Delhi High Court
Commissioner Of Income Tax vs Modipon Ltd. on 21 March, 2011
Author: A.K.Sikri
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA No.533 of 2011
% DECISION DELIVERED ON: MARCH 21, 2011.
COMMISSIONER OF INCOME TAX . . . APPELLANT
through : Mr. Kamal Sawhney, Sr.
Standing Counsel.
VERSUS
MODIPON LTD. . . .RESPONDENT
through: Mr. Santosh K. Aggarwal,
Advocate.
CORAM :-
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE M.L. MEHTA
1. Whether Reporters of Local newspapers may be allowed
to see the Judgment?
2. To be referred to the Reporter or not?
3. Whether the Judgment should be reported in the Digest?
A.K. SIKRI, J. (ORAL)
1. Assessment in this case was completed under Section 143(3)
of the Income Tax Act (hereinafter referred to as „the Act‟) on
30.01.2004 at loss of `1,03,63,693/- as against the returned
loss of `1,75,90,254/-. Thereafter, proceedings under Section
147 of the Act were initiated by issuing notice under Section
148 of the Act on 21.07.2005. Re-assessment proceedings
were completed on 29.09.2006 at loss of `39,13,425/-. In re-
assessment proceedings additions of `31,87,271/- and
`32,63,000/- were made on account of disallowance of prior
period expenses and capital expenditure respectively claimed
as revenue expenses. The reopening was made on the basis of
„tangible material‟ in the form of tax audit report filed by the
assessee and on the basis of information available in the Profit
and Loss account.
2. Before the CIT (A), the assessee had challenged the validity of
re-assessment proceedings. The CIT (A) vide para No.2.3.3 of
his order dated 25.09.2008 held that the reasons were
recorded for reopening the assessment on 20.07.2005 within
four years and therefore, the case is covered by the main
Section 147 of the Act and not by the proviso in Section 147 of
the Act. It was held by him that as per the amended provision
of Section 147 of the Act, the only necessary pre-requisite is
formation of belief by recording reasons for escapement of
income. The CIT (A) held that the only requirement was that
the AO should have some tangible material to come to the
conclusion. The CIT (A) held that it cannot be said to be a
„change of opinion‟ when the issue was never decided in the
original assessment. The CIT (A), therefore, upheld the order
of the AO.
3. The Income Tax Appellate Tribunal („the Tribunal‟ for brevity)
relying on the judgment of the Apex Court in the case of
Commissioner of Income Tax Vs. Kelvinator of India Ltd.
320 ITR 561 (SC) quashed the reassessment order passed by
the AO by holding that in present case also, the reopening was
on mere change of opinion on the basis of material which was
already available on record at the time of completion of the
original assessment. The Tribunal held that as per reasons
recorded by the AO, the re-assessment proceedings were
initiated by the AO on the basis of tax audit report filed by the
assessee and on the basis of information available in the Profit
and Loss account and there is no reference to any new material
which has come to AO‟s possession after the completion of
original assessment.
4. It is not in dispute that the re-assessment proceedings were
initiated by the AO on the basis of tax audit report filed by the
assessee in Form No.3CD and on the basis of information
available in the Profit and Loss account. There was no
reference to any new material by the AO which had come into
his possession after the completion of original assessment
under Section 143(3) of the Act. It is also a matter of record
that before initiating re-assessment proceedings by issuing
notice under Section 148 of the Act, the AO had initiated
proceedings under Section 154 of the Act for the same reasons
and proceedings initiated under Section 154 were dropped by
him after the issuance of notice under Section 148 and were
thus pending on the date of initiation of the re-assessment
proceedings. In these circumstances, the Tribunal while
setting aside the reassessment proceedings relied upon the Full
Bench Judgment of this Court in the case of Kelvinator of
India Ltd. (supra) and quoted the following passage from the
said judgment:
"This has been the settled position in law all through.
However, the question which requires consideration is
whether any change in law has been brought about on
account of amendment of Section 147 with effect from April
1, 1989.
In Jindal Photo Films Ltd. [1998] 234 ITR 170 (Delhi), R.C.
Lahoti J. (as his Lordship then was), observed (headnote):
The power to reopen an assessment was conferred by the
Legislature not with the intention to enable the Income-tax
Officer to reopen the final decision made against the
Revenue in respect of questions that directly arose for
decision in earlier proceedings. If that were not the legal
position it would result in placing an unrestricted power of
review in the hands of the assessing authorities depending
on their changing moods.
It was further held by the Bench that (page 178):
Reverting back to the case at hand, it is clear from the
reasons placed by the Assessing Officer on record as also
from the statement made in the counter affidavit that all
that the Income-tax Officer has said is that he was not
right in allowing deduction under Section 80-I because he
had allowed the deductions wrongly and, therefore, he was
of the opinion that the income had escaped assessment.
Though he has used the phrase 'reason to believe' in his
order, admittedly, between the date of the orders of
assessment sought to be reopened and the date of forming
of opinion by the Income-tax Officer nothing new has
happened. There is no change of law. No new material has
come on record. No information has been received. It is
merely a fresh application of mind by the same Assessing
Officer to the same set of facts. While passing the original
orders of assessment the order dated February 28, 1994,
passed by the Commissioner of Income-tax (Appeals) was
before the Assessing Officer. That order stands till today.
What the Assessing Officer has said about the order of the
Commissioner of Income-tax (Appeals) while recording
reasons under Section 147 he could have said even in the
original orders of assessment. Thus, it is a case of mere
change of opinion which does not provide jurisdiction to the
Assessing Officer to initiate proceedings under Section 147
of the Act.
It is also equally well settled that if a notice under Section
148 has been issued without the jurisdictional foundation
under Section 147 being available to the Assessing Officer,
the notice and the subsequent proceedings will be without
jurisdiction, liable to be struck down in exercise of writ
jurisdiction of this Court. If 'reason to believe' be available,
the writ court will not exercise its power of judicial review
to go into the sufficiency or adequacy of the material
available. However, the present one is not a case of testing
the sufficiency of material available. It is a case of absence
of material and hence the absence of jurisdiction in the
Assessing Officer to initiate the proceedings under Section
147/148 of the Act."
5. Various other judgments are also referred to by the Tribunal in
support of its aforesaid view.
6. In these circumstances, we do not find any substantial question
of law that would arise for consideration in this appeal. The
appeal is devoid of any merit and is accordingly dismissed.
(A.K. SIKRI)
JUDGE
(M.L. MEHTA)
JUDGE
MARCH 21, 2011
pmc
