The Tinplate Company Of India Ltd v. Deputy Commissioner Of Income Tax

OD 5 ORDER SHEET WPO 575 of 2017IN THE HIGH COURT AT CALCUTTACONSTITUTIONAL WRIT JURISDICTIONORIGINAL SIDE THE TINPLATE COMPANY OF INDIA LTD Vs DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 3(1), KOLKATA & ORS. BEFORE: The Hon’ble JUSTICE MD. NIZAMUDDINDate : 15[th] June, 2022 Mr. J.P. Khaitan, Sr. Adv.Ms. Nilanjana Banerjee Pal, Adv.…for the petitionerMr. Dhiraj Trivedi, Asst. S.G.Mr. Amit Sharma, Adv.…for the respondents The Court: Heard learned counsel appearing for the parties. In this writ petition petitioner has challenged the impugnednotice under Section 148 of the Income Tax Act, 1961, dated 31[st]March, 2017, relating to assessment year 2010-11 and the impugnedorder dated 13[th] September, 2017 rejecting the petitioner’s objectionto the aforesaid impugned notice under Section 148 and theproceedings under Section 147 of the Income Tax Act, 1961. Recordedreasons for reopening of assessment under Section 147 of the Act asappears at page 140 of the writ petition are as follows : “Reasons for the belief that Income has escaped assessment “For the Financial year 2009-10 relevant to the assessmentyear 2010-11, the assessee had debited a sum of Rs. 21,09,18,000/-to the P & L Account under the head “interest”. A part of the borrowedfund was utilized by the assessee in acquiring fixed assets underCapital Work in Progress (CWIP). The proportion of CWIP to fixedassets for the FY 2009-10 in case of the assessee company comes outto 61.85%. Hence, proportionate interest that was required to bedisallowed u/s 36(i)(iii) of the Income-tax Act, 1961 in the assessmentorder u/s 143(3) (in proportion of CWIP to fixed assets) should havebeen Rs. 13.04 crore. However, only a sum of Rs. 8.98 crore wasadded back to the income of the assessee in the scrutiny assessmentorder dated 29.03.2013. It is pertinent to note that no part of theinterest expense debited to the P & L Account has been capitalized bythe assessee in its books of accounts for the relevant assessment year.Disallowance of the sum of Rs. 8.98 crore only u/s 36(i)(iii) instead ofRs. 13.04 crore in the assessment order has resulted in escapement ofincome amount of Rs. 4.06 crore (13.04 crore less 8.98 crore). In viewof the same I have reasons to believe that income to the tune of Rs.4.06 crore has escaped assessment for the AY 2010-11 and needs tobe re-assessed.” Admittedly impugned reassessment proceeding under Section147 of the Act has been initiated after expiry of four years from theend of the relevant assessment year. Petitioner challenging theaforesaid impugned assessment proceeding submits that impugned notice under Section 148 and the proceedings under Section 147 ofthe Act is bad in law since it does not fulfil the criteria for reopeningof reassessment after expiry of four years from the end of relevantassessment year that in addition to escapement of income additionalduty cast upon the assessing officer is to establish that theescapement was due to omission or failure on the part of the assesseeto disclose fully or truly necessary material facts necessary for theassessment and that some new material facts have come to hispossession which was not made available by the assessee at the timeof regular assessment. It is also admitted position that in this case regular assessmentunder Section 143(3) of the Act was made and it is not a case ofsummary assessment. It also appears on perusal of the recordedreasons that the successor of the assessing officer who intends toinvoke the provisions of Section 147 of the Act on the ground and bytaking a view that the disallowance which was made under Section36(i)(iii) of the Act in course of regular assessment should have beenmore than the amount which has been disallowed in the originalassessment made by his predecessor. It is also admitted position that in this case regular assessmentunder Section 143(3) of the Act was made and it is not a case ofsummary assessment. It also appears on perusal of the recordedreasons that the successor of the assessing officer who intends toinvoke the provisions of Section 147 of the Act on the ground and bytaking a view that the disallowance which was made under Section36(i)(iii) of the Act in course of regular assessment should have beenmore than the amount which has been disallowed in the originalassessment made by his predecessor. In my considered view, this is a clear case of change of opinion.Furthermore from the recorded reasons it appears that nowhereassessing officer has been able to make out a case that there was anyomission or failure on the part of the petitioner to disclose fully andtruly the necessary material facts on the basis of which predecessor of the assessing officer has formed an opinion for disallowing lesseramount under Section 36(i)(iii) of the Income Tax Act in theassessment order under Section 143(3) of the Income Tax Act, 1961.Assessing officer in his recorded reasons also could not make out acase that the basis of reopening the assessment in question is somenew material which came into his possession subsequently and whichwas not available or was undisclosed or suppressed by theassessee/petitioner in course of regular assessment. From therecorded reason it appears that one of the grounds for reopening ofthe assessment is that in regular assessment there was mistake ofcalculation in disallowance under the aforesaid provisions of the Actto which I am of the view that if at all there was anyclerical/arithmetical mistake apparent from record then recourse wasavailable to the assessing officer by way of rectification under Section154 of the Income Tax Act, 1961 and that cannot be a ground ofreopening of an assessment for correcting a mistake in calculation ofan amount of disallowance causing alleged escapement of income. Mr. Khaitan, learned senior counsel appearing for theassessee/petitioner relies on a decision of this Court in the case ofCalcutta Club Ltd. vs. Income-Tax Officer and Ors. reported in(2020) 426 ITR 157 (Cal) particularly paragraph 30 of the saidjudgment which is quoted hereunder : “30. Considering the submission of the parties, the relevantrecords, provisions of law and the decisions relied upon by the parties, in my considered view the impugned notices under Section 148 of theIncome-tax Act, 1961 and the proceedings under Section 147 of theAct are not sustainable in law and should be quashed for the reasonthat admittedly the impugned proceeding initiated under section 147and notices issued under section 148 of the Income-tax Act, 1961,which were issued after the expiry of four years from the end of therelevant assessment year and in view of the fact that there is nowhispering in the recorded reason that there was any omission orfailure on the part of the assessee in disclosing fully and tryly materialfacts for assessment and in view of the fact that the Assessing Officercould not establish that the information of alleged escaped incomewas not within his knowledge and was not considered at the time ofpassing of the assessment order under Section 143(3) of the Income-tax Act, 1961 and it came to his knowledge subsequent to theassessment order passed under section 143(3) of the Income-tax Act,1961 and that the subsequent decision of the Hon’ble Supreme Courtreversing the legal position prevailing at the time of regularassessment cannot be called an omission or failure on the part of theassessee in disclosing fully and truly the material facts necessary forthe relevant assessment.” He also relies on a decision of the Hon’ble Supreme Court in the case of Income-Tax Officer vs. Techspan India Private Ltd. andAnother reported in (2018) 404 ITR 10 (SC) particularly paragraph13 of the said judgment which is quoted hereunder : He also relies on a decision of the Hon’ble Supreme Court in the case of Income-Tax Officer vs. Techspan India Private Ltd. andAnother reported in (2018) 404 ITR 10 (SC) particularly paragraph13 of the said judgment which is quoted hereunder : “13. The fact in controversy in this case is with regard to thededuction under section 10A of the Income-tax Act which ws allegedlyallowed in excess. The show-cause notice dated February 10, 2005reflects the ground for reassessment in the present case, that is, thededuction allowed in excess under section 10A and, therefore, theincome has escaped assessment to the tune of Rs. 57,36,811. In theorder in question dated August 17, 2005, the reason purportedly givenfor rejecting the objections was that the assessee was no maintainingany separate books of account for the two categories, i.e., softwaredevelopment and human resource development, on which it hasdeclared income separately. However, a bare perusal of notice datedMarch 9, 2004 which was issued in the original assessmentproceedings under section 143 makes it clear that the point on whichthe reassessment proceedings were initiated was well considered inthe original proceedings. In fact, the very basis of issuing the show-cause notice dated March 9, 2004 was that the assessee was notmaintaining any separate books of account for the said two categoriesand the details filed do not reveal proportional allocation of commonexpenses be made to these categories. Even the said show-causenotice suggested how proportional allocation should be done. All thesethings lead to an unavoidable conclusion that the question as to howand to what extent deduction should be allowed under section 10A ofthe Income-tax Act was well considered in the original assessmentproceedings itself. Hence, initiation of the reassessment proceedings under section 147 by issuing a notice under section 148 merelybecause of the fact that now the Assessing Officer is of the view thatthe deduction under Section 10A was allowed in excess, was based onnothing but a change of opinion on the same facts and circumstanceswhich were already in his knowledge even during the originalassessment proceedings.” Learned counsel appearing for the respondent Income TaxAuthority submits that this Court should not interfere with thereassessment proceeding under Section 147 of the Act since noprocedural irregularity has been committed by the assessing officerand there was escapement of income due to wrong claim made by theassessee/petitioner. Such submission is not convincing and afterperusing original assessment order under Section 143(3) of the Act aswell as recorded reason for impugned reopening of the assessmentand considering the submissions of the parties, relevant recordsavailable and judgments relied upon by the petitioner I am of theconsidered view that the impugned notice under Section 148 of theIncome Tax Act, 1961 and the proceeding under Section 147 of the Actare not sustainable in law and are liable to be quashed for the reasonthat the respondent assessing officer has been failed to make out anycase that the alleged escapement of income was due to any omissionor failure on the part of the assessee/petitioner in disclosing fully andtruly the material facts necessary in course of regular assessment. Inthe facts and circumstances of the case in my considered view it is a clear case of change of opinion since the materials which were alreadyavailable at the time of regular assessment and which were alreadyconsidered by the assessing officer at the time of regular assessment,on the basis of very same material and not on any another newmaterial assessing officer wants to take a different view which is notpermissible for reopening of an assessment particularly proceedingsafter regular assessment and after expiry of four years from the end ofthe relevant assessment year. clear case of change of opinion since the materials which were alreadyavailable at the time of regular assessment and which were alreadyconsidered by the assessing officer at the time of regular assessment,on the basis of very same material and not on any another newmaterial assessing officer wants to take a different view which is notpermissible for reopening of an assessment particularly proceedingsafter regular assessment and after expiry of four years from the end ofthe relevant assessment year. In view of the discussion made above, the impugned noticeunder Section 148 of the Act dated 31[st] March, 2017 and allsubsequent proceedings on the basis of aforesaid impugned noticerelating to assessment year 2010-11 are quashed. Accordingly, this writ petition being WPO 575 of 2017 isdisposed of by allowing the same. There will be no order as to costs. TR/ (MD. NIZAMUDDIN, J.)