In a major relief to Rolls Royce Industrial Power India Ltd, Justices S Muralidhar and Chander Sekhar held that S. 147/148 reassessment has to be based on “fresh material”.
In the opinion of the bench, e reopening based on mere reappraisal of existing material is without jurisdiction, and therefore, is invalid. The bench, while hearing an appeal filed by the department against the order of the ITAT, held that the assessee’s duty is only to disclose facts and not to make inferences. It was also held that the decision of the division bench of the Court in Consolidated Photo is no longer a good law.
For the relevant assessment years, the AO gave a questionnaire to the assessee for which assessee given reply. These questionnaires refer to the nature of the transactions and the payments received in relation thereto. Assessment was completed u/s 143(3) on the basis of this. However, the application filed by assessee for issuance of nil deduction of Tax Deducted at Source was rejected by the ADIT, International Transactions, and directed to initiate re-assessment proceedings against the assessee.
On appeal, the first appellate authority confirmed the order by relying on the decision in Consolidated Photo and Finvest Ltd. v. Assistant Commissioner of Income-Tax. However, the ITAT quashed the re-assessment order.
On departmental appeal against the order of the ITAT, the bench noted that the assesments were originally completed by the AO after examining the nature of the transactions involving the Assessee and the payments received therefor. “The reopening was not based on any fresh material. By revisiting the same materials the successor AO now concluded that the payments received by the Assessee pursuant to the O&M Agreements should be treated as FTS. In the circumstances, the view taken by a successor AO on the same material was indeed nothing but a mere change of opinion.”
Dismissing the appeal, the bench further said that “It is a well-settled legal proposition, as explained in Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191(SC) that once an Assessee has discharged the burden of not only producing the account books and other documents, but also the specific material relevant to the assessment, “it is for the Income-tax Officer to draw the proper inferences of fact and law therefrom and the Assessee cannot further be called upon to do so for him.” In Indian Oil Corporation v. ITO [1986] 159 ITR 956. the Court pertinently observed “it is for the taxing authority to draw inference. It is not necessary for the Assessee to draw inference.” These observations apply on all fours to the case on hand. Here the Assessee had discharged its burden of disclosing fully and truly all the material facts before the AO during the original assessments. There was no basis for the successor AO to conclude that “no opinion with regard to taxation” of the payments received for the services rendered had been formed by the AO. It is plain that the pre-condition for invoking Section 147 did not exist. The assumption of jurisdiction under Section 148 of the Act was not valid.”
Read the full text of the Judgment below.
