Provisio Of Section 147 Is Not Enough. This Is Because As Held By The Apexcourt In Calcutta Discount Co. Ltd v. The Assistant Commissioner Of Income Tax, Circle (5)(2)(2), And 2 Ors

Digitallysigned by1/7MEERAMEERAMAHESHMAHESHJADHAVJADHAVDate:2022.01.10 IN THE HIGH COURT OF JUDICATURE AT BOMBAY15:41:10+0530ORDINARY ORIGINAL CIVIL JURISDICTIONWRIT PETITION NO.3560 OF 2019Vodafone Idea Ltd.)(Successor in interest of M/s Idea)Cellular Ltd.) 10[th] Floor, Birla )Centurion, Centurion Mills Compound)Pandurang Budkar Marg, Worli,)Mumbai 400 030)..Petitioner V/s.1.The Assistant Commissioner of) Income Tax Circle (5)(2)(2) Mumbai)Room No.571, 5[th] floor, Aayakar)Bhavan, M. K. Road, Mumbai-400020)2. Principal Commissioner of Income)Tax-5, Mumbai, Room No.515, 5[th] flr)Aayakar Bhavan, M. K. Road, )Mumbai 400 020)3. Union of India)Through the Secretary, Ministry of )Finance, Department of Revenue,)North Block, New Delhi 110 001)..Respondents ---- Mr. Nitesh Joshi i/b Mr. Atul Jasani for PetitionerMr. Sham V Walve for Respondents-Revenue ---- CORAM : K.R. SHRIRAM &R. N. LADDHA, JJ DATED : 3rd JANUARY 2022 ORAL JUDGMENT (PER K. R. SHRIRAM J.) 1Petitioner is impugning a notice dated 2[nd] August 2019 issued underSection 148 of the Income Tax Act 1961 (the Act) for A.Y.-2013-2014 andfor quashing an order dated 5[th] December 2019 passed by respondent no.1 disposing of the objections filed by petitioner against initiation ofreassessment proceedings for A.Y.-2013-2014. 2For A.Y. 2013-2014 petitioner filed return of income on 30[th] November2013 declaring total income at loss of Rs.4,60,12,34,048/- under normalprovisions and Rs.273 crores under Section 115JB of the Act. Revisedreturn of income was also filed declaring income as shown in original returnof income. The assessment was completed on 30[th] December 2016 underSection 143(3) of the Act determining total income at Rs.24,76,63,28,847/-under normal provisions and Rs.13,96,21,60,821/- under Section 115Jb ofthe Act. 3Thereafter, petitioner received notice dated 2[nd] August 2019 underSection 148 of the Act saying that there are reasons to believe thatpetitioner’s income chargeable to tax for A.Y.-2013-2014 has escapedassessment within the meaning of Section 147 of the Act. Since the noticehas been issued after the expiry of 4 years from the relevant assessment yearand petitioner has been assessed under Section 143(3) of the Act, theproviso to Section 147 as it was then previously would apply. As per theproviso, the onus is on respondents to show that there was failure on thepart of petitioner to fully and truly disclose all material facts required forassessment. Simply stating that as per explanation (1) to Section 147 of theAct, production of books of accounts or other documents from which theAssessing Officer could have, with due diligence have been discovered bythe Assessing Officer will not necessarily amount to disclosure within the provisio of Section 147 is not enough. This is because as held by the ApexCourt in Calcutta Discount Co. Ltd. Vs. Income Tax Officer1 the duty ofdisclosing all the primary facts relevant to the decision of the questionbefore the assessing authority lies on the assessee. To meet a possiblecontention that when some account books or other evidence has beenproduced, there is no duty on the assessee to disclose further facts, which ondue diligence, the Income Tax Officer might have discovered, the Legislaturehas put in Explanation to Section 147. The duty, however, does not extendbeyond the full and truthful disclosure of all primary facts. Once all theprimary facts are before the assessing authority, he requires no furtherassistance by way of disclosure. It is for him to decide what inferences offacts can be reasonably drawn and what legal inferences have ultimately tobe drawn. It is not for somebody else-far less the assessee to tell theassessing authority what inferences, whether of facts or law, should bedrawn. Indeed, when it is remembered that people often differ as regardswhat inferences should be drawn from given facts, it will be meaningless todemand that the assessee must disclose what inferences - whether of facts orlaw - he would draw from the primary facts. If from primary facts moreinferences than one could be drawn, it would not be possible to say that theassessee should have drawn any particular inference and communicated itto the assessing authority. How could an assessee be charged with failure tocommunicate an inference, which he might or might not have drawn? It 1 (1961) 41 ITR 191 (SC) may be pointed out that the Explanation to the sub- section has nothing todo with "inferences" and deals only with the question whether primarymaterial facts not disclosed could still be said to be constructively disclosedon the ground that with due diligence the Income-tax Officer could havediscovered them from the facts actually disclosed. The Explanation cannotenlarge the scope of the section by casting a duty on the assessee to disclose"inferences", to draw the proper inferences being the duty imposed on theIncome Tax Officer. Therefore, it can be concluded that while the duty of theassessee is to disclose fully and truly all primary relevant facts, it does notextend beyond this. 4We have considered the reasons and in our view, it is nothing but achange of opinion. Reasons to believe cannot be arbitrary or irrational.2Apex Court in Commissioner of Income Tax Vs. Kelvinator of India Ltd.held that one needs to give a schematic interpretation to the words reasonto believe failing which, Section 147 would give arbitrary powers to theAssessing Officer to reopen assessments on the basis of mere change ofopinion which cannot be per se reason to reopen. Apex Court also held thatthe Assessing Officer has no power to review and he has power to reopenprovided there is tangible material to come to the conclusions that there isescapement of income from assessment and there was failure on the part ofassessee to truly and fully disclose material facts. The Assessing Officercannot simply say that he has reasons to believe that income which was 2 (2010) 320 ITR 561 chargeable to tax has escaped reassessment by reasons of failure on the partof assessee to disclose fully and truly all material facts necessary to take thecase out of the restrictions imposed by proviso to Section 147 of the Act asheld in Sesa Goa Limited Vs. Joint Commissioner of Income Tax & Ors.3 2 (2010) 320 ITR 561 chargeable to tax has escaped reassessment by reasons of failure on the partof assessee to disclose fully and truly all material facts necessary to take thecase out of the restrictions imposed by proviso to Section 147 of the Act asheld in Sesa Goa Limited Vs. Joint Commissioner of Income Tax & Ors.3 5The entire basis for proposing to reopen, as can be seen from thereasons, is on the documents and submissions which were available beforethe Assessing Officer, before passing of the original assessment order. Infact, in the reasons, it is also recorded that the same issue was considered bythe earlier Assessing Officer during the assessment proceedings. TheAssessing Officer notes that the assessee had made submissions on theseitems earlier but still states that income chargeable to tax has escapedbecause in his opinion certain amounts are required to be added back inprofit and loss account and certain amounts should not have beendisallowed. Where on consideration of material on record, one view isconclusively taken by the Assessing Officer, it would not be open to reopenthe assessment based on the very same material with a view to take anotherview. We are satisfied that petitioner had truly and fully disclosed allmaterial facts necessary for the purpose of assessment. Not only materialfacts were disclosed by petitioner truly and fully but they were carefullyscrutinized and figures of income as well as deduction were reworkedcarefully by the Assessing Officer. In the reasons for reopening, there is noteven a whisper as to what was not disclosed. In our view, this is not a case 3 (2007) 294 ITR 101 (Bom) where the assessment is sought to be reopened on the reasonable belief thatincome had escaped assessment on account of failure of the assessee todisclose truly and fully all material facts that were necessary forcomputation of income but this is a case wherein the assessment is sought tobe reopened on account of change of opinion of the Assessing Officer. In asimilar case where the notice to reopen the assessment was founded entirelyon the assessment records and the entire basis for reopening the assessmentwas the disclosure which has been made by the assessee in the course of theassessment proceedings and where no material to which a reference was tobe found, a Division Bench of this Court in 3i Infotech Limited V/s. AssistantCommissioner of Income Tax4 in paragraph 12 held as under: 12. The record before the Court, to which a reference has been madeearlier, is clearly reflective of the position that during the course of theassessment proceedings the assessee had made a full and truedisclosure of all material facts in relation to the assessment. As amatter of fact, it would be necessary to note that the notice to reopenthe assessment on the first issue is founded entirely on the assessmentrecords. There is no new material to which a reference is to be foundand the entire basis for reopening the assessment is the disclosurewhich has been made by the assessee in the course of the assessmentproceedings. In Cartini India Limited V/s. Additional Commissioner ofIncome Tax [(2009) 314 ITR 275 (Bom.)], a Division Bench of thisCourt has observed that where on consideration of material on record,one view is conclusively taken by the Assessing Officer, it would notbe open to the Assessing Officer to reopen the assessment based onthe very same material with a view to take another view. The principalwhich has been enunciated in Cartini must apply to the facts of a casesuch as the present. The assessee had during the course of theassessment proceedings made a complete disclosure of material facts.The Assessing Officer had called for a disclosure on which a specificdisclosure on the issue in question was made. In such a case, it cannotbe postulated that the condition precedent to the reopening of anassessment beyond a period of four years has been fulfilled. 4 (2010) 192 Taxman 137 (Bombay) 4 (2010) 192 Taxman 137 (Bombay) 6In the circumstances, petition is allowed. The notice dated 2[nd] August2019 and the order on objections dated 5[th] December 2019 are quashed and set aside. Petition disposed with no order as to costs. (R. N. LADDHA, J) (K.R. SHRIRAM, J.)