Polaris Financial Technology Limited v. The ACIT, CC-5(2), Chennai / The DCIT, CC-5(2), Chennai
[Citation -2020-LL-0313-72]

Citation 2020-LL-0313-72
Appellant Name Polaris Financial Technology Limited
Respondent Name The ACIT, CC-5(2), Chennai / The DCIT, CC-5(2), Chennai
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 13/03/2020
Assessment Year 2012-13
Judgment View Judgment
Keyword Tags full and true disclosure • reasons for reopening • escaped assessment • material evidence • change of opinion • reason to believe • due diligence • non-resident • time limit • reopening of assessment
Bot Summary: The purpose of issuing notice under Section 148 of the Income Tax Act, 1961 is for passing an order of re-assessment under Section 147 of the Income Tax Act, 1961. The first is that the Income Tax Officer must have reason to believe that income, profits or gains chargeable to income tax have been under- assessed. 31722 of 2017 per the 1st proviso to Section 147 of the Income Tax Act, 1961, no action shall be taken under the said Section after expiry of four years from the end of the relevant assessment year, unless income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under Section 139 or in response to a notice issued under sub-Section of Section 142 or 148 or to disclose fully and truly all material facts necessary for that assessment year. Income in relation to any asset located outside purposes of this Section, the India, chargeable to tax, has escaped assessment following shall also be deemed for any assessment year: to be cases where income Provided also that the Assessing Officer may chargeable to tax has escaped assess or reassess such income, other than the assessment, namely: income involving matters which are the subject where income chargeable to matters of any appeal, reference or revision, tax has been underassessed; or which is chargeable to tax and has escaped assessment. Production escaped assessment, namely : before the Income Tax Officer of account books or other evidence where no return of income has been from which material evidence furnished by the assessee although his total could with due diligence have income or the total income of any other person been discovered by the Income in respect of which he is assessable under this Tax Officer will not necessarily Act during the previous year exceeded the amount to disclosure within the maximum amount which is not chargeable to income-tax; meaning of this Section. 31722 of 2017 where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub- Section of Section 133C, it is noticed by the Assessing Officer that the income of the assessee exceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; where a person is found to have any asset located outside India. There a notice was issued under Section 148 of the Income Tax Act, 1961 on 14.03.1967 for the purpose of re-assessment under Section 147 of the Income Tax Act, 1961.


W.P.No.31722 of 2017 IN HIGH COURT OF JUDICATURE AT MADRAS Reserved On 06.02.2020 Pronounced On 13.03.2020 CORAM HON'BLE MR.JUSTICE C.SARAVANAN W.P.No.31722 of 2017 and W.M.P.Nos.34867 of 2017 & W.M.P.No.13876 of 2018 Polaris Financial Technology Limited, Represented by its Director, M/s Polaris Financial Technology Limited, 34, IT Highway, Navalur, Chennai 603103. Petitioner Vs. 1.The Assistant Commissioner of Income Tax, Corporate Circle 5-2, 4th Floor, Aayakar Bhavan, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600034. 2.The Deputy Commissioner of Income Tax, Corporate Circle 5 (2), 4th Floor, Ayakar Bhavan, 121, M.G.Road, Nungambakkam, Chennai 600 034. Respondents Page No 1 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 Writ Petition filed under Article 226 of Constitution of India praying to issue Writ of Certiorari, to call for records of respondents pertaining to reopening Notice under Section 147 of Act bearing No.ITBA/AST/S/148/2016-17/1003707383(1) dated 30.03.2017 issued by 2nd respondent and consequential order bearing ACIT.Co.CIR.5(2)/2017-18 dated 24.11.2017 issued by 1st respondent and quash same. For Petitioner : Mr.Srinath Sridevan For Respondents : Mr.D.Prabhu Mukunth Arunkumar Senior Standing Counsel for M/s.Hema Muralikrishnan Standing Counsel. ORDER petitioner has challenged impugned notice dated 30.03.2017 issued for Assessment Year 2012-2013 seeking to re-open assessment after lapse of four years from date of assessment. 2. petitioner had requested 1st respondent to provide reasons for re-opening of assessment in terms of decision of Hon ble Supreme Court in GKN Driveshafts (India) Ltd. Vs. Income Tax Page No 2 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 Officer and Others, (2003) 1 SCC 72. 3. As per decision, assessee who has been issued with notice under Section 148 of Income-tax Act, 1961 hasto file return and if he so desires, can ask for reasons for issuing notices and that assessing officer is bound to furnish reasons within reasonable time. In this case, petitioner asked for such reasons. 4. By communication dated 13.10.2017, 1st respondent furnished reasons for re-opening assessment. It reads as under: assessee company, M/s.Polaris Financial Technology Ltd., is engaged in business of software development. It filed its Return of Income on 30/11/2012 admitting total income of Rs.119,80,36,060/-. assessment u/s 143(3) r.w.s.92CA(3) was made on 10.05.2016 after making addition of Rs.6,12,74,728 on account of TPO adjustment and Rs.2,64,68,238 towards disallowance u/s 14A. assessee has claimed deduction u/s 80JJAA amounting to Rs.17,93,76,639/-. It was noticed that assessee had treated many persons as workmen, who were working in managerial or administrative capacity such as Senior Project Lead, Senior consultant, etc. As these employees are not regular workmen , as contemplated in Industrial Dispute Act, (hereinafter read as I.D.Act), 1947, Page No 3 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 payment mode do not qualify for deduction u/s 80JJAA of I.T.Act. Further, assessee failed to substantiate whether said employees were actually receiving wages from company less than Rs.6500 per month. As said conditions (iii) & (iv) of Section 2(s) of I.D.Act are not satisfied, said payments do not qualify for deduction u/s 80JJAA of I.T.Act. intention of legislature as per finance Act, 2013 was to provide deduction on wages paid to blue collar workers employed in industrial undertakings & not to white collar employees like employees of assessee company. Therefore, payments made as wages to such employees who do not come under purview of I.D.Act are also not eligible for deduction u/s 80JJAA of I.T.Act. Hence, this amount of Rs.17,93,76,639/- need to be examined/disallowed in this year, i.e.A.Y.2012-13. 5. petitioner filed its objection to aforesaid reasons given for re-opening of assessment, which culminated in impugned communication dated 24.11.2017 of 1st respondent overruling objection of petitioner against re-opening of assessment pursuant to impugned notice dated 30.03.2017. 6. Challenging impugned notice dated 30.03.2017 and Page No 4 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 impugned communication dated 24.11.2017, overruling objection for re- opening of assessment, petitioner has filed present writ petition. 7. It is contention of petitioner that respondents cannot re-open assessment merely based on change of opinion. Such exercise was contrary to decision of Hon ble Supreme Court in Kelvinator of India Vs. Commissioner of Income Tax, (2010) 187 Taxmann 312 (SC). It is further submitted that decision of Hon ble Supreme Court rendered in Calcutta Discount Co. Ltd. V. Income Tax Officer, AIR 1961 SC 372 is still relevant, though rendered in context of Section 34 of Income Tax Act, 1961. It is submitted that there is jurisdictional error in re-opening of assessment and therefore impugned notice dated 30.03.2017 and impugned notification dated 24.11.2017 are liable to be quashed. 8. It is submitted that petitioner has claimed deduction under Section 80JJAA of Income Tax Act, 1961 and had filed Income Tax Page No 5 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 Returns on 30.11.2012, which culminated in scrutiny assessment on 30.05.2016 after elaborate exchange of communication pursuant to notice u/s 142(1) of Income Tax Act, 1961. 9. It is submitted that petitioner had given all details to 2nd respondent for purpose of assessment, while claiming deduction under Section 80JJAA and therefore mere change in opinion by Assessing Officer, did not entitle said officer to re-open assessment. 10. learned counsel appearing for petitioner drew my attention to communication dated 03.03.2016, pursuant to notice issued under Section 142(1) and after personal hearing held on 15.02.2016 and 22.02.2016. It is contention of learned counsel appearing for petitioner that petitioner had clearly explained basis on which deduction under Section 80JJAA of Income Tax Act was claimed by petitioner. learned counsel appearing for petitioner relied on following decisions:- i. Calcutta Discount Co. Ltd. V. Income Tax Officer, Page No 6 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 AIR 1961 SC 372. ii. Jeans Knit P. Ltd. V. CIT, 2018(12) SCC 36. iii. Income Tax Officer V. Lakhmani Mewal Das, 1976(3) SCC 757. iv. Jindal Photo Films Ltd. V. Deputy Commissioner of Income Tax, 1998 (46) DRJ (DB). v. Income Tax Officer V. Techspan India P. Ltd., (2018) 6 SCC 685. vi. CIT V. Kelvinator of India Ltd., (2010) 2 SCC 723 vii.Deputy CIT V. Gay Travels (P) Ltd., in W.P.No.35606 and 35607 of 2002 viii.CIT V.Usha International Ltd., (2012) 348 ITR 485 ix. Asianet Star Communications Pvt. Ltd. V. Assistant Commissioner of Income Tax in reported judgment in W.P.Nos.25328 of 2018 etc. 11. On other hand, learned counsel appearing for respondents submits that impugned notice and impugned communication overruling objection cannot be interfered, inasmuch as it impedes re-assessment proceedings under Section 148 of Income Tax Act, 1961. It is submitted that it is open for petitioner to make all its Page No 7 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 submissions on merits, which has been raised before this Court and in case, as has been contended by petitioner that if there was change of opinion and if petitioner is liable to establish that there was no failure on part of petitioner to fully and truly disclose all materials required for assessment, officer would be obliged to drop proceedings. 12. I have considered submissions of learned counsel for petitioner and respondents and decisions cited by learned counsel for petitioner. 13. On one hand, it is contention of learned counsel for petitioner that impugned proceedings are without jurisdiction and therefore petitioner was entitled for relief. On other hand, it is contention of respondents that present Writ Petition is liable to be dismissed. 14. Though, purpose of issuing notice under Section 148 of Income Tax Act, 1961 is for passing order of re-assessment under Section 147 of Income Tax Act, 1961. Section 148 of Income Tax Page No 8 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 Act, 1961 is however not governed by restrictions contained in Section 147 of Income Tax Act, 1961. 15. For aforesaid purpose, Assessing Officer has to merely issue notice within time limit prescribed under Section 149 of Income Tax Act, 1961. Before issuing notice, he has to record reason. In view of decision of Honourable Supreme Court in GKN Drive Shafts referred to supra, assessee is now entitled to ask for reasons for reopening of assessment after filing returns. Assessing Officer has to merely communicate reasons for reopening assessment if desired by assessee. communication of reasons for reopening of assessment is merely to allow assessee to participate in re-assessment proceedings by giving effective reply. overruling of objection by respondents through speaking order is however not order under Section 147 of Income Tax Act, 1961. 16. decision of Hon ble Supreme Court in Calcutta Discount Company Ltd. Vs. Income Tax Officer, Companies District I, Page No 9 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 Calcutta and Others, (1961) 2 SCR 241 was rendered in context of Section 34(1)(a) of Income Tax Act, 1922. court there held that for Assessing Officer to exercise his jurisdiction under Section 34(1)(a) of Income Tax Act, 1922, Assessing Officer has to satisfy two conditions co-exist, namely:- i. that he must have reason to believe that income, profits or gains had been under-assessed; and ii. that such under-assessment was due to non-disclosure of material facts by assessee. 17. It must also be remembered that Section 148 of Income Tax Act, 1961 as it stands now and Section 34 of Income Tax Act, 1922 as it stood when decision was rendered read differently. They are reproduced below for easy reference:- Section 34 of Income Tax Section 148 of Income Tax Act, 1922 Act, 1961 Section 34(1) Section 148. Issue of notice where income has escaped assessment. If (a) Income Tax Officer has reason (1) Before making assessment, to believe that by reason of reassessment or recomputation under omission or failure on part of Section 147, Assessing Officer shall assessee to make return of his serve on assessee notice requiring income under Section 22 for any year him to furnish within such period, as or to disclose fully and truly all may be specified in notice, return of his income or income of any Page No 10 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 material facts necessary for his other person in respect of which he is assessment for that year, income, assessable under this Act during profits or gains chargeable to income previous year corresponding to tax have escaped assessment for that relevant assessment year, in year, or have been under assessed, or prescribed form and verified in assessed at too low rate, or have prescribed manner and setting forth been made subject of excessive such other particulars as may be relief under Act, or excessive loss prescribed; and provisions of this or depreciation allowance has been Act shall, so far as may be, apply computed, or accordingly as if such return were (b) notwithstanding that there has return required to be furnished under been no omission or failure as Section 139 : mentioned in clause (a) on part of assessee, Income Tax Officer has in consequence of information in Provided that in case his possession reason to believe that (a) where return has been furnished income, profits or gains chargeable to during period commencing on income tax have been underassessed 1st day of October, 1991 and ending on or assessed at too low rate, or have 30th day of September, 2005 in been made subject of excessive response to notice served under this relief under this Act, or that excessive Section, and loss or depreciation allowance has (b) subsequently notice has been been computed, served under sub-Section (2) of Section he may in cases falling under clause 143 after expiry of twelve months (a) at any time within eight years and specified in proviso to sub-Section in cases falling under clause (b) at any (2) of Section 143, as it stood time within four years of end of immediately before amendment of that year, serve on assessee, or, if said sub-Section by Finance Act, assessee is company, on 2002 (20 of 2002) but before expiry principal officer, thereof, notice of time limit for making containing all or any of assessment, re-assessment or requirements which may be included recomputation as specified in sub- in notice under sub-Section (2) of Section (2) of Section 153, every such Section 22 and may proceed to assess notice referred to in this clause shall be or reassess such income, profits or deemed to be valid notice: gains or recompute loss or depreciation allowance; and Provided further that in case provisions of this Act shall, so far as (a) where return has been furnished may be, apply accordingly as if during period commencing on notice were notice issued under that 1st day of October, 1991 and ending on sub-Section: Page No 11 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 30th day of September, 2005, in Provided that response to notice served under this (i) Income Tax Officer shall not Section, and issue notice under this sub-Section, (b) subsequently notice has been unless he has recorded his reasons for served under clause (ii) of sub-Section doing so and Commissioner is (2) of Section 143 after expiry of satisfied on such reasons recorded that twelve months specified in proviso it is fit case for issue of such to clause (ii) of sub-Section (2) of notice; Section 143, but before expiry of (ii) tax shall be chargeable at time limit for making assessment, rate at which it would have been reassessment or recomputation as charged had income, profits or specified in sub-Section (2) of Section gains not escaped assessment or full 153, every such notice referred to in this assessment, as case may be; and clause shall be deemed to be valid (iii) where assessment made or to notice. be made is assessment made or to Explanation. For removal of be made on person deemed to be doubts, it is hereby declared that agent of non-resident person under nothing contained in first proviso or Section 43, this sub-Section shall have second proviso shall apply to any effect as if for periods of eight return which has been furnished on or years and four years period of one after 1st day of October, 2005 in year was substituted. response to notice served under this Explanation. Production before Section. Income Tax Officer of account books or other evidence from which material (2) Assessing Officer shall, before facts could with due diligence have issuing any notice under this Section, been discovered by Income Tax record his reasons for doing so. Officer will not necessarily amount to disclosure within meaning of this Section. 18. It was in context of provision which was composite provision. It was further observed that where, however, Income Tax Officer has prima facie reasonable grounds for believing that there has been Page No 12 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 non-disclosure of primary material fact, that by itself gives him jurisdiction to issue notice under Section 34 of Act and adequacy or otherwise of grounds of such belief is not open to investigation by Court. 19. If assessee wants to challenge such jurisdiction, he has to establish that Income Tax Officer had no material for such belief. It observed as under:- 6. To confer jurisdiction under this section to issue notice in respect of assessments beyond period of four years, but within period of eight years, from end of relevant year two conditions have therefore to be satisfied. first is that Income Tax Officer must have reason to believe that income, profits or gains chargeable to income tax have been under- assessed. second is that he must have also reason to believe that such underassessment has occurred by reason of either (i) omission or failure on part of assessee to make return of his income under Section 22, or (ii) omission or failure on part of assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before Income Tax Officer could have jurisdiction to issue notice for assessment or reassessment beyond period of four years but within period of eight years, from end of year in question. Page No 13 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 20.It was further observed as follows:- 14. position therefore is that if there were in fact some reasonable grounds for thinking that there had been any non-disclosure as regards any primary fact, which could have material bearing on question of underassessment that would be sufficient to give jurisdiction to Income Tax Officer to issue notices under Section 34. Whether these grounds were adequate or not for arriving at conclusion that there was non disclosure of material facts would not be open for court's investigation. In other words, all that is necessary to give this special jurisdiction is that Income Tax Officer had when he assumed jurisdiction some prima facie grounds for thinking that there had been some non- disclosure of material facts. 21. Thus, it is clear that for issuing notice under Section 148 of Income Tax Act, 1961 as it stands today, Assessing Officer has to satisfy requirements of Section 149 of Income Tax Act, 1961. 22. However, while passing final order of re-assessment under Section 147 of Income Tax Act, 1961, Assessing Officer has to bear in mind express language of 1st proviso to Section 147 of Act. As Page No 14 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 per 1st proviso to Section 147 of Income Tax Act, 1961, no action shall be taken under said Section after expiry of four years from end of relevant assessment year, unless income chargeable to tax has escaped assessment for such assessment year by reason of failure on part of assessee to make return under Section 139 or in response to notice issued under sub-Section (1) of Section 142 or 148 or to disclose fully and truly all material facts necessary for that assessment year. 23. Unlike Section 34 of Income Tax Act, 1922, Section 148 of Income Tax Act, 1961 is standalone provision. Reopening of assessment begins with notice under Section 148 of Income Tax Act, 1961. It culminates with order under Section 147 of Income Tax Act, 1961 with either dropping or confirming proposal. Section 148 is not restricted by Section 147 of Income Tax Act, 1961. 24. Honourable Supreme Court while passing order in Income Tax Officer Vs. Lakhmani Mewal Das, (1976) 3 SCC 757, has concluded that Sections 147 to 153 of Income Tax Act, 1961 Page No 15 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 corresponded with Section 34 of Income Tax Act, 1922. 25. At time when above decision was rendered, Section 147 of Income Tax Act, 1961 was not as comprehensive as it reads now. provision did not have all sub-clauses which came to be inserted subsequently. 26. There is vast different between language of Section 147 during period in dispute in said case and as it stands today. Under Section 147 as it stands today, any other income chargeable to tax which had escaped assessment and which comes to his notice subsequently in course of proceedings under this section also can be taxed. For comparison, they are reproduced below:- Provisions as it stood when Provision as it stands today decision rendered Sections 147 & 148 of Sections 147 & 148 of Income Tax Income Tax 147. Income escaping 147.Income escaping assessment. assessment. If (a) Income Tax Officer has If Assessing Officer has reason to believe Page No 16 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 reason to believe that, by reason that any income chargeable to tax has escaped of omission or failure on assessment for any assessment year, he may, part of assessee to make subject to provisions of Sections 148 to 153, return under Section 139 for any assess or reassess such income and also any assessment year to Income other income chargeable to tax which has Tax Officer or to disclose fully escaped assessment and which comes to his and truly all material facts notice subsequently in course of necessary for his assessment for proceedings under this Section, or recompute that year, income chargeable to loss or depreciation allowance or any tax has escaped assessment for other allowance, as case may be, for that year, or assessment year concerned (hereafter in this (b) notwithstanding that there Section and in Sections 148 to 153 referred to as has been no omission or failure relevant assessment year) : as mentioned in clause (a) on Provided that where assessment under sub- part of assessee, Income Section (3) of Section 143 or this Section has Tax Officer has in consequence been made for relevant assessment year, no of information in his possession action shall be taken under this Section after reason to believe that income expiry of four years from end of relevant chargeable to tax has escaped assessment year, unless any income chargeable assessment for any assessment to tax has escaped assessment for such year, assessment year by reason of failure on he may, subject to provisions part of assessee to make return under of Sections 148 to 153, assess or Section 139 or in response to notice issued reassess such income or under sub-Section (1) of Section 142 or Section recompute loss or 148 or to disclose fully and truly all material depreciation allowance, as facts necessary for his assessment, for that case may be, for assessment assessment year: year concerned (hereafter in Provided further that nothing contained in Sections 148 to 153 referred to first proviso shall apply in case where any as relevant assessment year). income in relation to any asset (including Explanation 1. For financial interest in any entity) located outside purposes of this Section, India, chargeable to tax, has escaped assessment following shall also be deemed for any assessment year: to be cases where income Provided also that Assessing Officer may chargeable to tax has escaped assess or reassess such income, other than assessment, namely: income involving matters which are subject (a) where income chargeable to matters of any appeal, reference or revision, tax has been underassessed; or which is chargeable to tax and has escaped assessment. (b) where such income has been Page No 17 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 assessed at too low rate; or Explanation 1. Production before Assessing Officer of account books or other (c) where such income has been evidence from which material evidence could made subject of excessive with due diligence have been discovered by relief under this Act or under Assessing Officer will not necessarily amount to Indian Income Tax Act, 1922 disclosure within meaning of foregoing (11 of 1922); or proviso. (d) where excessive loss or depreciation allowance has been Explanation 2. For purposes of this Section, following shall also be deemed to computed. be cases where income chargeable to tax has Explanation 2. Production escaped assessment, namely : before Income Tax Officer of account books or other evidence (a) where no return of income has been from which material evidence furnished by assessee although his total could with due diligence have income or total income of any other person been discovered by Income in respect of which he is assessable under this Tax Officer will not necessarily Act during previous year exceeded amount to disclosure within maximum amount which is not chargeable to income-tax; meaning of this Section. (b) where return of income has been furnished by assessee but no assessment has been made and it is noticed by Assessing Officer that assessee has understated income or has claimed excessive loss, deduction, allowance or relief in return ; (ba) where assessee has failed to furnish report in respect of any international transaction which he was so required under Section 92E; (c) where assessment has been made, but (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low rate; or (iii) such income has been made subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed; Page No 18 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 (ca) where return of income has not been furnished by assessee or return of income has been furnished by him and on basis of information or document received from prescribed income-tax authority, under sub- Section (2) of Section 133C, it is noticed by Assessing Officer that income of assessee exceeds maximum amount not chargeable to tax, or as case may be, assessee has understated income or has claimed excessive loss, deduction, allowance or relief in return; (d) where person is found to have any asset (including financial interest in any entity) located outside India. Explanation 3. For purpose of assessment or reassessment under this Section, Assessing Officer may assess or reassess income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in course of proceedings under this Section, notwithstanding that reasons for such issue have not been included in reasons recorded under sub- Section (2) of Section 148. Explanation 4. For removal of doubts, it is hereby clarified that provisions of this Section, as amended by Finance Act, 2012, shall also be applicable for any assessment year beginning on or before 1st day of April, 2012. Section 148.Issue of notice where income has escaped assessment. 148. Issue of notice where income has escaped (1) Before making assessment, reassessment assessment. or recomputation under Section 147, Assessing Officer shall serve on assessee (1) Before making notice requiring him to furnish within such assessment, reassessment or Page No 19 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 recomputation under Section period, as may be specified in notice, 147, Income Tax Officer return of his income or income of any other shall serve on assessee person in respect of which he is assessable notice containing all or any of under this Act during previous year requirements which may be corresponding to relevant assessment year, included in notice under sub- in prescribed form and verified in Section (2) of Section 139 ; and prescribed manner and setting forth such other provisions of this Act shall, particulars as may be prescribed; and so far as may be, apply provisions of this Act shall, so far as may be, accordingly as if notice were apply accordingly as if such return were return notice issued under that sub- required to be furnished under Section 139 : Section. Provided that in case (2) Income Tax Officer (a) where return has been furnished during shall, before issuing any notice period commencing on 1st day of under this Section, record his October, 1991 and ending on 30th day of reason for doing so. September, 2005 in response to notice served Sub-Section (1) of Section 149 under this Section, and prescribes time limit for (b) subsequently notice has been served under notice and reads as under: sub-Section (2) of Section 143 after expiry (1) No notice under Section 148 of twelve months specified in proviso to shall be issued, sub-Section (2) of Section 143, as it stood (a) in cases falling under clause immediately before amendment of said sub- (a) of Section 147 Section by Finance Act, 2002 (20 of 2002) but before expiry of time limit for (i) for relevant assessment making assessment, re-assessment or year, if eight years have elapsed recomputation as specified in sub-Section (2) of from end of that year, unless Section 153, every such notice referred to in this case falls under sub-clause clause shall be deemed to be valid notice: (ii); Provided further that in case (ii) for relevant assessment year, where eight years, but not (a) where return has been furnished during more than sixteen years, have period commencing on 1st day of October, elapsed from end of that 1991 and ending on 30th day of September, year, unless income 2005, in response to notice served under this chargeable to tax which has Section, and escaped assessment amounts to (b) subsequently notice has been served under or is likely to amount to rupees clause (ii) of sub-Section (2) of Section 143 fifty thousand or more for that after expiry of twelve months specified in year; proviso to clause (ii) of sub-Section (2) of Page No 20 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 (b) in cases falling under clause Section 143, but before expiry of time (b) of Section 147, at any time limit for making assessment, reassessment after expiry of four years or recomputation as specified in sub-Section (2) of Section 153, every such notice referred to in from end of relevant this clause shall be deemed to be valid notice. assessment year. Explanation. For removal of doubts, it is hereby declared that nothing contained in first proviso or second proviso shall apply to any return which has been furnished on or after 1st day of October, 2005 in response to notice served under this Section. (2) Assessing Officer shall, before issuing any notice under this Section, record his reasons for doing so. 27. There notice was issued under Section 148 of Income Tax Act, 1961 on 14.03.1967 for purpose of re-assessment under Section 147 of Income Tax Act, 1961. By time above decision was rendered on 30.03.1976, provisions of Income Tax Act, 1961 had undergone several changes. 28. Hon ble Supreme Court in Income Tax Officer Vs. Lakhmani Mewal Das, (1976) 3 SCC 757 clearly mentioned that for purpose of disposal of said case, they were not relevant. Court Page No 21 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 was concerned with Assessment Year 1958-59 under Income Tax Act, 1961. 29. Therefore, ratio of Hon'ble Supreme Court in above case in Income Tax Officer Vs. Lakhmani Mewal Das (1976) 3 SCC 757, cannot be straightaway applied under amended provision as it stands today. Supreme Court merely followed views of Hon ble Supreme Court in Calcutta Discount Company Ltd. Vs. Income Tax Officer, Companies District I, Calcutta and Others, (1961) 2 SCR 241. 30. Whether notice that has been issued to petitioner was on account of change of opinion or on account of failure on part of petitioner to fully and truly disclose all material required for assessment is to be determined by Assessing Officer while passing order under Section 147 of Income Tax Act, 1961. 31. In recent decision, Honourable Supreme Court in Jeans Knit Private Limited Vs. Deputy Commissioner of Income Tax, Page No 22 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 (2018) 12 SCC 36, has held that Karnataka High Court had taken view contrary to law laid down by Honourable Supreme Court in Calcutta Discount Co-Limited Vs. CIT referred to supra. At same time, Hon ble Supreme Court has also refrained from making any observation on merits of case and remitted case back to concerned High Court. Therefore, said decision does not further case of petitioner. 32. In Asianet Star Communications Pvt. Ltd. V. Assistant Commissioner of Income Tax, order dated 16.04.2019 passed by this Court in W.P.Nos.25328 of 2018 etc. referred by learned counsel for petitioner, Court concluded that responsibility was on assessee to make true and full disclose and thereafter, mantle would shift on Assessing Officer and is expected to complete assessment. Court there quashed notice as all material was available to open sight. 33. In facts of case, though petitioner had furnished certain details at time of re-assessment, question still remains to be Page No 23 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 answered is whether there was full and true disclosure by petitioner as is contemplated under proviso to Section 147 of Income Tax Act, 1961. 34. In this case, mere filing to annexure by petitioner in response to notice during scrutiny assessment by itself may or may not have been sufficient to come to conclusion that there was full and true disclosure by petitioner if information furnished was neither complete nor true. 35. It is therefore best left open for petitioner to demonstrate before 1st respondent that details furnished by petitioner vide letter dated 03.03.2016 in annexure 2 meets requirements of full and true disclosure for Assessing Officer to drop proceedings in terms of 1st proviso to Section 147 of Income Tax Act, 1961. 36. In case there is change of opinion, 1st respondent cannot proceed in light of decision of Hon ble Supreme Court in CIT Vs. Kelvinator of India Ltd., (2010) 2 SCC 723. Hon ble Supreme Page No 24 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 Court cautioned Assessing Officers with following observation:- On going through changes, quoted above, made to Section 147 of Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, re- opening could be done under above two conditions and fulfilment of said conditions alone conferred jurisdiction on Assessing Officer to make back assessment, but in Section 147 of Act (with effect from 1st April, 1989), they are given go-by and only one condition has remained, viz., that where Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re-open assessment. Therefore, post-1st April, 1989, power to re-open is much wider. 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 fulfilment 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. Page No 25 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 37. In case indeed there is mere change in opinion, 1 st respondent will be obliged to drop proceeding. However, to ascertain whether is mere change of opinion or not first it has to be established that there was true and full disclosure by petitioner. This can be demonstrated by petitioner only before 2nd respondent and not in proceeding under Art.226 of Constitution of India as scope of judicial review is limited and it is not possible to conduct roving enquiry on facts. 38. Under these circumstances, I do not find any merits in quashing impugned notice dated 13.03.2017 and communication dated 24.11.2017 overruling objection of petitioner. 39. In light of above observation, I relegate petitioner to participate in proceedings before 1st respondent by filing appropriate representations/objections within period of thirty days from date of receipt of copy of this order. 1st respondent is obliged to pass orders on merits in accordance with law. It is made clear that in case circumstance do not justify invocation of proviso to Section 147, 1st Page No 26 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 respondent shall drop proceedings. At same time, while passing orders under Section 147 of Income Tax Act, 1st respondent can pass assessment order as per Explanation 3 to Section 147 of Income Tax Act, 1961. 40. Since dispute pertains to Assessment Year 2012-13, 1st respondent is requested to pass appropriate order within period of sixty days from date of receipt of copy of this order. 41. Writ Petition stands disposed of with above observations. No costs. Consequently, connected Miscellaneous Petitions are closed. 13.03.2020 Internet :Yes/No jen To 1.The Assistant Commissioner of Income Tax, Corporate Circle 5-2, 4th Floor, Aayakar Bhavan, 121, Mahatma Gandhi Road, Nungambakkam, Chennai 600034. Page No 27 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 2.The Deputy Commissioner of Income Tax, Corporate Circle 5 (2), 4th Floor, Ayakar Bhavan, 121, M.G.Road, Nungambakkam, Chennai 600034. C. SARAVANAN, J. jen Pre-Delivery Order in W.P.No.31722 of 2017 and W.M.P.Nos.34867 of 2017 & W.M.P.No.13876 of 2018 Page No 28 of 29 http://www.judis.nic.in W.P.No.31722 of 2017 13.03.2020 Page No 29 of 29 http://www.judis.nic.in Polaris Financial Technology Limited v. ACIT, CC-5(2), Chennai / DCIT, CC-5(2), Chennai
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