Karnataka High Court
The Commr Of Income Tax vs M/S Standard Chartered Finance Ltd on 12 January, 2012
Bench: D.V.Shylendra Kumar, H.S.Kempanna
4
notices under Section 10 of the Act on the premise that
interest attributable to what is known hire purchase
transactions which the assessee company ha.r..§§1__
brought to tax in the corresponding asses'sm:e_n,t"*years,
though the assessee had filed returns ofchlargeiabjlle
and assessment orders had been passed;«:._"'ou.t --'had= '
escaped assessment due to the rea:so.n's.,_vof non.-dpiscliosure of
true and precise interest ~corr1p(L{-n}3nt,,for'l'interest income
from hire purchase trah's'action«s',»._Vwhich the assessee
claimed it had.
3. .:a'm_'ountMof chargeable interest,
which, in "the assessing authority, had
escaped, --assess'1ment',"'wa's the amount which the assessee
Vvhad Airrresipect' of each of these assessment years indicated
to1'be-the~i.ncVo1n'e..from hire purchase transactions, in the
V 3' following manner:
Assessment year Amount in rupees
1 992-93 1,16, 50,000
1 993-94 5, 09,35, 000
1994-95 8,57,31,000
1995-96 9, 77,92,_0ao09:"lij y " Ii
1 996-97 151, 71','8(),[O_Q_ON. .
4. More interestingly, whviieg. the"._tvassesse'e not
specifically mentioned these interest in
respect of any of the 'returns of
income filed nor did it which is
otherwise not of the Act in
part--III of in which return
of interestwaslt submitted by the assessee <-
neverthelessxthese" amlountsé had been indicated to be
incomegfroin hirepurchase transactions as indicated in the
."pr():'fi't..'étI'1dfi'1t)S.SvA.'8v(:COunt which was part of the returns of
and a copy of which was also appended
to the filed under the Act.
it not in dispute that chargeable interest, if any, in
h':"resVp.e§ct of hire purchase transactions and the interest or
part or full amount of income as attributed towards
hire purchase transactions/activities, had not been
brought to tax for these assessment years in the regular
X§/
14
provisions of Section lO(b) of the Act and is bad in lawanpd
therefore no further proceedings could have
thereon.
12. However, for the assessment', y§:'a:.:'
appellate commissioner supplemerited a further'reasonthat
in so far as the reopening is not
specific, as to whether it or lO(b) of
the Act and as there part of the
assessee, in or on fact, and
therefore any information on
the part provision under which
reopening canlibae invol<e'd "is:."~~l1nder Section 10(b) of the Act
theseV"arg1..1i'nents of the assessee, opined that
time and accordingly allowed the
"Reven"1ie further appealed to the appellate tribunal.
Theliitribinnal opined that the appellate commissioner was
' 'fnpllyljustified in taking the view that reopening was beyond
15
the permitted time i.e. beyond the period of 4 years from
the end of the assessment year as stipulated in
lO(b) of the Act and therefore dismissed the V'
revenue, by passing a common order' dated 'Z--4l-'2'.OO6----:'inl"--»p
IN'ITA Nos 21 to 24, 5 & 6/Bang?/200a2._and 42
inclusive of the assessment years""e1:9'97~9t3
14. It is against this comrrion'*orLie_r"ofV"th'e_tribunal, in so
far as it relates to_the__ asses'sm"entA.years. 1:99'2-93 to 1996
97, the revenue l"has:él;.prefe:ifred_ tliieillaybovle five appeals, as
mentioned,abaove;i_ ' M
15. We have learned senior
counselappearing_fo'r "appellant -- revenue and Smt.
learned counsel appearing for the
respondent assessee, perused the assessment order,
V dd order passed the first appellate authority and the order Tribunal and we have also bestowed our
-ajttentlion to the authorities Cited and relied upon by the " -«learned counsel.
Vs 16
16. Submission of Sri. Indrakumar, counsel appearing for the appellant -- revent.1.e«.ilS:".that the"
authorities have committed an error inpllawl' ._fi'rst'lyv,V.c__ proceeding on the premise that the._lreopenir1gof assessments for the years 1995-96 and 199697 we1"e.__all selctior1"'"vlO(b) of the Act; that the '_V__the Tribunal taking the View thatljit-.iS attracting section lO(b) of the on the part of the authOI.mes;.. l'h'oxxze'£rer wanted to get the benefit of isyectionlv period of limitation and had urged can only be under section v_l.VO(b) of.ithei'~Act, theliappellate authorities merely accepting the same and proceeding to examine the questions on such premise_vy«is"clearly"an error committed in law and an act vcontrary to: the record, particularly, when the assessing vvhad recorded reasoning for reopening the _g assessment for the earlier assessment years. 17
17. It is submitted that the appellate authorities holding that reopened assessments are barred by limitation erroneous conclusion based on an erroneous a's.suvm"ption--.f which assumption could not have facts and circumstances of the casepcand as lr'evealed_.froin the record. It is also submitted that'i'e*ti.i1"r,her reopening is as a result inlitself was really begging the questionV_V:and.vls.l¢t erroneous assumption or pappellates:authorities have proceeded otherwise of the reopeningion provisions of section lO(b) of the Act;ll lthe""..senti1<e"approach of the appellate authorities is totally erroneous and is a case of invoking an IAinapplicpablei.statutory provision and therefore holding the orders ' are sustainable.
-. Withreference to the assessment order passed by the "aps"sess_in:'g authority after issue of notice under section 10 of ':"the___Act, learned senior counsel appearing for the revenue 18 has not only drawn our attention they recorlvclld2QVf_:tl1e assessing authority, particularly, recorddlviielatingxjtojvl' noting of the reason for reopeningbefore thelisstie notice under section 10 of theVAcVt that the conduct of the assessee in'-not interest part attributable to the hire purchasje Vfin.ar1cxeV_ transaction in the return amountsto of full and true material facts:,_ll:}ut. to a suppression, in the sense that 7e§..ren'l'3Vwli-evn'~¢the assessee had indicated the interest attributabl.eV to"vVario'u,s" other financial transactions, in the return of acliargeabletinterest had nevertheless, failed to include "the l'iri--ter_e_st. part attributable to the hire purchase transactions which was in the nature of a finance trans_ac.tionvan,'d a;'s""opined by the assessing authority; that the mere appending of a profit and loss account which was :".v4anJ'attachment to a return of income, to the return of 'cha1jge,able interest also, does not- amount to either of any fact or material fact relating to the cliargeable interest of the assessee for the relevant year nor V/.
19 does it amounts in any way the assessee__hav_1'ng" cedvfullvg and necessary facts before the asselssingro'ffiC»er".l§*§fl1,1ilcli_,,.bf§/ij_1 itself were sufficient to pass an assessment orderlundger the provisions of the Act.
19. In this regard, if senior counsel appearing.::'fo_r suzbrnits that the assessee never" fli.s(i:1_osed ,:nor.._ h..adfvvclaimed the amount which had beenV..indi'cated asincorne from hire purchase as interest not chargeable *under_ the Act and submission based on such pm'at_er-ital 'i's.___l"t'h'at the assessee had never revealed the f"c.harge'abl*e "interest insofar as the hire trarlsactions....a.re concerned and the fact that the income' ..fror_n'ahirle' purchase transaction being revealed as vincorhAe"--for ass-es;srnent of income purposes, cannot have any beaiitngpg the aspect of assessment of chargeable
-. _ Vinterest-.._ _g.O.......§Submission is that the assessee had, in fact, failed to merely file a proper return of the chargeable interest for 21 cases falling under clause _(a)_, 'ate time, and in cases falling under 'clause_ "
(b), at any time within four years the < end of that assessme_nt~.year,' " serve on assessee a notice containing allorpleany of the requirements whzich may be included in a notice U.__n'der .'section_ V.7,"«.and may proceed to assess' re€_a,s;s'ess the amount chargeable-to' interest--Vta2§-- and the provisions, of this Act shaflL_ so far as may be, aj_ppley; as if the notice iUe1'e a notice tssueftunder 'thu.__t_ 's~ectfo1':.,' " ' is attracted the premise and the basis on authorities proceeded in the first instance'=.to-ass.urne*.that the reopening was under
v.«-'SB.Ct1OIfi'}3[lZ3)]_flOf'th€hACt..9Jld in the second instance to apply the ;5'rmc_1p_ie~ orrthe development of law in the context of changehlof which is a situation which has been 'examined the courts only in the context of the provisions .e_ofl_"secti'Qn l47[b] of the IT Act and the corresponding ..__provision under the Income Tax Act, 1922. It is pointed out tliat lesser period of limitation operates in a situation where there is no failure or omission on the part of the assessee to disclose fully all relevant facts and to place on record 28 lO(a) of the Act, though not as such mentioned in the notice, the appellate authorities could not have relvegated the reopening to a situation of section lO(b) of therefore submitted that neither thempview Tribunal nor the View taken by the first is sustainable; that they are relcpyuiredllltolllbep the assessment order upheld.
23. Per contra, .AoVfl""'the assessee, submission of counsel is that this was assessing authority not taking that insofar as the assessee had, in fact, made a full andfitrue ofsthe material or primaxy facts :'VAwhichl.'i"xyei9e lessentialwfor the purpose of passing an assegssimen-t:"'Qrder...under the provisions of the Act; that it Vwas open to "the assessing officer to have ascertained if any the income attributable to the hire purchase l_traI@_sa'ctAion was having any element of interest in that and 06/ 29 if the assessing officer had not examined such aspect, but if had proceeded to conclude the assessment bringingvptohipltaax the other chargeable interest as had been assessee in respect of transactions other "
purchase transaction, it was nothingaabutiiaaippclear ease"o'f_th.e .0 assessing officer having a second olpinion onfthe vlery available material which not 'in where the assessee had made :itr"ue'.:di.sclosure of all material facts and4allV_priffiarv available. It is therefore authorities are fully justified, this being a case of change of the assessing officer, the limitation asVHsptipuVlatetd,_ "tinder the provisions of section
1.-"l.0_(b) Act "i's-_<_:_l__early attracted and the notice for Vreopeninxgv.the;'as'sessment issued on 20.6.2001 was clearly stipulated in section l0(b) of the Act and _lf:.p__therefore~~ setting aside the assessment order was fully ,ju.s'tifie'd_« gé/, 30
24. It is the supplemental or alternative Smt. Shashi M Kapila, learned counsel' 'for. that the assessee consciously did attributable to hire purchaseV-,:assessfi:e_nts_'ivfor:._;"t'ax as chargeable to tax under the Act as..ué1:cvcoi*»ding't'o--asseissee, in the first instance, a hire is not covered under thegprovisiionshfif thlatlllthere was no chargeable hire purchase transaction__~ and it is for this reason offered; that if there is no chargeable interlestV"at"a1i»;Viltlqere is no question of offering the to tax return and therefore it cannot be the assesseemhad either not disclosed the full and truieior had omitted to disclose any part of its ' if chargeable * Vvaithvvlllreference to the charging provisions and the sections 2[7], 4, 5, 6 and 26C of the Act, jjlsubrnission is that even in terms of the Board Circular 4/, 32 interest to tax; that in fact, the assessee . notice only reiterated its earlier return' and .4 of any fresh material or new facts liaviné by the assessing officer, the '«reasseslsmentjlis sustainable nor permitted in it only a mere change of opinioiiid' the appellate authorities have rightly ahsseslslrlent order and the law on they of being not permitted for ot assessment is too well settled and" drawn our attention to the recent 'Judgment btl1--e?"S'upreme Court in the case of 'COMBHSSIONER on INCGME TAX v. KELVINATOR OF
--I_NDIAV_~L31MIiTED' reported in 320 ITR 561. 'counsel for the assessee submits that the Supreme Court iivhile confirmed the full Bench decision of Delhivpliigh Court, the present situation being merely .__on."e.Vof"'*<;thange of opinion, the appellate authorities were W 34 which according to the learned counsel for the revenue amounted to virtually an admission in offering the indicated as income from hire purchase, as provisions of the Act, and therefore submits dated 7.3.2001 [copy at Annexure-F admission on the part of the assessee chargeable interest to offer to purchase transaction; that the 'had maintained consistent stand gt-hat it interest generated frorn. in the context of. the IT Act and the proceedings for the assessment year 1998-99 hadlloffered amount to tax under the Act more out ofV_"al'.:.corr1promise.fo_r,buying peace with the department ..to its stand and only in the background of thellearllieriflelttver of the assessee dated 2.2.2001 in the &,.,___co_nteXt oflassessment for the assessment year 1998-99; ._tl:iat.Vnei_ther the assessing authority could have picked out isolation a letter of this nature to conclude that there we 35 was an admission on the part of the assessee that there was chargeable interest nor is learned senior counseljdfor the revenue justified in relying upon this material or as a piece of evidence amounting on the part of the assessee that it is Act etc. A A
30. It is in the background of that we are required to answerlthe as are posed for our answer in~'tlies.'e ap_peals'l
81. Th€S:Q. 21H of the Act and the "under the Act being 260--A of the IT Act.
. Tlie E'largurrientslmaddressed at the Bar while have coVe_re'd large area, much beyond what is A required to" 'L29-"'considered for our answering two questions po;sedi_before us, we would deal with that to the extent they 37 reopening to be a situation as one that can be under section 10(b) of the Act and examining the that angle. In fact, it is only because of this T' authorities, both the appellate Tribunal have gone off at a tyangeint it attention on the concept of 'changerof opin'i--r)n':- A
35. The concept of 'change. is not a statutory pI'OVlSl(v)4n:V'fQ'uH;('.l" Tax Act, 1922 or the vthlelwllnterest Tax Act.
1974, it is developed in the context of sections 34[b] and l47[b] of the'lT not a legal principle, but a 5"co,nve:iient__vvay of"desc.r1bing a situation as one that does not "'fl:f"l,Iit.Q"'th€:v requirement of section 34[b] or section l47[b]__""of or even under the present Act under section of the Act.
change of opinion concept is because of "greopening under clause[b] in respect of statutory provisions 38 of these enactments is permitted officer has in his possession ..__somleA.V_lr1ew or information which throws the some income having escaped grip the Act and chargeable to interest is no new material and if the assessing authority all View, assuming that viewilwas or a blatantly wrong view, insofar as the reopening' the concluded assessment is
--concer1redv,_f"such Ila"-possibility is not permitted in the wake of the "ph1=aseology__ of clause[b] of the statutory language of ' V' the reopeningcjsections in these enactments. .. is';-'therefore, the phrase 'change of opinion' got l_l_c_oi'n_le"d'by saying that when there is no new material or
--,:fresh information in the possession which alone enables .4 reopening under clause [b].
38. A situation of this nature or the so called concept of 'change of opinion' is not at all germane to a reopening of 39 concluded assessment under the provisions of clause[a} of Section 10 of the Act. The law as developed in the the language of clause (b) of the statutory provision is that the reopening there is a change of opinion, attracted to a situation where-..__theAreopeninlgjl; la situation attracting clause[a] efnabling statutory provisions. ldllere no A doubt is circumcised by the'-requirements" in the very statutory as developed in the of the legal principlesiyfor' the clause[b] cannot be either engraftedor to a situation under clause[a]. laiwguage ovfflusedction lO(a) of the Act indicates that a re.op'ening"=is permitted in a situation where there is some it failurea tof 'disclose fully and truly all material facts it " 4 necessaryfor the assessment year. Mr 40
40. In our understanding, this is a situation where an assessee has not placed such material, such inforrnation, such facts which by themselves could have assessing officer to pass an assessment "
calling upon the assessee for any only a situation where which is already available in complete for the purpose of passing andassegssgmelntfvorder which alone goes out of the scope of lO(a) of the Act.
41. Theiffi in on the part of every assessee to _file a.__.rejturiaiclisclosing fully and truly all materialfacts vvhich enables the assessing officer to pass lllll situation which falls short of enabliitigli 'an--«.vVpasises'sing officer to proceed to assessment it order,"'always-.comes within the scope of section lO(a) of the 44
44. It is at this stage we have to consider one more submission of the learned counsel for the assessee assessee's stand being one of no chargeable V' that stand having been consistently'-pursu.ecl':
assessee, even assuming that .byn appellate authorities is erroneousr on of V reopening and change of a's's_esseeVcanysustain result by the argument chargeable interest which §Was..p:y1'11ot:=A._sufppressed by the assessee, transactions was only in 'purchase or a true hire purchase transaction generating any interest etc. Insofar' as this«ar_gument is concerned, we are unable to:ente*rtain"this:'submission at this stage for two reasons.
-- 'ianlhypothetical question before us and in an lea,.,__'appealsection 21H of the Act, we can only answer «..tlliosep:l'c1_uestions which are posed for our consideration. ..._jlS;:econdly, a question of this nature does not arise from the / M /., 45 order of the Tribunal and therefore we do not examine this question.
46. Insofar as the submission that there: "
admission on the part of the assesseefffthatthere Vs'oineg chargeableinterest generated from out 'p.urcVhTasVe"._ transactions, though the said hadyhfbeefn to tax under the Act for the. later due to the reason that the peace with the Department' in of certain developments not' an argument which we can permit the argument which is that if the assessee by its own conduct had. offered' the amount attributable to its hire tax under the Act i.e., by Voluntary condu"ct,f ziie."cannot either go into the circumstances V L1nder"vvhi»jch was so offered or the explanation offered at " .stage'," s more so, when the entire reopening in the ._p_re'se'ntAsituation for the assessment years concerned being 46 only in the background of the authorities having stumbled on the fact situation where certain bad debts had claimed by the assessee under the provisions of__ _ for the assessment year 1998-99 tha back etc.
47. Therefore, while we are ln'<'3tE'called 9 either the scope of the charging; the nature of the transaction per se insofarflasl concerned in the present appe'als'«A;.a1s not arise and the Tribunal haviiip, only on the question of the reo,plenVe_d" bad either as barred by limitation o'r__by_ chan§e-- tor"-{opinion and that alone is to be exainined and th.at'question having been answered, we do "',not propose togo into the details of other submissions and it is not propose to discuss further on the vmerits'---- of-._"tl'1e'l submissions made by learned counsel " the assessee with regard to chargeability of