Delhi Industries & Enterprises v. Assistant Commissioner of Income Tax

Case Laws Analysis
Followed CIT v. Kelvinator of India Ltd. 2010 TaxPub(DT) 1335 (SC)
Distinguished Jay Bharat Maruti Ltd. v. CIT 2010 TaxPub(DT) 0476 (Del-HC)
Distinguished Shipra Srivastava & Anr. v. Asstt. CIT 2009 TaxPub(DT) 2040 (Del-HC)
Relied ACIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. 2007 TaxPub(DT) 1257 (SC)
Followed CIT v. Kalvinator of India Ltd. 2002 TaxPub(DT) 1348 (Del-HC)
Relied Raymond Woollen Mills Ltd. v. Income Tax Officer & Ors. 1999 TaxPub(DT) 0348 (SC)
Relied Jindal Photo Films Ltd. v. Deputy CIT & Anr. 1998 TaxPub(DT) 1334 (Del-HC)

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The Tax PublishersITA Nos. 1464, 1465, 1534 & 15357Del/2010 2013 TaxPub(DT) 0137 (Del-Trib) : (2013) 052 (II) ITCL 0225 : (2012) 150 TTJ 0756 : (2012) 080 DTR 0252 INCOME TAX ACT, 1961 --Reassessment--Reason to believe Formation of opinion on information received from assessing officer--On inspection of records the Commissioner fond that certain excess relief had been claimed by the assessee in respect of interest expenses. He transmitted the inspection report to the assessing officer. The assessing officer found that only a sum of 1.66 crores was used out of bank loan for repayment of earlier loan whereas according to assessee, the loan outstanding on that day was Rs. 1.89 crores. The assessing officer reopened the assessment and made reassessment. it is to be noted that there was no original assessment under section 143(3). The assessee contended that notice under section 148 was issued only on the direction of Commissioner. *Held:* Not acceptable. The assessing officer had formed the opinion that income escaped assessment under section 147 as there was no change of forming of opinion by the assessing officer earlier on such issue. Reassessment made by the assessing officer was valid as it was not only on the basis of direction to Commissioner. A plain reading of the section 147 would indicate that if assessing officer has reason to believe that any income chargeable to tax has escaped for any assessment year then he may subject to the conditions enumerated in sections 148 to 153 of the Act, assess or reassess such income. Thus, the primary factor for exercising the powers under section 147 is that there should be some reasons which persuade the assessing officer to believe that income chargeable to tax has escaped. In other words, some information possessed by the assessing officer exhibiting the escapement of income would enable him to harbour the belief that income has escaped assessment and he would be authorized to issue notice under section 148. However, if an assessment under section 143(3) was passed and 4 years have expired from the end of relevant assessment year, if assessing officer wants to reopen the assessment then interdiction provided in the proviso would come in his way, in that case, he can reopen the assessment, if he has reason to believe that income has escaped assessment by reason of the failure on the part of the assessee to make return under section 139 or in response to a notice under section 142(1) or under section 148 and the assessee failed to disclose all material facts fully and truly for the assessment of that year. In the present appeals, notice under section 148 has been issued within four years, therefore, the proviso appended to section 147 has no application on the dispute in hands. Thus, we do not wish to make any elaborate discussion on this issue. The first proposition canvassed by the assessee is that after expiry of limitation for issue of notice under section 143(2), assessing officer cannot issue notice under section 148, unless a fresh information came to his possession. The emphasis of the learned counsel for the assessee was that details in respect of interest expenses were already on the record, therefore, no fresh information came to the possession of the assessing officer which can enable him to issue notice under section 148 particularly in assessment years 2002-03 and 2003-04. On perusal of these reasons, it revealed that learned Commissioner on an inspection of the record in his jurisdiction found certain excess relief claimed by the assessee in respect of interest expenses. He transmitted the inspection report to the assessing officer, who formed an opinion that income has escaped assessment. There is no scrutiny assessment in the assessment years 2002-03 and 2003-04. Thus, the assessing officer has not formed any opinion on these issues, i.e., about the assessability of interest expenses. There is no condition in section 147 that information should have flown from an external source after filing of the return and only then a notice under section 148 can be issued. Hon'ble Supreme Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500 (SC) : 2007 TaxPub(DT) 1257 (SC) has considered this aspect and observed that failure to take steps under section 143(3) will not render the assessing officer powerless to initiate reassessment proceedings even when the intimation under section 143(1) had been issued. [Para 12] On reading of the reasons, prima facie, it is discernible that the assessing officer has the information in respect of his opinion. He has not issued the notice under section 148 on suspicion. The next proposition raised by the assessee is that notice under section 148 was issued under the direction of the Commissioner; however, there is no force in this submissions also, because nowhere Commissioner has directed the assessing officer to reopen the assessment. He has only transmitted the information which has been analyzed by the assessing officer and he had formed his independent opinion. The next proposition raised by the assessee is that assessing officer has formed his opinion on the basis of incorrect facts. We have seen the balance sheet as well as the reasons recorded by the assessing officer. In the understanding of the assessing officer, only a sum of Rs. 1.66 crores was used out of the loan taken from V Bank for repayment of C Bank's loan, whereas according to the assessee, the loan of Canara Bank outstanding on that day was Rs. 1,89,08,019. In our opinion, it is not such an inaccuracy of facts which can goad the assessing officer at a wrong conclusion. Basic issue was whether loan of Rs. 4 crores taken from V Bank was utilized for construction of the building giving rental income or repayment of the loan earlier used for the construction of the building. If there is a small variation of Rs. 22 lacs, it can be looked into after hearing the assessee. But this variation did not influence the assessing officer for arriving at a wrong conclusion in forming the belief. [Para 13] In view of the above discussion, assessing officer has rightly reopened the assessment in assessment years 2002-03 and 2003-04. [Para 15] SUBSCRIBE FOR FULL CONTENT

The Tax PublishersITA Nos. 1464, 1465, 1534 & 15357Del/2010
2013 TaxPub(DT) 0137 (Del-Trib) : (2013) 052 (II) ITCL 0225 : (2012) 150 TTJ 0756 : (2012) 080 DTR 0252

INCOME TAX ACT, 1961

--Reassessment--Reason to believe Formation of opinion on information received from assessing officer--On inspection of records the Commissioner fond that certain excess relief had been claimed by the assessee in respect of interest expenses. He transmitted the inspection report to the assessing officer. The assessing officer found that only a sum of 1.66 crores was used out of bank loan for repayment of earlier loan whereas according to assessee, the loan outstanding on that day was Rs. 1.89 crores. The assessing officer reopened the assessment and made reassessment. it is to be noted that there was no original assessment under section 143(3). The assessee contended that notice under section 148 was issued only on the direction of Commissioner. Held: Not acceptable. The assessing officer had formed the opinion that income escaped assessment under section 147 as there was no change of forming of opinion by the assessing officer earlier on such issue. Reassessment made by the assessing officer was valid as it was not only on the basis of direction to Commissioner.

A plain reading of the section 147 would indicate that if assessing officer has reason to believe that any income chargeable to tax has escaped for any assessment year then he may subject to the conditions enumerated in sections 148 to 153 of the Act, assess or reassess such income. Thus, the primary factor for exercising the powers under section 147 is that there should be some reasons which persuade the assessing officer to believe that income chargeable to tax has escaped. In other words, some information possessed by the assessing officer exhibiting the escapement of income would enable him to harbour the belief that income has escaped assessment and he would be authorized to issue notice under section 148. However, if an assessment under section 143(3) was passed and 4 years have expired from the end of relevant assessment year, if assessing officer wants to reopen the assessment then interdiction provided in the proviso would come in his way, in that case, he can reopen the assessment, if he has reason to believe that income has escaped assessment by reason of the failure on the part of the assessee to make return under section 139 or in response to a notice under section 142(1) or under section 148 and the assessee failed to disclose all material facts fully and truly for the assessment of that year. In the present appeals, notice under section 148 has been issued within four years, therefore, the proviso appended to section 147 has no application on the dispute in hands. Thus, we do not wish to make any elaborate discussion on this issue. The first proposition canvassed by the assessee is that after expiry of limitation for issue of notice under section 143(2), assessing officer cannot issue notice under section 148, unless a fresh information came to his possession. The emphasis of the learned counsel for the assessee was that details in respect of interest expenses were already on the record, therefore, no fresh information came to the possession of the assessing officer which can enable him to issue notice under section 148 particularly in assessment years 2002-03 and 2003-04. On perusal of these reasons, it revealed that learned Commissioner on an inspection of the record in his jurisdiction found certain excess relief claimed by the assessee in respect of interest expenses. He transmitted the inspection report to the assessing officer, who formed an opinion that income has escaped assessment. There is no scrutiny assessment in the assessment years 2002-03 and 2003-04. Thus, the assessing officer has not formed any opinion on these issues, i.e., about the assessability of interest expenses. There is no condition in section 147 that information should have flown from an external source after filing of the return and only then a notice under section 148 can be issued. Hon'ble Supreme Court in the case of Asstt. CIT v. Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 291 ITR 500 (SC) : 2007 TaxPub(DT) 1257 (SC) has considered this aspect and observed that failure to take steps under section 143(3) will not render the assessing officer powerless to initiate reassessment proceedings even when the intimation under section 143(1) had been issued. [Para 12] On reading of the reasons, prima facie, it is discernible that the assessing officer has the information in respect of his opinion. He has not issued the notice under section 148 on suspicion. The next proposition raised by the assessee is that notice under section 148 was issued under the direction of the Commissioner; however, there is no force in this submissions also, because nowhere Commissioner has directed the assessing officer to reopen the assessment. He has only transmitted the information which has been analyzed by the assessing officer and he had formed his independent opinion. The next proposition raised by the assessee is that assessing officer has formed his opinion on the basis of incorrect facts. We have seen the balance sheet as well as the reasons recorded by the assessing officer. In the understanding of the assessing officer, only a sum of Rs. 1.66 crores was used out of the loan taken from V Bank for repayment of C Bank's loan, whereas according to the assessee, the loan of Canara Bank outstanding on that day was Rs. 1,89,08,019. In our opinion, it is not such an inaccuracy of facts which can goad the assessing officer at a wrong conclusion. Basic issue was whether loan of Rs. 4 crores taken from V Bank was utilized for construction of the building giving rental income or repayment of the loan earlier used for the construction of the building. If there is a small variation of Rs. 22 lacs, it can be looked into after hearing the assessee. But this variation did not influence the assessing officer for arriving at a wrong conclusion in forming the belief. [Para 13] In view of the above discussion, assessing officer has rightly reopened the assessment in assessment years 2002-03 and 2003-04. [Para 15]