9911796707
TMI Blog2020 (5) TMI 263X X X X Extracts X X X X X X X X Extracts X X X X ..... 03.2009. 2.2. The case was reopened under Section 148 of the IT Act on 26.08.2010 by issuance of notice and in response to the same, the respondent/assessee has sent a letter dated 14.09.2010 stating that the Return of Income already filed by him be treated as Return filed by him in compliance of Notice issued under Section 147 of the IT Act dated 26.08.2010. 2.3. Personal hearing was afforded and details were also called for from time to time. The Assessing Officer finalized the assessment under Section 143(3) r/w. Section 147 of IT Act as follows: Total Income Computation: Rs. Total Income admitted 23,92,137 Add:1.Disallowance u/s 14A 14,602 2.Depreciation 10,979 3.Donation 100 25,681 ----------------------------------- Total Income determined 24,17,818 ----------- Tax, S.C. & E.C. 8,13,83 Less : TDS 16,16,214 ------------ Refund 8,02,377 Add: 244-A Interest 96,285 ------------ Total Refund 8,98,662 Less: Refund already issued 9,08,420 ------------ Balance Payable 9,758 ------------ 2.4. The Assessing Officer subsequently had noticed certain income c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssed Total Income Rs. 2,53,18,357.00 Balance Tax Payable Rs. 1,09,30,440.00 2.8. The respondent/assessee, aggrieved by the said Assessment Order, filed an appeal in ITA.No.55/CIT(A)-15/15-16 dated 25.05.2016 before the Commissioner of Income Tax (Appeals) -15, Chennai-600 034. The appellant/assessee before the CIT (Appeals) contended among other things that the notice under Section 148 of the IT Act was issued after 4 years from the Assessment Order despite the fact that there was no failure on the part of the assessee to furnish truly and fully all material facts necessary for assessment. The appellant/assessee also took a stand that reopening of the assessment is purely on account of audit objections for which the Assessing Officer himself sent a reply that there is no justification for raising objections and the assessment can be reopened only if the Assessing Officer is in possession of tangible materials /facts on the basis of which, he had reason to believe that income had escaped assessment. The appellant/assessee also contended as to the sustainability of addition of Rs. 2,29,00,539/- as deemed dividend under Section 2(22)(e) of IT Act and that apart, also took a stan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture incurred such as Salary etc., without any profit / commission and it was only a system/colourable device adopted by the assessee to reduce the tax liability, for which the balance amount of Rs. 6,01,84,164/- is to be treated as Net Profit and it had to be taxed under Section 69 of the IT Act. ➔ The Audit Party has also considered the reply submitted by the Assessing Officer and found that RSC is making reimbursement for expenses incurred by the assessee company year after year and if that is so, RSC would have reimbursed the exact expenses incurred by the respondent/assessee and not any additional amount year after year and that apart, RSC did not make payment for rendering services and the entire amount was required to be brought to tax and therefore, the balance amount of Rs. 6,01,84,164/- is required to be brought to tax and reiterated the said fact. ➔ The Assessing Officer had submitted his response dated 04.03.2014 reiterating their earlier stand for which there was a communication dated 20.03.2014 from the Deputy Director (DT) to the Officer of the CIT, Chennai (VI), vide letter dated 03.04.2014. The Assessing Officer, has submitted his response dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essary for assessment and in the absence of any such reason, the notice for reopening of assessment under Section 143(3) r/w. 147 of the IT Act cannot be recorded as a valid material. ➔ Admittedly, notice under Section 148 of IT Act came to be issued after 4 years from the end of the Assessment Year and the Assessing Officer has also failed to furnish reasons for issuance of notice under Section 148 and only after the representation was submitted, reasons were furnished that too after the completion of the assessment. ➔ As regards the deemed dividend, the credit balance in the account of RSC cannot be treated as deemed dividend under Section 2(22)(e) of the IT Act for the reason that RSC had enlisted the services of the assessee for the purpose of selling road safety equipments which are basically insurance products to promote road safety and the said amount has been advanced to the assessee without any interest and debited to RSC account and the said arrangement was supported by an agreement dated 01.04.2005 and since it is in the nature of fresh advance for the purpose of commercial transaction, the said advance do not attract Section 2(22)(e) of the said Act an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2] he must have reason to believe that such income has escaped assessment by reason of the omission or failure on the part of the assessee [a] to make a return under section 139 for the assessment year to the Incometax Officer, or [b] to disclose fully and truly material facts necessary for his assessment for that year. Both these conditions must co-exist in order to confer jurisdiction on the Income-tax Officer. It is also imperative for the Income-tax Officer to record his reasons before initiating proceedings as required by section 148[2]. Another requirement is that before notice is issued after the expiry of four years from the end of the relevant assessment years, the Commissioner should be satisfied on the reasons recorded by the Income-tax Officer that it is a fit case for the issue of such notice. We may add that the duty which is cast upon the assessee is to make a true and full disclosure of the primary facts at the time of the original assessment. Production before the Income-tax Officer of the account books or other evidence from which material evidence could with due diligence have been discovered by the Incometax Officer will not necessarily amount to disclosure cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. In New Excelsior Theatre Pvt. Ltd. v. M.B.Naik, Income Tax Officer and Others [1990 Vol.185 ITR 159 (Bom.)], the Writ Court while quashing the notice issued under Section 147(a) of the IT Act has held that the condition for reopening of assessment was that formation of belief that income had escaped assessment must be by reason of either the assessee's omission to file a return of income or non-disclosure of full and material facts necessary for assessment and having taken note of the fact that the assessee had furnished full particulars, had quashed the notice. 9. In Commissioner of Income-Tax v. Akbarali Jummabhai [1992 Vol.198 ITR 69], Gujarat High Court had considered the reference made by ITAT under Section 256(2) of the IT Act for answering the following Questions of Law: "1. Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in law in holding that the reopening of assessment under Section 147(a) of the Income Tax Act, 1961, was not justified? 2. Whether, on the facts and in the circumstances of the case, it can be said that the assessee had disclosed fully and truly all the material necessary for the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and correct inferences to be drawn from the primary facts cannot be regarded as failure to disclose "material facts". The assessee is required to disclose only primary facts and the primary facts to be disclosed by him must be material or relevant to the decision of the question before the assessing authority so that the non-disclosure of such facts would have a material bearing on the question of escapement of income from assessment. If the assessee has disclosed the primary facts which are material and necessary for the purpose of his assessment, his assessment cannot be reopened by the Income-tax Officer by resorting to section 147[a], but, if there is omission or failure on the part of the assessee to disclose any material or relevant primary facts and, in consequence, there is escapement of income from assessment, such income can be got taxed by the Revenue by reopening the assessment under section 147[a]. ...... From the aforesaid observations in the case before the Supreme Court, it becomes clear that to confer jurisdiction under section 147[a] to issue notice in respect of an assessment beyond the period of four years from the end of the relevant year, two conditions h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. The amended Section 147 provides that where the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may apply the provisions of Sections 148 to 153 and assess or re-assess the income which has escaped assessment. For the present purpose, only Sections 148 and 151 are relevant. Cub-section (2) of Section 148 of the Act mandates that before issuing notice to the assessee under Subsection (1), for filing the return, the Assessing Officer shall record his reasons for doing so. Therefore, formation of reason to believe and recording of reasons are imperative before the Assessing Officer can re-open the completed assessment. Proviso to Sub-section (1) of Section 151 of the Act provides that after the expiry of four years from the end of the relevant assessment year, notice under Section 148 shall not be issued unless the Chief Commissioner or the Commissioner, as the case may be, is satisfied, on the reasons recorded by the Assessing Officer concerned, that it is a fit case for the issue of such notice. These are some in-built safeguards to prevent arbitrary exercise of power by an Assessing Officer to fiddle w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r a hunch. There must be some material which can be regarded as information which must exist on the file on the basis of which the authorising officer can have reason to believe that action under Section 132 is called for any of the reasons mentioned in Clauses (a), (b) or (c). When the action of issuance of an authorisation under Section 132 is challenged in a Court, it will be open to the petitioner to contend that on the facts or information disclosed, no reasonable person could have come to the conclusion that action under Section 132 was called for. The opinion which has to be formed is subjective and, therefore, the jurisdiction of the Court to interfere is very limited. A Court will not act as an Appellate Authority and examine meticulously the information in order to decide for itself as to whether action under Section 132 is called for. But the Court would be acting within its jurisdiction in seeing whether the act of issuance of an authorisation under Section 132 is arbitrary or mala fide or whether the satisfaction which is recorded is such which shows lack of application of mind of the Appropriate Authority. The reason to believe must be tangible in law and if the infor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 148 on November 20, 1998; to the assessee for reopening the original assessments for the assessment years 1988-89, 1989-90 and 1990-91, on the basis of the Appellate Tribunal's decision rendered in the case of Boudier Christian relating to the assessee's technicians deputed to India, the income of the assessee was to be treated as fee for assessments for those assessment years, were without jurisdiction as they were barred by limitation in view of the proviso to section 147, as amended by the Direct Tax Laws (Amendment) Act, 1987, as that was the provision that was applicable on November 20, 1998, when the reassessment notices were issued, and admittedly there was no failure on the part of the assessee to disclose fully and truly all material facts for assessment ; (v) on the facts, notices were bad as they were only on the basis of a change of opinion and the law that an assessment could not be reopened on a change of opinion was the 1987, of Section 147, and (vi) as the notices were without jurisdiction, the assessee should not be relegated to the alternative remedy, the Department preferred appeals to the Supreme Court. The Supreme Court saw no reason to di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... imitation, providing for a period exceeding four years, there should have been a failure on the part of the assessee to disclose fully and truly all material facts leading to the escapement of income. But as a result of the amendment brought with effect from April 1, 1989, the above distinction had been obliterated and the Assessing Officer could reassess the income as long as he had reason to believe that income chargeable had escaped assessment. The new law has inserted a proviso to section 147 in the following words: 'Provided that where an assessment under sub-section(3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under subsection (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year.' In addition to the time-limits provided for under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has escaped assessment or has been under assessed and the assessment in such a case would be valid even if the materials, on the basis of which the earlier assessing authority passed the order and the successor accessing authority proceeded, were same. The question still is as to whether in the present case, the assessing authority was satisfied or not." It was also observed from the materials that the Assessing Officer had to issue notice on the ground of directions issued by the audit party and not on his personal satisfaction which is not permissible under law and accordingly, allowed the appeal filed by the assessee. 16. In ICICI Home Finance Co. Ltd. v. Assistant Commissioner of Income-tax, 10(1) [(2012) 25 taxmann.com 241(Bom.)], the order passed by the Assessing Officer under Section 143(3) of IT Act as well as the scope of Section 147 of IT Act came up for consideration and on facts found that the reasons for reopening of the assessment are identical to the objections raised by the audit party and in para 7 had dealt with the law on the said subject and it is relevant to extract the same: "7. However, as submissions were made on other issues also we are examining them ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t and he passes an assessment order under Section 143(3) of the Act a presumption can be raised that he applied his mind to all the facts involved in the assessment." The appeal filed by the assessee was allowed by the Bombay High Court in the said decision. 17. In M/s Global Business Solutions India Pvt. Ltd. v. Principal Commissioner of Income Tax-3 [(2018) 409 ITR 560], a Division Bench of Delhi High Court, after taking note of the above quoted judgment of the Hon'ble Apex Court in Commissioner of Income Tax v. Kelvinator of India Ltd. [320 ITR 561] wherein it was held that review of the completed scrutiny can be done only if tangible material is made available to the Revenue and on the facts of the case found that reassessment notice is solely based on an audit opinion and accordingly, allowed the appeal filed by the assessee. 18. In the decision in Commissioner of Income Tax-17, Mumbai v. Shri Rajan N.Aswani [(2018) 403 ITR 30], the appeal filed by the Revenue was dismissed on the ground that reopening of the assessment was solely based upon audit objections. 19. The decision in Adani Infrastructure & Developers (P.) Ltd. v. Assistant Commissioner of Income Tax [(2019) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... categorical finding that the credit balance as on 31.03.2007 amounting to Rs. 5,30,99,960/- is treated as deemed dividend in the hands of the respondent/assessee and it is an independent finding recorded dehors the contents of the audit objections and the Tribunal, in the impugned common order, had failed to deal with the said issue and merely recorded a finding that the Assessing Officer did not apply his mind as to the income escaping assessment. The Assessing Officer, after application of mind, found that there was no escapement of income and also requested the Audit Wing to dropping proceedings did change his mind and the said finding is per se unsustainable. 23. The Income Tax Officer, Company Ward-VI(1), Chennai-600 034 had issued a notice dated 31.03.2014 stating that she had reason to believe that the income chargeable to tax for the Assessment Year 2007-2008 had escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961 and the respondent/assessee, in response to the said notice, sent a reply dated 19.04.2014, enclosing copy of the Profit & Loss Account, Balance Sheet and Statement of Computation of Income and requested reasons for issuance of notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors amounting to Rs. 6,01,84,164/- copy of relevance materials enclosed]. - "D" The very same official, in the above cited order dated 30.01.2015, had concluded that the amount in Schedule "G" of Rs. 5,30,99,959/- [Rounded off to Rs. 5,39,99,960/- in the said order of assessment should be treated as deemed dividend. 27. The primordial submission of the learned Senior Standing Counsel appearing for the Revenue is that the reasons recorded by ITO, in the order dated 30.01.2015 as to the treating of the amount of Rs. 5,30,99,960/- as on 31.03.2007 came into being on an independent application of mind to the materials placed and he did not refer to the audit objections which pertain to some other issue and though it is obligatory on the part of ITAT to deal with the merits of the appeal also, did not go in the merits at all and prays for remanding of the matter. 28. The respondent/assessee, in the case on hand, did not burke/suppress any material and whatever materials in their possession, had submitted the same by enclosing in their reply dated 19.04.2014, in response to the notice under Section 148 of the IT Act dated 31.03.2014. The ITO has passed the order of assessment dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as also ordered deletion of Rs. 2,29,00,539/- on the ground that the provision of Sec.2(22)(e) of IT Act do not apply and the reasons for arriving such a conclusion is sustainable in law. 33. The findings recorded by the ITAT, in the impugned common order as to the non-application of mind on the part of the Assessing Officer to apply his mind independently for the purpose of reopening of assessment is also sustainable for the reason that the very same official, namely Mr.S.Krishna Kumar, in response to the audit objection dated 31.01.2015, had taken into consideration all the materials placed and requested for dropping of the audit objection and therefore, passing of second order of assessment dated 31.03.2015 by him amounts to change of opinion on the very same set of facts. 34. This Court, on an independent application of mind and on thorough consideration of material aspects and legal position, is of the considered view that there is no error or infirmity in the reasons assigned by the ITAT in dismissing the appeal filed by the Revenue and allowing of the cross objection filed by the assessee. 35. Therefore, the Substantial Question of Law is answered innegative and against t ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
