Sca/18206/2021 Of Mayur Dyechem Intermediates Limited v. Deputy Commissioner Of Income Tax Circle 2(1)(1), Ahmedabad

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 18206 of 2021 ==================================================MAYUR DYECHEM INTERMEDIATES LIMITED VersusDEPUTY COMMISSIONER OF INCOME TAX CIRCLE 2(1)(1),AHMEDABAD ================================================== Appearance: MR B S SOPARKAR(6851) for the Petitioner(s) No. 1 for the Respondent(s) No. 1NOTICE SERVED BY DS for the Respondent(s) No. 1 ================================================== CORAM:HONOURABLE THE CHIEF JUSTICE MR. JUSTICE ARAVIND KUMARand HONOURABLE MR. JUSTICE ASHUTOSH J. SHASTRI Date : 28/09/2022 ORAL ORDER (PER : HONOURABLE THE CHIEF JUSTICE MR. JUSTICE ARAVIND KUMAR) [1]Though the matter is listed for admission, by consent oflearned advocates appearing for the parties, it is taken up forfinal disposal. [2]We have heard the arguments of Shri B. S. Soparkar,learned counsel appearing for the petitioner and Shri Varun K.Patel, learned counsel appearing for the respondent - assessee. [3]The short issue which arises for consideration in thispetition is whether the notice dated 30.03.2021 (Annexure-A)issued under Section 148 deserves to be quashed or set asidefor any reason whatsoever? -[4]BRIEF BACKGROUND OF THE CASE: Petitioner is a limited company, engaged in the business ofmanufacturing exports and trading of Dyes Intermediates. Forthe assessment year of 2013 - 2014 filed its return of income on17.09.2013 and revised return of income was filed on21.09.2013, which was processed under Section 143(1) of theIncome Tax Act, 1961 (hereinafter referred as to the "Act") andon returns being selected for scrutiny, notice under Section143(2) of the Act was issued to petitioner and assessment ordercame to be passed under 143(3) of the Act on 21.03.2016. It isthereafter i.e. on 30.03.2021 impugned notice came to be issuedfor reopening the assessment on the ground that AssessingOfficerhad reason to believe that income chargeable to tax hadescaped to tax. On being called upon by the assessee to furnish the reasons which had been recorded for reopening of suchassessment order, same was furnished to petitioner on17.05.2021 which was objected to by the petitioner by filingobjections on 27.05.2021 (Annexure-F). Thereafter, AssessingOfficer considered the said objection and rejected the same ordisposed of the objections by not accepting it on11.11.2021(Annexure-G). Hence, this petition. [5]The prime argument of Shri S. N. Soparkar, learnedcounsel appearing for petitioner is that in the noticed issue forreopening it is alleged that 40 lakhs loan was obtained by thepetitioner from M/s Dishman Carbogen Amics Ltd. (DishmanPharmaceuticals and Chemicals Ltd. earlier) which was afictitious loan and he would contend that as a matter of factpetitioner had not obtained any loan from the said company andtherefore, giving equal amount of cash to said company of M/sDishman did not arise. He would elaborate his submission bycontending that without even examining this plea raised in itsobjections filed for reopening of the assessment, same had beendisposed of in perfunctory manner and there has been total non- [5]The prime argument of Shri S. N. Soparkar, learnedcounsel appearing for petitioner is that in the noticed issue forreopening it is alleged that 40 lakhs loan was obtained by thepetitioner from M/s Dishman Carbogen Amics Ltd. (DishmanPharmaceuticals and Chemicals Ltd. earlier) which was afictitious loan and he would contend that as a matter of factpetitioner had not obtained any loan from the said company andtherefore, giving equal amount of cash to said company of M/sDishman did not arise. He would elaborate his submission bycontending that without even examining this plea raised in itsobjections filed for reopening of the assessment, same had beendisposed of in perfunctory manner and there has been total non- application of mind. He would submit that even otherwise theassessee being a company had filed Nil return and had paid taxon book profit computed under MAT provision and even if thesaid component of Rs.40 lakhs is proposed to the addition, itwould not change the tax implication, as the assessee would stillcontinue to be governed under the provisions of MAT, namely,Section 115JB and as such there would be no excess tax liabilityeven under MAT provision and as such there is no escapementof tax and therefore reassessment does not arise. He would alsocontend that no sanction has been obtained as required underSection 151 of the Act, prior to issuance of notice under Section148 and in the absence of any satisfaction being recorded by thehigher authority, impugned notice could not have been issued.Hence, he would contend that impugned notice (Annexure-A)and consequential order disposing of the objections filed to thesaid notice by overrulling the same on 11.11.2021 (Annexure-G)are liable to be quashed. [6]Per contra, Shri Varun K. Patel, learned standing counselappearing for the assessee would support the impugned notice and the consequential order dated 11.11.2021 passedorverruling the objections of the petitioner. [7]Having heard the learned advocates appearing for theparties and on perusal of the records, it would emerge from therecord and proceedings of this Court that at the time of issuingthe notice on this Special Civil Application and after hearing thelearned counsel appearing for the petitioner, it came to berecorded as under:- "2. We have heard the learned advocate, Mr.BandishSoparkar, who has drawn our attention to the fact that incase of these very Assessee for the subsequent AssessmentYears 2014-2015 and 2015-2016 the petitions have beenfiled being Special Civil Application Nos.18207 and 18204of 2021. He has further urged that for the AssessmentYear 2013-2014 there has been no transaction withDishman Pharmaceuticals and Chemicals Ltd. For thesubsequent Assessment Years 2014-2015 & 2015-2016 thepetitioner has paid the commission to DishmanPharmaceuticals and Chemicals Ltd. 3. Before we even seek to consider the matter further, wewould request the learned senior counsel, Mr.Bhatt to callfor the papers from the department and to assist thecause." "2. We have heard the learned advocate, Mr.BandishSoparkar, who has drawn our attention to the fact that incase of these very Assessee for the subsequent AssessmentYears 2014-2015 and 2015-2016 the petitions have beenfiled being Special Civil Application Nos.18207 and 18204of 2021. He has further urged that for the AssessmentYear 2013-2014 there has been no transaction withDishman Pharmaceuticals and Chemicals Ltd. For thesubsequent Assessment Years 2014-2015 & 2015-2016 thepetitioner has paid the commission to DishmanPharmaceuticals and Chemicals Ltd. 3. Before we even seek to consider the matter further, wewould request the learned senior counsel, Mr.Bhatt to callfor the papers from the department and to assist thecause." [8] Perusal of the above order would indicate this Court inorder to satisfy itself for issuance of notice to the respondentshad called upon the standing counsel appearing for thedepartment, to call for the papers from the department and toassist the cause. As such the records are said to have beenproduced before Court on 10.12.2021. However, the order-sheet does not reflect of such record having been tenderedbefore the Court or same having been perused by Court. Bethat as it may. The standing counsel who is present before theCourt today would submit that along with the present appealtwo other appeals were also filed and in respect of all the threeappeals, the Court intended to look into the records andaccordingly, the records were secured and tendered beforeCourt which came to be perused by the Court and on beingsatisfied, notice came to be issued to the respondent DeputyCommissioner of Income-tax on 10.12.2021 at which point oftime, the assessee withdrew the connected two appeals whichwere for the assessment years of 2014 - 2015 and 2015 - 2016on 07.12.2021. This fact is not disputed by the learned counselappearing for the assessee. [9]Be that as it may. The foundational facts for reopening ofan assessment is to be discerned from the reasons assigned forsuch reopening. In the instant case, the return of income whichwas filed by petitioner was for the assessment year 2013 - 2014based on which the assessment came to be framed on21.03.2016 and same is sought to be reopened by issuance ofimpugned notice on the ground that search was conducted inthe case of M/s Dishman group of Ahmedabad on 19.12.2019and it was found that said group had indulged in hugetransactions of bogus loans and advances and the ADIT's noteconcluded that loans and advances are received by the assessee,namely, the present writ applicant from the said M/s Dishmancompany as such it implies the assessee had given equal cash toM/s Dishman and was of the view that such transactions are tobe construed from the angle of applicability of Section 69Aapart from being treated as unexplained credits, whereverapplicable. It is this fact which persuaded the Assessing Officerto issue the notice stating thereunder that accommodation entryof Rs.40 lakhs in the form of fictitious loan was reflected from M/s Dishman Pharmaceuticals to the assessee. The assesseenot only in its objections statement filed to the reopening of theassessment has stated that there was no such transaction andeven the books of accounts which formed part and parcel of theassessment order passed under Section 143(3) did not discloseany such loan transaction for the assessment year 2013 - 2014insofar as the assessee is concerned. In the absence of anyfoundational facts, the reasons recorded for reopening of theassessment on the premises that Assessing Officer had reason tobelieve that income had escaped to assessment and therebythere is tax evasion has to be necessarily held as a myth and itcannot be countenanced and without any foundation. Thus,without due application of mind, the Assessing Officer could nothave issued the impugned notice. On this short ground itself,the impugned notice is liable to be quashed. [10] Under similar circumstances, the co-ordinate Bench in thecase of Amar Jewellers Ltd. versus Deputy Commissionerof Income-tax reported in (2018) 405 ITR 561 has held tothe following effect:- "8. A plain reading of the reasons recorded for reopeningthe assessment xxx has escaped assessment.Consequently, once there is no foundation for such belief,the reasons based thereupon have no legs to stand, hence,on the reasons recorded, the Assessing Officer could nothave formed the belief that any income chargeable to taxhas escaped assessment. Therefore, the assumption ofjurisdiction on the part of the Assessing Officer undersection 147 of the Act to reopen the assessment by issuingthe impugned notice under section 148 of the Act iswithout authority of law, which renders the impugnednotice unsustainable." [11] Yet another co-ordinate bench in the matter of Giraben Atulbhai Shah versus Office of the AssistantCommissioner of Income Tax, Central Circle 1(2),Ahmedabad in Special Civil Application No.26 of 2022 disposedof on 28.01.2022 has opined:- "6. We find merit in the contention raised by Mr.Dave that the reasons assigned by the Assessing Officerfor reopening of the assessment for the relevant year arefactually incorrect. This is apparent from page : 35 of thepaper book, which is a part of the return of income filed bythe writ applicant. In column No.8 of the same, we findreference of Rs.52 Lakh towards full value of consideration. Although Mr. Bhatt tried to say somethingas regards the cost of acquisition with indexation, yet weare of the view that factually there is no foundation for theRevenue to reopen the assessment on the ground asalleged in the reasons assigned to the writ applicant –assessee." The principles laid down in aforesaid cases are squarelyapplicable to facts on hand. [12] Hence, for the reasons aforestated, we find that in theinstant case there is no foundation in the notice which formedthe basis on which the Assessing Officer proposed to reopen theassessment for the assessment year 2013 - 2014. Hence, pointformulated hereinabove deserves to be answered in favour ofthe petitioner - assessee. [13] Thus, we proceed to pass the following O R D E R (i)Special Civil Application is allowed. (ii)The notice dated 30.03.2021 (Annexure-A) and order disposing of the objections dated11.11.2021 (Annexure-G) are hereby quashed. (iii)No order as to costs. (ARAVIND KUMAR, C.J.) DHARMENDRA KUMAR (ASHUTOSH J. SHASTRI, J.)