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Unitech Limited Vs. Deputy Commissioner Of Income Tax, Circle-27(1), New Delhi
August, 01st 2017
$~21
*      IN THE HIGH COURT OF DELHI AT NEW DELHI
+                        W.P. (C) 12324/2015
       UNITECH LIMITED                                 ..... Petitioner
                     Through:         Mr. Salil Aggarwal and Mr. Madhur
                                      Aggarwal, Advocates.

                         versus

       DEPUTY COMMISSIONER OF INCOME TAX,
       CIRCLE-27(1), NEW DELHI                  ..... Respondent
                       Through: Mr. Zoheb Hossain, Senior Standing
                                Counsel.

       CORAM: JUSTICE S.MURALIDHAR
              JUSTICE PRATHIBA M. SINGH
                         ORDER
        %                24.07.2017
Prathiba M. Singh, J.
1. This is yet another case in the ever increasing number of cases filed
before this Court challenging the issuance of notice under Section 148 of the
Income Tax Act, 1961 (hereinafter referred to as `the Act').


Brief Facts
2. The Petitioner filed its return of income for the Assessment Year (`AY')
2008-09 declaring an income of Rs.1334,87,70,381/-. Its case was picked
up for scrutiny and notice was issued to it under Section 143 (2) of the Act.
As part of the scrutiny, a questionnaire dated 20th October, 2009 was issued
to the Petitioner by the Assessing Officer (`AO') raising various queries.
This was duly replied by the Petitioner on 29th October, 2009. Further

W.P.(C) No. 12324/2015                                          Page 1 of 10
documents were also submitted on 17th November, 2009 by the Petitioner.
An assessment order under Section 143 (3) of the Act was passed by the AO
on 30th December, 2009.


3. Thereafter, two notices under Section 148 of the Act came to be issued
on 31st May, 2012 and 28th March, 2013 for the AY 2008-09. Both these
notices came to be challenged by the Petitioner in W.P.(C) Nos. 446/2014
and 4631/2014 which were disposed of by this Court by a common order on
3rd September, 2014. The said order reads as under:
               " These writ petitions are being disposed of together
               inasmuch as they pertain to the same very petitioner and
               relate to the same assessment year 2008-09. In these
               petitions, the notices issued under Section 148 on
               31.05.2012 and 28.03.2013 are impugned. We have
               heard the parties at length. We need not set out all the
               arguments in detail. It would suffice to say that the said
               notices do not meet the requirements of law.
               Consequently, the notices under Section 148 dated
               31.05.2012 and 28.03.2013 are set aside and all
               proceedings pursuant thereto are quashed.

               Quashing of the notices dated 31.05.2012 and
               28.03.2013, however, does not preclude the Assessing
               Officer from issuing a fresh notice under Section 148 of
               the Income Tax Act, 1961 in relation to the assessment
                year 2008-09, if the Assessing Officer has reason to
               believe that income chargeable to tax has escaped
               assessment, having regard to the first proviso to Section
               147 and other applicable provisions of the said Act. We
               are also making it clear that we have not expressed any
               opinion on the merits of the matter which includes the
               question as to whether there was mere change of opinion
               and/or no fresh material has surfaced after
               the completion of the assessment under Section 143(3).
W.P.(C) No. 12324/2015                                            Page 2 of 10
               The writ petitions are allowed to the aforesaid extent.
               There shall be no order as to costs."

4. Pursuant to the said order, a fresh notice was issued to the Petitioner on
16th July, 2015 under Sections 147/148 of the Act for the same AY viz.,
2008-09. The two reasons for reopening the assessment read as under:

               "2.1 Disallowance u/s 14-A r.w. Rule 8-D of the IT Act,
               1961;
                     ......

               2.2 Complex web of subsidiaries & colourable device of
               transferring shares instead of substantial transfer of
               landed properties.
                    ........"

5. The Petitioner filed its objections to the reopening of the assessment on
28th July, 2015. The said objections were rejected on 9th November, 2015.
The Petitioner thereafter filed the present writ petition seeking the quashing
of the notice under Section 148 of the Act dated 4th March, 2015 and order
dated 9th November, 2015 rejecting the Petitioner's objections thereto.







Petitioner's Submissions
6. Mr. Salil Aggarwal, learned counsel for the Petitioner, submitted that the
reasons recorded by the AO do not satisfy the requirement of law in terms of
Sections 147/148 of the Act. There is no failure by the Petitioner to disclose
fully and truly all the material facts necessary for the assessment and neither
is such a failure recorded in the reasons.


W.P.(C) No. 12324/2015                                           Page 3 of 10
7. Mr. Aggarwal further submitted that the order dated 3rd September, 2014
passed by this Court in the earlier round gave a clear mandate to the
Revenue that a fresh notice under Section 148 of the ITA could be issued if
the AO has reason to believe that the income chargeable to tax has escaped
assessment "having regard to the first proviso to Section 147 of the ITA and
other applicable provisions of the said Act". Thus, the direction of the Court
did not mean that a fresh notice could be issued if the same was
impermissible in law. Mr. Aggarwal further submitted that the two reasons
for the reopening of the assessment are unsustainable inasmuch as, all the
information regarding the said two issues already stood submitted to the AO.
This was duly brought to the AO's notice in the objections filed by the
Petitioner.


8. Mr. Aggarwal further submitted that in view of the ratio of the decision of
the Supreme Court in Commissioner of Income Tax, Delhi v. Kelvinator of
India Limited (2010) 2 SCC 723, the same material cannot be looked into
for opening the assessment. The reasons recorded by the AO do not satisfy
the legal requirement under the first proviso to Section 147 of the Act. Mr.
Aggarwal further submitted that the Petitioner has already gone through two
rounds of enquiry, inasmuch as, it was also issued a notice under Section
263 of the Act on 30th December, 2011 for the very same AY. Mr. Aggarwal
also relied upon the decision in Agya Ram v. Commissioner of Income Tax,
Delhi, (2016) 386 ITR 545 (Del). Mr. Aggarwal thus submitted that this is
nothing but a case of change of opinion on the same material, which is
impermissible in law.


W.P.(C) No. 12324/2015                                           Page 4 of 10
Respondent's Submissions
9. Mr. Zoheb Hossain, learned Senior Standing Counsel for the Revenue,
submitted that the earlier two notices issued to the Petitioner were within the
four year period and the present notice, having been issued pursuant to the
order dated 3rd September 2014 of this Court, was nothing but a
continuation of the said earlier notices. This was permitted by the Court in
its order dated 3rd September, 2014. Mr. Hossain further submitted that the
said order merely required the AO to issue a fresh notice if any income had
escaped assessment. There is no need to satisfy the conditions for reopening
an assessment beyond the four-year period. It is Mr. Hossain's submission
that the impugned order has to be treated as a notice issued within the four
year period. The mentioning of the first proviso to Section 147 in the order
dated 3rd September, 2014 of this Court was, according to Mr. Hossain, only
in the context of Section 143 (3) of the Act.


10. Without prejudice to the above submissions, Mr. Hossain further
submitted that the Petitioner has failed to make a full and true disclosure of
all the material facts, inasmuch as, the Petitioner has deliberately shown the
income under an incorrect head. It is clear from the order rejecting the
objection of the Petitioner and hence this is a fit case for dismissal of the
writ petition.


11. Mr. Hossain relied upon the decision in Chennai Properties and
Investments Limited, Chennai v. Commissioner of Income Tax Central
III, Tamil Nadu, (2015) 14 SCC 793 and urged that the AO at this stage had
only to see whether there was some material to reopen the case. The
W.P.(C) No. 12324/2015                                           Page 5 of 10
sufficiency or correctness of the material was not to be examined.


Analysis
12. There are a large number of cases that have been decided by this Court
with respect to reopening of assessments under Sections 147/148 of the Act.
After a period of four years under the first proviso to Section 147 of the Act,
for re-assessment proceedings to be initiated, the following pre-conditions
have to be satisfied:
          The original assessment had to be completed under Section 143
             (3) of the Act
          More than four years have lapsed from the end of the relevant
             AY
          The income chargeable to tax has escaped assessment
          Due to failure of the Assessee to make a return under Section
             139, or
          In response to a notice under sub-section 1 of Section 142, or
          Due to a failure on the part of the Assessee to disclose fully and
             truly all material facts necessary for the assessment for the
             relevant assessment order.


13. The wording of this provision makes it clear that reopening of
assessments after a period of four years, ought to be an exception and not the
rule. The purpose of this provision is to ensure that there is some finality
which is attached after the period of four years, for assessments which have
been completed under Section 143 (3) of the Act. The AO has to necessarily
record that there has been a failure on the part of the Assessee to disclose
W.P.(C) No. 12324/2015                                           Page 6 of 10
fully and truly all material facts necessary for his assessment, failing which
the reopening of the assessment cannot be triggered.


14. In the facts of the present case, the reasons stated by the AO do not
satisfy the mandatory legal requirement for reopening the assessment since
they failed to record the failure on the part of the Assessee to disclose fully
and truly all material facts necessary for the assessment.

15. For the AY 2008-09, the Assessee's return has been subjected to multiple
scrutinies;
(i) under Section 143 (3) of the Act;
(ii) under Section 263 of the Act;
(iii) under Sections 147/148 of the Act which was challenged in the writ
proceedings and was set aside.


16. The Revenue has had more than sufficient opportunity to carefully
scrutinize the returns of the Petitioner. In the circumstances of the case a
higher burden is placed on the Revenue to sustain the impugned notices. An
interesting feature of the impugned notice dated 4th March, 2015, is that the
reasons contained therein are a verbatim reproduction of the reasons which
were recorded in the notice dated 28th March, 2013 which came to be set
aside by this Court on 3rd September, 2014. The re-issuance of the quashed
notice in identical terms could not have been the purpose of the order dated
3rd September, 2014 passed by this Court. The said impugned notice dated
28th March, 2013 was set aside and proceedings pursuant to the said notice
stood quashed. The direction to issue fresh notice keeping in mind the first

W.P.(C) No. 12324/2015                                           Page 7 of 10
proviso of Section 147 of the Act clearly meant that the Revenue had to
satisfy the rigors of the said proviso.


17.    Further, a perusal of the reply submitted by the Petitioner to the
questionnaire, which was issued on 29th October, 2009 by the AO as part of
the proceedings under Section 143 (3) of the Act, clearly reveals that the
dividend income was fully disclosed in the reply dated 17th November, 2009.
The questionnaire having been duly replied to and the assessment order
having been passed under Section 143 (3) of the Act on 30th December
2009, it cannot be said that AO did not form an opinion on the issue. The
questionnaire specifically sought details of several incomes, which were
submitted by the Assessee.







18. Even the proceedings under Section 263 of the Act did not raise the
issue of disallowance of expenditure incurred for earning exempt income
under Section 14-A of the Act. Under Section 263 of the Act, the Revenue
had an opportunity to revisit the assessment order insofar if it was incorrect
and prejudicial to the interests of the Revenue.       However, even in the
Section 263 proceedings this issue was not raised.


19. In view of the fact, that there was a full disclosure by the Assessee of all
the material facts relating to the exempt income it cannot be said that the
condition for reopening of the assessment is satisfied on this count.


20. Even the second reason is a mere reproduction of the earlier notice dated
28th March, 2013. The nature of business of the Petitioner has always been
W.P.(C) No. 12324/2015                                            Page 8 of 10
known to the Revenue year after year. Even in this reason there is not even
a whisper of the failure by the Petitioner to make a full and true disclosure of
all the material facts necessary for the assessment.


21. Thus, the impugned notice does not satisfy the rigors of Sections
147/148 of the Act as there has been no non-disclosure of the material facts
by the Petitioner. In fact, even the reasons accompanying the impugned
notice do not even say that there is any failure by the Petitioner to disclose
fully and truly all the material facts.


22. The Supreme Court in Kelvinator (supra) held that:
               "6. ...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 "mere change
               of opinion", which cannot be per se reason to re-
               open. 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. One must
               treat the concept of "change of opinion" as an in-
               built test to check abuse of power by the Assessing
               Officer. Hence, after 1st April, 1989, Assessing
               Officer has power to re-open, provided there is
               "tangible material" to come to the conclusion that
               there is escapement of income from assessment.
               Reasons must have a live link with the formation of
W.P.(C) No. 12324/2015                                            Page 9 of 10
               the belief. ..."

23. This Court in HCL Technologies Ltd. v. Deputy Commissioner of
Income Tax (W.P.(C.) 8164/2010 decided on 20/7/2017) has held as
follows:
               "16. The AO has not made the effort of disclosing,
               in the reasons, what according to him constituted
               the failure by the Assessee to make a full and true
               disclosure. A mere reproduction of the language of
               the provision will not suffice. Also, although
               making such an averment either in the order
               rejecting the objections of the Assessee or
               subsequently in the counter-affidavit in the answer
               to a writ petition will not satisfy the requirement of
               the law. The reasons will have to speak for
               themselves. For complying with the jurisdictional
               requirement under the first proviso to Section 147
               of the Act, the reasons would have to show in what
               manner the Assessee had failed to make a full and
               true disclosure of all the material facts necessary
               for the assessment. The failure to do so would not
               be a mere irregularity. It would render the
               reopening of the assessment after four years
               vulnerable to invalidation." (emphasis supplied)

23.   For the reasons stated above, the writ petition is allowed and the
impugned notice dated 4th March, 2015 and order dated 9th November, 2015
are hereby quashed.


                                                    PRATHIBA M. SINGH, J


                                                          S.MURALIDHAR, J
JULY 24, 2017
dk
W.P.(C) No. 12324/2015                                              Page 10 of 10

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