The Decision Of The Hon'ble Supreme Court In The Case Ofcommissioner Of Income Tax v. Assistant Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED : 05.10.2021 CORAM : THE HON'BLE MR.JUSTICE T.S.SIVAGNANAMAND THE HON'BLE MR.JUSTICE SATHI KUMAR SUKUMARA KURUP W.A.NO.2521 OF 2021ANDC.M.P.NOS.16405 & 16406 OF 2021 M/s. Cognizant Technology Solutions India Private Limited,Represented by Authorised Signatory N.S.Balaji,No.165, Menon Eternity Building,6[th] Floor, St Mary's Road,Chennai 600 034. ... Appellant.Vs. 1. Assistant Commissioner of Income Tax, Large Taxpayer Unit- I, 7[th] Floor, Room No 712, 121 Nungambakkam High Road, Chennai – 600 034. 2. Joint Commissioner of Income Tax, Large Taxpayer Unit- I, 7[th] Floor, Room No 712, 121 Nungambakkam High Road, Chennai – 600 034.... Respondents Prayer : Writ Appeal filed under Clause 15 of the Letters Patent toset aside the order dated 09.08.2021 made in W.P.No.29023 of2018. Prayer in W.P.No.29023 of 2018:- Writ Petition is filed under Article 226 of the Constitutionof India, praying for the issuance of a writ of certiorari,calling for the records on the file of the first Respondent andquash the impugned notice in PAN. dated 29.03.2018issued under section 148 of the Income Tax Act for theAssessment Year 2013-14 in Notice No.ITBA/AST/148/2017-18/1009530834(1)alongwith the impugnedorderinLTU1/AAACD3312M/2018-19 dated 16.10.2018. For Appellant For Respondents : Mr.N.V.Balaji: Mr.A.P.Srinivas Senior Standing Counsel J U D G M E N T(Judgment was delivered by T.S. SIVAGNANAM, J.) This Writ Appeal filed by the assessee is directed againstthe order, dated 09.08.2021, in W.P.No.29023 of 2018, filed bythe appellant/assessee. 2.The said writ petition was filed, challenging the orderpassed by the 1[st] respondent, dated 29.03.2018, under Section 148of the Income Tax Act, 1961 (“the Act” for brevity), for theAssessment Year 2013-2014. 3.The assessment for the year under consideration wascompleted by order, dated 31.12.2016, under Section 143(3) readwith Section 92CA of the Act. Notice under Section 148 wasissued on 29.03.2018, proposing to reopen the assessment. Theassessee sought for the reasons for reopening, by letter dated27.04.2018. The reasons were not furnished. However, noticeunder Section 143(2) of the Act, dated 21.08.2018, was issued.Therefore, the assessee sent another letter, dated 27.08.2018,requesting for furnishing the reasons for reopening.Ultimately, the reasons were furnished on 30.08.2018. Theassessee submitted their objections, dated 12.09.2018, whichwere disposed of by the Assessing Officer, by order dated16.10.2018, which was impugned in the writ petition. 4.The learned Single Bench had dismissed the writ petitionon the ground that the Assessing Officer, if he is able to traceout a new information, material or dimension in consonance withthe provisions of the Act, which was omitted by the OriginalAssessing Authority, it is a good ground for reopening theassessment. Further, the learned Single Bench held that, merecomparison of subject or issues with reference to the originalAssessment Order and disposal of objections cannot be a groundfor the purpose of setting aside the reopening proceedings andif the reasons furnished for reopening of assessment provide anynew information or material or based on different dimensionunder the provisions of the Act, which was not considered by theOriginal Authority, then the reopening of assessment ispermissible. 5.This finding rendered by the learned Single Bench does notreflect correct legal position. In this regard, we may refer to https://hcservices.ecourts.gov.in/hcservices/ 5.This finding rendered by the learned Single Bench does notreflect correct legal position. In this regard, we may refer to https://hcservices.ecourts.gov.in/hcservices/ the decision of the Hon'ble Supreme Court in the case ofCommissioner of Income Tax v. Kelvinator India Limited reportedin 320 ITR 561 SC, wherein, it has been held that, one needs togive a schematic interpretation to the words “reason tobelieve”, failing which, Section 147 of the Act would givearbitrary powers to the Assessing Officer to reopen theassessment on the basis of mere “change of opinion”, whichcannot be per se reason to reopen. Further, it was pointed outthat the conceptual difference between the power to review andpower to re-assess has to be kept in mind; the Assessing Officerhas no power to review, he has power to re-assess, butreassessment is to be based on fulfillment of certain pre-conditions and if the concept of “change of opinion” is removed,then, in the garb of reopening the assessment, review would takeplace and one must treat the concept of “change of opinion” asan in-built test to check abuse of power by the AssessingOfficer. In Commissioner of Income Tax v. Techspan India Pvt.Ltd. reported in ITO (2018) (302 CTR 74), it was held that thereassessment proceedings cannot be initiated on the basis ofsame facts as was available during the regular assessment and inthe absence of any new material coming to the light of theAssessing Authority. 6.There are several other decisions which lay down the legalprinciples with regard to reopening of assessment. The legalposition that can be culled out from those decisions is that“reason to believe” shall be supported by new material facts,which come to the attention of the Assessing Officer, and shallnot be a re-appreciation of the facts already available at thetime of passing the original Assessment Order. 7.We need not labour much on the legal principle which hasbeen well settled and therefore, the observations made in theimpugned order by the learned Single Bench do not lay down thecorrect legal position. 8.Reverting back to the case of the assessee, the assessmentwas reopened on 5 grounds. 9.The assessee, in their objections dated 12.09.2018, at theoutset, submitted that the reasons for reassessment have beenrecorded on the basis of information forming part of records ofthe assessment under Section 143(3) of the Act. Further, it waspointed that, in the Assessment Order dated 31.12.2016 underSection 143(3) of the Act, certain disallowances were made,however, they were not considered and did not form part of theStatement of Computation of Assessed Income and Tax Liability.Therefore, the assessee, on their own volition, filed anapplication under Section 154 of the Act for rectification ofthe mistake apparent from the record in the Assessment Order and this issue, which was pointed out by the assessee, is one of thereasons for reopening the assessment. Thus, no reopening couldhave been done on the said issue, where, the Assessing Officer,at the time of completing the assessment under Section 143(3) ofthe Act, had made disallowances. this issue, which was pointed out by the assessee, is one of thereasons for reopening the assessment. Thus, no reopening couldhave been done on the said issue, where, the Assessing Officer,at the time of completing the assessment under Section 143(3) ofthe Act, had made disallowances. 10.With regard to the 2[nd] issue, namely, Mark-to-Market losson restatement of outstanding forward contracts to be disallowedin computing the income under the head profits and gains frombusiness or profession, the assessee stated that, on this veryissue, the Assessing Officer issued notice under Section 142(1),dated 11.08.2016, and directed the assessee to furnish specificinformation in respect of “Details of loss from foreign currencyfluctuation” and the assessee has submitted the ledger accountpertaining to “Effect of exchange differences on translation offorward contracts (un-realized)” vide their submission dated16.09.2016. Further, the assessee had furnished by letter dated21.09.2016, the ledger account pertaining to the expense in aCompact Disk, upon specific request made on the AssessingOfficer. Further, the assessee, vide letter dated 26.12.2016,furnished the detailed submissions on the allowability of Mark-to-Market losses on outstanding forward contracts as a deductionin computing income under the head “profits and gains ofbusiness or profession”. Thus the assessee submitted that thesaid issue was taken into consideration while completing theassessment under Section 143(3) of the Act. 11.On the 3[rd] issue with regard to “Repairs and Maintenance”pertaining to computer software, the assessee stated that,notice under Section 142(1), dated 11.08.2016, was issuedcalling for specific information regarding repairs andmaintenance, which were furnished by the assessee and in thisregard, the assessee pointed out that, in the questionnairefurnished to the assessee, Question No.16 pertains to “Repairsand Maintenance – Software”. The assessee, vide letter dated09.09.2016, submitted the monthly summary of the ledger accountpertaining to “Repairs and Maintenance – Software” and a hardcopy of the same was filed on 16.09.2016. Further, on aspecific request made by the respondent, the assessee providedthe ledger account in a Compact Disk. Therefore, the assesseecontended that the said issue was duly taken into considerationat the time of passing the order under Section 143(3) of theAct. 12.On the 4[th] issue regarding computation of Long TermCapital Loss claimed in the return of income for carry-forwardfor future set-off, the assessee stated that, notice dated11.08.2016 was issued under Section 142(1) and specificinformation was called for with respect to the documents of LongTerm Capital Loss. The assessee has furnished the computation of Long Term Capital Loss by their letter dated 09.09.2016 andin addition thereto, a copy of Valuation Report dated09.10.2012, a copy of ODR Report filed with the RBI and a copyof SBI TT buying rate chart for the purpose of conversion ofexchange rates were also furnished. Therefore, the assesseepointed out that the said issue was duly scrutinized andaccepted by the Assessing Officer, while passing the AssessmentOrder under Section 143(3) of the Act. of Long Term Capital Loss by their letter dated 09.09.2016 andin addition thereto, a copy of Valuation Report dated09.10.2012, a copy of ODR Report filed with the RBI and a copyof SBI TT buying rate chart for the purpose of conversion ofexchange rates were also furnished. Therefore, the assesseepointed out that the said issue was duly scrutinized andaccepted by the Assessing Officer, while passing the AssessmentOrder under Section 143(3) of the Act. 13.With regard to the 5[th] issue, namely, deduction ofunrealized Short Term Capital Gains, the assessee stated that,notice dated 11.08.2016 under Section 142(1) was issued andspecific information was called for with respect to the “Detailsof Short Term Capital Gain”. The assessee filed submissions,dated 09.09.2016, furnishing scrip-wise details and thecomputation statement and also pointed out that the unrealizedcapital gains accounted in the financial statements were addedback and offered to tax in the assessment of preceding previousyear. Therefore, the assessee stated that the said issue wasalso examined and the details were fully scrutinized andaccepted, while completing the assessment under Section 143(3)of the Act. 14.Unfortunately, the Assessing Officer, while disposing ofthe objections by order dated 16.10.2018, did not examine any ofthese aspects, but merely observed that the Assessing Officernowhere left the traces for verification of the issues,therefore, it does not tantamount to change of opinion. Thisfinding is wholly unsustainable. In other words, the AssessingOfficer, while disposing of the objections by order dated16.10.2018, has accepted the fact that the grounds on which theassessment was reopened were verified by his predecessor, whilecompleting the assessment under Section 143(3) of the Act. Ifsuch is the understanding of the Assessing Officer, then we haveno hesitation to hold that the reopening is a clear case ofchange of opinion. 15.The assessee, in their objections, had also referred tothe Circular issued by the Central Board of Direct Taxes, videCircular No.549 dated 31.10.1989, wherein, it was clarified thata mere change of opinion cannot constitute a reason to believeunder Section 147 of the Act so as to justify the reopening ofassessment. 16.Thus, in the absence of new facts coming to the knowledgeof the Assessing Officer subsequent to the original assessmentproceedings, the reopening could not have been done on the samematerials. In fact, when we perused the reasons for reopening,it is evidently clear that all the materials have been culledout from the return of income filed by the assessee and the https://hcservices.ecourts.gov.in/hcservices/ Annexure thereto. Thus, the impugned reassessment proceedings,having been done with the same set of facts which were availableduring the regular assessment, is to be held to be a clear caseof change of opinion. 17.One other issue which the assessee had pointed out iswith regard to the non-furnishing of reasons within reasonabletime. In this regard, the assessee placed reliance on thedecision of the High Court of Gujarat in the case of SahkariKhand Udyog Mandal Limited v. Assistant Commissioner of IncomeTax [370 ITR 107]. In the said decision, it had been pointedout that the Assessing Officer has to provide reasons recordedfor initiating reopening proceedings within 30 days of thefiling of the return of income by the taxpayer and withoutwaiting for the taxpayer to demand such reasons. The AssessingOfficer brushed aside the said decision, stating that thedecision will not bind him as it is not a decision of thejurisdictional High Court. 17.One other issue which the assessee had pointed out iswith regard to the non-furnishing of reasons within reasonabletime. In this regard, the assessee placed reliance on thedecision of the High Court of Gujarat in the case of SahkariKhand Udyog Mandal Limited v. Assistant Commissioner of IncomeTax [370 ITR 107]. In the said decision, it had been pointedout that the Assessing Officer has to provide reasons recordedfor initiating reopening proceedings within 30 days of thefiling of the return of income by the taxpayer and withoutwaiting for the taxpayer to demand such reasons. The AssessingOfficer brushed aside the said decision, stating that thedecision will not bind him as it is not a decision of thejurisdictional High Court. 18.As pointed out earlier, the notice under Section 148 ofthe Act was issued on 29.03.2018. The assessee within 30 daysby their letter dated 27.04.2018 had sought for reasons forinitiating the reopening proceedings. The Assessing Officer didnot furnish the reasons nor responded to the said letter, butproceeded to issue the notice under Section 143(2) dated21.08.2018. Therefore, the assessee submitted another letterdated 27.08.2018, requesting for furnishing the reasons forreopening. It is only thereafter, the reasons for reopeningwere furnished vide letter dated 30.08.2018. It is not clear asto why there was such a delay in furnishing the reasons. It maybe true that no time limit has been prescribed for furnishingthe reasons, but the Hon'ble Supreme Court, in the case of GKNDriveshafts (India) Limited v. Income-Tax Officer reported in(2003) 259 ITR 19 (SC), has held that the reasons shall befurnished within a reasonable time by the Assessing Officer,upon receiving the request for the same from the assessee.There is an enormous delay in furnishing the reasons forreopening and we are of the opinion that the reasons were notfurnished to the assessee within a reasonable time. However,since we are fully convinced that the reopening proceedings is aclear case of change of opinion, we do not wish to render anyfinding on the legal issue as to what would be the reasonabletime within which the assessee should be informed about thereasons for reopening, upon the request received from theassessee in that regard, and we leave the said legal issue openfor consideration in an appropriate proceedings at theappropriate time. In the result, the Writ Appeal is allowed and the orderpassed in the writ petition is set aside. Consequently, the writ petition is allowed and the reopening proceedings arequashed. No costs. Consequently, connected MiscellaneousPetitions are closed. Sd/- Assistant Registrar(CS VI) //True Copy// Sub Assistant Registrar mknTo1. The Assistant Commissioner of Income Tax, Large Taxpayer Unit- I, 7[th] Floor, Room No 712, 121 Nungambakkam High Road, Chennai – 600 034.2. The Joint Commissioner of Income Tax, Large Taxpayer Unit- I, 7[th] Floor, Room No 712, 121 Nungambakkam High Road, Chennai – 600 034. +1cc to Mr.A.P.Srinivas, SSC (IncomeTax), S.R.No.52174+1cc to Mr.N.V.Balaji, Advocate, S.R.No.52136 W.A.No.2521 of 2021 JP-II(CO)PM/27/10/2021