TMI Blog2016 (9) TMI 1529X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in the Returns and it was always open to the Assessing Officer to verify it at the stage of regular proceedings. If in the regular proceedings, Assessing Officer did not find any reason for verification what prompted it or made it obligatory to make verification now, is not clear and this ground in our view is nothing but change of process of opinion, not even a complete change of opinion, and cannot be justified to be a valid ground for reassessment unless there is something further to show that material was available before Assessing Authority so as to cause reason to believe that something has escaped assessment. There are several conditions under Section 194 A, 194 C and 194 J, and thereunder whether the TDS was actually deductable or not is a matter of investigation and inquiry. But it was always open to make this inquiry in regular proceedings when disclosure of payment under various heads as noted above was already there in the Income and Expenditure Account and Balancesheet of YEIDA. But when Assessing Authority did not find any justification to make verification at that stage, for change of opinion now, in our view Sections 147/148 would not be attracted. YE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are patently illegal and without jurisdiction, since conditions precedent to justify re assessment proceedings do not exist and authorities are proceeding without application of mind. 3. Details of relevant Assessment Year (hereinafter referred to as A.Y.) in respective writ petitions and date of notice etc. are stated as herein: Serial no. Writ petition no. A.Y. Date of notice under Section 148 Date of order passed on objection filed by Assessee against reassessment notice 1 682 of 2006 2009-10 29.03.2016 10.08.2016 2 184 of 2016 2010-11 30.11.2015 08.01.2016 3 182 of 2016 2011-12 30.11.2015 08.01.2016 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... separate sheets . In the documents filed as computation of income, along with Returns, YEIDA declared its income and taxable liability in respect to relevant years, as under: Serial no. A.Y. Gross total income Rs. Tax liability Refund of TDS, if any Rs. 1. 2009-10 -15736298 Nil Nil 2. 2010-11 Nil Nil 2,99,643 3. 2011-12 Nil Nil 98,286 4. 2012-13 Nil Nil 59,29,391 5. 2013-14 Nil Nil 50,34,984 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see for the relevant previous year. Hence this payment is to be disallowed u/s 40(a)(ia) of I.T. Act. (ii) Advertisement expenses of ₹ 2,31,65,429/ this year compared to ₹ 1,47,64,131/ last year. If the same was executed through contract, TDS is deductible u/s 194C of the I.T. Act, 1961. If no TDS was deducted and paid the expenses are liable to be disallowed 40(a)(ia). The same needs to be verified. (iii) Consultancy Expenses of ₹ 4,85,36,284/ this year compared to ₹ 22,35,504/ last year. The same is liable for TDS u/s 194J of the I.T. Act, 1961. If no TDS was deducted and paid the expenses are liable to be disallowed 40(a) (ia). The same needs to be verified. (iv) The sundry creditors have decreased to ₹ 2827.83 Crores as compared to 798.77 crores last year which needs verification. (v) The assessee has claimed depreciation on electrical equipment @ 15% instead of 10% during the relevant previous year which is prima facie inadmissible. A.Y. 2011 12 5. On perusal of Income and Expenditure A/c and Balance sheet for A.Y. 2011 -12 it is seen that the assessee has debited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I.T. Act, 1961. The same needs to be verified. (iii) Consultancy Expenses of ₹ 4,76,91,925/ this year compared to ₹ 3,33,33,898/ last year. The same is liable for TDS u/s 194J of the I.T. Act, 1961 and needs to be verified. (iv) The sundry creditors have decreased to ₹ 3617.41 Crores as compared to 3933.63 crores last year which needs verification. (v) The assessee has claimed depreciation on electrical equipment @ 15% instead of 10% during the relevant previous year which is prima facie inadmissible. A.Y. 2013 14 5. On perusal of Income and Expenditure A/c and Balance sheet for A.Y. 2013 -14 it is seen that the assessee has debited expenses totaling ₹ 2,28,24,31,417/ and shown income of ₹ 2,01,12,60,432/ only resulting in deficit of ₹ 27,11,70,984/ for the A.Y. 2013- 14. On further examination the following issue emerges: (i) The Assessee has not deducted TDS on interest of payment of 2,22,43,16,262/ as reported by ACIT(TDS) vide letter dated F.No. ACIT(TDS)/2014 -15/3426 dated 27.03.2015 order passed u/s 201(1), 201(1A) of Income Tax Act, 1961. The assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equipment @ 15% instead of 10% during the relevant previous year which is prima facie inadmissible. 12. YEIDA filed objection to the said notice dated 04.01.2016 in respect to all A.Y. s except A.Y. 2009 -10. The objection filed by YEIDA with respect to A.Y. 2009 -10 is dated 21.06.2015. DCIT communicated orders dated 08.01.2016 in respect to A.Y. s 2010 -11, 2011 -12, 2012- 13, 2013- 14 and rejected objections. In respect to A.Y. 2009 10 similar order has been passed on 10.08.2016 by Assistant Commissioner, Income Tax, Circle 3, NOIDA (hereinafter referred to as ACIT ). 13. In the order dated 08.01.2016, DCIT has considered two objections in detail namely, Assessee failed to deduct TDS under Section 194 A, 194C and 194J of Act 1961 and further that, Assessee if had understated income and claimed excessive loss, deduction, allowance or relief in the return, it shall be deemed to be a case of Escaped Assessment under Section 147 Explanation 2 (b). With regard to other objections, it has simply rejected the same stating as under: where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. s 2005 -06, 2006- 07 and 2007 -08 were completed on 11.03.2013, 03.03.2014, 27.03.2015, respectively. The exemption claimed by YEIDA under Section 10 (20) was denied. The appeal preferred by YEIDA against assessment order in regard to A.Y. 2005- 06 has been dismissed on 21.03.2014. In regard to A.Y. 2012- 13 assessment was also completed on 18.02.2016 which has been challenged in one of the connected writ petitions, up for consideration, being Writ (Tax) No. 237 of 2016. 16. Coming to other facts, respondents have said that YEIDA came into existence on 24.04.2001. Earlier it was existing with a different title namely Taj Expressway Industrial Development Authority which was changed as YEIDA by notification dated 11.07.2008. The basic object of constitution of YEIDA is securing Infrastructure Development of industrial area of Yamuna Expressway Corridor. The functions of YEIDA included acquisition of land in the industrial development area, by agreement or through proceedings under Land Acquisition Act, 1894, prepare a plan for industrial development area, to demarcate and develop sites for institutional, industrial, commercial and residential purposes and accordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd on the part of concerned authority. 19. Sri Ashok Mehta, learned Additional Solicitor General, on the contrary, sought to support impugned orders rejecting objection of petitioner, and notices issued for re assessment on the ground that Assessee was liable to deduct Tax/TDS under various provisions of Act 1961, as mentioned in the notices issued under Section 148 of Act 1961. The objections raised by YEIDA have also been considered in detail. Hence, under Article 226 of Constitution of India no interference is called for. 20. In all these writ petitions we are not concerned, as to whether YEIDA is amenable to income tax under Act 1961, or not or that an Assessment Order is correct, since that is an issue pending for consideration before concerned Revenue authorities. Our endeavor is confined to consider, whether objections raised by petitioner against re assessment proceedings under Section 147/148 have been decided by application of mind or whether authorities concerned have recorded, in fact, reasons to believe for initiating reassessment proceedings or not and the requirement of statute is justified, for the reasons that is a jurisdictional issue a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also 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. 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 amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ingly as if such return were a return required to be furnished under section 139: Provided that in a case- (a) where a return has been furnished during the periodcommencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub section (2) of section 143 after the expiry of twelve months specified in the proviso to sub section (2) of section 143, as it stood immediately before the amendment of said sub section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re assessment or recomputation as specified in sub section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case- (a) where a return has been furnished during the periodcommencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) ofsub section (2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up for constitution in Ganga Saran Sons P. Ltd Vs Income Tax Officer others, (1981) 130 ITR 1 (SC) and Court said; It is well settled as a result of several decisions of this Court that two distinct conditions must be satisfied before the Income Tax Officer can assume jurisdiction to issue notice under section 147 (a). First, he must have reason to believe that the income of the assessee has escaped assessment, and, secondly, he must have reason to believe that such escapement is by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. If either of these conditions is not fulfilled, the notice issued by the Income Tax Officer would be without jurisdiction. The important words under section 147 (a) are has reason to believe and these words are stronger than the words is satisfied . The belief entertained by the Income Tax Officer must not be arbitrary or irrational. It must be reasonable or in other words it must be based on reasons which are relevant and material. The Court, of course, cannot investigate into the adequacy or sufficiency of the reasons which have weighed with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, it appears that two conditions precedent which are required to be satisfied before an Income Tax Officer can acquire jurisdiction to proceed under Clause (a) of Section 147 read with Sections 148 and 149 of the Act, beyond the period of four years but within a period of eight years, from the end of the relevant year, are: (a) that the Income Tax Officer must have reason to believe that the income, profits or gains chargeable to tax had either been under assessed or escaped assessment and (b) that the ITO must have reason to believe that such escapement or under assessment was occasioned by reason, of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. Both these conditions must co exist in order to confer jurisdiction on the Income Tax Officer. The Income Tax Officer is obliged, before initiating proceedings under Section 148 of the Act to record the reasons for the formation of his belief to reopen the assessment. (emphasis added) 27. Court further said that, an Income Tax Officer confers with jurisdiction to re open assessment under Section 147 (a) read with Section 148 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apement of income. 29. All these authorities have been considered and reiterated recently in State of Uttar Pradesh and others Vs M/s Aryaverth Chawal Udyog Others, 2016 (91) VST 1 (SC), Court after referring its earlier authorities, said that consistently it has been held that, such material on which Assessing Authority bases its opinion must not be arbitrary, irrational, vague, distant or irrelevant. It must bring home the appropriate rationale of action taken by Assessing Authority in pursuance of such belief. In case of absence of such material, Court in clear terms has held that the action taken by Assessing Authority on such reason to believe as arbitrary and bad in law. The standard of reason exercised by Assessing Authority is laid down as that of an honest and prudent person who would act on reasonable grounds and come to a cogent conclusion. The necessary sequitur is that a mere change of opinion while perusing the same material, cannot be a reason to believe that a case of escaped assessment exists requiring assessment proceedings to be reopened. If a conscious application of mind is made to the relevant facts and material available or existing at the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty concerned has no subsequent material to form opinion but it is factual guesswork or conjectures on the part of authority concerned so as to include and make it part of reasons to justify re assessment under Section 147/148 of Act 1961. 32. The reasons communicated to YEIDA, we have already quoted in respect to A.Y's. 2010 -11, 2011- 12, 2012- 13 and 2013 -14. One of the ground is that Sundry Creditors have decreased and it needs verification. This is a fact disclosed by Assessee in the Returns and it was always open to the Assessing Officer to verify it at the stage of regular proceedings. If in the regular proceedings, Assessing Officer did not find any reason for verification what prompted it or made it obligatory to make verification now, is not clear and this ground in our view is nothing but change of process of opinion, not even a complete change of opinion, and cannot be justified to be a valid ground for reassessment unless there is something further to show that material was available before Assessing Authority so as to cause reason to believe that something has escaped assessment. The process of decrease of Sundry Creditors in the concerned A.Y. and pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es incurred by YEIDA on different heads i.e. payment of interest, advertisement and consultancy. These three expenses are disclosed in the documents filed along with return since this is evident from the reasons given by Assessing Authority that on the examination of Balance sheet, Income and Expenditure Account these facts are evident. If that be so, every material was before the Authority concerned, nothing new has come, nothing has been discovered and nothing was detained by YEIDA and there is no nondisclosure of correct particulars. 37. Besides, there are several conditions under Section 194 A, 194 C and 194 J, and thereunder whether the TDS was actually deductable or not is a matter of investigation and inquiry. But it was always open to make this inquiry in regular proceedings when disclosure of payment under various heads as noted above was already there in the Income and Expenditure Account and Balancesheet of YEIDA. But when Assessing Authority did not find any justification to make verification at that stage, for change of opinion now, in our view Sections 147/148 would not be attracted. 38. We also find that in respect to TDS, Assessing Author ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... %, which is prima facie inadmissible, is also unsustainable for the reason that it is a clear case of change of opinion. Assessee at the time of filing Return was not found incorrect but now a different opinion is being formed that depreciation should be lesser than that actually claimed. 41. In order dated 10.08.2016, height of non application of mind is evident from the fact that Assessing Authority while rejecting objection has observed that here is a case of seizure operation though admittedly there was no search and seizure matter. This clearly shows that while passing order dated 10.08.2016, competent authority did not care even to go through relevant record and apply its mind. When confronted, learned Additional Solicitor General has nothing to offer except his regret accepting that here is a clear case of non application of mind on the part of authority concerned. 42. In the entirety of facts and circumstances as discussed above, we are satisfied that the so called reasons mentioned by authority concerned, for all Assessment Years in question, for justifying reassessment proceedings under Section 147/148 of Act 1961, are illegal, showing non appli ..... X X X X Extracts X X X X X X X X Extracts X X X X
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