Bombay High Court
Sitara Diamond Pvt. Ltd vs Income Tax Officer 8(3)(2 on 16 September, 2013
Author: M. S. Sanklecha
Bench: Mohit S. Shah, M.S.Sanklecha
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.2420 OF 2012
Sitara Diamond Pvt. Ltd. ]
(formerly known as R. B. Jewellery Pvt. Ltd.]
Unit No.108, SDF IV Seepz, ]
Andheri (East), Mumbai 400 096. ] .. Petitioner.
V/s.
1 Income Tax Officer 8(3)(2) ]
Aayakar Bhavan, ]
Maharshi Karve Road, Mumbai 20. ]
2 Additional Commissioner of Income ]
Tax Circle 8 (3), Aayakar Bhavan, ]
Maharshi Karve Road, ]
Mumbai 400 020. ]
3 Commissioner of Income Tax 8 ]
Aayakar Bhavan, ]
Maharshi Karve Road, Mumbai 20. ]
4 Union of India ]
Aayakar Bhavan, ]
Maharshi Karve Road, Mumbai 20. ] .. Respondents.
Mr. P. J. Pardiwala, Senior Advocate with Mr. Pankaj Toprani and Mr. V. S.
Hadade, for the Petitioner.
Mr. Arvind Pinto, for the Respondents.
CORAM: MOHIT S. SHAH, C.J. &
M.S.SANKLECHA,J.
RESERVED ON : 30 AUGUST 2013.
PRONOUNCED ON : 16 SEPTEMBER 2013.
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JUDGMENT (Per M. S. Sanklecha, J.):-
This petition under Article 226 of the Constitution of India, challenges the notice dated 3 May 2012 issued for reassessment under Section 148 of the Income Tax Act, 1961 (in short "the Act") and the order dated 25 July 2012 dismissing the petitioner's objections while seeking to re-assess the petitioner for the Assessment Year 2006-07.
2 At the very outset, it is made clear that though the petition as filed challenges the approval/sanction of the Commissioner of Income Tax (Respondent No.3) under Section 151 of the Act for issue of notice under Section 148 of the Act, no submission in respect of the same was advanced during the hearing before us. Therefore, as the challenge to Section 151 of the Act is not pressed before us, we are not dealing with the same.
3 Briefly the facts leading to the present petition are as under:-
(a) On 29 November 2006, the petitioner filed its return of income for the Assessment Year 2006-07 uploading the same electronically;
(b) On 30 November 2006, the petitioner filed its Form 3-CEB returns/reports of Accountant under Section 92-E of the Act with the Income Tax Office Ward (1)-(1) at Mumbai and obtained acknowledgment for the same;
(c) The Petitioner's return for the Assessment Year 2006-07 filed electronically on 29 November 2006 was accepted by the Assessing Officer under Section 143(1) of the Act;
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(d) On 30 March 2011, a notice was issued by the Assessing Officer
under Section 148 of the Act, proposing to re-assess the petitioner's income for the Assessment Year 2006-07. The above notice dated 30 March 2011 under Section 148 of the Act was issued on the ground of alleged escapement of income on account of having been granted/allowed deduction under Section 10-A of the Act;
(e) During the course of reassessment proceedings for Assessment Year 2006-07, the Assessing Officer by notice dated 14 December 2011 called upon the petitioner to inter alia submit Form 3 CEB i.e. Accountant's report under Section 92 -E of the Act;
(f) In response to notice dated 14 December 2011, the petitioner did not file Form-3 CEB as called for. However, by letter dated 19 December 2011 the petitioner informed the Assessing Officer that they have filed Writ Petition (L) No.2785 of 2011 in this Court, challenging the notice dated 30 March 2011 issued under Section 148 of the Act. In view of the above, the petitioner requested the Assessing Officer not to proceed further with reassessment proceeding, till the petition is disposed of;
(g) The petitioner by communication dated 23 December 2011 informed the Assessing Officer that this Court by an order dated 21 December 2011 passed in Writ Petition (L) No.2785 of 2011 granted ad- interim stay of notice of reassessment dated 30 March 2011 under Section 148 of the Act till 24 January 2012. The petitioner also undertook to the Assessing Officer in its letter dated 23 December 2011 that it would furnish to him an authenticated copy of the Court order dated 21 December 2011;
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(h) On 31 December 2011, the Assessing Officer disposed of the notice
dated 30 March 2011 under Section 148 of the Act by passing an order under Section 143(3) r/w Section 147 of the Act in respect of Assessment Year 2006-07. In the order dated 31 December 2011, the Assessing Officer recorded the fact that the authenticated copy of the order granting stay of the reassessment proceeding for the Assessment Year 2006-07 by this Court was not produced before the Assessing Officer, even though the petitioner has represented that they would produce the same by 3.00 p.m. on 31 December 2011.
In the Assessment Order dated 31 December 2011, the Assessing Officer held that the petitioner is not entitled to deduction/benefit under Section 10-A of the Act as claimed by the appellant. The above order dated 31 December 2011 also records the fact that in spite of calling for, the petitioner has not furnished the report in Form 3 CEB. Besides a penalty notice was also issued under Section 271 BA of the Act for failure to submit report under Section 92E of the Act i.e. Form 3 CEB;
(i) Thereafter on 24 January 2012, the petitioner simplicitor withdrew the Writ Petition (L) No.2785 of 2011. No grievance was made by the petitioner in respect of the assessment order dated 31 December 2011 including the initiation of penalty proceedings under Section 271BA of the Act;
(j) On 3 May 2012, Assessing Officer issued a second notice under Section 148 of the Act, once again seeking to reassess for the Assessment Year 2006-07. On 7 May 2012, the petitioner filed its return of income for the Assessment Year 2006-07 and also called S.R.JOSHI 4 of 20 ::: Downloaded on - 27/11/2013 20:18:47 ::: wp-2420-2012 upon the Assessing Officer to furnish them with a copy of the reasons recorded for the purposes of issuing the notice dated 3 May 2012 under Section 148 of the Act;
(k) On 21 June 2012, the Assessing Officer furnished the following reasons to the petitioner as the reasons recorded for re-opening the assessment for the Assessment Year 2006-07 under Section 148 of the Act:
" The case of the assessee was reopened by issue of notice u/s. 148 dated 30.3.11 to withdraw excessive deduction allowed u/s. 10A of the I. T. Act. In the course of reassessment proceedings u/s. 147 of the Act, it was noticed that the assessee did not file the requisite Audit Report in Form No.3CEB. Hence, vide notice u/s. 142(1) of the I. T .Act dated 14.12.2011, the assessee was asked to furnish a copy of the report in Form no. 3 CEB. However, the assessee did not produce the same. The assessee kept on harping that they had filed a writ petition against the reassessment proceedings but did not comply with the requirements of notice u/s. 142(1). As the re-assessment proceedings were getting barred by limitation on 31.12.2011, under constraint to conclude the proceedings u/s. 147/148 of the I.T. Act, assessment order was passed u/s. 143(3) on 31.12.2011. As the assessee had failed to furnish the mandatory Form No.3 CEB, penalty proceedings u/s. 271BA of the Act were initiated against the assessee.
In response to the show cause notice dated 31.12.2011 issued u/s. 271BA of the Act, the assessee furnished a copy of Form No. 3 CEB claiming that it had filed the said Form No. 3 CEB before ITO Ward 1 (1) (1), Mumbai on 30.11.2006. Notably, the assessee had e-filed its return of income for A.Y. 2006-07 with ITO-8(3)(2), Mumbai on 29.11.2006, quoting PAN: AACCR6206Q but strangely, it filed the Form No. 3 CEB with ITO Ward 1 (1)(1), Mumbai informed that no such Form No.3 CEB was filed in his charge and hence was unable to S.R.JOSHI 5 of 20 ::: Downloaded on - 27/11/2013 20:18:47 ::: wp-2420-2012 transfer the same to the concerned AO having jurisdiction over the assessee's case.
On perusal of the Form No.3 CEB thus filed by the assessee on 01.02.2012, i.e. after the completion of the assessment proceedings vide Order u/s. 143(3) dated 31.12.2011, it is noted that International Transactions of purchases and sales with Associated Enterprises during the year were Rs.196 Crores and Rs.166 Crores respectively.
Accordingly, the case was mandated to be referred to TPO as per existing instructions, which was thwarted due to the assessee's non-compliance of the AO's notice u/s. 142 (1) of the Act calling for the relevant Form No. 3 CEB. On the contrary, the assessee filed a letter dated 19.12.2011 stating therein that the reassessment proceedings had been challenged by it in a writ petition filed before the Hon'ble Bombay High Court and requested not to proceed further with the reassessment proceedings till the writ petition is disposed off. In the context, it may be mentioned that in A. Y. 2008-09, in the case of the assessee an adjustment of Rs.9.9 Crores was made by the TPO on account of ALP in transactions with AEs.
In view of the above, I have reason to believe that for A. Y. 2006-07, income in excess of Rs.1,00,000/- has escaped assessment in the case of the assessee, within the meaning of Section 147 of the I. T. Act and therefore it is a fit case for issue of notice under section 148 of the I. T. Act, 1961."
(l) 25 June 2012, the petitioner filed its objections with the Assessing Officer objecting to re-opening of the assessment for Assessment Year 2006-07. In its objections, the petitioner recorded that their return of income for the Assessment Year 2006-07 had been uploaded on 29 November 2006 and had the acknowledgment for the same. Further, the Form 3-CEB report was filed on 30 November 2006 at Centralized place in Aayakar Bhavan, Mumbai and, therefore, acknowledgment bears the stamp of ITO ward 1 (1)(1).
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It was also stated that material information with regard to the petitioner's International Transactions was already made available on record. Therefore, it was submitted that there was no failure to disclose material facts necessary for the purpose of assessment on the part of the petitioner. It was also submitted that in spite of the fact that the Assessing Officer was aware that there were International Transactions entered into with associated persons took a decision not to make a reference to the Transfer Pricing Officer (TPO). Consequently, the basis of the present notice was only a change of opinion and the same would not warrant the re-opening of the assessment. In view of the above, petitioner objected the same and prayed for setting aside/withdrawal of notice dated 3 May 2012;
(m) On 25 July 2012, the Assessing Officer passed an order disposing of the petitioner's objections to the re-opening of the assessment for Assessment Year 2006-07. The Assessing Officer held that the audit report in Form 3 -CEB, was not filed by the petitioner before the Assessing Officer. Further, even during the earlier reassessment proceedings emanating from notice dated 30 March 2011 under Section 148 of the Act, the petitioner failed to comply with the requisition of the Assessing Officer dated 14 December 2011 for the report in Form 3- CEB. Thus, there was a failure to disclose truly and fully all material facts required for assessment of the income for Assessment Year 2006-07. Further, in view of the fact that for the Assessment Year 2008-09, a reference to the TPO resulted in adjustment of arm's length price to the extent of Rs.9.9 Crores led the Assessing Officer to form a reason to believe that S.R.JOSHI 7 of 20 ::: Downloaded on - 27/11/2013 20:18:47 ::: wp-2420-2012 the income chargeable to tax has escaped assessment for the Assessment Year 2006-07. Moreover, it was pointed out that failure to refer the International Transactions to the TPO was not a conscious decision of the Assessing Officer but only on account of failure on the part of the petitioner to disclose fully and truly all material facts. In view of the above, objections filed by the petitioner were rejected by order dated 25 July 2012 of the Assessing Officer.
4 Mr. Pardiwala, learned Senior Counsel appearing for the petitioner in support of the petition assails the notice dated 3 May 2012 under Section 148 of the Act and also the order dated 25 July 2012 disposing of the petitioner's objections and submits as under:-
(a) The notice under Section 148 of the Act has been issued on 3 May 2012 in respect of the Assessment Year 2006-07. Therefore, the notice dated 3 May 2012 under Section 148 of the Act being beyond a period of four years from the end of the Assessment Year 2006-
07, the jurisdiction to re-open an assessment can only arise if there is a failure on the part of the assessee to disclose truly and fully all material facts necessary for assessment. According to him in this case, there has been full disclosure of its International Transactions inasmuch as :-
(i) Form 3-CEB under Section 92-E of the Act had been filed with the Income Tax Office Ward 1 (1)(1) on 30 November 2006 of which it has an acknowledgment. This filing of Form 3-CEB with the above office was only on account of the fact S.R.JOSHI 8 of 20 ::: Downloaded on - 27/11/2013 20:18:47 ::: wp-2420-2012 that the Income Tax Department had directed that all filing on 30 November 2011 had to be done at the Centralized place in Aayakar Bhavan, Mumbai. In support of the aforesaid submission, reliance is placed upon the Affidavit dated 14 May 2012 of the petitioner's Chartered Accountant.
(ii) In any event, disclosure of International Transactions was done by them in their Accounts as filed. Thus mere non- filing of Form 3 CEB does not result into non-disclosure.
(b) In the present facts, there is no reason to believe that any income for the Assessment Year 2006-07 has escaped assessment. The only reason stated in the notice for believing that income has escaped assessment for the Assessment Year 2006-07 was that for the Assessment Year 2008-09, the TPO had made an adjustment of Rs. 9.9 Crores on account of arm's length price in respect of International Transactions entered into by the appellant with its Associated Enterprises. Thus, it is submitted that there is no reason to believe that income has escaped assessment for the Assessment Year 2006-07 as for immediately preceding and succeeding Assessment Years to the assessment year under consideration, i.e. 2005-06 and 2007-08, the TPO had accepted the arm's length price declared by the petitioner in respect of its International Transactions with Associated Enterprises. Therefore, the basis of re- opening is only reason to suspect and not reason to believe that income liable to tax has escaped assessment; and
(c) The impugned notice dated 3 May 2012 is on account of mere S.R.JOSHI 9 of 20 ::: Downloaded on - 27/11/2013 20:18:47 ::: wp-2420-2012 change of opinion as during the earlier assessment proceedings, a conscious decision was taken by the Assessing Officer to not refer the disclosed International Transactions of the petitioner with its Associated Enterprises to the TPO.
In the above circumstances, learned Counsel appearing for the petitioner further submits that the notice under Section 148 of the Act dated 3 May 2012 and the order dated 25 July 2012 disposing of the petitioner's objections to the same, be quashed and set aside.
5 On the other hand, Mr. Arvind Pinto, learned Counsel appearing for the Revenue supports the impugned notice dated 3 May 2012 and order dated 25 July 2012 and submits :-
(a) There was a failure on the part of the petitioner to respond to a notice issued under Section 142(1) of the Act on 14 December 2011, asking them to furnish a copy of Form 3 CEB of the Act, in spite of being called upon to do so. This failure warrants the re-
opening of Assessment in terms of the proviso to Section 147 of the Act for having failed to respond to the notice issued under Section 142(1) of the Act;
(b) In any event, there has been a failure to fully and truly disclose all the material facts necessary for assessment for the Assessment Year 2006-07 inasmuch as the petitioner has failed to file Form 3 CEB in terms of Section 92-E of the Act, with the Assessing Officer. It is submitted that the occasion to refer the transactions to the TPO under Section 92C-A of the Act would only arise when Report in Form 3-CEB under Section 92-E of the Act was filed. This S.R.JOSHI 10 of 20 ::: Downloaded on - 27/11/2013 20:18:47 ::: wp-2420-2012 according to the respondents had not been done by the petitioner along with the original return or even when called for during the reassessment proceeding by letter dated 14 November 2011; and
(c) The order of the Assessing Officer dated 25 July 2012, disposing of the objections raised by the petitioner for the re-opening of the Assessment Year 2006-07 under Section 148 of the Act is unexceptionable and calls for no interference.
In view of the above, learned Counsel appearing for the Revenue submits that the petition should be dismissed.
6 We have considered the submissions. It is trite law that once an assessment is completed under the Act, it can only be reopened according to the express provisions of the statute i.e. Sections 147 and 148 of the Act. The policy of law is that there must be a finality to all legal proceedings including assessments and therefore, completed assessment can only be re-opened if all the conditions prescribed by the Act for reopening of assessment are satisfied. The Supreme Court in the matter of CIT v/s. Kelvinator of India 320 ITR 561 has held that there is a conceptual difference between the power to review and the power to re-assess. The Act gives no power to the Assessing Officer to review an assessment but only a power to reassess. However, this power can only be exercised subject to certain pre conditions as provided in the Act being satisfied.
7 In the present case, it is an undisputed position that the impugned notice for re-opening of Assessment under Section 148 of the Act was issued only on 3 May 2012 relating to the Assessment Year 2006-
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07. Therefore, the notice has been issued after expiry of four years from the end of the relevant Assessment Year i.e. 2006-07. In such cases, the jurisdiction to reassess the assessee under the Act can only arise if the conditions specified in Section 147 of the Act i.e. the main portion and the first proviso therein are satisfied. Simply put the conditions to be fulfilled are:-
(a) The Assessing Officer must have reason to believe that income chargeable to tax for the Assessment Year concerned has escaped assessment;
(b) Such reason to believe must be based upon some tangible material leading to the belief;
(c) Where the Assessing Officer in the original proceedings formed an opinion on the disclosure made, then it is not open to the Assessing Officer to invoke Section 147/148 of the Act merely because there is a change in opinion on his part nor on account of oversight, inadvertent error and/or mistake while completing the Assessment originally; and
(d) In case assessment completed under Section 143(3) of the Act is being sought to be reopened beyond a period of four years from the end of the relevant assessment year, then the first proviso to Section 147 of the Act is to be additionally satisfied i.e. such escapement of income was either on account of failure to file a return under Section 139, or in response to a notice under Sections 142(1) or 148 of the Act or failing to disclose fully and truly all S.R.JOSHI 12 of 20 ::: Downloaded on - 27/11/2013 20:18:47 ::: wp-2420-2012 material facts necessary for assessment.
8 Before dealing with the various submissions, at the very outset, we make it clear that we do not agree with the submission of Mr. Pinto, learned Counsel appearing for the revenue, that failure to respond to a notice under Section 142(1) of the Act calling upon the assessee to produce a document will lead to satisfaction of the proviso to Section 147 of the Act, to enable the Assessing Officer to take action to reassess after the expiry of four years from the end of the relevant assessment year. It may be convenient to reproduce the first proviso to Section 147 of the Act which reads as under:-
" Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year."
The first proviso to Section 147 of the Act specifically restricts this power to reassess only in cases where the assessee fails to make a return inter alia, in response to notice under Section 142(1) of the Act.
Thus, the non-filing of document viz: Form 3 CEB in response to notice under Section 142(1) of the Act will not by itself without anything more entitle the Assessing Officer to take action to reassess an assessee in respect of an assessment year after the expiry of four years from the end of the relevant assessment year.
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9 In the light of the above, the petitioner's submission that the
notice dated 3 May 2012 is without jurisdiction as it was issued beyond the period of four years from the end of the Assessment Year 2006-07 when all material facts necessary for Assessment had been disclosed by the assessee is to be examined. Before us, it was contended that Form 3 CEB required to be filed before the Assessing Officer, had been filed before Income Tax Officer, Ward No.1 (1)(1) on 30 November 2006 only because the department had directed Centralized filing of all the tapal on 30 November 2006. In support of the same, an affidavit dated 14 May 2012 by the Statutory Auditor of the petitioner has been filed. However, we find that in the reasons recorded for re-opening the assessment, it has been recorded that the Income Tax Office Ward 1 (1)(1) has informed the Assessing Officer that no such return as alleged has been filed with him by the appellant-assessee. It is rather curious to note that though the affidavit of the Statutory Auditor was dated 14 May 2012, it was not filed before the Assessing Officer while raising objections to the reasons for re-opening Assessment as communicated to the petitioner by letter of the Assessing Officer dated 21 June 2012. In fact when the reasons for re-opening specifically record the fact that the Income Tax Office of Ward No.1 (1)(1) has informed the Assessing Officer that no such Form 3 CEB has been filed by the petitioner with his office, the affidavit should have been filed while objecting to the reasons for re-opening. In these circumstances, the Assessing Officer had no occasion to deal with the affidavit and, therefore, the reliance upon the same for the first time before this Court is not appropriate. It is also noteworthy that when the Assessment Order dated 31 December 2011 was passed, notice for penalty under Section 271 BA of the Act was issued for non-filing of Form 3 CEB and the petitioner did S.R.JOSHI 14 of 20 ::: Downloaded on - 27/11/2013 20:18:47 ::: wp-2420-2012 not object to the same on the ground that it had already been filed while withdrawing the Writ Petition on 24 January 2012. The Form 3 CEB was admittedly filed by the petitioner with the Assessing Officer only after the issue of penalty notice. We, therefore, proceed on the basis that no Form 3 CEB as required under Section 92-E of the Act had been filed by the petitioner with the Assessing Officer in respect of the Assessment Year 2006-07 prior to issue of penalty notice under Section 271AB of the Act. Moreover, it is clear that Section 92E of the Act mandates making disclosure by filing of Form 3 CEB. Therefore, there is a failure to disclose all material facts on the part of the petitioner for the Assessment Year 2006-07.
10 Alternatively, the petitioner contends that in any view of the matter, the fact of International Transactions with Associated Enterprises was known to the revenue, as the order of assessment passed on 31 December 2011, records the fact that the petitioner was 100% subsidiary of M/s. Rosy Blue Jewellery Inc. New York and further, the annual audited accounts and tax audit reports also sets out that they were having International Transactions with its holding Company. In view of the above, it is stated that the Assessing Officer had full knowledge of the fact that the petitioner had entered into International Transactions with its Associated Enterprises and, therefore, the same could have been referred to by the Assessing Officer to the TPO in terms of Section 92 CA(1) of the Act. The disclosure to be made by the Assessing Officer for the purpose of satisfying the requirements of having made full and true disclosure of all material facts necessary for the Assessment is to be meaningful so as to invite the attention of the Assessing Officer to the same. Mere furnishing of the information in the audited annual accounts of International S.R.JOSHI 15 of 20 ::: Downloaded on - 27/11/2013 20:18:47 ::: wp-2420-2012 Transactions would not per se invite/draw the attention of the Assessing Officer about the related party transactions and the requirements of the same being referred to the TPO. It is mandatory requirement under Section 92-E of the Act that wherever there are International Transactions during the previous year, then assessee has to obtain a report from an accountant in respect of these transactions. It is on examination of the same under Section 92-CA (1) of the Act, the occasion would arise for the Assessing Officer to refer the matter to the TPO to compute the arm's length price in relation to International Transactions entered into by the assessee with its Associated Enterprises. In the circumstances, we find that order dated 25 July 2012 shows that there has been failure on the part of the petitioner in making full and complete disclosure of material facts necessary for Assessment during the Assessment proceedings.
11 One more fact which cannot be overlooked is that even during earlier re-assessment proceeding, which was commenced by a notice dated 30 March 2011 under Section 148 of the Act for the Assessment Year 2006-07, the petitioner was specifically called upon to produce the From 3 CEB certificate by a notice dated 14 December 2011.
The petitioner did not produce Form 3 CEB as called upon and rather by letter dated 19 December 2011 informed the petitioner that they had filed Writ Petition in the High Court, challenging the reassessment proceeding for the Assessment Year 2006-07 and requested the Assessing Officer not to proceed with the Assessment proceeding till the Writ Petition is disposed of. The Assessing Officer while passing an order dated 31 December 2011 under Section 143(1) read with Section 147 of the Act, has observed that Form 3 CEB Certificate were not produced when called for and penalty proceedings were also initiated under Section 271AB of S.R.JOSHI 16 of 20 ::: Downloaded on - 27/11/2013 20:18:47 ::: wp-2420-2012 the Act. It is only thereafter that the petitioner filed the Form 3 CEB with the Assessing Officer. We, therefore, are of the view that there was a failure on the part of the petitioner to disclose fully and truly all material facts necessary for Assessment for the Assessment Year 2006-07 in as much as the report under Section 92 E of the Act was not filed.
12 The petitioner's contention that there is no reason to believe that any income for the Assessment Year 2006-07 liable to tax has escaped assessment is misconceived. According to the petitioner, this alleged reason to believe is based upon the order of Assessment for the Assessment Year 2008-09 where the TPO had made adjustment of about Rs.9.9 Crores on account of the arms length price with regard to the International Transactions with Associated Enterprises. It is urged that the above assessment order for the Assessment Year 2008-09 can only lead to a reason to suspect and cannot be a reason to believe. However, it is well settled at the stage of issuing a notice under Section 148/ 147 of the Act is concerned, the Assessing Officer does not need to have a cast iron case, but only a prima facie view that there is reason to believe that income has escaped assessment. An order passed for subsequent Assessment Year could form the basis of the material i.e. tangible material leading to a reasonable belief that income chargeable to tax has escaped assessment. This belief has to be of the Assessing Officer. The submission of Mr. Pardiwala, learned Senior Counsel for the Petitioner is that for the Assessment Years 2005-06 and 2007-08, the TPO did not disturb the assessment of the arms length price declared by the petitioner and in view thereof, the Assessing Officer could have no reason to believe that income chargeable to the tax has escaped assessment for Assessment Year 2006-07. This Court in the matter of Siemens Information Systems Ltd.
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v/s. CIT 343 ITR 188 has held that Assessment Order passed in a subsequent Assessment Year could well form the basis for obtaining tangible material to reach the belief that income chargeable to tax has escaped assessment. Therefore, keeping in mind the fact that the petitioner has failed to disclose material facts necessary to be disclosed in terms of Section 92-E of the Act, it must follow that there is reasonable belief that income chargeable to tax has escaped assessment in view of the fact that in a subsequent Assessment Year, the TPO has made adjustment to arms length price by Rs.9.9 Crores. Therefore, we find that there was reason to believe that income liable to tax has escaped assessment for the Assessment Year 2006-07.
13 It was next contended that the impugned notice dated 3 May 2010 is on account of mere change of an opinion as during earlier assessment proceeding, a conscious decision was taken by the Assessing Officer not to refer the International Transactions with Associated Enterprises to TPO. We find that the Assessing Officer had no occasion to apply his mind in the Assessment Year 2006-07 to the arms length price for International Transactions entered into by the petitioner with Associated Enterprises during year 2006-07 in the absence of Form 3 CEB. An opinion could only be formed when the necessary particulars for forming an opinion are available before the Assessing Officer. In terms of Section 92CA of the Act, it is not every International Transaction which is to be referred to TPO but only those transactions where the Assessing Officer considered it necessary to do so under Section 92C of the Act. This satisfaction by the Assessing Officer to refer the matter to the TPO could only be arrived at after a report from the accountant in terms of Section 92-E of the Act has been filed with the Assessing Officer. In the absence of S.R.JOSHI 18 of 20 ::: Downloaded on - 27/11/2013 20:18:47 ::: wp-2420-2012 such report being filed, it is impossible for the Assessing Officer to form any opinion much less an opinion so as to conclude that the International Transactions with related parties are not to be referred to the TPO. In view of the above, we find that no opinion had been formed by the Assessing Officer with regard to the arms length price of International Transactions entered into by the petitioner with Associated Enterprises.
Consequently, there is no change of opinion in issuing impugned notice dated 3 May 2012, seeking to re-open the assessment for the Assessment Year 2006-07.
14 Before we conclude, it must also be pointed out that during the earlier reassessment proceedings for the Assessment Year 2006-07 which were initiated by notice dated 30 March 2011, the Assessing Officer by letter dated 14 December 2011 called upon the petitioner to furnish Form 3 CEB. The Petitioner chose not to furnish the form as called for and instead filed a Writ Petition bearing Writ Petition (L) No.2785 of 2011 in this Court. On 21 December 2011, this Court granted ad-interim stay of the re-assessment proceedings. Advocate for the petitioner communicated the same to the Assessing Officer and promised to produce a copy of the order of this Court before 3.00 p.m. on 31 December 2011 before the Assessing Officer. However, same was not produced. The Assessing Officer being of the opinion that he had to pass an order before 31 December 2011 in view of constraint of limitation, passed an order re-assessing the appellant-assessee to an income of Rs.4.28 Crores disallowing the deduction claimed under Section 10-A of the Act. On 24 January 2012, when Writ Petition (L) No.2785 of 2011 for Assessment Year 2006-07 came up for hearing before this Court, the petitioner simplictor withdrew the petition. The petitioner made no grievances about the fact that the S.R.JOSHI 19 of 20 ::: Downloaded on - 27/11/2013 20:18:47 ::: wp-2420-2012 Assessing Officer passed an order in spite of ad-interim stay to re- assessment proceeding having been granted by this Court on 21 December 2011. In the impugned order dated 31 December 2011 passed for the Assessment Year 2006-07, it is recorded that:-
" During the course of assessment proceedings, the assessee was asked to furnish Form No.3 CEB (Report u/s 92- E) by notice u/s. 142(1) dated 14.12.2011. However, the same was not filed till 31 December 2011 due to which the Assessing Officer was not in a position to go through the report and examine the international transactions with its Associated Enterprises in respect of its appropriateness with (i) method used to determine the Arms Length Price and (ii) comparables adopted and to further analyse financial data related to the comparables. In view of the above facts, penalty proceedings were initiated u/s. 271 BA, 271AA and 271G of the Income Tax Act, 1961."
15 The aforesaid observations of the Assessing Officer speaks volume about the conduct of the petitioner and its desire to avoid furnishing Form 3 CEB as required under Section 92-E of the Act before the Assessing Officer for the Assessment Year 2006-07.
16 In view of all the above reasons, we see no reason to entertain the present petition challenging the notice dated 3 May 2012 under Section 148 of the Act and the order dated 25 July 2012 dismissing the petitioner's objections while seeking to re-assess the petitioner for the Assessment Year 2006-07.
17 Accordingly, Writ Petition is dismissed, with no order as to costs.
CHIEF JUSTICE
(M.S.SANKLECHA,J.)
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