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The Peerless General Finance and Investment Vs. Commissioner of Income Taxi, Kolkata and Ors. - Court Judgment

LegalCrystal Citation
CourtKolkata High Court
Decided On
Judge
AppellantThe Peerless General Finance and Investment
RespondentCommissioner of Income Taxi, Kolkata and Ors.
Excerpt:
.....together with the notes which are an integral part of such balance sheet were placed before the assessing officer for his consideration. he refers to the assessment order for the assessment year 1999-2000 and submits that, such head was looked into and considered by the assessing officer. in fact, queries were raised with regard to such head in the assessment proceeding. the petitioner replied thereto. he draws the attention of the court to the notice under section 148(1) of the act, 1961 issued by the department in this regard and the reply thereof given by the petitioner. he also refers to the order of assessment for the relevant assessment year. he submits that, return to certificate holders and the treatment with regard thereto was considered by the assessing officer in his order.....
Judgment:

ORDER

SHEET WP No.1952 of 2006 IN THE HIGH COURT AT CALCUTTA Constitutional Writ Jurisdiction ORIGINAL SIDE THE PEERLESS GENERAL FINANCE & INVESTMENT Versus COMMISSIONER OF INCOME TAX-I, KOLKATA & ORS.BEFORE: The Hon'ble JUSTICE DEBANGSU BASAK Date : 6th September, 2017.

Appearance: Mr.Abhijit Chatterjee, Sr.Adv.Mr.Somak Basu, Adv.For the petitioner.

Md.Nizamuddin, Adv.Mr.Siddhartha Lahiri, Adv.For the respondents.

The Court :- The petitioner assails a notice under Section 148 of the Income Tax Act, 1961 proposing to reopen the assessment year 1999-2000.

The reasons for such reopening is also under challenge.

The final order dated September 22, 2009 negating the objections raised by the petitioner to such reopening is also under challenge in the present writ petition.

Learned senior advocate appearing in support of the writ petition submits that, as appearing from the averment made in the affidavit-in-opposition, the impugned notice under Section 148 was issued without the prior approval of the higher authority as contemplated under the Act of 1961.

In this regard, he draws the attention of the Court to the relevant averment made in the affidavit-in-opposition.

Referring to the reasons for invocation of the provision of Section 148 of the Act of 1961, as supplied by the department, he submits that, none of the reasons given by the department would withstand judicial scrutiny.

The fiRs.ground is with regard to the return to certificate holders and the treatment of the account in relation thereto.

He submits that, the detail with regard to return to certificate holders were disclosed in the annual balance sheet of the petitioner.

He draws the attention of the Court to the balance sheet as at March 31, 1999 and the notes on account appended thereto which forms the part of the balance sheet.

He submits that, the balance sheet together with the notes which are an integral part of such balance sheet were placed before the assessing officer for his consideration.

He refers to the assessment order for the assessment year 1999-2000 and submits that, such head was looked into and considered by the assessing officer.

In fact, queries were raised with regard to such head in the assessment proceeding.

The petitioner replied thereto.

He draws the attention of the Court to the notice under Section 148(1) of the Act, 1961 issued by the department in this regard and the reply thereof given by the petitioner.

He also refers to the order of assessment for the relevant assessment year.

He submits that, return to certificate holders and the treatment with regard thereto was considered by the assessing officer in his order dated March 26, 2002.

Therefore, it cannot be said that the petitioner is guilty of withholding any relevant material or nonsupplying the same to the assessing officer or misleading the assessing officer in any manner whatsoever.

The pre-condition for invocation of Section 147 of the Act of 1961 does not stand satisfied so far as such ground is concerned.

Referring to the next ground for reopening as given by the department, learned senior counsel for the petitioner submits that, the head is on account of commission.

A claim for deduction was made with regard to commission was made for the relevant assessment year.

The assessing officer disallowed such claim for commission.

He refers to the order of assessment in this regard.

He submits that, the appeal is pending against the decision of the assessing officer in disallowing the commission claimed in its entirety.

Since the appeal is pending, it would not be prudent on the part of the department to have such issue revisited under the provisions of Section 148 of the Act of 1961.

In such a method, there will be a chance of conflict in decision with regard to the tax liability of the assessee.

He draws the attention of the Court to the fact that, prior to the order of assessment being passed, the department raised queries with regard to the commission and that, the petitioner replied thereto.

Referring to the third ground for reopening the assessment for the assessment year 1999-2000 as appearing from the reasons supplied by the department, learned senior advocate for the petitioner submits that, the suspense account of Rs.103.81 lacs emanating out of deferred obligation charge to the return to certificate holders fund was also placed before the assessing officer.

The claim on account of suspense account was considered by the assessing officer.

The assessing officer disallowed 50% in the order of assessment.

Again it cannot be said that, the petitioner is guilty of suppression of any material fact or not making a true and honest disclosure of its income and not pointing out the relevant fact to the assessing officer at the time of assessment.

He refers to the queries raised by the assessing officer at the material point of time and the reply given thereto.

In addition, he refers to the letter dated January 17, 2002 issued by the assessee.

Referring to the fourth ground appearing from the reasons supplied by the department for invoking Section 148 of the Act of 1961, learned senior advocate for the petitioner submits that, the assessee made a claim for deferred obligation which was disallowed in its entirety by the assessing officer in his order of assessment.

Therefore, the authorities are guilty of non-application of mind in putting in such ground in the reasons for invoking Section 148 of the Act of 1961.

Learned senior advocate for the petitioner refers to AIR1961SC372(Calcutta Discount Co.LTD.versus Income-tax Officer, Companies District I, Calcutta & Anr.).320 ITR561(SC) (Commissioner of Income-tax versus Kelvinator of India Ltd.) and an unreported decision of the Supreme Court dated December 8, 2016 passed in Civil Appeal No.11189 of 2016 (Jeans Knit PVT.LTD.Bangalore versus The Deputy Commissioner of Income Tax Bangalore, and Ors.) in support of the proposition that, the assessee is required to disclose fully and truly all material facts necessary.

He submits that, in the facts of the present case the assessee has done so.

The assessing officer has considered the same.

He has taken a particular view on such subject, On some of the issues, an appeal is pending.

Essentially, the department is trying to undertake a review of the order of assessment, on the basis of a different opinion on the same facts.

Neither the impugned notice nor the reasons given in support thereof shows that, the department has come across any new tangible material to suggest that, the petitioner is guilty of failing to disclose fully and truly all material fact necessary for the purpose of assessment and that, an income as escaped assessment by reason of such stand of the petitioner.

He relies upon 268 ITR332(Hindustan Lever LTD.versus Assistant Commissioner of Income-Tax and Ors.) and 237 ITR668(Garden Silk Mills PVT.LTD.versus Deputy Commissioner of Inocme-Tax) in support of the contention that, Section 148 of the Income-Tax Act, 1961 does not confer jurisdiction on change of opinion on the interpretation of a particular provision or the material placed on record before the assessing officer.

He relies upon two unreported decisions of the Court in W.P.No.1280 of 2001 (Tinplate Company of India LTD.versus Joint Commissioner of Income Tax) dated May 5, 2016 and W.P.No.1158 of 2000 (Tinplate Co.of India LTD.versus Joint Commissioner of Income Tax, Special Range 7, Calcutta) dated July 20, 2016 in support of the proposition that, the Court after noticing the various authorities on the subject had quashed the notice under Section 148 of the Act of 1961.

Referring to the impugned order, learned senior advocate for the petitioner submits that, the impugned order does not take into account the factual matrix in the correct perspective.

The impugned order suffers from the vice of perversity although the impugned order notices Calcutta Discount Co.LTD.(supra) it does not apply the ratio laid down therein correctly.

He contends that, a notice under Section 143(2) of the Income Tax Act, 1961 is mandatory for the assessing officer to pass an order of assessment, even after invoking the provisions of Section 148 read with Section 147 of the Income Tax Act, 1961.

In the present case, the department has not served any notice under Section 143(2) of the Income Tax Act, 1961 upon the petitioner.

The petitioner is not aware of an order of reassessment.

In such circumstances, he submits that the impugned notice under Section 148, and the reasons given in respect thereof along with the disposal of the objection raised dated September 29, 2006 be quashed.

Learned advocate for the department submits that, notice under Section 148 of the Act of 1961 was issued after obtaining the prior approval of the appropriate authority.

In this regard, he relies upon the original records produced in Court.

Learned senior advocate for the petitioner is allowed to look into such record as produced by the department.

Learned advocate appearing for the department submits that, the petitioner had participated in the process of adjudication of the objection raised to the invocation of Section 148 of the Act of 1961.

The impugned order dated September 22, 2006 is well reasoned.

It does not require any interference by the Writ Court.

He contends that, it cannot be said or alleged that, the assessing officer had acted with an inherent lack of jurisdiction in an invocation of Section 148 of the Act of 1961 or in passing the impugned order dated June 22, 2006.

He submits that, the final order of assessment was passed under Section 143(2) after due issuance of notice with regard thereto.

He further submits that, the petitioner had received such notice for reassessment.

The order of reassessment being passed, he submits that Writ Court should not interfere in the present writ petition.

In support of the contention that, when there is a statutory efficacious remedy available, the Writ Court need not interfere, learned advocate for the department relies upon (2013) 357 ITR357(Commissioner of Income Tax & Anr.

versus Chhabil Dass Agarwal).Consequently, he submits that the writ petition should be dismissed.

I have considered the rival contentions of the parties and the materials made available on record.

As noted above, a notice under Section 148 of the Act of 1961, the reasons for invocation of such provisions of the Act of 1961 and the ultimate decision of the assessing officer on the objection raised thereto found in the decision dated September 22, 2006 are under challenge in the present writ petition.

So far as the question with regard to the notice under Section 148 of the Act of 1961 not being issued after obtaining permission from the higher authority is concerned, it appears from the record produced in Court on behalf of the department, inspection forthwith being given to the learned senior advocate for the petitioner in Court that, the authorities did obtain permission from the higher authorities on March 22, 2006 itself.

Therefore the contention of the petitioner that the notice under Section 148 of the Act of 1961 was issued without the due approval of the higher authority as envisaged in law is without any basis.

The other contention that, the assessing officer in fact is having a change in the opinion in respect of matters placed before him and considered by him in the order of assessment, is required to be considered.

Calcutta Discount Co.LTD.(supra) is of the view that, two conditions have to be satisfied in its entirety, for the Income Tax Officer to reopen an order of assessment after four years under Section 148 of the Act of 1961.

The fiRs.condition is that, the officer must have reasons to believe that there has been under-assessment.

The second condition is that, he has to have reasons to believe such under-assessment has resulted from nondisclosure of material facts.

With regard to non-disclosure of material fact, it is of the view that, the assessee has a duty to disclosing all material facts relevant to the decision in respect of the questions before the assessing officer.

Simplicitor producing the account books and evidence before the assessing officer will not suffice.

The assessee owes the duty to bring to the attention of the assessing authorities the requisite particulars in the books of account or the particular portions of the document which are relevant.

Failure to discharge such duty would amount to omission to disclose fully and truly all material facts necessary for the assessment.

Jeans Knit PVT.LTD.(supra) notices Calcutta Discount PVT.LTD.(supra) and is of the view that, the rigors laid down in Calcutta Discount (supra) were not adhered to, in the facts of that case.

Kelvinator of India LTD.(supra) is of the view that, it is not permissible to reopen an order of assessment on the basis of change of opinion by the assessing officer.

It notices the conceptual difference between the power to review and the power to reassess.

It is of the view that the assessing officer has no power to review ; he has the power to reassess.

However, the reassessment has to be based on fulfilment of certain preconditions and if the concept of “change of opinion” is removed, then in the garb of reopening the assessment, review would take place.

This view is followed in Hindustan Lever LTD.(supra) as well as Garden Silk Mills PVT.LTD.(supra).In the two Tinplate Company of India LTD.(supra) notices under Section 148 were set aside on the ground of non-adherence to the jurisdictional requirement to invoke such provision.

Applying the ratio of the decisions noted above, it is necessary to evaluate the jurisdictional facts put forth as justification for assumption of jurisdiction under Section 148 read with Section 147 of the Act of 1961 so as to pronounce whether requisite jurisdictional facts exists, in the facts of this case, for the assessing officer to do so.

In the facts of the present case, primarily four grounds for reopening the order of assessment for the assessment year 1999-2000 are given in the reasons for doing the same.

The fiRs.ground is return to certificate holdeRs.Such ground was considered by the assessing officer in his order of assessment.

In fact, he had required further evidence and documents from the assessee prior to the order of assessment to which the petitioner had replied furnishing the same.

The assessing officer had taken a particular view on the subject.

Although no appeal is pending against the portion of the order with regard to return to certificate holdeRs.in my view, the reasons, not specifying the tangible new materials available with the department to allege that the petitioner is guilty of not making a true and proper disclosure, is not sufficient to reopen the assessment.

In absence of such material, the authorities have incorrectly applied the principles laid down in Calcutta Discount PVT.LTD.(supra) and followed subsequently for the purpose of reopening the assessment order on that ground.

The second ground for reopening the assessment is commission, incentive and other payment made to the field officeRs.The petitioner had claimed the same as an expenditure in its return.

Such claim was disallowed by the assessing officer in the order of assessment.

An appeal is pending against such portion of the order of assessment.

The appeal is yet to be disposed of.

Therefore, on the parity of reasoning for the fiRs.ground as noted above, and in addition thereto, in view of the fact that, if Section 148 is allowed to continue, it may result in conflict in decision between the assessing officer and the appellate authority on the same head, it would be appropriate to hold that the invocation of Section 148 for the same is improper.

Therefore the reasons for invocation of Section 148 of the act of 1961 on the second ground also fails.

The third ground is the treatment of the suspense account.

The claim made on this head was disallowed by the assessing officer to the extent of 50%.

Again the assessing officer before passing the order of assessment had called upon the petitioner to furnish information with regard thereto.

The petitioner had furnished such information in its reply.

In addition, the petitioner had written a letter dated January 17, 2002 to the assessing officer.

In such factual matrix it cannot be said that, the department has any new tangible material to hold that the petitioner did not make a true and faithful disclosure in its account before the assessing officer.

The fourth ground for reopening as given in the reasons is deferred obligation.

Claim as an expenditure made on this account before the assessing officer was disallowed in its entirety.

Therefore again on the parity of reasoning as noted in respect of the earlier grounds, the reason fails.

The contention of the department that, the order of assessment being made subsequent to the invocation of Section 148 of the Act of 1961, and that in respect of such order of assessment, the petitioner having a statutory alternative remedy available, the writ petition should be dismissed.

This is the view expressed in Chhabil Dass Agarwal (supra).However the fact scenario in the present case is different than that in obtaining Chhabil Dass Agarwal (supra).In that case, the Supreme Court notices that two notices under Section 148 of the Act of 1961 for two different assessment years went unrepresented and unreplied to by the assessee.

Notices under Section 143(2) in respect of those assessment years were also not attended to by the assessee.

It is after receipt of the orders of assessment that, the assessee sought to approach the Writ Court under Article 226 questioning the validity and legality of the notices under Section 148 as also the order of assessment.

In such context, the Supreme Court is of the view that, once an order of assessment is passed and the assessee has a statutory alternative remedy, the Writ Court need not interfere therein, unless it is established that, there is a breach of fundamental right of the petitioner or that authorities have acted wholly without jurisdiction.

In the present case, the writ petitioner approached the Writ Court immediately upon receipt of the order dated September 22, 2006.

The order of assessment is much later.

It is dated December 29, 2006.

The department claims that, the interim order passed in the writ petition permitted the department to pass an order of assessment and so it has done so.

The writ petitioner claims that, the writ petitioner was not served with the notice under Section 143(2) of the Act of 1961.

The department contends that the appropriate notice was served upon the assessee.

As a Writ Court I need not enter into such arena.

The fact remains that, the writ petition was filed immediately after the order dated September 22, 2006.

The writ petition is pending since then.

As noted above, the department did not have necessary material before it to invoke Section 148 of the Act of 1961 in respect of the assessment year concerned.

In such circumstances, the impugned notice dated March 22, 2006 and the impugned order dated September 22, 2006 passed by the authorities are set aside.

All consequential steps taken pursuant thereto are also set aside.

W.P.No.1952 of 2006 is disposed of.

No order as to costs.

(DEBANGSU BASAK, J.) snn/TR


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