Cit v. Vinod D.ghodawat (163 Ctr 432( (Bom

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3318 OF 2004 M/s. Krishna Life Style Technology Ltd.(Formerly known as M/s. Shree Krishna Polyester Ltd.) ..Petitioner. vs.Deputy Commissioner of Income Tax and ors...Respondents. Mr. P. J. Pardiwala, Senior Counsel along with S.G.Dalal i/by S.G. Lakhani for the Petitioner.Mr. Suresh Kumar for the Respondent. CORAM : M. S. SANKLECHA AND N.M. JAMDAR, JJ. 25 AUGUST 2014 DATE : PC: This petition is directed against the notice dated 26 March 2003 issued under Section 148 of the Income Tax Act, 1961 (“the Act”). The impugned notice seeks to reopen the assessment for A.Y. 1993-94. 2)On 30 December 1993 the petitioner filed its return of income for Assessment Year 1993-94 declaring total income of Rs.8.49 lacs. This was after having claimed deduction for depreciation of Rs.2.71 crores. On 15 September 1995 the Assessing officer passed an assessment order under Section 143(3) of the Act assessing the petitioner to an income of Rs.16.88 lacs after having accepted the petitioner's claim for deduction on account of depreciation. 3)Thereafter on 1 August 1996 the petitioner's premises were searched under Section 132 of the Act. Consequent to the above search a block assessment order was passed by the Assessing Officer on 30 September 1997 under Section 143(3) read with Section 158BC of the Act partly disallowing the claim for depreciation resulting in assessing the petitioner undisclosed income of Rs.38.65 lacs. 4)Being aggrieved by the order dated 30 September 1997 the petitioner preferred an appeal to Income Tax Appellate Tribunal (“the Tribunal”). By an order dated 25 October 2002 the Tribunal disposed of the petitioner's appeal from the order dated 30 September 1997 holding that the claim for depreciation cannot be a subject matter of assessment for block assessment as its scope is only to assess the undisclosed income of the block period unlike a regular assessment which is to assess the total income or loss for the previous year. Besides on facts it was found that no evidence/material was found during the course of search in respect of the claim for depreciation. Therefore, it was beyond the powers of the Assessing Officer in Block Assessment to assess the same under Chapter XIV B of the Act. 5) On 26 March 2003, the Assessing Officer issued the impugned notice seeking to reopen the assessment for assessment year 1993-94. The reasons recorded for reopening of the assessment as furnished to the petitioner were as under:- “Date 26.03/2003 A search and seizure action u/s.132 of the I.T. Act, 1961 was conducted on M/s. Shree Krishna Polyster Limited on 1.8.1996.The assessee had filled nil return for the block period in response to notice u/s. 158BC.The block assessment in this case was completed on 30.9.1997 estimating the total undisclosed income of Rs.38,65,986/- for the block period in A.Y. 1993-94. Being aggrieved, the assessee went in first appeal before the Hon. ITAT against the above assessment order. The Hon. ITAT has given relief to the assessee relying on various judicial pronouncements viz. 1.CIT vs. Vinod D.Ghodawat (163 CTR 432( (Bom.) 2.CIT vs. Dr. M.K.E. Memon (112 Taxmen 96) (Bom.) 3.DCIT vs. Shaw Wallace & Co. (248 ITR 81) (Cal.) 4.CIT vs. Rajendra Prasad Gupta (248 ITR 350( (Raj.)5.Bhagwat Prasad Kedia vs. CIT (248 ITR 562) (Cal.)6.CIT vs. Ravi Kant Jain (250 ITR 141) (Delhi)5.Bhagwat Prasad Kedia vs. CIT (248 ITR 562) (Cal.)6.CIT vs. Ravi Kant Jain (250 ITR 141) (Delhi) 7.Vrsihali Hotels Pvt. Ltd. vs,. ACIT (66 TTJ 693) (ITAT Pune) 8.Ravi Prakash Agarwal vs. ACIT (67 YYJ 234) (ITAT, Delhi) The Hon. ITAT has also given a clear cut finding that: Being aggrieved, the assessee went in first appeal before the Hon. ITAT against the above assessment order. The Hon. ITAT has given relief to the assessee relying on various judicial pronouncements viz. 1.CIT vs. Vinod D.Ghodawat (163 CTR 432( (Bom.) 2.CIT vs. Dr. M.K.E. Memon (112 Taxmen 96) (Bom.) 3.DCIT vs. Shaw Wallace & Co. (248 ITR 81) (Cal.) 4.CIT vs. Rajendra Prasad Gupta (248 ITR 350( (Raj.)5.Bhagwat Prasad Kedia vs. CIT (248 ITR 562) (Cal.)6.CIT vs. Ravi Kant Jain (250 ITR 141) (Delhi)5.Bhagwat Prasad Kedia vs. CIT (248 ITR 562) (Cal.)6.CIT vs. Ravi Kant Jain (250 ITR 141) (Delhi) 7.Vrsihali Hotels Pvt. Ltd. vs,. ACIT (66 TTJ 693) (ITAT Pune) 8.Ravi Prakash Agarwal vs. ACIT (67 YYJ 234) (ITAT, Delhi) The Hon. ITAT has also given a clear cut finding that: “the rate at which depreciation is permissible on a particular asset is a matter to be considered in the regular assessment. Even if the assessee has claimed higher depreciation than what is permissible, the same cannot be said to be undisclosed income for the purpose of the block assessment.” Keeping in view the provisions of section 153(3)(ii) Explanation 2, it is proposed to reopen the assessment of the assessee for A.Y. 1993-94 u/s. 148 of the I.T. Act 1961 as income of Rs.38,65,986/- for A.Y.1993-94 has escaped assessment. In this regard, a letter dated 11.3.2003 has been put up requesting CIT(C)-III's sanction u/s.151. CIT(C)-III has accorded his approval for issuance of notice u/s. 148 vide letter dated 24.3.03. Accordingly, notice u/s. 148 is issued.” 6)On 23 November 2004 the petitioner filed detailed objections to the reopening of the assessment for assessment year 1993-94 inter alia on the ground that the impugned notice is barred by limitation. Besides, the petitioner also submitted that during the regular assessment proceedings leading to order dated 15 September 1995 there has been no failure on its part to disclose truly and fully all facts necessary for reassessment. In the above circumstances, according to the petitioner the impugned notice was without jurisdiction. However, the objections of the petitioners were rejected by order dated 6 December 2004 of the Assessing officer. 7)Counsel for both sides have agreed that the issues raised in this petition are covered against the respondent revenue by order dated 11 August 2014 of this Court (Coram M.S.Sanklecha & G.S.Kulkarni, JJ.) in Writ Petition No.3314 of 2014 filed by M/s. Eskay K'n'it (India) Ltd. a group company of the petitioner challenging a reopening notice dated 26 March 2003 seeking to reopen the assessment for A.Y. 1993-94. In fact the order of the Tribunal dated 25 October 2002 which forms the basis of the revenue's basic contention that the impugned notice is not time barred in view of the “findings” also emanates/arises from the common order of the Tribunal dated 25 October 2002. In the above order dated 11 August 2014 this Court has held that there are no findings in the order of the Tribunal dated 25 October 2002 which would extend the period of limitation by making Section 150of the Act applicable. Besides holding that the notice for reopening of assessment is a mere change of opinion and therefore, not sustainable. 8)Therefore, for the reasons indicated in the order dated 11 August 2014 passed in W. P. No. 3314/2004 (M/s. Eskay K'n'it (India) Ltd. vs. Dy. Commissioner of Income Tax Central Circle 33 and ors.) this petition is allowed. The impugned notice dated 26 March 2003 is quashed and set aside.Petition is allowed. Rule made absolute. ( N. M. JAMDAR, J.) (M.S. SANKLECHA, J.)