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SCA/3580/2010 12/ 12 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No. 3580 of 2010
For
Approval and Signature:
HONOURABLE
MR. JUSTICE D.A.MEHTA
HONOURABLE
MS. JUSTICE H.N.DEVANI
=========================================
1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To
be referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
=========================================
CADILA
HEALTHCARE LTD - Petitioner(s)
Versus
DEPUTY
COMMISSIONER OF INCOME-TAX (OSD) OR HIS SUCCESSOR & 1 -
Respondent(s)
=========================================
Appearance
:
MR RK PATEL
for Petitioner(s) :
1,
NOTICE SERVED BY DS for Respondent(s) : 1 - 2.
MR MR BHATT,
SR. ADVOCATE with MRS MAUNA M BHATT for Respondent(s) :
1-2.
=========================================
CORAM
:
HONOURABLE
MR. JUSTICE D.A.MEHTA
and
HONOURABLE
MS. JUSTICE H.N.DEVANI
Date
: 04/05/2010
ORAL
JUDGMENT
(Per :
HONOURABLE MS. JUSTICE H.N.DEVANI)
1. Rule.
Mrs. M.M. Bhatt, learned senior standing counsel is directed to
waive service of rule on behalf of the respondents. Since the
controversy involved in the present petition lies in a very narrow
compass, the matter is taken up for final hearing today.
2. This
petition challenges notice dated 28th October, 2009 issued
by the respondent Assessing Officer under section 148 of the
Income-tax Act, 1961 (the Act) and seeks the following reliefs:-
Issue
a writ of certiorari and/or a writ of mandamus and/or any other
writ, direction or order to quash and set aside the impugned notice
dated 28.10.2009 under section 148 of the Income-tax Act, 1961
annexed hereto at Annexure ‘I’ along with preliminary order dated
05.03.2010 annexed hereto at Annexure ‘M’ for proceeding and
completing Reassessment proceedings.
Pending
admission, hearing, and disposal of this petition, ad-interim relief
be granted and the Respondent be ordered to restrain from enforcing
compliance of the impugned notice dated 28.10.2009 at Annexure ‘I’
and/or taking any other steps in this regard including ex-parte
order or implementation of Preliminary order dated 05.03.2010 at
Annexure ‘M’.
Pending
admission, hearing and till final disposal of this petition, stay
the implementation/operation of the notice and orders to restrain
the Respondent from taking any further proceedings pursuant to the
impugned notices at Annexure ‘I’ including stay of operation of
Preliminary order at Annexure ‘M’.
Award
the cost of this petition.
Grant
such other and further reliefs as this Hon’ble Court deems fit.
3. The
petitioner, a company filed return of income for assessment year
2004-2005 along with necessary documents like statement of income,
audited accounts, auditor’s reports in Form No.3CB, 3CD, 10CAAC and
29B. The Assessing Officer issued notice under section 143(2) of the
Act and vide order dated 26th December, 2006, framed
scrutiny assessment under section 143(3). Being aggrieved on certain
counts, the petitioner preferred appeal before Commissioner (Appeals)
to the extent it was aggrieved by the assessment order, which came to
be partly allowed vide order dated 26th April, 2007 and
order giving effect to the said order was passed by the respondent
Assessing Officer under section 250 on 3rd October, 2007.
4. The
respondent Assessing Officer issued notice dated 28th
October, 2009 under section 148 of the Act seeking to reopen the
assessment for the year 2004-2005. The petitioner filed its reply to
the said notice on 27th November, 2009 along with a copy
of the acknowledgment of the return filed before the Assessing
Officer in response to the notice under section 148 and requested for
a copy of the reasons recorded. The Assessing Officer furnished the
reasons for reopening the assessment vide letter dated 20th
January, 2010. The petitioner filed its objections against the
reasons for reopening on 8th February, 2010 which came to
be disposed of vide order dated 5th March, 2010. Vide
notice dated 5th March, 2010 under section 143(2) of the
Act, the respondent called upon the petitioner to furnish certain
information in connection with the return of income filed for
assessment year 2004-2005. Being aggrieved the petitioner has
approached this Court by way of this writ petition under Article 226
of the Constitution of India seeking the reliefs noted hereinabove.
5. Mr.
R.K. Patel, learned advocate for the petitioner has vehemently
assailed the impugned notice contending that the respondent Assessing
Officer wants to reprocess the issues pertaining to section 115JB and
deduction under section 80HHC of the Act which were already processed
thoroughly at the time of scrutiny assessment under section 143(3) of
the Act. It is submitted that the notice has been issued beyond a
period of four years from the end of the relevant assessment year for
which scrutiny assessment order under section 143(3) has already been
framed. It is submitted that at the time of framing the assessment
order the Assessing Officer has taken a conscious decision on both
the issues of section 115JB and section 80HHC and that the reasons
recorded for issuance of notice under section 148 indicate mere
change of opinion on the same issues. It is submitted that there is
no failure on the part of the petitioner in either filing return or
furnishing all particulars truly and completely; that the reasons
recorded by the respondent are based on details and information filed
by the petitioner. It is, accordingly, submitted that the issuance
of notice and initiation of proceedings under section 147 read with
section 148 of the Act are violative of the proviso to section 147 of
the Act.
6. Learned
advocate for the petitioner has further submitted that on the basis
of computation of total income, audit report under Form 29B and audit
report under Form 10CAAC filed by the assessee along with its return
of income, the then Assessing Officer had finally assessed the income
on book profit under section 115JB and allowed the claim for
deduction under section 80HHC. Thus, there was due application of
mind on the part of the Assessing Officer while computing the book
profit under section 115JB and allowing the deduction under section
80HHC claimed by the assessee company. Hence, reopening the case
under section 147 on the very same issues is nothing but a change of
opinion on the same set of facts. Inviting attention to the
affidavit-in-reply filed by the respondent, it is submitted that the
respondent has stated in the affidavit-in-reply that the petitioner
did not disclose fully and truly all material facts necessary for its
assessment on the issues raised by it. Inviting attention to the
reasons recorded for reopening assessment, it is pointed out that the
reasons do not record that the assessee had not disclosed fully and
truly all material facts. It is submitted that the respondent
authority having failed to show from the reasons recorded that there
is any material to treat any income as escaped income, or to indicate
that the petitioner has failed to disclose fully and truly all
material facts and in absence of any new information for any probable
escapement of income, the respondent lacks jurisdiction for reopening
assessment.
7. On
the other hand, Mr. M.R. Bhatt, learned senior advocate for the
respondent has vehemently opposed the petition. The learned counsel
has placed reliance upon the affidavit-in-reply made by the
respondent no.1 wherein, it has inter alia been stated that in
the original assessment order, the claim of the deduction under
section 80HHC had not been examined from the angle that as per the
provisions of section 80IA(9), the petitioner had not reduced the
deduction claimed under section 80IA before computing deduction under
section 80HHC. That since on this issue, the petitioner’s claim of
deduction had not been examined, no opinion was framed by the
Assessing Officer during the original assessment. That by claiming
deduction which was not in accordance with the provisions of law, the
petitioner is deemed to have not disclosed fully and truly all
material facts necessary for its assessment for that assessment year.
That similarly, the reduced amount of deduction under section 80HHC
would increase the amount of book profit of the petitioner as per
section 115JB of the Act which had not been dealt with by the
Assessing Officer in the original assessment order. As regards the
contention raised by the petitioner that in absence of any new
information showing any escapement of income, the respondent lacks
jurisdiction for reopening assessment, it is stated in the
affidavit-in-reply that the return of income filed by the petitioner
and the records of the assessment proceedings constitute tangible
material to come to the conclusion that there was escapement of
income from assessment. It is, accordingly, submitted that the
petitioner having failed to disclose fully and truly all material
facts necessary for its assessment, the respondent is justified in
reopening the assessment in exercise of powers under section 147 of
the Act.
8. Section
147 of the Act provides that 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 section 148
to 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 the
section, or recompute the loss or the depreciation allowance or any
other allowance, as the case may be for the assessment year
concerned. The proviso to section 147 provides that where an
assessment under sub-section (3) of section 143 or section 147 has
been made for the relevant assessment year, no action shall be taken
under the 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 failure on
the part of the assessee to make a return under section 139 or in
response to a notice 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.
9. In
the facts of the present case, it is an admitted position that notice
under section 148 of the Act for reopening the assessment for
assessment year 2004-2005 has been issued after the expiry of the
period of four years from the end of the relevant assessment year. In
the circumstances, the proviso would come into play and it would be
permissible for the Assessing Officer to take action under section
147 only if the conditions laid down thereunder, viz., any income
chargeable to tax has escaped assessment (i) by reason of failure on
the part of the assessee to make a return under section 139 or in
response to notice issued under section 142 or section 148; or (ii)
by reason of failure to disclose fully and truly all material facts
necessary for his assessment, for that assessment year. Insofar as
the first condition is concerned, it is not even the case of the
Revenue that there is any failure on the part of the petitioner to
make return under section 139 or in response to notice under section
142 or section 148. It is the case of the respondent Assessing
Officer that income chargeable to tax has escaped assessment by
reason of failure on the part of the assessee to disclose fully and
truly all material facts necessary for his assessment for that
assessment year.
10. It
is well settled as held by the Supreme Court in a catena of decisions
which have been referred to in the memo of petition that the duty
which is cast upon the assessee is to make a true and full disclosure
of the primary facts at the time of the original assessment.
Production before the Assessing Officer of the account books or other
evidence from which material evidence could with due diligence have
been discovered by the Assessing Officer will not necessarily amount
to disclosure contemplated by law. The duty of the assessee in any
case does not extend beyond making a true and full disclosure of
primary facts. Once he has done that his duty ends. It is for the
Assessing Officer to draw the correct inference from the primary
facts. It is no responsibility of the assessee to advise the
Assessing Officer with regard to the inference which he should draw
from the primary facts. If an Assessing Officer draws an inference
which appears subsequently to be erroneous, mere change of opinion
with regard to that inference would not justify initiation of action
for reopening assessment. The grounds or reasons which lead to the
formation of the belief contemplated by the proviso to Section 147 of
the Act must have a material bearing on the question of escapement of
income of the assessee from assessment because of his failure or
omission to disclose fully and truly all material facts.
11. It
may, therefore, be germane to refer to the reasons for reopening the
assessment recorded by the Assessing Officer which read thus:
“The
assessee company filed its return of income on 29.10.2004 declaring
total income of Rs.23,54,96,896/-. The assessment was finalized u/s.
143(3) determining totally income at Rs.24,19,86,700/-. On
verification of the records, it is seen that the assessee company had
reduced an amount of Rs.3,68,02,210/-, from book profit as per (viii)
of second proviso of Section 115JB of the Act instead of
Rs.1,02,22,660/- resulting into under assessment of Rs.2,65,79,550/-.
Further, it is seen that excess deduction u/s. 80HHC has been allowed
at Rs.8,18,002/-.
In
the light of the above fact, I am of the firm belief that the Income
to the tune of Rs.2,73,97,552/- has escaped assessment within the
meaning of section 147 of the IT Act, 1961. Looking at the facts, it
is a fit case of reopening the assessment for the assessment year
under consideration as per the provisions of the section 147 of the
IT Act, 1961.”
12. On
a plain reading of the reasons recorded for reopening the assessment,
it is apparent that what is stated therein is that in the opinion of
the respondent the income referred to therein has escaped assessment.
The reasons do not reflect that the petitioner has failed to disclose
fully and truly any material facts necessary for its assessment for
the year under consideration. In the objections filed by the
petitioner against the notice under section 148 of the Act, it was
the specific case of the petitioner that it had not defaulted in
disclosing fully and truly all material facts necessary for the
assessment. However, the order disposing of the objections is totally
silent in respect of the same. Thus, neither the reasons for
reopening the assessment nor the order disposing of the objections
indicate that there was any failure on the part of the petitioner to
disclose fully and truly all material facts relevant for its
assessment.
13. From
the reasons recorded as well as the order disposing of objections and
the affidavit-in-reply filed by the respondent, it is apparent that
it is the case of the respondent that in the original assessment
order, the claim of the deduction under section 80HHC of the Act was
not examined from the angle that as per the provisions of section
80IA(9), the petitioner had not reduced the deduction claimed under
section 80IA before computing deduction under section 80HHC.
Similarly, according to the respondent, deduction under section 80HHC
would increase the amount of book profit of the petitioner as per
section 115JB of the Act which had not been dealt with by the
predecessor Assessing Officer in the original assessment order.
Thus, in effect and substance, the respondent seeks to reopen the
assessment mainly on the ground that while making the original
assessment order, the predecessor Assessing Officer had not examined
certain issues from the angle desired by the present Assessing
Officer. The opinion formed by the successor Assessing Officer
regarding escapement of income, is not based upon any new material or
facts having come to his notice which is evident from the
affidavit-in-reply made by the respondent wherein he has
categorically stated that the return of income filed by the
petitioner and the record of proceedings constitute tangible material
to come to the conclusion that there was escapement of income from
assessment. In the circumstances, it is apparent that the reopening
of assessment under section 147 is nothing but a change of opinion on
the same set of facts. Thus, the petitioner is justified in
contending that if notice is issued for reopening proceedings after
expiry of four years from the end of the relevant assessment year and
no new material is there on the basis of which reopening of
proceedings is initiated, the jurisdiction is not validly assumed.
14. From
the facts emerging on record, there is nothing to indicate that the
petitioner has withheld any particulars. The successor Assessing
Officer has verified the same record to come to the conclusion that
there is escapement of income which could have been done at the
initial stage itself. There is nothing on record to indicate any
omission on the part of the assessee in fulfilling any obligation in
law. Whether the Assessing Officer while framing original assessment
had failed to work out the tax liability correctly or not, the
assessee cannot be charged for any omission. In case the assessee had
laid a claim to a particular amount, it was the job of the Assessing
Officer to correctly compute the tax liability. Merely making a
claim cannot be stated to be non-disclosure of material facts so as
to vest in the Assessing Officer jurisdiction under section 147 of
the Act. Besides, as already noted hereinabove, the respondent seeks
to reopen the assessment after a period of four years from the end of
the relevant assessment year. In the reasons recorded, there is
nothing to indicate that the assessee has failed to disclose fully
and truly all material facts necessary for its assessment for the
year under consideration. Hence, the ingredients of the proviso to
section 147 of the Act are clearly not satisfied. In the
circumstances, there is no justification for assumption of
jurisdiction by the respondent Assessing Officer for reopening the
proceedings under section 147 of the Act. The entire proceedings
initiated pursuant to the impugned notice dated 28th
October, 2009, therefore, are without jurisdiction and as such,
cannot be sustained.
15. For
the foregoing reasons, the petition succeeds and is accordingly
allowed. The impugned notice dated 28th October, 2009
under section 148 of the Income-Tax Act, 1961 (Annexure ‘I’) as well
as preliminary order dated 05th March, 2010 (Annexure ‘M’)
are hereby quashed and set aside. Rule is made absolute accordingly
with no order as to costs.
(
D.A. Mehta, J. )
(
Harsha Devani, J. )
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