|CORAM:||Madan B. Lokur J, R. K. Agrawal J|
|SECTION(S):||147, 148, s. 19 Bihar Finance Act 1981|
|CATCH WORDS:||Audit Objection, Reassessment, Reopening|
|COUNSEL:||P. H. Parekh|
|DATE:||March 21, 2017 (Date of pronouncement)|
|DATE:||March 22, 2017 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 147: Entire law on reopening of assessments pursuant to audit objections explained in the context of the corresponding provisions of the Bihar Finance Act. If the AO disagrees with the information/ objection of the audit party and is not personally satisfied that income has escaped assessment but still reopens the assessment on the direction issued by the audit party, the reassessment proceedings are without jurisdiction|
The Supreme Court had to consider whether on the information given by the audit team of the Auditor General, Bihar, the Assessing Authority was satisfied that reasonable ground exists to believe that a part of the turnover of the appellant-Company has escaped assessment within the meaning of Section 19 of the Section 19 of the Bihar Finance Act, 1981 based on which the assessing officer can re-open the assessment? The point arose for consideration whether an ‘audit objection’ can be construed as ‘information’ within the meaning of Section 19 of the State Act based on which the assessing officer was satisfied that reasonable grounds exist to believe that any part of the turnover of the appellant-Company had escaped assessment under Section 19 of the State Act. HELD by the Supreme Court:
(i) It is also pertinent to understand the meaning of the word ‘information’ in its true sense. According to the Oxford Dictionary, ‘information’ means facts told, heard or discovered about somebody/something. The Law Lexicon describes the term ‘information’ as the act or process of informing, communication or reception of knowledge. The expression ‘information’ means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or having a bearing on the assessment. We agree that a mere change of opinion or having second thought about it by the competent authority on the same set of facts and materials on the record does not constitute ‘information’ for the purposes of the State Act. But the word “information” used in the aforesaid Section is of the widest amplitude and should not be construed narrowly. It comprehends not only variety of factors including information from external sources of any kind but also the discovery of new facts or information available in the record of assessment not previously noticed or investigated. Suppose a mistake in the original order of assessment is not discovered by the Assessing Officer, on further scrutiny, if it came to the notice of another assessor or even by a subordinate or a superior officer, it would be considered as information disclosed to the incumbent officer. If the mistake itself is not extraneous to the record and the informant gathered the information from the record, the immediate source of information to the Officer in such circumstances is in one sense extraneous to the record. It will be information in his possession within the meaning of Section 19 of the State Act. In such cases of obvious mistakes apparent on the face of the record of assessment, that record itself can be a source of information, if that information leads to a discovery or belief that there has been an escape of assessment or under-assessment or wrong assessment.
(ii) There are a catena of judgments of this Court holding that assessment proceedings can be reopened if the audit objection points out the factual information already available in the records and that it was overlooked or not taken into consideration. Similarly, if audit points out some information or facts available outside the record or any arithmetical mistake, assessment can be re-opened.
(iii) The contention whether finding the information from the very facts that were already available on record amounts to information for the purpose of Section 19 of the State Act, it would be sufficient to refer to a judgment of this Court in Anandjiharidas & Co. vs. S.P. Kasture AIR 1968 SC 565 wherein it was held that a fact which was already there in records doesn’t by its mere availability becomes an item of “information” till the time it has been brought to the notice of assessing authority. Hence, the audit objections were well within the parameters of being construed as ‘information’ for the purpose of section 19 of the State Act.
(iv) The expression ‘information’ means instruction or knowledge derived from an external source concerning facts or parties or as to law relating to and/or after bearing on the assessment. We are of the clear view that on the basis of information received and if the assessing officer is satisfied that reasonable ground exists to believe, then in that case the power of the assessing authority extends to re-opening of assessment, if for any reason, the whole or any part of the turnover of the business of the dealer has escaped assessment or has been under assessed and the assessment in such a case would be valid even if the materials, on the basis of which the earlier assessing authority passed the order and the successor assessing authority proceeded, were same. The question still is as to whether in the present case, the assessing authority was satisfied or not.
(v) From a perusal of the last paragraph of the aforementioned report of the audit party, it is clear that the Assessing Officer was of the opinion that as the goods had not been transferred to appellant-Company but had been consumed, so it does not come under the purview of taxation. In other words, the Assessing Officer was not satisfied on the basis of information given by the audit party that any of the turnover of the appellant-Company had escaped assessment so as to invoke Section 19 of the State Act. From the above, it also appears that the assessing officer had to issue notice on the ground of direction issued by the audit party and not on his personal satisfaction which is not permissible under law.
(vi) In view of the above discussion, we are of the considered view that the order dated 27.02.2006 passed by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur is without jurisdiction and the High Court was not right in dismissing the petition filed by the appellant-Company. We, therefore, allow the appeal and set aside the order dated 27.02.2006 passed by the Deputy Commissioner, Commercial Taxes, Urban Circle, Jamshedpur as well as the order dated 17.11.2006 passed by the Division Bench of the High Court of Jharkhand. However, the parties shall bear their own costs.
M/s Indian & Eastern 6 Newspaper Society, New Delhi vs. Commissioner of Income Tax, New Delhi (1979) 4 SCC 248,
Bhimraj Madanlal vs. State of Bihar and Another (1984) 56 STC 273,
Usha Sales (Pvt.) Ltd. vs. The State of Bihar (1985) 58 STC 217
Deputy Commissioner of Sales Tax (Law), Board of Revenue (Taxes), Ernakulam vs. M/s Thomas Stephen & Co. Ltd. Quilon (1988) 2 SCC 264.
Commissioner of Income Tax vs. P.V.S. Beedies Pvt. Ltd. (1998) 9 SCC 272,
Anandji Haridas and Co. (P) Ltd. vs. S.P. Kasture and Others AIR 1968 SC 565,
Commissioner of Customs, Mumbai vs. Virgo Steels, Bombay and Another (2002) 4 SCC 316,
Supreme Paper Mills Limited vs. Assistant Commissioner, Commercial Taxes, Calcutta and Others (2010) 11 SCC 593,Chatturam & Ors. vs. CIT, Bihar AIR 1947 FC 32.
Commissioner of Income Tax, U.P., Lucknow vs. M/s Gurbux Rai Harbux Rai (1971) 3 SCC 654
M/s Phool Chand Bajrang Lal and Another vs. Income Tax Officer & Another (1993) 4 SCC 77