DHIRENDRA HANSRAJ SINGH vs. ASSITANT COMMISSIONER OF INCOME TAX OFFICER

The assessee is in the business of manufacturing of processing fruit juices. The manufacturing process involves the following: a) The water is analyzed to confirm to the required standards and hardness which included calcium, magnesium and chlorides. b) The sugar syrup is heated to the required level and the various fruit pulps and then citric acid is added in the tank containing these beverages and stirred and mixed. This process is known as blending. c) The blend is then homogenized-” Upon receipt of the reasons for reopening of the assessment, the petitioner filed his objections on 7th November 2017 pointing out to the respondent that during the course of assessment proceedings, the assessee was called upon to furnish various information in respect of the return of income filed by him by issuing two notices dated 24th August 2012 and 27th September 2012 both issued under Section 142 [1] of the Act. That, the assessee furnished various particulars; as required by the Assessing Officer, in support of the claim of depreciation and allowances of deduction under Section 80IB [11A] of the Act. It was further pointed out that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, as the assessee had already tabulated details/particulars asked/submitted at the time of original assessment. As per the submissions, reopening of the assessment was beyond the four years from the end of relevant assessment year without any failure on the part of the assessee to disclose truly and fully all material facts was bad in law. That, the assessee had filed return of income under Section 139 [1] of the Act on 30th October 2010. The Assessing Officer was accordingly requested to drop the proceedings initiated under Section 147 of the Act. The Assessing Officer, however, rejected the objections filed by the petitioner, which has given rise to the present petition. Shri BS Soparkar, learned counsel for the assessee assailed the impugned notice by submitting that the assessment of the petitioner was contrary to law inasmuch as no reasons were recorded to indicate that there was any failure on the part of the petitioner to disclose fully and truly all material facts, while original assessment was made. Counsel further submitted that mere belief that income chargeable to tax as escaped assessment was not sufficient to reopen the assessment beyond the period of four years. That, as per the provision of Section 147 of the Act, even for reopening of assessment during the period of four years, it is mandatory for the Assessing Officer to record failure of the petitioner to disclose fully and truly all material facts. That, the impugned notice is issued on the basis of change of opinion which is not open for the respondent to reopen the assessment for reconsideration of the same issue without any new material available on the record. That, the notice can be issued under Section 147 of the Act if and only if, the Assessing Officer has a reason to believe that any income chargeable to tax has escaped assessment. That, during the assessment proceedings, specific queries regarding additions made to the fixed assets as well as nature of petitioner’s business were furnished by the petitioner, and therefore, it is not open to just change the opinion, be it on the same set of facts, by the respondent-Assessing Officer. Hence, it was requested by learned counsel for the petitioner to quash and set aside the impugned notice; as prayed for. On the other hand, learned counsel for the Revenue Shri Varun K Patel supported the impugned notice on the grounds stated by the Assessing Officer in the order disposing of the objections. It is submitted that at the time of original assessment, the petitioner has not provided sufficient information and disclosed truly and fully all material facts and therefore, the Assessing Officer formed an opinion that the income chargeable to tax had escaped the assessment. That, satisfaction to believe of the Assessing Officer was clearly in the reasons for reopening of the assessment; as recorded by him. That, the objections raised by the petitioner against the impugned notice of reopening were rejected with detailed reasons by the Assessing Officer by an Order dated 30th November 2017. That, the impugned notice under Section 148 of the Act was just, proper and legal, and therefore, it was requested by learned counsel for the Revenue that as the petitioner has not submitted material details which were essentially requisitioned for claiming deduction under Section 80IB [11A] of the Act, and hence, it is not true that the assessee had made truly and fully all material disclosures of facts. That, the issues on which notice under Section 148 of the Act was issued were not examined during the course of assessment proceedings by the then Assessing Officer, and therefore, it is not a change of opinion. Lastly, counsel for the Revenue urged this Court to dismiss the present writ petition. Having heard learned counsel for the respective sides and having perused the material available on the record, it appears that the return of income for AY 2010-2011 was filed by the petitioner on 7th October 2010 showing his income at Rs. nil. Thereafter, scrutiny of the return of income was undertaken and certain questions were raised by the Assessing Officer; including the business of the petitioner and claim of deduction made under Section 80IB. It also appears that other questions were also raised by the Assessing Officer in respect of additions made to the fixed assets. The petitioner replied the queries raised by the respondent and thereafter, the assessment was framed under Section 143 [3] of the Act by an order dated 28th March 2013 calculating the income of the petitioner at Rs. 98,40,140/=. It appears that thereafter, the impugned notice was issued by the Assessing Officer under Section 148 of the Act intending to reopen the assessment for AY 2010- 2011. In compliance of the notice issued by the Assessing Officer, the petitioner had filed reply on 21st March 2017 showing details of return of income and requested to provide reasons recorded for initiating re-assessment proceedings under the aforesaid section. On 19th September 2017, the reasons recorded by the Assessing Officer were provided to the petitioner for reopening of the assessment under Section 148 of the Act for the year under consideration. It appears that during the course of assessment proceedings, the assessee was called upon to furnish various information in support of the return of income has filed the following notices : Sr No. Particulars of Notices Copy placed in Paper Book 1 U/s. 142 [1] dated 24.08.2012 1 to 3 2 U/s. 142 [1] dated 27.09.2012 4 to 6 It appears from the aforesaid details provided by the petitioner earlier that before issuing the notice under Section 148 of the Act, particularly in respect of the claim for allowance of depreciation and deduction under Section 80IB [11A], were provided and disclosed during the course of assessment proceedings. Thus, where an assessment under sub-section [3] of Section 143 of the Act for the relevant assessment year has been made, no action could be taken under this section after expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year for reason of the failure on the part of the assessee to make a return under Section 139 or in connection with a notice issued under sub-section [1] of Section 142, or Section 148, or to disclose fully and truly all material facts necessary for re- assessment for that assessment year. Assessment can be reopened after four years from the end of relevant assessment year only where any income chargeable to tax has escaped assessment for such assessment year by reason of [a] failure on the part of assessee to make a return under Section 139; or [b] failure to file return in response to a notice issued under sub-section [1] of Section 142 or Section 148 of the Act; or [c] failure to disclose fully and truly all material facts necessary for assessment for that assessment year. It transpires from the record that the assessee had filed return of income under Section 139 [1] of the Act on 7th October 2010. It is a fact that there is no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment, as the assessee had already tabulated necessary details/particulars as were required by the Assessing Officer at the time of original assessment, and therefore, there was no failure on the part of the assessee to disclose fully and truly any material facts which were necessary for assessment. A brief discussion of the precedents in law on this issue would be relevant at this stage. In the case of Corporation Bank Limited, reported in [2002] 254 ITR 791, in a case wherein the balance sheet filed along with the income-tax return, the assessee furnished particulars of interest suspense account showing a sum which was not recoverable for the relevant account year, it was held that the proceedings under Section 147 of the Act was not justified since there was no failure on the part of the assessee to disclose fully and truly the material facts necessary for the assessment. In the case of ACIT v. ICIC Securities Primary Dealership Limited, reported in 348 ITR 299, the Apex Court while dismissing the Appeal filed by the Department held that, “..For A.Y 1999-2000, the assessee claimed a deduction for Rs.

86 Crores which was allowed by the A.O in Section 143 [3] assessment. Subsequently, after expiry of four years, the AO reopened the assessment under Section 147 on the ground that the said loss was a “speculative loss” and could not be allowed as a deduction. The assessee filed a writ petition to challenge the reopening which was allowed by the High Court on the ground that though the AO was justified in his analysis that there was escapement of income, there was “nothing new” which had come to the notice of the revenue and that reopening was based on a “mere relook” which was not permissible.” The ambit and scope of powers to be exercised under Section 147 of the Income Tax Act by the Assessing Officer, while reopening the assessment beyond the period of 4 years is discussed by this Court in the case of Gujarat Lease Financing Limited v. DCIT, Circle IV, Ahmedabad, reported in 360 ITR 496 [Guj], wherein, it has been observed and held in para 16, 17 and 27 as under :

Once the case of the assessee is covered by the first proviso to Section 147 of the Act, the reassessment proceedings beyond the period of 4 years from the end of the relevant assessment year would be without any jurisdiction and bad in law, if all material facts are furnished and there remained no omission or failure on the part of the assessee to disclose truly and fully all material facts. This Court, after extensively discussing law on the issue in case of Gujarat Lease Financing Limited [Supra], has held thus :

From the ratio that can be culled out from all these decisions, it is amply clear that the Assessing Officer, who is authorized to issue notice under section 148 of the Act for reassessment, on his having a reason to believe that income chargeable to tax had escaped assessment for any assessment year, can assess or reassess such income and also any such other income chargeable to tax, which has escaped the assessment. However, no such action is permissible after lapse of 4 years from the end of the relevant assessment year unless income chargeable to tax has escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts necessary for the purpose of such assessment. The onus is on the assessee to reveal the primary facts and to draw the inferential facts would be responsibility of the Assessing Officer. Once having revealed from the record that the assessee disclosed full and complete facts and on scrutiny, at the time of original assessment all these details are examined, no change of opinion is permissible merely because there was some error either on the part of the Assessing Officer himself or because he choose not to opine on the issue or even when he changes his mind and interprets the material or law otherwise than what was done by him.” Indisputably, the impugned notice issued by the Assessing Officer itself is beyond the period of four years from the end of relevant assessment year and did not comply with the requirements of proviso to Section 147 of the Act, the Assessing Officer had no jurisdiction to reopen the assessment proceedings which were concluded on the basis of assessment under Section 143 [3] of the Act, and therefore, on this short count alone, the impugned notice is liable to be quashed and set-aside. Resultantly, for the foregoing reasons, re-assessment proceedings being illegal and bad in law, need to be dropped. Impugned notice dated 26th March 2017 issued by the respondent-Assessing Officer under Section 148 of the Income-tax Act, 1961 is hereby quashed. Rule nisi made absolute to the aforestated extent with no order as to costs.