Case: Debashu Services Private Limited Vs. Deputy Commissioner of Income Tax, Circle 1 &amp; Others

3. Petitioner is a private limited company duly registered under the provisions of the Companies Act, 1956. It is a regular assessee under the Income Tax Act, 1961 (for short the Act). The petitioner company is the authorized dealer for spare parts of Kirloskar Pumps and does exclusive supply to mines of Western Coalfields Limited and South Eastern Coalfields Limited.4. Petitioner company had filed income tax return for the assessment year 20102011 under Section 139(D) of the Act showing taxable income Rs.80,54,340/for the said year. The said return was processed under Section 143(1) of the Act and subsequently it was also subjected to scrutiny under Section 143(3) vide order dated 20/3/2013 passed by the Assessing Officer. In the scrutiny so carried out, the Assessing Officer disallowed the expenditure of Order Procurement Charges (OPC), being commission paid to agents, amounting to Rs.1,62,92,870/. As averred in the petition the said expenditure was disallowed by the Assessing Officer holding that no services were rendered by the agents and no such services were ever required in the course of business of the petitioner company. The said Assessing Officer thereafter issued notice dated 28/3/2013 under Section 148 of the Act calling upon the petitioner to deliver the return in prescribed form for the A.Y. 20062007. Similar notice of the even date was also issued for A.Y. 20082009. The petitioner company gave reply to the said notices and also requested the respondents to clarify for what reasons the notices under Section 148 of the Act were issued to the petitioner. Respondent no.2 along with covering letter dated 08/08/2013 communicated to the petitioner reasons for reopening the assessment under Section 147 and issuance of notices under Section 148 of the Act. The reasons so communicated by the respondent no.2, reveal that according to the Assessing Officer the Order Procurement Charges to the tune of Rs.1,12,60,843/2007 and Rs.1,19,59,063/09 cannot be accepted as business expenditure and to that extent the income had escaped assessment.5. Being aggrieved by the notices so issued under Section 148 of the Act and being dissatisfied with the reasons stated for issuance of such notices, the petitioner has filed the present writ petitions.

Court's reasoning:
Looking to the facts of the present case the observations recorded and the view taken by the Division Bench as above may also not be of any help to advance the case of the petitioner further. The Devision Bench of this Court set aside the impugned notices in the said cases on the ground that the reasons recorded by the A.O. were nowhere stating that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year and the second reason for setting aside the notices was that the impugned notices were beyond the period of 4 years from the end of A.Y. 1996 1997. It was also recorded by the Court that the A.O. had no jurisdiction toreopen the assessmentproceedings which were concluded on the basis of assessment under Section 143(3) of the Act. In the present matters we have already noticed that the reasons which were communicated to the petitioner along with covering letter dated 8/8/2013 contain sufficient particulars. Moreover, in the reasons so communicated, the A.O. has expressly mentioned that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of those assessment years.35. The decision of the Honble Apex Court in Chhugmal Rajpal V/s. S.P. Chaliha and Ors. reported at (1971) 79 ITR 306 (SC) was also pressed in service by the learned counsel for the petitioner to urge that in the impugned reassessment notices under Section 148, since, the A.O. has not set out any reason for coming to the conclusion that it is a fit case to issue notice, both the notices are liable to be quashed. On the face of the contents of the impugned notices the argument so made by the petitioner is liable to be rejected. We have already noted that in the reasons supplied to the petitioner the A.O. has clearly recorded his opinion that he has reason to believe that the income has escaped assessment by the reason of the failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment.36. After having thoroughly considered the pleadings of the parties the resulting position according to us is:(i) that the reasons were recorded before issuance of the impugned notices;(ii) that no malafides seen in the delay caused in communicating the said reasons;(iii) that the facts revealed to the Assessing Officer during the assessment proceedings for A.Y. 20102011 is ancontemplated by Section 147 of the Act;(iv) that the information so revealed pertains to the assessment years to which the impugned notices relate;(v) that the said information has direct nexus and/or live link with the tax liability for A.Y. year 20062007 and A.Y. 20082009;(vi) that the material in the hands of A.O. is prima facie sufficient for him to form a belief that income had escaped assessment of the assessment years to which the impugned notices relate and therefore, reassessment is needed;(vii) that the issuance of impugned notices is not an outcome of change in opinion of the successor Assessing Officer but is based on tangible material received to him during the assessment proceedings of the subsequent year.37. The other two objections raised by the petitioner, first about the competence of respondent no.1 to issue the impugned notice and the other that the impugned action is beyond the period of limitation are kept open to be agitated before the appropriate authority.38. In view of the above, we do not find any fault with the impugned notices. It does not appear to us that the respondents have committed any illegality in initiating an action against the petitioner of reopening the assessmentfor A.Y. 20067 and A.Y. 20082009. No case is made out by the petitioner to interfere in the action so initiated.