged by the petitioner. Therefore, they cannot dispute that the respondent has no power to reopen the assessment. In any event, the respondent has not passed any orders on merits of the issue as to whether the petitioner is entitled to exemption under Section 10B of the said Act or not. Where the reassessment proceedings are still in the nascent stage, what has to be seen is whether there is any prima facie material to support the reopening and whether the reassessment is within the period of limitation. It is not in dispute that Annexure to Form 56G submitted for the assessment year 2010-11 contained contradictory statement in column No.7 and 8. While Column 7 referred the date of commencement of manufacture as 28.03.2000, Column 8 referred the year of claim for deduction as tenth year. If the petitioner had commenced the production on 28.03.2000, then 2010-11 cannot be tenth year of production and in fact, it is the eleventh year. Therefore, it is clear that there has not been a full and true disclosure. Consequently, the respondent is entitled to proceed with the reassessment after the period of four years a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The Assessing Officer, after considering such claim made under Section 10B, partly disallowed such claim only to the tune of ₹ 1,01,819/- on the reason that the exemption claimed under the Foreign Exchange to the tune of ₹ 1,64,936/- obtained beyond one year without the approval of the competent Authority cannot be allowed. The Assessing Officer passed the order of assessment on 28.01.2013 and derived a taxable income as ₹ 1,01,819/- and consequently, a demand of ₹ 42,170/- towards tax was raised. In other words, the Assessing Officer has evidently accepted the claim of the assessee for Section 10B deduction and allowed the same for the balance claim. The Assessee went on appeal before the Commissioner of Income Tax (Appeals) as against such partial disallowance and the Appellate Authority allowed the appeal thereby deleting the additions made by the Assessing Officer of the unrealised amounts of foreign exchange remittances. Therefore, the net result was that both the Assessing Officer as well as the Appellate Authority have considered the claim of the assessee for deduction under Section 10B, based on the materials placed before them, which includes F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowability of deduction, Explanation (1) to section 147 comes into operation and first proviso to section 147 becomes redundant and hence there is a reason to believe that the income of ₹ 97,34,567/- has escaped assessment. 10.Perusal of the impugned communication would undoubtedly show that the reason for reopening the assessment was solely based on the statement or entry made in Column No.7 and 8 of Form 56G, which according to the respondent, is not a true and full disclosure. Thus, the initiation of proceedings under Section 147, after the expiry of four years from the date of the relevant assessment year, is sought to be justified. At this juncture, it is relevant to quote Sections 147, 148 and 149 of the Income Tax Act, 1961, which deal with reopening of assessment as follows: Income Escaping Assessment: 147. 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years from the Assessment Year 2010-11 fell on 31.03.2015. However, the notice under Section 148 was issued on the petitioner only on 03.01.2017. Therefore, it is evident that the proceeding under Section 147 was initiated after a period of four years, as required under Section 147. However, first proviso to Section 147 entitles the respondent to initiate such proceedings for reopening the assessment beyond the period of four years also and within a period of six years, provided anyone of the following conditions are satisfied: i) 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 Section 142(1) or Section 148. ii)the assessee failed to disclose fully and truly all material facts necessary for the assessment year. 12. To put it to more precisely, the first proviso to Section 147, for extending the period of limitation of four years, can be taken shelter, only when the assessee either failed to make a return in response to the notice under Sub Section 142(1)/Section 148 or failed to disclose fully and truly all material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ressed any material fact before the Assessing Officer to claim deduction under Section 10B. If the exact date of manufacturing could be ascertained or gathered from the conjoined consideration of other material documents, such as relevant certificates of registration by the competent authority, mere wrong mentioning of the date in Column 7 cannot be construed as non disclosure of true and material facts, especially when column 8 of statement supports the claim. One can understand and appreciate the stand of the Revenue for reopening the assessment, if the assessee, by giving a false information regarding the date of commencement of manufacture as 28.03.2000 alone, had obtained deduction under Section 10B. Thus, it is seen that the Assessing Officer, who has originally chosen to allow the deduction based on the materials filed already, has now changed his opinion and has chosen to reopen the assessment, which in my considered view, cannot be done after a period of four years. 17. If, by furnishing incorrect particulars or facts, the assessee got benefited, then one can understand that there was no true and full disclosure by the assessee. On the other hand, if the benefit, in thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... latable to such material fact, would not have escaped assessment. In other words, it should lead to an irrebuttable conclusion that by the conduct of the assessee, either by providing wrong or incorrect particulars or by not providing the full and correct particulars, he should have made the Assessing Officer not to bring a particular income to tax, which is otherwise liable to be taxed. If this test is applied to the present case, I am of the view that the Revenue has to fail. 19. It is settled law that mere change of opinion on the existing material cannot be a ground for reopening the assessment in the absence of any new material that had come to the possession of the Assessing Officer. In this case, there is no tangible material available before the Assessing Officer to reopen the assessment and on the other hand, it was purely out of his change of opinion on the material already existed. In this connection, the following decisions can be relied on: 20 . In 2010) 320 ITR 561, the Apex Court has held at paragraph No.4 as follows: 4. On going through the changes, quoted above, made to s.147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment was framed. The subsequent re-opening of the assessment is nothing but in our considered view also a mere change of opinion to follow the earlier year assessment order, which is not the reason for reopening of the assessment under Section 147 of the Income-tax Act. Further, the re-opening of the assessment cannot also be brought within the exemption stated therein for reopening after the period of four years. 22. In (2018) 404 ITR 10 (SC), ITO vs Techspan India P. Ltd. Equivalent citation: (2018) 6 SCC 685, the Apex has held at paragraphs 14 to 18 as follows: 14. The language of Section 147 makes it clear that the assessing officer certainly has the power to re-assess any income which escaped assessment for any assessment year subject to the provisions of Sections 148 to 153 . However, the use of this power is conditional upon the fact that the assessing officer has some reason to believe that the income has escaped assessment. The use of the words reason to believe in Section 147 has to be interpreted schematically as the liberal interpretation of the word would have the consequence of conferring arbitrary powers on the assessing offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment has to be based on fulfilment of certain pre-condition and if the concept of change of opinion is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. 7. One must treat the concept of change of opinion as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, Assessing Officer has power to reopen, provided there is tangible material to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. 18. Before interfering with the proposed re-opening of the assessment on the ground that the same is based only on a change in opinion, the court ought to verify whether the assessment earlier made has either expressly or by necessary implication expressed an opinion on a matter which is the basis of the alleged escapement of income that was taxable. If the assessment order is nonspeaking, cryptic or perfunctory in nature, it may be difficult to attribute to the assessing officer any opinion on the questions that are raised in the proposed reassessment proceedings. Every attempt to bring ..... X X X X Extracts X X X X X X X X Extracts X X X X
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