Preethi Kitchen Appliances Private Ltd v. The Assistant Commissioner Of Income Tax,Circle 10 (3)(2), Mumbai -400 020

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 3546 OF 2019 Preethi Kitchen Appliances Private Ltd.. ...Petitioner. Vs. The Assistant Commissioner of Income Tax,Circle 10 (3)(2), Mumbai -400 020. --- ...Respondent. Mr. Paras S. Savla, Advocate i/by Mr. Harsh R. Shah forPetitioner.Mr. Akhileshwar Sharma, Advocate for Respondent. --- CORAM : K.R. SHRIRAM & R.N. LADDHA, JJ. DATED : JANUARY 04, 2022 P.C. : (Through Video Conferencing) 1.Petitioner had filed return of Income on 30[th] November,2012 for the Assessment Year 2012-13, declaring a total loss ofRs. 1,79,43,98,171/-. The return was processed under section143 (1) of the Income Tax Act, 1961 [“the said Act”]. The casewas selected for scrutiny and assessment proceedings werecompleted under section 143 (3) read with section 92CA(4) ofthe said Act. On 23[rd] March, 2016 assessment order waspassed by which income was assessed at a loss ofDigitally signedSHALIKRAMPRALHADRAOby SHALIKRAMPRALHADRAOBOREYRs.1,79,43,98,171/-. Copy of the assessment order dated 23[rd]BOREYDate: 2022.01.1012:07:33 +0530 March, 2016 is annexed to the Petition. The order of TransferPricing OfÏcer (TPO) passed on 25[th] January, 2016, acceptingthe suggestions of Petitioner regarding arm’s length price oftransactions declared has also been accepted and referred to inthe assessment order. The order of the TPO is also annexed tothe Petition. 2.Petitioner received a notice dated 28[th] March, 2019 undersection 148 of the Act for Assessment Year 2012-13. ThePetitioner filed returns and, also was provided with reasons forre-opening. The copy of the reasons recorded for issuing noticeunder section 148 is also annexed to the Petition. 3. Shri Savla submitted that as the assessment proceedingswere completed under section 143 (3) of the Act and the noticeunder section 148 had been issued after expiry of four yearsfrom the relevant assessment year, the proviso to section 147of the Act applies. Shri Savla submitted that Respondentshave to prove that there was failure by Petitioner to truly andfully disclose material facts. Shri Savla submitted that if oneconsiders the reasons recorded, it is quite clear that on thesame set of material which was considered by an Assessing OfÏcer and one view is conclusively taken in the assessmentorder, re-opening of assessment on the same set of facts isproposed and that was not permissible in law. 4.Shri Sharma submitted that if on reading of the reasonsas a whole it is found that it does indicate that there has beenfailure on the part of Petitioner to disclose truly and fully allmaterial facts necessary for the assessment then it cannot besaid that the notice is without jurisdiction. According to Mr.Sharma on reading of the reasons in support of the impugnednotice as a whole, it does bring out failure on the part ofPetitioner to disclose truly and fully material facts necessaryfor assessment. 5.We have considered the reasons supplied and we do notagree with Shri Sharma. The factum of failure to disclosecannot be culled from the reasons in support of the noticeseeking reopening of the assessment. No case of failure todisclose is made out. In our view, on consideration ofmaterial, the Assessing OfÏcer has conclusively taken one viewand hence based on the same material, it will not be open toreopen the assessment with a view to take another view. 5.We have considered the reasons supplied and we do notagree with Shri Sharma. The factum of failure to disclosecannot be culled from the reasons in support of the noticeseeking reopening of the assessment. No case of failure todisclose is made out. In our view, on consideration ofmaterial, the Assessing OfÏcer has conclusively taken one viewand hence based on the same material, it will not be open toreopen the assessment with a view to take another view. 6. In the reasons for proposed re-opening of assessment it isrecorded that after the assessment order was passed on 23[rd]March, 2016, the Department received certain informationfrom the Directorate of Income Tax, Intelligence & CriminalInvestigation, Chennai, from where it was found that theacquisition of Brands of Rs. 2,91,30,00,000/- and Goodwill ofRs.2,85,30,94,220/- as claimed by Petitioner was incorrect andthe said transfer has not been established. Thus, Petitionerhas claimed incorrect depreciation of Rs. 144,15,23,555/-[Rs.72,82,50,000/- on Brands and Rs.71,32,73,555/- onGoodwill]. 7.The facts pertaining to acquisition of Goodwill, trademarks and Patents and Brands were not only available beforethe original assessment by the Assessing OfÏcer but were alsoanalysed by him during the course of the assessmentproceedings. Petitioner’s financial statements were submittedto the Assessing OfÏcer vide letter dated 22[nd] October, 2014.Annexure-A to the said letter categorically explained themanner in which the business was acquired by Petitioner andhow the purchase consideration was treated in the books ofaccounts. After considering the information, the Assessing OfÏcer had issued a notice dated 12[th] February, 2015 undersection 142 (1) of the Act in which the Assessing OfÏcersought copies of the master agreement and any othersupplementary agreement entered into for acquiring businessof the three concerns, sought clarification on how the saleconsideration was paid by Petitioner to the parties and alsocalled for valuation report in support of the intangible assetsbrought in Petitioner’s book of accounts alongwith the breakupof the intangible assets. We have to note that in note 36 tothe financial statement of Petitioner, Petitioner has explainedacquisition of the assets and liabilities and also disclosed thevalue of Brands and Goodwill at Rs. 2,91,30,00,000/- and Rs.2,85,30,94,220/-, respectively. In response to Respondents’notice under section 142 (1), Petitioner, vide its letter dated20[th] January, 2015, provided copies of master agreementalongwith the amendment to the agreement; copy of theindividual slump sale agreements; copy of deed of trademarkassignment and copy of deed of assignment of patents.Petitioner also explained as to how the sale consideration waspaid and how it was funded. Thereafter, the Assessing OfÏcervide letter dated 24[th] November, 2015, in connection with theon going assessment proceedings, called upon Petitioner to provide further details. Clause 4 thereof is relevant and itreads as under : 4.Note 36 to Financial Statement shows that the value ofGoodwill Rs.285.31 crores is determined by subtractingpurchase consideration from total value of assets determined bythe Valuer, which is adopted in Annexure 3 to Report u/s 44AB ofthe Income Tax Act, 1961, determining depreciation u/s 32(1) ofthe Income Tax Act, 1961, on ‘Goodwill’ @ 25% amounting toRs.71.33 crores. Kindly justify the same. provide further details. Clause 4 thereof is relevant and itreads as under : 4.Note 36 to Financial Statement shows that the value ofGoodwill Rs.285.31 crores is determined by subtractingpurchase consideration from total value of assets determined bythe Valuer, which is adopted in Annexure 3 to Report u/s 44AB ofthe Income Tax Act, 1961, determining depreciation u/s 32(1) ofthe Income Tax Act, 1961, on ‘Goodwill’ @ 25% amounting toRs.71.33 crores. Kindly justify the same. Further this note also reveals that the value of acquiredassets is adopted on the basis of Valuation by the Valuer. Pleasestate whether the same value has been considered fordepreciation u/s 32(1) of the Income Tax Act, 1961. If so, pleaseexplain why the 5[th] proviso to Section 32(1) of the Income TaxAct, 1961 should not be invoked for quantifying depreciationallowable, after adopting WDV in the hands of the predecessorcompanies/firms. You are requested to provide the evidenceregarding the WDV in the hands of the predecessorcompanies/firms on the day of transfer. 8.Petitioner responded vide its letter dated 4[th] February,2016 and, after providing the justification for claimingdepreciation on goodwill and brand, also provided the copies ofthe two reports relied upon by Petitioner for the purpose ofcapitalization of assets taken over viz., due diligence reportdated 4[th] July, 2011 issued by Price Waterhouse Coopers Pvt.Ltd., and valuation report dated 5[th] July, 2011 issued byDeloitte Touche Tohmatsu India Pvt. Ltd.. Thereafter, as notedearlier, the order under section 92CA(3) of the Income Tax Act, 1961 was also passed by the Transfer Pricing OfÏcer on 26[th]January, 2016. 9.The Assessing OfÏcer after considering all these pointspassed the assessment order dated 23[rd] March, 2016, acceptingthe fact that transfer has been established and there wasproper acquisition of the Brands and Goodwill, as claimed byPetitioner. It is true that there is no detail reference to thequery raised by the Assessing OfÏcer during the assessmentproceedings and the reply provided by the Assessee alongwithdocumentary evidence. But, once the query raised wassubject to the consideration of the Assessing OfÏcer, whilecompleting the assessment, it is not necessary that theassessment order should contain reference and/ or discussionto disclose his satisfaction in respect of each of the queryraised. If the Assessing OfÏcer has to record the considerationbestowed by him on all issues raised during the assessmentproceedings even where he is satisfied, then it would beimpossible for the Assessing OfÏcer to complete all theassessments which are required to be scrutinized by himunder section 143 (3) of the Act. We find support for this viewin a Judgment of the Division Bench of this Court in the case of Aroni Commercials Ltd., vs. Deputy Commissioner ofIncome Tax–2(1)[1]. The Assessing OfÏcer had in his possessionall material facts when he made original assessment. When theprimary facts necessary for assessment are fully and trulydisclosed, the Assessing OfÏcer is not entitled on change of theopinion to commence proceedings for re-assessment. Whereon consideration of the material on record, one view isconclusively taken by the Assessing OfÏcer, it would not beopen to reopen the assessment based on the very samematerial with a view to take another view. (Ananta Landmark(P.) Ltd., vs. Deputy Commissioner of Income Tax)[2]. 10.In the circumstances, the notice dated 28[th] March, 2019issued under section 148 of the Act to reopen the assessmentfor Assessment Year 2012-13 together with order dated 11[th]November, 2019, dealing with Petitioner’s objections, arehereby quashed and set aside. 11.Petition disposed with no order as to costs. (R.N. LADDHA,J.) (K.R. SHRIRAM, J.) 1 2014 (44) taxmann.com 304 (Bombay).2 2021 (131) taxmann.com 52 (Bombay).2 2021 (131) taxmann.com 52 (Bombay).