The Pr Commissioner Of Income Tax-2 Chandigarh v. M/S Swaraj Engines Ltd Mohall

ITA-266-2016 204IN THE HIGH COURT OF PUNJAB & HARYANA|AT CHANDIGARH he f ITA-266-2016 (O&M)DECIDED ON: FEBRUARY 03, 2020 THE PR COMMISSIONER OF INCOME TAX-2 CHANDIGARH VERSUS APPELLANT M/S SWARAJ ENGINES LTD MOHALL RESPONDENT CORAM: HON'BLE MR. JUSTICE AJAY TEWARIHON'BLE MR. JUSTICE AVNEESH JHINGANHON'BLE MR. JUSTICE AVNEESH JHINGAN Present:Ms. Urvashi Dhugga, Advocatefor the appellant.for the appellant. Ms. Radhika Suri, Sr. Advocate with|Mr. M.S. Kanda, Advocatefor the respondent. AJAY TEWARI, J (Oral): This appeal has been filed against the order of the Income TaxAppellate Tribunal Chandigarh Bench 'A' Chandigarh dated 22.03.2016holding that the issue of allowance of Section 80-I of Income Tax Act, 1961(for short ‘the Act’) had wrongly been given to the assessee. 2 The brief facts are that assessee had claimed the deduction underSection 80-I of the Act in the year 1997-1998. In the final assessment underSection 143(3) of the Act, the issue of this deduction was gone into detail bythe A.O and a portion of it was disallowed. Thereafter notice under Section148 of the Act was issued to the assessee claiming that the benefit of Section80-I of the Act had wrongly been extended. Ultimately the Tribunal set asidethis order holding that the primary condition of Section 147 of the Act viz‘reason to believe’ (as defined by a plethora ofjudgments) did not exist and it was merely a case of change of opinion at best, which could not be permitted.3The argument of learned counsel for the appellant is that sub-clause-c of explanation 2 to Section 147 of the Act permits this. The said sub-clause is quoted here-in-below; :147. Income escaping assessment 2 If the Assessing Officerhas reason to believe] that any income chargeable to tax hasescaped assessment for any assessment year, he may, subject tothe provisions of sections 148 to 153, assess or reassess suchincome and also any other income chargeable to tax which hasescaped assessment and which comes to his notice subsequentlyin the course ofthe proceedings under this section, or recomputethe loss or the depreciation allowance or any other allowance,as the case may be, for the assessment year concerned (hereafterin this section and in sections 148 to 153 referred to as therelevant assessment year): Provided that where an assessmentunder sub- section (3) of section 143 or this section has beenmade for the relevant assessment year, no action shall be takenunder this section after the expiry offour years from the end ofrelevant assessment year, unless any income chargeable to taxhas escaped assessment for such assessment year by reason ofthe failure on the part of the assessee to make a return undersection 139 or in response to a notice issued under sub- section(1) ofsection 142 or section 148 or to disclose fully and truly allmaterial facts necessary for his assessment for that assessmentyear. Explanation 1-Production before the Assessing Officer ofaccount books or other evidence from which material evidencecould, with due diligence, have been discovered by the AssessingOfficer will not necessarily amount to disclosure within themeaning oftheforegoing proviso. Explanation 2.- For the purposes of this section, the followingshall also be deemed to be cases where income chargeable to taxhas escaped assessment, namely:- under this Act; or(Vv)excessive loss or depreciation allowance or any other allowance under this Act has been computed. 4On the other hand the stand of learned Senior Counsel appearing for the assessee is that explanation 2 can only be read subject to mainprovision of Section 147 of the Act and the interpretation which the learnedcounsel for the appellant is trying to give to it would give it an existence ofan exception rather than an explanation. Explanation 2.- For the purposes of this section, the followingshall also be deemed to be cases where income chargeable to taxhas escaped assessment, namely:- under this Act; or(Vv)excessive loss or depreciation allowance or any other allowance under this Act has been computed. 4On the other hand the stand of learned Senior Counsel appearing for the assessee is that explanation 2 can only be read subject to mainprovision of Section 147 of the Act and the interpretation which the learnedcounsel for the appellant is trying to give to it would give it an existence ofan exception rather than an explanation. 5 We find this argument to be well merited. It is trite to say that anexplanation is always subordinate to the main provision (as the namesuggests, only to explain). In the present case we find that the powers underSection 147 of the Act have been now defined without any equivocation andwithout going to deep into it it is safe to say that a mere change of opinioncannot be considered within the ambit of phrase reason to believe. onLearned counsel for the petitioner has tried to take us to themerits of the case and to show how the deduction could not have beenclaimed but we are unable to into the merits of the case because she has notbeen able to deny that in the original order under Section 143(3) of the Act,the issue of deduction did arise and after discussing the same a particularfinding was given. Had the revenue been aggrieved of the assessment orderpassed under Section 143(3) of the Act, it would had the recourse underSection 263 of the Act but the present short cut method cannot be allowed. TiLearned counsel for the appellant has relied uponFCommissioner of IncomeTax _vs. Kelvinator of India Ltd and Another 2010 (320) ITR 561 (SC) and particularly to the following part of thejudgment: “On going through the changes, quoted above, made toSectionIT4of the Act, we find that, prior to Direct Tax Laws(Amendment) Act, 1987, re-opening could be done under abovetwo conditions and fulfillment of the said conditions aloneconferred jurisdiction on the Assessing Officer to make a backassessment, but insection [47of the Act [with effect from IstApril, 1989], they are given a go-by and only one condition hasremained, viz., that where the Assessing Officer has reason tobelieve that income has escaped assessment, confers jurisdictionto re- open the assessment. Therefore, post-Ist April, 1989,power to re-open is much wider. However, one needs to give aschematic interpretation to the words "reason to believe” failingwhich, we are afraid,Section [47would give arbitrary powersto the Assessing Officer to re-open assessments on the basis of“mere change of opinion”, which cannot be per se reason to re-open. We must also keep in mind the conceptual differencebetween power to review and power to re-assess. The AssessingOfficer has no power to review; he has the power to re-assess.But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion” is removed,as contended on behalf of the Department, then, in the garb ofre-opening the assessment, review would take place. One musttreat the concept of “change of opinion” as an in-built test tocheck abuse ofpower by the Assessing Officer. Hence, after IstApril, 1989, Assessing Officer has power to re-open, providedthere is “tangible material” to come to the conclusion that thereis escapement of income from assessment. Reasons must have alive link with the formation of the belief. Our view gets supportfrom the changes made to'Section 147of the Act, as quotedhereinabove. Under the Direct Tax Laws (Amendment) Act,1987, Parliament not only deleted the words “reason to believe”but also inserted the word “opinion” inSection 147of the Act. However, on receipt of representations from the Companiesagainst omission of the words "reason to believe", Parliamentre-introduced the said expression and deleted the word“opinion” on the ground that it would vest arbitrary powers inthe Assessing Officer. We quote hereinbelow the relevant portionof Circular No.549 dated 31st October, 1989, which reads asfollows: "7.2 Amendment made by the|Amending Act, 1989, toreintroduce the expression ‘reason to believe’ in|SectionT47.--A number of representations were received againstthe omission of the words ‘reason to believe’from)SectionT47and their substitution by the ‘opinion’ of the AssessingOfficer. It was pointed out that the meaning of theexpression, reason to believe’ had been explained in anumber of court rulings in the past and was well settledand its omission fromsection [47would give arbitrarypowers to the Assessing Officer to reopen pastassessments on mere change of opinion. To allay thesefears, the.Amending Act, 1989, has again amendedsectionT47to reintroduce the expression ‘has reason to believe’in place of the words for reasons to be recorded by him inwriting, 1s of the opinion’. Other provisions of theHewsection [47, however, remain the same." For the afore-stated reasons, we see no merit in these civilappeals filed by the Department, hence, dismissed with no orderas to costs. 8 The contention of learned counsel for the appellant is that thephrase ‘conceptual difference’ between power to review and power toreassess, some how changes the law. This argument is flawed because theirLordships’ have merely reiterated that invocation of Section 147 of the Actcan only be on the basis of tangible material which has come to theknowledge of the assessing officer after the assessment. | ITA-266-2016 QOThe question of law does not arise. 10.Dismissed. IAJAY TEWARI]JUDGE FEBRUARY 03, 2020 sham 1. Whether speaking/ reasoned2. Whether reportable JIAVNEESH JHINGANJUDGE Yes/NoYes/No Yes/No