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TMI Blog2021 (2) TMI 427X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Act, 1961 (for short "the Act, 1961") proposing to reopen the assessment for the year 2012-13 under Section 147 of the Act, 1961. It appears that the writ applicant filed his original return of income on 19th September, 2012, declaring total income at Rs. 4,81,02,130/-. The case was selected for scrutiny and an order under Section 143(3) of the Act was passed on 26th February, 2015, determining the total income at Rs. 4,81,02,130/-. Thereafter, an order under Section 154 of the Act was passed dated 25th May, 2018, determining the total income of Rs. 4,81,18,350/-. In the original return of income, the TDS deducted by some of the parties was not included in the income and was also not claimed as TDS. In such circumstances, the amount of Rs. 16,270/- was added to the total income of the assessee and the TDS of the same was also given under the order passed under Section 154 and, ultimately, the income was determined at Rs. 4,81,18,350/-. 3. The reasons for reopening furnished to the writ applicant are as under; "The assessee has filed original return of income on 19.09.2012 declaring total income of Rs. 4,81,02,130/-. The case was selected for scrutiny and order u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd therefore the notice u/s. 148 is bad and must be dropped. It is submitted that vide letter dated 2.07.2014 the then assessing officer had called various details including the details about the income claimed exempt and the expenses incurred for earning such exempt income. Vide letter dated 19.08.2014, I had replied to the same giving details of the exempt income earned and also stated that no expenditure was incurred to earn such income. Further, pursuant to personal hearing a specific submission was made regarding non-applicability of section 14A r.w.r. 8D vide letter dated 11.09.2014. It is submitted that the issue was scrutinized in detail at the time of original assessment and therefore by issue of notice u/s. 148 an opinion that was originally formed is sought to be change which is not permissible in law. It is therefore submitted that the notice is bad and be dropped. The law on this point is explained by the Supreme Court in Kelvinator of India Ltd. (2010) 320 ITR 561(SC). I annex herewith the copy of letter dated 25.07.2014, 19.8.2014 and 11.09.214 as Annexure-A. 4.2 For the impugned Assessment Year 2012-13 the assessment order u/s.143(3) was passed on 26.02.2015. As p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 14A of the Income Tax Act read with Rule 8D of Income Tax Rules. In this regard I would like to state that no disallowance is required because of following reasons. On facts Section 14A and rule 8D are not applicable in any case as I have incurred almost no expenditure to earn the exempt income. Further, large part of the income is received through ECS hence no expenditure is incurred to earn such income at all. On Law: Pleader refer rule 8D. Relevant para is produced hereunder for reference. "(1) Where the Assessing Officer, having regard to the accounts of the assessee of a previous year is not satisfied with- (a) the correctness of the claim of expenditure made by the assessee, or (b) the claim made by the assessee that no expenditure has been incurred. In relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of expenditure in relation to such income in accordance with the provisions of subrule (2). The clause 1(b) states that the sub-rule 2 of rule 8D is only applicable if the A.O. Is not satisfied with claim that no expenditure is incurred. In my case from the perusal of the profi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment order, the Assessing Officer has not formed any opinion regarding disallowance u/s. 14A r.w.r 8D. Therefore, when no opinion has been formed by the Assessing Officer, the question of change of opinion does not arise. b) Regarding disclosure of all material facts necessary for the assessment, it is stated that in view of the facts, this case has been re-opened only after following the due procedure prescribed in the IT Act and was based on the tangible material leading to the conclusion that there was escapement of income from assessment. It may also be pointed out that mere furnishing of details about income does not mean that all material facts have been fully and truly disclosed. In the case of Indo-Aden Salt Manufacturing and Trading Co.(P) Ltd. vs. Commissioner of Income Tax 159 ITR 624 (SC), the Hon'ble Supreme Court has held that even if the assessee had supplied details but if it had not disclosed true facts which the ITO could have found by further proving, the reopening of the assessment was valid. In the case of Olwin Tiles (India) Pvt. Ltd. vs. DCIT in ITA No.17303, 18388 & 18389 OF 2015, Hon'ble Gujarat High Court vide its order dated 5th January 2016 h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment, proper procedure as per income tax law has been followed by the Assessing Officer. The case has been reopened well within the time limit prescribed as per the provisions of the Income Tax Act, 1961 and also on account of the fact that there was reason to believe that the income chargeable to tax has escaped assessment. 6. In view of the above facts, it becomes evident that this case has been reopened only after following the due procedures prescribed in the IT Act and was based on the tangible material leading to the conclusion that there was escapement of income from assessment. It may also be pointed out that mere furnishing of details about income does not mean that all material facts have been fully and truly disclosed. In the case of Indo-Aden Salt Manufacturing and Trading Co. (P) Ltd. vs. Commissioner of Income Tax 159 ITR 624 (SC), the Hon'ble Supreme Court has held that even if the assessee had supplied details but if it had not disclosed true facts which the ITO could have found by further probing the reopening of the assessment was valid. In the case of Olwin Tiles (India) Pvt. Ltd. vs. DCIT in ITA No.17303, 18388 & 18389 of 2015, Hon'ble Gujarat High C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer, vide his letter dated 25th July, 2014, had called for various details including the details about the income claimed exempt and the expenses incurred for earning such exempt income. He pointed out that vide letter dated 19th August, 2014, the writ applicant had replied to the same, furnishing details of the exempt income earned and had also clarified that no expenditure was incurred to earn such income. He further submits that in the course of the personal hearing, a specific submission was made regarding the non-availability of Section 14A read with Rule 8D. He would argue that the issue regarding the non-applicability of Section 14A read with Rule 8D was scrutinized in detail at the time of the original assessment. In such circumstances, according to Mr. Soparkar, it could be said that the Assessing Officer consciously took a particular decision and now such decision is sought to be changed based on the same set of facts. 9. The second argument of Mr. Soparkar is that there is no failure on the part of the writ applicant to disclose truly and fully all the material facts. He would argue that merely because the Assessing Officer has a reason to believe that inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the contention of the petitioner is not correct. Regarding disclosure of all material facts necessary for the assessment, it is submitted that mere furnishing of details about income does not mean that all material facts have been fully and truly disclosed. In the case of Indo-Aden Salt Manufacturing and Trading Co. (P) Ltd. Vs. Commissioner of Income-tax 159 ITR 624 (SC), the Hon'ble Supreme Court has held that even if the assessee had supplied details but if it had not disclosed true facts which the ITO could have found by further probing, the reopening of the assessment was valid. In the case of Olwin Tiles (India) Pvt. Ltd. Vs. DCIT in ITA No.17303, 18388 & 18389 of 2015, Hon'ble Gujarat High Court vide its order dated Sth January 2016 has held that once the reasons are recorded properly, the proceedings initiated u/s.147 of the Act are valid. In the case of Shree Krishna (P) Ltd. Vs. Income-tax Officer 221 ITR 538 (SC), the Hon'ble Supreme Court reiterated that it was the duty of the assessee to disclose material facts fully and truly The disclosure of a loan, which was subsequently discovered to be false, would make the re-assessment valid. In the case of ITO vs. Sele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to tax has escaped assessment Further, it is submitted that mere furnishing of details about income does not means that all material facts have been fully and truly disclosed. Further, during the course of original assessment proceedings the Assessing Officer has not formed any opinion regarding issue of disallowance of expenses related to exempt income u/s.14A. Therefore, the question of change of opinion does not arise. 3.6 With reference to para 3.3 and 3.4, it is submitted that contention of the assessee is not correct. It is submitted that the assessment was reopened on the basis of tangible materials leading to the conclusion that there was escapement of income from the assessment. It may also be pointed out that mere furnishing of details about income does not mean that all material facts have been fully and truly disclosed. In the case of Indo-Aden Salt Manufacturing and Trading Co. (P) Ltd. Vs. Commissioner of Income-tax 159 ITR 624 (SC), the Hon'ble Supreme Court has held that even if the assessee had supplied details but if it had not disclosed true facts which the ITO could have found by further probing, the reopening of the assessment was valid. In the case o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted that the contention of the petitioner is that he has not incurred any expenses for earning tax free income is not correct The assessee has claimed exempt income of dividend of Rs. 2743265/- and also claimed administrative and other expenses in Profit & Loss account. However, the assessee failed to make disallowance of expenditure related to the exempt income u/s.14A r.w.r. 8D(2)(iii). The disallowance was worked out under Rule 8D(2)(iii) at Rs. 8,20,952 - being 0.5% of average investment as per Balance Sheet as on 31.03.2011 and 31.03.2012. Therefore, the provision of Rule-8D(2)(iii) is applicable to the petitioner case. Hence, the disallowance under rule-8D(2)(ili) has been correctly worked out. 3.9 With reference to para 4, it is submitted that the contention of the petitioner is not correct. It is submitted that the petition is filed at a pre-mature stage inasmuch as only a notice u/s.148 read with section 147 of the Income Tax Act ('the Act' for short) has been issued. In the event, the petitioner is aggrieved by the reassessment, alternative efficacious remedy is available by way of an Appeal to the CIT(A) and thereafter to the Tribunal as per the provisions of the Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... "5. On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to the Direct Tax Laws (Amendment) Act, 1987, reopening could be done under the above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the assessing officer to make a back assessment, but in Section 147 of the Act (with effect from 1-4- 1989), they are given a go-by and only one condition has remained viz. that where the assessing officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment. Therefore, post-14- 1989, power to reopen is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the assessing officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. 6. We must also keep in mind the conceptual difference between power to review and power to reassess. The assessing officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain precondition and if the concept ..... X X X X Extracts X X X X X X X X Extracts X X X X
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