Pirangut, Taluka Mulshi, Pune 412 108 v. The Deputy Commissioner Of Income-Tax,Circle 1 (1), Pune

IN THE HIGH COURT OF JUDICATURE AT BOMBAYCIVIL APPELLATE JURISDICTION WRIT PETITION NO.1779 OF 2006 Coca-Cola India Private Limited,a Company incorporated under the Companies Act, 1956 and having itsregistered Office at Plot No.1109-1110, Pirangut, Taluka Mulshi, Pune 412 108 ...Petitioner vs. 1. The Deputy Commissioner of Income-Tax,Circle 1 (1), Pune. 2. The Commissioner of Income- Tax-I, Pune 3. The Union of India ...Respondents ---- Mr. Nitesh Joshi with Mr. Arun Siwach and Ms. Prachi Vasudeo i/b CyrilAmarchand Mangaldas for Petitioner.Mr. Suresh Kumar for Respondent. ---- CORAM : K. R. SHRIRAM AND AMIT B. BORKAR, JJ. DATE : 26 NOVEMBER 2021 JUDGMENT: ( Per K. R. Shriram, J.) Petitioner is impugning notice dated 28/3/2005 received by respondent No.1 under Section 148 of the Income Tax Act seekingreopening of the assessment for the Assessment Year 1998-1999 and the rsk consequential order dated 10/11/2005 received by respondent No.1 undersection 143(2) of the Act and the order dated 28/2/2006. 2.Petitioner is a Company engaged in the business ofmanufacture and sale of non-alcoholic beverage bases and beverages madeout of such bases. With a view to reorganize its business so as to achievecertain commercial advantages, petitioner filed in this Court an applicationunder Sections 391 to 394 of the Companies Act, 1956 whereby it hadsought sanction for the transfer of its bottling manufacturing undertakingin Pune and Goa to a company Hindustan Coco-Cola Beverages PrivateLimited (HCCBPL). HCCBPL also filed an application in Delhi High Courtfor the same purpose. On 3/5/1999 the scheme of arrangement wassanctioned by Bombay High Court and on 13/8/1999 Delhi High Courtalso sanctioned the scheme of arrangement filed in that Court by HCCBPL. 3.In the meanwhile, on 30/11/1998, petitioner filed the returnof income which disclosed total loss of Rs.100,80,48,931/-. On 31/3/1999petitioner filed revised return declaring loss of Rs.73,83,98,203/-. On31/12/1999 petitioner filed second revised return declaring loss ofRs.23,23,42,821/- for the Assessment Year 1998-1999 as a result ofdemerger of petitioner’s bottling division. Respondent issued a notice rsk dated 10/12/2000 to petitioner under Section 143(2) of the Act andanother notice on the same date under section 142(1) of the Act togetherwith a questionnaire. Petitioner replied vide its letter dated 24/10/2000and furnished reasons for filing a revised return of income. On24/11/2000 petitioner provided further clarification to respondent No.1 inresponse to various queries raised by respondent No.1 and on 22/2/2001respondent No.1 issued a questionnaire in which it is noted that petitioner’sbottling division had been demerged with effect from 30/11/1997. On8/3/2001 petitioner provided to respondent No.1 Balance Sheet and theProfit and Loss Account as on 30/11/1997. 4.Respondent No.1 passed assessment order dated 30/3/2001under section 143 (3) of the Act in which respondent No.1 computed totalincome of petitioner as “Nil” after setting off earlier year's losses to theextent of Rs.22,42,75,013/- Aggrieved by the disallowances made byrespondent No.1, petitioner filed an appeal before the Commissioner ofIncome Tax (Appeals), Pune. By an order dated 14/8/2003, respondentNo.2 had issued a show cause notice under Section 263 of the Act and on28/3/2003 set aside the assessment order passed on 30/3/2001 anddirected respondent No.1 to pass a fresh assessment order after consideringthe issues which respondent No.2 had identified in the first order. On rsk 22/3/2004 respondent No.1 passed the assessment order under Section143(3) of the Act read with Section 263 of the Act. 4.Respondent No.1 passed assessment order dated 30/3/2001under section 143 (3) of the Act in which respondent No.1 computed totalincome of petitioner as “Nil” after setting off earlier year's losses to theextent of Rs.22,42,75,013/- Aggrieved by the disallowances made byrespondent No.1, petitioner filed an appeal before the Commissioner ofIncome Tax (Appeals), Pune. By an order dated 14/8/2003, respondentNo.2 had issued a show cause notice under Section 263 of the Act and on28/3/2003 set aside the assessment order passed on 30/3/2001 anddirected respondent No.1 to pass a fresh assessment order after consideringthe issues which respondent No.2 had identified in the first order. On rsk 22/3/2004 respondent No.1 passed the assessment order under Section143(3) of the Act read with Section 263 of the Act. 5.On 28/3/2005, after expiry of 4 years from the relevantAssessment Year, respondent No.1 issued a notice under Section 148 of thesaid Act. In response to request made by petitioner, respondent No.1, by itscommunication dated 27/12/2005 provided the reasons for reopening theassessment for the Assessment Year 1998-1999. As per proviso to Section147 of the Act, if assessment is being reopened after expiry of 4 years fromthe relevant assessment year, it will be time barred unless the assessee hadfailed to disclose material facts that were necessary for the assessment forthat Assessment Year. 6.We have considered the reasons for reopening and there is noteven a whisper that there was failure on the part of the assessee to disclosefully and truly all material facts necessary for the assessment of that year.Failure to disclose would render the notice issued under Section 148 beingheld as without jurisdiction. 7.Mr. Suresh Kumar relied upon a judgment of this Court inCrompton Greaves Ltd. V/s. Assistant Commissioner of Income Tax, Circle rsk 6 (2) 4[1] to submit that even if the reason for reopening does notspecifically state that there was any failure on the part of petitioner todisclose fully and truly all material facts necessary for its assessment for therelevant assessment year, it will not be fatal to the assumption ofjurisdiction under Sections 147 and 148 of the Act. We would certainlyagree with Mr. Suresh Kumar but as held in Crompton Greaves Ltd.(Supra), this is subject to the rider that there must be cogent and clearindication in the reasons supplied, that in fact there was failure on the partof the assessee to disclose fully and truly all the material facts necessary forits assessment. If the factum of failure to disclose can be culled down fromthe reasons in support of the notice seeking to reopen assessment, that willcertainly not be fatal to the assumption of jurisdiction under Sections 147and 148 of the Act. The Court held “However, if from the reasons, no caseof failure to disclose is made out, then certainly the assumption ofjurisdiction under Sections 147 and 148 of the Act would be ultra vires,being in excess of the jurisdictional restraints imposed by the first provisoto Section 147 of the Act” . 8.Paragraph 17 to 21 of another judgment of this Court inHindustan Lever Ltd. vs. R. B. Wadkar2 reads as under: 1(2015) 55 taxmann.com 59 (Bombay)22004(3) Mh.L.J. 51722004(3) Mh.L.J. 517 17.Having heard the parties at length, we are of theopinion that the petition can be disposed of on the firstcontention raised by the petitioner, wherein the petitioner hascontended that the notice issued under section 148 is withoutjurisdiction being hit by the proviso to section 147 of the Act assuch not within the prescribed period provided under proviso tosection 147 of the Act. In the circumstances, it would benecessary to turn to section 147 of the Act, which reads asunder : Income escaping assessment. 8.Paragraph 17 to 21 of another judgment of this Court inHindustan Lever Ltd. vs. R. B. Wadkar2 reads as under: 1(2015) 55 taxmann.com 59 (Bombay)22004(3) Mh.L.J. 51722004(3) Mh.L.J. 517 17.Having heard the parties at length, we are of theopinion that the petition can be disposed of on the firstcontention raised by the petitioner, wherein the petitioner hascontended that the notice issued under section 148 is withoutjurisdiction being hit by the proviso to section 147 of the Act assuch not within the prescribed period provided under proviso tosection 147 of the Act. In the circumstances, it would benecessary to turn to section 147 of the Act, which reads asunder : Income escaping assessment. 147.If the Assessing Officer has reason to believethat any income chargeable to tax has escaped assessmentfor any assessment year, he may subject to the provisionsof sections 148 to 153, assess or reassess such income andalso any other income chargeable to tax which hasescaped assessment and which comes to his noticesubsequently in the course of the proceedings under thissection, or recompute the loss or the depreciationallowance or any other allowance, as the case may be, forthe assessment year concerned (hereinafter in this sectionand in sections 148 to 153 referred to as the relevantassessment year) : "Provided that where an assessment under sub-section (3)of section 143 or this section has been made for therelevant assessment year, no action shall be taken underthis section after the expiry of four years from the end ofthe relevant assessment year, unless any incomechargeable to tax has escaped assessment for suchassessment year by reason of the failure on the part of theassessee to make a return under section 139 or inresponse to a notice issued under sub-section (1) ofsection 142 or section 148 or to disclose fully and truly allmaterial facts necessary for his assessment for thatassessment year." 18. Reading of proviso to section 147 makes it clear that if theAssessing Officer has reason to believe that any incomechargeable to tax has escaped assessment for any assessmentyear, he may, subject to the provisions of sections 148 to 153,assess or reassess such income and also any other incomechargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of theproceedings under section 147, or recompute the loss or thedepreciation allowance or any other allowance, as the case maybe for the concerned assessment year. However, where anassessment under sub-section (3) of section 143 has been madefor relevant assessment year, no action can be taken undersection 147 after the expiry of four years from the end of therelevant assessment year, unless any income chargeable to taxhas escaped assessment for such assessment year by reasons ofthe failure on the part of the assessee to disclose all materialfacts necessary for his assessment for that assessment year.(Emphasis supplied) 19. In the case in hand it is not in dispute that the assessmentyear involved is 1996-97. The last date of the said assessmentyear was 31-3-1997 and from that date if four years arecounted, the period of four years expired on 1-3-2001. Thenotice issued is dated 5-11-2002 and received by the assessee on 7-11-2002. Under these circumstances, the notice is clearlybeyond the period of four years. 19. In the case in hand it is not in dispute that the assessmentyear involved is 1996-97. The last date of the said assessmentyear was 31-3-1997 and from that date if four years arecounted, the period of four years expired on 1-3-2001. Thenotice issued is dated 5-11-2002 and received by the assessee on 7-11-2002. Under these circumstances, the notice is clearlybeyond the period of four years. 20. The reasons recorded by the assessing officer nowhere statethat there was failure on the part of the assessee to disclosefully and truly all material facts necessary for the assessment ofthat assessment year. It is needless to mention that the reasonsare required to be read as they were recorded by the AssessingOfficer. No substitution or deletion is permissible. No additionscan be made to those reasons. No inference can be allowed tobe drawn based on reasons not recorded. It is for the AssessingOfficer to disclose and open his mind through reasons recordedby him. He has to speak through his reasons. It is for theAssessing Officer to reach to the conclusion as to whether therewas failure on the part of the assessee to disclose fully and trulyall material facts necessary for his assessment for the concernedassessment year. It is for the Assessing Officer to form hisopinion. It is for him to put his opinion on record in black andwhite. The reasons recorded should be clear and unambiguousand should not suffer from any vagueness. The reasons recordedmust disclose his mind. Reasons are the manifestation of mindof the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for thereasons. Reasons provide link between conclusion and evidence.The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able tojustify the same based on material available on record. He mustdisclose in the reasons as to which fact or material was notdisclosed by the assessee fully and truly necessary forassessment of that assessment year, so as to establish vital linkbetween the reasons and evidence. That vital link is thesafeguard against arbitrary reopening of the concludedassessment. The reasons recorded by the Assessing Officercannot be supplemented by filing affidavit or making oralsubmission, otherwise, the reasons which were lacking in thematerial particulars would get supplemented, by the time thematter reaches to the Court, on the strength of affidavit or oralsubmissions advanced. 21. Having recorded our finding that the impugned notice itselfis beyond the period of four years from the end of theassessment year 1996-97 and does not comply with therequirements of proviso to section 147 of the Act, the AssessingOfficer had no jurisdiction to reopen the assessmentproceedings which were concluded on the basis of assessmentunder section 143(3) of the Act. On this short count alone theimpugned notice is liable to be quashed and set aside." 9.In the circumstances, the impugned notice dated 28/3/2005 is quashed and set aside and consequential order dated 20/2/2006 is also setaside. Rule is made absolute in terms of prayer clause (a) which reads as under: (a)this Hon'ble Court may be pleased to issue a Writ ofCertiorari or a Writ in the nature of Certiorari or any otherappropriate writ, order or direction under Article 226 of theConstitution of India calling for the records of the Petitioner'scase and after examining the legality and validity thereof quashand set aside the notice dated 28th March, 2005 (Exhibit "O")issued by Respondent No.1 under Section 148 of the Act seekingto reopen the assessment for the assessment year 1998-99 andthe consequential notice dated 10th November, 2005 issued byRespondent No.1 under Section 143(2) (Exhibit "Q") of the Act and the order dated 20th February, 2006 (Exhibit "U"). 10.Petition disposed. (AMIT B. BORKAR, J) (K. R. SHRIRAM , J.) Digitally signedby RAJESHWARIRAJESHWARISUBODHSUBODHKARVEKARVEDate:2021.12.0114:55:26 +0530