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BALASUBRAMANIAN RAMACHANDRAN Vs. INCOME TAX OFFICER WARD 8
December, 02nd 2014
          IN THE HIGH COURT OF DELHI AT NEW DELHI

%                                          Judgment delivered on: 24.11.2014

+       W.P.(C) 6159/2013 & CM 13549/2013

BALASUBRAMANIAN RAMACHANDRAN                                     ..... Petitioner

                            versus


INCOME TAX OFFICER WARD 8                                        ..... Respondent
Advocates who appeared in this case:
For the Petitioner  : Mr Deepak Chopra with Mr Amit Srivastava
For the Respondents : Mr Kamal Sawhney with Mr Sanjay Kumar

CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SIDDHARTH MRIDUL

                                   JUDGMENT

BADAR DURREZ AHMED, J (ORAL)

1.      This writ petition is directed against the notice under Section 148 of

the Income Tax Act, 1961 (hereinafter referred to as the ,,said Act) , which

was issued to the petitioner on 28.03.2012 seeking to re-open the assessment

which had been completed under Section 143(3) of the said Act on

30.11.2007 in respect of the assessment year 2005-06.




WP(C) 6159/2014                                                              Page 1 of 9
2.      It is evident that the notice under Section 148 was issued beyond the

period of four years from the end of the relevant assessment year.

Consequently, the first proviso to Section 147 of the said Act would be

applicable. The said Section 147 along with the said first proviso reads as

under:-

      "147. If the Assessing Officer has reason to believe that any
      income chargeable to tax has escaped assessment for any
      assessment year, he may, subject to the provisions of sections 148
      to 153, assess or reassess such income and also any other income
      chargeable to tax which has escaped assessment and which comes
      to his notice subsequently in the course of the proceedings under
      this section, or recompute the loss or the depreciation allowance or
      any other allowance, as the case may be, for the assessment year
      concerned (hereafter in this section and in sections 148 to 153
      referred to as the relevant assessment year):




      Provided that where an assessment under sub-section (3) of section
      143 or this section has been made for the relevant assessment year,
      no action shall be taken under this section after the expiry of four
      years from the end of the relevant assessment year, unless any
      income chargeable to tax has escaped assessment for such
      assessment year by reason of the failure on the part of the assessee
      to make a return under section 139 or in response to a notice issued
      under sub-section (1) of section 142 or section 148 or to disclose
      fully and truly all material facts necessary for his assessment, for
      that assessment year:"


3.      The learned counsel for the petitioner submitted that the re-assessment

proceedings were bad in law inasmuch as the conditions stipulated in the first

proviso to Section 147 of the said Act had not been fulfilled. In essence, he



WP(C) 6159/2014                                                      Page 2 of 9
submitted that there was no failure on the part of the assessee to disclose fully

and truly all material facts necessary for its assessment. He submitted that

apart from there being no such failure on the part of the petitioner, there was

not even any allegation with regard to such failure in the reasons which were

supplied to the petitioner subsequent to the issuance of the said notice.


4.      The learned counsel for the petitioner submitted that the entire

controversy revolves around the deduction which had been claimed and

allowed to the petitioner under Section 10A of the said Act in the original

assessment order dated 30.11.2007. In the assessment order, it was

specifically stated that the assessee company deals in software design,

development and modification services and had claimed exemption under

Section 10A of the said Act. After making certain disallowances on account

of certain other items and examining the return and accompanying

documents, the Assessing Officer assessed the profit and gains from business

and profession as nil as claimed by the petitioner/ assessee on account of the

exemption claimed under Section 10A. The learned counsel for the petitioner

also drew our attention to the fact that the computation, accompanying the




WP(C) 6159/2014                                                       Page 3 of 9
return, specifically referred to the claim of deduction under Section 10A and

also gave the details of such claim.


5.      It was also pointed out by the learned counsel for the petitioner that the

company had, in fact, been wound up on 15.11.2011 by virtue of an order

passed by the Andhra Pradesh High Court. However, we are not examining

that aspect of the matter inasmuch as this petition can be disposed of on the

simple point as to whether the petitioner had made a full and true disclosure

of the material facts necessary for its assessment or not.


6.      As mentioned above, on the issuance of the notice dated 28.03.2012,

the petitioner asked for the reasons behind the issuance of the notice and the

same were thereafter supplied to the petitioner. The purported reasons were

as under:-

        "Reasons for issuance of notice u/s 148 of the I.T. Act, 1961
        Name of the assessee : M/s. Skyworks Solutions (I) Pvt. Ltd.
                                  202-206, Tolstoy Marg, New Delhi.
        Assessment Year        : 2005-06
        PAN                     : AAGCS8197K
        Assessment u/s 143(3) was completed in November, 2007 in total
        income of Rs. 41,86,880/- u/s It has been noticed that while
        completing the assessment, deduction u/s 10A has been wrongly
        allowed which resulted in under assessment of the Income to the
        tune of Rs. 5,85,472/-.

        Section u/s 147 reads as under:




WP(C) 6159/2014                                                         Page 4 of 9
        Section 147....
        Explanation 2 for the purposes of this section, the following shall
        also be deemed to be cases where income chargeable to tax has
        escaped assessment namely:
        (a) ..............
        (b) ..............
        (c) Where the assessment has been made, but
        (i)   Income chargeable to tax has been under assessed; or
        (ii) Such Income has been assessed at too low a rate or
        (iii) Such Income has been made the subject of excessive relief
              under this Act; or
        (iv) Excessive loss or depreciation allowance or any other
              allowance under this Act has been computed:"

               In view of explanation 2(c) (i) & (iv) to section 147, as
        quoted above, I have reason to believe that taxable Income to the
        tune of Rs. 5,85,472/-, has escaped assessment. Therefore it is
        proposed to issue notice u/s 148 of the IT Act, 1961 in order to
        tax the above said escaped income. In view of the above, as per
        provisions of section 151, it is requested to kindly accord
        approval for issuance of notice u/s 148 in this case for the
        assessment year 2005-06.
                                                       Sd/-
                                               Income Tax Officer
                                              Ward 8(2), New Delhi "

7.      The petitioner filed its objections to the said reasons and in paragraph

2.5 of the said objections the specific plea of time bar and non-compliance

with the conditions precedent stipulated in the proviso to Section 147 were

taken. The relevant portion of the objections is as under:-


        "2.5      Initiation of re-assessment proceedings is time barred




WP(C) 6159/2014                                                       Page 5 of 9
        It is respectfully submitted that there has been no escapement as
        alleged and the said purported proceedings are barred by
        limitation and have been initiated in violation of the provisions
        of the Act. In this regard it would be pertinent to refer to the
        proviso to Section 147 of the Act which reads as under:

        "Provided that where an assessment under sub-Section (3) of
        Section 143 or this Section has been made for the relevant
        assessment year, no action shall be taken under this Section after
        the expiry Of four years from the end of the relevant assessment
        year, unless any income chargeable to tax has escaped
        assessment for such assessment year by reason of the failure on
        the part of the assessee to make a return under Section 139 or in
        response to a notice issued under sub Section (1) of Section 142
        Or Section 148 or to disclose fully and truly all material facts
        necessary for his assessment, for that assessment year."




        The assessment in the case of Skyworks India for the subject AY
        was completed under Section 143(3) of the Act. Detailed scrutiny
        proceedings were initiated and the assessment was concluded
        vide order dated November 30, 2007. However, the notice under
        Section 148 of the Act seeking to reopen the assessment for the
        assessment year is issued after the expiry of four years from the
        end of the relevant assessment year i.e. beyond the period of
        limitation which in the instant case expires on March 31, 2010.

        Hence, after the expiry of four years from the end of the relevant
        assessment year, the proviso to Section 147 of the Act would be
        attracted and no action can be taken after 4 years from the end of
        relevant assessment year under Section 147 of the Act, unless
        such income has escaped assessment by reason of the failure on
        the part of the assessee to disclose fully and truly all material
        facts for his assessment for that assessment year.

        It would be appreciated that Skyworks India has provided all the
        documents and details called for in the course of assessment
        proceedings initiated by your office. Also, there is no indication




WP(C) 6159/2014                                                       Page 6 of 9
        in the notice issued under Section 147 of the Act that there was a
        failure or omission on part of Skyworks India to truly disclose
        the material facts necessary for assessment."


8.      However, the Assessing Officer was not convinced with the objections

taken by the petitioner and passed an order dated 20.12.2012 rejecting the

objections. The order, however, did not consider the point raised by the

assessee that the reasons themselves did not contain any allegation that there

was a failure on the part of the petitioner / assessee to disclose fully and truly

all material facts necessary for its assessment. Thereafter, the re-assessment

order was passed on 22.03.2013, once again, without referring to the specific

point raised by the petitioner.


9.      We have heard the learned counsel for the petitioner as well as the

learned counsel for the respondent and we are of the view that the essential

ingredient of there being a failure to disclose fully and truly all material facts

necessary for assessment is conspicuous by its absence. In fact, there is not

even an allegation or a whisper or suggestion with regard to this in the

reasons recorded.     It is well settled by several decisions starting from

Haryana Acrylic Manufacturing Company v. CIT: (2009) 308 ITR 38

(Delhi) and including Wel Intertrade Private Limited v. ITO: (2009) 308




WP(C) 6159/2014                                                        Page 7 of 9
ITR 22 (Delhi) and CIT v. Suren International Private Limited: (2013) 357

ITR 24 (Delhi) that the reasons must record that there was such a failure on

the part of the assessee or, in the least, the reasons must lead to the clear and

direct inference that there was a failure on the part of the assessee to fully and

truly disclose all material facts necessary for assessment. The reasons must

indicate which material fact was not fully and truly disclosed. In the last

mentioned case, this Court, after referring to the earlier decisions observed as

under:-

        "In the reasons as furnished by the Assessing Officer, we find
        that there is neither any allegation that the assessee had failed to
        truly disclose any material facts at the time of assessment, nor
        can we readily infer the same in view of the fact that a detailed
        enquiry had been conducted by the Assessing Officer with regard
        to the identity and creditworthiness of the share-applicants and
        genuineness of the transactions in relation to the share application
        money received by the assessee. Further the mere statement that
        the DRI has seized certain goods of the assessee and levied a
        penalty also cannot be stated to be a reason for reopening of
        assessment of the assessee as the said statement made is neither
        followed by the recording of a belief that the income escaped on
        that count or that the assessee has failed to disclose all relevant
        material, fully and truly, at the stage of the first assessment."


10.     Similarly, in the present case, we find that in the reasons recorded,

there is neither any allegation that the assessee had failed to truly and fully

disclose material facts at the time of the assessment nor can we readily infer




WP(C) 6159/2014                                                        Page 8 of 9
the same. Consequently, one of the essential ingredients for re-opening an

assessment beyond the period of four years has not been satisfied in the

present case. The re-assessment proceedings are, therefore, bad in law. The

impugned notice under Section 148 dated 28.03.2012 as well as all

proceedings pursuant thereto, including the re-assessment order dated

22.03.2013, are set aside. The writ petition is allowed as above. There shall

be no order as to costs.


                                      BADAR DURREZ AHMED, J



                                        SIDDHARTH MRIDUL, J
NOVEMBER 24, 2014
SR




WP(C) 6159/2014                                                    Page 9 of 9

 
 
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