Andheri East, Mumbai – 400 099 v. Deputy Commissioner Of Income Taxcircle – 1(1)(2

Sharayu Khot.IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2791 OF 2019 M/s. Hindustan Unilever Ltd.Unilever House,B.D. Sawant Marg, Chakala, Andheri East, Mumbai – 400 099 …Petitioner Versus 1.Deputy Commissioner of Income TaxCircle – 1(1)(2) Aaykar Bhavan, M.K. Marg, New Marinelines, Mumbai 2.Principal Commissioner of Income-taxRange – 1 Aaykar Bhavan, M.K. Marg, New Marinelines, Mumbai 3.The Union of India Through the Secretary, Government of India, Ministry of Finance, New Delhi – 110 001…Respondents ---------- Mr. Nishant Thakkar a/w Mr. Hiten Chande i/by PDS Legal for thePetitioner. SHARAYUPANDURANGKHOT Mr. Suresh Kumar for the Respondents. Digitallysigned bySHARAYUPANDURANGKHOTDate:----------2021.10.0817:06:23+0530 CORAM : K.R. SHRIRAM & R.I. CHAGLA, JJ. DATE : 30 September 2021 JUDGMENT : (Per R.I. Chagla, J) 1.Since pleadings are complete, we decide to dispose of this Petition at the admission stage itself. 2.Rule. Rule made returnable forthwith. 3.The Petitioner is a company carrying on the business ofmanufacturing and selling fast moving consumer goods. ThePetitioner had filed the return of income for the Assessment Year2012-13 declaring total income of Rs. 20,56,92,90,230/-. 3. 4.One of the subsidiary of the Petitioner namely PondsExports Limited made an application to the High Court of Madras forcapital reduction under Section 100 of the Companies Act, 1956. Ithad proposed that the face value of 1,99,00,147 equity shares bereduced to Rs. 1/- and the shareholders be paid consideration of Rs.0.20 per share. The reduction of capital was approved by the HighCourt of Madras vide order dated 26th March 2012. 5. It is the case of the Petitioner that the Petitioner was 907-WP-2791-19.doc holding 90% of the share capital of the subsidiary Ponds ExportsLimited. In the return of income for Assessment Year 2012-13, thePetitioner had claimed long term capital loss on account of capitalreduction in shares of the subsidiary. In the Profit & Loss Account,loss suffered on account of capital reduction was shown separatelyunder the head “exceptional items”. The amount received from thesubsidiary on account of capital reduction was shown separately inthe notes of account under the head “related party disclosure”. 6.The return of income of the Petitioner for AssessmentYear 2012-13 was selected for scrutiny assessment under Section143(3) of the Income Tax Act, 1961 (“the Act”). During theassessment, the Petitioner vide letter dated 2nd December 2015 filedits final statement and computation of income wherein detailsregarding loss suffered on account of reduction of capital wasdisclosed. It was brought to the notice of Respondent No. 1 by thesaid letter that during the relevant year, the Petitioner receivedconsideration on account of capital reduction by its subsidiary PondsExports Limited, wherein the face value of the shares of PondsExports Limited was reduced from Rs. 10/- to Re. 1/-. Since therewas extinguishment of proportionate right in shares held by the company, the long term capital loss arising on account of capitalreduction had been claimed. 7.A draft assessment order dated 22nd March 2016 waspassed by Respondent No. 1 without making any addition ordisallowance of loss claimed on account of capital reduction. On 27thFebruary 2017, the Respondent No. 1 passed final order underSection 143(3) read with 144C(13) of the Act giving effect to thedirection of the Dispute Resolution Panel (“DRP”). In the finalassessment order, there was no addition or disallowance with respectto the loss claimed by the Petitioner. 8.Four years after the end of the relevant Assessment Year2012-13, the Petitioner received a notice dated 31st March 2019under Section 148 of the Act informing the Petitioner thatRespondent No. 1 had reason to believe that income had escapedassessment for Assessment Year 2012-13 and requested the Petitionerto file return of income in pursuance of the said notice. 8.Four years after the end of the relevant Assessment Year2012-13, the Petitioner received a notice dated 31st March 2019under Section 148 of the Act informing the Petitioner thatRespondent No. 1 had reason to believe that income had escapedassessment for Assessment Year 2012-13 and requested the Petitionerto file return of income in pursuance of the said notice. 9.The Petitioner by its letter dated 24th April 2019informed the Respondent No. 1 that the return filed on 30th 907-WP-2791-19.doc November 2012 under Section 139(1) of the Act be treated as returnof income in response to the notice dated 31st March 2019 underSection 148 of the Act. The Petitioner asked Respondent No. 1 tofurnish a copy of the reasons recorded for reopening the assessment. 10.The Petitioner on 14th August 2019 received aletter dated 29th July 2019 from Respondent No. 1 wherein thereasons recorded for reopening the assessment for Assessment Year2012-13 are provided to the Petitioner. In the said letter, it has beenstated that “However, it was noticed that the assessee whilecomputing the Long Term Capital Gains, reduced Rs. 20,52,22,019/-as Long Term Capital Loss on capital reduction of shares (No. ofshares- 1,79,10,132) of Ponds Exports Limited. However, it wasnoticed from the Balance sheet (Sch-14 Current Investments) thatthe number of 1,79,10,132 in Ponds Exports Limited is shown asinvestment under the head Investment in Subsidiaries. Hence, itshows that there is no transfer during the year as claimed by theassessee in their return of income.” Thereafter, it has been concludedthat the assessee has not incurred any Long Term Capital Loss duringthe year against equity shares of Ponds Exports Limited. The LongTerm Capital Loss should have been disallowed while completing the 907-WP-2791-19.docassessment under Section 143(3) of the Act. Omission to do so hasresulted in under assessment of Long Term Capital Gains by Rs.20,52,22,019/-. 11.On 16th August 2019 and 21st August 2019, thePetitioner filed letters with Respondent No. 1 requesting RespondentNo. 1 to give 15 days time to file objections against the reopeningunder Section 148 of the Act for Assessment Year 2012-13.Thereafter, the Petitioner filed objections on 29th August 2019against the reopening under Section 148 of the Act and submittedthat reopening is based on change of opinion and full and truedisclosure had been made by the Petitioner regarding the long termcapital loss claimed in the return of income. It has been submitted inthe said objections that the claim made for long term capital loss onreduction of capital is supported by many authorities and therefore,the reopening under Section 148 of the Act is bad in law. 12.Respondent No. 1 by its order dated 10thSeptember 2019 rejected the objections filed by the Petitioner againstthe reopening of the assessment under Section 148 of the Act. Beingaggrieved by the order dated 10th September 2019, the Petitioner has filed the present Petition. 12.Respondent No. 1 by its order dated 10thSeptember 2019 rejected the objections filed by the Petitioner againstthe reopening of the assessment under Section 148 of the Act. Beingaggrieved by the order dated 10th September 2019, the Petitioner has filed the present Petition. 13.Mr. Nishant Thakkar, learned Counsel appearingfor the Petitioner has submitted that the Petitioner had filed itsincome tax return on 30th November 2012. The Petitioner held179,10,132 shares of Rs. 10/- each of Ponds Exports Limited. Duringthe previous year under consideration, the Petitioner had receivedconsideration on account of capital reduction by Ponds ExportsLimited, wherein the face value of the share of Ponds Exports Limitedwas reduced from Rs. 10/- to Re. 1/- each. Since there isextinguishment of proportionate right in shares held by the company,the long term capital loss arising on account of capital reduction hadbeen claimed by the Petitioner. Accordingly, the Petitioner had filedits return of income for Assessment Year 2012-13 claiming the longterm capital loss Rs. 20,52,22,019/-. He has submitted that true andfull disclosure of all material facts was made in the tax return. He hassubmitted that all details relating to the said transaction was filed bythe Petitioner vide letter dated 2nd December 2015 during the courseof assessment. Being satisfied with the details submitted by thePetitioner, the assessment under Section 143(3) of the Act wascompleted and long term capital loss claimed by the Petitioner was allowed by the Assessing Officer. 14.Mr. Thakkar has submitted that the notice issuedunder Section 148 of the Act dated 30th March 2019 was received bythe Petitioner on 31st March 2019, i.e., beyond the period of fouryears from the end of relevant Assessment Year 2012-13 under theprovisions of Section 147 of the Act. In view thereof, the AssessingOfficer should have had reason to believe that income had escapedassessment in the case of the assessee before proceeding to initiatethe reassessment proceedings. It is settled law that this requirementrelating to recording of reasons is a very significant one, based onwhich alone an Assessing Officer can assume jurisdiction to reopenthe assessment. He has submitted that there is no failure to disclosetruly and fully all material facts which is an essential requirementunder the applicable first proviso to Section 147 of the Act where thereassessment has been initiated beyond the period of four years fromthe end of relevant assessment year. Under the first proviso, it isprovided that the statement of income chargeable to tax should bedue to failure on the part of assessee to disclose truly and fully allmaterial facts and this requirement must be satisfied. He hassubmitted that the Petitioner had made full disclosure of the material 907-WP-2791-19.doc fact that it had claimed capital loss on account of capital reductionundertaken by Ponds Exports Limited. A detailed capital loss workingwas filed during the assessment proceedings vide submission dated2nd December 2015. A detailed note on capital loss claim was alsofiled vide the submission dated 2nd December 2015. There was thus,no failure on the part of the Petitioner to disclose truly and fully allmaterial facts. 15.Mr. Thakkar has further submitted that reading ofthe notice under Section 148 of the Act shows that it has been issuedon a mere change of opinion by the Tax Authorities. He has placedreliance upon several decisions of the Supreme Court and this Court.He has relied upon the recent decision of the Division Bench of thisCourt in Ananta Landmark Pvt.Ltd. Vs. Deputy Commissioner ofIncome Tax1. He has submitted that the reasons recorded in thenotice under Section 148 of the Act are ex facie contrary to thesettled law. 16. In the case of Vania Silk Mills Pvt.Ltd. Vs. CIT 191 ITR 647, the Supreme Court observed that the definition of transfer 1 Writ Petition No. 2814 of 2019 Jt. dt. 14.09.2021 907-WP-2791-19.doc 15.Mr. Thakkar has further submitted that reading ofthe notice under Section 148 of the Act shows that it has been issuedon a mere change of opinion by the Tax Authorities. He has placedreliance upon several decisions of the Supreme Court and this Court.He has relied upon the recent decision of the Division Bench of thisCourt in Ananta Landmark Pvt.Ltd. Vs. Deputy Commissioner ofIncome Tax1. He has submitted that the reasons recorded in thenotice under Section 148 of the Act are ex facie contrary to thesettled law. 16. In the case of Vania Silk Mills Pvt.Ltd. Vs. CIT 191 ITR 647, the Supreme Court observed that the definition of transfer 1 Writ Petition No. 2814 of 2019 Jt. dt. 14.09.2021 907-WP-2791-19.doc clearly contemplates extinguishment of rights in a capital assetdistinct and independent of such extinguishment consequent uponthe transfer thereof. The Supreme Court has observed that“extinguishment of any right therein” can be extended to meanextinguishment of right independent of or otherwise on account oftransfer. Thus, even extinguishment of right in a capital asset wouldamount to transfer and in the present case, the Petitioner’s righthaving been extinguished proportionately to the reduction of capital,would amount to a transfer. He has accordingly, submitted that it hasbeen erroneously held in the reasons for the reopening of theassessment that there is no transfer of shares during the year asclaimed by the assessee in the return of income and that the assesseehas not incurred any long term capital loss during the year againstequity shares of Ponds Exports Limited. Further, it has beenerroneously held that the long term capital loss should have beendisallowed by completing the assessment under Section 143(3) of theAct and that omission to do so has resulted in under assessment oflong term capital gain by Rs. 20,52,22,019/-. 17.Mr. Thakkar has submitted that in view of the erroneousfindings in the reasons for reopening of assessment, the Respondent 907-WP-2791-19.doc No. 1 had concluded that he has reason to believe that the incomechargeable to tax amounting to Rs. 20.52 cr. had escaped assessmentunder Section 147 of the Act. He has submitted that the objections ofthe Petitioner has been erroneously rejected by the Respondent No. 1in the impugned order dated 10th September 2019. He hassubmitted that the impugned notice and impugned order are ex faciebad in law and deserves to be set aside. 18.Mr. Suresh Kumar, learned Counsel appearing forthe Respondents has relied upon the Affidavit of Neeraj KumarAgarwal, the Assistant Commissioner of Income Tax-1(1)(1), Mumbaidated 25th August 2021 in Reply to the Petition. He has submittedthat full and true disclosure had not been made by the Petitioner, asthe Petitioner had failed to disclose that the Petitioner held 100%shares in the subsidiary Ponds Exports Limited and since thePetitioner held 100% shares in the subsidiary as per provisions ofSection 47(iv) of the Act, there is no transfer under the Act andtherefore, there cannot be any loss under the head “capital gains”. Hehas submitted that the share holding of the Petitioner remainedunchanged during Financial Year 2011-2012, its right in PondsExports Limited remained undisturbed and the Petitioner’s annual 907-WP-2791-19.docreports for Financial Year 2010-2011 and 2011-2012 expose thePetitioner inasmuch as they show that Ponds Exports Limited was a100% subsidiary of the Petitioner Company. He has submitted that inview of the Petitioner’s failure to fully and truly disclosed thismaterial fact, the Respondent No. 1 had issued the notice underSection 148 of the Act for reassessing the assessment for FinancialYear 2012-2013. 907-WP-2791-19.docreports for Financial Year 2010-2011 and 2011-2012 expose thePetitioner inasmuch as they show that Ponds Exports Limited was a100% subsidiary of the Petitioner Company. He has submitted that inview of the Petitioner’s failure to fully and truly disclosed thismaterial fact, the Respondent No. 1 had issued the notice underSection 148 of the Act for reassessing the assessment for FinancialYear 2012-2013. 19.Mr. Suresh Kumar has submitted that mereproduction of books of accounts or other evidence from which theAssessing Officer could have with due diligence, inferred materialfacts, does not amount to disclosure within the meaning of proviso ofSection 147 of the Act. He has submitted that the Petitioner had notincurred any long term capital loss during the year against the equityshares of Ponds Exports Limited, as there was no transfer of sharesduring the year as claimed by the Petitioner in the return of incomeand such long term capital loss should have been disallowed whilecompleting the assessment under Section 143(3) of the Act. Thus,Respondent No. 1 has expressed reasons to believe that incomechargeable to tax amounting to Rs. 20.52 cr. had escaped assessmentwithin the meaning of Section 147 of the Act read with proviso 907-WP-2791-19.doc therewith. He has accordingly submitted that there is no merit in thePetition. 20.Having considered the submissions, in our view,the notice and order impugned requires to be set aside by ruling thatthe Assessing Officer had no jurisdiction to issue the notice underSection 148 of the Act. This is particularly the case where theassessment is sought to be reopened after the expiry of period of fouryears from the end of the relevant assessment year. The proviso ofSection 147 of the Act prior to amendment of Section 147 of the Actwhich would be applicable in the present case stipulates therequirement that there must be a failure on the part of the assessee todisclose fully and truly all material facts necessary. In the presentcase, the Petitioner assessee has disclosed fully and truly all materialfacts necessary. It can be seen from the reasons for reopening of theassessment by issuance of notice under Section 148 of the Act thatRespondent No. 1-Assessing Officer has based his reliance on theBalance Sheet produced by the Petitioner assessee during theassessment proceedings to contend that “However, it was noticedfrom the Balance Sheet (Sch-14 Current Investments) that thenumber of equity shares of 1,79,10,132 in Ponds Exports Limited is 907-WP-2791-19.doc shown as investment under the head Investment in Subsidiaries.Hence, it shows that there is no transfer of shares during the year asclaimed by the assessee in their return of income. Thus, assess hasnot incurred any Long Term Capital Loss during the year againstequity shares of PEL. Therefore, the long term capital loss shouldhave been disallowed while completing the assessment u/s 143(3) ofthe Act. Omission to do so has resulted in under assessment of LTCGby Rs. 20,52,22,019/-. It is, therefore, inferred from the abovediscussion that the assessee has failed to disclose fully and truly allmaterial facts necessary for its assessment for the A.Y. 2012-13.Therefore, the issue could not be verified by the Assessing Officerduring the course of assessment proceedings.”. 21.It is further apparent from the reasons for thereopening of the assessment that the Respondent No. 1 merely statedthat the assessee has failed to disclose fully and truly all the materialfacts necessary for its assessment for Assessment Year 2012-13. 22.It is settled law that as per Section 147 of the Actand proviso thereto, where the assessment is sought to be reopenedafter the expiry of a period of four years from the end of the relevant 22. 907-WP-2791-19.doc 21.It is further apparent from the reasons for thereopening of the assessment that the Respondent No. 1 merely statedthat the assessee has failed to disclose fully and truly all the materialfacts necessary for its assessment for Assessment Year 2012-13. 22.It is settled law that as per Section 147 of the Actand proviso thereto, where the assessment is sought to be reopenedafter the expiry of a period of four years from the end of the relevant 22. 907-WP-2791-19.doc assessment year, the Assessing Officer has to mention what was thetangible material to come to the conclusion that there is anescapement of income from assessment and that there has been afailure to truly and fully disclose material fact. He cannot exercisepower to reopen unless he discloses what was the material fact whichwas not fully and truly disclosed by the assessee. If we consider thereasons for reopening, except stating that in the Balance Sheet, it wasnoticed that the number of equity shares of 1,79,10,132 in PondsExports Limited were shown as investment under the headInvestment in Subsidiary, and hence, there was no transfer of sharesduring the year, there is non disclosure of the material fact which wasnot truly and fully disclosed by the Petitioner/Assessee. ThePetitioner assessee had in fact disclosed the material facts in theBalance Sheet and based on which an opinion had been arrived at bythe Assessing Officer. 23.In the reason for reopening of the assessment theRespondent No. 1 has stated “Even otherwise, it is pertinent tomention that Explanation 1 to Section 147 provides that productionbefore the Assessing Officer of account books or other evidence fromwhich material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount todisclosure within the meaning of proviso to the said Section.”. 24. The Supreme Court in Calcutta Discount Co. Ltd. V/s. Income Tax Officer2 has held that there can be no doubt that theduty of disclosing all the primary facts relevant to the decision of thequestion before the assessing authority lies on the assessee. TheSupreme Court has held that to meet a possible contention that whensome account books has been produced, there is no duty on theassessee to disclose further facts, which on due diligence, the IncomeTax Officer might have discovered, the Legislature has put in theExplanation to Section 34(1). The duty, however, does not extendbeyond the full and truthful disclosure of all primary facts. Once allthe primary facts are before the assessing authority, he requires nofurther assistance by way of disclosure. It is for him to decide whatinferences of facts that can be reasonably drawn and what legalinferences have ultimately to be drawn. It is not for somebody else-far less the assessee to tell the assessing authority what inferences,whether of facts or law, should be drawn. 2 (1961) 41 ITR 191 (SC) 25. (Supra) reads as under : 2 (1961) 41 ITR 191 (SC) 25. (Supra) reads as under : “Before we proceed to consider the materials on record to seewhether the appellant has succeeded ,in showing that theIncome-tax Officer could have no reason, on the materialsbefore him, to believe that there had been any omission todisclose material facts, as mentioned in the section, it isnecessary to examine the precise scope of disclosure which thesection demands. The words used are "omission or failure todisclose fully and truly all material facts necessary for hisassessment for that year ". It postulates a duty on every assesseeto disclose fully and truly all material facts necessary for hisassessment. What facts are material, and necessary forassessment will differ from case to case. In every assessmentproceeding, the assessing authority will, for the purpose ofcomputing or determining the proper tax due from an assessee,require to know all the facts which help him in coming to thecorrect conclusion. From the primary facts in his Possession,whether on disclosure by the assessee, or discovered by him onthe basis of the facts disclosed, or otherwise-the assessingauthority has to draw inferences as regards certain other facts;and ultimately, from the primary facts and the further factsinferred from them, the authority has to draw the proper legalinferences, and ascertain on a correct interpretation of thetaxing enactment, the proper tax leviable. Thus, when aquestion arises whether certain income received by an assesseeis capital receipt, or revenue receipt, the assessing authority hasto find out what primary facts have been proved, what otherfacts can be inferred from them, and taking all these together, todecide what the legal inference should be. There can be no doubt that the duty of disclosing all the primaryfacts relevant to the decision of the question before theassessing authority lies on the assessee. To meet a possiblecontention that when some account books or other evidence hasbeen produced, there is no duty on the assessee to disclosefurther facts, which on due diligence, the Income-tax Officermight have discovered, the Legislature has put in theExplanation, which has been set out above., In view of theExplanation, it will not be open to the assessee to say, forexample-" I have produced the account books and thedocuments: You, the assessing officer examine them, and findout the facts necessary for your purpose: My duty is done with disclosing these account-books and the documents". Hisomission to bring to the assessing authority's attention theseparticular items in the account books, or the particular portionsof the documents, which are relevant, amount to "omission todisclose fully and truly all material facts necessary for hisassessment." Nor will he be able to contend successfully that bydisclosing certain evidence, he should be deemed to havedisclosed other evidence, which might have been discovered bythe assessing authority if he had pursued investigation on thebasis of what has been disclosed. The Explanation to the section,gives a quietus to all such contentions; and the position remainsthat so far as primary facts are concerned, it is the assessee'sduty to disclose all of them-including particular entries inaccount books, particular portions of documents anddocuments, and other evidence, which could have beendiscovered by the assessing authority, from the documents andother evidence disclosed. Does the duty however extend beyond the full and truthfuldisclosure of all primary facts ? In our opinion, the answer tothis question must be in the negative. Once all the primary factsare before the assessing authority, he requires no furtherassistance by way of disclosure. It is for him to decide whatinferences of facts can be reasonably drawn and what legalinferences have ultimately to be drawn. It is not for somebodyelse-far less the assessee--to tell the assessing authority whatinferences-whether of facts or law should be drawn. Indeed,when it is remembered that people often differ as regards whatinferences should be drawn from given facts, it will bemeaningless to demand that the assessee must disclose whatinferences-whether of facts or law-he would draw from theprimary facts. If from primary facts more inferences than one could be drawn,it would not be possible to say that the assessee should havedrawn any particular inference and communicated it to theassessing authority. How could an assessee be charged withfailure to communicate an inference, which he might or mightnot have drawn? It may be pointed out that the Explanation to the sub- sectionhas nothing to do with " inferences " and deals only with thequestion whether primary material facts not disclosed could stillbe said to be constructively disclosed on the ground that withdue diligence the Income-tax Officer could have discoveredthem from the facts actually disclosed. The Explanation has notthe effect of enlarging the section, by casting a duty on theassessee to disclose " inferences "-to draw the proper inferences being the duty imposed on the Income-fax Officer. We have therefore come to the Conclusion that while the duty ofthe assessee is to disclose fully and truly all primary relevantfacts, it does not extend beyond this. The position, therefore, is that if there were in fact somereasonable grounds for thinking that there had been any non-disclosure as regards any primary fact, which could have amaterial bearing on the question of "under assessments thatwould be sufficient to give jurisdiction to the Income-tax Officerto issue the notice under Section 34. Whether these groundswere adequate or not for arriving at the conclusion that therewas a non disclosure of material facts would not be open for thecourt's investigation. In other words, all that is necessary to givethis special jurisdiction is that the Income-tax officer had whenhe assumed jurisdiction some prima facie grounds for thinkingthat there had been some non-disclosure of material facts. ..............… -Both the conditions, (i) the Incometax Officer having reason tobelieve that there has been under assessment and (ii) his havingreason to believe that such under assessment has resulted fromnondisclosure of material facts, must co-exist before the Income-tax Officer has jurisdiction to start proceedings after the expiryof 4 years. The argument that the Court ought not to investigatethe existence of one of these conditions, viz., that the Income-tax Officer has reason to believe that under assessment hasresulted from non-disclosure of material facts, cannot thereforebe accepted.” 26. It can thus, be concluded that while the duty of the assessee is to disclose fully and truly all primary relevant facts, itdoes not extend beyond this. Thus, it can be said that the Petitionerassessee in the present case has by production before the AssessingOfficer of account books and other evidence from which the materialevidence could with due diligence have been discovered by theAssessing Officer does amount to disclosure within the meaning of 27.It can be seen from the reasons for reopening ofthe assessment that there is no mention of Ponds Exports Limitedbeing a 100% subsidiary of the Petitioner. This has been mentionedfor the first time in the impugned order dated 20th September 2019rejecting the objections of the Petitioner assessee and later stated inthe Affidavit in Reply to the Petition. It has been held in First Source assessee is to disclose fully and truly all primary relevant facts, itdoes not extend beyond this. Thus, it can be said that the Petitionerassessee in the present case has by production before the AssessingOfficer of account books and other evidence from which the materialevidence could with due diligence have been discovered by theAssessing Officer does amount to disclosure within the meaning of 27.It can be seen from the reasons for reopening ofthe assessment that there is no mention of Ponds Exports Limitedbeing a 100% subsidiary of the Petitioner. This has been mentionedfor the first time in the impugned order dated 20th September 2019rejecting the objections of the Petitioner assessee and later stated inthe Affidavit in Reply to the Petition. It has been held in First Source Solutions Limited V/s. The Assistant Commissioner of Income Tax –312 (2) (1) and Anr. that the reasons for reopening an assessmenthas to be tested/examined only on the basis of the reasons recordedat the time of issuing a notice under Section 148 of the Act seeking toreopen an assessment. These reasons cannot be improved upon and/or supplemented much less substituted by affidavit and/or oralsubmissions. 28.In the present case, the deponent of the Affidavitin Reply Neeraj Kumar Agarwal, the Assistant Commissioner ofIncome Tax-1(1)(1), Mumbai has sought to improve upon thereasons for reopening the assessment recorded at the time of 3Writ Petition No.2762 of 2019 dated 31.08.2021 907-WP-2791-19.doc issuance of notice under Section 148 of the Act and which is clearlyimpermissible according to the decision of this Court in First SourceSolutions Limited (supra). 29.In the Petition, the Petitioner has in paragraph 6stated that the Petitioner was holding 90% of the share capital ofPonds Exports Limited and accordingly, in the return of income forAssessment Year 2012-13, the Petitioner had claimed long termcapital loss on account of reduction in the shares of the subsidiary. Inthe Profit and Loss Accounts, loss suffered in the capital reductionwas shown separately under the head “exceptional items”. Also theamount received from the subsidiary on account of the capitalreduction was shown separately in the notes to accounts under thehead “related party disclosure”. Thus it is the case of the Petitionerthat Ponds Exports Limited was never a fully owned subsidiary of thePetitioner. This submission of the Petitioner in paragraph 6 of thePetitioner has been dealt with paragraph 4.4 of the said Affidavit inReply on behalf of the Respondents wherein it is stated that thePetitioner has submitted the factual aspect of the subsidiary of thePetitioner, application made to the High Court for capital reduction,order of the High Court, share holding of the Petitioner and loss 907-WP-2791-19.doc suffered on account of capital reduction to the Petitioner forAssessment Year 2012-13. Hence, no comments are offered. Thus, theRespondents have not controverted what is stated in paragraph 6 ofthe Petition. 30.The Petitioner has further stated in ground B ofthe Petition that Ponds Exports Limited was not a 100% subsidiaryand this is borne out from Schedule 14 to the Balance Sheet,Schedule 35 of the Profit and Loss Accounts and Schedule 54disclosing related party transactions. The factum of loss suffered bythe Petitioner on the shares of the subsidiary on account of capitalreduction has also been mentioned in the above books of accounts.Here too in response at paragraph 4.13 of the Affidavit in Reply,Respondent No. 1 has not offered any comments and the statementin Ground B of the Petition has also not been controverted. 31.It has been held by this Division Bench in AnantaLandmark Pvt.Ltd. (supra) after considering the law laid down by theSupreme Court as well as this Court on reopening of assessmentunder Section 147 of the Act and proviso thereto, that where theassessee has disclosed truly and fully all material facts necessary for 31.It has been held by this Division Bench in AnantaLandmark Pvt.Ltd. (supra) after considering the law laid down by theSupreme Court as well as this Court on reopening of assessmentunder Section 147 of the Act and proviso thereto, that where theassessee has disclosed truly and fully all material facts necessary for 907-WP-2791-19.doccomputation of income, the assessment cannot be reopened onaccount of change of opinion of the Assessing Officer about themanner of computation of reduction under Section 57 of the Act. Ithas been further held by this Division Bench that when onconsideration of material on record, one view is conclusively taken bythe Assessing Officer, it would not be open to reopen the assessmentbased on the very same material with a view to take another view. Inthe present case, the Assessing Officer had taken a view that theassessee had incurred long term capital loss during the year againstthe equity shares of Ponds Exports Limited on account of capitalreduction of Ponds Exports Limited wherein the face value of theshares of Ponds Exports Limited was reduced from Rs. 10/- to Re. 1/-each and thus, there was an extinguishment of the proportionateright in the shares held by the Petitioner. This resulted in long termcapital loss on account of capital reduction. The Assessing Officer hadbased its assessment on the accounts books and arrived at conclusionthat the Petitioner had incurred long term capital loss and hadallowed such long term capital loss while completing the assessmentunder Section 143(3) of the Act. Respondent No. 1 in the reopening of the 907-WP-2791-19.doc assessment on account of change of opinion placed reliance on thesame account books to opine that the Petitioner assessee had notincurred any long term capital loss during the year against the equityshares of Ponds Exports Limited and there had been no transfer ofshares during the year as claimed by the Petitioner assessee. Thus, adifferent view has been taken from the view conclusively taken bythe Assessing Officer and as held in Ananta Landmark Pvt.Ltd.(supra), it would not be open to reopen the assessment based on thevery same material with a view to take another view. 33.We are satisfied that the Petitioner had truly andfully disclosed all the material facts necessary for the purpose ofassessment and that this was a case where the assessment was soughtto be reopened on account of change of opinion of Respondent No. 1. 34.We are of the view that the Respondent No. 1 byrecording that “I have reason to believe that income chargeable totax amounting to Rs. 20.52 cr. had escaped assessment within themeaning of Section 147 of the Act read with proviso thereto” has notreferred to any material fact not disclosed and merely stated that thePetitioner had failed to disclose fully and truly all the material facts 907-WP-2791-19.doc necessary for its assessment for Assessment Year 2012-13. Thisstatement is clearly made with an attempt to take the case out of therestrictions imposed by the proviso to Section 147 of the Act. 35.Consequently, the Petition deserves to be allowed.The impugned notice dated 31st March 2019 seeking to reopen theassessment for Assessment Year 2012-13 and the impugned orderdated 10th September 2019 are quashed and set aside. 36. Writ Petition is disposed of with no order as to costs. [R.I. CHAGLA J.] [K.R. SHRIRAM, J.]