India Pvt. Ltd.), Mumbai v. Deputy Commissioner Of

Dmt IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION (L) NO. 2699 OF 2011 M/s. Carat Integra Pvt. Ltd. (now known as Posterscope India Pvt. Ltd.), Mumbai. .. Petitioner. versus Deputy Commissioner of Income Tax-6(2) Mumbai & Ors. .. Respondents. ..... Mr. Percy J. Pardiwala, Sr. Adv., with Mr. Jitendra Jain and Mr. Atul K. Jasani for the Petitioner. Ms. Suchitra Kamble for the Respondents. ...... CORAM : DR.D.Y.CHANDRACHUD & A. A. SAYED, JJ. 20 DECEMBER 2011. P.C. : Rule, by consent returnable forthwith. With the consent of Counsel and at their request the Petition is taken up for hearing and final disposal. 2.By these proceedings under Article 226 of the Constitution, the Petitioner seeks to challenge a notice issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961 seeking to reopen the assessment for Assessment Year 2004-05. For the assessment year in question, a return of income was filed on 1 November 2004 declaring a loss of Rs.56,300/-. An order of assessment was passed on 20 November 2006. A notice was issued under Section 148 on 22 March 2011 while reasons have been disclosed under cover of a letter dated 31 March 2011. The reasons which have been disclosed are as follows : “Assessment in this case has been completedu/s. 143(3) on 21.11.2006 at total loss of Rs.56,300/-. Subsequently it is seen that in the details of 3 sales submitted during completion of regular assessment, assessee company had shown total sales to M/s. Percept H.P. Ltd. at Rs. 73,90,175/-. However, as per Sr. No. 4 of Annexure to Auditor s Report,’ total sales to M/s. Percept H.P. Lt. At Rs.170,62,797/-. This shows that while computing assessee s income’in the assessment order u/s 143(3) dt. 21.11.2006, sales to the tune of Rs.96,12,622/- have not been included. I, therefore, have reason to believe that income chargeable to tax to the extent of Rs. 96,12,622/- has escaped assessment. Issue notice u/s. 148 for A.Y. 2004-05.” The assessee addressed objections on the reopening of the assessment on 19 September 2011 which have been disposed of on 28 November 2011. Dmt 4 3.Learned Counsel appearing on behalf of the Petitioner submits that : (i)The reopening of the assessment is beyond the period of four years of the end of the relevant assessment year. Ex-facie, the reasons for reopening the assessment do not even suggest that there was any failure on the part of the assessee to disclose fully and truly all relevant material necessary for assessment; (ii)As a matter of fact, during the course of assessment proceedings, the assessee addressed a communication to the Assessing Officer on 13 November 2006 setting out all the relevant facts and this was actually explained to the Assessing Officer when objections were filed to the proposed reopening on 19 September 2011. The order of the Assessing Officer disposing of the objections does not even deal with the explanation. In any event, since the jurisdictional condition for reopening assessment beyond four years is absent in this case, the notice, it is urged, ought to be quashed and set aside. 4.On the other hand, learned Counsel for the Revenue relied on the reasons disclosed to the assessee for reopening the assessment. 5.During the course of the assessment proceedings, the assessee filed its balance sheet as on 31 March 2004 and its profit and loss account for the relevant year. The schedule annexed to and forming part thereof disclosed under the head of Sales an amount of Rs. 1.70 crores under the head of“”“sales to Percept H. Pvt. Ltd. By a letter dated 13 November”2006 the assessee had made the following disclosure to the Assessing Officer. 6 “ 7) does not even deal with the explanation. In any event, since the jurisdictional condition for reopening assessment beyond four years is absent in this case, the notice, it is urged, ought to be quashed and set aside. 4.On the other hand, learned Counsel for the Revenue relied on the reasons disclosed to the assessee for reopening the assessment. 5.During the course of the assessment proceedings, the assessee filed its balance sheet as on 31 March 2004 and its profit and loss account for the relevant year. The schedule annexed to and forming part thereof disclosed under the head of Sales an amount of Rs. 1.70 crores under the head of“”“sales to Percept H. Pvt. Ltd. By a letter dated 13 November”2006 the assessee had made the following disclosure to the Assessing Officer. 6 “ 7) The details of cost of sales is vide separate statement enclosed herewith. The assessee is a media planning and buying company. It procures orders from clients and gets the work done by its Vendors. What is paid to the Vendors gets booked as cost of sales and what is charged to the clients, as sales. So in effect what the assessee company earns is only a sort of commission for getting the work done. The assessee company does not do the main advertising job since it is not an adverting agency, but only evaluates & plans how the job is to be executed. That is the main reason why the sales & the cost of sales are such large amounts as compared to what the assessee actually earns.”statement enclosed herewith. The assessee is a media planning and buying company. It procures orders from clients and gets the work done by its Vendors. What is paid to the Vendors gets booked as cost of sales and what is charged to the clients, as sales. So in effect what the assessee company earns is only a sort of commission for getting the work done. The assessee company does not do the main advertising job since it is not an adverting agency, but only evaluates & plans how the job is to be executed. That is the main reason why the sales & the cost of sales are such large amounts as compared to what the assessee actually earns.” Similarly, names and addressed of parties to/from whom sales and purchases were made above Rs. 10 lakhs were enclosed under a separate statement. The reasons which have been recorded by the Assessing Officer would ex-facie make it clear that there has been no failure on the part of the assessee to disclose fully and truly material facts. The reasons as a matter of fact suggest that the entire basis for reopening is the material which was furnished by the assessee together with the return of income. In that view of the matter, since the assessment is sought to be reopened in exercise of powers conferred by Section 147 beyond the period of four years of the end of the relevant assessment year, the jurisdictional requirement, namely a failure on the part of the assessee to disclose fully and truly all the material facts necessary for assessment is clearly absent in the present case, nor is it the case of the Assessing Officer that such a condition was fulfilled. 6.For these reasons, we make the Rule absolute by setting aside and quashing the impugned notice dated 8 July 2011. setting aside and quashing the impugned notice dated 8 July 2011. (Dr. D.Y. Chandrachud, J.)