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2018 Supreme(Bom) 307
IN THE HIGH COURT OF JUDICATURE AT BOMBAY BENCH AT GOA
N.M. JAMDAR, PRITHVIRAJ K. CHAVAN, JJ.
Zuari Foods & Farms Pvt. Ltd. - Petitioner
Versus
Asst. Commissioner of Income-tax, Circle 1(1) & Another - Respondents
Writ Petition No. 1000 of 2017
Decided On : 13-03-2018
Advocate Appeared:
For the Petitioner: K. Gopal, Shivan Desai
For the Respondents: Susan Linhares
Headnote:
Income Tax Act - Reassessment Proceedings - Section 147, 148 - [Section 147, Section 148] - The court discussed the jurisdictional requirements for reopening of an assessment under Sections 147 and 148 of the Income Tax Act, emphasizing the need for the Assessing Officer to have a reason to believe that income chargeable to tax has escaped assessment, and the requirement for the assessee to have failed to disclose fully and truly all material facts necessary for assessment. The court highlighted that the reasons recorded at the time of issuing notice are the only evidence of the Assessing Officer's reason to believe that income chargeable to tax has escaped assessment, and that the Assessing Officer is not permitted to improve upon the reasons so furnished to the assessee. The court also emphasized that the validity of the initiation of the assessment proceedings will be determined only by the reasons furnished by the Assessing Officer to the assessee.
Fact of the Case:
The Petitioner-Assessee challenged the notice under Section 148 of the Income Tax Act, 1961 issued by the Assistant Commissioner of Income-tax and the order disposing of the objections raised by the Petitioner. The Petitioner had filed its return of income for the Assessment Year 2011-12, declaring its total income as Nil, after claiming exemption under Section 10(1) of the Act. Reassessment proceedings were initiated after a period of four years, alleging failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment.
Finding of the Court:
The court found that the jurisdictional requirement for initiating reassessment proceedings under Sections 147, 148 of the Act was not satisfied, as the reasons supplied to the Petitioner did not contain a statement of failure to disclose material information, and the reassessment proceedings were based on a change of opinion rather than tangible material.
Issues: The issues involved in the case were the validity of the reassessment proceedings initiated under Sections 147, 148 of the Income Tax Act, and whether the jurisdictional requirements for reopening of an assessment were met.
Ratio Decidendi: The court held that the reasons recorded at the time of issuing notice are the only evidence of the Assessing Officer's reason to believe that income chargeable to tax has escaped assessment, and emphasized the need for the Assessing Officer to have tangible material and a live link between the tangible material and the reason to believe that income chargeable to tax has escaped assessment.
Final Decision: The court allowed the petition, holding that the Respondent-Authority had no jurisdiction to proceed under Sections 147, 148 of the Act, and made the rule absolute in favor of the Petitioner.
N.M. Jamdar, J.
1. Rule. Rule made returnable forthwith. The respondents waive service. Taken up for final disposal.
2. The Petitioner-Assessee has challenged the notice under Section 148 of the Income Tax Act, 1961 issued by Respondent No.1 2 WP1000-17-13-03-18 -Assistant Commissioner of Income-tax, dated 17 October 2016 and the order passed on 3 October 2017, disposing of the objections raised by the Petitioner.
3. The Petitioner filed its return of income for the Assessment Year 2011-12, declaring its total income as Nil, after claiming exemption under Section 10(1) of the Act. The date of the assessment order was 31 March 2012. Scrutiny assessment proceedings were initiated and a notice was issued on 22 February 2013. The Petitioner filed its response on 13 July 2013. Thereafter, the explanation given by the Petitioner was accepted and the scrutiny assessment proceedings were closed by an order dated 30 December 2013.
4. A notice under Section 148(1) of the Act was issued to the Petitioner on 17 October 2016. The Petitioner made a representation seeking reasons. The Petitioner received the reasons supplied by Respondent No.1 for reassessment and the Petitioner filed its objections on 14 September 2017. Thereafter, Respondent No.1 passed an order rejecting the objections, on 3 October 2017. The Petitioner has challenged the reassessment proceedings.
5. In a series of decisions of the Apex Court and of this Court, have explained contours of the jurisdictional requirement under Sections 147, 148 of the Act. Some of these are, CIT vs. Benoy Kumar Sahas Roy, (1975 (0) Supreme (SC) 66) Praful Patel vs. ACIT, [1999] 236 ITR 832) Dr. Amin's Pathology Lab. Vs. JCIT, [2001] 252 ITR 673) Kalyanji Mavji vs. CIT, (1976 ITR 0287) S. Narayanappa vs. CIT [1967] 63 ITR 219), Revathy CP Equipment Ltd. vs. DCIT [2000] 108 Taxman 279), Rakesh Aggarwal vs. ACIT, [1996] 87 Taxman 306 (Del) Income Tax Officer vs. Biju Patnaik [1991] 56 Taxman 165 (SC), CIT Vs. Mahaliram Ramjidas, [1940] 8 ITR 442 (PC).
6. In the case of Godrej Industries Ltd. vs. B.S. Singh, Deputy Commissioner of Income-tax and ors., the Division Bench (Sanklecha and Jamdar, JJ) has summarised the position of law as regards the jurisdiction under Sections 147, 148 of the Act, as under :
“9. We have considered the rival submissions. The law with regard to reopening of assessment is fairly settled. An assessment can be reopened under section 147 and section 148 of the Act only on the jurisdictional requirement for reopening of an assessment being strictly satisfied. This is for the reason that a reopening of an assessment would disturb an settled position by reopening a completed proceeding. Normally, the jurisdictional requirements to be satisfied for issuing of an reopening notice are as under:
(a) the Assessing Officer must record his reasons/grounds for issuing a reopening notice before issuing the same;
(b) the Assessing Officer should have reason to believe that income chargeable to tax has escaped assessment and the same must be recorded/revealed in his reasons/grounds;
(c) the Assessing Officer should not have considered the issue on which the reopening is sought during the regular assessment proceedings. In case the issue has been considered even if evidenced by asking questions then such an attempt to reconsider would not be permitted on ground of being a mere change of opinion;
(d) the reopening of an assessment must be on tangible material and the grounds/reasons for reopening must be recorded before the issuing of notice for reopening of an assessment;
(e) these grounds/reasons recorded for reopening of an assessment must disclose a live link between the tangible material and the reason to believe that income chargeable to tax has escaped assessment;
(f) in case of assessments sought to be reopened are beyond a period of four, years from the end of the relevant assessment year then there should have been a failure on the part of the assessee to truly and fully disclose
