M/S.cairn Energy India Pty.limited Rep. By Its Authorised Signatory Mr.navin Jain, Authorised Signatory Wellington Plaza,2Nd Floor v. Deputy Director Of Income Tax (International Taxation) 7Th Floor, Room

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED 29.10.2011 CORAM THE HONOURABLE MRS.JUSTICE CHITRA VENKATARAMAN W.P.No.10910 of 2011and M.P.No.1 of 2011 --- M/s.Cairn Energy India Pty.LimitedRep. by its Authorised SignatoryMr.Navin Jain, Authorised SignatoryWEllington Plaza,2nd FloorNO.90, Anna SalaiChennai-600 002..PetitionerVs 1.Deputy Director of Income Tax (International Taxation) 7th Floor, Room NO.703, Annexe Building, Aaykar Bhawan 121, Mahatma Gandhi Road Chennai-600 034 2. Assistant Director of Income Tax (International Taxation-I) 121, Mahatma Gandhi Road Chennai-600 034..Respondents Writ Petition filed under Article 226 of the Constitution of Indiapraying to issue a writ of Certiorari quashing the impugned noticeunder Section 148 of the Income Tax Act, 1961 passed by the secondrespondent dated 30.03.2010 and the consequential order dated29.03.2011 passed by the first respondent disposing off theobjections to the initiation of the proceedings under Section 147 ofthe Act. For Petitioner : Mr.C.S.Aggarwal Senior Counsel for Mr.M.V.Swaroop For respondents: Mr.T.R.SenthilKumar Junior Standing Counsel for Income Tax. This writ petition is filed by the assessee seeking writ ofcertiorari to quash the impugned notice under Section 148 of theIncome Tax Act, 1961 dated 30.03.2010 and the consequential orderpassed on 29.03.2011 based on the objections filed by the assesseeto the initiation of the proceedings under Section 147 of the IncomeTax Act, 1961. 2. On notice, the respondents have filed the counter affidavit.Apart from supporting the notice issued to reopen the assessment,the counter supported that the Officer had valid reason to believethat the income had escaped assessment. The Counter supported theproceedings as well within the limitation provided for under Section147 and 148 of the Income Tax Act, 1961 (hereinafter called as "theAct"). Hence, the respondents sought for dismissal of the main writpetition. 3. The petitioner herein is a Company incorporated in New SouthWales, Australia and is a subsidiary of Cairn Energy PLC based inEdinburgh. The Company is stated to be engaged in the business ofexploration and production of oil and gas in India since 1996. Inthe return filed for the assessment year 2003-04 on 24.11.2003, theassessee declared Nil total income under the normal provisions ofthe Act and book profit of Rs.195,14,29,385/- under Section 115JB ofthe Act. The assessee states that it filed the tax audit reportunder Section 44 AB of the Act. The assessee's case was selectedfor scrutiny by issuance of notice under Section 143(2) of the Act.In the enquiry conducted, the assessee is stated to have filedreplies and materials in support of its various claims starting fromits letter dated 19.09.2005 to end on 16.02.2006. 4. Thus, a perusal of the records produced before this Courtshow that for nearly 8 months or so, the assessment proceedings weregoing on seeking various information and materials and clarificationfrom the assessee. Ultimately, on 20.02.2006, the respondent-IncomeTax Department completed the assessment under Section 143(3) of the Act. As regards the disallowance made againstcertain claims of the assessee in the assessment, the assessee hadfiled appeal before the Commissioner of Income Tax (Appeals), whichis now pending disposal therein. 5. While the matters stood thus, the second respondent hereinsent a notice under Section 148 of the Act on 30.03.2010 on theground that the claim of the assessee as regards the payment madetowards geological studies, seismic data acquiring and processing 4. Thus, a perusal of the records produced before this Courtshow that for nearly 8 months or so, the assessment proceedings weregoing on seeking various information and materials and clarificationfrom the assessee. Ultimately, on 20.02.2006, the respondent-IncomeTax Department completed the assessment under Section 143(3) of the Act. As regards the disallowance made againstcertain claims of the assessee in the assessment, the assessee hadfiled appeal before the Commissioner of Income Tax (Appeals), whichis now pending disposal therein. 5. While the matters stood thus, the second respondent hereinsent a notice under Section 148 of the Act on 30.03.2010 on theground that the claim of the assessee as regards the payment madetowards geological studies, seismic data acquiring and processing and chartered hire charges (drilling preparation, rig mobilisationand demobilisation) amounting to Rs.29,73,41,247/- would not fallfor consideration under Section 44BB of the Act to go for TDS at therate of 4%. The Officer viewed that the services rendered by theassessee would attract Section 44D of the Act or Section 115A of theAct or fall within the definition of "Fee for technical services"under Section 9(1)(vii) of the Act and hence, not eligible forconsideration under Section 44BB of the Act. Referring to the CBDTInstruction No.1862 and to the decision of the Advance RulingAuthority in file No.P/6 of 1995 (234 ITR 371), the respondentviewed that the assessee was not entitled to deduct lower rate ;since the expenses claimed had been fully allowed in the assessment,the same called for proportionate disallowance under Section 40(a)(i) of the Act. The second respondent viewed that the excessdeduction had resulted in escapement of income chargeable to tax.The assessee also made payment towards reimbursement of actualexpenses and time cost charges to its associated enterprises abroad.Although, these expenses had been allowed in the assessment, no TDSwas made on these payments. In the light of the same, therespondent herein held that there was reason to believe that theincome chargeable to tax had escaped assessment and hence liable tobe dealt with under Section 147 of the Act read with Explanationthereto. 6. Immediately, by letter dated 18.10.2010, the assesseeobjected to the proceedings that it was in total disregard of theproviso to Section 147 of the Act ; further, there were no reasonssent along with notice under Section 148 of the Act, supporting thereopening of the assessment. However, in support of its contentionthat the claim fell for consideration under Section 44AB, theassessee made its objections that when (1) there was no suppressionof facts on the side of the assessee, (2) there being no materialsto warrant the reopen of the assessment and (3) there was nojurisdiction to reopen assessment. The petitioner stated that therewas no allegation that there had been any failure on the part of theassessee to disclose fully or truly all material facts necessary forthe assessment. Hence, in the absence of valid materials,proceedings under Section 148 of the Act are totally withoutjurisdiction. In view of the proviso to Section 147 of the Act, theproceedings are barred by limitation. 7. In support of its contention on the aspect of jurisdiction,the assessee relied on the following decisions of this Court, DelhiHigh Court as well as the Supreme Court :- (1) Haryana Acylic Manufacturing Co. Vs. CIT (308 ITR 38 (Del) (2) CIT Vs Tarachand Khusiram 303 ITR 298 (MP) (3) Thiagarajar Mills (P) Ltd Vs. Deputy Commissioner of IncomeTax (2009) 26 DTR 50 (Mad) (4) Fenner India Ltd., Vs. DCIT (241 ITR 672 (Mad)(5) Well Intertrade Pvt Ltd Vs. ITO (308 ITR 22 (Del.) (6) Duli Chand Singhania Vs. Assistant Commissioner of IncomeTax (269 ITR 192 (P&H)(7) CIT Vs. Elgi Finance Ltd (155 Taxman 124)(8) CIT Vs. Former France (264 ITR 566 (SC)) (9) Former France Vs. CIT (247 ITR 436 (All) 7. In support of its contention on the aspect of jurisdiction,the assessee relied on the following decisions of this Court, DelhiHigh Court as well as the Supreme Court :- (1) Haryana Acylic Manufacturing Co. Vs. CIT (308 ITR 38 (Del) (2) CIT Vs Tarachand Khusiram 303 ITR 298 (MP) (3) Thiagarajar Mills (P) Ltd Vs. Deputy Commissioner of IncomeTax (2009) 26 DTR 50 (Mad) (4) Fenner India Ltd., Vs. DCIT (241 ITR 672 (Mad)(5) Well Intertrade Pvt Ltd Vs. ITO (308 ITR 22 (Del.) (6) Duli Chand Singhania Vs. Assistant Commissioner of IncomeTax (269 ITR 192 (P&H)(7) CIT Vs. Elgi Finance Ltd (155 Taxman 124)(8) CIT Vs. Former France (264 ITR 566 (SC)) (9) Former France Vs. CIT (247 ITR 436 (All) (10) Bapalal and Company Vs. JCIT (289 ITR 37 (Mad)) (11) Jindal Photo Films Vs. CIT (234 ITR 170 (Del)) (12) CIT Vs. Kelvinator of India Ltd (256 ITR 1 (Del) (FB)) (13) KLM Royal Dutch Airlines Vs. Assistant Director of IncomeTax (292 ITR 49 (Del)) (14) Andhra Bank Ltd., Vs. CIT (225 ITR 447(SC)) (15) Calcutta Discount Co Ltd Vs. ITO (41 ITR 191 (SC)) (16) Fenner India Ltd Vs. DCIT (241 ITR 672(Mad)) (17) Parashuram Pottery Works Co., Limited Vs. Income TaxOfficer (106 ITR 1 (SC)) (18) Cartini India Ltd., Vs. Addl CIT (179 Taxman 157) (19) Jindal Photo Films Ltd Vs. CIT & Another (234 ITR 170) (20) CIT Vs. Baer Shoes India (P) Ltd T.C.(Appeal) No.706 of2010 Lex Doc Id:393691(21) ITO Vs. Lakhmani Mewal Das (103 ITR 437,448(SC))(22) CIT Vs. Daulat Ram Rawatmull (87 ITR 349 (SC))(23) Raunaq & Co. Pvt Ltd., Vs. ITO (158 ITR 30(Del))(24) Ritu Investments Private Limited Vs. DCIT in W.P.(C).7515/2010 (25) First Income Tax Officer, Davanagere Circle Vs. A.Y.Panduranga Rao and others (128 ITR 250 (Kar.)) (26) Gemini Leather Stores Vs. ITO (1975) (100 ITR 1 (SC)) (27) CIT Vs. Kelvinator of India Limited (256 ITR 1 (FB)) (28) K.L.M.Royal Dutch Airlines Vs. ITO (292 ITR 49 (Del)) (29) Calcutta Discount Co. Ltd Vs. ITO (41 ITR 191) (30) CIT Vs. Former France (264 ITR 566(SC)) Relying on the above decisions, learned Senior Counsel submits thatin the face of complete disclosure of all the materials in thecourse of enquiry on various dates at the time of originalassessment, the question of reopening as though the assessee had notdisclosed the facts fully or truly would not arise. Thus, in theabsence of any material disclosed by the Revenue to go for a primafacie view that there is escapement of tax, the proceedings are tobe dropped. 8. On consideration of the detailed reply, the respondentpassed the order dated 29.03.2011, rejecting the objection undereleven heads and ultimately called upon the assessee to co-operatein the proceedings. Aggrieved by the same, the present writpetition is filed by the assessee. https://hcservices.ecourts.gov.in/hcservices/ 8. On consideration of the detailed reply, the respondentpassed the order dated 29.03.2011, rejecting the objection undereleven heads and ultimately called upon the assessee to co-operatein the proceedings. Aggrieved by the same, the present writpetition is filed by the assessee. https://hcservices.ecourts.gov.in/hcservices/ 9. Learned Senior Counsel appearing for the petitioner took methrough Section 147 of the Act to point out that unless and untilthe Revenue had necessary materials to treat the income as escapingassessment, the question of reopening of the assessment underSection 147 of the Act would not arise. Placing reliance on thedecision of the Apex Court reported in 320 ITR 561 in the case ofCommissioner of Income Tax Vs. (1)Kelvinator Of India LTd (2)EicherLtd, learned Senior Counsel pointed out that even after theamendment to Section 147 in 1989, the Officer concerned has torecord his reason that the income had escaped assessment. To arriveat such a view, the Officer concerned must have valid and necessarymaterials providing live link for the formation of the belief. Inthe absence of any materials disclosed in the notice or evensubsequently thereto, the question of assuming jurisdiction underSection 147 does not arise. Placing reliance on the proviso toSection 147 of the Act, he submitted that on the facts thusdisclosed in the notice, no action could be taken after the expiryof four years from the end of the relevant assessment year. Even tofall under any of the clauses in Explanation (2) from (a) to (c),the respondent is duty bound to show that his reasons rested onmaterials in his possession. In the absence of any such materialsdisclosed, the reassessment proceedings has to fail. 10. Referring to the reply filed at the time of the originalassessment proceedings, in respect of TDS made both under Section44AB of the Act as well as as regards the payment towardsreimbursement of actual expenses, he pointed out that in the letterdated 16.02.1996 in respect of the claim under Section 44BB of theAct at 4%, the assessee had offered the explanation and produced thedetails thereon on the details of TDS made. Thus, along with thetax Audit Report before the Officer, all materials relating to theclaim was placed and the same were considered. Therefore, thequestion of making allegation that the assessment had resulted inunder-assessment resulting in granting of excess relief does notarise. 11. In so contending, learned Senior counsel for the assesseeplaced reliance on the following decisions:-(1) Haryana Acrylic Manufacturing Co. Vs. CIT reported in 308ITR 38 (Del)(2) Well Intertrade Pvt Ltd Vs. Income Tax Officer reported in308 ITR 22 (Del)(3) Duli Chand Singhania Vs. Assistant Commissioner of IncomeTax reported in 269 ITR 192 (P&H)(4) Fenner India Ltd Vs. DCIT reported in 241 ITR 672 (Mad) and(5) the unreported decision of the Delhi High Court dated31.05.2011 in W.P.No.7789 of 2010and submitted that on the face of the records thus available and on https://hcservices.ecourts.gov.in/hcservices/ a reading of the notice issued under Section 147 of the Act, it isclear that the Revenue had no material to substantiate that therewas reason to believe that income had escaped assessment, warrantingproceedings under Section 147 of the Act. https://hcservices.ecourts.gov.in/hcservices/ a reading of the notice issued under Section 147 of the Act, it isclear that the Revenue had no material to substantiate that therewas reason to believe that income had escaped assessment, warrantingproceedings under Section 147 of the Act. 12. Per contra, while supporting the notice, learned StandingCounsel for Income Tax Department reiterated his contention takenin the counter affidavit. He submitted that even assuming for amoment that the assessee had given the details in the claim underSection 44AB of the Act, the reading of the order shows that therewas no proper consideration made on the said claim in accordancewith law. In the circumstances, as there income had escaped tax,reopening of the assessment was rightly done. The allegation of theassessee that the respondent had not stated any reasons in thenotice under Section 147 of the Act is not a good ground forquashing the proceedings. He further argued that the proceedingsbeing at the notice stage, the petitioner be directed to cooperatein the reassessment proceedings and work out the remedy inaccordance with law. It is further stated that the mere submissionof the records in the course of assessment proceedings, per se,would not oust the jurisdiction of the officer resorting to Section147 of the Act. Learned Standing Counsel pointed out that the merefact that the assessee had given certain details would notautomatically fall under the phrase that there was 'true and fulldisclosure of all material facts'. The Assessing Officer hasrecorded his reasons to believe that the income of the assesseecompany had escaped assessment. Rightly, the proceedings wereinitiated to reopen the assessment to bring to tax the income thathad escaped assessment. 13. In support of his contention, learned Standing Counsel forthe Income Tax Department placed reliance on the decision of thisCourt in the case of Tamil Nadu Petroproducts Ltd Vs. Commissionerof Income Tax reported in (2011) 11 Taxmann 311 (Mad), in the caseof Ankita Deposits and Advances (P) Ltd Vs. Commissioner of IncomeTax reported in (2010) 235 CTR(HP) 273, in the case of Honda SielPower Products Limited Vs. The Deputy Commissioner of Income Tax AndAnother reported in (2011) 197 Taxman 415 (Del) in W.P.No.9036 of2007 dated 14.02.2011. Relying on the decision of the Delhi HighCourt, learned Standing Counsel for the Revenue contended that theproceedings initiated for reassessment could not be quashed at thethreshold. Hence, it is open to the assessee to produce records andthere is no necessity to quash the notice on reassessment notice.Learned Standing Counsel further pointed out that when the assesseehad not stated anything or given particulars to justify the claim ;thus going by Explanation to Section 147 of the Act, the notice hasto be upheld. 14. Heard learned Senior Counsel appearing for the petitionerand learned Standing Counsel for the Income Tax Department andperused the materials available on record. 15. I am constrained to accept the plea to quash the noticeissued under Section 147 of the Act. Even though the assessee hasfurther remedy in the event of the order passed under thereassessment proceedings, I hold that the notice issued is totallywithout jurisdiction, there being no materials to base the beliefthat income had escaped assessment and it is hit by limitation offour years. I have no hesitation in accepting the plea of the writpetitioner and thereby, quash the proceedings. 14. Heard learned Senior Counsel appearing for the petitionerand learned Standing Counsel for the Income Tax Department andperused the materials available on record. 15. I am constrained to accept the plea to quash the noticeissued under Section 147 of the Act. Even though the assessee hasfurther remedy in the event of the order passed under thereassessment proceedings, I hold that the notice issued is totallywithout jurisdiction, there being no materials to base the beliefthat income had escaped assessment and it is hit by limitation offour years. I have no hesitation in accepting the plea of the writpetitioner and thereby, quash the proceedings. 16. As far as the jurisdiction of the Officer to reopen theassessment under Section 147 is concerned, the consistent view takenby this Court as well as by the other Courts and particularly by theApex Court is that while the power to reopen the assessment underSection 147 is a very wide power, yet, reopening of assessment mustbe based on tangible materials to show that income had escapedassessment. In considering the amended provision under Section 147of the Act with effect from 01.04.1989 as well as the provisionprior to the amendment, in the decision in the case of Commissionerof Income Tax Vs. (1) Kelvinator of India Ltd (2) Eicher Ltdreported in (2010 320 ITR 561 (SC), the Apex Court observed that inassuming jurisdiction under Section 147 of the Act, under the guiseof reopening the assessment, the Officer does not review his ownorder. The Apex Court pointed out that after the amendment post 1stApril 1989, the power to reopen under Section 147 of the Act is muchwider than what it was under the old law. Cautioning the exerciseof arbitrary power in the guise of "reason to believe" as availableunder Section 147 of the Act, the Apex Court pointed out that "merechange of opinion" would not empower the authority to reopen anassessment. The Apex Court pointed out as under:- " We must also keep in mind the conceptualdifference between power to review and power toreassess. The Assessing Officer has no power toreview ; he has the power to reassess. Butreassessment has to be based on fulfilment ofcertain preconditions and if the concept of"change of opinion" is removed, as contended onbehalf of the Department, then, in the garb ofreopening the assessment, review would takeplace. One must treat the concept of "change ofopinion" as an in-built test to check abuse ofpower by the Assessing Officer. Hence, after 1stApril, 1989, the Assessing Officer has power toreopen, provided there in "tangible material" tocome to the conclusion that there is escapement " We must also keep in mind the conceptualdifference between power to review and power toreassess. The Assessing Officer has no power toreview ; he has the power to reassess. Butreassessment has to be based on fulfilment ofcertain preconditions and if the concept of"change of opinion" is removed, as contended onbehalf of the Department, then, in the garb ofreopening the assessment, review would takeplace. One must treat the concept of "change ofopinion" as an in-built test to check abuse ofpower by the Assessing Officer. Hence, after 1stApril, 1989, the Assessing Officer has power toreopen, provided there in "tangible material" tocome to the conclusion that there is escapement of income from assessment. Reasons must have alive link with the formation of the belief. Ourview gets support from the changes made toSection 147 of the Act, as quoted hereinabove.Under the Direct Tax Laws (Amendment) Act, 1987,Parliament not only deleted the words "reason tobelieve" but also inserted the word "opinion" inSection 147 of the Act. However, on receipt ofrepresentations from the companies againstomission of the words "reason to believe",Parliament reintroduced the said expression anddeleted the word "opinion" on the ground that itwould vest arbitrary powers in the AssessingOfficer. We quote hereinbelow the relevantportion of Circular No.549 dated October 31, 1989((1990) 182 ITR (St.)1, 29), which reads asfollows:-"7.2. Amendment made by the Amending Act,1989, to reintroduce the expression "reason tobelieve" in Section 147 - A number ofrepresentations were received against theomission of the words "reason to believe" fromSection 147 and their substitution by the'opinion' of the Assessing Officer. It waspointed out that the meaning of the expression,'reason to believe' had been explained in anumber of court rulings in the past and was wellsettled and its omission from Section 147 wouldgive arbitrary powers to the Assessing Officer toreopen past assessments on mere change ofopinion. To allay these fears, the Amending Act,1989, has again amended section 147 toreintroduce the expression 'has reason tobelieve' in place of the words 'for reasons to berecorded by him in writing, is of the opinion'.Other provisions of the new Section 147, however,remain the same." 17. In the background of such enunciation of law, we need tolook at the amended Section 147 of the Act relevant to the case onhand. For convenience of reference, Section 147 is extractedhereunder:- "147. If the Assessing Officer has reasonto believe that any income chargeable to tax hasescaped assessment for any assessment year, hemay, subject to the provisions of Sections 148to 153, assess or reassess such income and also any other income chargeable to tax which hasescaped assessment and which comes to his noticesubsequently in the course of the proceedingsunder this section, or recompute the loss or thedepreciation allowance or any other allowance,as the case may be, for the assessment yearconcerned (hereafter in this section and insections 148 to 153 referred to as the relevantassessment year. "147. If the Assessing Officer has reasonto believe that any income chargeable to tax hasescaped assessment for any assessment year, hemay, subject to the provisions of Sections 148to 153, assess or reassess such income and also any other income chargeable to tax which hasescaped assessment and which comes to his noticesubsequently in the course of the proceedingsunder this section, or recompute the loss or thedepreciation allowance or any other allowance,as the case may be, for the assessment yearconcerned (hereafter in this section and insections 148 to 153 referred to as the relevantassessment year. Provided that where an assessment undersub-section (3) of Section 143 or this sectionhas been made for the relevant assessment year,no action shall be taken under this Sectionafter the expiry of four years from the end ofthe relevant assessment year, unless any incomechargeable to tax has escaped assessment forsuch assessment year by reason of the failure onthe part of the assessee to make a return underSection 139 or in response to a notice issuedunder Sub-section (1) of section 142 or section148 or to disclose fully and truly all materialfacts necessary for his assessment, for thatassessment year. Provided further that the Assessing Officermay assess or reassess such income, other thanthe income involving matters which are thesubject matters of any appeal, reference orrevision, which is chargeable to tax and hasescaped assessment." A reading of the said provisions thus show that when an assessmentis made under Section 143(3), a proceeding taken to reopen theassessment under Section 147 must first satisfy that the incomechargeable to tax has escaped assessment by reason of (1) failure tomake a return under Section 139 or in response to Section 141(1) orSection 148 or (2) to disclose fully and truly all material factsnecessary for the assessment. Thus, the fundamental aspect ofreopening is that the order of assessment suffers under-assessmenton account of want of material facts and such a situation has arisenon account of the assessee not placing fully and truly all materialfacts necessary for assessment and but for which, the occasion toreopen would not have arisen at all. Thus the reason to believethat income has escaped assessment must necessarily rest on factsindicating the failure on the part of the assessee not placing fulland true facts or material relating to the assessment. There is nodispute that the assessee had filed its return under Section 139 ofthe Act and assessments were also completed under Section 143(3) ofthe Act. 18. A perusal of the records filed before this Court show thatin response to the notice issued under Section 143(2) of the Act,the assessee filed its reply immediately starting from 19.09.2005,26.09.2005, 16.12.2005, again 16.12.2005, 23.12.2005, 30.12.2005 and16.02.2006. A reading of all these replies show that particularlyon 16.12.2005, the assessee had given the particulars of TDS made.Along with the return filed, the assessee had also enclosed thestatutory Auditor's report and the Schedule to the Financialstatements on the expenses made on geological studies, seismic data,acquiring and processing and chartered hire charges (drillingpreparation, rig mobilisation and demobilisation). In respect ofthe above said claim, particularly with reference to Section 40(a)(i) of the Act, in the letter dated 16.02.2006, the assessee hadalso clarified that it had not withheld any tax at source to attractSection 40(a)(i) of the Act. In the letter written on 16.02.2006,in response to the enquiry made, the assessee had also given detailsregarding the TDS deducted from time to time. Thus, a reading of thevarious correspondence show that the assessee had participated fullyin the enquiry under Section 143(2) of the Act and had in fact,disclosed fully and truly all material facts and materials for thepurpose of making the assessment. 19. Learned Standing counsel appearing for the Revenue pointedout that even though the assessee might have disclosed thesematerials, in the absence of any consideration on these details,rightly, the proceedings has to be initiated. 20. I do not think such line of reasoning could be sustained inthe context of the decisions referred to above viz.,in the case ofMesse Dusseldorf India P.Ltd Vs. Deputy Commissioner of Income Tax,Transfer pricing officer and another reported in (2010) 320 ITR 565(Delhi) (1) Haryana Acrylic Manufacturing Co. Vs. CIT reported in308 ITR 38 (Del), (2) Well Intertrade Pvt Ltd Vs. Income TaxOfficer reported in 308 ITR 22 (Del), (3) Duli Chand Singhania Vs.Assistant Commissioner of Income Tax reported in 269 ITR 192 (P&H),(4) Fenner India Ltd Vs. DCIT reported in 241 ITR 672 (Mad) and (5)the unreported decision of the Delhi High Court dated 31.05.2011 inW.P.No.7789 of 2010 etc. It is no doubt true that under Explanation2, Sub clause (c) narrates the instances which enables the Officerto assume jurisdiction under Section 147 of the Act viz., (i) where the income chargeable to tax has been underassessed ; (ii) income has been assessed at too low a rate ; or(iii) income has been made the subject of excessive reliefunder this Act ; or (iv) excessive loss or depreciation allowance or any otherallowance under this Act has been computed. Even to come under any of the clauses referred to above, unless and https://hcservices.ecourts.gov.in/hcservices/ until the department is in a position to show "tangible material'leading to an inference that there is income escaping assessment, asthe Apex Court pointed out unless the reasons have a live link tothe formation of belief, the mere belief that the income chargeableto tax is the subject of excessive relief or under assessment, perse, would not empower the Officer to assume jurisdiction to reopenthe assessment under Section 147. Following the decisions in thecases of Haryana Acrylic Mfg.Co. Vs CIT reported in (2009) 308 ITR38, in the case of Duli Chand Signhania Vs. Assistant Commissionerof Income Tax reported in 269 ITR 192 (P&H), in an unreporteddecision in W.P.No.7789 of 2010 dated 31 May 2011 relied upon by theassessee, the Delhi High Court held that when the assessee haddisclosed fully and truly all material facts for its assessment, noaction could be taken under Section 147 of the Act after the expiryof four years indicated therein. I agree that the submission of thelearned Senior counsel appearing for the petitioner that in theabsence of any reasons disclosed to link the materials to theformation of belief that there is an escapement of income, theproceedings taken, necessarily, has to be quashed by this Court. 21. It may be of relevance to point out that in the decisionreported in the case of Fenner India Ltd Vs.DCIT reported in 241 ITR672 (Mad), which has been consistently followed by this Court aswell as by the other High Courts, it was pointed out that after anassessment had been made under normal circumstances, there is noreason for anyone to doubt the assessment made on the basis of allrelevant facts. This Court pointed out:- 21. It may be of relevance to point out that in the decisionreported in the case of Fenner India Ltd Vs.DCIT reported in 241 ITR672 (Mad), which has been consistently followed by this Court aswell as by the other High Courts, it was pointed out that after anassessment had been made under normal circumstances, there is noreason for anyone to doubt the assessment made on the basis of allrelevant facts. This Court pointed out:- " If the Assessing Officer chooses toentertain the belief that the assessment has beenmade in the background of the assessee's failureto disclose truly and fully all material facts,it is necessary for him to record that fact, andin the absence of a record to that effect, itcannot be held that a notice issued withoutrecording such a fact is capable of beingregarded as a valid notice. AS to whether thematerial facts disclosed by the assessee are fulland true is always a question of fact and unlessthe facts disclosed had been examined in relationto the extent of failure if any on the part ofthe assessee, it is not possible to form theopinion that there had been a failure on theassessee's part to truly and fully disclose thematerial facts. A notice issued without a recordof the Assessing Officer's reasonable belief thatthere was such failure on the part of theassessee would be indicative of a failure on the part of the Assessing Officer to apply his mindto material facts, and on that ground also, thenotice issued would be vitiated." 22. In the light of the above said enunciation of law, therebeing no allegation that the assessee had not disclosed truly andfully the material facts, on the mere allegation that the claimwould not fall under Section 44BB of the Act, the Officer could notreview his order in the guise of exercise of power under Section 147to reopen the assessment and there cannot be any assumption ofjurisdiction under Section 147 of the Act. 23. As to the decisions relied on by the petitioner alreadyreferred to above, I do not think that it is necessary to deal witheach of the decisions referred to by the learned counselindependently since all of them are as regards the same enunciationof law. 24. As regards the decision in the case of Tamil NaduPetroproducts Ltd Vs. Commissioner of Income Tax reported in (2011)11 Taxmann 311 (Mad) rendered in W.P.Nos.28457 of 2008 and 19260 of2009 dated September 17, 2010 relied on by learned Standing Counselfor the Revenue is concerned, the same has to be seen in the lightof the facts therein. This Court pointed out that the reassessmentproceedings were initiated based on the information available onrecord relating to the assessment of M/s.CIBA India Pvt Ltd asregards the compensation paid to the assessee for the termination ofsupply agreement. The Revenue pointed out that there was total non-disclosure of full and true facts before the Income Tax Officer andhence the reassessment proceedings were justified in law. Onconsidering the materials, this Court came to the conclusion thatthe proceedings taken for reassessment could not be quashed at thethreshold and that it is open to the assessee to produce all therecords and accordingly held that there is no necessity for quashingthe reassessment proceedings. 25. As far as the decision of the Himachal Pradesh High Courtin the case of Ankita Deposits and Advances (P) Ltd Vs. Commissionerof Income Tax reported in (2010) 235 CTR (HP) 273 is concerned, eventhe said decision is not of any assistance to the Revenue. Thefacts show that the assessee therein filed its return declaringincome on the sale of shares as attracting capital gains. Eventhough originally, the returns were accepted under Section 143(1) ofthe Act, later on, the Assessing Officer found on a perusal ofcomputation of the income that the assessee was engaged in thebusiness of the trading in shares and the income shown as a long-term capital gain should in fact be computed under the head of'business income'. The assessee contended that in respect of the https://hcservices.ecourts.gov.in/hcservices/ previous years, they had reflected the shares in question asinvestment and therefore, the Revenue could not change the natureand character of this investment. In considering such a question,the Himachal Pradesh High Court pointed out that in the proceedingsunder Section 143(1), the returns filed by the assessee was acceptedas a matter of course. The returns filed by the assessee normallywould be taken up for scrutiny only in few cases. As regards thenotice issued for the reopening of the assessment, the factsrevealed that the assessee had been showing investment as tradinginvestment and the income on sale, a long-term capital income.However, when losses were incurred on the sale of shares, theassessee claimed the losses under the head of business income andfor the previous years, the assessee was showing the investment inthe very same shares as trading investment. The Himachal PradeshHigh Court pointed out that the assessee had been showing theholding as stock in trade. Thus on going through the records, theauthorities came to the conclusion that the holding of shares was byway of stock in trade. In the light of the factual finding, theHimachal Pradesh High Court upheld the notice issued by theAssessing Officer and held that the Assessing Officer was justifiedin reopening the assessment. 26. As far as the decision of the Delhi High Court in the caseof Honda Siel Power Products Limited Vs The Deputy Commissioner ofIncome Tax and another reported in (2011) 197 Taxman 415 (Delhi)relied by the Revenue is concerned, the said decision rests on thefacts of the case. The issue therein related to the claim of theRevenue that the income chargeable to tax amounting to Rs.98.46lakhs was found to have escaped assessment by reason of the assesseenot disclosing the details fully and truly. The Revenue pointed outthat the Tax Audit Report mentioned a sum of Rs.1,07,69,936/- as theamount written back under Section 41 of the Act. A sum ofRs.9,23,471/- was specifically added in the profit and loss accountunder the head 'other income' leaving Rs.98.46 lakhs and was addedback under different heads, but was not separately indicated. TheHigh Court pointed out that the assessee did not give complete breakup of Rs.98.46 lakhs reflected in the different accounts. In thebackground of facts thus available, the Delhi High Court ultimatelyupheld the reopening of the assessment. In so holding, the DelhiHigh Court referred to the Explanation to Section 147 of the Act andpointed out that there was omission or failure on the part of theassessee to make full and true disclosure of material facts to pointout that the expenses incurred were relatable to tax free / exemptincome, which prima facie had been claimed as deduction in theincome and expenditure account. The Delhi High Court pointed outthat the failure on the part of the Assessing Officer to applySection 14 A of the Income Tax Act, 1961 had resulted in theescapement of income. In the background of the fact that the assessee had not disclosed the material facts fully or truly, thenotice on reopening was upheld. 27. A reading of the above decisions relied on by the learnedStanding Counsel for the Revenue shows that while there is nodispute on the point of law laid down therein that the reason musthave a live link to the formation of the belief that the income hasescaped assessment and that there must be tangible material to cometo conclusion that there is escapement of income from assessment,the decision in the above cases rested on the facts in each case.Thus, as rightly pointed out by the learned Senior Counsel appearingfor the petitioner the facts before us are different and therefore,the decisions are distinguisable. When the assessee had placed allthe materials before the Officer during enquiry under Section 143(2)of the Act fully and truly and the notice does not, in any manner,speak on the failure of the assessee to disclose truly and fully thematerials with the very basis on initiation of reassessmentproceedings thus absent, I do not find any justification in thecontention of the Revenue that the reassessment proceedings issustainable on the face of the provisions of Section 147 of the Act.Hence, holding that the decisions referred to by the learnedStanding Counsel appearing for the Revenue are distinguishable onfacts, I accept the plea of the assessee that the reassessmentproceedings lack the very basis for assumption of jurisdiction. 28. The second ground taken in the notice was that theassessment called for proportionate disallowance under Section 40(a)(i) of the Act. In the light of the fact that the assessee hadspecifically dealt with the same in its reply given and the accountsproduced, there being no other materials disclosed on a view held bythe Assessing Officer the proceedings deserved to be quashed by thisCourt. As regards the second view taken by the Officer in thenotice that there was no TDS found to have been made on the paymentof reimbursement of actual expenses and time cost charges to itsassociated enterprises abroad, the notice does not disclose anymaterials on the formation of belief, consequently, I have nohesitation in rejecting the plea of the Revenue. 29. As already pointed out even though the assessee has analternative remedy to canvass the merits of reassessment under thevarious provisions of Statute, a reading of the notice leaves nomanner of doubt that it is more in the nature of review of theassessment made than in the nature of reopening. 30. In the light of the above, on the ground of relevantmaterials not being there to justify the formation of belief as tothe escapement of income, there being, no allegation that there wasno full and true disclosure of the material facts by the assessee at the time of original assessment, I hold that the reassessmentproceedings lack jurisdiction as required under Section 147 of theAct, consequently, is also hit by limitation. 31. In the circumstances, quashing the impugned notice, I allowthe writ petition. No costs. Consequently, connected miscellaneouspetition is closed. Sd/- Asst.Registrar. /true copy/ Sub Asst.Registrar.nvsriTo1.Deputy Director of Income Tax (International Taxation) 7th Floor, Room NO.703, Annexe Building, Aaykar Bhawan 121, Mahatma Gandhi Road, Chennai-600 0342. Assistant Director of Income Tax (International Taxation-I) 121, Mahatma Gandhi Road Chennai-600 0341 cc to Mr.M.v. Swaroop, Advocate, Sr. 656361 cc to Mr.T.R. Senthilkumar, Advocate, Sr. 65588W.P.No.10910 of 2011VD (CO)kk 20/12