TMI Blog2019 (8) TMI 894X X X X Extracts X X X X X X X X Extracts X X X X ..... 010 (1) TMI 11 - SUPREME COURT] after taking note of the transitory change in Section 147, the legal position as to the prerequisites for such exercise, has not undergone a change and which is that, there had to be tangible material at the disposal of the AO for reopening of such proceedings and which power cannot be exercised for initiating a roving enquiry. There was no tangible material in possession of the AO for formation of belief of escaped income chargeable to tax. In view of the clear fact situation available on the record where such reopening is simply founded on the advisory dated 10.03.2016 issued by the department and where the reasons so present for the formation of belief is not resting on any tangible material, in possession of AO as confirmed from the discussions above, in our opinion, the entire exercise is illegal and dehors the provisions of Section 147/148. Since the entire exercise is held de hors the statutory prescriptions, we do not consider it necessary to express our opinion on the expanded scope of Explanation 3 attached to Section 147 and leave it open for discussion in an appropriate case. - Decided in favour of assessee. - Civil Writ Juris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer, Ward 1 (2), Bhagalpur in purported exercise of powers vested under Section 133 (6) of the Act requiring the petitioner to furnish the information detailed in the notice. A plain look of the directions present in the notice would confirm that the documents so directed to be produced related to the agricultural income disclosed by the petitioner in his return which is to the tune of ₹ 4,85,905/- for the assessment year 2011-12, a copy of which is at Annexure-2. The petitioner did not respond to this notice which was followed by a notice under Section 148 of the Act charging the petitioner of escaped assessment for the reasons to believe in possession of the said officer and thereby proposing to reassess the income/loss for the assessment year 2011-12. A copy of such notice is at Annexure-3 to the writ petition and it is in compliance of the direction that the return was again submitted by the petitioner before the Income Tax Officer vide Annexure- 4 to the writ petition which is identical to the one originally filed and placed at Annexure-1 series to the writ petition. The petitioner along side requested for supply of the reason which led the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... having not done so, the law does not permit the Assessing officer to hold an enquiry which should have been done at the stage of filing of the returns. According to Mr. Pathy, in case the Assessing authority is in possession of materials which leads to a reasonable belief that any part of income had escaped assessment that a proceeding of such kind under Section 147 can be carried out but such power cannot be abused for holding a roving enquiry where the petitioner was being directed to produce evidence against himself. It is submitted by Mr. Pathy, that although the petitioner questioned the authority of the Income Tax Officer to reopen the proceedings but the same has been ignored to result in the order impugned at Annexure-10 series. Learned counsel has next turned to the satisfaction recorded by the Commissioner on such reopening and the copy of which has been placed on record by the department in its counter affidavit at Annexure- B. According to Mr. Pathy, while Section 151 of the Act casts an obligation on the Principal Chief Commissioner or the Chief Commissioner or the Principal Commissioner or the Commissioner to record satisfaction on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no responsibility of the assessee to advise the Income Tax Officer as to the inference that he should draw from the fact so disclosed. (3) W.P. No. 1000 of 2017 and W.P. No.1001 of 2017 (Zuari Foods and Farms Pvt. Ltd. versus Assistant Commissioner of Income Tax and Ors.). In reference to the opinion expressed by the Bombay High Court at paragraph 6 of the judgment, he submits that the grounds for reopening an assessment has to be recorded before a notice is issued and which reason must disclose live link between the tangible material in possession of the assessing Officer as well as the reason to believe that income chargeable to tax has escaped assessment. It is submitted that in so far as the present case is concerned, there is no material in possession of the Assessing Officer to reopen a proceeding rather it is to gather material that documents etc. are being directed to be produced as manifest from notice issued under section 133 of the Act impugned at Annexure-2. (4) (2016) 91 VST 1(SC) (State of Uttar Pradesh versus Aryaverth Chawal Udyog and Ors.) In reference to the position settled by the Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parameters of the statutory provisions and there is neither any default in jurisdiction nor the order is in excess of such jurisdiction. According to Mr. Sinha, the entire argument of Mr. Pathy is resting on preamended provisions of Section 147 of the Act and even the judgments relied upon is in reference to such provision. According to Mr. Sinha, there has been a sea change in the provisions of Section 147 of the Act vide Direct Tax Law (Amendment) Act, 1987 which came into force with effect from 01.04.1989. According to Mr. Sinha, the enunciation of law as found in the judgments relied upon by Mr. Pathy is in consideration of the unamended provisions of Section 147 of the Act but since after its amendment with effect from 01.04.1989, the Assessing officer has been given a wider play field. According to Mr. Sinha, learned Senior Standing Counsel for the Department, a disclosure towards agricultural income was made by the petitioner in his returns which was not supported with material. He submits that it is in the light of an order passed by this Court on a pubic interest litigation that an advisory was issued to all Assessing Officers to carefully examine th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s reasons to believe that any income chargeable to tax has escaped assessment, it is after issuing notice and hearing the assessee that the Assessing Officer can assess or reassess. According to Mr. Sinha, even if the reasons supplied by the Assessing Officer made reference to the disclosure of agricultural income by the assessee but once the assessment is reopened, it allows the Assessing Officer to examine the other claims as well and since the material on record showed that certain expenses had been wrongly claimed by the assessee petitioner that it is within the powers so vested under Section 147 to assess or reassess, the Assessing officer has proceeded to pass the order in respect of the expenses claimed as well and which would suffer no infirmity. In sum and substance, it is the argument of Mr. Sinha that there is absolutely no infirmity in the exercise complained of which warrants any interference. Briefly responding to the arguments of Mr. Sinha, Mr. Pathy has made reference to the statutory provisions of Section 143 of the Act to submit that when a return is filed under Section 139 of the Act it is processed in the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer could have travelled beyond the reasons to disallow the expenses claimed by the petitioner in his return to add to his total income, by relying on Explanation 3 attached to Section 147. In so far as the issue of limitation as raised by Mr. Pathy is concerned, considering the import of Section 149 of the Act that the return were originally filed on 30.3.2012, the notice issued under Section 148 on 22.3.2018 is found to be well within the limitation period and to that extent there is no infirmity in the initiation of the proceedings. The issue of contest is that the disclosure towards agricultural income made by the petitioner in his return at Annexure-1 of the writ petition has been disbelieved and it is to satisfy himself on this account that an enquiry is initiated by the Assessing officer under Section 133(6) of the Act . No less than 14 documents/records/registers have been demanded by the Income Tax Officer respondent No.2. It is rather fairly informed by Mr Sinha that such exercise was initiated in view of an advisory issued which had the approval of the Principal D.G.I.T. (S) New Delhi. Such advisory contained in a le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by such advisory to issue notice for such proceeding and unfortunately even the Principal Commissioner has defaulted in not appreciating whether at all the case was a fit case for reopening especially where the Assessing Officer had failed to satisfy himself on the reasons for the belief that any part of income chargeable to tax had escaped assessment. Much reliance has been placed by Mr. Sinha to contest the proposition advanced by Mr. Pathy in reference to the parameters drawn for exercise of power vested in the Assessing Officer under Section 147 of the Act by submitting that the proposition canvassed may be good under the preamended provision of Section 147 of the Act but since after its amendment with effect from 01.04.1989, this argument would not hold good for extensive powers has been vested in the Assessing Officer to reopen assessments where he has reasons to believe that any income chargeable to tax has escaped assessment and in such exercise, the Assessing Officer can also direct for production of the documents/records needed for the purpose. It is also his argument that in this course, the Assessing Officer can also go beyond the reasons supplied, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws(Amendment) Act, 1987, Parliament not only deleted the words reason to believe but also inserted the word opinion in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words reason to believe , Parliament reintroduced the said expression and deleted the word opinion on the ground that it would vest arbitrary powers in the Assessing Officer. The Supreme Court taking note of the transitory change in Section 147 has in paragraph 7 concluded that a power to reopen would vest in the Assessing Officer only if, there is tangible material in his possession for coming to a conclusion that there was an escapement of income chargeable to tax, from assessment and the reasons with the Assessing Officer must have a live link with the formation of belief. Testing the case in hand in the backdrop of the position so settled in the judgments relied upon by Mr. Pathy as well as on the transitory change as clarified in the judgment of Kelvinator of India (supra), it is to be seen whether the case in hand wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng powers is only to be exercised only where there is tangible material available at the hands of the Assessing Officer and not in absence thereof. The judgments relied upon by Mr. Pathy has been contested by Mr. Sinha on grounds that they relate to the preamended provisions of Section 147 but in our considered opinion, in view of the position settled by the Supreme Court in the case of Kelvinator of India ( supra) after taking note of the transitory change in Section 147, the legal position as to the prerequisites for such exercise, has not undergone a change and which is that, there had to be tangible material at the disposal of the Assessing Officer for reopening of such proceedings and which power cannot be exercised for initiating a roving enquiry. Even if the judgments rendered by the Supreme Court in the case of Calcutta Discount Co. Ltd. and Lakhmani Mewal Das is relatable to preamended provisions of Section 147, in view of the legal position settled by the Supreme Court in the judgment rendered in the case of Kelvinator of India( supra), whatsoever doubts that may be present are in the mind of the department is set at rest. In this contest we are persu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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