(Prayer: ITA 1156 of 2006 is filed under Section 21H of the Int.Tax Act r/w Sec.260A of the Income Tax Act, 1961 arising out of Order dated 07.04.2006 passed in Int.T.A.No.21/Bang/2002, for the assessment year 1992-93 praying to set aside the said order and etc.,)
1. These five appeals by the revenue under section 21H of the Interest Tax Act, 1974 [for short, the Act] read with Section 260A of the Income Tax Act, 1961 [for short, the IT Act], are in respect of the assessment years 1992-93, 1993-94,1994-95,1995-96 and 1996-97 respectively and are all in respect of the same assessee, an Indian company by name M/s Standard Chartered Finance Ltd., (formerly ESANDA Finanz and Leasing Ltd.) H-2, Connaught Circus, New Delhi-110001, which was a non-banking financial company, registered under the provisions of the Reserve Bank of India Act, 1934 and the subject assessments relate to assessment of chargeable interest for these assessment years for the determination of the liability under the Act.
2. At the outset, it is to be noticed that these assessments were concluded by the assessing authority and by reopening the earlier assessments and by issuing of notices under Section 10 of the Act on the premise that interest attributable to what is known hire purchase transactions which the assessee company had not been brought to tax in the corresponding assessment years, though the assessee had filed returns of chargeable interest and assessment orders had also been passed, but had escaped assessment due to the reasons of non-disclosure of true and precise interest component or interest income from hire purchase transactions, which the assessee claimed it had carried on.
3. Interestingly, the amount of chargeable interest, which, in the opinion of the assessing authority, had escaped assessment, was the amount which the assessee had in respect of each of these assessment years indicated to be the income from hire purchase transactions, in the following manner:
|Assessment year||Amount in rupees|
5. It is not in dispute that chargeable interest, if any, in respect of hire purchase transactions and the interest of any part or full amount of income an attributed towards hire purchase transactions/activities, had not been brought to tax for these assessment years in the regular assessments, the assessing authority being of the opinion that such interest which was otherwise chargeable to tax under the Act for each of the assessment year had not been so brought to tax by non-disclosure on the part of the assessee; that this amount or part of the amount constituted interest by carrying on the activity of hire purchase and had, therefore, escaped assessment and sought to reopen the concluded assessments by issuing notices under Section 10 of the Act for each of these assessment years.
6. It is the stand of the appellant-revenue that the revenue and the assessing authority realized about such escapement during the course of finalization of the income tax assessment for the year 1998-99, wherein the assessee had occasion to claim certain deductions by way of bad debts or irrecoverable debts, also attributable to hire purchase transactions and such claim on the part of the assessee claimed and deductions in respect of hire purchase transactions also, on the premise that irrecoverable debts, alerted the revenue about the escapement of tax on certain chargeable interest and was the trigger for initiating proceedings under Section 10 of the Act. The assessing authority, it appears, had recorded reasons for reopening the concluded assessment as per his order dated 20-6-2001.
7. Sri E I Indra Kumar, learned senior counsel appearing for the appellant-revenue has made available a copy of the order sheet indicating the reasons as recorded by the assessing authority on 20-6-2011, reading as under:
20/06/01 During the year, ‘a’ earned income from Hire Purchase amounting to Rs.116.50 lacs. This was not disclosed in the Interest Tax return as chargeable interest. This was on the plea that it was doing true hire purchase business and not financing transaction camouflaged as hire purchase transaction. During the course of Income Tax proceedings for A.Y.1998-99, assessee claimed allowance of bad debt on such transactions on the plea that it was doing finance transactions. This stand was taken in the Interest Tax proceedings for A.Y.98-99 also and after detailed discussions, assessee admitted in writing, in both the proceedings that it was not doing true hire purchase activity but financing activity camouflaged as hire purchase transactions (see letter dated 7/3/01) filed by ‘a’ in respect I.T. and Interest Tax proceedings for A.Y. 98-99). On this basis, finance income earned by the ‘a’ from “hire purchase” transactions is liable to levy of interest tax. Since the nature of such transactions, agreements executed with the customers, method of accounting followed etc. are similar to that of A.Y.98-99, chargeable interest earned by ‘a’ on H.P. finance transactions escaped assessment because of the failure on the part of the ‘a’ to disclose fully and truly all material facts necessary for the interest Tax assessment.
Hence, I have reason to believe that interest chargeable to tax has escaped interest Tax assessment. Issue notice u/s.10 of interest Tax Act.
Following this was issue of notices under Section 10 of the Act on the very day. The notices had been served on the assessee on 22-6-2001.
8. The assessee responded by reiterating the contents of the returns which it had already filed as the normal return and did raise questions on the tenability or legality of the issue of notices under Section 10 of the Act. It was strongly urged on behalf of the assessee that reopening of the concluded assessments for the five assessment years in question is not permitted in law; that it is not in consonance with the requirement of Section 10 of the Act; that the assessee had made full and true disclosure of all the relevant factors for the purpose of concluding the assessments; that even assuming that some chargeable interest had escaped assessment, but with the precise amount having been mentioned in the profit and lose account, a copy of which had been appended to the return of interest and being very much before the assessing authority, there was absolutely no non-disclosure on the part of the assessee and it was nothing but a case of the assessing authority changing his opinion as to the assessibility or otherwise of the amount which had already been placed or disclosed to the assessing authority even in the first instance and therefore urged that the notice was not issued in accordance with law and no further proceedings can take place for reassessment pursuant to such invalid notice etc.
9. The assessing authority, however, opined that the assessee had carried on the activity such as hire purchase financing; that hire purchase income is chargeable to interest tax; that the assessee had by not making full and true disclosure of the chargeable interest in the returns it had already filed, had not made a true disclosure or even disclosure of the interest chargeable attributed to the hire purchase transactions and therefore it was a fit case to reassess or assess the escaped interest amount and accordingly rejected the claim of the assessee and assessed to tax the income as had been disclosed by the assessee attributable to hire purchase transactions as chargeable interest. From the assessment orders, it is indicative that the transaction was treated as a finance transaction called hire purchase finance transaction and therefore the income attributable to its activity was taken to be interest chargeable to tax under the Act.
10. The assessee appealed to the commissioner of income tax [appeals] and met with success. The commissioner not merely accepted the claim of the assessee, but even held out a brief for the assessee in recording the following findings:
Notices u/s 10 for all the assessment years have been issued on 26.6.2001 by the Assessing Officer. The assessee has asked for the reasons for reopening assessments which was communicated by the Assessing Officer’s letter dtd.29.1.2002. Briefly the reasons read as under:
The assessee had failed to disclose the income earned from hire purchase as chargeable interest in the returns filed under the Interest Tax Act. The assessee did so, on the grounds that it is in true hire purchase business and these are not financing transactions camouflaged as hire purchase transactions. During the course of assessment proceedings for A.Y.98-99, the assessee claimed allowance of bad debt on such transactions on the plea that it was doing financing business. The same stand was taken by the assessee in the Interest Tax assessment proceedings for A.Y.98-99. This was also admitted by the assessee in a latter dtd.7.3.2001 in respect of both Income Tax and Interest Tax proceedings for the A.Y.98-99. Since the assessee itself has admitted that the hire purchase transactions are actually financing transactions, the hire purchase, charges are nothing but interest in nature and hence are chargeable under the Interest Tax Act.
The reply to this has been given by the assessee during the course of reopened assessment proceedings in para 2.1 of the assessment orders. The assessee explained that though the basic accounting entry in the books for non-recoverable hire charges are shown as bad debts, the actual entries are reversing the original entries at the time of the hire purchase sale, that is, debiting stock account and crediting customers account. In other words, the assessee has been selling the stocks on hire purchase and not financing the customers for purchasing of the goods involved. So the transactions are not financing transactions camouflaged as hire purchase once. On the basis of facts, I have no reason to disbelieve the assessee. The assessee has been in hire purchase business since long and has been a consistently following the type of accounting entries as mentioned above. The Assessing Officer has accepted in the past that these are true hire purchase transactions and the charges earned are not interest in nature chargeable under the Interest Tax Act. Merely because the assessee gives the nomenclature of bad debts to the irrecoverable amounts outstanding from customers, the situation does not stand altered and the amount receivable do not become chargeable interest. On the face of it, it only amounts to a mere change of opinion by the Assessing Officer and it cannot be a valid ground for reopening an assessment.
and went to the extent of issuing certificates to the assessee, but not examining the issue from the angle of legality or otherwise of the reopening aspect.
11. The appellate authority also being of the view that the assessing authority had invoked provisions of Section 10(b) of the Act, which was a situation for reopening only if the assessing officer had in his possession any information throwing light on any chargeable interest having escaped assessment and in the absence of any such fresh information and virtually indicating, that the departmental representative had conceded the case of the revenue on the question of availability of any fresh information and allowed the appeals, being of the view that the very notice issued is beyond the period for reopening assessments invoking the provisions of Section 10(b) of the Act and is bad in law and therefore no further proceedings could have taken placed thereon.
12. However, for the assessment year 199-97, the appellate commissioner supplemented a further reason that in so far as the reopening is concerned, notice being not specific, as to whether it is under Section 10(a) or 10(b) of the Act and as there was no omission on the part of the assessee, in the sense of a omission in law or on fact, and therefore there being no suppression of any information on the part of the assessee, only provision under which reopening can be invoked is under Section 10(b) of the Act and accepting these arguments of the assessee, opined that reopening was beyond time and accordingly allowed the appeal.
13. Revenue further appealed to the appellate tribunal. The tribunal opined that the appellate commissioner was fully justified in taking the view that reopening was beyond the permitted time i.e. beyond the period of 4 years from the end of the assessment year as stipulated in Section 10(b) of the Act and therefore dismissed the appeals of the revenue, by passing a common order dated 7-4-2006 in INTTA Nos 21 to 24, 5 and 6/Bang/2002 and 42/Bang/2003, inclusive of the assessment years 1997-98 and 1998-99.
14. It is against this common order of the tribunal, in so far as it relates to the assessment years 1992-93 to 1996-97, the revenue has preferred the above five appeals, as mentioned above.
15. We have heard Sri. Indrakumar, learned senior counsel appearing for the appellant – revenue and Smt. Shashi M Kapila, learned counsel appearing for the respondent – assessee, perused the assessment order, order passed by the first appellate authority and the order passed by the Tribunal and we have also bestowed our attention to the authorities cited and relied upon by the learned counsel.
16. Submission of Sri. Indrakumar, learned senior counsel appearing for the appellant – revenue is that the authorities have committed an error in law, firstly, in proceeding on the premise that the reopening of the assessments for the years 1992-93, 1993-94, 1993-95, 1995-96 and 1996-97 were all by invoking section 10(b) of the Act; that the appellate authority and the Tribunal taking the view that it is only a situation attracting section 10(b) of the Act is an assumption on the part of the authorities; that the assessee however wanted to get the benefit of section 10(b) i.e., lesser period of limitation and had urged that the reopening can only be under section 10(b) of the Act, the appellate authorities merely accepting the same and proceeding to examine the questions on such premise is clearly an error committed in law and an act contrary to the record, particularly, when the assessing authority had recorded reasoning for reopening the assessment for the earlier assessment years.
17. It is submitted that the appellate authorities holding that reopened assessments are barred by limitation is an erroneous conclusion based on an erroneous assumption which assumption could not have been made on the facts and circumstances of the case and as revealed from the record. It is also submitted that further assumption that reopening is as a result of change of opinion in itself was really begging the question and it is on such erroneous assumption or presumption, the appellate authorities have proceeded to examine the legality or otherwise of the reopening on the touchstone of provisions of section 10(b) of the Act, that the entire approach of the appellate authorities is totally erroneous and is a case of invoking an inapplicable statutory provision and therefore holding the orders are not sustainable.
18. With reference to the assessment order passed by the assessing authority after issue of notice under section 10 of the Act, learned senior counsel appearing for the revenue has not only drawn our attention to the record of the assessing authority, particularly, the record relating to noting of the reason for reopening before the issue of notice under section 10 of the Act and has submitted that the conduct of the assessee in not disclosing the interest part attributable to the hire purchase finance transaction in the return amounts to not merely a non disclosure of full and true material facts, but virtually amounts to a suppression, in the sense that even when the assessee had indicated the interest attributable to various other financial transactions, in the return of chargeable interest had nevertheless, failed to include the interest part attributable to the hire purchase transactions which was in the nature of a finance transaction and as opined by the assessing authority; that the mere appending of a profit and loss account which was an attachment to a return of income, to the return of chargeable interest also, does not amount to either disclosure of any fact or material fact relating to the chargeable interest of the assessee for the relevant year nor does it amounts in any way the assessee having placed full and necessary facts before the assessing officer which by itself were sufficient to pass an assessment order under the provisions of the Act.
19. In this regard, Mr. Indrakumar, learned senior counsel appearing for the revenue submits that the assessee never disclosed nor had claimed the amount which had been indicated as income from hire purchase as interest not chargeable under the Act and submission based on such material is that the assessee had never revealed the chargeable interest insofar as the hire purchase transactions are concerned and the fact that the income from hire purchase transaction being revealed as income for assessment of income purposes, cannot have any bearing on the aspect of assessment of chargeable interest.
20. Submission is that the assessee had, in fact, failed to not merely file a proper return of the chargeable interest for the relevant assessment year but has also not fully disclosed all relevant facts; that in fact not indicating the amount as interest in itself is an act of suppression of a material fact and therefore submits that this was a clear case where the provisions of section 10(a) and 10(b) of the Act reading as under:
“10. Interest escaping assessment,-If
(a) the Assessing Officer has reason to believe that by reason of the omission or failure on the part of the assessee to make a return under section 7 for any assessment year or to disclose fully and truly all material facts necessary for his assessment for any assessment year, chargeable interest for that year has escaped assessment or has been under-assessed or has been made the subject of excessive relief under this Act, or
(b) notwithstanding that there has been no omission failure as mentioned in clause (a) on the part of the assessee, the Assessing Officer has, in consequence of information in his possession, reason to believe that chargeable interest assessable for any assessment year has escaped assessment or has been under-assessed or has been the subject of excessive relief under this Act, he may, in cases falling under clause (a), at any time, and in cases falling under clause (b), at any time within four years of the end of that assessment year, serve on the assessee a notice containing all or any of the requirements which may be included in a notice under section 7, and may proceed to assess or re-assess the amount chargeable to interest-tax and the provisions of this Act shall, so far as may be, apply, as if the notice were a notice issued under that section.”
is attracted and therefore submits that the premise and the basis on which the appellate authorities proceeded in the first instance to assume that the reopening was under section 8[b] of the Act and in the second instance to apply the principle or the development of law in the context of change of opinion which is a situation which has been examined by the courts only in the context of the provisions of section 147[b] of the IT Act and the corresponding provision under the Income Tax Act, 1922. It is pointed out that lesser period of limitation operates in a situation where there is no failure or omission on the part of the assessee to disclose fully all relevant facts and to place on record relevant material. In a situation of such nature, even when there is no failure, but the assessing authority has in its possession some information subsequent to passing of the assessment order which can throw light that some assessable income or chargeable to tax has escaped the assessment, it can be reopened and the amount so has escaped any tax, can be brought to tax.
21. Elaborating the submission, learned senior counsel appearing for the revenue has placed reliance on the following decisions of the Supreme Court to buttress his submissions.
[a] ‘CALCUTTA DISCOUNT COMPANY LIMITED v. INCOME TAX OFFICER’[41 ITR 191]
[b] ‘INDO-ADEN SALT MFG. and TRADING CO. P. LTD v COMMISSIONER OF INCOME TAX’ [159 ITR 624]
[c] ‘PHOOL CHAND BAJRANG LAL and ANOTHER v. INCOME TAX OFFICER AND ANOTHER’ [203 ITR 456]
22. Mr. Indrakumar, learned senior counsel appearing for the revenue has drawn our specific attention to the following paragraph in the Judgment of the Supreme Court in INDO-ADEN SALT’s case [supra] wherein the Supreme Court had an occasion to notice its earlier decision in CALCUTTA DISCOUNT’s case [supra].
“The assessee’s contention is that the Income-tax Officer could have found out the position by further probing. That, however, does not exonerate the assessee to make full disclosure truly. Explanation 2 to section 147 of the Act makes the position abundantly clear. The principles have also been well settled and reiterated in numerous decisions of this court: See Kantamani Venkata Narayana and Sons v. First ITO  63 ITR 638 [SC] and ITO v. Lakhmani Mewal Das  103 ITR 437 [SC]. Hidayatullah J., as the learned Chief Justice then was, observed in Calcutta Discount Co., s case  41 ITR 191 [SC] that mere production of evidence before the Income Tax Officer was not enough, that there may be omission or failure to make a true and full disclosure, if some material for the assessment lay embedded in the evidence which the Revenue could have uncovered but did not, then it is the duty of the assessee to bring it to the notice of the assessing authority. The assessee knows all the material and relevant facts – the assessing authority might not. In respect of the failure to disclose, the omission to disclose may be deliberate or inadvertent. That was immaterial. But if there is omission to disclose material facts, then, subject to the other conditions, jurisdiction to reopen is attracted. It is sufficient to refer to the decision of this court in Calcutta Discount Co.’s case  41 ITR 191 [SC] where it had been held that if there are some primary facts from which a reasonable belief could be formed that there was some non-disclosure or failure to disclose fully and truly all material facts, the Income-tax Officer has jurisdiction to reopen the assessment. This position was again reiterated by this court in Malegaon Electricity Co. P. Ltd., v. CIT  78 ITR 466 [SC].
Furthermore, bearing these principles in mind, in this particular case, whether there has been such non-disclosure of primary facts which has caused escapement of income in the assessment was basically a question of fact.”
and which view has again been reiterated by the Supreme Court in PHOOL CHAND’S case [supra], particularly, the observations as contained at pages 477 and 478 reading as under:
“From a combined review of the judgments if this court, it follows that an income tax Officer acquires jurisdiction to reopen as assessment under section 147 [a] read with section 148 of the Income Tax Act, 1961, only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons, which he must record, to believe that, by reason of omission or failure on the part of the assessee to make it true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profits or gains chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts had come to light which were not previously disclosed or some information with regard to the facts previously disclosed comes into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since the belief is that of the Income Tax Officer, the sufficiency of reasons for forming the belief is not for the court to judge but it is open to an assessee to establish that there in facts existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non specific information. To that limited extent, the court may look into the conclusion arrived at the Income Tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income Tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income tax Officer, at the time of making the original assessment, could or could not have found by further enquiry or investigation, whether the transaction was genuine or not if, on the basis of subsequent information, the income tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in section 147[a] of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and, therefore, income chargeable to tax had escaped assessment. The High Courts which have interpreted Burlop Dealers’ case  79 ITR 609 [SC] as laying down the law to the contrary fell into an error and did not appreciate the import of that judgment correctly.
We are not persuaded to accept the argument of Mr. Sharma that the question regarding the truthfulness or falsehood of the transactions reflected in the return can only be examined during the original assessment proceedings and not any stage subsequent thereto. The argument is too broad and general in nature and does violence to the plain phraseology of sections 147 [a] and 148 of the Act and is against the settled law down by this court. We have to look to the purpose and intent of the provisions. One of the purposes of section 147 appears to us to be to ensure that a party cannot get away by willfully making a false or untrue statement at the time of original assessment and when that falsity comes to notice, to turn around and say ‘you accepted my lie, now your hands are tied and you can do anything.’ It would be a travesty of justice to allow the assessee that latitude.
In our opinion, therefore, in the facts of the present case, the Income tax Officer, Azamgarh, rightly initiated the reassessment proceedings on the basis of subsequent information which was specific, relevant and reliable and, after recording the reasons for the formation of his own belief that in the original assessment proceedings, the assessee had not disclosed the material facts truly and fully and, therefore, income chargeable to tax had escaped assessment. He, therefore, correctly invoked the provisions of sections 147[a] and 148 of the Act. The High Court was, thus, perfectly justified in dismissing the writ petition. There is no merit in this appeal which fails and is dismissed but with no order as to costs.’’
and points out that the question as to whether there was full and true disclosure of all material facts, primary facts is one to be inferred from the facts and circumstances of each case; that as to whether a situation attracts the provisions of section 10[a] or 10[b] of the Act is one which is dependent on the material which was before the authorities; if a return had been filed and the other material relevant for it and if no return had been filed, what other material based on which reopening is made and submits that when the assessing authority had, based on available material with reference to them proceeded to reopen the assessment for the years in question being of the definite view that it attracted the provisions of section 10(a) of the Act, though not as such mentioned in the notice, the appellate authorities could not have relegated the reopening to a situation of section 10[b] of the Act and therefore submitted that neither the view taken by the Tribunal nor the view taken by the first appellate authority is sustainable; that they required to be set aside and the assessment order upheld.
23. Per contra, appearing on behalf of the assessee, submission of Mrs. Shashi M Kapila, learned counsel is that this was a clear case of an assessing authority not taking note of material on record; that insofar as the assessee is concerned, the assessee had, in fact, made a full and true disclosure of the material or primary facts which were essential for the purpose of passing an assessment order under the provisions of the Act; that it was open to the assessing officer to have ascertained if any part of the income attributable to the hire purchase transaction was having any element of interest in that and if the assessing officer had not examined such aspect, but if had proceeded to conclude the assessment bringing to tax the other chargeable interest as had been revealed by the assesssee in respect of transactions other than the hire purchase transaction, it was nothing but a clear case of the assessing officer having a second opinion on the very available material which is not permitted in a case where the assessee had made full and true disclosure of all material facts and all primary facts were made available. It is therefore submitted that the appellate authorities are fully justified in taking the view that this being a case of change of opinion on the part of the assessing officer, the limitation as stipulated under the provisions of section 10(b) of the Act is clearly attracted and the notice for reopening the assessment issued on 20.6.2001 was clearly beyond the period stipulated in section 10(b) of the Act and therefore setting aside the assessment order was fully justified.
24. It is the supplemental or alternative submission of Smt. Shashi M Kapila, learned counsel for the assessee that the assessee consciously did not include the income attributable to hire purchase assessments for tax as chargeable to tax under the Act as according to assessee, in the first instance, a hire purchase transaction is not covered under the provisions of the Act; that there was no chargeable interest generated by the hire purchase transaction carried on by the assessee and it is for this reason no amount had been offered; that if there is no chargeable interest at all, there is no question of offering the same to tax in the return and therefore it cannot be said that the assessee had either not disclosed the full and true material facts or had omitted to disclose any part of its chargeable interest.
25. With reference to the charging provisions and the definition, sections 2, 4, 5, 6 and 26C of the Act, submission is that even in terms of the Board Circular No.760 dated 13.1.1998 where under the earlier board circular had been clarified and in particular by drawing attention to paragraphs 2 and 3 of this board circular, the transactions of the asssessee insofar as the hire purchase transactions are concerned, were more in the nature of a transaction of hiring the asset of the assessee – company; that the assessee was in the practice of placing bulk orders to the manufacturers and then was virtually hiring to its customers and therefore it was in the nature of as true hire purchase transaction; that it did not amount to a finance or loan transaction and therefore there was no question of generation of any interest or any part of the hire amount as received from the assessee being characterized as chargeable interest under the provisions of the Act.
26. It is also submitted by learned counsel for the assessee that the assessing authority in fact had no fresh information or fresh material which could have thrown some light on the possible escapements of any chargeable interest to tax; that in fact, the assessee even as per the notice only reiterated its earlier return and in the absence of the fresh material or new facts having been discovered by the assessing officer, the reassessment is neither sustainable nor permitted in law as it only constituted a mere change of opinion and therefore the appellate authorities have rightly set aside the assessment order and the law on the question of change of opinion being not permitted for reopening of a concluded assessment is too well settled and in this regard has drawn our attention to the recent Judgment of the Supreme Court in the case of ‘COMMISSIONER OF INCOME TAX v. KELVINATOR OF INDIA LIMITED’ reported in 320 ITR 561.
27. learned counsel for the assessee submits that the Supreme Court while confirmed the full Bench decision of the Delhi High Court, the present situation being merely one of change of opinion, the appellate authorities were fully justified in setting aside the reopened assessment order.
28. It is also submitted that the law as laid down and declared by the Supreme Court in K L JOHAR and COMPANY v. DEPUTY COMMERCIAL TAX OFFICER’ reported in 16 STC 213 is one nearer home to the present situation and is required to be applied to ascertain the nature of the transaction; that the assessee’s activities insofar as the hire purchase activity are concerned, being in the nature of a true hire purchase activity, it cannot be called as a financing or loan transaction and therefore the appellate authorities are fully justified in taking the view that no chargeable interest had been generated from the activity.
29. Learned counsel for the assessee in this regard seeks to counter the submission of Sri. Indrakumar, learned senior counsel appearing for the revenue, who had drawn our attention to the letter written by the assessee itself and which according to the learned counsel for the revenue amounted to virtually an admission in offering the amount indicated as income from hire purchase, as tax under the provisions of the Act, and therefore submits that the letter dated 7.3.2001 [copy at Annexure-F to the appeal] is not an admission on the part of the assessee nor assessee had any chargeable interest to offer to tax from hire purchase transaction; that the assessee while had maintained consistent stand that it had no chargeable interest generated from out of hire purchase transactions, in the context of the proceedings under the IT Act and the proceedings under the Act but for the assessment year 1998-99 had offered the amount to tax under the Act more out of a compromise for buying peace with the department without prejudice to its stand and only in the background of the earlier letter of the assessee dated 2.2.2001 in the context of assessment for the assessment year 1998-99; that neither the assessing authority could have picked out in isolation a letter of this nature to conclude that there was an admission on the part of the assessee that there was chargeable interest nor is learned senior counsel for the revenue justified in relying upon this document as a material or as a piece of evidence amounting to admission on the part of the assessee that it is liable for tax under the Act etc.
30. It is in the background of such contentions urged that we are required to answer the two questions as are posed for our answer in these appeals.
31. These appeals are under section 21H of the Act and the corresponding provision under the Act being 260-A of the IT Act.
32. The arguments addressed at the Bar while have covered considerably large area, much beyond what is required to be considered for our answering two questions posed before us, we would deal with that to the extent they are of any relevance and are of any usefulness for answering the two questions.
33. An examination of the record of the revenue and the reasons recorded and the assessment order clearly indicates that the assessing authority had proceeded on the premise that there was some non disclosure on the part of the assessee in not offering its chargeable interest attributable to hire purchase transactions to tax. A conjoint reading of the recording of reasons for reopening, notice and orders passed leaves one with no doubt that this is a clear case of reopening within the scope of section 10(a) of the Act and definitely not within the scope of section 10(b) of the Act.
34. A reopening under the provisions of section 10(a) of the Act if is per se not a situation attracting the provision of section 10(a) of the Act, it can definitely be opined so. But, we definitely cannot either appreciate or understand the attitude of the appellate authorities in relegating the reopening to be a situation as one that can be under section 10(b) of the Act and examining the question from that angle. In fact, it is only because of this the appellate authorities, both the appellate commissioner and the Tribunal have gone off at a tangent by focusing their attention on the concept of ‘change of opinion’.
35. The concept of ‘change of opinion’ while is not a statutory provision found in either the Income Tax Act, 1922 or the IT Act, 1961, or even in the Interest Tax Act, 1974, it is a phrase which has been developed in the context of language of the provisions of sections 34[b] and 147[b] of the IT Act. This is not a legal principle, but a convenient way of describing a situation as one that does not fit into the requirement of section 34[b] or section 147[b] of the Act or even under the present Act under section 10[b] of the Act.
36. The change of opinion concept is because of reopening under clause[b] in respect of statutory provisions of these enactments is permitted only when the assessing officer has in his possession some new material or information which throws light on the factum of some income having escaped the net of taxation in the IT Act and chargeable to interest under the Act. If there is no new material and on the available material if the assessing authority had already taken a particular view, assuming that view was an incorrect view or a blatantly wrong view, insofar as the reopening of the concluded assessment is concerned, such a possibility is not permitted in the wake of the phraseology of clause[b] of the statutory language of the reopening sections in these enactments.
37. It is, therefore, the phrase ‘change of opinion’ got coined by saying that when there is no new material or fresh information in the possession which alone enables reopening under clause [b].
38. A situation of this nature or the so called concept of ‘change of opinion’ is not at all germane to a reopening of concluded assessment under the provisions of clause[a] of Section 10 of the Act. The law as developed in the light of the language of clause (b) of the reassessment enabling statutory provision is that the reopening is bad in law if there is a change of opinion, but this principle is not attracted to a situation where the reopening is in a situation attracting clause[a] of reassessment enabling statutory provisions. Here reopening no doubt is circumcised by the requirements as indicated in the very statutory provision, but to make the concept as developed in the context of understanding, interpretation of the legal principles, for reopening under the clause[b] cannot be either engrafted or implanted to a situation under clause[a].
39. The language of section 10(a) of the Act indicates that a reopening is permitted in a situation where there is some failure to disclose fully and truly all material facts necessary for the assessment year.
40. In our understanding, this is a situation where an assessee has not placed such material, such information, such facts which by themselves could have enabled the assessing officer to pass an assessment order without calling upon the assessee for any further information. It is only a situation where the material/data/information which is already available should be in itself complete for the purpose of passing an assessment order which alone goes out of the scope of the provisions of section 10(a) of the Act.
41. There is a compulsion in law on the part of every assessee to file a return disclosing fully and truly all material facts which enables the assessing officer to pass an assessment order. Any situation which falls short of enabling an assessing officer to proceed to assessment order, always comes within the scope of section 10(a) of the Act.
42. The discussion as referred to in CALCUTTA DISCOUNT’s case [supra] and PHOOL CHAND’s case [supra] very clearly spells out how such a situation develops and what are the duties and responsibilities not only of the assessee, but in what manner the assessing officer has to proceed. In our considered opinion, after examining the entire record, insofar as the return of the chargeable interest is concerned, if there is some chargeable interest and if the assessee has not indicated that as interest at all in the return, it amounts to a case of clear non disclosure of chargeable interest and though learned counsel for the assessee pointed out to the copy of the profit and loss account being accompanied to the return of chargeable interest which had been filed for each of the assessment year by the assessee, that appendage of the profit and loss account does not make any difference for the purpose of filing a proper return under the provisions of the Act and for the purpose of disclosing fully and truly all material facts relevant for the purpose of passing an assessment order under the Act. What material may constitute relevant, essential facts for passing an assessment order in the context of one enactment may not be so in the context of a different enactment legislated for a different purpose and the subject matter of which is different, must necessarily constitute such material or primary facts in the context of an assessment order under different enactment. The mere fact that some situations which could have led to an enquiry such as there may be a possible interest element in the transaction and therefore it was the duty the assessing officer to ascertain and to have brought to tax is a submission which we cannot accept on the authority of the Supreme Court in the two cases referred to above in in CALCUTTA DISCOUNT’s case [supra] and PHOOL CHAND’s case [supra].
43. The other alternative argument on behalf of the assessee which is though urged in some detail, we are afraid, we cannot examine for the purpose of answering the question as the two questions posed for our answer can be answered with our conclusion that the findings and recording of reasons given by the appellate authorities that the assessment orders were not sustainable for the reason that it constituted mere change of opinion on the part of the assessing authority and therefore reopening was not permissible and also the reason that they are all barred by limitation are both flawed as concept of change of opinion is never attracted to the present situation and therefore the period of limitation of four years from the end of the assessment order is also not attracted and it is in this background, the first question is answered in the negative and against the assessee. The second question being merely another facet of the same question and being covered by our answer to the first question, need not be separately answered.
44. It is at this stage we have to consider one more submission of the learned counsel for the assessee that the assessee’s stand being one of no chargeable interest and that stand having been consistently pursued by the assessee, even assuming that the view taken by the appellate authorities is erroneous, on the question of reopening and change of opinion, the assessee can sustain result by the argument that there was never any chargeable interest which was not revealed or suppressed by the assessee, particularly, as the assessee’s transactions was only in the nature of a hire purchase or a true hire purchase transaction not generating any interest etc.
45. Insofar as this argument is concerned, we are unable to entertain this submission at this stage for two reasons. One, it will be an hypothetical question before us and in an appeal under section 21H of the Act, we can only answer those questions which are posed for our consideration. Secondly, a question of this nature does not arise from the order of the Tribunal and therefore we do not examine this question.
46. Insofar as the submission that there was no admission on the part of the assessee that there was some chargeable interest generated from out of its hire purchase transactions, though the said amount had been offered to tax under the Act for the later years, and that was only due to the reason that the assessee wanted to buy peace with the Department and in the background of certain developments under the IT Act, is not an argument which we can accept and we cannot also permit the argument which is contrary for the reason that if the assessee by its own conduct had offered the amount attributable to its hire purchase transaction to tax under the Act i.e., by voluntary conduct, then we cannot either go into the circumstances under which it was so offered or the explanation offered at this stage, more so, when the entire reopening in the present situation for the assessment years concerned being only in the background of the authorities having stumbled on the fact situation where certain bad debts had been claimed by the assessee under the provisions of the IT Act for the assessment year 1988-99 and that being worked back etc.
47. Therefore, while we are not called upon to examine either the scope of the charging section or the nature of the transaction per se insofar as the assessee is concerned in the present appeals as such questions did not arise and the Tribunal having bestowed its attention only on the question of the reopened assessments being bad either as barred by limitation or by change of opinion and that alone is to be examined and that question having been answered, we do not purpose to go into the details of other submissions and it is therefore we do not propose to discuss further on the merits of the submissions made by learned counsel appearing for the assessee with regard to chargeability of the amount involved in the hire purchase transaction and the nature of the hire purchase transaction.
48. In the result, these appeals are allowed. However, parties to bear their respective costs.