Solvay Specialities India Pvt. Ltd.phoenix House, A Wing, 4[Th] Floor v. The Deputy Commissioner Of Income Tax8(2)(2), Room

Digitallysigned bySHRADDHASHRADDHAKAMLESHKAMLESHTALEKARTALEKARDate:2023.02.1521:24:39+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 1090 OF 2016 Solvay Specialities India Pvt. Ltd.Phoenix House, A Wing, 4[th] Floor, 462, Senapati Bapat Marg, Lower Parel (West), Mumbai – 400 013. … Petitioner Versus 1. The Deputy Commissioner of Income Tax8(2)(2), Room No.615, 6[th] Floor,Aayakar Bhavan, M.K. Road,Mumbai – 400 020. 2. The Principal Commissioner of Income-tax-8,Aayakar Bhavan, M.K. Road,Mumbai-400 020. 3. Union of India,Through the Secretary,Department of Revenue,Ministry of Finance, Government of India,North Block, New Delhi-110 001. …Respondents ***** Mr.Madhur Agrawal with Mr.Upendra Lokegaonkar i/b Mint andConfreres, Advocate for petitioner. Mr. Suresh Kumar, Advocate for respondents. CORAM : DHIRAJ SINGH THAKUR & KAMAL KHATA, JJ. DATE :8[th] FEBRUARY, 2023. ORDER : 1.In the present petition, the petitioner challenges the noticedated 24[th] February 2015, issued under section 148 of the IncomeTax Act, 1961 (‘the Act’) by respondent No.1 seeking to reopen theassessment, on the basis of ‘his reason to believe’ that incomechargeable to tax for the assessment year 2010-11 had escapedassessment within the meaning of section 147 of the Act. 2.The reasons recorded for reopening are as under : “REASON FOR RE-OPENING THE ASSESSMENT U/S.147 OF THE ACT On verification of assessment records, it is observed thatthe assessee company has debited ‘Loss on write-off ofFixed Assets’ in the P&L a/c of Rs 1.81,32,821/-. Thisamount has been added back to the total income at thetime of Computation of Income. There is no mention ofthis ‘write off due to loss’ in Annexure 4 to Clause 14 ofAudit Report in Form 3CD, pertaining to depreciation orin the Notes to Accounts. However, the assessee vide hisreply dated 13.02.2014 had appended a list of assetswritten of during the PY 2009-10 wherein he hasaccepted that the date of capitalization is 10.05.2006 forgross asset value of Rs. 2,66,21,927/- on which theaccumulated depreciation is Rs.84,88,990/- and the Netbook Value is Rs. 1,81,32,937/- On physical verification, these assets have not beenfound, although depreciation at Rs.84,88,990, on theassessee’s own admission, has been claimed on theseassets during the previous years, since the assessee hastaken over the company ‘Gharda Chemical’s and theseassets have been factored for valuation purposes. The physical availability or otherwise of assets, is thepurview of the assessee and the onus is on him toestablish as to the period from which the assets havegone missing. Failing this obligation, the AssessingOfficer is compelled to take a stand that any prudentperson would do, as stated in Sec 114 of the EvidenceAct. Also, the assessee has failed to mention any stepstaken to avail insurance or any other step. In view of the above, I have reason to believe thatthere is failure on the part of the assessee to disclosetruly and fully all details necessary for making a correctassessment and accordingly, I am satisfied that there hasbeen an escapement of income within the scope ofExplanation 1 to Section 147 if the Act. Issue notice u/s.148.” 3.Objections to the reopening were fled by the petitioner and came to disposed of vide order dated 27[th] January 2016. 4.Counsel for the petitioner states that the reopening theassessment was bad and illegal inasmuch as there was notangible material with the Assessing Offcer which would warrantthe reopening of the assessment and that the reassessmentproceedings were nothing but a ‘change of opinion’. It was alsourged that not only all the material facts were disclosed to theAssessing Offcer during the assessment proceedings undersection 143(3) of the Act, but the same had been considered indepth leading to the passing of the order of assessment dated 27[th] 3.Objections to the reopening were fled by the petitioner and came to disposed of vide order dated 27[th] January 2016. 4.Counsel for the petitioner states that the reopening theassessment was bad and illegal inasmuch as there was notangible material with the Assessing Offcer which would warrantthe reopening of the assessment and that the reassessmentproceedings were nothing but a ‘change of opinion’. It was alsourged that not only all the material facts were disclosed to theAssessing Offcer during the assessment proceedings undersection 143(3) of the Act, but the same had been considered indepth leading to the passing of the order of assessment dated 27[th] January 2016. Reliance was placed upon the Apex Courtjudgment in the case of Commissioner of Income-tax Vs.Kelvinator of India Ltd. [1]to urge that in the guise of reassessment,the Assessing Offcer cannot be permitted to review its earlierorder of assessment. 5.Reply affdavit has not been fled by the revenue, however,counsel for the revenue, Mr.Kumar stated that the AssessingOffcer, during the regular assessment proceedings, haderroneously granted beneft of depreciation on fxed assets, which,according to the assessee’s own admission, upon verifcation, hadbeen written of ‘due to loss’, which was otherwise impermissible. 6.We have heard learned counsel for the parties. 7.In the present case, the impugned notice under section 148has been issued in regard to assessment year 2010-11 on 24[th]February 2015, and this has been issued within four years fromthe end of the relevant assessment year. It is, thus, clear that forthe reassessment proceeding to succeed, it was not necessary forthe Assessing Offcer to establish that the assessee had notdisclosed fully and truly facts material and necessary for1320 ITR 561 (SC) reopening an assessment, which has since been completed.However, even in a case, where the assessment is sought to bereopened within a period of four years from the end of the relevantassessment year, the Assessing Offcer has to have reasons tobelieve that income chargeable to tax had escaped assessment. 8.In Commissioner of Income-tax Vs. Kelvinator of India Ltd. (Supra),the Apex Court held : “4…………..Therefore, post-1-4-1989,power to re-open is much wider. However, oneneeds to give a schematic interpretation to thewords "reason to believe" failing which, we areafraid, Section 147 would give arbitrary powersto the Assessing Officer to re-open assessmentson the basis of "mere change of opinion", whichcannot be per se reason to re-open. We must alsokeep in mind the conceptual difference betweenpower to review and power to re-assess. TheAssessing Officer has no power to review; he hasthe power to re-assess. But re-assessment has tobe based on fulfillment of certain pre-conditionand if the concept of "change of opinion" isremoved, as contended on behalf of theDepartment, then, in the garb of re-opening theassessment, review would take place. One musttreat the concept of "change of opinion" as an in-built test to check abuse of power by theAssessing Officer. Hence, after 1[st] April, 1989,Assessing Officer has power to re-open, providedthere is "tangible material" to come to theconclusion that there is escapement of incomefrom assessment. Reasons must have a live linkwith the formation of the belief…………..” 9.Therefore, based upon the reasons recorded, one needs toscrutinize whether there was any tangible material with theAssessing Offcer justifying reopening of the assessment or can it be said to be a case of ‘review’ and ‘change of opinion’ by the saidoffcer. 10.In Kalyanji Mavji & Co. Vs. Commissioner of Income Tax, West Bengal-II [2], it was held : On a combined review of the decisions of this Court thefollowing tests and principles would apply to determine theapplicability of s. 34(1) (b) to the following categories of cases: 9.Therefore, based upon the reasons recorded, one needs toscrutinize whether there was any tangible material with theAssessing Offcer justifying reopening of the assessment or can it be said to be a case of ‘review’ and ‘change of opinion’ by the saidoffcer. 10.In Kalyanji Mavji & Co. Vs. Commissioner of Income Tax, West Bengal-II [2], it was held : On a combined review of the decisions of this Court thefollowing tests and principles would apply to determine theapplicability of s. 34(1) (b) to the following categories of cases: (1) Where the information is as to the true andcorrect state of the law derived from relevantjudicial decisions; (2) Where in the original assessment the incomeliable to tax has escaped assessment due tooversight, inadvertence or a mistake committed bythe Income-tax officer. This is obviously based onthe principle that the tax-payer would not beallowed to take advantage of an oversight ormistake committed by the Taxing Authority; (3) Where the information is derived from anexternal source of any kind. Such external sourcewould include discovery of new and importantmatters or knowledge of fresh facts which were notpresent at the time of the original assessment; (4) Where the information may be obtained evenfrom the record of the original assessment from aninvestigation of the materials on the record, or thefacts disclosed thereby or from other enquiry orresearch into facts or law. If these conditions are satisfied then the Income-tax officerwould have complete jurisdiction to re-open the originalassessment. It is obvious that where the Income-tax officer getsno subsequent information, but merely proceeds to re-open theoriginal assessment without any fresh facts or materials orwithout any enquiry into the materials which form part of theoriginal assessment, s. 34(1) (b) would have no application. 11.The Supreme Court, however, in Indian Eastern Newspaper Society Vs. Commissioner of Income Tax[3]held that the viewexpressed by a two Judge Bench of the Apex Court in KalyanjiMavji (Supra) that income escaping assessment due to "oversight,inadvertence or mistake" by the Income Tax Offcer must fallwithin section 34(1)(b) of the Indian Income Tax Act, 1922 did notlay down correct law in the light of the view expressed by the ApexCourt in Maharaj Kamal Singh v. Commissioner of Income Tax[4]and Commissioner of Income Tax v. Raman & Company [5]. 12.It is equally settled as held in Income-tax Offcer Vs.Lakhmani Mewal Das[6]that the duty and responsibility of theassessee is only to make a full and true disclosure of the primaryfacts while it is for the AO to draw the correct inference from thoseprimary facts and that it is not the responsibility of the assessee 31979 ITR 996 SC4[1959] Sup. 1 SCR 104[1959] Sup. 1 SCR 10 5 [1968] 1 SCR 10 6[1976] 103 itr 437 to advise the Income-tax Offcer with regard to the inference whichhe ought to draw from those primary facts. 13.In the present case, it can be seen that a return of incomewas fled by the petitioner for the assessment year 2010-11declaring a loss of Rs.4,27,46,522/-. In the computation ofincome, the petitioner added back an amount of Rs.1.81 Crore tothe business income and did not claim the said amount asdeduction in computing its taxable income. 31979 ITR 996 SC4[1959] Sup. 1 SCR 104[1959] Sup. 1 SCR 10 5 [1968] 1 SCR 10 6[1976] 103 itr 437 to advise the Income-tax Offcer with regard to the inference whichhe ought to draw from those primary facts. 13.In the present case, it can be seen that a return of incomewas fled by the petitioner for the assessment year 2010-11declaring a loss of Rs.4,27,46,522/-. In the computation ofincome, the petitioner added back an amount of Rs.1.81 Crore tothe business income and did not claim the said amount asdeduction in computing its taxable income. The case set up by the petitioner is that for thefnancial year 2009-10, relevant to the assessment year2010-11, the petitioner carried out a physical verifcation ofits assets and realized that the assets worth Rs.1.18 crores,which were shown in the books of the petitioner, were notavailable with the petitioner, and accordingly, it wrote offRs.1.81 crores in the proft and loss account for the saidfnancial year. Return of income was then fled declaring aloss of Rs.4,27,46,522/-. In the computation of income, thepetitioner added back the said amount of Rs.1.81 crore withthe business income and did not claim it as a deduction incomputing its taxable income but claimed depreciation onthe basis of written down value of the assets. The return was accompanied by a computation of the total income, balance-sheet, audit report under section 44AB in Form No.3CB and3 CD, and Proft and Loss Account. 14.On 13[th] February 2014, pursuant to the queries raisedduring personal hearing, the assessee claims that it submitteddetails regarding the list of assets written off during the relevantfnancial year. It was, thus, urged that all the material had beenplaced before the Assessing Offcer, including the fact that thepetitioner had written off fxed assets of the value of Rs.1.81 Croreas also the fact that it had made a claim on account ofdepreciation. 15.From the aforementioned facts, it is, thus, clear from therecord that the Assessing Offcer did enquire into the claim ofdepreciation and had called for certain details with regard to theassets written of, which were supplied with the Assessing Offcer,and only then, the Assessing Offcer passed the order ofassessment under section 143(3) of the Act and did not make anydisallowance in regard to the claim of depreciation. All thematerial facts, therefore, were certainly before the AssessingOffcer and notwithstanding the fact that the order of assessment does not specifcally discuss the issue, yet must be deemed tohave been considered and allowed. 16.In Kelvinator of India Limited(Supra), a Full Bench of theDelhi High Court held : “ ….We also cannot accept submission of Mr.Jolly to the effect that only because in theassessment order, detailed reasons have not beenrecorded on analysis of the materials on the recordby itself may justify the Assessing Officer to initiatea proceeding under section 147 of the Act. The saidsubmission is fallacious. An order of assessmentcan be passed either in terms of sub-section (1) ofSection 143 or Sub-section (3) of Section 143.When a regular order of assessment is passed interms of the said sub-section (3) of section 143 apresumption can be raised that such an order hasbeen passed on application of mind.” 17.It can also be seen from the reasons recorded that there was no new material which had come to the notice of the Assessing Offcer and the entire reference in the reasons recorded is only tothe material on record. 18.In Jindal Photo Films Ltd. Vs. Deputy Commissioner of Income Tax [7], the Court, in the background of section 147 of theAct, observed : “……………….all that the Income-tax Officer has 17.It can also be seen from the reasons recorded that there was no new material which had come to the notice of the Assessing Offcer and the entire reference in the reasons recorded is only tothe material on record. 18.In Jindal Photo Films Ltd. Vs. Deputy Commissioner of Income Tax [7], the Court, in the background of section 147 of theAct, observed : “……………….all that the Income-tax Officer has said is that he was not right in allowing deductionunder Section 80I because he had allowed thedeductions wrongly and, therefore, he was of theopinion that the income had escaped assessment.Though he has used the phrase "reason to believe" inhis order, admittedly, between the date of the ordersof assessment sought to be reopened and the date offorming of opinion by the Income-tax Officer nothingnew has happened. There is no change of law. Nonew material has come on record. No information hasbeen received. It is merely a fresh application of mindby the same Assessing Officer to the same set of facts.While passing the original orders of assessment theorder dated February 28, 1994, passed by theCommissioner of Income-tax (Appeals) was beforethe Assessing Officer. That order stands till today.What the Assessing Office has said about the order ofthe Commissioner of Income-tax (Appeals) whilerecording reasons under Section 147 he could havesaid even in the original orders of assessment. Thus,it is a case of mere change of opinion which does notprovide jurisdiction to the Assessing Officer to initiateproceedings under Section 147 of the Act. It is also equally well settled that if a noticeunder Section 148 has been issued without thejurisdictional foundation under Section 147 beingavailable to the Assessing Officer, the notice and thesubsequent proceedings will be without jurisdiction,liable to be struck down in exercise of writjurisdiction of this court. If "reason to believe" beavailable, the writ court will not exercise its power ofjudicial review to go into the sufficiency or adequacyof the material available. However, the present one isnot a case of testing the sufficiency of materialavailable. It is a case of absence of material andhence the absence of jurisdiction in the AssessingOfficer to initiate the proceedings under Section147/148 of the Act.” 19.Testing the facts of the present case on the touchstone of thejudgments (Supra), it can be seen that there was no new materialin the possession of the Assessing Offcer. Nothing new hadhappened, neither was there any change in the applicable law,which would have warranted the reopening of the case. It clearlysuggests that in the garb of reopening the assessment, theAssessing Offcer was reviewing the earlier order of assessment. Inthe absence of any new tangible material available with theAssessing Offcer, and in view of the fact that there is a generalpresumption that an order of assessment under section 143(3)has been passed after proper application of mind and consideringthe fact that in the present case, the Assessing Offcer had soughtclarifcation with regard to the assets which had been written off,details whereof were submitted during the course of theproceedings, it certainly goes to show that the issue with regard todepreciation had been gone into by the said Assessing Offcerwithout making any disallowance as regards the claim of thedepreciation. 20.In the light of the above, we have no hesitation in holdingthat the reassessment proceedings were nothing but a case of ‘change of opinion’, which does not comply with the jurisdictionalfoundation under section 147 of the Act. Be that as it may the impugned notice dated 24[th]February 2015 as also the impugned order dated 23[rd]January 2016 disposing of the objections are set aside. 21.The petition is allowed accordingly. No costs. [ KAMAL KHATA, J. ] [DHIRAJ SINGH THAKUR, J.]