TMI Blog2021 (8) TMI 1189X X X X Extracts X X X X X X X X Extracts X X X X ..... own merits keeping in view the scope of the judicial review while entertaining such matters. When a notice under Section 148 of the Act has been issued to the assessee for reopening the assessment, it shows it involved complex facts and circumstances and the same are to be adjudicated by producing documents and by adducing evidence by the assessee. Power exercised by the assessing officer to reopen the assessment - In this case, the appellants clearly stated that there is escapement of assessment and also stated the reason by its letter dated 04.05.2016, pointing out that the assessee company has not commenced its business during the year, therefore, the expense claimed needs to be capitalised. During the year, the assessee company has received other income and the same has to be treated as income from other sources . The material fact has not been disclosed fully and truly during the course of assessment proceedings. Therefore, there are definite reasons to believe that income has escaped assessment. Maintainability of writ - alternative statutory remedy - When there is hierarchy of appeals provided under the statute, the assessee must exhaust the statutory remedies. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pening. 3. During the assessment proceedings in respect of the return of income filed by the writ petitioner for the assessment year 2009-10, the case of the writ petitioner was referred to the Transfer Pricing Officer under Section 92 CA (1) of the Act, for determination of arm s length price of international transaction done by the petitioner with its associated enterprises. 4. The petitioner participated in the assessment proceedings as well as in the proceedings before the Transfer Pricing Officer (TPO). The TPO vide order dated 27.12.2012 under Section 92 CA (3) of the Act accepted arm s length price of the international transactions done by the petitioner with the associated enterprises. 5. After considering the order of the TPO, the assessing officer independently examined the submissions/documents placed on record by the writ petitioner, completed the assessment vide order dated 25.02.2013 passed under 143(3) of the Act and assessed the total loss of the writ petitioner, after making disallowances. The 1st appellant, by the impugned notice dated 24.03.2016, sought to reopen the assessment for the relevant year. 6. Pursuant to such notice, the writ petitioner vid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pre-production period, expenditure incurred by the assessee such as interest on loans, commitment charges, project appraisal fee, loan processing fees, formed part of capital employed in industrial undertaking. Further the Assessing Officer noted the submission of the assessee that after the Hero group exited from the joint venture in 2009 and the Company became a wholly owned subsidiary of Daimler AG, it started its commercial production only in the financial year 2008-09, relevant to the assessment year 2009-10. 10. The Assessing Officer examined the case and found that disallowances under Section 14A requires to be made in accordance with 3rd limb of Rule 8 and accordingly computed the same. Therefore, while completing the scrutiny assessment, all materials were available with the Assessing Officer and they were considered and order was passed and the impugned proceedings is a clear case of change of opinion. 11. The reasons for reopening are that the assessee has not fully and truly disclosed the material fact and that they had not commenced its business during the year and mere production of the account books or other evidence before the Assessing Officer will not neces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rticulars relevant for assessment and the Assessing Officer on consideration of the materials placed before him had completed scrutiny assessment under Section 143 of the Act and present attempt of the 1st respondent is to reopen the same solely on account of change of opinion. The Assessing Officer in the course of regular assessment proceedings formed an opinion that the factory was under construction, commercial production had not commenced not withstanding that the business of the petitioner being a composite one had been set up, expenses for setting up of the plant for manufacturing operations had been capitalized. Reassessment proceedings is merely an attempt to reappraise the materials and evidences already on record, predicated on mere change of opinion, which is impermissible. 16. On the side of Revenue, it was argued that there is a clear failure on the part of the assessee in making full and true disclosure and while completing the scrutiny assessment, the assessing officer will not go into the details contained in Form III CEV, which will be looked into only by Transfer Pricing Officer and only in this document, the assessee has stated that production activity has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng on the question of under assessment, that would be sufficient to give the income tax officer to issue notices for reopening. (x)Whether, these grounds were adequate or not for arriving at the conclusion that there was a non disclosure of material facts would not be open for the Courts investigation. (xi)It is the duty of the assessee, who wants the Court to hold that the jurisdiction was lagging, to establish that the ITO had no material at all before him for believing that there has been such non disclosure. 18. The legal principle from the decision of this Court in Fenner (India) Limited Vs. Deputy Commissioner of Income Tax, reported in 241 ITR 672 (Madras) was also drawn for reference wherein it is stated that when power is invoked under Section 147 after the expiry of four years from the end of the assessment year, further pre-condition for such exercise is imposed by the proviso namely that there has been failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment for that assessment year. Mere escape of income is insufficient to justify the initiation of action after the expiry of four years. Such escapement mus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 148 of the Act and so this would be sufficient to set aside the impugned proceedings. 21. The learned Single Judge also discussed about the financial statements filed by the assessee/respondent which forms part of the return of income and held that the TPO specifically recorded that the commercial production proposes to start in the year 2012 and that this material was available and considered by the Assessing Officer as could be seen from para 2 of the scrutiny assessment order dated 24.01.2013. 22. While rejecting the arguments raised by the learned senior standing counsel for the Revenue, learned Single Judge held that assessment proceedings are not a one way proceedings and there is sufficient indication to show that the Assessing Officer considered the order passed by the TPO and the order passed by the TPO is binding on the Assessing Officer. 23. Pointing out that the writ petitioner placed the profit and loss account and the balance sheet and the relevant annexures and notes to the financial statements before the Assessing Officer, in the absence of any new material in the hands of the Assessing Officer or discovery of some materials or a new insight after the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thing can be found in the record of the assessment, which itself would show escape of assessment or under assessment, can be viewed as information which led to the belief that there has been escape from assessment or under-assessment. The learned Single Judge ought to have seen that the Supreme Court in the case of Kelvinator of India Ltd., held that there must be tangible material with the assessing officer to make a reassessment and the Supreme Court did not render any finding on whether such tangible material must be an independent material or a material that can be discovered from the books of accounts submitted at the time of original assessment. 26. Learned Senior Standing counsel for the appellant would submit that the appellant-Department had prima facie reason to believe that the assessee's income chargeable to tax for the assessment year 2009-10 had escaped assessment, within the meaning of Section 147 of the Income Tax Act, 1961. The learned counsel also drawn the attention of this court to the reasons recorded by the Joint Commissioner of Income Tax stating that the assessee company has not commenced its business during the year and therefore, the expense claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of account or the documents, etc., without pointing out the relevant entries therein, does not amount to disclosure within the meaning of section 147(a). 28. Per contra, the learned Senior counsel appearing for the assessee/respondent would reiterate the factual submissions and laid emphasis on the notes to the accounts, stating that it is a very important document which was considered by the Assessing Officer, while completing the scrutiny assessment. There is no failure on the part of the assessee to make full and true disclosure of all particulars relevant for assessment. The Assessing Officer had completed scrutiny assessment under Section 143 of the Act and therefore, the impugned order passed by the 1st respondent, to reopen the same solely on account of change of opinion, cannot be sustainable. The assessee disclosed clearly the manner of computation of income under the Head Profits and Gains from Business or Profession. Apart from adjustment in respect of expenditure incurred prior to the set up of the business, there can be no reopening. 29. Heard both sides and perused the records carefully. 30. The respondent is the assessee, doing business of manufacture of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erefore, reopening the assessment is based on definite reason to believe that income to the tune of ₹ 4,14,99,995/- escaped assessment. In this regard, the assessee was asked to file its objections. The assessee/respondent herein filed objections dated 17.05.2016 raising the following objections:- (i) Re-assessment of income beyond four years is bad in law where the cumulative conditions stipulated under Section 147 of the Act are not satisfied; (ii) the assessing officer must also have reason to believe that such income has escaped assessment by reason of failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment for that assessment year. (iii) Once the assessee has made full and true disclosure of primary facts, the Assessing Officer would not be empowered to reopen the assessment after a period of four years from the end of the relevant assessment year, having regard of the first proviso to Section 147 of the Act. (iv) the assessing officer cannot reopen the assessment order by mere change of opinion or by drawing a different inference from the same facts as were earlier available. In the instant case, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ight not. In respect of the material failure, the omission to disclose may be deliberate or inadvertent. That was immaterial. But if there is omission to disclose material facts, then subject to the other conditions, jurisdiction to reopen is attracted. If there are some primary facts from which reasonable belief could be formed that there was some non disclosure or failure to disclose fully and truly all material facts, the ITO has jurisdiction to reopen the assessment. (vii) In the instant case, the officer has applied his mind and has recorded the opinion with the belief that there lies an income that has escaped the assessment. When an income liable to tax has escaped assessment in the original assessment proceedings due to oversight or a mistake committed by the ITO, he has jurisdiction to reopen the assessment-Reassessment is permissible even if the information is obtained after proper investigation from the material on record or from any enquiry or research into facts or law. Information need not be from external source. (viii) The merits of the case will be analysed in the light of various case laws and the facts which will be done during the proceedings by giving due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and therefore there is no merit in the appeal and the appeal is liable to be dismissed. 35. A perusal of the records would go to show that the respondent is the assessee and it was engaged in manufacturing and sale of commercial vehicles and for the assessment year 2009-10, they filed the returns. Since the business of the respondent/assessee is in India and also overseas. For the overseas transaction, to fix the Arm s Length Price, after getting report from the Transfer Pricing Officer, after completing the formalities, the assessing officer passed the assessment order under Section 143(3) of the Act dated 25.02.2013. It is also not in dispute that on 24.03.2016, the 1st appellant sent a notice under Section 148 of the Act to the respondent/assessee to submit the returns in the prescribed form stating that he has reasons to believe that the respondent income chargeable to tax for the assessment year 2009-10, escaped assessment within the meaning of Section 147 of the Act. The respondent sent a letter seeking reason for reopening on 04.05.2016 for which the respondent sent objection on 17.05.2016. After considering the objection, 2nd appellant rejected the objection and passed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, reasons recorded was provided to assessee. Again the assessee raised objections and after considering the objections, 2nd appellant passed the order dated 25.10.2016 disposing the objections. So the answer is, each case shall be examined on its own merits keeping in view the scope of the judicial review while entertaining such matters. When a notice under Section 148 of the Act has been issued to the assessee for reopening the assessment, it shows it involved complex facts and circumstances and the same are to be adjudicated by producing documents and by adducing evidence by the assessee. 39. As far as the 2nd and 3rd questions that arise in this Writ Appeal are concerned, there is no dispute that the assessee who is doing business of Designing, manufacturing and selling of commercial vehicles, filed its returns for the assessment year 2009-10 and the assessment order also passed on 25.02.2013 under Section 143(3) of the Act by the Assessing Officer. There is no quarrel with proposition of law that the assessment can be reopened but the only question is whether the reason stated by the appellants for reopening the assessment is valid or not. In this case, the appellants clear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les settled in this regard is that writ petition is maintainable in exercising the extra ordinary jurisdiction under Article 226 of the Constitution of India, in challenging the order, inter alia, either on the ground that it is malafide or arbitrary or that it is passed on irrelevant and extraneous consideration or if the same is in violation of any Statutory Rules in force. However, the point for consideration is as to whether the the respondent/assessee established its legally acceptable ground in seeking to quash the rejection order passed by the 2nd appellant and whether the reasons set out in the order passed by the learned Single Judge in quashing the impugned rejection order, is sustainable or not. We are of the considered view that the mixed question of law and facts, in respect of the reopening of the assessment are to be adjudicated and appreciated by the competent statutory authority contemplated under the Act. So, the details with regard to scrutiny of materials are all available with the Assessing Officer and so objections in respect of the reasons raised by the assessee has to be discussed only by the statutory authority and the assessee is bound to respond to the As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rounds. There is no bar to reopen the assessment and the authority has invoked that power of reopening, after giving the opportunities to the assessee. Therefore, the questions raised as to whether the same is based on the change of opinion or not, whether the reopen is based on the available materials or not and whether fresh tangible material is available or not and whether the reopening of the assessment is barred by limitation are all matters subject to facts and circumstances of each case. In all the cases, uniform method cannot be adopted. Every case is based on the facts and circumstances depending on the merits of its relevant particulars and the same has to be decided by the fact finding authority. The scope of the writ is very limited. Unless it is shown that there is violation of Fundamental Rights or infringement of rights of citizen, or the order passed is against principles of law or violation of principles of natural justice, the writ court cannot interfere in the case where there is no violation of principles of natural justice or fundamental right or non compliance of statutory requirements in any manner. 45. In the present case on hand, the appellants clearly s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-assessment order. 47. There are chances and possibilities that the tax payer not filing the returns properly or the taxing authority due to oversight or mistake or various other reasons at the time of scrutinising the returns, not assessed properly. The tax payer by taking advantage of such error or omission, would evade payment of tax and it may lead to revenue loss. Therefore, the main purpose of reopening the assessment order is that in the original assessment, if the income liable to tax has escaped assessment due to oversight, inadvertence or any other mistake committed by the ITO, as per the provisions contained in section 147 of the Income Tax Act, 1961, if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment. Further, the Assessing Officer may assess or reassess income in respect of any issue which comes to his notice subsequently during the course of re-assessment, even though such an issue was not covered under the reasons recorded fo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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