Gujarat High Court
Saurashtra Cricket Association vs Income Tax Officer on 17 February, 2014
Author: Ravi R.Tripathi
Bench: Ravi R.Tripathi, K.J.Thaker
C/SCA/2321/2014 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL CIVIL APPLICATION NO. 2321 of 2014
With
SPECIAL CIVIL APPLICATION NO. 2323 of 2014
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SAURASHTRA CRICKET ASSOCIATION....Petitioner(s)
Versus
INCOME TAX OFFICER....Respondent(s)
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Appearance:
MR MIHIR JOSHI, SR. ADVOCTE, MR TUSHAR P HEMANI, ADVOCATE, MS
VAIBHAVI K PARIKH, ADVOCATE for the Petitioner(s) No. 1
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CORAM: HONOURABLE MR.JUSTICE RAVI R.TRIPATHI
and
HONOURABLE MR.JUSTICE K.J.THAKER
Date : 17/02/2014
COMMON ORAL ORDER
(PER : HONOURABLE MR.JUSTICE RAVI R.TRIPATHI)
1. Heard, Mr. Mihir Joshi, learned Sr. Advocate with Mr. Tushar P. Hemani, learned Advocate for the appellant.
2. Learned Sr. Advocate moves a Draft Amendment, same is allowed. The amendment shall be carried out during the course of the day.
3. The learned Sr. Advocate invited the attention of this Court to the averments made in Paragraph-2.10, which reads as under;
"2.10 However, the Respondent, vide order dated 16.04.2013 disposed off the objections raised by the Petitioner and inter alia held that when the original Page 1 of 8 C/SCA/2321/2014 ORDER assessment order is framed due to oversight and inadvertence or a mistake, the reopening is valid. A copy of the order dated 16.04.2013 passed by the Respondent is annexed herewith and marked hereto as "Annexure K" to this petition."
4. The learned Sr. Advocate, then, invited the attention of this Court to Paragraph-3.10, which reads as under;
"3.10 The Petitioner further submits that whenever an assessment order is framed u/s 143(3) of the Act, the Assessing Officer builds an opinion about all the issues which are expressly and impliedly accepted by him. Under such circumstances, any variation from the opinion, already framed by the Assessing Officer in absence of any tangible material would amount to change of opinion, and therefore, it is not open to the Respondent to now, change his opinion, and reopen the concluded assessment is sought to be done."
5. The learned Sr. Advocate placed reliance on a decision of this Court in the matter of "SIDDHI VINAYAK TRANSPORT VS. ASST. COMMISSIONER OF INCOME TAX", [2013] 35 taxmann.com 84(Gujarat). The learned Sr. Advocate invited the attention of this Court to Paragraphs- 9 to 12, thereof;
"09. It thus clearly emerges from the record that the Assessing Officer now wishes to reexamine the petitioner's claim of deduction on the premise that the earlier Assessing Officer made an Page 2 of 8 C/SCA/2321/2014 ORDER error in limiting such allowance to 20% of the total expenditure. In his opinion, 100% disallowance was called for. To the extent that the Assessing Officer, in the scrutiny assessment, did not disallow 80% of the expenditure and limited the disallowance to 20%, had committed an error.
10. We are not examining the validity of the contention of the Assessing Officer, recorded in the form of reasons, for issuing the notice. We are limiting our observations to his assuming jurisdiction of reopening of the assessment on such basis. When the earlier Assessing Officer had framed scrutiny assessment and examined certain deductions thoroughly, it was, thereafter, simply not open to the latter Assessing Officer to reopen the assessment on the basis that the earlier Assessing Officer committed a legal error. Once the claim was examined, scrutiny assessment was framed and Assessing Officer came to the conclusion with or without recording reasons in the assessment order, such an assessment could not have been subjected to the process of reopening. This is not to suggest that the Revenue would be rendered without any remedy even in a case where the Assessing Officer committed a gross error in under assessing income chargeable to tax.
11. Section 263 of the Act, of course, when the requirements laid down in the provisions are satisfied, empowers the Commissioner to take such an order in revision. However, the succeeding Assessing Officer cannot doubt the legality of a conclusion recorded by the earlier Assessing Officer in his assessment order, which was framed Page 3 of 8 C/SCA/2321/2014 ORDER after scrutiny. In same what similar circumstance, we had in our judgment dated 16.4.2013 passed in S.C.A. No. 357 of 2013 in case of Transwind Infrastructure Pvt. Lid. Vs. Income Tax Officer, made following observations :
10. From the above, it can be seen that the Assessing Officer was acutely conscious about the petitioner not having deducted tax on labour payment charges of Rs. 3.05 crores and the petitioner's contention that it was so done because provision for TDS was not applicable. He was not convinced by such explanation. He, however, for some strange reasons did not apply the provision of Section 40(a)(ia) of the Act instead made adhoc disallowance of Rs. 25,60,000/@ 8% of the total labour payment charges.
11.Whatever be the legality of such assessment, fact remains that, in the scrutiny assessment, the Assessing Officer had thoroughly and fully scrutinized the assessee's claim of deduction of labour expenditure. To the extent he was inclined to disallow the same, he did so. By no stretch of imagination it can be stated that the issue was not at large before the Assessing Officer in the original scrutiny assessment. Any reexamination of such a question at this stage would only amount to change of opinion. Remedy of reopening the assessment, therefore, was simply not available. In the decision of the Supreme Court in case of Commissioner of Income Tax Vs. Kelvinator of India Ltd. reported in [2010] 320 ITR 561 (SC) the Apex Page 4 of 8 C/SCA/2321/2014 ORDER Court observed as under:
"On going through the changes, quoted above, made to Section 147 of the Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a goby and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to reopen the assessment.
Therefore, post 1 st April, 1989, power to reopen 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 reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. But reassessment has to be based on fulfillment of certain precondition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the Page 5 of 8 C/SCA/2321/2014 ORDER garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an inbuilt test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to reopen, 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 the belief. Our view gets support from the changes made to Section 147 of the Act, as quoted hereinabove. Under the Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted the words "reason to believe" but also inserted the word "opinion"
in Section 147 of the Act.
However, on receipt of
representations from the
Companies against omission of the words "reason to believe", Parliament reintroduced the said expression and deleted the word "opinion" on the ground that it would vest arbitrary powers in the Assessing Officer."
12. If the Revenue was of the opinion that the Assessing Officer erroneously and to the prejudice of the interest of the Revenue allowed certain claim, in a given situation, it would have been open for the appropriate authority to exercise revisional powers. However, once the claim was fully examined, power of reopening was simply not available.
Page 6 of 8 C/SCA/2321/2014 ORDER12. Such observations would apply in the present case also. We make it clear that it is not a case where the Assessing Officer, while framing original scrutiny assessment, did not examine the petitioner's claim of deduction. He was acutely conscious of such a claim and was also of the opinion that the entire claim was not required to be granted. He called for explanation of the assessee and after taking into consideration the explanation, made disallowance to the extent he was convinced to do. If, in the process, he made a legal error, the succeeding Assessing Officer cannot correct such an error, through the process of reopening of the assessment. This is precisely, in the present case, what the respondent seeks to achieve. His reasons recorded clearly reflect such a state of affairs. He expresses his opinion that the disallowance which was limited to 20% of the expenditure was not justified in law and the entire expenditure should have been disallowed. We are afraid, this cannot be the basis for reopening of the assessment previously framed after scrutiny."
6. In view of the above, both the matters require consideration. Hence, RULE.
7. NOTICE as to interim relief, returnable on 3RD MARCH, 2014. Ad-interim-relief in terms of PARA-7(b), till then. Direct service is permitted.
(RAVI R.TRIPATHI, J.) Page 7 of 8 C/SCA/2321/2014 ORDER (K.J.THAKER, J) UMESH Page 8 of 8