TMI Blog2022 (8) TMI 1340X X X X Extracts X X X X X X X X Extracts X X X X ..... nt that while furnishing the reasons for reassessment vide its communication dated 05.11.2018, there is no finding that there was failure on the part of the appellant to fully and truly disclose all material facts necessary for assessment. It is submitted that in the absence of any finding on the above jurisdictional fact, the entire proceeding would be void and a nullity. There is merit in the above submission inasmuch as the normal period of limitation for exercising the power of reassessment u/s 147 of the Act is four years. The extended period of six years could be invoked only under three circumstances set-out/ mentioned above. Admittedly, the only circumstance which could have enabled the respondents to invoke the extended period of 6 years in the present case is to bring the proceedings under clause (c). To invoke the extended period of six years for reassessment, the reasons furnished for reassessment ought to contain a finding that the appellant herein had failed to disclose fully and truly all material facts necessary for assessment. We say this since it appears to us that the whole idea of furnishing reasons before embarking on a full fledged exercise of reassessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bove jurisditional fact while invoking the extended period under the proviso to Section 147 of the Act, would vitiate the entire proceedings. It may be relevant to refer the following judgments, wherein it was held that failure to render a finding as to the existence of the above circumstance warranting invocation of the extended period in terms of the proviso to Section 147 of the Act would vitiate the entire proceedings. Thus the initiation of reassessment proceedings is in excess of jurisdiction. Initiation of reassessment proceeding is without jurisdiction as it is made on the basis of mere change of opinion - Assessment year 2013-14 - It is trite law that reassessment cannot be on the basis of mere change of opinion. However, the above aspect may require investigation into facts namely as to what were the documents furnished before the AO or whether details relevant for assessment and embedded in the books of accounts or other evidence were brought to the notice of the AO while framing the original assessment (or) whether an opinion was formed by the AO while framing the assessment on the issues forming the subject matter of reassessment, for the reassessment to constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tioning the initiation of reassessment proceedings on the premise that the very assumption of jurisdiction is baseless and illegal. The learned Judge has dismissed both the Writ Petitions. The contentions raised by the appellant questioning the initiation of reassessment is dealt with independently for the two assessment years, viz., 2011-12 and 2013-14. Assessment Year 2011-12 W.A.No.1081 of 2021: 2. The appellant is a Private Limited Company engaged in the business of providing Paint Finishing Systems and related services to automobile manufacturers. For the Assessment Year 2011-12, the appellant filed Income Tax return on 30.11.2011 returning a total income of Rs.68.44 Crores. The 1st Respondent proceeded with the assessment of the appellant under Section 143 of the Income Tax Act, 1961 (hereinafter referred to as the Act ). During the course of the assessment proceedings, the appellant submitted the Audited Profit and Loss Account and the Balance Sheet, together with the Notes thereon as required by the 1st Respondent. The assessment under Section 143(3) read with Section 144C of the Act, was completed determining the total income at Rs.79.44 Crores vide order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n since in the reasons for reopening furnished to the appellant vide communication dated 12.11.2018 there is no finding or allegation of ''failure on the part of the assessee/appellant to disclose fully and truly all material facts''. It was submitted that in the absence of a finding on the above aspect, the exercise of power of reassessment beyond four years would be barred by limitation, since it is the existence of the above jurisdictional fact that would enable invoking the extended period of six years for reassessment in terms of the proviso to Section 147 of the Act. b) It was submitted that the order under Section 143 of the Act was passed after scrutiny of the documents submitted and adjustments made thereafter. There is no new material in support of the proposal to make a reassessment. In other words, the reassessment is merely a change of opinion on the basis of the material already furnished and examined by the assessing authority which is impermissible and beyond the jurisdiction relating to reassessment under Section 147 read with Section 148 of the Act. 5. The objections of the appellant was disposed of by the Respondent vide communication/order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant as to the initation of reassessment proceedings on the ground of the same being barred by limitation, both in terms of issuance of notice and furnishing of reasons and also in any view the reasons for reassessment being mere change of opinion which does not warrant exercise of powers of reassessment, the appellant filed a writ petition challenging the same reiterating the above aspects. 7. The learned Single Judge however proceeded to dispose of the writ petitions holding that there were no justifiable reasons to interfere at this stage of the reassessment proceedings and directed the respondents to complete the reassessment after examining the documents produced by the appellant and pass orders on merits. 8. Though it appears that submissions were made before the learned Judge even on the merits apart from the question of jurisdiction, we would steer clear of examining the merits of the claim and confine ourselves to the question whether the assumption of jurisdiction is legal/ valid or otherwise. 9. The appellant is before this Court challenging the order of the learned Single Judge on the following premise: a. That the learned Judge failed to appreciate th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ission, it may be relevant to refer to Sections 147 and 148 of the Income Tax Act, 1961, as it stood during the relevant period. 147. Income escaping assessment .- 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 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 (hereafter in this section and in Sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of Section 143 or 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 the 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 r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invoke Section 147 of the Act within a period of four years, if the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment, subject to the provisions of Sections 148 to 153 of the Act. The proviso to Section 147 of the Act, enables the Assessing Officer to make reassessment even after the expiry of four years from the end of the relevant assessment year, but, within six years from the relevant assessment year, if the income chargeable to tax has escaped assessment under the following circumstances, viz., a. Failure of the assessee to make a return under Section 139 of the Act. b. Does not make a return in response to a notice issued under Sub- Section (1) to Section 142 or Section 148 of the Act. c. Failure of the assessee to disclose fully and truly all material facts necessary for assessment. 11.3. In the present case, admittedly the extended period of six years is being invoked not under (a) or (b) set out above but only in view of (c) i.e., failure to disclose fully and truly all material facts necessary for assessment. It is submitted by the learned counsel for the appellant that while furnishing the reasons fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le Supreme Court in the case of Arun Kumar v. Union of India reported in (2007) 1 SCC 732, which reads as under: ''74. A jurisdictional fact is a fact which must exist before a court, tribunal or an authority assumes jurisdiction over a particular matter. A jurisdictional fact is one on existence or non-existence of which depends jurisdiction of a court, a tribunal or an authority. It is the fact upon which an administrative agency's power to act depends. If the jurisdictional fact does not exist, the court, authority or officer cannot act. If a court or authority wrongly assumes the existence of such fact, the order can be questioned by a writ of certiorari. The underlying principle is that by erroneously assuming existence of such jurisdictional fact, no authority can confer upon itself jurisdiction which it otherwise does not possess.'' 75. In Halsbury's Laws of England, it has been stated: Where the jurisdiction of a tribunal is dependent on the existence of a particular state of affairs, that state of affairs may be described as preliminary to, or collateral to the merits of, the issue. If, at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nces enabling the invoking of the extended period, it has been held by the Hon'ble Supreme Court that the issuance of Show Cause Notice itself is impermissible. In this regard, it may be relevant to refer the judgment in the case of ITW Signode India Ltd v. CCE reported in (2004) 3 SCC 48 , wherein, after extracting the judgment of the Supreme Court in the case of Easland Combines, the Court proceeded to conclude as under: 68. Even in Easland Combines [(2003) 3 SCC 410 : (2003) 152 ELT 39] this Court held: (SCC pp. 424-25, para 31) 31. It is settled law that for invoking the extended period of limitation duty should not have been paid, short-levied or short-paid or erroneously refunded because of either fraud, collusion, wilful misstatement, suppression of facts or contravention of any provision or rules. This Court has held that these ingredients postulate a positive act and, therefore, mere failure to pay duty and/or take out a licence which is not due to any fraud, collusion or wilful misstatement or suppression of fact or contravention of any provision is not sufficient to attract the extended period of limitation. 69. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g which is a sine qua non for assuming jurisdiction under section 147 of the Act in a case falling under the proviso thereto, made the action taken by the Assessing Officer wholly without jurisdiction. The notice was not valid and was liable to be quashed. (Emphasis Supplied) b) Commissioner of Income Tax vs. Eigi Ultra industries Ltd. (296 ITR 573) : ...the reopening of the assessment under s. 148 beyond the period of four years at the end of the relevant assessment year can be sustained only if it is established that there is a failure on the part of the assessee to disclose fully and truly all material facts. in this case there is no finding that there is failure on the part of the assessee to disclose fully and truly all material facts . (Emphasis supplied) c) Commissioner of Income-Tax v. Premier Mills Ltd ., 2007 SCC OnLine Mad 1058 : (2008) 296 ITR 157 at page 160: 6 . In case where the assessment is completed under section 143(3) of the Income-tax Act, the reopening of the assessment under section 148 beyond the period of four years at the end of the relevant assessment year can be sustained only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... annot act in the matter of reopening of assessment beyond four years, unless he has reason to believe that income has escaped assessment by reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. He submitted that a bare reading of the reasons shows that reopening is sought to be effected only on the basis of the case records. He submitted that on two out of three points mentioned in the reasons, the Assessing Officer merely states that the issue needs to be looked into . That, on those two issues regarding subsidy and provident fund being disallowed, the Assessing Officer does not even say that there is escapement of income from assessment. He therefore submits that the proviso to section 147 is not attracted. That, on the said two points, there is nothing to indicate escapement of income. That, on the said two points, there is nothing to indicate failure on the part of the assessee to disclose fully and truly all material facts. That, on these two points, there is nothing to show as to on what basis the Assessing Officer has formed his belief regarding escapement of income from assessment. It is submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the P L A/c and takes such sum to the liability side of the balance sheet for the purpose of better disclosure, it will not affect the income already accrued to the assessee as the accounting entries cannot change the accrual of income which happened already''. 17. In response to the same, the appellant had submitted its objection to the initiation of reassessment on the premise that the reasons for reopening is based on the details already submitted during assessment proceedings. That there are no new materials on record to initiate reassessment proceedings and thus, the reassessment proceedings is nothing but is one made on the basis of mere change of opinion which is impermissible. It was further submitted that the appellant had maintained and produced its books of accounts as per Schedule VI of the Companies Act and had explained the method of recognition of revenue for the billing done in excess in terms of Financial Statements. That the accounting was in compliance and in consonance with the Accounting Standard AS-7 which governs construction contract. It was further submitted that the reasons for reopening would reveal that the reasons have been sourced f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was with reference to the very same issue and on the basis of mere change of opinion, without any new material which in the facts of the present case can be arrived at only on the basis of deep/close scrutiny of the documents and books of accounts. 21. It is trite law that reassessment cannot be on the basis of mere change of opinion. However, the above aspect may require investigation into facts namely as to what were the documents furnished before the Assessing Officer or whether details relevant for assessment and embedded in the books of accounts or other evidence were brought to the notice of the Assessing Officer while framing the original assessment (or) whether an opinion was formed by the Assessing Officer while framing the assessment on the issues forming the subject matter of reassessment, for the reassessment to constitute one being made on change of opinion and thus impermissible. There is no room for any doubt that reassessment under Section 147 of the Act, cannot be made on the basis of mere change of opinion but, whether there is change of opinion or otherwise could either be apparent on the face of the record or may require an investigation of facts to arri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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