| COURT: | Bombay High Court |
| CORAM: | B. P. Colabawalla J, M. S. Sanklecha J |
| SECTION(S): | 147, 148 |
| GENRE: | Domestic Tax |
| CATCH WORDS: | reasons, Reopening |
| COUNSEL: | B. V. Jhaveri, Percy Pardiwala |
| DATE: | February 10, 2016 (Date of pronouncement) |
| DATE: | February 22, 2016 (Date of publication) |
| AY: | 2010-11 |
| FILE: | Click here to download the file in pdf format |
| CITATION: | |
| S. 147: Law laid down in DCIT vs. Zuari Estate Development and Investment Co 373 ITR 661 does not mean that in cases where no assessment order is passed and assessment is completed by Intimation u/s 143(1), the sine qua non to show that there is "reason to believe that income chargeable to tax has escaped assessment" is not required. It is open to the assessee to challenge a notice issued u/s 148 as being without jurisdiction for absence of reason to believe even in case where the assessment has been completed earlier by Intimation u/s 143(1) of the Act | |
The assessee filed a Writ Petitioon to challenge a notice issued u/s 148 in a case where only an intimation u/s 143(1) had been passed. The Department contented that the Writ Petition was not maintainable in view of the judgement of the Supreme Court in Deputy Commissioner of Income Tax Vs. Zuari Estate Development and Investment Co. Ltd. (2015) 373 ITR 661 where the order of the Bombau High Court in Zuari Estate Development Co. Ltd. Vs. Dy. Commissioner of Income Tax 271 ITR 269 had been set aside. The Supreme Court held that where the original Return has been accepted by Intimation under Section 143(1) of the Act, there could be no change of opinion. Further, it was contended that the Supreme Court impliedly held that in such cases where assessment is completed by Intimation under Section 143(1) of the Act, there is no requirement for the Assessing Officer to have reason to believe that income chargeable to tax has escaped assessment, so as to exercise jurisdiction under Section 148 of the Act. HELD by the Bombay High Court:
(i)T he Apex Court in Assistant Commissioner of Income Tax Vs. Rajesh Jhaveri Stock Brokers P. Ltd. 291 ITR 500, had an occasion to deal with identical facts, namely reopening Notices issued under Section 148 of the Act where assessment is completed earlier by Intimation under Section 143(1) of the Act. In the above case, the Apex Court held that a Notice for reopening an assessment under Section 148 of the Act could only be justified if the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. This decision of the Supreme Court in Rajesh Jhaveri Stock Brokers P. Ltd. (Supra) has not been disturbed by the Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra). In fact, the Supreme Court in Zuari Estate Development and Investment Co. Ltd. (Supra) makes a specific reference to its decision in Rajesh Jhaveri Stock Brokers P. Ltd. (Supra) to hold that where the assessment has been completed by Intimation under Section 143(1) of the Act, there can be no question of change of opinion.
(ii) The Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra) has not dealt with the issue whether before invoking Section 148 of the Act, the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment, where the original assessment has been completed by Intimation under Section 143(1) of the Act. The Revenue is trying to infer that because the Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra) has set aside the order of this Court and restored the issue to be decided on merits by the Tribunal, it must be inferred that the Apex Court had come to the conclusion that reason to believe was not necessary for issuing reassessment Notices where the regular assessment was completed under Section 143(1) of the Act. As rightly pointed out by Mr. Pardiwalla, it can equally be inferred that the Apex Court in the above case had come to the conclusion that there is reason to believe that income had escaped assessment and consequently restored the issue to the Tribunal to decide the reassessment proceedings on merits.
(iii) It is settled position in law that the decision of the Court has to be read in the context of the facts involved therein and not on the basis of what logically flows therefrom as held by the Supreme Court in Ambica Quarry Works Vs. State of Gujarat, 1987(1) SCC 213. The Apex Court in Zuari Estate Development and Investment Co. Ltd. (Supra)not having dealt with the issue of reason to believe that income chargeable to tax has escaped assessment on the part of the Assessing Officer in cases where regular assessment was completed by Intimation under Section 143(1) of the Act, it would not be wise for us to infer that the Supreme Court in Zuari Estate Development and Investment Co. Ltd. (Supra) has held that the condition precedent for the issue of reopening notice namely, reason to believe that income chargeable to tax has escaped assessment, has no application where the assessment has been completed by Intimation under Section 143(1) of the Act. The law on this point has been expressly laid down by the Apex Court in the case of Rajesh Jhaveri Stock Brokers P. Ltd. (Supra) and the same would continue to apply and be binding upon us. Thus, even in cases where no assessment order is passed and assessment is completed by Intimation under Section 143(1) of the Act, the sine qua non to issue a reopening notice is reason to believe that income chargeable to tax has escaped assessment. In the above view, it is open for the petitioner to challenge a notice issued under Section 148 of the Act as being without jurisdiction for absence of reason to believe even in case where the Assessment has been completed earlier by Intimation under Section 143(1) of the Act.
Tentative
In several contexts in the reported judgment / observations of the HC, a repeated mention is made of,-” where the assessment has been completed by Intimation under Section 143(1)”. On the first blush,it is anybody’s guess whether such observations- which, although,are prima facie not readily reconcilable with one’s individual understanding of the HC and SC judgments in the Zuari Estate case,as brought out in the comments posted thereon- could be taken for granted to clarify, implicitly though not explicitly, and be relied on to support the view that in a case of this type intimation sent or deemed to have been sent as envisaged in sec 143 (1)requires to be construed as an ‘assessment’ within the meaning of the Act, more so for all its purposes.
If so, should not, as a necessarily corollary,what must follow is that any action initiated by AO by invoking sec 147 could only be regarded to be for making a ‘reassessment’ within the meaning of the law- not an ‘assessment’ for the first time?
(May be contd)
As Updated (elsewhere; shared on Facebook) :
The HC judgment in Khubchandani Healthparks Pvt. Ltd’s case (< http://itatonline.org/…/khubchandani-healthparks-pvt-ltd-v…/
) has held, very rightly so,to the effect that, Revenue has wrongly cited SC judgement in Zuari Estate…case ( the commentary and cited case law on “Precedents” in Kanga & Palkhivala’s Text Book) ought not to be over sighted but should be consciously taken a note of and necessarily borne in mind.
Briefly stated, under Art 141 of the Constitution, in order to have a ‘binding force’, the SC judgment must be one in which the apex court has “DECLARED THE LAW”. The proposition, as advanced and canvassed by Revenue in the instant case, in one’s firm conviction, cannot most certainly, by any stretch of imagination, even remotely, be regarded to be covered by the SC judgment relied on by Revenue in a casual manner.
Further, in order to invoke sec 147, as spelt out by the enactment itself, “reason to believe that income has escaped ‘assessment’ or ‘reassessment'” as envisaged therein, is a condition precedent / sine quo non. Also on that premise, Revenue’s stance is, without an iota of doubt, extremely illogical and misconceived to the core.
Point to seriously Ponder: Should not such instances, of disgustingly bizarre type , be avoided, at any cost; in order to cry a halt , once for all,with a view to uphold and maintain the rudimentary principles of ‘justice’ (in its most comprehensive sense), by the judiciary, at least in such cases in which the Executive is noted to have failed, unwittingly, or impudently, or otherwise, to do so.
Weekend Musings:
The 3 ‘Rs’, (as in the letter R), as may have been heard of, refers to the foundations of a basic skills-oriented education program within schools: reading, writing and arithmetic.
Simply but frankly stated, those are related to quite an elementary stage of education, anyone is expected to have gone through in formative years, compulsively, in order to jump on to the bandwagon of so called-, and eventually qualify /being fit to be classified as-, ‘educated ‘ (in common parlance, ‘literate’).
If were to be inquisitively provoked and intelligently looked through, in one’s perspective, the Bom. HC case – http://itatonline.org/…/khubchandani-healthparks-pvt-ltd-v…/ is reminiscent of /has something closely related to the first of the three- i.e. ‘reading’.
On the flip side of it, the Del. HC case @ http://taxguru.in/…/reopening-incoherent-reasons-valid-147.… underscores an abject failure / neglect to attach equal importance , as is legitimately due, to the second- i.e. ‘writing’.
Considered no need to, hence, no attempt made to dilate, to make the intended message more explicit.
Should, however, anyone have an urging thirst for ‘etymology’ of, – that is, if interested in knowing more about – the 3 ‘Rs’, , may be recommended to look up, – https://en.wikipedia.org/wiki/The_three_Rs#Etymology
AND
https://en.wikipedia.org/wiki/The_three_Rs…