Cgu Logistics Ltd v. Income Tax Officer 5 (1) (3) & Ors

rng IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONWRIT PETITION NO.1216 OF 2014 CGU Logistics Ltd ..Petitioner vs. Income Tax Officer 5 (1) (3) & ors.. Respondents --- Mr.J.D.Mistry Sr.Advocate a/w Mr.Nishant Thakkar and Mr.Rajesh Poojari i/b Mint & Confreres for PetitionerMr.AbhayAhuja for Respondents …. CORAM : M.S.SANKLECHA &G.S.KULKARNI, JJ P. C. DATED : 23 JULY, 2014 This petition challenges a notice dated 31.7.2012 issued by the Assessing Officer under section 148 of the Income Tax Act, 1961 (the Act) seeking to reopen the assessment for A.Y.2008-09. 2. The reasons in support of the impugned notice dated 31.7.2012 for reopening the assessment for A.Y.2008-09 are as under : 1.The assessee M/s CGU Logistics Ltd, having PAN AACC8880B is assessed to tax in this charge. In this case the return of income for A.Y.2008-09 was filed on 25.09.2008 declaring total taxable income at Rs.4,17,390/-. The return was processed u/s 143 (1) of the I.T.Act assessing the total taxable income at Rs.4,17,390/-. 2.The assessee company was incorporated on 04.07.2006. The main objective of the company is to be build, own, operate and manage the vessel. For the year ending 31.03.2007 assessee has shown Capital work in progress at Rs.1885,31,360/- in the Fixed Assets schedule. For the year ending 31.03.2008 the gross block of Fixed assets was shown at Rs.79,32,23,039/-. There is no balance in capital work in progress account remained to be capitalized for the year ending 31.03.2008. The assessee has also not claimed any depreciation on the assets. This indicates the fact that the assets were not put to use during the year. The assessee has shown interest receipt of Rs.4,17,390/- and other income of Rs.8,39,093/- in the Profit and Loss Account. The assessee claimed revenue expenses of Rs.1,76,05,029/- (which includes insurance expenses of Rs.62,52,988/-, conveyance expenses of Rs.41,410/- audit fee of Rs.5,15,000/- and other expenses like legal and professional fees, rent, regisrtration expenses,miscellaneous expenses. Bank charges etc of Rs.1,07,95,631/- in the P & L Account against the above receipts and claimed a net revenue loss of Rs.1,63,48,546/-. 3. The assessee company has not started its business operations. The only activity during the year under consideration was acquiring assets. As such all the expenditure incurred in relation to acquiring such assets including insurance, bank charges, professional fees etc are required to be capitalized to the value of asset till the date it came into existence or is put to use and the income earned from other sources is required to be taxed. The assessee in the return filed has however offered only the interest income for tax and thus the other income of Rs.8,39,093/- has escaped assessment. Similarly. the expenses of Rs.1,76,05,029/- claimed as revenue expenses have been wrongly allowed to the assessee instead of capitalization to the value of asset. This has resulted in escapement of income chargeable to tax within the meaning of explanation 2(b) to section 147 of the I.T.Act 1961. 4. In view of the above facts, I have reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the I.T.Act 1961.Therefore, I am satisfied that this is a fit case to issue notice u/s 148 r.w.s. 147 of the I.T. Act 1961.” 4. In view of the above facts, I have reason to believe that income chargeable to tax has escaped assessment within the meaning of section 147 of the I.T.Act 1961.Therefore, I am satisfied that this is a fit case to issue notice u/s 148 r.w.s. 147 of the I.T. Act 1961.” 3. The petitioners objected to the reasons by their communication dated 31.12.2012 inter alia on the ground that proper sanction from the appropriate authority had not been taken while issuing the impugned dated 31.7.2012. With regard to the exchange rate fluctuations gains the petitioners contended that being a shipping company, they are covered under the special provisions applicable to a shipping company under Chapter XII-G section 115V to section 115 v2c of the Act. Consequently, it was submitted there was no occasion for the Assessing Officer to come to a reasonable belief that income chargeable to tax has escaped assessment. The Assessing Officer by an order dated 15.1.2014 accepted the petitioner's objections so far as expenses of Rs.1.76 crores are concerned. However, he did not accept the petitioner's objection with regard to exchange rate fluctuations gains of Rs.8.39 crores.Moreover the order also records the fact that necessary sanction had been obtained from the Commissioner of Income Tax for the purpose of issuing the impugned notice. Thereafter the petitioner filed a further submission explaining in detail why according to the petitioners the impugned notice are without jurisdiction and particularly rng on account of the fact that the notice proceeds on change of opinion as issues with regard to exchange rate fluctuation gains which were the subject matter of consideration under Section 143 of the Act. However, the Assessing Officer by a communication dated 4.3.2014 did not consider the further objections filed by the petitioner on the ground that he has already disposed of the objections. 4. Normally we would not have interfered with the order disposing of the objections and entertained the petition on merits. However, after hearing the petitioner and the revenue for sometime and the issues raised with regard to jurisdiction viz of not obtaining sanction from the appropriate authority as well as there being a change of opinion appear to be substantial. Therefore, in the present facts it would be appropriate for the Assessing Officer considers the petitioner's further communication dated 4.2.2014 and also objections made earlier including the issue of sanction by the appropriate authority to issue the impugned notice at the earliest. The petitioners undertake to file a consolidated objections within a period for two weeks from today before the Assessing Officer. rng 51216.14 5. Accordingly, we set aside the order disposing of order dated 15.1.2014 and communication dated 4.3.2014 issued by the Assessing Officer and direct the Assessing Officer to dispose of the objections at the earliest. We do direct that the period from today till four weeks after the Assessing Officer disposes of and communicates his order on objections the impugned notices are stayed for the purposes of computing the period of limitation to pass an Assessment order in terms of the fifth proviso to Section 153 B of the Act. 6. Accordingly, the Petition is disposed of in above terms. No order as to costs. (G.S.KULKARNI, J) (M.S.SANKLECHA, J)