M-I Overseas Limited. vs Deputy Director of Income Tax and Another

B.S. Verma, J.

Stay Application No. 10969 of 2010

Heard learned Counsel for the parties and perused the record.

By means of this writ petition, the Petitioner has sought the following relief:

(a) To issue a writ, order or direction in the nature of certiorari quashing the notice dated 31-3-2010 (Annexure-2), issued under Sections 147/148 of the Income Tax Act (for short the Act) by Respondent No. 1 and order dated 9-12-2010 (Annexure-6) dismissing the objections of the Petitioner.

(b) a writ, order or direction in the nature of mandamus dropping all subsequent assessment proceedings thereto for the assessment year 2003-04.

(c) a writ, order or direction in the nature of prohibition commanding Respondent No. 1 and 2 for giving effect to any step whatsoever, pursuant to or in furtherance to the purported notice u/s 148 of the Act and or in any proceedings initiated there under for the assessment year 2003-04.

(d) such other order or orders which this Hon''ble Court may deem fit and proper in the facts and circumstances of the case.

According to the Petitioner, the Petitioner company is engaged in the business of providing services and facilities in connection with exploration and extraction of and production of mineral oils. The Petitioner company filed original return of income for the assessment year 2003-04 on 31-3-2004 declaring total income of Rs. 1,50,09,176/- under the normal provisions of the Act offering its gross revenue for tax u/s 44BB of the Act. The Assessing Officer issued notice dated 15-10-2004 u/s 143(2) of the Act and initiated assessment proceeding proceedings. The Petitioner filed written submissions and furnished details/information during the assessment proceedings. The assessing officer ultimately passed by the assessment order dated 2-3-2006 u/s 143(3) of the Act. Subsequently, the Respondent No. 1 issued notice dated 31-3-2010 u/s 148 of the Act proposing to reassess the income of the Petitioner alleging the same to be escaped assessment. The Petitioner again filed the original return as was filed for the assessment year 2003-04 and requested the Respondent No. 1 to furnish reasons recorded for re-opening the assessment. According to the Petitioner the reasons were based on a Division Bench judgment rendered by this Court in Income Tax Appeal No. 239 of 2001 Commissioner of Income Tax and Anr. v. O.N.G.C (2008) 229 ITR 438 (Uttaranchal) wherein the nature of service has been held fee for technical services.

Learned Counsel for the Petitioner has vehemently contended that the impugned notice was issued to the Petitioner after a lapse of four years from the end of the assessment year 2003-04, therefore, the matter falls within the ambit of Proviso first appended to Section 147 of the Act.

The counsel for the Petitioner has placed reliance upon the Full Bench judgment rendered by the Delhi High Court in the case of Commissioner of Income Tax v. Kelvinator of India Ltd. [2002] 256 ITR 1] and the Apex Court judgment in the case of Commissioner of Income Tax, Delhi Vs. Kelvinator of India Limited, , wherein it has been held that the change of opinion is not permissible even if it is within four years. Learned Counsel for the Petitioner has contended that when the Income Tax Officer had all the material facts before him when he had framed the original assessment, he could not take recourse to Section 147(a) of the Act to correct the error resulting from his own oversight and that change of opinion cannot clothe the assessing officer with the jurisdiction to initiate the proceeding u/s 147 of the Act. In support of his contention, learned Counsel has placed reliance upon the judgment of Delhi High Court rendered in Writ Petition (C) 7515 of 2010, Ritu Investments Private Limited v. Deputy Commissioner of Income Tax decided on 22-11-2010.

In reply, learned Counsel for the revenue Mr. Arvind Vashist Advocate has vehemently urged that the assessing officer is fully competent to assess or reassess such income, other than the income involving matters which are the subject-matter of any appeal, reference or revision, which is chargeable to tax and has escaped assessment as per Proviso second appended to Section 147 of the Act and the case at hand comes within the ambit of explanation 2 (c) appended to Section 147 of the Act, which reads as under:

(c) where an assessment has been made, but-(i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.

Learned Counsel has therefore contended that where the income is escaped assessment, there is no bar of a period of four years and, the assessing authority has jurisdiction to issue notice u/s 148 of the Act. According to the learned Counsel for the Respondent, the case of Commissioner of Income Tax V. Kelvinator of India Ltd. (supra) is not applicable because that is a case of pre-amendment i.e. prior to enactment of the Direct Tax Laws (Amendment)Act, 1987 i.e. prior to 1-4-1989, while the case at hand pertains to Assessment Year 2003-04.

Learned Counsel for the Petitioner company has vehemently argued that the assessing officer has no power to reopen the assessment after the assessment order had already been made under Sub-section (3) of Section 143 of the Act and no other income has been noticed and that too after expiry of a period of four years from the end of the relevant assessment year, i.e. 2003-04. Learned Counsel also urged that change of opinion is not permissible in the eye of law in respect of the same income.

Relevant extract of Section 147 of the Act reads as under:

Income escaping assessment.-If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of Sections 148 - 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recomputed the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in Sections 148 - 153 referred to as the relevant assessment year).

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 u/s 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.

Provided further that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject-matter of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.

I have perused the judgment rendered by Full Bench of Delhi High Court as well as the Apex Court in the case of Kelvinator of India (supra). In that case, the Apex Court has also discussed the amendments made after 1-4-1989 and according to the learned Counsel for the revenue, the scope after the amendment is wider.

I have also gone through judgment rendered by a Division Bench of this Court in the case of Commissioner of Income Tax and Anr. v. O.N.G.C. (supra). This judgment is not on the issue of change of opinion. The Division Bench has considered the recitals and various clauses of the contract of agreement between the parties and on that ground, it has been held that the services are technical in nature.

Since the impugned notice dated 31-3-2010 u/s 148 of the Act (Annexure-2 to the petition) was issued after a lapse of four years from the end of assessment year 2003-04 i.e. from 31-3-2003, Proviso second appended to Section 147 of the Act would be applicable.

Prima facie the question whether the services rendered by the Petitioner is a technical service or not, it requires scrutiny in the matter by the Court, therefore, as an interim measure it is directed that till the next date of listing, the assessment proceedings may go on but no final order shall be passed in the assessment proceedings by assessing officer. (Stay Application stands disposed of).

Learned Counsel for the Respondent prays for and is allowed four weeks'' time to file counter affidavit. List thereafter for admission/orders.

A certified copy of this order be issued to the learned Counsel for the parties by 30-12-2010 on payment of usual charges.