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.
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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
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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
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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:
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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
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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
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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
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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
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