Aia Engineering Limited v. Honourable Ms. Justice Nisha M. Thakore

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/SPECIAL CIVIL APPLICATION NO. 13101 of 2021 ========================================================== AIA ENGINEERING LIMITED Versus THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1) ==========================================================Appearance:MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1M R BHATT & CO.(5953) for the Respondent(s) No. 1========================================================== CORAM:HONOURABLE MR. JUSTICE J.B.PARDIWALAand HONOURABLE MS. JUSTICE NISHA M. THAKORE Date : 05/04/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1.By this writ application under Article 226 of theConstitution of India, the writ applicant has prayed for thefollowing reliefs; “(a) quash and set aside the impugned notice atAnnexure-”A” to this petition; (b)pending the admission, hearing and finaldisposal of this petition, to stay the implementationand operation of the notice at Annexure-’A’ to thispetition and stay the further proceedings for theAssessment Year 2014-15 (c )any other and further relief deemed just andproper be granted in the interest of justice; (d)to provide for the cost of this petition” 2.The subject matter of challenge in the present writ application is the legality and validity of the notice issuedby the respondent dated 20[th] March, 2021 under Section148 of the Income Tax Act, 1961 (for short “the Act,1961”), seeking to reopen the assessment for theA.Y.2014-15 under Section 147 of the Act, 1961. Broadly,the Assessing Officer seeks to reopen the assessment forthe relevant year on the following grounds; “i)Adjustmentof“businessloss”ofRs.3,79,53,351/- and “unabsorbed depreciation” ofRs.6,76,08,604/- aggregating to Rs.10,55,61,955/-(i.e. Rs.3,79,53,351 + Rs.6,76,08,604) is notpermissible. ii)Capital receipt of Rs.9,63,41,028/- shown asSHIS is to be added as income; iii)Proportionate disallowance of Rs.2,31,65,026/-is warranted under section 40(a)(i) r.w.s. 195 of theAct; iv)Depreciation of Rs.1,91,95,171/- on goodwillcreated on amalgamation is not allowable.” 3.The writ applicant raised objections againstreopening vide letter dated 01.05.2021. The objectionscame to be disposed of by the respondent vide orderdated 11.08.2021. The respondent disposed of theobjections stating that the action of reopening for the yearunder consideration is justified. 4.In such circumstances, referred to above, the writapplicant is here before this Court with the present writ application. 5.Mr. Tushar Hemani, the learned senior counselassisted by Ms. Vaibhavi Parikh, the learned advocateappearing for the writ applicant broadly made thefollowing submissions; I)Reopening is beyond a period of four years and thereis no failure on the part of the writ applicant as to full andtrue disclosure. II)Reopening is based on mere change of opinion. III)Even on merits, the addition is not warranted. IV)There is no escapement of income chargeable to tax. V)Reopening is based on audit objections. 6.In such circumstances, referred to above, Mr. Hemaniprays that there being merit in his writ application, thesame be allowed and the impugned notice be quashedand set aside. 7.Per contra, Mr. M.R. Bhatt, the learned senior counselappearing for the revenue would submit that theimpugned notice issued under Section 148 cannot be saidto be illegal or without jurisdiction in any manner. The I)Reopening is beyond a period of four years and thereis no failure on the part of the writ applicant as to full andtrue disclosure. II)Reopening is based on mere change of opinion. III)Even on merits, the addition is not warranted. IV)There is no escapement of income chargeable to tax. V)Reopening is based on audit objections. 6.In such circumstances, referred to above, Mr. Hemaniprays that there being merit in his writ application, thesame be allowed and the impugned notice be quashedand set aside. 7.Per contra, Mr. M.R. Bhatt, the learned senior counselappearing for the revenue would submit that theimpugned notice issued under Section 148 cannot be saidto be illegal or without jurisdiction in any manner. The same has been issued after recording cogent reasons.The objections raised by the writ applicant have beenexhaustively dealt with. Mr. Bhatt would submit that thecase has been reopened on the ground that the writapplicant had claimed business loss of Rs.3,79,53,351/-and absorbed depreciation of Rs.6,76,08,604/- therebyaggregating to Rs.10,55,61,955/- and the same wasjustified against the current year business income.According to Mr. Bhatt, the said losses were returnedlosses and not assessed losses and, in suchcircumstances, the amount of Rs.10,55,61,955/- could besaid to have escaped assessment. Mr. Bhatt furtherpointed out that the writ applicant had also shown capitalreceipt of Rs.9,46,44,744/- from the SHIS which wasutilized in the purchase of fixed assets. However, thesame was not added back and the same has resulted inescapement of income of Rs.9,63,41,028/-. 8.Mr. Bhatt invited the attention of this Court to thereply filed on behalf of the revenue wherein two moregrounds have been highlighted for the purpose ofreopening. We quote Paras-6 and 7 of the reply as under; “6.The Assessing Officer also reopened the case onthe ground that the petitioner had deducted TDS ofUS$ 24,960 on payment of US $ 592012 to City Corp.Singapore towards interest on external commercialborrowing. The petitioner failed to deduct the TDS @10% on the gross amount which comes to US $65,779 in view of the DTAA Singapore. Such failureon the part of the petitioner requires proportionate disallowance under Section 40(a)(i) of the Act. Suchfailure has resulted into escapement ofRs.2,31,65,026/-. 7.The Assessing Officer also reopened the case onthe ground that the DCPL Founders Limited wasamalgamated with the petitioner Company with theappointed date being 1.4.2013. The petitionerclaimed depreciation of Rs.1,91,95,171/- at the rateof 25% on account of goodwill. As a result ofamalgamation, the assets of the amalgamatedCompany were brought in the books of the petitionerCompany and applicable depreciation was alsoclaimed. No intangible assets in the form of goodwillwere in existence at the time of amalgamation eitherin the books of the amalgamated Company or in thebooks of the petitioner Company. The claim ofdepreciationofthesuccessor/amalgamatedCompany in the year of amalgamation would be onthe written down value of the assets in the books ofthe amalgamating company and not on the cost asrecorded in the books of the amalgamated company.Failure to do the above has resulted into escapementof income of Rs.1,91,95,171/-.”9.In such circumstances, referred to above, Mr. Bhattwould submit that reopening should be permitted and thisCourt may not disturb the same. 10.Having heard the learned counsel appearing for theparties and having gone through the materials on record,we are of the view that all the aspects of the mattersought to be relied upon for the purpose of reopeningwere very much before the Assessing Officer at the timewhen the scrutiny assessment under Section 143(3) wascarried out. To this extent, Mr. Bhatt with his usual 10.Having heard the learned counsel appearing for theparties and having gone through the materials on record,we are of the view that all the aspects of the mattersought to be relied upon for the purpose of reopeningwere very much before the Assessing Officer at the timewhen the scrutiny assessment under Section 143(3) wascarried out. To this extent, Mr. Bhatt with his usual fairness conceded. We are of the view that the case is notone of any omission or failure on the part of the writapplicant in fully and truly disclosing all the relevantaspects of the matter. No new tangible material could besaid to have come to the knowledge of the respondentafter the framing of the assessment. The case could besaid to be one of mere change of opinion. 11.In view of the aforesaid, this writ applicationsucceeds and is hereby allowed. The impugned notice ishereby quashed. (J. B. PARDIWALA, J) (NISHA M. THAKORE,J) Vahid