The Cbdt v. Acit (2004) 268 Itr 339 (Bom), (4) Grindwell Norton

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 621 OF 2005 .WITHWRIT PETITION NO. 619 OF 2005. M/s German Remedies Ltd. V/s. Dy. Commissioner of Income-Tax. .. Respondent. .. Petitioners. Shri Ajay Singh for the petitioner. Shri A.S. Rao for the respondent. CORAM : V.C.DAGA AND J.P. DEVADHAR, JJ. DATED : 28.10.2005. ORAL JUDGMENT (Per V.C.Daga,J.) the petitioners to reopening their completed assessments. orders are common; so this common judgment shall dispose of both petitions. .The facts necessary to appreciate rival contentions are taken from Writ Petition 619/2005, wherein assessment year involved is 1998-99. The Facts: 3.The petitioners are the public Limited was filed on 29.11.1998. The last date of the assessment year was 31.3.1998.. 4.The assessment order was passed under which came to be served on the petitioners on 8.10.2003. 5.The petitioners responded to the notice to file writ petition being Writ Petition No. 3065of 2004. On being noticed, respondent- departmentappeared and disclosed reasons vide their affidavitdated 17.1.2005 for reopening assessment undersection 148 of the Act. In view of the disclosureof reasons; petitioners were permitted to fileobjections, within two weeks from the date of theorder dated 18.1.2005, with the respondents toobject to reopen the assessment. The petition came to be disposed of. The reasons disclosed are as under: "(i) Expenses on interest, royalty, consultancy and analytic fees in the foreign currency wereallowed though there is no evidence on record toshow that tax had been deducted before remittance ofthe same. U/s 40(a) of the Act, the payments inforeign currency are allowed in the year in whichtax has been deducted. (ii)Central excise duty and customs duty payableon finished goods for the year is not taken intoaccount in valuing closing stock resulting intounder assessment." 6.The objections to the reasons recorded weredecided by the respondent No.1 vide its order dated18.2.2005; whereby objections raised came to be 8.On being noticed, respondents appeared in this petition and filed their counter affidavit and tried to justify their action. Submissions: Assessing Officer. That power cannot be exercised casually, in a routine and perfunctory manner. justify formation of belief that the income of the petitioners had escaped assessment. 13. The learned Counsel further submits that has been issued contrary to the circular issued by the CBDT No. 549 dated 31.3.1989. appeal for A.Y. 1998-99; which was allowed by theFirst Appellate Authority and also the Tribunalbased on the decision of this Court in the case ofC.I.T. vs. Indo Nippon vs. which was subsequentlyaffirmed by the Apex Court in the judgment reportedin (2003) 261 ITR 275. Petitioners have placedreliance on various judgments of this Court as wellas of the Apex Court in the cases of (1) CaprihensIndia Ltd. vs. Tarun Seem- (2004) 266 ITR 566(Bom), (2) CIT vs. Farmer France- (2004) 264 ITR566 (SC), (3) Hindustan Lever Ltd vs.R.B. Wadkar, ACIT (2004) 268 ITR 339 (Bom), (4) Grindwell Norton Ltd. vs. ACIT (2004) 267 ITR 673 (Bom) Per Contra: 15.The Learned Counsel appearing for theRevenue submits that notice under section 148 of theAct was issued after recording reasons for reopeningof the assessment. He further submits that section149 (1)(b) empowers the respondents to reopen theassessment with prior approval of the Commissionerof Income Tax under section 151(1) of the Act. He further submits that there was no evidenceonrecord to show that TDS had been deducted aftermaking payment under section 40 (a) of the Act. Hefurther submits that since the assessee had failed Commissioner of Income tax on 15.9.2003 with file for taking his prior approval. ACIT (2004) 268 ITR 339 (Bom), (4) Grindwell Norton Ltd. vs. ACIT (2004) 267 ITR 673 (Bom) Per Contra: 15.The Learned Counsel appearing for theRevenue submits that notice under section 148 of theAct was issued after recording reasons for reopeningof the assessment. He further submits that section149 (1)(b) empowers the respondents to reopen theassessment with prior approval of the Commissionerof Income Tax under section 151(1) of the Act. He further submits that there was no evidenceonrecord to show that TDS had been deducted aftermaking payment under section 40 (a) of the Act. Hefurther submits that since the assessee had failed Commissioner of Income tax on 15.9.2003 with file for taking his prior approval. 17.The second affidavit is that of Shri granted approval to the proposal on the same day i.e. 15.9.2003. 18.In rejoinder,the petitioner submits that the (188) ITR 44 (SC), as such the power to reopen exercised by the Revenue is bad and illegal. Consideration: the first reason pressed into service to reopen is unsustainable. 20. So far as second reason for issuing notice valuation not closing stock as laid down by the Apex Court in the case of British Paints India (supra). 21. The very same judgment has been followed in the decision of this Court in the case of Indo Nippon (supra). 22.In the above circumstances, the reasons mentioned are unsustainable. Those reasons do not lead to formation of belief that income has escaped assessment for a.y. 1998-99. (13) facts in the return of inocome filed for theassessment of income of that assessment year. Itwas also obligatory on the part of the Commissionerto consider whether or not power to reopen is beinginvoked within a period of 4 years from the end ofthe assessment year to which they relate. None ofthese aspects have been considered by him which issufficient to justify the contention raised by thepetitioner that the approval granted suffers fromnon-application of mind . In the above view of thematter, the impugned notices and consequently the order justifying reasons recorded are unsustainable. The same are liable to be quashed and set aside. 25.In the result, the petitions are allowed. Rule made absolute in each petition with no order as to costs. (J.P. DEVADHAR, J.) (V.C. DAGA,J)