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TMI Blog2021 (7) TMI 1384X X X X Extracts X X X X X X X X Extracts X X X X ..... a reference was made to the Transfer Pricing Officer under section 92CA(1) of the Income Tax Act [hereinafter referred to as "the Act"] on 31.08.2015. Notice under section 92CA(2) was issued by the Transfer Pricing Officer [TPO] to the petitioner on 08.09.2015 calling for information which the petitioner submitted and appeared before the Transfer Pricing Officer. 3. The Transfer Pricing Officer passed an order under Section 92CA(1) recommending an upward adjustment of Rs.25,73,41,261/- towards international transactions vide his report dated 31.10.2016. Upon receipt of the said report, the Assessing Officer issued a draft assessment order under Section 144C dated 21.12.2016. The said draft assessment order was served on the petitioner on 03.01.2017. 4. The petitioner had not chosen to file any objection against the said draft assessment order neither before the Dispute Resolution Panel [DRP] on or before 02.03.2017 being 30 days limit prescribed for filing objections nor before the Assessing Officer. Since the petitioner did not object within 30 days on receipt of draft assessment order, the Assessing Officer ought to have passed a final assessment order confirming the draft a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty with the Arm's Length price as so determined by the Transfer Pricing Officer. 9. In this context, the attention of this Court is drawn with reference to the order passed by the Transfer Pricing Officer wherein the Transfer Pricing Officer fixed the Arm's length price of international transactions. Additions were made and the proceedings of the Transfer Pricing Officer was communicated to the Assessing Officer and based on the said report of the TPO, the Assessing Officer passed the draft assessment order on 30.12.2016 under section 143(3) r/w. Section 92CA of the Act. It is contended that beyond the report of the Transfer Pricing Officer, the Assessing Authority considered the disallowance under section 40(a)(ia) and made additions and thereafter the Assessing Officer considered the claim of the assessee regarding the expenditure and other aspects of the matter. In paragraph 6 of the draft assessment order, total taxable income is computed. Relying on the said draft assessment order, the petitioner states that once the draft assessment order is passed by the Assessing Officer then under section 144C, he has to pass the final assessment order within a period of 30 days ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s part of reasons for initiation of reopening proceedings, there is no jurisdiction for the authority to invoke section 147 of the Act and thus the proceedings are to be set aside. 11. The learned counsel for the petitioner elaborated the scope of section 147 of the Act to determine the income escaping assessment. In his opinion, section 147 of the Act enumerates such income and also any other income chargeable to tax which has escaped assessment. When the language is adopted "such income" and when that income which is the reason for reopening was adjudicated by the Transfer Pricing Officer and a draft assessment order is passed, there cannot be any power under section 147 of the Act for reopening of assessment and issue notice under Section 148 of the act". Thus, in the absence of any scope for reopening, the Assessing Authority cannot further stretch the provisions for the purpose of reopening of assessment, which is illegal and without jurisdiction. The learned counsel for the petitioner reiterated that section 153 of the Act prescribes time limit for completion of assessment, re-assessment and re-computation. Therefore, in the present case, none of these procedures cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er [(1983) 139 ITR 0386], the High Court of Calcutta made an observation as extracted hereunder: "14.It thus appears to be well-settled that when a return has been filed by an assessee, it cannot be ignored by the ITO and he will have no jurisdiction to issue a notice under Section 148 without completing the assessment on the return filed by the assessee. Even though a return is invalid in the sense that it is not correct and complete within the meaning of Section 139 of the I.T. Act, 1961, the ITO cannot ignore or disregard the same for the purpose of issuing a notice under Section 148 of the Act, unless the return can be regarded as not a return in the eye of law as in the case of the two illustrations given above. In the instant case, the ITO acted on the returns filed by the appellant, issued notices under Section 143(2) and heard the appellant for the assessment years in question under Section 143 (3), but without completing the assessments he took recourse to reopen the assessments under Section 147 by issuing the impugned notices under Section 148 of the Act. In our view, the ITO has acted without jurisdiction in issuing the impugned notices." (iii) In the case of T.Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chase of the drafts could be treated as part of the total income of the assessee during the relevant year. This the Income-tax officer did not do. It was plainly a case of oversight, and it cannot be said that the income chargeable to tax for the relevant assessment year had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts. The Income tax officer had all the material facts before him when he made the original assessment. He cannot now take recourse to Section 147(a) to remedy the error resulting from his own oversight. (v) In the case of Vijay Television (P) Ltd. Dispute Resolution Panel and others [(2014) 369 ITR 0113(Mad)], the High Court of Madras made the following observations: "23.It is evident from the above decision of the Honourable Supreme Court that if an order is passed beyond the statutory period prescribed, such order is a nullity and has no force of law. In that case before the Honourable Supreme Court, the period for assessment proceedings expired and thereafter, fresh assessment orders have been issued by anti-dating it. In those circumstances, it was held that the High Court ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eady mentioned, 'this cannot be said in the present case. The appeal is consequently allowed; the judgment of the High Court is set aside and the impugned notices are quashed. The parties in the circumstances shall bear their own costs throughout." (vii) In the case of K.M.Sharma vs. Income Tax Officer [(2002) 254 ITR 772 (SC)], the Hon'ble Supreme Court held as follows: 13. Fiscal statute more particularly on a provision such as the present one regulating period of limitation must receive strict construction. Law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation to litigant for indefinite period on future unforeseen events. Proceedings, which have attained finality under existing law due to bar of limitation cannot be held to be open for revival unless the amended provision is clearly given retrospective operation so as to allow upsetting of proceedings, which had already been concluded and attained finality. The amendment to sub-section (1) of Section 150 is not expressed to be retrospective and, therefore, has to be held as only prospective. The amendment made to sub-section (1) of Section 150 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that provided in sub-section (2) of Section 119." (x) In the case of TANMAC India vs. Deputy Commissioner of Income Tax [(2016) 97 CCH 0189], the High Court of Madras held as follows: "12.If the assessing officer, after issuing intimation u/s section 143(1) does not to issue a notice u/s 143(2) of the Act to initiate proceedings for scrutiny of the return of income, the obvious conclusion is that he does not consider it necessary or expedient to do so, the inference being that the Return of Income filed in order. It is this opinion that cannot be arbitrarily changed by the assessing officer, to re-assess income on the basis of stale material, already on record. If we thus keep in the mind the above fundamental requirement of section 147, it would be apparent that the exercise undertaken by the Revenue in this case is not one of reassessment, but of review. The reasons make it abundantly clear that the re-assessment is sought to be initiated on the basis of the return of income and the enclosures which were available with the assessing officer since 2.11.1998 and which ought to have prompted him to issue a notice under section 143(2) of the Act to conduct the proceedings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n . . .". We find solace in what is stated to be the eternal verity of life and law that statutes of limitation achieve peace and good administration but do not advance morals and pood conduct. 18. We answer that the assessment order for 1970-71 and the assessment proceedings are barred. The answer is recorded against the Revenue. As respects 1971-72, the assessment order is not barred, and we answer the question against the assessee and in favour of the Revenue. No costs." 13. Relying on the above judgments, the learned counsel for the petitioner reiterated that the Courts have consistently held that the scope of section 147 cannot be extended in such circumstances where the TPO determined the Arm's length price and the Assessing Authority passed a draft assessment order considering the materials as well as the report of the TPO and additions are also made. It is not only beyond the scope of jurisdiction it is not within the time limit prescribed. Some of the judgments are cited to elaborate the importance of the limitation prescribed under the Income Tax Act which is mandatory. The other judgments are cited for the purpose of understanding the procedures to be followed f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fic in the notice". Relying on the said clause, the learned standing counsel contended that a notice under section 148 of the Act may be issued before making the assessment, reassessment or re-computation. In the present case, admittedly no assessment order has been passed. The Transfer Pricing Officer submitted his report, and draft assessment order was passed. However under section 144C(4), no final assessment order has been passed and therefore, the respondent is vested with power to invoke section 147 of the Act and issue notice under section 148 of the Act. 16. The learned standing counsel referred section 149 of the Act which stipulates time limit for notice. Relying on subclause (1)(b) which states that "if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for that year". In the present case admittedly the reopening of assessment is made within four year, therefore, there is no irregularity or infirmity as such. The Assessing officer has not passed any final assessment order under section 144C(4) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment 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 and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned. 21. In the present case, reopening of assessment is made within a period of four years. Therefore, the proviso clause may not have any application. Perusal of Section 147 of the Act and its scope undoubtedly is wider enough to cover numerous circumstances, wherein the Assessing Authority can invoke if he has reason to believe that any income chargeable to tax has escaped assessment. Many other circumstances are also elaborated in explanation (1) and explanation (2) to Section 147 of the Act. As far as the reopening of assessment is concerned, if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year. As far as the reopening of assessment is concerned, if the Assessing Officer has reason to believ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r invoking section 147 of the Act is that any income chargeable to tax has escaped assessment. That being the heart and soul of the provision and if the Assessing Officer has reason to believe, then he is empowered to issue notice under Section 148 of the Act. Thus the stages under which the reopening can be made are wider enough to cover the circumstances which all are prevailing in the case of the petitioner also. There is no restriction to assess or re-assess any income chargeable to tax has escaped assessment except the restrictions imposed under the proviso clause with reference to the time limit prescribed as well as the additional conditions for invoking the provision beyond the period of four years. Admittedly, in the present case reopening is within the period of four years and therefore, the assessment and re-assessment shall be made if the Assessing Officer has reason to believe. 25. As far as the ground taken regarding the reason to believe is concerned, this Court has to consider the reasons for reopening of assessment. The reasons for reopening of assessment states as follows: "The above additions and disallowances are recorded in the order sheet and are duly vou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tralian case law to define assessment. "Assessment means the completion of the process by which the provisions of the Act relating to liability to tax are give concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case." The instant case perfectly fits into this comprehensive definition, as 'the process of giving concrete application of the provisions of the Act resulting in a specified amount of money becoming due and payable as the proper tax' has not been completed due to the reason that the demand notice u/s.156 along with the regular assessment order has not been served on the assessee company within the statutory period. This means that no assessment has been made in the instant case and the provisions of section 147 of the Income Tax Act 1961 read with its explanation 2(b) are squarely applicable to this case. With regard to the assessee's reference to various other case laws stating that reassessment has to be based on 'fresh material' and reopening based on reappraisal of existing material is in valid, attention is drawn to the decision of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18, the objections raised were considered by the authority and reasonings are also given. 29. This Court is of the considered opinion that the satisfaction of the reasons alone are to be considered by the High Court. The sufficiency of the reasons cannot be gone into by the High Court. The sufficiency of the reasons may differ from case to case, however, the principle is that the reasons as well as the findings would be sufficient to form an opinion that the Assessing Officer has reason to believe. If the reasons furnished passed the test, then the assessee is bound to cooperate for the re-assessment proceedings. Therefore, the High Court cannot go into the adjudication of the reasons furnished with reference to certain materials. If the reasons furnished are prima facie satisfied with reference to the ingredients contemplated under section 147 of the Act, then the authority must be allowed to continue the proceedings. The assessee is getting further opportunity to submit their documents or explain the nature of transaction, etc before passing the final order of assessment/re-assessment. Thus the intervention after initiation and before completion must be expected to be cautious ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such wider provision is that the initial assessment order is passed based on the return of income filed by the assessee. Once the return of income is accepted as it is the Income Tax Department did not go further for any other enquiry, i.e. limited scrutiny. Therefore, in all circumstances, the Income Tax Act Act trust the assessee through the return of income filed and only when the discrepancy or income escaped assessment is identified, the procedures are set in motion for further action under Chapter XIV of the Act. Thus there cannot be any other opinion that the re-assessment provisions are for the benefit of revenue and the revenue being the backbone of the economy of the Nation, such provisions are necessary to protect the interest and welfare of the Nation in consonance with the Constitutional principles. 34. As far as the other contentions raised that once the draft assessment order is passed and the assessee has not raised any objections with reference to the draft assessment order, the Assessing Officer has to necessarily pass the final assessment order. Undoubtedly, in the present case the assessee has not raised any objection, however, the same would not preclude the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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