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2019 (5) TMI 1061

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..... ons of the Income Tax Act. The amended phraseology of reason to believe must be interpreted that the Assessing Officer on receipt of any such new material or materials in relation to the non furnishing of fact by the assessee has made out a prima facie opinion that it is the case for reopening of the assessment, then he can issue notice u/s 148 and thereafter, the procedure of furnishing the reasons, receiving objections and conducting scrutiny and all other procedures contemplated under the provisions of the Act will suit as follow. As the present case falls u/s 149(1)(b), the period of limitation prescribed is six years. In view of the fact that the notice has been issued within a period of six years, the ground of limitation raised on behalf of the writ petitioners, fails. As far as the ground in relation to the change of opinion, it is premature on the part of the writ petitioners to come to such a conclusion whether it is a change of opinion or the reopening is made based on the new or additional material available with the Income Tax Department, the same can be ascertained only after furnishing objections to the Income Tax Department by the assessee. In the absence of ha .....

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..... ed in all these present writ petitions. 2. The learned Senior Counsel Sri.A.L Somayaji appearing on behalf of the writ petitioners, mainly relied on the grounds that the very issuance of notice by the respondents are without jurisdiction and they have no authority to issue the notice. This apart, the notice was issued after the expiry of the time limit prescribed under the statute and therefore, the notice impugned is liable to be scrapped on these grounds: To substantiate the above legal grounds, the learned Senior Counsel made a submission that the assessment orders relevant for the purpose of considering the present writ petitions for 1995-1996, 1996-1997 and 1997-1998. The writ petitioners had submitted their returns in time, which were properly assessed by the Assessing Officer under Section 143(3) of the Income Tax Act, 1961 and therefore, the same were scrutinized and finalized by the Income Tax Department. The block assessment made in this regard were also quashed by the ITAT and therefore there is no reason to believe , which is contemplated under the Act for initiation of proceedings for reassessment by invoking the powers conferred under Se .....

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..... Limited (2006) 286 ITR 674 . The substantial question of law raised in that case is Whether, on the facts and circumstances of the case, the Tribunal was right in treating the reassessment under Section 147, as time barred? The question of law has been answered by his lordship Justice P.P.S. Janarthana Raja, while speaking for the change as follows in paragraphs 9 and 10 of the judgment: 9. In the present case, the question is whether the assessee-company had disclosed fully and truly all the material facts necessary for the assessments and with particular reference to computation of depreciation allowance. The assessee company had filed full set of accounts before the Assessing Officer comprising of profit loss account, balance sheet and schedules thereto. The assessee-company had furnished the details regarding the acquisition of various machineries and assets and the details regarding the leasing out of those machineries and items to other parties. The assessee had also furnished the details of lease rent received out of those lease agreements. The assessee had also furnished the detailed computation of depreciation mentioning therein the written down val .....

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..... of action after the expiry of four years from the end of the assessment year. Such escapement must be by reason of the failure on the part of the assessee either to file a return referred to in the proviso or to truly and fully disclose the material facts necessary for the assessment. Whenever a notice is issued by the Assessing Officer beyond a period of four years from the end of the relevant assessment year, such notice being issued without recording the reasons for his belief that income escaped assessment, it cannot be presumed in law that there is also a failure on the part of the assessee to file the returns referred to in the proviso or a failure to fully and truly disclose the material facts. The reasons referred to in the main paragraph of section 147 would, in cases where the proviso is attracted, include reasons referred to in the proviso and it is necessary for the Assessing Officer to record that any one or all the circumstances referred to in the proviso existed before the issue of notice under section 147. After an assessment has been made, in the normal circumstances, there would be no reason for anyone to doubt t .....

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..... the extent of ₹ 19.86 crores has escaped the assessment. In his submission, this is impermissible under the powers that are available to the Revenue under Section 147 of the Income Tax Act. It can only be where there is a failure on the part of the assessee to make a true return which is would be permissible after the expiry of four years. In the instant case, nothing of the kind has happened. 7. Mr.Kotangale, learned counsel for the respondents, has drawn our attention to a judgment of the Apex Court in Srikrishna (P) Ltd. v. ITO . In this case, what is held by the Apex Court is that where certain loan transactions were relied upon and which were subsequently discovered to be false, reassessment proceedings were validly initiated. What is however material to note is that in that particular case the Court has given a clear finding that the assessee had created and recorded bogus entries of loan and, therefore, the Court held that the assessee could not say that it had truly and fully disclosed all material facts necessary for the assessment for the year concerned. 6. Relying on the above findings of the Apex Court, the learne .....

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..... ssued without recording the reasons for his belief that income escaped assessment, it cannot be presumed in law that there is also a failure on the part of the assessee to file the returns referred to in the proviso or a failure to fully and truly disclose the material facts. The reasons referred to in the main paragraph of section 147 would, in cases where the proviso is attracted, include reasons referred to in the proviso and it is necessary for the Assessing Officer to record that any one or all the circumstances referred to in the proviso existed before the issue of notice under section 147... The duty of an assessee is limited to fully and truly disclosing all the material facts. The assessee is not required thereafter to prepare a draft assessment order. If the details placed by the assessee before the Assessing Officer were in conformity with the requirements of all applicable laws and known accounting principles, and material details had been exhibited before the Assessing Officer, it is for the Assessing Officer to reach such conclusions as he considered was warranted from such data and any failure on his part to do so cannot be regarded as the assessee s .....

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..... der the legal principles settled by the High Court of Madras as well as the Supreme Court of India so also the High Court of Allahabad. In the present case, the notice was issued beyond the period of limitation of 4 years, even there is no reason to believe, which is a precondition for invoking Section 147. In case, the A.O proposes to reopen the assessment beyond the period of 4 years then he must possess any additional material to establish that the assessee had not furnished any information which all are required to be furnished or suppressed any material facts at the time of filing original assessment. Both the conditions are not satisfied in respect of the facts and circumstances of the present writ petitions. Thus, the impugned notices are liable to be scrapped as not maintainable. 13. The learned Senior Central Government Standing Counsel appearing on behalf of the Income Tax Department disputed the entire contentions raised on behalf of the writ petitioners by stating that, the writ petitions are not maintainable and liable to be dismissed in limine. What is under challenge in these writ petitions are notices issued under Section 148 of the Income Tax Act. Th .....

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..... to be relied upon on account of efflux of time and now after a lapse of 15 years, the law in this subject has been changed and the writ petitioners are entitled for the reasons and the competent authorities/Assessing Officer is bound to furnish the reasons for reopening of the assessment with reference to Sections 147 to 153 of the Income Tax Act. Therefore, the respondents are ready to furnish the reasons. On receipt of such reasons, the writ petitioners are entitled to submit their objections/explanation and file documents and that the adjudication process is to be undertaken by the Assessing Officer and thereafter, a decision would be taken by the authorities competent by passing the final assessment order. This being the procedure contemplated and now being followed by the Income Tax Department, the present writ petitions deserve no merit consideration and accordingly liable to be rejected. 15. In support of the said contentions, the learned Senior Standing Counsel for the Income Tax Department cited the judgment of the honorable Single Judge of this Court in W.P.No.27598 of 2008 dated 29.01.2018, the said judgment is submitted to repudiate the judgment submitted .....

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..... .11.2018 passed in W.P.Nos.34676 and 34677 of 2003 and the said judgment was delivered by myself (Honorable Mr.Justice S.M.Subramaniam). The relevant paragraphs are extracted here under: 26. The learned counsel for the petitioner has drawn the attention of this Court regarding the judgment of the Hon'ble Supreme Court of India in the case of GKN Driveshafts (India) Ltd. vs. Income Tax Officer And Others [(2003) 1 SCC 72], in paragraph-5, held as follows:- 5. We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income Tax Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passin .....

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..... us other sources. It is the process of investigation. On receipt of such materials or informations from various other sources, in such circumstances, the authorities must be in a position to reopen the assessment and impose tax. In the absence of any such lucid provision, enabling the Department reopening a case, there is a possibility of escapement of payment of tax by large number of Assessees. The very nature of the Act is to ensure that the informations and the materials collected or received from various other sources are also dealt with by the Department of Income Tax appropriately and with reference to the provisions of the Act. 97. The power of reopening of the assessment is certainly wide in nature. If it is restricted, then the very purpose and object of the Income Tax Act will be defeated. The wide power provided to the authorities competent to reopening of the assessment and to ensure that all external materials and the informations received from various sources should also be dealt in accordance with the provisions of Law. Thus, it does not mean that the Income Tax Authorities may reopen at any point of time. In order .....

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..... sing Officer has got wider power in respect of covering the escaped assessments for the purpose of reopening the assessment. The proviso to Section 147 states that provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment . This also provides various circumstances enabling the Assessing Officer to assess or reassess such income other than the income involving the matters which are the subject matters of any appeal, reference or revision. The wideness of the power has been further clarified in the said proviso clause. 101. Explanation 2 sub-clause (b) to Section 147 also provides power to the Assessee where a return of income has been furnished by the Assessee but no assessment has been made and 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. 102. The circumstances are narrated wherein certain materials and informations are provided by the Assessee at the t .....

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..... be taken advantage by the Assessee by contemplating the procedures that the reasons so recorded by the Assessing Officer should be communicated to the Assessee along with the notice issued under Section 148(1) of the Act. Such a proposition cannot be appreciated and that is not the intention of the Act itself. Thus, the very arguments advanced in this regard by the writ petitioner deserve no merit consideration. 111. In case of M/S. Phool Chand Bajrang Lal vs Income-Tax Officer And Another [1993 203 ITR 456] , it has been held as follows:- One of the purposes of Section 147, appears to us to be, to ensure that a party cannot get away by wilfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say you accepted my lie, now your hands are tied and you can do nothing . It would be travesty of justice to allow the assessee that latitude. 112. On careful consideration of all the judgments, cited supra, this Court is of an undoubted opinion that if the Assessing Officer has reason to believe that income has escaped assessment, it confers jurisdiction to re .....

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..... t petitioner. Therefore, the Assessing Officer has to complete the process of assessment and accordingly, take a decision and pass final orders by providing further opportunity to the assessee concerned. The writ petitioner, who is an assessee, is entitled to submit all his further objections, documents or materials available with him, enabling the Assessing Officer to consider his case independently and with reference to the documents and materials produced by the writ petitioner and also the documents and materials available with the Income Tax Department. The Assessing Officer is empowered to consider the issue relating to jurisdiction, time limit and all other legal grounds raised by the writ petitioner at the time of passing the final orders. 32. Under these circumstances, this Court has no hesitation in coming to the conclusion that the writ petitioner is entitled to submit all his objections and legal grounds and materials, enabling the Assessing Officer to consider the same and pass an assessment order under the provisions of the Income Tax Act, 1961, without causing any undue delay. 33. With the above observations, the wri .....

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..... enabling the assessee to avail of all further opportunities contemplated under the Statutes. 22. Thus, the Court cannot come to the conclusion that non quoting of the reasons by the Assessing Officer in the impugned notice will vitiate the entire proceedings. If such a proposition is adopted, then it would be certainly difficult for the executives to reopen the cases as per the provisions of the Act. The procedures are contemplated under the Act, enabling the assessee to avail the opportunity and defend their respective cases in accordance with the provisions contemplated. 23. Certain aspects which are all contemplated under the provisions of the Act, cannot be interpreted, so as to defeat the purpose for which such a provisions were enacted by the Legislators. Constructive interpretation of the Statutes and the rules are of paramount importance. The rule of constructive interpretation requires that the possible object and the purpose to be achieved is met out by adopting not only the balancing approach, but also by providing all reasonable opportunities to the persons, who are all connected or aggrieved. 24. The purpose of Income Tax A .....

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..... son to believe to reopen the assessments does not mean that all opinions and reasons formulated by the Assessing Officer must be communicated to the assessee in the very notice issued under Section 148 of the Act. The very concept of notice is that the authorities while issuing notice should not predetermine the issues or arrive a conclusion. 27. In the event of stating the reasons elaborately, it is to be construed that such reasonings are recorded without providing an opportunity to the assessee and such a procedure now argued, deserves no merit consideration. However, the notice issued must be based on certain materials available with the Income Tax Department and on receipt of the notice, the assessee has got every 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 in the manner known to law. 28. In the present cases, as contended by the learned Senior Counsel, further, on receipt of the notices impugned, the writ petitioners had filed their respective returns. They are requested to furnish the reasons for reopening .....

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..... ore the Assessing Officers. This being the legal principles settled by the Hon'ble Supreme Court as well as by this Court, as per the judgment cited supra, this Court has no hesitation in holding that the writ petitioners are not substituted any acceptable legal ground for the purpose of interfering with the notices issued under Section 148 of the Income Tax Act. Thus, the writ petitioners are bound to face the reopening proceedings by availing the opportunities to be provided by the Income Tax Department. 31. Accordingly, the following orders are passed: a) The relief sought for in these writ petitions stand rejected. b) The respondent/Income Tax Department is directed to furnish the reasons for reopening of the assessment for the years referred in the impugned notices to the writ petitioners, within a period of four weeks from the date of receipt of a copy of this order. c) On receipt of the reasons from the Income Tax Department, the writ petitioners are directed to submit their objections/explanations and the documents if any, within a period of four weeks from the date of receipt of the reasons from the Income Tax .....

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