Delhi High Court
Commissioner Of Income Tax vs Engineers India Ltd. on 20 September, 2010
Author: Manmohan
#11
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* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA 276/2010
COMMISSIONER OF
INCOME TAX ..... Appellant
Through: Mr. Sanjeev Sabharwal, Senior
Standing Counsel
versus
ENGINEERS INDIA LTD. ..... Respondent
Through: None
% Date of Decision: 20th September, 2010
CORAM:
HON'BLE THE CHIEF JUSTICE
HON'BLE MR. JUSTICE MANMOHAN
1. Whether the Reporters of local papers may be allowed to see the judgment? No.
2. To be referred to the Reporter or not? No.
3. Whether the judgment should be reported in the Digest? No.
JUDGMENT
MANMOHAN, J
CM 3235/2010
This is an application for condonation of delay in re-filing the
appeal.
For the reasons stated in the application, delay in re-filing the
appeal is condoned.
Accordingly, application stands disposed of.
ITA 276/2010
1. The present appeal has been filed under Section 260A of the
Income Tax Act,1961 (for brevity "Act") challenging the order dated
18th July, 2008 passed by the Income Tax Appellate Tribunal (in short
"Tribunal") in ITA No. 1569/Delhi/2005 for the Assessment Year
1996-1997.
2. Mr. Sanjeev Sabharwal, learned senior standing counsel for
Revenue submitted that the Tribunal had erred in law in upholding the
order of Commissioner of Income Tax (Appeals) who had quashed the
re-assessment proceedings initiated under Section 147/148 of the Act.
3. It is pertinent to mention that the reason for reopening the
concluded assessment proceedings was the decision for Assessment
Year 2000-2001 wherein such warrantees, guarantees and penalties
were disallowed.
4. Upon a perusal of the record, it is apparent that the aforesaid
deductions were allowed after considering the reply of the assessee
dated 27th March, 1998 to the notice/questionnaire issued by the
Assessing Officer (in short "AO") under Section 142(1) of the Act. In
fact, the AO before concluding the assessment proceedings under
Section 143(3) of the Act had considered the said issue in detail and
only thereafter allowed the said deductions. Consequently, we are of
the opinion that in the present case, re-assessment has been initiated on
the basis of mere change of opinion - which is not permissible under
the Act.
5. In any event, we find that re-assessment was initiated after expiry
of four years from the end of the relevant assessment year and one of
the conditions precedent in the first proviso to Section 147 of the Act
had not been fulfilled in the present case. The first proviso to Section
147 which provides extended limitation for reassessment i.e. beyond
the period of four years reads as under:-
"Provided that where an assessment under sub-section (3) of
section 143 or this section has been made for the relevant
Assessment Year, no action shall be taken under this section
after the expiry of four years from the end of the relevant
Assessment Year, unless any income chargeable to tax has
escaped assessment for such Assessment Year by reason of
failure on the part of the assessee to make a return under
section 139 or in response to a notice issued under sub-
section (1) of section 142 or section 148 or to disclose fully
and truly all material facts necessary for his assessment, for
that Assessment Year."
6. From a plain reading of the above proviso, it is apparent that
where an assessment under Section 143(3) has been made, as in the
present case, no action can be taken under Section 147 of the Act, 1961
after expiry of four years from the end of the relevant Assessment Year
unless two conditions are simultaneously fulfilled i.e. firstly, the AO
must have reasons to believe the income chargeable to tax has escaped
assessment and secondly, the AO must have reasons to believe that
such escapement occurred either due to omission or failure on the part
of the respondent-assessee to disclose fully and truly all material facts
necessary for its assessment [See CIT vs. Rajesh Jhavery Stock
Brokers Pvt. Ltd. (2007) 291 ITR 500 at 512; Haryana Acrylic
Manufacturing Co. vs. CIT & Anr. (2009) 308 ITR 38 and Wel
Intertrade P. Ltd. & Anr. Vs. ITO (2009) 308 ITR 22 (Delhi)].
7. Consequently, as the AO has failed to prove and establish that
there was failure on the part of the assessee to disclose fully and truly
all material facts necessary for his assessment, we are of the opinion
that the present case is not covered by the Proviso to Section 147 of the
Act. Accordingly, the present appeal, being bereft of merit, is
dismissed in limine.
MANMOHAN, J
CHIEF JUSTICE
SEPTEMBER 20, 2010
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