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TMI Blog2018 (10) TMI 872X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of the returns. While-so, the impugned notice has been issued by the respondent in proceedings dated 30.3.2016 under Section 148 of the Act to reopen the assessment years 2009-2010. 4. The grievance of the writ petitioner is that the returns filed by the writ petitioner had been assessed under Section 143(1) of the Act and again as a special case under Section 143(3) by way of complete scrutiny of accounts. Under those circumstances, the completed assessments are sought to be reopened after a lapse of six years without any basis or reasons by the respondent. The writ petitioner by its letter dated 19.4.2016 sought for reasons for reopening of the assessments. The respondent by their letter dated 31.8.2016 furnished the writ petitioner with reasons for reopening of the assessments. The reasons cited for the reopening of the assessments, in brief, are:- (a) We have received money from South Asia Entertainment Holdings Limited in the name of share subscription along with share premium - Rs. 203.98 crores; (b) Shri Kalanithi Maran and his wife Mrs.Kaveri Kalanithi Maran were allotted shares only at Rs. 10 per share without any premium; (c) Hence the share premium invested b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isclosed. If according to the respondent if the same has not been disclosed, which is not true, then it is the duty of the respondent to record as from where such information was received. The alleged information for reopening was already available before the Assessing Officer during the course of scrutiny assessment and there was no fresh information for him to hold that the transaction as not genuine or a capital receipt has escaped assessment as income. Therefore, it was only a change of opinion that a capital receipt is an income as against the earlier decision in a validly concluded scrutiny assessment that the receipt of share application money on premium from M/s.South Asia Entertainment Holding Limited, was only a capital investment by a foreign legal entity in an Indian Legal Entity, going through a spate of approvals and legal channels, and hence accepted the income returned without making any adjustment on this issue; (e) The last alleged reason is that the transaction is not genuine and required to be assessed under Section 68 of the Act. The transaction which was a genuine transaction in the original scrutiny assessment has now become a non-genuine transaction with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in fact was the reasons for issuing of questionnaire during the course of original assessment and the same being accepted, the present reasons for reopening of the assessment is nothing but change of opinion. 8. In support of the said submission, the petitioner has cited certain judgments which we will deal little later. The contention of the petitioner is that respondent deliberately failed to take into consideration the judgment with regard to the limitation provided under the Act for issuance of notice under Section 148 with reference to the Law of Limitation prescribed under the Act. 9. The learned Senior Counsel, appearing on behalf of the writ petitioner, forcibly contended that the impugned notice dated 30.3.2016 and the rejection of objections by the respondent are clearly barred by limitation prescribed under the provisions of the Income Tax Act, 1961. The failure on the part of the respondent in not producing the reasons along with the impugned notice caused a stigma and has got certain civil consequences. 10. In the present cases, it is contended that it is a "change of opinion by the Assessing Officer". It is not a case of "reason to believe" contemplated under Secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issued to the writ petitioners were answered properly and the Assessing Officer considered the same and concluded the assessment. This being the factum, there is no reason to believe for reopening of the assessments, which were closed. 14. At the outset, the learned Senior Counsel is of an opinion that "change of opinion" in the absence of any new material or suppression of fact is impermissible under the Act. The reopening of assessments and the notices under Section 148 of the Act, were issued in respect of four different Assessees. Therefore, the principles of "one income", "one tax" had not been considered by the Assessing Officer. Thus, the very action is mala fide, perverse and in violation of the provisions of the Act. 15. The learned Senior Counsel, with reference to the point raised by the Additional Solicitor General of India that the writ petition is not maintainable, contended that the Hon'ble Division Bench of this Court passed an order in the writ appeal in W.A.No.347 to 349 of 2014 etc. batch, on 4.7.2014. In the writ appeals the issues raised before the Hon'ble Division Bench were answered against the Assessees and in favour of the revenue and the writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO for reopening of assessment has not been supplied or served within 6 years then it will be construed that no valid notice has been served upon the assessee within 6 years." 18. In the case of Haryana Acrylic Manufacturing Co. vs. Commissioner of Income Tax [(2008) 175 Taxman 262 (Delhi)], wherein the Hon'ble High Court of Delhi, in paragraphs-20 and 24, it has been held as follows:- "20. In the reasons supplied to the petitioner, there is no whisper, what to speak of any allegation, that the petitioner had failed to disclose fully and truly all material facts necessary for assessment and that because of this failure there has been an escapement of income chargeable to tax. Merely having a reason to believe that income had escaped assessment, is not sufficient to reopen assessments beyond the four year period indicated above. The escapement of income from assessment must also be occasioned by the failure on the part of the assessee to disclose material facts, fully and truly. This is a necessary condition for overcoming the bar set up by the proviso to section 147. If this condition is not satisfied, the bar would operate and no action under section 147 could be taken. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs pursuant thereto cannot be upheld." 19. In respect of exhausting the alternate remedy, the learned Senior Counsel for the writ petitioner relying on the case of Union of India vs. Ajit Jain [(2003) 129 Taxman 74 (SC)], wherein the Hon'ble Supreme Court held as follows:- "The availability of an alternative remedy is not an absolute bar to the entertainment of a petition under Article 226 of the Constitution, though on account of availability of statutory remedies Courts normally do not entertain the writ petitions but where an action is wholly without jurisdiction and results in the infringement of any fundamental right, the plea of alternative remedy is of no avail. The instant case did fall in that category." 20. In the case of Principal Commissioner of Income Tax vs. Meenakshi Overseas (P) Ltd [(2017) 82 Taxmann.com 300 (Delhi)], wherein the Hon'ble High Court of Delhi, in paragraphs 23, 24 and 26, held as follows:- "23. Thus, the crucial link between the information made available to the AO and the formation of belief is absent. The reasons must be self evident, they must speak for themselves. The tangible material which forms the basis for the belief that inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open the assessment. Therefore, post-1st April, 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment 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 re-o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oner to give a list, source, genuineness, identity of the share holders along with confirmation copies of the ledger account of the party including confirmation of the mode, date, address and acknowledgement of return, etc. from the said party along with source and relevant bank entries. The said information was provided by the assessee. After receipt of the said information, Assessing Officer did not think it fit to make an addition and, under these circumstances, no addition itself amounts to forming an opinion as has been held in Usha International Ltd. (supra)." 23. In the case of Commissioner of Income Tax VI, New Delhi vs. Usha International Ltd [(2012) 253 CTR 113 (Delhi)], the term "change of opinion" has been explained in paragraph-6 as under:- "6. The questions of law at serial Nos. 1 to 3 referred to the Full Bench are interconnected. They deal with the term and facets of the term -change of opinion?. The expression -change of opinion? postulates formation of opinion and then a change thereof. In the context of Section 147 of the Act it implies that the Assessing Officer should have formed an opinion at the first instance, i.e., in the proceedings under Section 143( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACIT Writ Petition (Civil) No. 6884/2010 decided on 1st December, 2011. In the last decision it has been observed: "13. Revenue had the option, but did not take recourse to Section 263 of the Act, inspite of audit objection. Supervisory and revisionary power under Section 263 of the Act is available, if an order passed by the Assessing Officer is erroneous and prejudicial to the interest of the Revenue. An erroneous order contrary to law that has caused prejudiced can be correct, when jurisdiction under Section 263 is invoked." 25. Relying on the abovesaid judgment, the learned Senior Counsel for the writ petitioner, urged this Court by stating that in any angle, the impugned orders cannot sustain for want of legal support and accordingly liable to be scrapped. PLEADINGS OF THE RESPONDENT AS WELL AS THE ARGUMENTS:- 26. The respondent raised a preliminary objection with regard to the maintainability of the writ petition in view of the fact that an alternate remedy is available and provided under the Income Tax Act itself. Without exhausing the remedies provided under the Statute, the present writ petition cannot be entertained and accordingly, they are liable to be rejected in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... does not absolve the writ petitioner of the proceedings being initiated against him in the light of the new information concerning the writ petitioner's case. Further, in the following cases, the Courts have held that the information received from the Investigation Wing would constitute material based on which reason to believe could be formed. [See AGR Investment Ltd vs. Additional CIT and Another [333 ITR 146 (Del); and Salimar Builtcon P. Ltd vs. ITO-ITAT, Jaipur [136 TTJ 701]. 31. The settled position of law regarding sufficiency of the reason is not up for questioning when the Assessing Officer has formed his belief for the same. Substantive proof for escapement of income in order to make any additions can only be made after verification of details during the proceedings. The writ petitioner had quoted from the speaking order but had conveniently omitted a line in between there by changing the context of the sentence with the intention to mislead this Court. Courts have consistently held that at the time of reopening, the Assessing Officer should possess of some material and is not required to establish the escapement of income, the validity of the reassessment on the ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated the position that Courts can only consider whether there was a prima facie case for reassessment and that sufficiency of material or correctness of the material is not to be considered at that stage. 35. The learned Additional Solicitor General of India, at the first instance, made a submission that in respect of WP No.3405 of 2016, the order of assessment had already been passed by the Assessing Officer and the same has not given effect to on account of the pendency of the present writ petition. In respect of WP No.43944 of 2016, the order passed by the Assessing Officer is kept under the sealed cover, so also the assessment order passed with referrence to WP No.44311 of 2016 has not given effect to. 36. The learned Additional Solicitor General of India, at the outset, disputed the interpretations provided by the learned Senior Counsel appearing for the writ petitioner with reference to Sections 147 and 148 of the Income Tax Act, 1961. In respect of maintainability of the present writ petition, it is contended that the writ petitioner is bound to participate in the process of assessment based on the notice issued by the Competent Authority under Section 148 of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment as well as the reassessment is permissible and if the Assessing Officer has got a reason to believe that there are some materials for reopening of the assessment, then he can issue notice under Section 148 of the Act. 40. Explanation 1 to Section 147 states that "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 amount to disclosure within the meaning of the foregoing proviso". Explanation 1 to Section 147 enumerates that mere production of a document is not a ground to dispute the reopening of the assessment nor amount to a disclosure in respect of the escaped assessment. It clarifies that even in case where the Assessee had produced the document showing the income which was not assessed earlier, is also a ground for reopening of the assessed returns. Thus, the Assessee cannot plead that he had already produced the documents along with the returns at the time of filing and therefore, the Assessing Officer cannot reopen the assessment already reached finality with reference to Section 143(1) of the Act. 41. It is further cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the Assessees to avoid or evade payment of income tax as per the provisions of the Act. 44. Notice is a proposal mooted out by the Assessing Officer under Section 148 on coming to the conclusion that the authorities has got a "reason to believe" in respect of the materials available on record. Thus, the very notice will not provide a cause of action for the writ petitioner to file the present writ petition. This apart, the writ petitioner had already been responded to the notice and pursuant to the request made by the writ petitioner, the reasons recorded by the Assessing Officer were furnished to the writ petitioner, enabling him to submit his assessment as required under the provisions of the Act. As of now, there is no due of tax under the provisions of the Act. In the absence of any demand of tax and in the absence of any decision in respect of assessment, the writ petition is certainly premature and filed only based on the presumptions and assumptions and such writ petitions filed on the apprehensions can never be entertained by this Court. 45. There is no bar for the authorities to form an opinion based on the Criminal Court charge sheet that it is a fit case for reopen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had been underassessed. Dealing with the question whether the reasons which led the Commissioner to accord sanction for the initiation of proceedings under Section 34 are required to be communicated to the assessee, this Court held: (S. Narayanappa case [AIR 1967 SC 523] , AIR p. 525, para 4) "4. ... There is no requirement in any of the provisions of the Act or any section laying down as a condition for the initiation of the proceedings that the reasons which induced the Commissioner to accord sanction to proceed under Section 34 must also be communicated to the assessee." 16. We reject the submission of the appellant for the following reasons. Firstly, there is no express statutory requirement to communicate the reasons which led to the issuance of notice under Section 6 of the Act. Secondly, the reasons, though not initially supplied along with the notice dated 4-3-1977, were subsequently supplied thereby enabling the appellant to effectively meet the case of the respondents. Thirdly, we are of the opinion that the case on hand is squarely covered by the ratio of Narayanappa case [AIR 1967 SC 523] . The appellant could have effectively convinced the respondents by producin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been passed by the concerned authority. In view of this, we do not find any justification to entertain the petitioner's prayer for quashingb of the notice issued under section 148 of the Act. 5. In view of this conclusion, we would have refrained from expressing any opinion on the merits of the reasons recorded by the Assistant Commissioner of Income-tax, Circlecum- New Assessees Circle, Bhatinda, for initiating proceedings under section 147 read with section 148 of the 1961 Act, but as Shri Mittal made repeated efforts to persuade us to nullify the notice solely on the ground that/the Special Judge, Delhi, has not framed charges against the petitioner, we are constrained to observe that an order, like the one passed by the Special Judge, Delhi, not framing the charge cannot be treated as conclusive, so far as the proceedings under the 1961 Act are concerned. A careful reading of the order, annexure P-12, passed by the Delhi High Court in Criminal Revision No. 473 of 1997 shows that the Central Bureau of Investigation had not pressed for framing of charges against the petitioner on the issue of receipt of Rs. 51,24,800 because at that stage it did not have sufficient e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8(1). He must first file his return or a revised return, as the case may be, and if he raises a contention either that no reasons were recorded or that the reasons recorded are not relevant and germane, then the Assessing Officer has to communicate the reasons to him". 49. The abovesaid judgment also reiterates that it is mandatory on thepart of the Assessing Officer to communicate the reasons along with the notice issued under Section 148(1) of the Act. The Assessee has to respond to the notice at the first instance by filing his return. If there is no discrepancy, then the Assessing Officer can close the file. In the event of any discrepancy, then the further proceedings can be continued. In such circumstances, the Assessee also is entitled to seek reasons for reopening of the assessment. Thus, the proposition laid down by the Courts are very clear that the reasons need not be communicated to the Assessee at the time of issuing the notice under Section 148(1) of the Act. 50. In the case of GKN Driveshafts (India) Ltd vs. Income Tax Officer [(2002) 125 Taxman 963 (SC)], the Hon'ble Supreme Court of India, in paragraph-5, held as follows:- "5. .. .. .. .. ... .. However ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or materials both from the returns or through external sources. The power of reopening under the provisions of the Income Tax Act is wider and in the event of new material or suppression of fact, the reassessment can be dealt with under Sections 148 to 153 of the Act. Even during the course of the proceedings, if any new materials or informations are received by the Assessing Officer, even then powers are conferred upon him to proceed against such new materials or informations. Thus, Section 147 of the Act, is an enabling Section and in the presence of any tangible materials available on record, the Assessing Officer is empowered to proceed against the Assessee for the purpose of reopening of the assessments. DISCUSSIONS: 54. Considering the contentions raised by the respective parties to the cases on hand, this Court is of an opinion that issuance of the notice under Section 148 of the Act is nothing but initiation of the proceedings for reopening of the assessment already finalised. Undoubtedly, such reopenings are to be done cautiously and the reasons for reopening is also mandatory. In the absence of any substantial reason, the Assessing Officer cannot reopen the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ose to be achieved is met out by adopting not only the balancing approach, but also by providing all reasonable opportunities to the persons, who all are connected or aggrieved. 59. The purpose of the Income Tax Act, more specifically, Sections 147 and 148 of the Act, is to ensure that the Assessees, who have suppressed the fact at the time of filing of their income tax returns or if the Department is in possession of certain new materials in respect of the assessment of a particular year, then the Assessee must be informed about the decision to reopen the assessment and after such information is provided, the procedures must be followed for the purpose of concluding the reassessment. 60. In the present cases on hand, the proceedings have not reached its finality. It is only an initiation of proceedings under Sections 147 and 148 of the Act. The very initiation cannot be interfered with by the Courts in a routine manner. Judicial review against such initiations under the provisions of the Act, is certainly limited. The Court cannot intervene on such initiations in a routine manner in the absence of any valid and acceptable legal grounds. Thus, the exercise of judicial review in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961. 66. The very concept of notice is that the authorities while issuing notice should not predetermine the issues or arrive a conclusion. In the event of stating the reasons elaborately, it is to be construed that such reasonsings are recorded without providing an opportunity to the Assessee and such a procedure now argued by the writ petitioner deserves no merit consideration. 67. Thus, the notice is issued based on certain materials available with the Department and on receipt of the notice, the Assessee has got right to seek for the reasons from the Department and the Department is bound to provide reasons, enabling the Assessee to submit his explanations/objections in order to defend his case. Thus, mere issuance of notice will not preclude the writ petitioner from seeking the reasons and other documents. 68. In the present case, admittedly, on receipt of the notice, the writ petitioner submitted a letter to the respondent on 24.4.2015, seeking reasons for reopening of the assessment for the assessment years 2008-2009 and 2009-2010. The respondent also furnished the reasons for reopening of the assessment on 8.5.2015. Thereafter, the Assessee must co-operate for the scr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the reasons must be recorded in the files and thereafter issue notice to the Assessee and the Assessee on receipt of the notice is entitled to seek the reasons or otherwise from the respondent, enabling him to adjudicate the matter in the manner known to law. This being the interpretation to be adopted, the arguments as advanced on behalf of the writ petitioner deserves no consideration at all. 72. In respect of exhausting the appellate remedy available under the provisions of the Act, this Court is of an opinion that the writ petitioner has to exhaust the remedy provided under the Act, this Court cannot entertain the writ petition, when there is a remedy available to the aggrieved person under the Statute. The High Court cannot usurp the power of the Appellate Authorities in respect of the adjudication of the merits and the demerits of the matter. The High Court cannot appreciate the mixed question of law and facts, at the initial stage, when a notice under Section 148 of the Income Tax Act, 1961 was issued to the Assessee for reopening the assessment. Such complex facts and circumstances are to be adjudicated by producing documents and by adducing evidences by the parties co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i of corruptions in certain areas. 76. The huge transactions like that of the present cases on hand, the authorities must be in a position to investigate the issues thoroughly and by using an intelligent way of investigation. Under these circumstances, the Courts cannot interfere in a routine manner in respect of the notice issued under Section 148 of the Act. Whenever such allegations are raised against the Assessee, who was holding a high position of Union Minister, then the Department shall be allowed to investigate the matter with all fairness and by adopting an intelligent way of investigating the issues. 77. The very concept of income tax assessment is that the Assessee is taxed by the Department based on the returns filed by the Assessee. Section 2 of the Act provides "definitions". Section 2(8) defines "assessment includes reassessment". Thus the very meaning of the assessment provided under the Act includes reassessment also. Thus, the reassessment is not a separate concept and it is included within the meaning of the assessment under Section 2(8) of the Act. Thus, an assessment and reassessment are part and parcel of the procedures and therefore, there cannot be any d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in respect of the present writ petition, it is six years. 80. The procedure of reopening of the assessment is contemplated under Sections 148 to 153 of the Act. Once again looking into the spirit of Section 147, it is unambiguously enumerated that "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". 81. The language employed in Section 147(1) of the Act is that "which comes to his notice subsequently in the course of the proceedings under the Section". Thus even after initiation of reopening of assessment proceedings under Section 147 of the Act. If during the course of the proceedings if any materials or informations are received by the Assessing Officer that also can be taken into consideration for the purpose of reassessment. It is crystal clear that the reasons recorded before the initiation of the reopening of the assessment alone need not be a ground for reassessment. Even after reopening of the assessment if any materials or informations are received by the Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court is of an opinion that it is certainly flexible and wider power has been provided, enabling the Assessing Officer to reopen the assessment in the interest of revenue and to ensure that the Assessees pay the correct tax with reference to the provisions of the Act. 86. This Court is of a firm opinion that where certain doubts in respect of the reasons or otherwise has been raised by the Assessee, such benefit of doubt should be held in favour of the revenue and not in favour of the taxpayer. Contrariness is to be established by the Assessee, while scrutinising the materials available with the Assessing Officer. 87. It is for the Assessee to convince the Assessing Officer in respect of all such escaped assessments, informations and materials available and submit the returns. This being the legal principles to be followed, the provisions are to be interpreted to achieve its purpose and the object and therefore the wider powers provided under Section 147 of the Act, for reopening of the escaped assessments can never be restricted by imposing certain conditions on the Assessing Officer. 88. Even in case of certain procedural lapses, this Court is of an opinion that such procedura ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out any basis. 91. Every actions of the Authorities Competent must be on reasonings and the same must be recorded in files. The reasons to be recorded by the Assessing Officer for taking decision to reopen the escaped assessment does not mean that such reasons are to be communicated along with the notice itself. The notice directs the Assessee to submit his returns. If the Assessee is of an opinion that he requires the reasons recorded by the Assessing Officer for reopening of the assessment, then he can made a request and accordingly the same shall be furnished by the Assessing Officer to the Assessee. 92. In the present cases on hand, the request made by the writ petitioner had been complied with and the reasons for reopening of the escaped assessment had been communicated to the writ petitioner. The said propositions are very well recognised by the Supreme Court of India in the case of GKN Driveshafts (India) Ltd. Thus the very provision stating that the Assessing Officer should record the reasons does not mean that the same should be communicated along with the notice itself. The provision is incorporated in order to ensure that the Assessing Officers act with responsibility ..... X X X X Extracts X X X X X X X X Extracts X X X X
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