9911796707
TMI Blog2025 (5) TMI 892X X X X Extracts X X X X X X X X Extracts X X X X ..... [2] Petitioner has sought quashing of notice under Section 148 of the Income Tax Act, 1961 vide DIN & Notice No. ITBA/AST/S/148/2020-21/1032094963(1) dated 31.03.2021 issued by the Deputy Commissioner of Income Tax for the assessment year 2014-2015 and the order dated 21.02.2022 rejecting the objection of the petitioner vide letter No. ITBA/AST/F/17/2021-22/1039954650(1) issued by the Additional/Joint/ Deputy/Assistant Commissioner of Income Tax Department. He also prayed for a direction upon the respondents not to proceed further on the basis of the notice under Section 148 of the Act of 1961 and drop the proceedings after considering the objection dated 21.02.2022. Petitioner also prayed for an interim stay of the impugned notice. [3] When the matter was taken up earlier before the Co-ordinate Bench of this Court on 29.03.2022 while issuing notices the proceedings initiated against the petitioner under Section 148 of the Income Tax Act 1961 were kept in abeyance. Therefore, the re-assessment proceedings have not been concluded. Respondents filed their counter affidavit on 01.08.2022. When the matter was taken up on 27.06.2023, this Court taking note of the of the fact that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the search operation was completed, a detailed appraisal report was prepared by the department containing the search details and other details of Shri Swapan Kumar Paul along with eight other assessees connected with Shri Swapan Kumar Paul including the present Petitioner i.e. Shri Abhijit Paul. Based on such disclosure of Shri Swapan Kumar Paul and the appraisal report prepared by the department, notice under Section 142 (1) of the Act was served upon the petitioner. The petitioner was directed to file his return of income for the assessment year 2014-15. Accordingly, petitioner filed his return on 25.11.2015 showing the total income at Rs. 64,17,120/- [6] It is the case of the respondent-revenue that based on such information gathered from the appraisal report as well as the disclosure of Shri Swapan Kumar Paul and also after considering the return filed by the petitioner pursuant to the notice issued under Section 142 (1) of the Act, the Assessing Authority completed the assessment of the petitioner after complying with all the required provisions of law and passed the assessment order dated 29.03.2016 whereby the total income of the petitioner was assessed at Rs. 12,98,56,202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... jection filed by the petitioner holding that the proceedings were initiated as per provisions of the Act which was valid and justified. Being aggrieved, the Petitioner preferred this writ petition before this Court under Article 226 of the Constitution of India seeking interference of the said action of the respondents in initiating the said proceedings under Section 147 of the Act. [8] Petitioner challenged the said proceedings initiated under Section 147 of the Act mainly on four grounds: (i) It is barred by limitation as the notice was issued after the expiry of the period prescribed under Section 149 (1) (b) of the Act. (ii) The matter is still sub-judice before the Appellate Tribunal in respect of additions made by the Assessing Authority while passing the initial assessment order. (iii) There was no new or fresh material which came up to the notice of the Assessing Authority to initiate a proceedings under section 147 of the Act and (iv) The proceedings were initiated based on borrowed satisfaction of a different authority i.e. the audit wing of the department and not of the Assessing Authority. There was no 'reason to believe' formed by the Assessing Autho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer has no reason to believe on his own that the income of assessee had escaped assessment on ground of erroneous computation. Learned counsel for the petitioner has placed reliance upon decision of the Apex Court in case of Commissioner of Income Tax, Delhi Versus Kelvinator of India reported in (2010) 2 SCC 723 at paragraph No. 7 wherein it was held that one must treat the concept of "change of opinion" as in in-built test to check abuse of power by the assessing officer. Hence, after 01.04.1989, the assessing officer has power to re-open provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief. Under the Direct Tax Laws (Amendment), Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion" in Section 147 of the Act. However, on receipt of representations from the companies against omission of the words "reason to believe" Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the assessing officer. [11] Learned counsel for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in case of M/S Indian & Eastern Newspaper Society, New Delhi versus Commissioner of Income Tax, New Delhi, reported in (1979) 4 SCC 248 and submits that the Apex Court in the said case has held that opinion of an internal audit party of Income Tax Department on a point of law cannot be regarded as an information within the meaning of Section 147 of Income Tax Act. Notice under Section 148 IT Act issued on 01.04.2021 after expiry of 6 years from the relevant assessment year 2014-2015 is not permissible under the un-amended Act which was applicable till 31.03.3021. [13] Mr. S. Chetia, learned counsel for the respondents-revenue submits that the submission of the petitioner that in view of Section 149 (1) (b) of the Act, the notice dated 31.03.2021 issued under Section 148 of the Act was time barred, is not legally correct. The respondent No. 5 has formed his 'reason to believe' that the income of the petitioner had escaped assessment on account of 'net profit' for the period 01.04.2013 to 22.08.2013. The petitioner had not disclosed his income fully and truly in his return of income filed on 25.11.2015. Therefore, respondent No. 5 had sought an approval from the Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal. Both are altogether on a different footing i.e. issues before the Appellate Authority and the Tribunal were 'undisclosed investment' and 'undisclosed income' of the petitioner and the present proceedings initiated under Section 147 of the Act was in respect of escapement of tax because of non-disclosure of actual profits by the petitioner. Therefore, there is no bar under the Income Tax Act, 1961 to Initiate any proceedings under Section 147 of the Act for reassessment of the petitioner which was escaped assessment during the original assessment and which came to the notice of the respondent No. 5 subsequently after the original assessment order was passed. [16] As regards the submission made by the petitioner that no new or fresh material came up to the notice of the Assessing Authority to initiate proceedings under section 147 of the Act, it is stated that subsequent to the assessment order dated 29.03.2016 passed by the Assessing Officer, it has come to the notice of the respondent No. 4 that certain income chargeable to tax of the petitioner had escaped assessment. The escapement of tax of the petitioner had come to the notice of the respondent No. 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessing officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word "reason" in the phrase "reason to believe" would mean cause or justification. If the assessing officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the assessing officer should have finally ascertained the fact by legal evidence or conclusion. The function of the assessing officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. [19] Learned counsel for the respondents-revenue has also relied upon a decision of the Apex Court in case of Raymond Woollen Mills Limited vs. Income Tax Officer, reported in (2008) 14 SCC 218 and submitted that the Apex Court at paragraph 3 of the said judgment held that it has to see whether there was prima facie some material on the basis of which the department could reopen the case. The sufficiency or correctness of the material is not a thing to be considered at tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year: Provided also that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely :- (a) where no return of income has been furnished by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139 : Provided that in a case- (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or recomputation as specified in sub-secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment, reassessment or recomputation to be made in pursuance of the notice is to be made on him as the agent of such non-resident, the notice shall not be issued after the expiry of a period of six years from the end of the relevant assessment year. Explanation.-For the removal of doubts, it is hereby clarified that the provisions of sub-sections (1) and (3), as amended by the Finance Act, 2012, shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012 Xxxxxxxx 151. Sanction for issue of notice. (1) No notice shall be issued under section 148 by an Assessing Officer, after the expiry of a period of four years from the end of the relevant assessment year, unless the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner is satisfied, on the reasons recorded by the Assessing Officer, that it is a fit case for the issue of such notice. (2) In a case other than a case falling under sub-section (1), no notice shall be issued under section 148 by an Assessing Officer, who is below the rank of Joint Commissioner, unless the Joint Commissioner is satisfied, on the reasons recorded by such Assessing Offi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer to reopen assessment on the basis of "mere change of opinion" which cannot be per se reason to reopen. [24] The Apex Court in case of Commissioner of Income Tax, Delhi versus Kelvinator of India Limited, reported in (2010) 2 SCC 723 at paragraphs No.6 and 7 has explained the change in the law as regards the basis to reopen the concluded assessment only on the basis of 'reason to believe' and not on the basis of 'change in opinion' after the amendment made with effect from 01.04.1989 which reads as under: "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 of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. 7. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the assessing officer. Hence, after 1-4-1989, the assessing officer has power to reopen, provided there is "tangible material" to come to the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment under Section 147(a) read with Section 148 of the Income Tax Act, 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income Tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge b but it is open to an assessee to establish that there in fact existed no belief or that the beli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reopening of a concluded assessment i.e. reassessment under Section 147 of the Income Tax Act, 1961 following issuance of notice under Section 148 of the Act is legally sustainable or is bad in law. The Apex Court in Mangalam Publication (supra) extensively dealt with the position in law as it existed prior to the amendment to Section 147 and post amendment introduced by Direct Tax Laws (Amendment) Act, 1989 and also the decisions rendered by the Apex Court in case of Kelvinator of India Limited (supra); Phool Chand Bajrang Lal (supra) and Sri Krishna Private Limited (supra). [28] The Apex Court also dealt with the Constitution Bench judgment rendered in case of Calcutta Discount Company Limited versus Income Tax Officer, Companies District Calcutta & another, reported in AIR 1961 SC 372. It was a case under Section 34 of the Income Tax Act which is pari materia to Section 147 of the Act. The Apex Court in the case of Mangalam Publication (supra) once again reiterated the salient principles as regards reopening of assessment by invocation of power under Section 147 of the Act. [29] In the background of the position in law as above, the issues which fall for consideration in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder Section 68 as undisclosed investment. Penalty proceedings under Section 271 (i) (c) were initiated for furnishing inaccurate details and concealment of income. Further, on the basis of loose sheets which are statements showing the details of pendency with FCI towards different dispatching point in respect of amount receivable by Abhijit Paul and Subhajit Paul as on 17.04.2013 and 13.04.2013 and also the details of liability against such receivable, the assessee could not explain the surplus of Rs. 2,72,33,682/- by producing any counter documentary evidence. Therefore, the difference of Rs. 2,72,33,682/- after considering depreciation of Rs. 35,36,591/- was added back into the income of the assessee as undisclosed investment. Penalty proceedings were separately initiated Section 271 (i) (c). As a result, the additions were Rs. 9,62,33,682.00 + Rs. 2,72,33,682.00 totaling Rs. 12,98,56,202.00. [31] The tally data as contained under paragraph 5 of the assessment order is extracted hereunder as it may have a bearing on the answer to the issue. Tally data with path F.Y/Date Ledger/nature of account Amount Remarks CN-8/D Drive/Tally/data/0005 2013-22.08.2013 Ramkrishna Enter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l under Section 151 of the Income Tax Act by the PCIT, Shillong is at (Annexure-11). Thereafter, petitioner filed his objection against initiation of proceedings on 30.01.2022 (Annexure-19). The same has been rejected by the order dated 21.02.2022 (Annexure-20) which is also impugned in the present writ petition. It holds that the assessee had not disclosed the material facts truly and fully and therefore income chargeable to tax had escaped assessment. Therefore, the provisions of Section 147 and 148 of the Act are correctly invoked. The objection as to the authority of the PCIT to grant permission was also rejected as untenable. [35] During course of hearing of this case, the revenue relied upon the appraisal report which formed the basis of the audit objection on which the notice under Section 148 was issued for reopening assessment under Section 147 of the Act of 1961. Since the appraisal report was being relied upon to justify the reopening of the assessment and they were not part of the pleadings, the respondent-revenue was asked to make a categorical statement on affidavit as to whether the appraisal report was available before the assessing authority while making the initi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t when compared to the net profit shown in the audit report or P&L so prepared. For the relevant year 2013 it showed net profit of Rs.96,89,209/-. It is not in dispute that this appraisal report was available before the Assessing Officer during the assessment. The assessment order was passed based on the materials seized during search and seizure operation including ledger, cash book of different years found in the tally data of the petitioner and in the wake of the fact that the assessee had failed to produce any books of accounts, ledgers, bills, vouchers and any other supporting evidence substantiating his cause. Evidently, the materials were present before the Assessing Officer when undertook the assessment on the basis of the materials seized during search and seizure operation. [37] Perusal of the reasons for issuance of the notice for reopening assessment as extracted in the foregoing paragraph also indicates that as per page 32 of the appraisal report there was a net profit for the period 01.04.2013 to 22.08.2013 to the tune of Rs. 96,89,209/- on the basis of profit and loss account found in the tally data of Abhijit Paul whereas the net profit disclosed in his return of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Income Tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and, therefore, income chargeable to tax had escaped assessment. [40] In the facts of the present case, the assessment was carried out at the first instance on the basis of the materials collected during search and seizure operation including the ledgers/cash book of different years found in the tally data of the petitioner and also the appraisal report based thereupon. The Appraisal report was placed before the Assessing Officer to examine the claim. If the same material formed the basis of the Assessing Officer to pass the original assessment order, the reopening of the assessment by issuance of notice under Section 148 of the Act would be a mere change of opinion of the Assessing Officer and not a case of reason to believe on basis of the material which has subsequently come to his notice and/or which the assessee failed to truly and fully disclose during assessment proceedings. This is a case where the assessee had not submitted any books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment till 31.03.2021 and as such the same is bad in law, we may usefully refer to a decision on this point rendered by a Division Bench of the Jharkhand High Court in which one of us (Aparesh Kumar Singh, CJ) was a party. The matter relates to the period of limitation prescribed under Section 153 in case of Prakash Lal Khandelwal versus Commissioner of Income Tax and another in WP(T) No.1901 of 2022. The issue involved in the said case was whether if the DIN number was generated on 01.04.2022 and the order was uploaded on 03.04.2022, was it barred in time as the limitation to initiate proceedings expired on 31.03.2022. [44] In the present case, the revenue in its first additional affidavit has made a categorical statement at paragraph 9 to the effect that the respondent No.4 i.e. the Assessing Officer issued notice under Section 148 of the Act by digitally signing the notice on 31.03.2021 at 7.01 p.m. The moment the respondent No.4 put his digital signature on the said notice in the specified online portal of the department, it went out of the hands of respondent No.4 to the centralized online application unit of the Income Tax Department and therefore it was beyond the contro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egislature at different places has certainly a different objective. Making of the order and communication of the order are two different things. Even the circular No.19 of 2019 dated 14.08.2019 relevant to the issue in the said case and relied upon by the assessee stipulated communication of the order and not making of the order as it said that every communication relating to assessment, appeal, order, etc. shall have a DIN on the body of the order. On facts, in the present case, it is undisputed that the Assessing Officer had digitally signed the notice under Section 148 of the Act on 31.03.2021 at 7.01 p.m. As such, it was not barred by limitation though it may have been uploaded on the portal on 01.04.2021. The instant issue is, therefore, answered against the assessee in favour of the revenue. [46] On consideration of the entire conspectus of facts and circumstances narrated above and the principles of law as regards the reopening of assessment under Section 147 read with Section 148 of the Act of 1961 and the findings recorded in respect of the issue No. (i) hereinabove, in conclusion, we are of the considered opinion that the reopening of the assessment of the petitioner for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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