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Le passage to india tours & travels pvt ltd vS. additional commissioner of income tax
April, 21st 2014


                                               Date of decision: 16.04.2014

+       W.P.(C) 7550/2012
                                                                 ..... Petitioner
                           Through Mr Ajay Vohra and Ms Kavita Jha,


                                                               ..... Respondent
                           Through Mr Sanjeev Sabharwal, sr. standing
                           counsel with Mr Ruchir Bhatia, Adv.


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


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

        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

WP(C) 7550/2012                                                   Page 7 of 7
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