M/S. Om Sons International Jalandhar, Punjab v. Commissioner Of Income Tax,Jalandhar, Punjab

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. --- Income Tax Appeal No. 869 of 2010Date of decision: 12.7.2011 M/s. Om Sons International Jalandhar, Punjab --- Appellant Versus Commissioner of Income Tax,Jalandhar, Punjab CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELACTING CHIEF JUSTICE HON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- Present:Mr. S.K. Mukhi, Advocate assisted byMs. Jyoti, Advocate for the appellant. --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-Tax Act,1961 (for short “the Act”) has been filed by the assessee against theorder dated 16.10.2009, passed by the Income Tax AppellateTribunal Amritsar Bench, Amritsar (in short “the Tribunal”) in ITA No.332/ASR/2009, relating to the assessment year 2000-2001. 2.The following substantial questions of law have beenclaimed for determination of this Court: “(i)Whether on the facts and in the circumstances of thecase the action initiated by respondent No.3 in issuingthe notice u/s 148 of the Income Tax Act, 1961 and thecase the action initiated by respondent No.3 in issuingthe notice u/s 148 of the Income Tax Act, 1961 and the consequential passing of the orders u/s 143(3) is bad inlaw in view of the fact that the same have beenissued/taken without proper service of notice u/s 148which is a basic condition for starting of any proceedingsunder any enable provisions of the Income Tax Act, 1961and also the ITAT has erred in not adjudicating upon thesaid issue though specifically taken as per Ground No.3? (ii)Whether on the facts and in the circumstances of thecase, the Tribunal was justified in confirming the veryissuance of notice u/s 148 of the Income Tax Act, 1961by the authorities below, as valid without appreciating thefact and the trite law that law applicable on the date offiling of the Income Tax Return is to be seen than thesubsequent events or judgments?case, the Tribunal was justified in confirming the veryissuance of notice u/s 148 of the Income Tax Act, 1961by the authorities below, as valid without appreciating thefact and the trite law that law applicable on the date offiling of the Income Tax Return is to be seen than thesubsequent events or judgments? (iii)Whether on the facts and in the circumstances of thecase, the Tribunal was justified in confirming the veryissuance of notice u/s 148 of the Income Tax Act, 1961by the authorities below, as valid without appreciating thefact and the trite law that there was no concealment orwrong claim of deduction by the appellant rather it was asper law applicable on the date of filing of the Income TaxReturn?case, the Tribunal was justified in confirming the veryissuance of notice u/s 148 of the Income Tax Act, 1961by the authorities below, as valid without appreciating thefact and the trite law that there was no concealment orwrong claim of deduction by the appellant rather it was asper law applicable on the date of filing of the Income TaxReturn? (iv)Whether on the facts and in the circumstances of thecase, the Tribunal was justified in confirming the veryissuance of notice u/s 148 of the Income Tax Act, 1961by the authorities below, as valid without appreciating thefact and the trite law that there was no concealment orwrong claim of deduction by the appellant rather it was ascase, the Tribunal was justified in confirming the veryissuance of notice u/s 148 of the Income Tax Act, 1961by the authorities below, as valid without appreciating thefact and the trite law that there was no concealment orwrong claim of deduction by the appellant rather it was as per law applicable on the date of filing of the Income Tax Return and the reopening on the basis of retrospectiveamendment that too beyond four years from the end ofthe assessment year is bad in law? (v)Whether on the facts and in the circumstances of thecase, the Tribunal was justified in concurring with thereason recorded by the A.O.? per law applicable on the date of filing of the Income Tax Return and the reopening on the basis of retrospectiveamendment that too beyond four years from the end ofthe assessment year is bad in law? (v)Whether on the facts and in the circumstances of thecase, the Tribunal was justified in concurring with thereason recorded by the A.O.? (vi)Whether on the facts and in the circumstances of thecase, the findings of ITAT are perverse and against theevidence on record, thus, unsustainable in law?case, the findings of ITAT are perverse and against theevidence on record, thus, unsustainable in law? (vii) Whether ITAT has misdirected itself in being influencedby irrelevant facts and applying erroneous criteria whiledeciding the issue for claiming deduction under Section80HHC of the Income Tax Act, 1961? 3. The facts, in brief, necessary for adjudication as narrated in the appeal, are that the assessee is a partnership firm. It isengaged in the business of manufacturing, assembling, processingand exporting goods to various parts of the world. The assessee filedreturn for the assessment year in question on 31.10.2000 declaringtotal income of Rs. 11,05,920/-. The income also included deductionof Rs.1,18,10,594/- claimed under Section 80HHC of the Act. Thereturn was processed under Section 143(1) on 28.3.2002. However,reassessment proceedings under Section 147/148 of the Act wereinitiated. The assessing officer vide order dated 26.12.2007computed the taxable income of the assessee at Rs. 1,29,16,510/-.The appeal carried by the assessee to the Commissioner of IncomeTax (Appeals) [for short “the CIT(A)”], was dismissed vide orderdated 11.5.2009. 4.The appellant-assessee filed appeal before the Tribunalchallenging the action of the assessing officer in re-opening of theassessment under Sections 147/148 of the Act, which was rejectedvide order dated 16.10.2009. 5.This is how the assessee has preferred the instant appeal. 6.We have heard learned counsel for the appellant andperused the record. 7. The first substantial question of law claimed by the assessee relates to the validity of proceedings under Section 148and the consequential order passed under Section 143(3) in theabsence of proper service of such notice under Section 148 of theAct. 8.It would be expedient to refer to Section 292BB of theAct. Section 292BB had been inserted by Finance Act, 2008 witheffect from 1.4.2008 whereby presumption is made relating to serviceof notice on the assessee in respect of assessment andreassessment proceedings. The scope and applicability of theaforesaid provision on pending proceedings came up forconsideration in Commissioner of Income Tax, Bathinda v. M/sPanchvati Motors (P) Ltd., ITA 292 of 2008 decided on 3.5.2011,wherein it was held as under: “Section 292BB of the Act was inserted byFinance Act, 2008 w.e.f. 1.4.2008. It reads thus:- “292BB: Where an assessee has appeared in any proceeding or co-operated in any inquiryrelating to an assessment or reassessment, it shallbe deemed that any notice under any provision of the Act, which is required to be served upon him,has been duly served upon him in time inaccordance with the provisions of this Act and suchassessee shall be precluded from taking anyobjection in any proceeding or inquiry under this Actthat the notice was – a) not served upon him; or b) not served upon him in time; or c) served upon him in an improper manner. Provided that nothing contained in this section shallapply where the assessee has raised suchobjection before the completion of suchassessment or reassessment.” “292BB: Where an assessee has appeared in any proceeding or co-operated in any inquiryrelating to an assessment or reassessment, it shallbe deemed that any notice under any provision of the Act, which is required to be served upon him,has been duly served upon him in time inaccordance with the provisions of this Act and suchassessee shall be precluded from taking anyobjection in any proceeding or inquiry under this Actthat the notice was – a) not served upon him; or b) not served upon him in time; or c) served upon him in an improper manner. Provided that nothing contained in this section shallapply where the assessee has raised suchobjection before the completion of suchassessment or reassessment.” A presumption has been raised under the saidprovision relating to service of notice upon theassessee in respect of assessment orreassessment proceedings. According to thisprovision, where an assessee appears in anyproceedings or cooperates in any enquiry relating toassessment or reassessment proceedings, it shallbe presumed that the assessee has been validlyserved and it shall not be open to the assessee toobject that the notice was not served upon him orwas not served in time or was served upon him inan improper manner. However, an exception to theaforesaid presumption has been made in a casewhere such objection has been raised beforecompletion of assessment or reassessment. The provision has been made effective from 1.4.2008and therefore, shall apply to all pendingproceedings. The Central Board of Direct Taxesissued circular No.1 of 2009 dated 27[th] March, 2009(2009) 310 ITR (St.) 42 giving explanatory notes onthe provisions relating to direct taxes contained inFinance Act, 2008. Clause 42.7 (at page 86 of thereport) is relevant which relates to applicability ofthis provision and reads thus: “42.7 Applicability – This amendment hasbeen made applicable with effect from 1[st] April,2008. This means that the provision of new-section292BB shall apply in all proceedings which arepending on 1[st] April, 2008.” 9.Accordingly, such objection having been raised for thefirst time before this Court do not give any valid justification forchallenging the re-assessment proceedings on that ground.Accordingly, question No.1 is held not to be a substantial question oflaw calling for consideration of this Court. 10.Adverting to questions mentioned at 2, 3 and 4 above,claimed by the assessee, suffice it to notice that the reassessmentproceedings were questioned by the assessee before the Tribunalwherein it was contended that the assessing officer had no materialto take recourse to reassessment proceedings and the same wasbased on imagination, suspicion and change of opinion. Thecontention of the assessee was repelled by the Tribunal by noticingas under: 9.Accordingly, such objection having been raised for thefirst time before this Court do not give any valid justification forchallenging the re-assessment proceedings on that ground.Accordingly, question No.1 is held not to be a substantial question oflaw calling for consideration of this Court. 10.Adverting to questions mentioned at 2, 3 and 4 above,claimed by the assessee, suffice it to notice that the reassessmentproceedings were questioned by the assessee before the Tribunalwherein it was contended that the assessing officer had no materialto take recourse to reassessment proceedings and the same wasbased on imagination, suspicion and change of opinion. Thecontention of the assessee was repelled by the Tribunal by noticingas under: “We have carefully perused the relevant facts of the case,rival submissions and the order of the authorities below.We find that the return of income was processed u/s 143(1)(a) of the Act. Needless to emphasis that undersummary scheme, the processing is made even by theministerial staff acknowledgment is treated as intimation,which indicates refundable or payable amount. The A.O.is not competent to make any enquiry under suchsummary scheme as Govt. of India has reposed full faithin the assessee and introduced the said Scheme.Therefore, to contend that there is change of opinion, insuch circumstances, is incomprehensible. In ourconsidered view, change of opinion, presupposesexistence of opinion. So, in the summary scheme, at thetime of processing the return u/s 143(1) of the Act, thereis no formation of opinion. Hence, the question ofchange of opinion, does not arise. Therefore, thecontention that the case has been reopened “on changeof opinion” is patently erroneous and contrary to thestatutory provisions contained under Section 143(1) ofthe Act. The fact-situation of the present case is squarelygoverned by the ratio of the decision, in the case of Asstt.CIT v. Rajesh Jhaveri Stock Brokers P. Ltd. (2007) 29110 (SC TR 50). The relevant part of the decision isreproduced hereunder: “The Supreme Court in asstt. CIT v. Rajesh Jhaveristock Brokers P.Ltd. (2001) 291 ITR 500 (SC) has re-iterated some of the first principles relating to re- assessment. In this case, the Assessing Officer’sjurisdiction was questioned on the ground that theAssessing Officer already having issue an intimation u/s143(1) of the act, could not issue reassessment notice onmatter disclosed along with return and such notice shouldbe taken as one prompted by change of opinion notpermitted by law. The Supreme Court found that primafacie adjustment under Section 143(1)(a) (now deleted),is no assessment. In fact, in this case, such intimationwas issued on 26[th] November, 2001, after intimationunder Section 143(1)(a) was replaced with effect from1.6.1999 by a different intimation under Section 143(1),which did not permit even such adjustment. There canbe no change of opinion inferable, where no opinioncould have been formed at the time of intimation.” The Supreme Court held, all that is required for issue ofnotice under Section 147 is “reason to believe” that someincome has escaped assessment in following words: “The word reason in the phrase “reason to believe” wouldmean cause or justification. If the Assessing Officer hascause or justification to know or suppose that income hadescaped assessment it can be said to have reason tobelieve that an income had escaped assessment. Theexpression cannot be read to mean that the AssessingOfficer should have finally ascertained the fact by legalevidence or conclusion. The function of the assessingofficer is to administer the statute with solicitude for thepublic exchequer with an inbuilt idea of fairness to The Supreme Court held, all that is required for issue ofnotice under Section 147 is “reason to believe” that someincome has escaped assessment in following words: “The word reason in the phrase “reason to believe” wouldmean cause or justification. If the Assessing Officer hascause or justification to know or suppose that income hadescaped assessment it can be said to have reason tobelieve that an income had escaped assessment. Theexpression cannot be read to mean that the AssessingOfficer should have finally ascertained the fact by legalevidence or conclusion. The function of the assessingofficer is to administer the statute with solicitude for thepublic exchequer with an inbuilt idea of fairness to taxpayers as observed by the Supreme Court in CentralProvinces Manganese Ore Co.Lt. ITO (1991) 191 ITR662, for initiation of action under Section 147(a) (as theprovision stood at the relevant time) fulfillment of the tworequisite conditions in that regard is essential. At thatstage, the final outcome of the proceeding is not relevant.In other words, at the initiation stage, what is required isreason to believe, but not the established fact ofescapement of income. At the stage of issue of notice,the only question is whether there was relevant materialon which a reasonable person could have formed arequisite belief, whether the materials would conclusivelyprove the escapement is not the concern at that stage.This is so because the formation of belief by theAssessing Officer is within the realm of subjectivesatisfaction (see ITO v. Selected Dalurband Co. Ltd.(1996) 217 ITR 597 (SC) : Raymond Woollen Mills Ltd. VITO (1999) 236 ITR 34 (SC).” 11.Learned counsel for the assessee was unable todemonstrate that the aforesaid conclusion of the Tribunal wasperverse or against law in any manner. In the absence thereof,question Nos.2 to 4 as claimed by the assessee do not arise from theorder of the Tribunal for consideration of this Court. 12.Question Nos. 5, 6 and 7 being general in nature cannotbe held to be substantial questions of law that may require this Courtto give any opinion thereon. 13. In all fairness to learned counsel for the assessee, the following judgments whereupon reliance was placed by him arenoticed here: (i)CIT vs. Hindustan Electro Graphites Ltd., (2000) 243 ITR48 (SC)48 (SC) ii)CIT vs. Max India Ltd., (2007) 295 ITR 282 (SC)(iii)ACIT vs. Prem Kumar Rastogi, (1980) 124 ITR 381(Allahabad)(iii)ACIT vs. Prem Kumar Rastogi, (1980) 124 ITR 381(Allahabad) 14.A perusal of the aforesaid judgments shows that thesame were on individual fact situation involved therein and thus, haveno applicability to the facts involved in the present appeal.Accordingly the said judgments do not advance the case of theassessee. 15.In view of the above, there is no merit in the appeal andthe same is accordingly dismissed. (AJAY KUMAR MITTAL) JUDGE July 12, 2011*rkmalik* (ADARSH KUMAR GOEL) ACTING CHIEF JUSTICE