$~29
* IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 16.04.2014
+ W.P.(C) 7550/2012
LE PASSAGE TO INDIA TOURS & TRAVELS PVT LTD
..... Petitioner
Through Mr Ajay Vohra and Ms Kavita Jha,
Advs.
versus
ADDITIONAL COMMISSIONER OF INCOME TAX
..... Respondent
Through Mr Sanjeev Sabharwal, sr. standing
counsel with Mr Ruchir Bhatia, Adv.
CORAM:
MR. JUSTICE S. RAVINDRA BHAT
MR. JUSTICE R.V. EASWAR
S. RAVINDRA BHAT, J.: (OPEN COURT)
CM 19191/2012
Exemption is allowed subject to all just exceptions.
The application is disposed of.
W.P.(C) 7550/2012 & CM 19190/2012
WP(C) 7550/2012 Page 1 of 7
1. The petitioner, an income tax assessee challenges a notice dated
4.7.2011 issued by the respondent/revenue (hereinafter referred to as
"revenue") in exercise of its powers under section 147 and 148 of the
Income Tax Act seeking to reopen the assessment for the assessment year
2006-07.
2. The assessee is in the tourism and travel business. By the
impugned reassessment notice, the AO was of the opinion that based upon
the materials on the record, certain expenses incurred abroad were not
disclosed. He therefore sought to use the reassessment proceedings to
verify the expenses and thereafter frame a re-assessment. The material
portion of the reassessment notice dated 4.7.2011 to the extent it is
relevant is extracted below.
"1. Assessment in this case was completed under section
143(3) on 26.12.2008 at an income of Rs.8,55,51,563/- as
against the returned income of Rs.8,55,11,040/-. Further,
the case was reopened u/s 147 and assessment u/s
147/143(3) was completed at Rs.1,22,84,55,005/-. Scrutiny
of income tax assessment records revealed that as per the
submissions of the assessee during the course of re-
assessment proceedings the assessee had earnings of
Rs.1,31,10,67,825/- and the assessee offered income from
services in P& L A/c at Rs.21,03,01,532/-. Accordingly,
WP(C) 7550/2012 Page 2 of 7
being not satisfied with the submissions of the assessee the
Assessing officer made a disallowance of Rs.114,29,03,442/-
the assessee filed writ petition against the said order before
the Hon'ble High Court and the Hon'ble High Court quest
the assessment order passed by the Assessing Officer and
also has held that the reasons for reopening have to stand on
their legs and cannot be substantiate for reasons and
grounds which are not mentioned therein. The Hon'ble
Court further commented that we will only state that this
order does not and will not operate as a bar or prohibition.
It is opened to the Assessing Officer to record reasons and
re-open assessment for the A.Y.2006-07 in accordance with
law. In view of the above, the following reasons recorded to
re-open the assessment for A.Y.2006-07. The assessee at the
time of re-assessment proceedings only submitted that the
income has been offered on the basis of netting. All the
expenses booked outside India were excluded from the gross
receipts. The assessee never offered details of the expenses
where and to whom payments were made outside India. In
the absence of any evidence on records, it is necessary to re-
open the assessment for verification of expenses incurred
outside India amounting to Rs.114,29,03,442/-. For the
verification of genuineness of the expenses, it is extremely
necessary to initiate proceedings u/s 148 in the instant case.
2. In view of the above, I have reasons to believe that the
income of Rs.114,29,03,442/- chargeable to tax has escaped
assessment within the meaning of section 147/148 of the
Income Tax Act, 1961."
WP(C) 7550/2012 Page 3 of 7
The petitioner had approached this Court earlier by filing writ petition
8685/2010 in respect of the earlier reassessment notice for the same
assessment year, dated 17.2.2010. In that instance, the AO after
considering the notes to accounts filed during the original assessment
proceedings, prima facie felt that the assessee had earned Rs.129 crores in
foreign currency on approval basis from sale and service but disclosed
only Rs.21.03 lakhs in the profit and loss account under the head
"services". The Court in those writ proceedings was of the opinion that
since all the materials were on the record, on an appropriate application of
the Supreme Court's ruling in CIT V. Kelvinator of India Ltd. (2010) 2
SCC 723, the earlier reassessment notice was not justified. The court
accordingly quashed the reassessment notice. At the same time the Court
observed that the order would not operate as a bar or prohibition and fresh
reasons for the reopening assessment for 2006-07 may be recorded in
accordance with law.
3. It is submitted that the present impugned reassessment notice dated
4.7.2011 is on the same lines which led the Court to quash the previous
one. It is urged that there is no fresh or tangible material to trigger a
WP(C) 7550/2012 Page 4 of 7
legally justified reassessment proceedings in the circumstances of this
case. In the previous instance the AO was of the opinion that income to
the tune of Rs.121 crore had not been offered though what was shown in
P & L account was Rs. 129 crores. In the present case similarly the AO
has expressed the opinion that reassessment proceedings are called for on
the assumption that all expenses booked outside India were excluded from
the gross receipts. The revenue has filed its counter affidavit urging that
the impugned notice in this case does not call for interference and that
since liberty was given in the previous order, the reopening of assessment
was justified.
4. In Kelvinator of India Ltd. (supra) the Supreme Court stated that
the expression "reasons to believe" cannot comprehend a mere change of
opinion which would only amount to an impermissible review. The Court
held that-
".....Therefore, post-1-4-1989, power to re-open is much
wider. However, one needs to give a schematic interpretation
to the words "reason to believe" failing which, we are
afraid, Section 147 would give arbitrary powers to the
Assessing Officer to re-open assessments on the basis of
WP(C) 7550/2012 Page 5 of 7
"mere change of opinion" which cannot be per se reason to
re-open.
6. We must also keep in mind the conceptual difference
between power to review and power to re-assess. The
Assessing Officer 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 of re-opening the assessment,
review would take place."
5. In the present case the "reasons to believe" extracted above
nowhere reveal as to what tangible material which the AO came to obtain
to justify the reassessment notice. In the previous instance, the
reassessment notice was based on the assumption that a much larger
income had accrued to the assessee whereas only a fraction of its was
offered in the P & L account. In the present case, a somewhat similar, if
not identical, ground has been made out i.e. that of expenses incurred
abroad have not been revealed. This was an aspect which was known to
the AO at the time of the original assessment; the explanations by the
assessee appear to have been taken into account. At the time when the
first reassessment notice was issued a facet of this was taken into
WP(C) 7550/2012 Page 6 of 7
consideration and in fact cited in the "reasons to believe". A virtual
assertion of the same reasons in different words does not clothe the
reassessment notice, in the opinion of the Court, with any more sanctity,
nor does it take away the vice of lack of jurisdiction noticed in the order
in WP 8685/2010. Moreover, an assessment cannot be reopened merely
to verify the genuineness of the expenses as that would amount to an
impermissible fishing or rowing enquiry without any tangible material to
show escapement of income.
For the above reasons it is held that the impugned notice is not
justified and beyond the authority of law. It is accordingly quashed and
the writ petition is allowed.
S. RAVINDRA BHAT, J
R.V.EASWAR, J
APRIL 16, 2014
vld
WP(C) 7550/2012 Page 7 of 7
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