1. This is yet another case in the ever increasing number of cases filed before this Court challenging the issuance of notice under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’).
Brief Facts
2. The Petitioner filed its return of income for the Assessment Year (‘AY’) 2008-09 declaring an income of Rs.1334,87,70,381/-. Its case was picked up for scrutiny and notice was issued to it under Section 143 (2) of the Act. As part of the scrutiny, a questionnaire dated 20th October, 2009 was issued to the Petitioner by the Assessing Officer (‘AO’) raising various queries. This was duly replied by the Petitioner on 29th October, 2009. Further documents were also submitted on 17th November, 2009 by the Petitioner. An assessment order under Section 143 (3) of the Act was passed by the AO on 30th December, 2009.
3. Thereafter, two notices under Section 148 of the Act came to be issued on 31st May, 2012 and 28th March, 2013 for the AY 2008-09. Both these notices came to be challenged by the Petitioner in W.P.(C) Nos. 446/2014 and 4631/2014 which were disposed of by this Court by a common order on 3rd September, 2014. The said order reads as under:
“ These writ petitions are being disposed of together inasmuch as they pertain to the same very petitioner and relate to the same assessment year 2008-09. In these petitions, the notices issued under Section 148 on 31.05.2012 and 28.03.2013 are impugned. We have heard the parties at length. We need not set out all the arguments in detail. It would suffice to say that the said notices do not meet the requirements of law. Consequently, the notices under Section 148 dated 31.05.2012 and 28.03.2013 are set aside and all proceedings pursuant thereto are quashed.
Quashing of the notices dated 31.05.2012 and 28.03.2013, however, does not preclude the Assessing Officer from issuing a fresh notice under Section 148 of the Income Tax Act, 1961 in relation to the assessment year 2008-09, if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment, having regard to the first proviso to Section 147 and other applicable provisions of the said Act. We are also making it clear that we have not expressed any opinion on the merits of the matter which includes the question as to whether there was mere change of opinion and/or no fresh material has surfaced after the completion of the assessment under Section 143(3).
The writ petitions are allowed to the aforesaid extent. There shall be no order as to costs.”
4. Pursuant to the said order, a fresh notice was issued to the Petitioner on 16th July, 2015 under Sections 147/148 of the Act for the same AY viz., 2008-09. The two reasons for reopening the assessment read as under:
“2.1 Disallowance u/s 14-A r.w. Rule 8-D of the IT Act, 1961;
……
2.2 Complex web of subsidiaries & colourable device of transferring shares instead of substantial transfer of landed properties.
……..”
5. The Petitioner filed its objections to the reopening of the assessment on 28th July, 2015. The said objections were rejected on 9th November, 2015. The Petitioner thereafter filed the present writ petition seeking the quashing of the notice under Section 148 of the Act dated 4th March, 2015 and order dated 9th November, 2015 rejecting the Petitioner’s objections thereto.
Petitioner’s Submissions
6. Mr. Salil Aggarwal, learned counsel for the Petitioner, submitted that the reasons recorded by the AO do not satisfy the requirement of law in terms of Sections 147/148 of the Act. There is no failure by the Petitioner to disclose fully and truly all the material facts necessary for the assessment and neither is such a failure recorded in the reasons.
7. Mr. Aggarwal further submitted that the order dated 3rd September, 2014 passed by this Court in the earlier round gave a clear mandate to the Revenue that a fresh notice under Section 148 of the ITA could be issued if the AO has reason to believe that the income chargeable to tax has escaped assessment “having regard to the first proviso to Section 147 of the ITA and other applicable provisions of the said Act”. Thus, the direction of the Court did not mean that a fresh notice could be issued if the same was impermissible in law. Mr. Aggarwal further submitted that the two reasons for the reopening of the assessment are unsustainable inasmuch as, all the information regarding the said two issues already stood submitted to the AO. This was duly brought to the AO’s notice in the objections filed by the Petitioner.
8. Mr. Aggarwal further submitted that in view of the ratio of the decision of the Supreme Court in Commissioner of Income Tax, Delhi v. Kelvinator of India Limited (2010) 2 SCC 723, the same material cannot be looked into for opening the assessment. The reasons recorded by the AO do not satisfy the legal requirement under the first proviso to Section 147 of the Act. Mr. Aggarwal further submitted that the Petitioner has already gone through two rounds of enquiry, inasmuch as, it was also issued a notice under Section 263 of the Act on 30th December, 2011 for the very same AY. Mr. Aggarwal also relied upon the decision in Agya Ram v. Commissioner of Income Tax, Delhi, (2016) 386 ITR 545 (Del). Mr. Aggarwal thus submitted that this is nothing but a case of change of opinion on the same material, which is impermissible in law.
Respondent’s Submissions
9. Mr. Zoheb Hossain, learned Senior Standing Counsel for the Revenue, submitted that the earlier two notices issued to the Petitioner were within the four year period and the present notice, having been issued pursuant to the order dated 3rd September 2014 of this Court, was nothing but a continuation of the said earlier notices. This was permitted by the Court in its order dated 3rd September, 2014. Mr. Hossain further submitted that the said order merely required the AO to issue a fresh notice if any income had escaped assessment. There is no need to satisfy the conditions for reopening an assessment beyond the four-year period. It is Mr. Hossain’s submission that the impugned order has to be treated as a notice issued within the four year period. The mentioning of the first proviso to Section 147 in the order dated 3rd September, 2014 of this Court was, according to Mr. Hossain, only in the context of Section 143 (3) of the Act.
10. Without prejudice to the above submissions, Mr. Hossain further submitted that the Petitioner has failed to make a full and true disclosure of all the material facts, inasmuch as, the Petitioner has deliberately shown the income under an incorrect head. It is clear from the order rejecting the objection of the Petitioner and hence this is a fit case for dismissal of the writ petition.
11. Mr. Hossain relied upon the decision in Chennai Properties and Investments Limited, Chennai v. Commissioner of Income Tax Central III, Tamil Nadu, (2015) 14 SCC 793 and urged that the AO at this stage had only to see whether there was some material to reopen the case. The sufficiency or correctness of the material was not to be examined.
Analysis
12. There are a large number of cases that have been decided by this Court with respect to reopening of assessments under Sections 147/148 of the Act. After a period of four years under the first proviso to Section 147 of the Act, for re-assessment proceedings to be initiated, the following pre-conditions have to be satisfied:
