Canon India Pvt Ltd And Anr vs Assistant Commissioner Of Income ...
2013 Latest Caselaw 3341 Del

$~25.
*       IN THE HIGH COURT OF DELHI AT NEW DELHI


+                WRIT PETITION (CIVIL) NO. 2770/2012


                                       Date of decision 31st July, 2013


        CANON INDIA PVT LTD AND ANR
                                                        ..... Petitioners
                          Through Mr. Prakash Kumar, Advocate.


                          Versus


        ASSISTANT COMMISSIONER OF INCOME TAX
                                          ..... Respondent

Through Ms. Suruchi Aggarwal, Sr. Standing Counsel.

CORAM:

HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE SANJEEV SACHDEVA

SANJIV KHANNA, J. (ORAL):

This writ petition impugns reassessment proceedings initiated

for the Assessment Year 2006-07 vide notice under Section 148 of the

Income Tax Act, 1961 (Act, for short) dated 24th March, 2011. We

record that the reassessment proceedings have been initiated within

four years from the end of the relevant assessment year and, therefore,

the additional requirement mentioned in the first proviso to Section

147 is not required to be satisfied.

2. The petitioner had filed return of income for the Assessment

Year 2006-07 on 28th November, 2006 declaring "nil" income under

the normal provisions and Rs.3,15,36,278/- under Section 115JB of the

Income Tax Act, 1961 (Act, for short). The assessment order under

Section 143(3) read with Section 144C of the Act was passed on 14 th

December, 2009 making several additions. We are not concerned with

the said additions, but state that the total income was assessed at

Rs.39,67,07,990/- under the normal provisions.

3. As noticed above, subsequently the Assessing Officer recorded

reasons to believe and issued reassessment notice dated 24th March,

2011. Reasons to believe recorded by the Assessing Officer read as

under:-

"As per information received by the Income Tax Department M/s Canon India Pvt. Ltd. has received a sum of JPY 89992707 (Rs.3,35,58,280/-)from M/s Canon Inc. Japan in F.Y. 2005-06 relevant to A.Y. 2006-07. The income tax return of the assessee for the A.Y. 2006-07 was filed on 28.11.2006 declaring an income of Rs.14,99,98,977/-. The return was processed u/s 143(1) of the I.T. Act, 1961. Notice u/s 143(2) was issued on 02.07.2008 and assessment was completed u/s 143(3) r.w.s. 144C of the I.T. Act, 1961 on 30.08.2010 at an income of Rs.38,94,75,850/- thereby making addition of Rs.23,94,76,875/-. However, the assessee has not disclosed the amount received from M/s Cannon Inc. Japan in its return of income. In view of the above

facts, I have reason to believe that income chargeable to tax has escaped assessment owing to the failure on the part of the assessee to disclose fully and truly all material facts relevant for the assessment. Issue notice u/s 148 of the I.T. Act, 1961 for the A.Y. 2006-

07."

4. Subsequent to the recording of the reasons dated 24th March,

2011, the petitioner wrote letter dated 28th March, 2011 that JPY

89,992,707 was disclosed and included in the income for the

Assessment Year 2005-06.

5. A perusal of the „reasons to believe‟ indicate that information

had been received by the Income Tax Department about receipt of

Japanese Yen 8,99,92,707 (Rs.3,35,58,280/-) from M/s Canon Inc.

Japan in Financial Year 2005-06 relevant to the Assessment Year

2006-07. The reasons to believe further records that the income tax

return for the Assessment Year 2006-07, which had resulted in the

regular assessment order dated 30th August, 2010 did not take into

consideration receipt of the said sum. It is specifically recorded that

the petitioner had not disclosed this amount in the return of income for

Assessment Year 2006-07 and, therefore, the Assessing Officer had

reason to believe that income chargeable to tax had escaped

assessment.

6. The respondent, it is apparent, had received information from

the tax authorities in Japan about deduction of tax at source by Canon

Inc. Japan on funds, which were transferred to Canon India Private

Limited. This had resulted in deduction and deposit of Japanese Yen

8,99,92,707 with the tax authorities in Japan. The tax certificate

received from Japan mentions the date of payment as 8th July, 2004 but

was issued on 13th July, 2005. On receipt of the information and copy

of the tax certificate, Assistant Director of Income Tax (Investigation),

Gurgaon by issue of notice under Section 131(1)(A) of the Act had

called upon the petitioner to produce books of accounts and other

documents relating to all payments received from Japan of Rs.1 crore

or more for the Financial Years 2004-05 and 2005-06 as per the chart

enclosed as Annexure-A. Details were submitted by the petitioner vide

letter dated 16th February, 2011. In reply, the petitioner had stated that

amount of payments received mentioned in Annexure-A to the notice

matched the company‟s record and there was no difference in the first

and second item of the annexure. Regarding the third item pertaining

to the year 2005, accounts were checked and the petitioner was unable

to trace receipt of Japanese Yen 8,99,92,707. They would further

check their records and had requested the authority to provide more

details/information. The exact reply given by the petitioner in response

to the said query is as under:-

"Regarding the third line item of

Annexure-A pertaining to year 2005 amounting to JPY 89,992,707, we have checked our records and have not been able to trace the said amount. However, we are further checking our records and in the meantime, request your goodself to kindly provide more details/information in relation to the same."

7. The said reply, as noticed above, was given on 16 th February, 2011. Thereafter, the petitioner did not correspond nor furnished details or information till notice under Section 148 dated 24 th March, 2011 was issued by the Assessing Officer of the petitioner from Delhi. It is apparent that the Investigation Wing at Gurgaon had communicated these details to the Assessing Officer, who then examined the same and recorded the reasons to believe mentioned above.

8. The contention of the petitioner is that after notice was received,

they have been able to reconcile their records and have ascertained that

Japanese Yen 8,99,92,707 was received and duly accounted for in their

books for the earlier assessment year, i.e., Assessment Year 2005-06.

Thus, as per the petitioner, the income in question has already been

brought into books and taxed in the earlier assessment year. It is

noticeable that this assertion or statement, was made by the assessee

after reasons to believe were recorded and has not been checked or

verified by the Assessing Officer in Delhi or by the Investigation Wing

at Gurgaon. The said assertion has not been tested or examined. The

veracity of the same, therefore, is uncertain and requires scrutiny. To

some extent, the petitioner themselves are to be blamed because they

did not furnish and give the information on or before "reasons to

believe" were recorded by the Assessing Officer and reassessment

notice was issued on 24th March, 2011. They kept quiet and remained

silent after writing letter dated 16th February, 2011.

9. The petitioner asserts that it is factually correct and true that

receipt of Japanese Yen 8,99,92,707 was included and was brought to

tax in the Assessment Year 2005-06. It is not possible for the Court to

determine and decide the said contention. It is a question of fact. This

aspect has to be examined and dealt with by the Assessing Officer

during the course of the assessment proceedings. It is submitted that if

the assertion made by the petitioner is correct, then they would be put

to inconvenience/harassment and have to face reassessment

proceedings. This is true and correct but as already noted above, to a

large extent the assessee himself is responsible for the present situation

as they did not furnish the requisite details in spite of the letter of the

Investigation Wing of the Department. Reasons to believe have to be

recorded by the Assessing Officer before notice is issued. The facts

and averments made in the „reasons to believe‟ have to be tested on the

basis of facts and information available with the Assessing Officer on

the said date. Reasons to believe cannot be substituted or altered.

They form the foundation of the jurisdiction of the Assessing Officer,

who initiates reassessment proceedings. At that stage, only a prima

facie or tentative view is to be taken as it marks the beginning of the

reassessment proceedings. Subsequently and when documents and

papers are produced and the assessee is able to satisfy that no addition

is required to be made, reassessment order is passed accepting the

claim of the assessee. „Reasons to believe‟ mean cause or justification

of the Assessing Officer to believe that income has escaped

assessment. It does not mean that the

Assessing Officer should have finally ascertained the said fact by legal

evidence or reached a firm conclusion, as this is determined and

decided in the assessment order, which is the final stage before the

Assessing Officer. As we are dealing with initiation of proceedings, it

is not necessary that the material should conclusively prove

escapement.

10. Learned counsel for the petitioner submitted that there have been

cases where reassessment notices have been quashed pursuant to

authoritative pronouncement on the question of law or because of

decisions of higher authorities in the case of the assessee themselves

relating to different years. This is correct but in such cases

reassessment proceedings are quashed for the reason that it would be

futile to allow reassessment proceedings to continue, when the subject

matter of the reason to believe had arisen in another year and stands

decided in favour of the assessee or there is an authoritative

pronouncement on the question of law and, therefore, facts need not be

examined. In such cases, it would be fallacious and wrong to allow the

said reassessment proceedings to continue as a mere formality. In the

present case, there is a factual dispute whether or not Japanese Yen

8,99,92,707 were included in the receipts for the Assessment Year

2005-06. The said factual assertion made by the petitioner has not

been examined or affirmed or denied. As far as Assessment Year

2006-07 is concerned, the petitioner admits that this amount was not

shown in the return or as income. The Assessing Officer has

proceeded on the basis of investigation made, relying upon

communications exchanged between the Investigation Wing of the

Department at Gurgaon and the petitioner-assessee. He did not have

benefit of the letter dated 28th March, 2011 written by the petitioner

before reasons were recorded and notice was issued. If letter dated 28th

March, 2011 had been written before the reasons were recorded, the

Assessing Officer was mandated to examine and consider the

averments made therein before he recorded his reasons. In view of the

averments made in the said letter, the assessee could have asserted and

insisted that the Assessing Officer should have dealt with the assertion

in the reasons recorded. This is not the position in the present case.

11. Keeping in view the aforesaid facts and balancing out equities,

we feel it will be just and proper to direct that the petitioner should

furnish complete and full details before the Assessing Officer in the

reassessment proceedings in regard to receipt of Japanese Yen

8,99,92,707 in India and the fact that the said amount was shown in the

taxable income and received in the previous year. In case the

petitioner is able to satisfy the Assessing Officer on the said aspect,

necessary and consequential assessment order will follow. Only in

case the petitioner is not able to satisfy the Assessing Officer on the

said aspect, the Assessing Officer can proceed with the reassessment in

accordance with law. We clarify that only one assessment order can be

and will be passed and the petitioner cannot insist that a separate order

be passed. We hope and trust that the Assessing Officer will adhere

and abide by the said direction.

12. With the aforesaid observations and direction, we dispose of the

present writ petition. There will be no order as to costs.

SANJIV KHANNA, J.

SANJEEV SACHDEVA, J.

JULY 31, 2013 VKR