{"id":6096,"date":"2013-01-06T04:41:01","date_gmt":"2013-01-06T04:41:01","guid":{"rendered":"http:\/\/itatonline.org\/archives\/?p=6096"},"modified":"2013-01-06T04:41:01","modified_gmt":"2013-01-06T04:41:01","slug":"cit-vs-orient-craft-ltd-delhi-high-court-even-s-1431-intimation-cannot-be-reopened-us-147-without-fresh-material","status":"publish","type":"post","link":"https:\/\/itatonline.org\/archives\/cit-vs-orient-craft-ltd-delhi-high-court-even-s-1431-intimation-cannot-be-reopened-us-147-without-fresh-material\/","title":{"rendered":"CIT vs. Orient Craft Ltd (Delhi High Court)"},"content":{"rendered":"\n\n
Click here to download the judgement (orient_carft_143_1_Intimation_147_reopening.pdf) <\/strong> <\/a><\/p><\/td>\n<\/tr>\n<\/table>\n


\nEven s. 143(1) Intimation cannot be reopened u\/s 147 without “fresh material”<\/strong><\/p>\n

The assessee filed a ROI in which it claimed s. 80HHC deduction of Rs. 13.35 crores. The AO accepted the ROI u\/s 143(1). He thereafter reopened the assessment u\/s 147 on the ground that the sale proceeds of the quota was wrongly considered as export turnover and that it was business profits and 90% thereof had to be reduced u\/s 80HHC. The assessee challenged the reopening on the ground that as there was no “fresh material<\/em>“, the AO had no jurisdiction to reopen the s. 143(1) Intimation. This was upheld by the Tribunal (order attached<\/em>) by relying on Kelvinator of India<\/a><\/strong> 320 ITR 561 (SC). On appeal by the department to the High Court, HELD dismissing the appeal:<\/p>\n

S. 147 permits an assessment to be reopened if there is “reason to believe<\/em>“. It makes no distinction<\/strong> between an order u\/s 143(3) or an Intimation u\/s 143(1). Accordingly, it is not permissible to adopt different standards while interpreting the words \u201creason to believe<\/em>\u201d vis-\u00e0-vis s. 143(1) and s. 143(3). The department’s argument that the same rigorous standards<\/strong> which are applicable in the interpretation of the expression when it is applied to the reopening of a s. 143(3) assessment cannot apply to a s. 143(1) Intimation is not acceptable because it would place an assessee whose return is processed u\/s 143(1) in a more vulnerable position than an assessee in whose case there is a full-fledged s. scrutiny assessment u\/s 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee. An interpretation which makes a distinction between the meaning and content of the expression \u201creason to believe<\/em>\u201d between a case where a s. 143(3) assessment is made and one where an Intimation u\/s 143(1) is made may lead to unintended mischief<\/strong>, be discriminatory<\/strong> & lead to absurd results<\/strong>. In Kelvinator<\/a><\/strong> 320 ITR 561 (SC) it was held that the term “reason to believe<\/em>” means that there is “tangible material<\/em>” and not merely a “change of opinion<\/em>” and this principle will apply even to s. 143(1) Intimations. On facts, the AO reached the belief that there was escapement of income \u201con going through the ROI<\/em>\u201d filed by the assessee. This is nothing but a review<\/strong> of the earlier proceedings and an abuse of power<\/strong> by the AO. There is no whisper in the reasons recorded of any tangible material<\/strong> which came to the possession of the AO subsequent<\/strong> to the issue of the Intimation. It reflects an arbitrary exercise of the power<\/strong> conferred u\/s 147 (Rajesh Jhaveri Stock Brokers<\/strong> 291 ITR 500 (SC) distinguished)<\/p><\/blockquote>\n

\nNote<\/strong>: This impliedly approves the Third Member verdict in Telco Dadajee Dhackjee<\/a><\/strong> (which incidentally was also authored by Easwar J when he was Sr. VP in the ITAT<\/em>) which have been followed in H. V. Transmissions<\/a><\/strong> & Delta Airlines<\/a><\/strong>. Contrast with the Full Bench verdict in Usha International<\/a><\/strong> (where Easwar J. dissented<\/em>) that even in a s. 143(3) assessment, there is no “change of opinion” if there is no specific inquiry by the AO\n<\/div>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

S. 147 permits an assessment to be reopened if there is “reason to believe<\/em>“. It makes no distinction<\/strong> between an order u\/s 143(3) or an Intimation u\/s 143(1). Accordingly, it is not permissible to adopt different standards while interpreting the words \u201creason to believe<\/em>\u201d vis-\u00e0-vis s. 143(1) and s. 143(3). The department’s argument that the same rigorous standards<\/strong> which are applicable in the interpretation of the expression when it is applied to the reopening of a s. 143(3) assessment cannot apply to a s. 143(1) Intimation is not acceptable because it would place an assessee whose return is processed u\/s 143(1) in a more vulnerable position than an assessee in whose case there is a full-fledged s. scrutiny assessment u\/s 143(3). Whether the return is put to scrutiny or is accepted without demur is not a matter which is within the control of assessee. An interpretation which makes a distinction between the meaning and content of the expression \u201creason to believe<\/em>\u201d between a case where a s. 143(3) assessment is made and one where an Intimation u\/s 143(1) is made may lead to unintended mischief<\/strong>, be discriminatory<\/strong> & lead to absurd results<\/strong>. In Kelvinator<\/a><\/strong> 320 ITR 561 (SC) it was held that the term “reason to believe<\/em>” means that there is “tangible material<\/em>” and not merely a “change of opinion<\/em>” and this principle will apply even to s. 143(1) Intimations. On facts, the AO reached the belief that there was escapement of income \u201con going through the ROI<\/em>\u201d filed by the assessee. This is nothing but a review<\/strong> of the earlier proceedings and an abuse of power<\/strong> by the AO. There is no whisper in the reasons recorded of any tangible material<\/strong> which came to the possession of the AO subsequent<\/strong> to the issue of the Intimation. It reflects an arbitrary exercise of the power<\/strong> conferred u\/s 147 (Rajesh Jhaveri Stock Brokers<\/strong> 291 ITR 500 (SC) distinguished)<\/p>\n

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