Tahnee Heights CHS Ltd. v. Income Tax Officer

2022.

5. Learned Counsel for the Petitioner has, during the course of his arguments, reiterated the stand as was taken in the objections before the A.O.. Counsel for the Respondents Mr. Sharma has reiterated the stand of the revenue as reflected in the order disposing of objections, dated 10th March, 2022, further supported and buttressed by the reply fled by the Respondents to that extent.

6. Broadly stated the power of an A.O to reopen an assessment R.V. Patil 5 of 11 falls under two categories i.e. reopening within a period of four years from the end of the relevant assessment year and a reopening after four years from the end of the relevant assessment year. Insofaras the reopening within a period of four years from the end of the relevant assessment year is concerned, the A.O. can reopen if he has reason to believe that income chargeable to tax has escaped assessment. Beyond the period of four years, the A.O. has to additionally be satisfed that in a case where an assessment under Section 143(3) of the Act had been completed, the assessee had failed to disclose fully and truly all material facts necessary for assessment during the original assessment proceedings.

7. In the present case admittedly the assessment is sought to be reopened beyond the period of four years and, therefore, both the jurisdictional conditions were required to be satisfed by the A.O.. While testing the issue whether there has been any failure to disclose material facts fully and truly by the assessee, it has repeatedly been held that a bald allegation made by the A.O. in the reasons recorded would not be suffcient and that the A.O. ought to specifcally point out as to what facts which were otherwise material for the assessment were not disclosed by the assessee fully and truly during the regular assessment proceedings. A reference R.V. Patil 6 of 11 in this regard can be made to Hindustan Lever Ltd. V/s. R. B. Wadkar, Assistant Commissioner of Income-Tax and others[1] “…...The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. The reasons are the manifestation of the mind of the Assessing Offcer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Offcer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish the vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. This Court in the aforementioned judgment proceeded to allow the petition and set aside the notice impugned therein only on this ground that the jurisdictional requirement of proviso to Section 147 of the Act had not been complied with by the A.O. In the judgment supra, this Court had noticed that the A.O. had nowhere stated that there was failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment of that assessment year, without touching upon any of the other grounds.

8. In the present case although the A.O. has recorded in the reasons that there was failure on the part of the assessee to disclose 1 2004 ITR 332 Vol.268. R.V. Patil 7 of 11 fully and truly material facts, it failed to identify as to what was that material fact which was not disclosed by the assessee which if so disclosed could have prevented the escapement of income. The alleged failure to disclose appears to be nothing but a statement to somehow overcome the hurdle of reopening the assessment beyond four years. Apart from the above, the A.O. could have proceeded to reopen the assessment only if he had reason to believe that ‘income had escaped assessment’.

9. In CIT V/s. Kelvinator of India Ltd.[2] the Supreme Court held: “ The Assessing Offcer has no power to review; he has the power to reassess. But reassessment has to be based on fulfllment 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 re-opening the assessment, review would take place. One must treat the concept of “change of opinion” as an in-built test to check abuse of power by the Assessing Offcer. Hence, after 1-4-1989, Assessing Offcer has power to reopen, 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.”

10. In Jindal Photo Films Ltd. Vs. Deputy Commissioner of, the Court, in the light of the facts before it and in the background of section 147 of the Act, observed: 2 [2002] 123 Taxman 433 (Delhi). 3 [1998] 234 ITR 170 (Delhi) R.V. Patil 8 of 11 “……………….all that the Income-tax Offcer has said is that he was not right in allowing deduction under Section 80I because he had allowed the deductions wrongly and, therefore, he was of the opinion that the income had escaped assessment. Though he has used the phrase "reason to believe" in his order, admittedly, between the date of the orders of assessment sought to be reopened and the date of forming of opinion by the Income-tax Offcer nothing new has happened. There is no change of law. No new material has come on record. No information has been received. It is merely a fresh application of mind by the same Assessing Offcer to the same set of facts. While passing the original orders of assessment the order dated February 28, 1994, passed by the Commissioner of Income-tax (Appeals) was before the Assessing Offcer. That order stands till today. What the Assessing Offce has said about the order of the Commissioner of Income-tax (Appeals) while recording reasons under Section 147 he could have said even in the original orders of assessment. Thus, it is a case of mere change of opinion which does not provide jurisdiction to the Assessing Offcer to initiate proceedings under Section 147 of the Act. It is also equally well settled that if a notice under Section 148 has been issued without the jurisdictional foundation under Section 147 being available to the Assessing Offcer, the notice and the subsequent proceedings will be without jurisdiction, liable to be struck down in exercise of writ jurisdiction of this court. If "reason to believe" be available, the writ court will not exercise its power of judicial review to go into the suffciency or adequacy of the material available. However, the present one is not a case of testing the suffciency of material available. It is a case of absence of material and hence the absence of jurisdiction in the Assessing Offcer to initiate the proceedings under Section 147/148 of the Act.”

11. Even in the present case there appears to be no tangible material with the A.O. as can be seen from the reasons recorded and that the reference was made only to the records of the assessment. It thus appears that between the date of the order of assessment and the date of the issuance of notice, nothing new had happened. There was no new information received by the Assessing Offcer nor was any reference made to any new material on record. The A.O. was simply attempting to R.V. Patil 9 of 11 accord a fresh consideration on the issue of deduction under Section 80P of the Act claimed and allowed in favour of the Petitioner.

12. We cannot forget that the order of assessment passed in the case of the assessee was under Section 143(3) of the Act. The Petitioner had specifcally claimed the deduction under Section 80P of the Act which was not only reflected in the return of income but also gone into specifcally as can be seen from the notice issued under Section 142(1) of the Act where by the details of various deductions and exemptions along with documentary evidence had been sought for by the A.O., which fnally led to the passing of the order of assessment where by while certain disallowances were made in respect to certain items, the claim of deduction under Section 80P was allowed. It is settled law that if a query is raised during the assessment proceedings and the assessee submits a reply thereto, leading to the passing of the order of assessment, a reopening in the absence of any new tangible material would be nothing but a change of opinion, which would not furnish to the A.O. a basis for his ‘reasons to believe’ that income chargeable to tax had escaped assessment.

13. Be that as it may, we are of the opinion that the impugned notice is unsustainable on account of these jurisdictional errors committed by the A.O.. Consequently, the petition is allowed. The impugned notice dated R.V. Patil 10 of 11 30th March, 2021 under Section 148 of the Act and the impugned order dated 10th March, 2022 are held to be unsustainable and are accordingly quashed. The writ petition is disposed of accordingly. (KAMAL KHATA, J.) (DHIRAJ SINGH THAKUR, J.) R.V. Patil 11 of 11