IN HIGH COURT OF DELHI AT NEW DELHI W.P. (C) 12324/2015 UNITECH LIMITED ..... Petitioner Through: Mr. Salil Aggarwal and Mr. Madhur Aggarwal, Advocates. versus DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-27(1), NEW DELHI ..... Respondent Through: Mr. Zoheb Hossain, Senior Standing Counsel. CORAM: JUSTICE S.MURALIDHAR JUSTICE PRATHIBA M. SINGH ORDER 24.07.2017 Prathiba M. Singh, J. 1. This is yet another case in ever increasing number of cases filed before this Court challenging issuance of notice under Section 148 of Income Tax Act, 1961 (hereinafter referred to as Act ). Brief Facts 2. Petitioner filed its return of income for Assessment Year ( AY ) 2008-09 declaring income of Rs.1334,87,70,381/-. Its case was picked up for scrutiny and notice was issued to it under Section 143 (2) of Act. As part of scrutiny, questionnaire dated 20th October, 2009 was issued to Petitioner by Assessing Officer ( AO ) raising various queries. This was duly replied by Petitioner on 29th October, 2009. Further W.P.(C) No. 12324/2015 Page 1 of 10 documents were also submitted on 17th November, 2009 by Petitioner. assessment order under Section 143 (3) of Act was passed by AO on 30th December, 2009. 3. Thereafter, two notices under Section 148 of Act came to be issued on 31st May, 2012 and 28th March, 2013 for AY 2008-09. Both these notices came to be challenged by Petitioner in W.P.(C) Nos. 446/2014 and 4631/2014 which were disposed of by this Court by common order on 3rd September, 2014. said order reads as under: These writ petitions are being disposed of together inasmuch as they pertain to same very petitioner and relate to same assessment year 2008-09. In these petitions, notices issued under Section 148 on 31.05.2012 and 28.03.2013 are impugned. We have heard parties at length. We need not set out all arguments in detail. It would suffice to say that said notices do not meet requirements of law. Consequently, notices under Section 148 dated 31.05.2012 and 28.03.2013 are set aside and all proceedings pursuant thereto are quashed. Quashing of notices dated 31.05.2012 and 28.03.2013, however, does not preclude Assessing Officer from issuing fresh notice under Section 148 of Income Tax Act, 1961 in relation to assessment year 2008-09, if Assessing Officer has reason to believe that income chargeable to tax has escaped assessment, having regard to first proviso to Section 147 and other applicable provisions of said Act. We are also making it clear that we have not expressed any opinion on merits of matter which includes question as to whether there was mere change of opinion and/or no fresh material has surfaced after completion of assessment under Section 143(3). W.P.(C) No. 12324/2015 Page 2 of 10 writ petitions are allowed to aforesaid extent. There shall be no order as to costs. 4. Pursuant to said order, fresh notice was issued to Petitioner on 16th July, 2015 under Sections 147/148 of Act for same AY viz., 2008-09. two reasons for reopening assessment read as under: 2.1 Disallowance u/s 14-A r.w. Rule 8-D of IT Act, 1961; ...... 2.2 Complex web of subsidiaries & colourable device of transferring shares instead of substantial transfer of landed properties. ........ 5. Petitioner filed its objections to reopening of assessment on 28th July, 2015. said objections were rejected on 9th November, 2015. Petitioner thereafter filed present writ petition seeking quashing of notice under Section 148 of Act dated 4th March, 2015 and order dated 9th November, 2015 rejecting Petitioner s objections thereto. Petitioner s Submissions 6. Mr. Salil Aggarwal, learned counsel for Petitioner, submitted that reasons recorded by AO do not satisfy requirement of law in terms of Sections 147/148 of Act. There is no failure by Petitioner to disclose fully and truly all material facts necessary for assessment and neither is such failure recorded in reasons. W.P.(C) No. 12324/2015 Page 3 of 10 7. Mr. Aggarwal further submitted that order dated 3rd September, 2014 passed by this Court in earlier round gave clear mandate to Revenue that fresh notice under Section 148 of ITA could be issued if AO has reason to believe that income chargeable to tax has escaped assessment "having regard to first proviso to Section 147 of ITA and other applicable provisions of said Act". Thus, direction of Court did not mean that fresh notice could be issued if same was impermissible in law. Mr. Aggarwal further submitted that two reasons for reopening of assessment are unsustainable inasmuch as, all information regarding said two issues already stood submitted to AO. This was duly brought to AO s notice in objections filed by Petitioner. 8. Mr. Aggarwal further submitted that in view of ratio of decision of Supreme Court in Commissioner of Income Tax, Delhi v. Kelvinator of India Limited (2010) 2 SCC 723, same material cannot be looked into for opening assessment. reasons recorded by AO do not satisfy legal requirement under first proviso to Section 147 of Act. Mr. Aggarwal further submitted that Petitioner has already gone through two rounds of enquiry, inasmuch as, it was also issued notice under Section 263 of Act on 30th December, 2011 for very same AY. Mr. Aggarwal also relied upon decision in Agya Ram v. Commissioner of Income Tax, Delhi, (2016) 386 ITR 545 (Del). Mr. Aggarwal thus submitted that this is nothing but case of change of opinion on same material, which is impermissible in law. W.P.(C) No. 12324/2015 Page 4 of 10 Respondent s Submissions 9. Mr. Zoheb Hossain, learned Senior Standing Counsel for Revenue, submitted that earlier two notices issued to Petitioner were within four year period and present notice, having been issued pursuant to order dated 3rd September 2014 of this Court, was nothing but continuation of said earlier notices. This was permitted by Court in its order dated 3rd September, 2014. Mr. Hossain further submitted that said order merely required AO to issue fresh notice if any income had escaped assessment. There is no need to satisfy conditions for reopening assessment beyond four-year period. It is Mr. Hossain s submission that impugned order has to be treated as notice issued within four year period. mentioning of first proviso to Section 147 in order dated 3rd September, 2014 of this Court was, according to Mr. Hossain, only in context of Section 143 (3) of Act. 10. Without prejudice to above submissions, Mr. Hossain further submitted that Petitioner has failed to make full and true disclosure of all material facts, inasmuch as, Petitioner has deliberately shown income under incorrect head. It is clear from order rejecting objection of Petitioner and hence this is fit case for dismissal of writ petition. 11. Mr. Hossain relied upon decision in Chennai Properties and Investments Limited, Chennai v. Commissioner of Income Tax Central III, Tamil Nadu, (2015) 14 SCC 793 and urged that AO at this stage had only to see whether there was some material to reopen case. W.P.(C) No. 12324/2015 Page 5 of 10 sufficiency or correctness of material was not to be examined. Analysis 12. There are large number of cases that have been decided by this Court with respect to reopening of assessments under Sections 147/148 of Act. After period of four years under first proviso to Section 147 of Act, for re-assessment proceedings to be initiated, following pre-conditions have to be satisfied: original assessment had to be completed under Section 143 (3) of Act More than four years have lapsed from end of relevant AY income chargeable to tax has escaped assessment Due to failure of Assessee to make return under Section 139, or In response to notice under sub-section 1 of Section 142, or Due to failure on part of Assessee to disclose fully and truly all material facts necessary for assessment for relevant assessment order. 13. wording of this provision makes it clear that reopening of assessments after period of four years, ought to be exception and not rule. purpose of this provision is to ensure that there is some finality which is attached after period of four years, for assessments which have been completed under Section 143 (3) of Act. AO has to necessarily record that there has been failure on part of Assessee to disclose W.P.(C) No. 12324/2015 Page 6 of 10 fully and truly all material facts necessary for his assessment, failing which reopening of assessment cannot be triggered. 14. In facts of present case, reasons stated by AO do not satisfy mandatory legal requirement for reopening assessment since they failed to record failure on part of Assessee to disclose fully and truly all material facts necessary for assessment. 15. For AY 2008-09, Assessee's return has been subjected to multiple scrutinies; (i) under Section 143 (3) of Act; (ii) under Section 263 of Act; (iii) under Sections 147/148 of Act which was challenged in writ proceedings and was set aside. 16. Revenue has had more than sufficient opportunity to carefully scrutinize returns of Petitioner. In circumstances of case higher burden is placed on Revenue to sustain impugned notices. interesting feature of impugned notice dated 4th March, 2015, is that reasons contained therein are verbatim reproduction of reasons which were recorded in notice dated 28th March, 2013 which came to be set aside by this Court on 3rd September, 2014. re-issuance of quashed notice in identical terms could not have been purpose of order dated 3rd September, 2014 passed by this Court. said impugned notice dated 28th March, 2013 was set aside and proceedings pursuant to said notice stood quashed. direction to issue fresh notice keeping in mind first W.P.(C) No. 12324/2015 Page 7 of 10 proviso of Section 147 of Act clearly meant that Revenue had to satisfy rigors of said proviso. 17. Further, perusal of reply submitted by Petitioner to questionnaire, which was issued on 29th October, 2009 by AO as part of proceedings under Section 143 (3) of Act, clearly reveals that dividend income was fully disclosed in reply dated 17th November, 2009. questionnaire having been duly replied to and assessment order having been passed under Section 143 (3) of Act on 30th December 2009, it cannot be said that AO did not form opinion on issue. questionnaire specifically sought details of several incomes, which were submitted by Assessee. 18. Even proceedings under Section 263 of Act did not raise issue of disallowance of expenditure incurred for earning exempt income under Section 14-A of Act. Under Section 263 of Act, Revenue had opportunity to revisit assessment order insofar if it was incorrect and prejudicial to interests of Revenue. However, even in Section 263 proceedings this issue was not raised. 19. In view of fact, that there was full disclosure by Assessee of all material facts relating to exempt income it cannot be said that condition for reopening of assessment is satisfied on this count. 20. Even second reason is mere reproduction of earlier notice dated 28th March, 2013. nature of business of Petitioner has always been W.P.(C) No. 12324/2015 Page 8 of 10 known to Revenue year after year. Even in this reason there is not even whisper of failure by Petitioner to make full and true disclosure of all material facts necessary for assessment. 21. Thus, impugned notice does not satisfy rigors of Sections 147/148 of Act as there has been no non-disclosure of material facts by Petitioner. In fact, even reasons accompanying impugned notice do not even say that there is any failure by Petitioner to disclose fully and truly all material facts. 22. Supreme Court in Kelvinator (supra) held that: 6. ...However, one needs to give schematic interpretation to words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to Assessing Officer to re-open assessments on basis of "mere change of opinion", which cannot be per se reason to re- open. We must also keep in mind conceptual difference between power to review and power to re-assess. Assessing Officer has no power to review; he has power to re-assess. But re- assessment has to be based on fulfillment of certain pre-condition and if concept of "change of opinion" is removed, as contended on behalf of Department, then, in garb of re-opening assessment, review would take place. One must treat concept of "change of opinion" as in- built test to check abuse of power by Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to conclusion that there is escapement of income from assessment. Reasons must have live link with formation of W.P.(C) No. 12324/2015 Page 9 of 10 belief. ... 23. This Court in HCL Technologies Ltd. v. Deputy Commissioner of Income Tax (W.P.(C.) 8164/2010 decided on 20/7/2017) has held as follows: 16. AO has not made effort of disclosing, in reasons, what according to him constituted failure by Assessee to make full and true disclosure. mere reproduction of language of provision will not suffice. Also, although making such averment either in order rejecting objections of Assessee or subsequently in counter-affidavit in answer to writ petition will not satisfy requirement of law. reasons will have to speak for themselves. For complying with jurisdictional requirement under first proviso to Section 147 of Act, reasons would have to show in what manner Assessee had failed to make full and true disclosure of all material facts necessary for assessment. failure to do so would not be mere irregularity. It would render reopening of assessment after four years vulnerable to invalidation. (emphasis supplied) 23. For reasons stated above, writ petition is allowed and impugned notice dated 4th March, 2015 and order dated 9th November, 2015 are hereby quashed. PRATHIBA M. SINGH, J S.MURALIDHAR, J JULY 24, 2017 dk W.P.(C) No. 12324/2015 Page 10 of 10 Unitech Limited v. Deputy Commissioner of Income-tax, Circle-27(1), New Delhi