Case Law Details
Brief of the case:
Punjab & Haryana High Court held in CIT(A) Vs M/s ITW India Limited that mere change in opinion of the AO could not amount to issue of notice for re-assessment u/s 147. AO should had reasonable tangible facts in hand before issuing notice u/s 147. Moreover notice u/s 147 could not be issued beyond four years from the relevant assessment years. Further it was the duty of the AO to analyse into the facts/ documents presented before AO during scrutiny proceedings, later on it could not be said by the AO that assesse had not disclosed the facts fully which would build reasons for issuing notice u/s 148.
Facts of the case:
The undisputed facts are that the respondent-assessee company had filed its return for the year in question on 31.10.2002 for returned income of ` 24,49,94,815/- after taking benefit of deduction of `1,11,83,170/- under Section 80HHC of the Income Tax Act, 1961 (hereinafter referred to as “the Act”). The said deductions pertaining to service income of ` 52,86,87,813/- were claimed in the duly supported form No. 10CCAC which was filed along with the return of income and the detailed working computation of deduction had been given along with the Auditor’s Report. The claim of benefit was reduced to ` 1,02,01,403/- after excluding the excise duty and the sales tax from the turnover and that point was within the knowledge of the Assessing Officer that the assessee had received the said service income and the claim of deduction was related to such service income and the income was then assessed at a sum of ` 24,86,85,407/- on 31.3.2005.
Thereafter, the re-assessment proceedings were initiated under Section 148 of the Act by issuing notice dated 27.3.2006and the income was re-assessed at ` 25,30,84,690/- on 8.5.2006. The said reassessment was concluded on a different issue and not in connection with Section 80HHC. Thereafter, notice under Section 148 was issued on 31.3.2009, admittedly, after the expiry of four years from the end of relevant assessment year on the ground that the deduction was not admissible on service income. The said notice was issued on the basis of the judgment of the Hon’ble Apex Court rendered in Commissioner of Income-tax, Thiruvananthapuram v. K. Ravindranathan Nair (2007) 295 ITR 228 (SC).
Resultantly, the re-assessment order was passed by holding that the income derived by the assessing company pertaining to service income on which the deduction had been claimed could not be allowed.
Contention of the assesse:
Assessee was of the view that it had disclosed all the facts related with service income as it had presented the Profit & Loss Account under which all the details related with service income was mentioned and it had disclosed each and every information before the AO.
Moreover the notice issued u/s 147 was time barred because the same was issued beyond the four years from the relevant assessment year and AO was not having any tangible reasonable cause in its hand which was must for issuing notice u/s 147 because re-assessment could not be made on the basis of mere change in opinion.
Contention of the revenue:
Revenue was of the view that the service income on which deduction had been claimed by the assesse u/s 80HHC was not admissible so the assessment could be reopened. Moreover assesse had not disclosed all the material facts relevant with the case during proceedings, so re-assessment could be made.
Held by High Court:
High Court after lelying on the decision given in Commissioner of Income-tax, Thiruvananthapuram v. K. Ravindranathan Nair (2007) 295 ITR 228 (SC) that the duty of the assesse was to disclose the particulars of the facts, it was the duty of AO to draw correct inference from the primary facts not the responsibility of assesse.
Moreover as far as question of validity of notice u/s 147 was concerned, it was time barred. The reason of the revenue that the assesse had not disclosed full facts therefore AO had issued notice for re-assessment was not correct because assesse had disclosed profit & Loss account in which there was details of the service income, further AO had deducted the sales tax amount and excise amount from the service amount for calculation of deduction so it could not be said that assesse had not disclosed full facts of the service income. It was the duty of AO to draw correct inference from the details disclosed by the assesse.
Moreover High Court relied on the decision given in Winsome Textiles Industries Ltd. Vs. Union of India & others [2005] 278 ITR 470 in which it was held that once assessment had been done u/s 143(3), the genuineness of the claims made in the return had to be examined and the failure of the AO to do so would not permit him to reopen the assessment which had already been completed and had become barred by limitation.Accordingly, the notices issued under Section 148 were quashed.
