IN THE HIGH COURT OF DELHI AT NEW DELHI
Judgment delivered on: 11.08.2014
W.P.(C) 2594/2013, CM 4918/2013 & CM 15970/2013
ORIENTAL BANK OF COMMERCE .....Petitioner
versus
ADDITIONAL COMMISSIONER OF INCOME TAX .....Respondent
Advocates who appeared in this case:
For the Petitioner : Mr Rajat Navet, Ms Sanya Talwar and Mr Rohan Yadav.
For the Respondent : Mr N.P.Sahni and Mr Nitin Gulati.
CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SIDDHARTH MRIDUL
JUDGMENT
BADAR DURREZ AHMED, J (ORAL)
1. This writ petition is directed against the re-assessment order dated
28.03.2013 passed by the Assessing Officer in re-assessment proceedings
pursuant to the notice under Section 148 of the Income Tax Act, 1961
(hereinafter referred to as the ,,said Act) dated 29.03.2012 pertaining to the
WP(C) 2594/2013 Page 1 of 24
assessment year 2005-06. The writ petition also seeks the quashing of the
entire re-assessment proceedings under Section 147/148 of the said Act as
being without jurisdiction.
2. It is an admitted position that the original assessment was completed
on 20.03.2006. The notice under Section 148 was issued in respect of the
said assessment year 2005-06 on 29.03.2012 and, as such, the said notice
was beyond the period of four years from the end of the relevant assessment
year. Thereby, the provisions of the first proviso to Section 147 of the said
Act would be invoked. Along with the notice under Section 148 dated
29.03.2012 the purported reasons for the re-opening were also furnished. The
said reasons read as under:-
"Reasons for reopening the case u/s 147 of the Income
Tax Act, 1961 in the case of M/s Oriental Bank of
Commerce- A.Y. 2005-06
Return declaring an income of Rs.174,45,44,140/- was filed
on 29.10.2005. Assessment u/s 143(3) of the IT Act was
made on 20.03.2006 at an income of Rs.664,17,56,340/-
and under section 154/154/154/143(3) was made on
28.03.2008 at an income of Rs.583,65,72,060/- under
normal provisions of the IT Act.
The scrutiny of assessment revealed that the assessee has
failed to disclose following facts in its Computation of
Income and Balance Sheet:-
(a) The assessee had made a provision of Rs.4,67,46,051/-
on account of "Expenses" in the balance sheet. As the
WP(C) 2594/2013 Page 2 of 24
provision made was not an ascertained liability, the
same should also have been disallowed and added back
to the income of the assessee. The mistake resulted in
underassessment of Income of Rs.4,67,46,051/-
involving tax effect of Rs.1,71,05,548/-.
(b) The assessment record revealed that under section
143(1), a refund of Rs.125,55,01,247/- was allowed to
the assessee. However, assessment under section
154/154/143(3) a demand of Rs.154,25,41,272/- was
raised and no amount was refundable on assessment.
Thus, the assessee was liable to pay interest under
section 234 D on excess refund of Rs.125,55,01,247/-.
The mistake resulted in short levy of interest of
Rs.62,77,506/-.
I, therefore, have reasons to believe that the escapement of
Income is on account of failure on the part of the assessee
to furnish true and fair particulars and disclose truly and
fully all material facts necessary for assessment for the
above assessment year, the income of Rs.4,67,46,051/- has
escaped assessment and interest u/s 234D to the extent of
Rs.62,77,506/- has not been withdrawn within the meaning
of proviso to section 147 of the IT Act.
Sd/-
(Shankar Gupta)
Asst. Commissioner of Income Tax
Circle 13(1), New Delhi"
3. It is the case of the petitioner that no additions were made in respect of
either of the two reasons (a) and (b) indicated above. Instead, without
issuing a separate notice under Section 148 of the said Act, by virtue of a
mere note-sheet entry during the course of the re-assessment proceedings on
WP(C) 2594/2013 Page 3 of 24
16.03.2013, the petitioner was asked to furnish a reply to the following
entry:-
"On examination of claim of the assessee for provision for
expenses, it is noticed that the assessee has claimed 10%
under section 36 of the act shows that the assessee has
calculated for in excess of 10% of aggregate rural
advances. He is asked to show cause as to why the excess
should not be disallowed by 21.03.2013."
In response thereto the petitioner furnished its reply on 21.03.2013 to the
said query indicating that the deduction had been correctly claimed under
Section 36(1)(viia) of the said Act. Thereafter, the assessment order dated
28.03.2013, which is impugned before us as being without jurisdiction, was
passed.
4. The learned counsel for the petitioner took us through the said re-
assessment order dated 28.03.2013 and submitted that no additions have
been made in respect of the purported reasons [(a) and (b)] as indicated
above. Furthermore, even the deduction of approximately Rs.126 crores
claimed under Section 36(1)(viia) in respect of the assessment year 2005-06
has been accepted. However, an addition has been made to the extent of
Rs.453,96,44,854/- on account of the opening balance pertaining to the
assessment year 2005-06. The learned counsel for the petitioner drew our
WP(C) 2594/2013 Page 4 of 24
attention to paragraphs 3.3.1 and 3.3.2 of the said re-assessment order which
read as under:-
"3.3.1 In response thereto, the assessee submitted
detail of deduction claimed U/s. 36(1)(viia). A perusal of
detail shows that the opening balance of deduction U/s.
36(1)(viia) already claimed and allowed to the assessee as
at 1/4/2014 is Rs.453,96,44,854/- {both 10% of rural
advances and 7.5% of total income}. A perusal of the
details submitted further reveals that aggregate of average
advance made by each rural branch of the assessee
computed in the manner prescribed in Rule 6ABA is Rs.
1040.56 crore. The total income of the assessee for the
assessment year under consideration before making any
deduction under section 36(1)(viia) and Chapter VIA is
Rs.303,48,04,587/-
3.3.2 Thus, the amount of deduction to which the
assessee is eligible by the provisions of section 36(1)(viia),
is worked out as under:
(i)7.5% on Rs.303,48,04,587, i.e., Rs.22,76,10,344; and
(ii) 10% on Rs. 1040,55,96,000/-, i.e., Rs.104,05,99,600/-,
totalling to Rs.104,05,59,600 + 22,76,10,344 =
126,81,69,944."
5. With reference to paragraph 3.3.1 extracted above the learned counsel
for the petitioner pointed out that the claim of Rs.453,96,44,854/- had
already examined and allowed in respect of the preceding years. Insofar as
the current year was concerned the learned counsel for the assessee referred
to paragraph 3.3.2 extracted above where it is specifically recorded that the
assessee was eligible for the deductions to the extent of Rs.126,81,69,944/-
WP(C) 2594/2013 Page 5 of 24
and, therefore, the deductions claimed in the year in question was not in
issue. The learned counsel for the petitioner submitted that the addition
which has been made in the re-assessment order does not pertain to the
assessment year 2005-06 but, it pertains to preceding years which was not
the subject matter of the original notice under Section 148 which was dated
29.03.2012 nor of the note sheet entry dated 16.03.2013.
6. The learned counsel for the petitioner, therefore, submitted that the re-
opening as well as the re-assessment order were both without jurisdiction
and the same ought to be quashed. He submitted that since there was no
addition in respect of the original reasons given for re-opening of the
assessment for the year 2005-06 there could be no addition in respect of a
new entry. He also submitted that there was no valid notice under Section
148 of the said Act with regard to the additions made insofar as the
deduction claimed under Section 36(1)(viia) of the said Act is concerned.
Furthermore, there was a clear change of opinion even in respect of the issue
pertaining to Section 36(1)(viia) of the said Act inasmuch as a specific
question had been raised during the original assessment proceedings as a part
of a questionnaire issued on 13.02.2006 by the Assessing Officer wherein
question No.11 was as under:-
WP(C) 2594/2013 Page 6 of 24
"11. You have claimed Rs. 1040.55 Crs as aggregate
advance pertaining to rural branches on which you have
claimed 10% deduction U/s 36(i)(viia) of Rs. 104.05 Crs.
Please demonstrate the method followed to work out the
average aggregate advances made by the rural branches of
the bank as per Sec. 36(i)(viia) r/w explanation (ia) of I.T.
Act r/w Income Tax Rules 6ABA."
7. The learned counsel further submitted that the specific question was
replied to on 28.02.2006 in the following manner:-
"11) During the Assessment Year 2005-06, the bank
has claimed deduction of Rs. 104,05,59,600/- towards
Aggregate Average Advances pertaining to Rural Branches
of the Bank under Section 36(1)(viiia) of the Income Tax
Act, 1961.
Certificate in this regard from Statutory Auditors of the
bank is being enclosed for your kind perusal. Please note
this certificate is issued by the auditors taking into
consideration the criteria prescribed under Rule 6ABA as is
evident from the certificate."
8. Thereafter, the Assessing Officer did not disallow the deduction so
claimed. Consequently, it was argued, the fact that the Assessing Officer,
through the re-assessment order, had made an addition on this very ground,
would straightaway amount to a mere change of opinion, which is not
permissible in law.
WP(C) 2594/2013 Page 7 of 24
9. Finally, the learned counsel for the petitioner also submitted that the
deduction under Section 36(1)(viia) of the said Act which has been
disallowed by virtue of the re-assessment order does not even pertain to the
assessment year 2005-06 but relates to earlier assessment years. This also is
not permissible, particularly, because it had become time barred by
16.03.2013 when the note sheet entry was made. In fact, it was stated to have
been time-barred even when the initial re-opening notice dated 29.03.2012
was issued.
10. The learned counsel for the petitioner placed reliance on the following
decisions in support of his submissions:-
(i) Ranbaxy Laboratories Ltd. v. Commissioner of Income Tax:
(2011) 336 ITR 136 (Del).
(ii) Commissioner of Income Tax v. Jet Airways (I) Ltd.: (2011)
331 ITR 236 (BOM).
(iii) Commissioner of Income Tax v. Dr Devendra Gupta: (2011)
336 ITR 59 (Raj).
(iv) Commissioner of Income Tax, Delhi-II v. Kelvinator of India
Ltd.: 99 (2002) Delhi Law Times 221 (FB).
(v) Commissioner of Income Tax v. Usha International Ltd.:
(2012) 348 ITR 485 (Delhi).
(vi) Wel Intertrade Pvt. Ltd. and Anr. v. Income Tax Officer:
(2009) 308 ITR 22 (Del).
WP(C) 2594/2013 Page 8 of 24
11. Mr Sahni appearing on behalf of the Revenue contended that it was
not correct on the part of the learned counsel for the petitioner to submit that
no findings or additions have been made on the original reasons (a) and (b)
of the reasons for re-opening of assessment. He submitted that insofar as
reason (a) was concerned there was a clear finding in the re-assessment order
and the same is recorded in paragraphs 2 and 2.1 which read as under:-
"2. The assessee has shown an increase in the amount of
its provisions for expenses by an amount of
Rs.4,70,46,051/-, which is an increase of nearly 20%. The
expenditure claimed by the assessee under the head other
expenses has shown a rise of more than Rs.24 crores, i.e. an
average of Rs. 2 crores a month whereas the increase in
provisions for expenses has risen by more than 4 crores.
The operating expenses of the assessee has also shown a
large rise of more than 23%. The assessee has explained
that these provisions are for expenses incurred in the last
month which could not be accounted for, thereby creating a
provision.
2.1 The assessee being a large organization with more than
1000 branches and 30 regions stated that it is difficult to
obtain even headwise break up of such expenses and
provision for expenses. This claim of the assessee cannot
be accepted as there must be at least a headwise breakup of
such provision for expenses to enable the officer to
examine the expenses claimed by the assessee. The
expenses has shown head wise expenses of the Delhi Head
Office amounting to more than Rs. 12 crores. Thus, the
assessee could not account for the headwise details of
expenses and the provision made thereon."
12. He submitted that though the Assessing Officer recorded his finding
rejecting the pleas of the petitioner/assessee, through an inadvertence and by
WP(C) 2594/2013 Page 9 of 24
a mistake no addition has been made in the computation given at the end of
the assessment order which, according to him, can be rectified under Section
154 of the said Act. The computation given in the assessment order is as
under:-
"Based upon the above, the income of the assessee is re
computed as under:
1. Income as per order U/s. 154, Dt. 31-03-2009 Rs.267,25,60,863/-
2. Add: disallowance of excess deduction claimed Rs.453,96,44,854/-
U/s. 36(1)(viia)
Total Income Rs.721,22,05,717/-
Rounded off to Rs.721,22,05,720/-
Income is assessed at Rs.721,22,05,720/-/
Penalty proceedings u/s 271(1)(c) with reference to all
disallowance/additions discussed above are being initiated
separately. Charge interest u/s 234B, 234D, and 244A(c) of
I.T. Act as per law. Issue necessary forms."
13. Insofar as the question of charging of interest under Section 234D on
the purported excess refund granted to the petitioner/assessee is concerned,
Mr Sahni submitted that although there is no discussion on this aspect in the
assessment order there is a clear direction to compute the same as given in
the extracted portion above. Therefore, Mr Sahni submitted that it was not
open to the learned counsel for the petitioner to allege that no additions have
been made in respect of the original reasons (a) and/or (b), given in the
reasons for re-opening the assessment pertaining the assessment year 2005-
WP(C) 2594/2013 Page 10 of 24
06. He, thereafter, submitted that the case law relied upon by the learned
counsel for the petitioner for the proposition that unless and until there are
additions made in respect of the original reasons no fresh addition can be
made for subsequent items found during the course of the re-assessment
proceedings, would have no applicability.
14. Insofar as the disallowance under Section 36(1)(viia) of the said Act is
concerned Mr Sahni submitted that the closing balance of the preceding year
would constitute the opening balance of the current year therefore when the
Assessing Officer questioned the opening balance it would by in itself have
an impact on the closing balance of the preceding year as also on the closing
balance of the current year. Therefore, the Assessing Officer was well within
his rights to make the additions by making the disallowance under Section
36(1)(viia) of the said Act even though it pertained to the preceding year.
15. The learned counsel for the petitioner, however, pointed out in
rejoinder that the reasons as originally furnished were by themselves not
good enough for invoking the re-assessment proceedings. He drew our
attention to the fact that in both the reasons (a) and (b), the Assessing
Officer has indicated that it was based on the mistake on the part of the
WP(C) 2594/2013 Page 11 of 24
Assessing Officer. He submitted that though the reason mentioned that there
was of a failure on the part of the assessee to fully and truly disclose all
material facts necessary for the assessment, there is no specific indication as
to which material was not fully and truly disclosed by the assessee which he
was required to do for the purposes of assessment. All that the reasons
indicate are that on account of a mistake on the part of the Assessing Officer
the income had escaped assessment. He once again referred to the decision in
Wel Intertrade Pvt. Ltd. (supra) to submit that a mistake on the part of the
Assessing Officer is not sufficient to invoke the provisions of Section 147,
particularly, in view of the first proviso thereof wherein one of the pre-
conditions is that there must be failure on the part of the assessee to make a
full and true disclosure of the material facts which would be necessary for
making the assessment. Since there is no failure on the part of the assessee,
the provisions of Section 147 could not at all have been invoked after the
period of four years from the end of the assessment year. Insofar as the
disallowance under Section 36(1)(viia) of the said Act is concerned, the
learned counsel for the petitioner reiterated that there was a clear case of
change of opinion which, in any event, was not permissible.
WP(C) 2594/2013 Page 12 of 24
16. Now, let us examine the decisions relied upon by the learned counsel
for the petitioner. In Ranbaxy Laboratories Ltd.(supra), a Division Bench of
this court had agreed with the reasoning of the Bombay High Court in the
case of CIT v. Jet Airways (I) Ltd.: (2011) 331 ITR 236 (Bom). In the latter
case, the Bombay High Court had observed in the context of proceedings
under Sections 147/148 of the said Act that:-
"Section 147 has this effect that the Assessing Officer has
to assess or reassess the income (,,such income) which
escaped assessment and which was the basis of the
formation of belief and if he does so, he can also assess or
reassess any other income which has escaped assessment
and which comes to his notice during the course of the
proceedings. However, if after issuing a notice under
section 148, he accepted the contention of the assessee and
holds that the income which he has initially formed a
reason to believe had escaped assessment, has as a matter
of fact not escaped assessment, it is not open to him
independently to assess some other income. If he intends to
do so, a fresh notice under section 148 would be necessary,
the legality of which would be tested in the event of a
challenge by the assessee."
17. This court in Ranbaxy Laboratories Ltd.(supra), agreeing with the
above views held as under:-
"We are in complete agreement with the reasoning of the
Division Bench of Bombay High Court in the case of CIT
v. Jet Airways (I) Limited [2011] 331 ITR 236(Bom).We
may also note that the heading of Section 147 is "income
escaping assessment" and that of Section 148 "issue of
notice where income escaped assessment". Sections 148 is
supplementary and complimentary to Section 147. Sub-
WP(C) 2594/2013 Page 13 of 24
section (2) of Section 148 mandates reasons for issuance of
notice by the Assessing Officer and sub-section (1) thereof
mandates service of notice to the assessee before the
Assessing Officer proceeds to assess, reassess or recompute
escaped income. Section 147 mandates recording of
reasons to believe by the Assessing Officer that the income
chargeable to tax has escaped assessment. All these
conditions are required to be fulfilled to assess or reassess
the escaped income chargeable to tax. As per Explanation 3
if during the course of these proceedings the Assessing
Officer comes to conclusion that some items have escaped
assessment, then notwithstanding that those items were not
included in the reasons to believe as recorded for initiation
of the proceedings and the notice, he would be competent
to make assessment of those items. However, the
legislature could not be presumed to have intended to give
blanket powers to the Assessing Officer that on assuming
jurisdiction under Section 147 regarding assessment or
reassessment of escaped income, he would keep on making
roving inquiry and thereby including different items of
income not connected or related with the reasons to
believe, on the basis of which he assumed jurisdiction. For
every new issue coming before Assessing Officer during
the course of proceedings of assessment or reassessment of
escaped income, and which he intends to take into account,
he would be required to issue a fresh notice under Section
148."
18. In Ranbaxy Laboratories Ltd.(supra), which was an appeal under
Section 260A of the said Act, the question under consideration was as
follows:-
"Whether on the facts the Tribunal was right in law in
holding that the Assessing Officer had jurisdiction to
reassess issues other than the issues in respect of which
proceedings were initiated especially when the reasons for
the latter ceased to survive?"
WP(C) 2594/2013 Page 14 of 24
The facts in that case were that the reassessment proceedings had been
initiated on the premise that on account of items such as club fees, gifts and
presents and provision for leave encashment, income had escaped
assessment. The explanation given by assessee pursuant to the notice under
Section 148 was accepted by the Assessing Officer and he did not make any
disallowance in respect of these items. However, during the reassessment
proceedings the Assessing Officer found that that deductions claimed by the
assessee therein under Section 80HH and 80I were inadmissible. In this
context, the court held:-
"20. The very basis of initiation of proceedings for which
reasons to believe were recorded were income escaping
assessment in respect of items of club fees, gifts and
presents, etc., but the same having not been done, the
Assessing Officer proceeded to reduce the claim of
deduction under Section 80 HH and 80-I which as per our
discussion was not permissible. Had the Assessing Officer
proceeded not to make dis-allowance in respect of the items
of club fees, gifts and presents, etc., then in view of our
discussion as above, he would have been justified as per
explanation 3 to reduce the claim of deduction under
Section 80 HH and 8-I as well.
21. In view of our above discussions, the Tribunal was
right in holding that the Assessing Officer had the
jurisdiction to reassess issues other than the issues in
respect of which proceedings are initiated but he was not so
justified when the reasons for the initiation of those
proceedings ceased to survive. Consequently, we answer
the first part of question in affirmative in favour of
Revenue and the second part of the question against the
WP(C) 2594/2013 Page 15 of 24
Revenue."
19. It is pertinent to point out that in Ranbaxy Laboratories Ltd.(supra),
this court had also referred to a decision of the Rajasthan High Court in the
case of CIT v. Shri Ram Singh: (2008) 306 ITR 343 (Raj), where it was
held as under:-
"To clarify it further, or to put it in other words, in our
opinion, if in the course of proceedings under section 147,
the Assessing Officer were to come to the conclusion, that
any income chargeable to tax, which, according to his
,,reason to believe, had escaped assessment for any
assessment year, did not escape assessment, then, the mere
fact, that the Assessing Officer entertained a reason to
believe, albeit even a genuine reason to believe, would not
continue to vest him with the jurisdiction, to subject to tax,
any other income, chargeable to tax, which the Assessing
Officer may find to have escaped assessment, and which
may come to his notice subsequently, in the course of
proceedings under section 147."
The decision of the Rajasthan High Court in Dr Devendra Gupta (supra)
followed the decision in Shri Ram Singh (supra).
20. We now come to the decision of the Supreme Court in Kelvinator of
India Ltd. (supra) which was rendered in the context of the concept of
,,change of opinion. The question before the Supreme Court was "whether
the ,,concept of change of opinion stands obliterated with effect from 1st
April, 1989, i.e., after substitution of Section 147 of the Income Tax Act,
WP(C) 2594/2013 Page 16 of 24
1961 by the Direct Tax Laws (Amendment) Act, 1987?" The Supreme Court
held as under:-
"6. On going through the changes, quoted above, made to
Section 147 of the Act, we find that, prior to Direct Tax
Laws (Amendment) Act, 1987, re-opening could be done
under above two conditions and fulfillment of the said
conditions alone conferred jurisdiction on the Assessing
Officer to make a back assessment, but in Section 147 of
the Act [with effect from 1st April, 1989], they are given a
go-by and only one condition has remained, viz., that
where the Assessing Officer has reason to believe that
income has escaped assessment, confers jurisdiction to re-
open the assessment. Therefore, post-1st April, 1989, power
to re-open is much wider. However, one needs to give a
schematic interpretation to the words "reason to believe"
failing which, we are afraid, Section 147 would give
arbitrary powers to the Assessing Officer to re-open
assessments on the basis of "mere change of opinion",
which cannot be per se reason to re-open. We must also
keep in mind the conceptual difference between power to
review and power to re-assess. The Assessing Officer has
no power to review; he has the power to re-assess. But re-
assessment has to be based on fulfillment of certain pre-
condition and if the concept of "change of opinion" is
removed, as contended on behalf of the Department, then,
in the garb of re-opening the assessment, review would
take place. One must treat the concept of "change of
opinion" as an in-built test to check abuse of power by the
Assessing Officer. Hence, after 1st April, 1989, Assessing
Officer has power to re-open, provided there is "tangible
material" to come to the conclusion that there is
escapement of income from assessment. Reasons must
have a live link with the formation of the belief."
21. The full bench decision of this court in Usha International Ltd.
(supra), again in the context of change of opinion, held as under:-
WP(C) 2594/2013 Page 17 of 24
"13. It is, therefore, clear from the aforesaid position
that:
(1) Reassessment proceedings can be validly initiated
in case return of income is processed under
Section 143(1) and no scrutiny assessment is undertaken. In
such cases there is no change of opinion;
(2) Reassessment proceedings will be invalid in case
the assessment order itself records that the issue was raised
and is decided in favour of the assessee. Reassessment
proceedings in the said cases will be hit by principle of
"change of opinion".
(3) Reassessment proceedings will be invalid in case
an issue or query is raised and answered by the assessee in
original assessment proceedings but thereafter the
Assessing Officer does not make any addition in the
assessment order. In such situations it should be accepted
that the issue was examined but the Assessing Officer did
not find any ground or reason to make addition or reject the
stand of the assessee. He forms an opinion. The
reassessment will be invalid because the Assessing Officer
had formed an opinion in the original assessment, though
he had not recorded his reasons.
14. In the second and third situation, the Revenue is not
without remedy. In case the assessment order is erroneous
and prejudicial to the interest of the Revenue, they are
entitled to and can invoke power under Section 263 of the
Act. This aspect and position has been highlighted in CIT
v. DLF Power Ltd. ITA No. 973 of 2011 decided on
November 29, 2011 since reported in [2012] 345 ITR 446
(Delhi) and BLB Limited v. Asst. CIT Writ Petition (Civil)
No. 6884 of 2010 decided on December 1, 2011 since
reported in [2012] 343 ITR 129 (Delhi). In the last
decision it has been observed (page 135):
"The Revenue had the option, but did not take
recourse to Section 263 of the Act, in spite of audit
objection. Supervisory and revisionary power under
Section 263 of the Act is available, if an order passed
WP(C) 2594/2013 Page 18 of 24
by the Assessing Officer is erroneous and prejudicial
to the interest of the Revenue. An erroneous order
contrary to law that has caused prejudiced can be
correct, when jurisdiction under Section 263 is
invoked."
15. Thus where an Assessing Officer incorrectly or
erroneously applies law or comes to a wrong conclusion
and income chargeable to tax has escaped assessment,
resort to Section 263 of the Act is available and should be
resorted to. But initiation of reassessment proceedings will
be invalid on the ground of change of opinion."
22. Finally, in Wel Intertrade Pvt. Ltd. (supra), a Division Bench of this
court analyzed the first proviso to Section 147 as under:-
"A plain reading of the said proviso makes it more than
clear that where the provisions of Section 147 are being
invoked after the period of four years from the end of the
relevant assessment year, in addition to the Assessing
Officer having reason to believe that any income
chargeable to tax has escaped assessment, it must also be
established as a fact that such escapement of assessment
has been occasioned by either the assessee failing to make
a return under Section 139, etc., or by reason of failure on
the part of the assessee to disclose fully and truly all
material facts necessary for his assessment, for that
assessment year. In the present case, the question of
making of a return is not in issue and the only question is
with regard to the second portion of the proviso, which
relates to failure on the part of the assessee to disclose fully
and truly all material facts necessary for assessment.
Insofar as this pre-condition is concerned, there is not a
whisper of it in the reasons recorded by the Assessing
Officer. In fact, as indicated above, the Assessing Officer
could not have made this a ground because the Assessing
Officer had required the petitioner to furnish details with
regard to loss occasioned by foreign exchange fluctuation
which the petitioner did by virtue of the reply dated
WP(C) 2594/2013 Page 19 of 24
February 5, 2002. Since the petitioner had fully and truly
disclosed all the material facts necessary for the
assessment, the pre-condition for invoking the proviso to
Section 147 of the said Act had not been satisfied."
23. From the above review of the case law it is evident that, in the facts of
this case, if no additions were made in respect of the said reasons (a) and/or
(b), it was not open to the Assessing Officer to make additions on some
other ground such as the disallowance of the deduction under Section
36(1)(viia) of the said Act without first issuing a notice under Section 148.
Mr Sahni, appearing for the Revenue, argued that although no addition has
been made in respect of reason (a), there is a finding against the assessee on
that aspect. He, as pointed out above, referred to paragraphs 2 and 2.1 of the
reassessment order to submit that the finding was recorded in favour of the
Revenue. We are unable to agree with this. It is clear that no addition has
been made on account of reason (a). It is also clear that though the specific
point was taken in reason (a) and it was one of the ,,reasons to believe that
income had escaped assessment yet, no addition was made. The proposition
that by ,,mistake or through ,,inadvertence the Assessing Officer did not
make the addition, cannot be accepted. Reason (a) was one of only two
reasons for reopening the assessment. How can it be accepted that the
Assessing Officer was so callous or naïve (whichever expression is taken)
WP(C) 2594/2013 Page 20 of 24
that, though he found against the assessee yet he did not make any addition
in respect of reason (a)? As pointed out in Usha International Ltd.(supra),
when an Assessing Officer raises a specific issue in the assessment
proceedings and yet does not make any addition in the assessment order, it
should be accepted that the Assessing Officer did not find any ground or
reason to make the addition. What is stated in paragraph 2 and 2.1 of the
reassessment order are mere observations and not the conclusions. The fact
remains that no addition was made by the Assessing Officer insofar as
reason (a) is concerned. And, it must be taken that the Assessing Officer
consciously did not make any addition after examining the entire issue.
24. Coming to reason (b), we find that there is no addition with regard to
that either. Nor is there any adverse finding in the reassessment order.
Mr Sahni, as pointed out above, suggested that there is a finding by referring
to the sentence at the end of the reassessment order to the following effect:-
"Charge interest u/s 234B, 234D and 244A(c) of I.T. Act as
per law."
25. We are afraid that we cannot accept this argument either. This general
statement at the end of the reassessment order cannot be regarded as a
finding or an addition with regard to reason (b). If we recall, reason (b) was
WP(C) 2594/2013 Page 21 of 24
a specific allegation that the assessee was liable to pay interest under Section
234D on excess refund of Rs.125,55,01,247/- and that because of the
,,mistake that the assessee had not been required to pay the interest amount,
there was a short levy of interest of Rs.62,77,506/-. We do not find any
conclusion with regard to this in the reassessment order. The Assessing
Officer having indicated the specific amount of alleged short levy of interest
had to return a conclusive finding resulting in an addition. There was none.
Therefore, even in respect of reason (b) there was no addition made.
26. That being the position, since no addition had been made in respect of
reasons (a) and/or (b), in view of the decisions in Ranbaxy Laboratories
Ltd.(supra), Jet Airways (I) Ltd.(supra), Shri Ram Singh (supra) and
Dr Devendra Gupta (supra), it was not open to the Assessing Officer to
independently assess some other income [in this case, disallowance under
Section 36(1)(viia)].
27. The note sheet entry of 16.03.2013, cannot, by any stretch of
imagination be regarded as a notice under Section 148. Where are the
,,reasons to believe that income had escaped assessment and, more
importantly, that such escapement was on account of the assessees failure to
WP(C) 2594/2013 Page 22 of 24
disclose truly and fully all material facts necessary for assessment? By
virtue of Section 148(2) the Assessing Officer is mandated to record his
reasons before issuing any notice under Section 148. Moreover, as pointed
out in Wel Intertrade Pvt. Ltd. (supra), in cases where the first proviso to
Section 147 applies, "in addition to the Assessing Officer having reason to
believe that any income chargeable to tax has escaped assessment, it must
also be established as a fact that such escapement of assessment has been
occasioned by either the assessee failing to make a return under Section 139,
etc., or by reason of failure on the part of the assessee to disclose fully and
truly all material facts necessary for assessment, for that assessment year."
This essential pre-condition is clearly missing in the present case even if we
were, for the sake of argument, to assume, which we cannot, that the note-
sheet entry of 16.03.2013 was a notice under Section 148 as also the
,,reasons to believe rolled into one!
28. As regards the deduction claimed under Section 36(1)(viia) of the said
Act to the tune of Rs.126,81,944/-, the learned counsel for the petitioner has
correctly pointed out that the same has been accepted by the Assessing
Officer insofar as the assessment year 2005-06 is concerned. This would be
evident from paragraph 3.3.2 of the reassessment order which has been
WP(C) 2594/2013 Page 23 of 24
extracted in paragraph 4 above. The disallowance of Rs.453,96,44,854/- in
the reassessment order does not pertain to assessment year 2005-06 but to an
earlier year which was not the subject-matter of reassessment. This is
clearly impermissible in law. This is apart from the fact that reassessment
for an earlier year was in any event time-barred and would also amount to a
,,change of opinion which is also not permitted in law as is evident from the
decision of the Supreme Court in Kelvinator of India Ltd. (supra).
29. For all these reasons, the reassessment order dated 28.03.2013 as also
the proceedings pursuant to the notice dated 29.03.2012 under Section 148
cannot be sustained. They are quashed. The writ petition is accordingly
allowed. The parties are left to bear their own costs.
BADAR DURREZ AHMED, J
SIDDHARTH MRIDUL, J
AUGUST 11, 2014
mk
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