Madras High Court
M/S.Vedanta Limited vs Assistant Director Of Income Tax on 13 July, 2021
W.P.Nos.34891 & 34892 of 2007
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 13.07.2021
CORAM
THE HONOURABLE MR.JUSTICE S.M.SUBRAMANIAM
W.P.Nos.34891 & 34892 of 2007
and
M.P.Nos.1, 1, 2 and 2 of 2007 and
M.P.Nos.1 and 1 of 2008
M/s.Vedanta Limited,
Authorised Signatory Mr.G.R.Arun Kumar,
Core 6, 3rd Floor, Scope Complex,
7, Lodhi Road, New Delhi – 110 003. .. Petitioner in both W.Ps.
-vs-
Assistant Director of Income Tax,
(International Taxation)
7th Floor, Room No.703,
Annexe Building, Aaykar Bhawan,
121, Mahatma Gandhi Road,
Chennai – 600 034. .. Respondent in both W.Ps.
[cause title amended as per order made
in W.M.P.Nos.23147/2019 and 23169/2019
dated 16.08.2019]
Petitions filed under Article 226 of the Constitution of India praying
for issuance of Writ of Certiorari, calling for the impugned notice in
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G.I.No.10-C AAACC 3097L for the assessment year 2002-03 dated
24.10.2007 and 27.04.2006 of the respondent and quash the same.
For Petitioner : Mr.C.S.Agarwal
(In both W.Ps.) Senior Counsel
for Mr.G.Baskar
For Respondent : M/s.Hema Muralikrishnan
Senior Standing Counsel
******
COMMON ORDER
The writs on hand are filed by M/s.Vedanta Limited. The writ
petitions are filed challenging the reopening proceedings initiated under
Section 147 of the Income Tax Act [hereinafter referred to as “the Act'],
more specifically, the order disposing of the rejections filed by the
petitioner. Thus the writ petitions are heard together and common order is
passed.
2.It is not in dispute that the final assessment order was passed in
respect of the assessment year 2002-03. It is an admitted fact that the final
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assessment order was passed in respect of the assessment year. However
the dispute raised due to the initiation of reopening of the assessment under
Section 147 of the Act. Thus, it may not be required to record the other
facts narrated in the affidavit filed in support of the writ petitions and this
Court would confine the facts with reference to the dispute raised.
3.The learned senior counsel appearing on behalf of the writ
petitioner has raised certain important grounds relatable to the provision of
reopening of the assessment under Section 147 of the Act. It is contended
that absolutely there is no reason for the purpose of reopening nor the
reasons furnished are in compliance with the requirements contemplated
under Section 147 of the Act. Even the reasons for reopening was furnished
to the petitioner after a lapse of more than one year and the learned senior
counsel by drawing an inference with reference to the conduct of the
respondent made a submission that no reason was available, thus there was
a delay. It is contended that it is a classic case of change of opinion. Once
all the materials, books of accounts, details, informations, clarifications
provided by the petitioner were considered by the Assessing Officer and
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after passing of the assessment order, reopening must be done strictly in
accordance with the ingredients contemplated under Section 147 of the Act.
Thus, the respondent have no option to change their opinion with reference
to the materials already considered and the finding made in the original
assessment order. The learned senior counsel resorted to differentiate the
reason to believe and the change of opinion. It is contended that no reasons
were recorded prior to the issuance of notice under Section 148 of the Act in
the present case. The reasons communicated are recorded at later point of
time and therefore, the impugned order providing reason is in violation of
Section 148(2) of the Income Tax Act. Sub-clause (2) contemplates “the
Assessing Officer shall, before issuing any notice under this section, record
his reasons for doing so”. In view of the fact that the reasons are not
recorded prior to the issuance of notice under Section 148 of the Act, the
entire exercise is untenable.
4.The learned senior counsel referred the other provisions of the
Income Tax Act and solicited the attention of this Court regarding the
details furnished by the petitioner before the Assessing Officer at the time
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of scrutiny of the return of income filed by the petitioner. In this regard, the
learned senior counsel refer the return of income filed for the relevant
assessment year 2002-03 and contended that loss from business or
profession brought forward as well as the amounts stated and other
expenditures with reference to the particular heads were elaborately
furnished to the Assessing Officer. The learned senior counsel relied on the
net profit/loss for the year before taxation and contended that the facts and
figures furnished by the petitioner in their return of income is reflected in
the order passed by the respondent providing reasons for reopening of
assessment. Thus, by taking a different opinion on the same facts the
reopening proceedings are initiated. Thus, it amounts to change of opinion
and the requirement of reason to believe is not satisfied. The learned senior
counsel referred the notes to the financial statements furnished by the
petitioner Company and read out the portions with reference to the
particulars furnished. The expenditures incurred during the year in foreign
currency also has been furnished. The very same materials produced by the
petitioner Company is relied upon for the purpose of reopening of
assessment. Thus, the entire exercise is in violation of the provisions of the
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Income Tax Act and amounts to change of opinion. The objections
submitted by the writ petitioner regarding the reasons furnished were also
not considered in a right perspective with reference to the provisions of the
Act, disposal of reasoning was undertaken in a routine manner and
therefore, the impugned order disposing of the objections is also not in
consonance with the facts as well as the provisions of the Income Tax Act.
In this regard, the learned senior counsel read out the reasoning furnished as
well as the order passed disposing of the objections. Comparatively
submissions are made to establish that there was no proper application of
mind on the part of the respondent in dealing with the objections and the
grounds placed before the respondent were not even looked into.
5.The learned senior counsel relied on catena of judgments mainly to
establish the legal proposition what amounts to change of opinion and what
is reason to believe as contemplated under the Act. The judgments relied
upon would show that the processes through which a decision is to be
arrived in respect the reopening of proceedings under Section 147 of the
Act. Curiously more than hundred judgments are cited. This Court also
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heard the learned senior counsel patiently with reference to the principles
laid down in those judgments and some of the judgments are in support of
the petitioner so as to establish that the authorities competent must have
tangible materials and the phraseology 'reason to believe' must be
interpreted pragmatically so as to ensure that there is a connection between
the reason as well as the reopening. It is not as if every opinion can be
construed as belief. The reason to believe indicates that such belief must be
based on certain records or informations which would provide an
opportunity for the authorities to reopen the concluded assessment
proceedings. Thus the Courts have repeatedly ruled that “reason to believe”
is not mere belief but belief with some materials. What are all the materials
which can be brought within the phraseology 'reason to believe' is the
subjective satisfaction and this Court is of the considered opinion that if
there are some materials on records to establish or if there is some reasons
which can be believed for the purpose of reopening of assessment, then the
authorities must be allowed to exercise their powers under Section 147 of
the Act.
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6.The learned senior counsel relied on the judgment of the Hon'ble
Supreme Court in Calcutta Discount Company Limited vs. Income Tax
Officer [(1961) 41 ITR 191(SC)], Jeans Knit (P.) Limited vs. Deputy
Commissoner of Iincome Tax [(2017) 77 Taxmann.com 176(SC)], GKN
Driveshafts (India) Ltd., vs. Income Tax Officer [(2002) 125 Taxman
963(SC)] and other judgments. This Court is of the considered opinion that
the principles laid down in those judgments are consistently followed by the
subsequent Benches of various Courts and there is no contrary opinion. The
principles relied upon by the petitioner are not disputed even by the
respondent. Those principles regarding 'has reason to believe' and 'change
of opinion' are well settled and ultimately this Court would draw the
attention that interpretation and the principles are to be considered with
reference to the facts and circumstances of each case.
7.The principles on one hand, facts and circumstances on the other
hand and the facts alone would throw light with reference to the decision to
be arrived by the Courts. Therefore, the principles relied on and settled
cannot be applied directly so as to allow the petition or to dismiss the
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petition. The facts plays the major role in view of the fact that it is only a
reopening of proceedings and not an appeal questioning the validity of the
final order of assessment passed.
8.Whenever the very initiation of proceedings under the provisions of
the statute is questioned, the Courts are expected to be slow and cautious.
The power of initiation may be curbed if there is specific violation of the
provisions of the Act. In the event of unnecessary intervention by the
Courts, the same would derail the procedures to be followed which is to be
of importance for the purpose of achieving the objectives of the statute. In
normal circumstances, one would not prefer to pluck the flower at the
budding stage unless it is infected. Thus, the intervention during the initial
stage is to be exercised sparingly and if there is a blatant violation of the
Act.
9.The learned senior counsel relied on various judgments of the High
Court of Delhi and High Court of Madras to establish that the Courts have
interfered in reopening of proceedings, more specifically, when there is a
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formation of opinion that it is change of opinion.
10.Certain judgments referred on behalf of the petitioner are disputed
by the respondent on the ground that some judgments of the High Court of
Madras relied on by the petitioner are against the tax case appeals
challenging the order passed by the Income Tax Appellate Tribunal and
therefore, those judgments cannot be relied upon as far as the present writ
petition challenging the very reopening proceedings itself. It is further
contended that the other judgments, the revenue has already preferred
appeals and the said appeals are pending. However, this Court is of the
considered opinion that all those judgments relied on are also based on the
parent judgment of the Hon'ble Supreme Court of India in the cases cited
supra. The Courts have elaborated the principles on various judgments
based on those facts and circumstances. Elaboration of principles with
reference to the facts may be applied if the facts are similar but not in a case
where it is dissimilar. Thus, application of facts with reference to the
provisions of the Income Tax Act are of paramount importance to form an
opinion.
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11.This Court with little experience finds that in respect of the writ
petitions challenging the reopening proceedings hundreds of judgments are
produced by the respective learned counsels appearing on behalf of the
parties to the lis and in all those judgments, the Courts have formed an
opinion with reference to the facts and circumstances and as well as based
on the principles laid down by the Hon'ble Supeme Court. It is needless to
stated that the principles are binding and the facts of each case is to be the
deciding factor to form an opinion.
12.The learned senior standing counsel on behalf of the respondent in
short submitted that the re-assessment proceedings are initiated within a
period of four years and the notice under Section 148 of the Act was issued
on 27.04.2006. The reasons furnished would establish that the details
regarding the technical services submitted by the assesee were not properly
considered and therefore, the Assessing Officer has reason to believe that
there is an under assessment and Section 147 Explanation 2(c)(i) permits the
Assessing Officer to initiate reopening proceedings under Section 147 of the
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Act. The learned senior standing counsel disputed the contentions raised on
behalf of the petitioner by stating that the certification as claimed by the
petitioner cannot be relied upon in view of the fact that the auditor's report
would reveal that the Company has certified that there is no expenditure
debited to the Profit and Loss Account which is admissible under Section
40(a) of the Act. Therefore, the auditors have not independently scrutinized
those expenditures debited, however, the auditors have stated that the
Company has certified and therefore, they recorded the same. Thus, the
reliance placed by the petitioner are untenable and the Assessing Officer has
to consider all these aspects for the purpose of forming an opinion. The
learned senior standing counsel referred Section 40(a) of the Act and the
petitioner has not produced any details regarding the consulting fees and
other expenditures stated. Regarding these particulars, reopening of
assessment is imminent and therefore, there is no irregularity or otherwise in
respect of the notice issued under Section 148 of the Act. Thus the writ
petitions are to be dismissed.
13.The learned senior standing counsel relied on the judgments in the
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case of Kalyanji Mavji & Co. vs. Commissioner of Income Tax [(1976)
102 ITR 287 (SC)] and said that the principle No.4 laid down by the Apex
Court would be applicable in respect of the present case. The said principle
is that “where the information may be obtained even from the record of the
original assessment from an investigation of the materials on record, or the
facts disclosed thereby or from other enquiry or research into facts or law”.
Relying on the said principle which was not expunged by the Hon'ble
Supreme Court in the subsequent case. The learned senior standing counsel
said that even certain informations culled out from the record of the original
assessment would be sufficient for reopening of assessment if the power
under Section 147 of the Act is exercised within a period of four years.
Therefore, the petitioner cannot contend that they have produced all the
records and informations and therefore the exercise by the Assessing Officer
is change of opinion. The learned senior standing counsel relied on the
judgment of the High Court of Madras in the case of Dayanidhi Maran vs.
Assistant Commissioner of Income Tax reported in [2018 (98)
Taxman.com 202 (Mad)], wherein the said principles are reiterated.
Relying on these judgments, the learned senior standing counsel contended
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that the revenue must be provided with an opportunity to examine all the
records and files for the purpose of ascertaining the income escaped
assessment with reference to the reasons furnished for reopening of
assessment.
14.The learned senior counsel for the petitioner referred the letters
sent by the petitioner on 17.01.2005, wherein the details regarding various
items are furnished by the petitioner. The petitioner referred deduction for
the purpose of book of profit and the details furnished by the petitioner. In
another letter dated 28.01.2005 the petitioner has elaborated the details
regarding exploration and development expenditure contract area wise,
interest received under Section 244A, Club membership fees and other
details. In another letter dated 10.02.2005, the petitioner has furnished
details regarding software purchase and maintenance, amount charged off
under the area of interest method, details of exchange fluctuation and fixed
asset purchase in foreign exchange. In yet another letter dated 07.03.2005,
the petitioner had elaborated the details with regard to the items mentioned
by the respondent, more specifically, the petitioner has stated that the
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impact of change in the accounting policy resulting in charging of
Rs.2005.15 Million out of carry value of these expenses in the current year
profit and loss account. To substantiate the said explanation, the petitioner
has referred to the Notes to the Financial Statement for the year and further
cited the judgments of the Hon'ble Supreme Court.
15.In reply, the learned senior standing counsel made a submission
that all these details and particulars required an adjudication and the said
details cannot be adjudicated in a writ proceedings by this Court. Thus the
respondent must be allowed to proceed with the reopening proceedings for
the purpose of culling out the truth or otherwise in respect of the
informations provided by the petitioner.
16.Let us now consider the scope of Section 147 of the Act though
this Court has considered on several occasions. The very scheme of the Act
under Chapter XIV of the Income Tax Act pertains to the procedures for
assessment. Section 139 deals with return of income. Thus the entire
assessment proceedings are undertaken under Chapter XIV of the Income
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Tax Act based on the return of income filed by the respective assessment.
In other words, the return of income filed by the assessee is to be trusted
upon in all circumstances except where there is a possibility of doubt which
should be on the basis of some reasoning and materials. Therefore, the
assessment proceedings at the first instance is done based on the
informations provided by the assessee in their return of income. The
Department has no knowledge about the particulars and informations
provided in the return of income at the first instance. Those return of
income would provide a cause for reopening of assessment if there has been
a reason to believe that the assessee has not produced certain materials or
certain informations or inferences can be drawn with reference to the
materials produced. Chapter XIV of the Act enumerates the procedures in a
systematic manner so as to progress the development based on certain facts
and circumstances as well as the informations received during the pending
assessment or after assessment order or on account of such or otherwise.
The cogent understanding of the entire procedures contemplated under
Chapter XIV of the Act would reveal that at each stage the revenue is
protected with an opportunity to assess or re-assess. The very purpose and
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object is to ensure that the income chargeable to tax escaped assessment is
brought under the tax net. The Courts while interpreting Chapter XIV of
the Act must borne in mind the very objectives of the procedures
contemplated under Chapter XIV of the Act is met with and the income
chargeable to tax escaped assessment must be assessed or re-assessed.
17.Chapter XIV of the Income Tax Act can be broadly classified into
three set of procedures. The first phase of Chapter XIV is return of income
filed by the assessee is either accepted or picked up for scrutiny assessment.
In either of the case based on the informations provided in the return of
income, assessments are made and accordingly the tax chargeable is
determined. The second set of procedures would be reopening of
assessment in respect of the closed assessment. Once the reopening of
assessment is initiated then the procedures to be followed are enumerated in
the second phase of procedure. The third phase would be search under
Section 132 of the Act. If search operations are conducted then the
procedures to be followed are enumerated in the third phase of Chapter
XIV. Therefore, each stage has got its own importance with reference to the
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procedures which are all contemplated. The authorities competent thus
bound to follow the procedures contemplated mandatorily and any deviation
would vitiate the very proceedings itself. The importance of the procedures
contemplated under Chapter XIV are repeatedly emphasized by the
Constitutional Courts across the Country. Thus the High Court should
ensure that the procedures contemplated are scrupulously followed and in
the event of any violation reliefs are to be granted based on the facts and
circumstances of each case. For instance, in some cases, remand may be
required and in some other cases orders itself could be liable to be set aside.
18.With reference to Section 147 of the Act, if the Assessing Officer
has reason to believe that any income chargeable to tax escaped assessment
for any assessment year, he may subject to the provisions of sections 148 to
153, assess or reassess such income and also any other income chargeable to
tax which has escaped assessment and which comes to his notice
subsequently in the course of the proceedings under this section, or
recompute the loss or the depreciation allowance or any other allowance, as
the case may be, for the assessment year concerned.
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19.The wider scope provided for reopening of assessment under
Section 148 of the Act is undoubtedly vibrant if the Assessing Officer has
reason to believe. The reason to believe has been defined in umpteen
number of judgments and in this context the reason to believe must be based
on certain materials or informations and such informations or materials
should have life link and therefore, the Assessing Officer is not empowered
to reopen in all circumstances. The reason to believe cannot be change of
opinion. The change of opinion is also defined in number of judgments.
Normally the change of opinion would be that the opinion formed in the
original assessment order is deviated and a different interpretation is given
with reference to the finding or opinion already given, then it is to be
construed as change of opinion. More precisely, the Assessing Officer
considered the materials, informations produced by the assessee, formed an
opinion and passed an assessment order with a particular finding. From and
out of the same materials, if the Assessing Officer wants to have a different
opinion, then it is to be construed as change of opinion, except the cases
which all are falling under Explanation I & II to Section 147 of the Act.
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20.As far as the reason to believe is concerned, the scope is again
wider. The reason to believe is supported with many circumstances in the
provision itself. Section 147 of the Act contemplates that the income
chargeable to tax which has escaped assessment and which come to the
notice subsequently in the course of the proceedings under this Section is
also a ground. To elaborate the said ground in respect of escapement if it
comes to the Assessing Officer subsequently after the proceedings, then also
the authority is empowered to reopen the assessment under Section 147 of
the Act. To re-compute the loss or the depreciation allowance or any other
allowance as the case may be for the assessment year concerned is also a
ground for reopening of assessment.
21.The proviso clause contemplates two circumstances, wherein if the
reopening of assessment is made within four years and beyond four years
but within six years. In such circumstances where reopening of assessment
is to be made beyond four years, then certain additional requirements are
contemplated. In view of the fact in the present case the reopening of
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assessment is made within four years those special circumstances became
unnecessary. As far as the reopening of assessment within four years are
concerned, explanation (1) to section 147 of the Act provides that
production before the Assessing Officer of account books or other evidence
from which material evidence could with due diligence have been
discovered by the Assessing Officer will not necessarily amount to
disclosure within the meaning of the foregoing proviso. Thus mere
production of materials or evidences are insufficient. Even with reference
to the same materials, books of accounts, etc. scrutinized by the Assessing
Officer may be a ground for reopening of assessment if the Assessing
Officer has reason to believe that some materials which were not
adjudicated are newly emerged or identified after passing of the assessment
order. Therefore, even in respect of materials considered or scrutinized the
Assessing Officer may cull out certain materials or informations for the
purpose of reopening of assessment under section 147 of the Act.
Explanation (2) to Section 147 of the Act stipulates for the purposes of
section 147, the following shall also be deemed to be cases where income
chargeable to tax has escaped assessment. Sub-clause (c) where an
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assessment has been made, but (i) income chargeable to tax has been under
assessed; or (ii) such income has been assessed at too low a rate; or (iii)
such income has been made the subject of excessive relief under this Act; or
(iv) excessive loss or depreciation allowance or any other allowance under
this Act has been computed.
22.Sub-clause (c)(i) states that income chargeable to tax if under
assessed then also reopening under Section 147 is permissible. However,
such an under assessment is made in the absence of consideration of any
material alone would provide power to the Assessing Officer. In case the
materials which were considered and an assessment is made and the opinion
formed at the time of passing an assessment order cannot be a ground for
reopening of assessment. The thin difference in the matter of culling out the
truth makes all the difference under section 147 of the Act. The authorities
are also expected to be cautious, while forming an opinion which is not
formed at the time of passing an order of assessment. Therefore reopening
of assessment under section 147 of the Act indicates that the reopening must
be done if there is any new dimension not amounting to change of opinion
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is possible or informations are culled out or certain materials were not
considered, then alone the reopening will fall under the mandatory clause of
reason to believe.
23.With reference to such income had been assessed at too low rate
would also indicate that certain new materials must be available for the
purpose of reopening. At the outset, it is to be considered whether the
reopening of assessment is made based on some informations or materials or
based on certain interpretations of the provisions of the Act or the other
circumstances contemplated under the Act. In all such circumstances, the
Assessing Officer must establish that he has a reason to believe and such
reasons must be legally acceptable and based on certain materials and
informations, which were neither considered nor adjudicated and no
findings are made in the original assessment order.
24.The wider scope of Section 147 of the Act cannot be narrowed
down by the Courts by way of restrictive interpretations. While interpreting
Section 147 of the Act more specifically the Courts must adopt constructive
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interpretation in consonance with the purpose and object of Chapter XIV as
well as the Act as a whole. Therefore the purpose and object of the
procedures contemplated under Chapter XIV of the Act is of paramount
importance to understand the widerness of the provisions contemplated to
determine the tax with reference to the income chargeable to tax escaped
assessment.
25.Referring to Section 148(2), the learned senior counsel for the
petitioner made a submission that the respondent had failed to record
reasons before issuance of notice under Section 148 of the Act and therfore
the impugned orders are liable to be side.
26.The learned senior standing counsel pointed out that the reasons
communicated to the petitioner would reveal that the reasons to believe that
income chargeable to tax has escaped assessment in the case of the
petitioner was recorded by the predecessor of the order passed in letter
dated 05.10.2007. Such reasons are furnished by one Shri.C.Vatchala,
Assistant Director of Income Tax [International Taxation], Chennai. The
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said Officer has clearly stated that the reasons to believe were recorded by
her predecessor and such reasons were communicated to the petitioner.
Under these circumstances, this Court has no reason to believe that the
reasons were recorded subsequently unless the petitioner establishes the
contrary with proof. A mere statement in this regard would be insufficient
to form an opinion.
27.In this backdrop, this Court has to consider the reasons furnished
for the purpose of reopening of assessment which reads as under:
“It is seen from Clause 15 of Notes to the Financial
Statements accompanying the return of income that the
assessee had incurred expenditure during the period
relevant for the above assessment year in foreign currency
under the following heads:
(i) Interest Rs.2.4 Crores
(ii) Professional fees Rs.0.2 Crores
(iii) Consulting fees Rs.5.3 Crores
(iv) Others Rs.47.6 Crores
It was also provided as a foot note that the above
information relates only to the activities of CEIPL India
and do not include the CEIPL India's share in the
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respective joint ventures.
There is no indication either in the return of income
or the accompanying statements or the details filed that the
assessee has deducted tax on the above payments. Besides
the assessee company itself had stated that the information
relating to the expenditure incurred as stated above does
not relate to assessee's share. In the respective joint
ventures and the assessee has not stated that tax has been
deducted in respect of the assessee's share of expenditure
in the joint venture. As per section 40(a)(i) the above
expenditure on which tax has not been deducted or after
deduction has not been paid before expiry of time
prescribed under sub-section (1) of section 200 are not
allowable as a deduction. In view of this, the above
payments incurred in foreign currency have to be
disallowed.
The assessee has stated in the Notes to the Financial
Statement that as a result of the change in accounting
principle, the Company has written off general exploration
cost such as geological and seismic Interpretation cost and
dryhole cost of Rs.200.5 Crores pertaining to earlier years.
This requires to be examined in detail as to whether the
write off fits into any of the adjustments to book profit as
specified in clause (a) to (f) of the explanation to section
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115 JB of the Income Tax Act, 1961.
In view of the above I have reason to believe that
the assessee's income chargeable to tax have escaped
assessment for the assessment year 2002-03.”
28.The petitioner filed their objections for the reasons. The learned
senior counsel refer the objections and contended that all the objections are
relatable to the informations furnished by the petitioner at the time of
original assessment and the learned senior counsel compared the objections
as well as the informations produced by the assessee at the first instance
before passing the assessment order.
29.The order impugned dated 24.10.2000 disposing of the objections
and its rejection were attacked by the learned senior counsel by stating that
none of the objections raised are met with by the Assessing Officer with
reference to the documents relied on by the petitioner.
30.This Court is of the considered opinion that what is under
challenge is the initiation of reopening proceedings under section 147 of the
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Act. The High Court is not expected to conduct a rowing enquiry in respect
of facts and circumstances as narrated by the respective parties to the lis on
hand. It is improper on the part of the Courts to form an opinion with
reference to the disputed facts at this point of time as several alternate and
efficacious remedies are available to the assessee under the provisions of the
Income Tax Act and only after exhausting all those remedies the High Court
can rely on those findings of the appellate authorities for the purpose of
forming an opinion with reference to the facts. In other words, it would be
premature to form an opinion as accounting technicalities and intricacies are
to be considered by the authorities competent while proceeding with the
reopening of assessment. The endeavour of the High Court is to ensure that
reopening of assessment is made by following the procedures contemplated
or not, but not otherwise. The confinement of the scope of judicial review
under Article 226 of the Constitution of India is imminent and venturing in
to the adjudication of facts would lead to commissions, omissions and
errors. Thus the High Court is expected to refrain itself from venturing it
into the disputed facts at the initiation stage more specifically with reference
to the reopening of assessment initiated under Section 147 of the Act.
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31.As far as the reasons are concerned, it is elaborated in proceedings
dated 05.10.2007, wherein the Assessing Officer has stated that it is seen
from Clause 15 to Notes of the Financial Statements accompanying the
return of income that the assessee had incurred expenditure during the
period relevant for the above assessment year in foreign currency under the
heads of interest Rs.2.4 Crores, professional fees Rs.0.2 Crores, consulting
fees Rs.5.3 Crores and Others Rs.47.6 Crores. The Notes of the Financial
Statement furnished before this Court would state that expenditure incurred
during the year in foreign currency wherein the petitioner had furnished
particulars regarding interest, professional fees, consulting fees and other
expenses. The said particulars provided by the petitioner are the reason to
believe that the income chargeable to tax escaped assessment. The reasons
furnished by the Assessing Officer would also show that the assessee has
not given satisfactory explanations or materials to substantiate the said
expenses. It is stated that “there is no indication either in the return of
income or the accompanying statement or the details that the assessee has
deducted tax on the above payments”. Thus the claim of the petitioner with
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reference to the disallowance is to be considered by the authorities
competent with reference to Section 40(a) of the Act.
32.Under these circumstances, this Court is of the considered opinion
that the assessee is bound to furnish further details or the documents or
materials so as to establish the expenditure, which are all now considered as
the reason for the purpose of reopening of assessment. This Court cannot
go into the factual details now furnished by the petitioner at the time of
original assessment nor made a comparison with reference to the original
explanations or submissions along with inferences drawn by the Assessing
Officer for reopening of assessment. However, the reasoning furnished for
reopening of assessment would reveal that there is no indication either in
the return of income or the accompanying statement or the details filed that
the assessee had deducted tax on the above payments. If at all the Assessing
Officer's finding in this regard is not in consonance with the facts and
circumstances, it is for the assessee to place all materials and at any stage,
there is a possibility of dropping of further proceedings by the Assessing
Officer if he is satisfied. Therefore, the petitioner need not shy away from
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participation and to explain before the Assessing Officer that the reasons to
believe is incorrect as the petitioner is having materials to establish the
contrary.
33.Thus the reasons for reopening as stated has got sum and
substance and the said differences or inferences are to be answered and
explained by the assessee by participating in the process of re-assessment.
Contrarily the High Court cannot form an opinion with reference to the
doubt raised by the Assessing Officer in the impugned orders and made a
finding with reference to the documents relied on by the petitioner. This
being the scope of the provisions of Sections 147/148 of the Act, this Court
has no hesitation in forming an opinion that the petitioner has to participate
in the process of re-assessment and establish their case in the manner known
to law and by availing the opportunities to be provided by the respondent.
The respondent is directed to continue the reopening proceedings and
conclude the same as expeditiously as possible.
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34.With the above direction, the writ petitions are dismissed. No
costs. Consequently, connected miscellaneous petitions are closed.
13.07.2021
Index : Yes/No
Speaking/Non-Speaking Order
cse
To
Assistant Director of Income Tax,
(International Taxation)
7th Floor, Room No.703,
Annexe Building, Aaykar Bhawan,
121, Mahatma Gandhi Road,
Chennai – 600 034.
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W.P.Nos.34891 & 34892 of 2007
S.M.SUBRAMANIAM, J.
cse
W.P.Nos.34891 & 34892 of 2007
13.07.2021
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