Case Law Details
Siemens Limited Vs DCIT (Bombay High Court)
Bombay High Court ruled in favor of Siemens Limited, setting aside reassessment proceedings initiated by the Income Tax Department for the Assessment Year 2014-15. The dispute arose from two conflicting orders issued by the Assessing Officer (AO) under Section 148A(d) of the Income Tax Act. The first order, dated July 26, 2022, concluded that Siemens had fully disclosed its income, and no reassessment was warranted. However, just five days later, on July 31, 2022, the AO issued another order taking a completely opposite stance, stating that Rs. 77.2 crore of unassessed income had escaped taxation. The High Court found this inconsistency unjustified, as no new evidence or material had surfaced to warrant a change in position. The court also questioned the role of the Principal Chief Commissioner of Income Tax (PCCIT) in approving two contradictory orders within a short span.
The court ruled that the reassessment notice was invalid, emphasizing that once an authority determines that reassessment is unnecessary, it cannot reverse its decision arbitrarily without a valid reason. The court also directed an inquiry into the actions of the AO responsible for issuing contradictory orders. The ruling underscores the importance of procedural consistency and proper application of the law in tax reassessment cases. The petition was allowed, and the reassessment notices were quashed.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. By this petition, petitioner is challenging the notice dated 30th May 2022 issued under Section 148A(b) of the Income Tax Act 1961(the Act), order dated 31st July 2022 passed under Section 148(A)(d) of the act and notice dated 31st July 2022 issued under Section 148 of the Act for re- opening the assessment for AY-2014-15.
2. Having heard the counsels and considering the notices and orders, we do not need to go into too many Paragraphs 4(K) and (L) of the petition reads as under:
K) Respondent 1 passed the order dated July 26, 2022 under section 148A(d) of the Act without providing any further details to the Petitioner. Respondent No. 1 alleged that based on the Supreme Court judgement notices issued under unamended section 148 of the Act were construed or treated as a show cause notice in terms of section 148A(b) of the Act and hence, the re-assessment proceedings are valid as per the provisions of the Act. Further, Respondent No.1 allegedly relied on explanation 1 to section 148 of the Act to suggest that income chargeable to tax has escaped assessment. Respondent No.1 alleged that full and true disclosure of all material facts necessary for the assessment had not been made and the material facts were embedded in a manner that the evidence could not be discovered by Respondent No.1 and it is not a case of change of opinion. Further, with regard to the impugned show cause notice being issued in the name of Demag instead of the Petitioner, Respondent No.1 alleged that due to technical problems the name of Demag appeared in the impugned show cause notice and the technical problem has been solved by the Income Tax Business Application (hereinafter referred to as ‘ITBA’) helpdesk. However, Respondent No.1 after considering the submissions of the Petitioner held that the Petitioner has fully disclosed the information in its return of income which were reflecting on Actionable Information Monitoring System (hereinafter referred to as ‘AIMS’) data of the ITBA systems and Respondent No.1 was satisfied that the Petitioner’s case is not a fit case to issue a notice under the amended provisions of section 148 r.w.s 149 of the Act. Further, Respondent No.1 held that as per the information the amount of Rs.77,20,00,000/- is duly explained and does not represent an asset within the meaning of explanation to section 149(1) of the Act and income chargeable to tax does not represent in the form of assets of more than Rs.50 lakhs which have escaped assessment. Based on the above, Respondent No.1 held that the Petitioner’s case is not considered a fit case to issue the notice under section 148 of the Act and the order is passed after obtaining approval from the competent authority. Hence, Respondent No. 1 dropped the re- assessment proceedings vide his order dated July 26, 2022.
(L) Surprisingly, Respondent No.1 passed the impugned order dated July 31, 2022 under section 148A(d) of the Act which is identical to the order dated July 26, 2022 passed earlier under section 148A(d) of the Act from paragraph 1 to 9. Thereafter, Respondent No. 1 took a complete contrary stand than what was already taken by him in the order dated July 26, 2022 under section 148A(d) of the Act. Respondent No.1 referred to the submissions of the Petitioner and found the same to be untenable. Respondent No.1 held that the Petitioner has not furnished any documentary evidences to justify the claim. Respondent No. 1 was satisfied that the Petitioner’s case is a fit case to issue a notice under the section 148 and the amount of income of Rs.77,20,00,000/- represented in the form of an asset has escaped assessment. Respondent No.1 held that the impugned order and notice is being issued after taking prior approval of the competent authority.
3. In paragraph 2 of the affidavit in reply filed through one Amit Kumar, affirmed on 8th February 2023, response to paragraphs 4(K) and (L) of the petition has been given which reads as under:
“5.2 With reference to the contents of para no.4 of the Writ Petition, I say that: this para gives rise to the brief facts to the present petition annexing various Exhibits, hence no comments are offered.”
4. Ground (L) in paragraph 5 of the petition reads under:
“(L) The Petitioner submits that Respondent No. 1 passed an order dated July 26, 2022 under section 148A(d) of the Act after considering the submissions of the Petitioner and held that the Petitioner has fully disclosed the information in its return of income and there is no income represented in the form of an asset within the meaning of explanation to section 149(1) of the Act which has escaped assessment. Respondent No. 1 was satisfied that the Petitioner’s case is not a fit case to issue a notice under the amended section 148A(d) of the Act. The Petitioner submits that Respondent No. 1 after passing the order dated July 26, 2022 under section 148A(d) of the Act dropping the reassessment cannot pass the impugned order on July 31, 2022 taking a complete contrary stand than what was already taken by him earlier as there is no provision in the Act for Respondent No. 1 to again pass another order under section 148A(d) of the Act. Hence, the subsequent impugned order under section 148A(d) and the impugned notice are bad in law and should be quashed on this ground alone.”
5. In paragraph 6 of the affidavit in reply response to Ground (L) of the petition has been given which reads as under:
5.6. With reference to the contents of para no.5 (J) to (M) of the Writ Petition, I say that at the outset, the provisions of section 148 of the I. Act 1961 are reproduced as under:
“148. Before making the assessment, reassessment or re-computation u/s.147 and subject to the provisions of section148A, the AO shall serve on the assessee a notice along with a copy of the order passed, if required, under clause(d) of section 148A, requiring him to furnish within such period, as may be specified in such notice, a return of income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant A.Y., in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act, shall so far as may be apply accordingly as if such return were a return required to be furnished u/s. 39.
Provided that no notice under this section shall be issued unless there is information with the AO which suggests that the income chargeable to tax has escaped assessment in the case of the assessee for the relevant A.Y. and the AO has obtained prior approval of the specified authority to issue such notice.
Explanation 1 – For the purpose of this section and section 148A, the information with the AO which suggests that the income chargeable to tax has escaped assessments means,-
(i) any information flagged in the case of the assessee for the relevant A.Y. in accordance with the risk management strategy formulated by the Board from time to time.
(ii) Any final objection raised by the C&AG to the effect that the assessment in the case of the assessee for the relevant A.Y. has not been made in accordance with the provisions of this Act”.
The purpose of issuing notice u/s. 148 is to make assessment/re- assessment or re-computation u/s. 147 of the Act. The provisions of section 147 are invoked when any income chargeable to tax has escaped assessment and the AO may subject to the provisions of section 148 to 153 assess to re-assess such income.
Therefore, whereas the provisions of section 148 of the Act are kicked off for assessment/reassessment/re-computation us. 147 of the Act the proviso to section 148 provides following conditions which needs to be satisfied simultaneously, otherwise u/s. 148 cannot be issued.
(i) There is information with the AO which suggests that income chargeable to tax has escaped assessment.
(ii) The information should be in the case of the
(iii) The information should pertain to the relevant Y.
As per Explanation 1 to section 148 of the Act, the information flagged in the case of the assessee information available on record is deemed as information with the AO which suggest that the income chargeable to tax has escaped assessment. In the present case, information relating to the assessed for the A.Y. under consideration is available on record and as formulated by the CBDT, the provision of section 148 is applicable.
Further, it is also pertinent to mention that it is true that the assessee has filed relevant documents, however, the requisite full and true disclosure of all material facts necessary for assessment has not been made by the assessee. Also, the assessment was made as stipulated u/s.2(40) of the Act. However, AO had reason to believed that income chargeable to tax has been underassessment therefore, the provisions of clause (c) of Explanation 2 to section 147 are rightly invoked.”
6. Therefore, the fact that an earlier order dated 26th July 2022 recommending that it is not a fit case to issue notice under Section 148 of the Act, has been issued, is not denied. There is not even a reference to that earlier order in the order dated 31st July 2022.
7. In the circumstances, respondents having once held it was not a fit case for issuing notice under Section 148 of the Act, in our view, cannot change that opinion without any basis. Therefore, petition is allowed in terms of prayer clause (a), which reads as under:
(a) that this Hon’ble Court be pleased to issue a Writ of Certiorari, or a Writ in the nature of Certiorari, of any other appropriate Writ, order or direction under Article 226 of the Constitution of India, calling for the records of the Petitioner’s case and after examining the legality and validity thereof quash, cancel and set aside the impugned show cause notice dated May 30, 2022 being Exhibit H, the impugned order dated July 31, 2022 being Exhibit P and the impugned notice dated July 31, 2022 being Exhibit Q issued by respondent no.1.
8. We have to note that post filing of petition, petitioner received a communication dated 26th August 2022, in which the same Amit Kumar, who has filed the affidavit in reply, has recorded as under:
“It is hereby inform that a letter was issued on 26.07.2022 vide DIN No. ITBA/COM/F/17/2022-23/1044129225(1) in your case, due to some technical glitch and hence the same is stands cancelled.
The letter issued on 31.07.2022 vide DIN No. ITBA/COM/F/17/2022-23/1044374624(1) is correctly issued after taking prior approval from specified authority should be used for subsequent proceedings.
This corrigendum letter is issued superseding the earlier letter dated 26.07.2022 vide DIN No. ITBA/COM/F/17/2022- 23/1044129225(1).”
9. Strangely, this letter is not even mentioned in the affidavit in reply and what is the technical glitch, also is not explained Considering the conclusions in both the orders dated 26th July 2022 and 31st July 2022, in our view, it cannot be due to any technical glitch. We say this because in the order dated 26th July 2022, in paragraph 8, the same Amit Kumar records, “ …….. the assessee has fully disclosed the information in its R.O.I. for AY 2014-15, which were reflecting on AIMS data of the ITBA systems. I am satisfied that the case of the assessee is not a fit case to issuance of notice under the amended provisions of section 148 r.w.s. 149 of the I. T. Act, 1961.” , and in the order dated 31st July 2022 in paragraph 8 the same Amit Kumar records, “……………. However, not found tenable as the assessee has not provided the supporting documents to justify its claim. Therefore, I am satisfied that it is a fit case of issue of notice under Section 148 of the Act and the amount of income escaped assessment in this case is Rs.77,20,00,000/- which is not explained……………………….. ”
10. In both these orders dated 26th July 2022 and 31st July 2022, the said Amit Kumar has also stated in paragraph 9 as under:
Paragraph 9 of order dated 26th July 2022 reads as under:
9. In the light of the above facts and on the basis of material available on record, order u/s 148A(d) of the I. T. Act, 1961 is being passed in the case of SIEMENS Ltd. Pan-AAACS0764L for AY 2014-15 after obtaining necessary approval from competent authority.
Paragraph 9 of the order dated 31st July 2022 reads as under:
9. In the light of the above facts and on the basis of material available on record, order u/s 148A(d) of the I. T. Act, 1961 is being passed and notice u/s 148 of the Act is being issued in the case of SIEMENS Ltd. Pan-AAACS0764L for AY 2014-15 after obtaining necessary approval from competent authority.
This also reflects non application of mind by sanctioning authority, i.e., PCCIT, because if a sanctioning authority has given sanction for issuance of order dated 26th July 2022, we wonder how the sanction for issuing the order dated 31st July 2022 taking a totally contrary stand has been given by the sanctioning authority. This also expresses the total non application of mind by the PCCIT. We should also note that these points had been raised and recorded in this court’s order dated 5th September 2022 but still respondents have not bothered to explain in the affidavit in reply.
11. We direct Principal Chief Commissioner of Income Tax, Mumbai (PCCIT) to conduct an inquiry against the said Amit Kumar as to how he has passed two such orders, which contradict each other, in a span of five days and take necessary action.
12. Petition disposed.
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