TMI Blog2020 (12) TMI 1079X X X X Extracts X X X X X X X X Extracts X X X X ..... ate that the Investigation Wing of the Department made certain inquiries and investigation to verify the genuineness of the transactions relating to purchase and lease back of the machineries from the above stated parties and the corresponding claim of depreciation in respect of those assets could not be accepted. Thus, the five transactions, which have been referred to as the reasons for reopening the assessment, were, indeed, the very same transactions, which formed part of the 14 transactions, which were considered in the block assessment as well as in the proceedings under Section 263 of the Act. As perused the return of income filed by the assessee for the relevant assessment years, in which, the claim for depreciation had been disclosed. Therefore, it is clear that the assessee disclosed all material information to the Assessing Officer. There is no allegation made by the Department against the assessee that they failed to truly and fully disclose all relevant material. Thus, without any such allegation against the assessee, the Department would not be justified in reopening the assessment by exercising its power by issuing notices under Section 148 of the Act. Id ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... less there is a fresh tangible material available with the Department, the question of reopening the assessments based on the material already available on record is impermissible. As pointed in the decision of the Hon'ble Supreme Court in the case of Kelvinator of India Ltd. [ 2010 (1) TMI 11 - SUPREME COURT] what is to be borne in mind is the conceptual difference between the power of review and the power to re-assess, that the Assessing Officer has no power to review, but he has a power to reassess, that the reassessment should be based on fulfillment of certain preconditions and that if the concept of change of opinion is removed, then in the garb of reopening the assessment, review would take place. This is precisely what the Department seeks to do in the cases on hand. No hesitation to hold that the reopening of assessment is without jurisdiction, bad in law and liable to be set aside and consequently, the same is set aside. - Writ Appeal Nos.1632, 1633 and 1635 of 2019 And CMP.Nos.11109, 11090 and 11092 of 2019 - - - Dated:- 21-12-2020 - Honourable Mr. Justice T.S. Sivagnanam And Honourable Mrs. Justice V. Bhavani Subbaroyan For the Appellant : Mr.A.L.Somaya ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed based on the majority opinion by order dated 18.2.2002. The Revenue did not challenge the said proceedings and the same attained finality. 6. Parallelly, for all the three years, the assessment was concluded by order dated 30.3.1998 (AY 1995-96), 22.3.1999 (AY 1996-97) and 22.3.2000 (AY 1997-98). So far as the claim for depreciation is concerned, in the said scrutiny assessment, the Assessing Officer held that already the claim for depreciation had been held to be an undisclosed income in the block assessment and therefore, the necessity once over again for consideration would not arise. As against the findings under other heads, the assessee, being aggrieved, filed an appeal before the Commissioner of Income Tax (Appeals) concerned, who, by order dated 07.5.1999, allowed the appeal and remanded the matter to the file of the Assessing Officer to redo the assessment. 7. It will not be very relevant to take note as to how the assessments were completed on remand. What would be relevant is with regard to the action initiated by the Commissioner of Income Tax, Central 2, Chennai (for short, the CIT), who issued a notice under Section 263 of the Act dated 12.3.2001. Though ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , learned Senior Standing Counsel assisted by Mr.A.N.R.Jayaprathap, learned Junior Standing Counsel appearing for the respondents. 11. The first objection raised by the Department before the learned Single Judge was that the proceedings, which were impugned in the writ petitions, were notices simplicitor issued under Section 148 of the Act and that the assessee should avail the remedy available under the Act, seek reasons for reopening in terms of the decision of the Hon'ble Supreme Court in the case of GKN Driveshafts (India) Ltd., file their objections and pursue other remedies available to them under the Act. 12. In other words, the Department contended that the writ petitions were premature. 13. The assessee, on the other hand, would contend that the notices issued under Section 148 of the Act having admittedly been issued beyond a period of four years, unless and until the Department is able to establish that there was failure on the part of the assessee to fully and truly disclose all the material information, the assessments could not be reopened and if done, it would be a case of change of opinion. 14. The Department resisted such a plea by contending th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ground that the claim for depreciation could not be treated as an undisclosed income and the provisions of Section 158B(b) of the Act would not stand attracted. It is further submitted that if the said writ petitions were to be entertained at this stage, it will open flood gates and that several cases will be filed challenging the notices without even filing a return pursuant to the notice under Section 148 of the Act and without even seeking to furnish the reasons. Hence, the learned Senior Standing Counsel is pressing to sustain the common impugned order passed in the said writ petitions. 19. Per contra, the argument of the learned Senior Counsel appearing for the assessee is that the Department was not correct in stating that the merits of the matter were not dealt with by the Tribunal. That apart, the Department had not produced any record to show that there was a tangible material available to reopen the assessment and more so when all the 14 lease transactions were the subject matter of block assessment, which was set aside and thereafter, it was the subject matter of the directions issued by the CIT under Section 263 of the Act, which was also set aside by the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who have denied the transaction, have been proceeded against by way of a civil suit, the outcome of which is as yet awaited. According to learned counsel, though the parties had denied the transactions, they have declared the commission received from the transactions as their income from undisclosed sources. They have admitted to sign the documents. The crux of the allegation is that in substance they never intended the transaction. At present we are not concerned with the form or substance of the transactions. The concern at present only is whether the amounts accruing to the appellant as a result of the transactions can be said to be undisclosed income. The criteria of form, substance may be relevant in regular assessment and this inquiry can certainly be made therein, subject, however, the law permitting the same. In the circumstances, the mere fact that some parties have denied the transaction cannot lead to existence of undisclosed income, especially when all particulars of the transaction have duly been furnished to the department or rather found by them in the course of search. The extent to which a party to a written contract can deny the transaction is foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Tribunal with regard to the block assessment on a technical ground. 23. There can be no quarrel over the proposition that this Court, exercising jurisdiction under Article 226 of The Constitution of India, would be very slow in interfering with a show cause notice. This is a self imposed restriction in tune with various decisions of the Hon'ble Supreme Court. This is more so when a matter arises under a Taxation Statute. Nevertheless, if the show cause notice suffers from the vice of lack of jurisdiction, Courts are entitled to consider the challenge to such notices. Therefore, there is no absolute bar in entertaining writ petitions against show cause notices. But, Courts will be very slow and cautious in exercising its jurisdiction and would carefully take note of the fact situation before stepping in to interfere with the show cause notices. With this guarded principle in mind, we have examined the factual position. 24. As noticed above, the issue pertaining to the claim for depreciation was the subject matter of block assessment. Totally, 14 lease transactions were examined and the stand taken by the Department was negatived. Though there may be certain observ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed income for the purpose of bringing under Chapter XIV-B of the Income Tax Act. Thus, if any item of income could not fall within the meaning of undisclosed income , it could not be aggregated at all. He further viewed that the question whether the assessee would be entitled to depreciation or not was a matter to be considered in the regular assessment and if the Assessing officer had granted the relief, it is always open to the Assessing Officer to touch the assessment under Sections 147 and 148 of the Income Tax Act. The block assessment procedure was strictly based on the income which was found to have been suppressed or not to have been disclosed and to come to that conclusion, the Revenue must have materials seized at the time of search proceedings. In that view of the matter, the Third Member agreed with the learned Vice President. 28. Thus, the sum and substance of the proceedings in the appeal arising out of the block assessment was that the transactions were held to be genuine and were reflected in the books of accounts, in which event, the question of granting depreciation or a deduction, which is available to an assessee, could not be denied at all. It is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e during the assessment years 1995-96 and 1996-97. With the claim of the Revenue on the genuineness of the transaction itself negatived by the Tribunal in the first round of litigation in the appeal filed before the Tribunal, it is no longer now open to the Revenue to cling on to the block assessment order to contend that the proceedings would nevertheless be justifiable under the provisions of Section 263 of the Income Tax Act based on the genuineness of the transactions. 30. In the background of the facts found by the Tribunal that the transactions were reflected in the books of accounts and they were all genuine transactions and that the order of the Tribunal on the block assessment appeal having become final, the sole reliance on the findings in the block assessment thus not being available to the Revenue, on merits, we have no hesitation in holding that the Tribunal had committed serious error in not considering the facts in a proper perspective. It is rather ironical that the Tribunal ignored the findings of its own order in the block assessment appeal, which clearly points out to the genuineness of the transactions and the disclosure of the transactions in the book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finality to be arrived at. That apart, the said writ petitions were pending from the year 2002 and the Department did not take any steps to file counter in the said writ petitions and only in the writ appeals, a brief counter has been filed touching upon the merits of the matter. 31. The issue as to whether the assessee should be driven to avail other remedies available to them has to be considered on the facts and circumstances of each case. Therefore, we have examined the facts, which have been placed on record by the Assistant Commissioner of Income Tax, Circle-I, Namakkal. The reasons for reopening are stated in paragraph 10, which are as hereunder : Meanwhile, a notice under Section 148 was issued to the assessee on 13.3.2002 after getting previous approval of the CIT (Central), Chennai-II on 12.3.2002. Reasons to reopen the assessment is The assessee claimed 100% depreciation on the below mentioned assets purchased from the following persons amounting to ₹ 12,50,30,000/- and claimed depreciation of ₹ 12,50,30,000/- (100%) on the assets purchased. The machineries purchased from the below parties have been leased back to the seller companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing notices under Section 148 of the Act. 35. More or less identical circumstances were the subject matter of the decision in the case of Smt.Mira Ananta Naik wherein it was held that it was not in dispute that the block assessment was carried out and the block assessment was the subject matter of the proceedings and that notices merely stating that there was reason to believe that income chargeable to tax for the relevant assessment year escaped assessment without anything more could not be stated to be something, which would enable the Authorities to invoke Section 147 of the Act. 36. In the decision of this Court in the case of Fenner (India) Ltd., it was pointed out that the duty of an assessee is limited to fully and truly disclose all material and he is not required to prepare a draft assessment order. We find that the assessee disclosed all relevant facts and the Assessing Officer considered them and after the search, which was conducted on 08.7.1996, the block assessment was framed, which was ultimately set aside. Parallelly, the regular scrutiny assessments were done under Section 143(3) of the Act and thereafter the CIT exercised his power under Section 263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... without a return being filed by the assessee would open a flood gate of litigation. An assessee shall not be permitted to bypass the procedure prescribed under the Act and he is required to file a return of income pursuant to the notices under Section 148 of the Act or inform the Assessing Officer that his original return may be treated as a return in response to the notice under Section 148 of the Act. However, the case on hand is a peculiar case, which has convinced us to examine the entire issue in a holistic manner. 41. If we are to give a seal of approval to the reopening proceedings, it would fall foul of the findings of the Tribunal in the block assessment, which has attained finality and the findings rendered therein are binding on the Department. It will also fall foul of the judgment of the Division Bench of this Court dated 03.12.2013, which has quashed the order passed under Section 263 of the Act relating to the very same claim for depreciation and the said judgment having attained finality, it binds the Department. Therefore, the Department is wholly unjustified in initiating reassessment proceedings in the fact situation prevailing in these cases. The assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies denied the transaction could not lead to existence of undisclosed income especially when all the particulars of transactions have duly been furnished to the Department or rather found them in the course of search. 44. The Tribunal further noted that the assessee filed return of income as well as accounts and they had reflected all the 14 transactions. The third Member, who agreed with the opinion rendered by the Judicial Member, had examined the merits of the transactions and held that the various documents that were found consequent to the search gave no indication to the fact that the entries in the books of accounts were fraudulent or not so made with reference to any documents that were found during the course of search and that the various material seized were with reference to various transactions and with reference to the claim of depreciation at 100%. 45. The learned Senior Standing Counsel appearing for the Department has argued that the third Member, while concurring with the Judicial Member of the Tribunal, made an observation that whether the claim for 100% depreciation is justifiable or not may be a question to be considered in a regular assessment, for which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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