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TMI Blog2020 (1) TMI 1318X X X X Extracts X X X X X X X X Extracts X X X X ..... called for by the 1st Respondent, by issuing a Notice under Section 142(1) of the Act. In response to the Notice dated 15.09.2014, the Petitioner herein submitted all the documents before the Respondent from time-to-time, more particularly, the details of shares bought back by the Petitioner and the shares acquired by SPI Power Private Limited ['SPIPPL'] from Covanta Energy India (Balaji) Limited ['CEIBL']. It is to be noted that, the basis on which the assessment was reopened already formed part of the assessment records and was fully disclosed in Note 1(a) to Note 1 (c) of the financial statements for the year ending on 31.03.2012, filed as part of submission dated 31.10.2014. Further, the consideration paid as part of the buyback transactions was disclosed as a foot note to cash flow statements. ii) Based on the examination and review of the information submitted, the 1st Respondent herein passed an order under Section 143(3) of the Act on 31.03.2015, showing the tax to be paid as "Nil". In the letter, dated 31.03.2015, there was no additions in relation to Section 56(2)(viia) of the Act by the 1st Respondent, thereby establishing that the 1st Respondent after verification o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .2019, on the ground that there is failure on the part of the Petitioner to disclose fully and truly all the material facts during the course of their assessment without again referring to the actual nature of the failure on the part of the Petitioner. Challenging the same, the present Writ Petition came to be filed on various grounds. 3) (i) Learned Senior Counsel Sri R.V. Eswar, representing Sri.D. Satya Siva Darshan, Advocate, would contend that, since all the material facts were furnished along with the original assessment itself, reviewing of the same without any new material and coming to different conclusion is erroneous. According to him, Section 147 of the Act can be invoked only when new facts come to light affording a valid reason to believe that income has escaped assessment. (ii) He also pleads that, when the Petitioner himself has alerted the assessing authority by disclosing the amount obtained by the Petitioner Company under Section 56(2)(viia) of the Act and when the Assessing authority himself found that no tax is liable to be levied on the said amount by accepting the return, reopening of the same on the basis of the same material is illegal, since, the same do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k by the Petitioner and the shares acquired by SPIPPL from CEIBL were disclosed in Note 1(a) to Note 1 (c) and Note 27 of the financial statements for the year ending 31.03.2012 forming part of the assessment records, the mere foot note in the cash flow statement would not amount to disclosing fully and truly all material facts necessary for assessment. (iv) It is further submitted that the evidence in support of transfer of shares on buy back should have been substantiated in detail so as to come to a conclusion whether there was escapment of income or not. It is pleaded that, even if no additions are made in relation to Section 56(2)(viia) of the Act while passing the original assessment order under Section 143(3) of the Act, the same would not bar the assessing officer to reassess the income which escaped the assessment. In other words, the plea of the Respondents is that, reassessment is permissible if the information is obtained on proper investigation of the materials on record or from any enquiry or research in facts or law. Production of voluminous documents before the assessing officer without disclosing the income, in the returns of income which does not even form part o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment for the financial year 2012-13? 7) It may not be necessary to refer to all the facts in issue once again. 8) Before proceeding further, it would be appropriate to extract the reason recorded for reopening of the assessment, which is as under: "On verification of assessment record for the A.Y. 2012-13, it is noticed that there is an income of Rs. 80,41,23,351/- u/s 56(2)(viia) which has not been routed through P&L Account and the above income u/s 56(2)(viia) has not been considered either in the returned income or in the assessed income for the purpose of computing book profit or for arriving at income under normal provisions of the Act. Hence, I have reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment resulting the escapement of income." 9) It is also to be noted here that pursuant to an office objections raised by the audit party, a reply came to be issued by the Respondents to the Senior Audit Officer, DTAP-3 (Review), Office of the Director General of Audit (Central), Hyderabad, stating that, there is no leakage/concealment in the income of the assessee company and the profit is worked out o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ub-section postulate that where an assessment under sub-section (3) of Section 143 of 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 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 sub-section (1) of Section 142 or Section 148 or to disclose fully and truly all material facts necessary for the assessment for that assessment year. From a reading of this provision, it is very clear that in order to invoke Section 147 of the Income Tax Act, the authority should have reason to believe that any income chargeable to tax has escaped assessment for any assessment year and action if any to be initiated should be within four years from the end of the relevant assessment year. 12) Section 147 of the Act further states that, the Assessing Officer should have reason to believe that certain income has escaped the assessment on the basis of new facts/information which has come to his knowledge subsequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer himself by giving an appropriate reply in the month of October itself. In-fact, in paragraph 16 of the counter it is stated that, "in the interests of revenue, the Assessing Officer is left with no option except to initiate a suitable remedial action on the findings of the Audit Team" which in our view cannot be a ground for reopening the assessment. 16) Issue No. 2- Reassessment proceedings after expiry of four years. i) In Commissioner of Income Tax v. Foramer France [2003] 129 Taxman 72 (SC) the Hon'ble Apex Court was dealing with a case where "an assessing officer while making assessment under Section 143(3) took the view that proceeds from manning and management contracts were taxable as business income in terms of Section 44BB, in the light of Tribunal decision in the case of Scan Drilling. The assessment order was accepted by the Petitioner in order to buy peace and avoid protracted litigation and has become final. Long thereafter, i.e., in the month of November 2018, a notice under Section 148 was issued proposing to treat the income of the Petitioner Company as fees for technical services and not business income in view of another decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year." A plain reading of the said proviso makes it more than clear that where the provisions of Section 147 are being invoked after the period of four years from the end of the relevant assessment year, in addition to the Assessing Officer having reason to believe that any income chargeable to tax has escaped assessment, it must also be established as a fact that such escapement of assessment has been occasioned by either the assessee failing to make a return under Section 139 etc. or by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment, for that assessment year". iv) Even in the instant case, a notice under Section 148 was issued in the month of March 2019 pertaining to the assessment year 2012-13, therefore, it is clearly beyond the period of four years and against the proviso to Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Delhi High Court in Bharti Infratel Limited v. Deputy Commissioner of Income-tax [2019] 101 taxmann.com 285 (Delhi) as under: "32. In view of the aforesaid discussion, the writ petition has to be allowed as the jurisdictional pre-conditions in the form of proviso to Section 147 is not satisfied in the facts of the present case. Explanation 1 would not apply as all primary facts were disclosed, stated and were known and in knowledge of the Assessing Officer. Further, this would be a case of ‗change of opinion' as the assessee had disclosed and had brought on record all facts relating to transfer of passive infrastructure, its book value, fair market value as was mentioned in the SOA as also that the transferred passive assets to become property of M/s. Indus Infrastructure Ltd. including the dates of transfer and the factum that one-step subsidiary Bharti Infratel Ventures Ltd. was created for the said purpose. These facts were within the knowledge of the Assessing Officer when he had passed the original assessment order for the Assessment Year 2008-09 on 20th December, 2010. 33. The writ petition is accordingly allowed and Writ of Certiorari is issued quashing th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ange in opinion cannot lead to reassessment. 19) Issue No. 5- Reassessment based on audit objections invalid. i) In Indian & Eastern Newspaper Society v. Commissioner of Income-tax [1979] 2 Taxman 197 (SC) the three Judge Bench of the Hon'ble Supreme Court dealt with a case, where the assessee was established with the principal object of promoting the welfare and interest of all newspapers. The assessee owns a building in which a conference hall and rooms were let out on rent to its members as well as to outsiders, apart from providing certain services. The income from that source was assessed to tax all along as income from business including the assessment years 1960-61, 1961-62, 1962-63 and 1963-64. In the course of auditing the income-tax records pertaining to the assessment years, the internal audit party of the Income-tax Department expressed the view that the money realised by the assessee on account of the occupation of its conference hall and rooms should not have been assessed under the head "profits and gains of business or profession" but should have been assessed under the head "Income from property". The Income Tax Officer treated this report as "information" in hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice came to be issued and the impugned order came to be passed. iv) The issue is whether the authorities were justified in ordering re-assessment basing on audit objections. v) The Judgment in Calcutta Discount Co. Limited v. Income-tax Officer [1961] 41 ITR 191 (SC) was relied upon not only by the Petitioner but also by the Respondents. In the said case, the Constitution Bench dealt with a case where, the Appellant Company was assessed to income tax and orders were respectively passed on January 26, 1944, February 12, 1944, and February 15, 1945, for the assessment years 1942-43, 1943-44 and 1944. On March 28, 1951, three notices under S. 34 of the Act were issued calling upon the Appellant to submit fresh returns in respect of previous years related to each of the said assessment years. This action was taken after more than four years. The matter fell to be governed by Section 34(1)(a) of the Indian Income-tax Act. The clause provided an extended period for sending a notice calling for a return for the purpose of assessing or reassessing income, profits and gains which had escaped assessment or had been under-assessed for any year within eight years, if the Income-tax Offic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed as deduction and the expenditure incurred in the previous year cannot be allowed in the present assessment year, the Assessing Officer initiated reassessment proceedings. The Tribunal cancelled the order of reassessment. On reference, the High Court held that apart from the information furnished by the audit party, the Assessing Officer had no other information for reopening the assessment under Section 147(b). The opinion expressed by the audit party would go to show that they had pointed out to the Assessing Officer that he failed to apply the provisions contained in Section 35. This would amount to pointing out the law and the interpretation of the provisions contained in Section 35, which is clearly barred by the decision of the Supreme Court in Indian & Eastern Newspaper Society v. CIT [1979] 119 ITR 996/2 Taxman 197. We have heard the learned counsel for the revenue. Despite his very persuasive argument, we are, on the facts available to us, unable to take a view other than that taken by the Tribunal and the high Court. Accordingly the Appeals were dismissed". 21) The Counsel for the Respondents relied upon the Judgment in Commissioner of Income Tax v. P.V.S. Beedie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions of Section 147(a) are not attracted ? 2. Whether, on the facts and in the circumstance of the case, the Income-tax Appellate Tribunal is right in law in holding that the interest of Rs. 54,485 taken directly to interest suspense account is not assessable to income-tax?" 6. So far as the second question is concerned, the High Court recorded that the matter need not be gone into by reason of the circular dated October 6, 1952, issued by the Central Board of Direct Taxes. Neither do we feel it necessary to go into the issue any further. 7. Turning attention to the first question as regards the provisions under Section 147(a) be it noted and as the facts depict, there is no failure on the part of the assessee in furnishing the particulars pertaining to the above noted sum as not recoverable for the relevant accounting year and the statements filed along with the original return disclosed the full details of the aforesaid account. There is, therefore, no failure on the part of the assessee to disclose fully and truly the material facts necessary for the assessment years for the respective years and as such Section 147(a) has no manner of application and is not attracted in t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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