Unilever Industries Private Limited v. Deputy Commissioner Of Income Tax 1(3) & Another

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.370 OF 2011 Unilever Industries Private Limited..Petitioner. Versus Deputy Commissioner of Income Tax 1(3) & Another..Respondents. Mr.P.J. Pardiwala, Senior Advocate with Mr.Nishant Thakkar i/by Mulla & Mulla & C B & C for the petitioner.Mr.Vimal Gupta for the respondent. CORAM : J.P. Devadhar & A.A. Sayed, JJ. P.C. : DATE : 5[th] July, 2011. 1.Heard. Rule. Rule is made returnable forthwith. By consent, taken up for final hearing. 2.This Petition is filed to challenge the notice dated 26th March 2010 issued under Section 148 of the Income Tax Act, 1961 for reopening of the assessment for the assessment year 2003-04, order dated 22nd November 2010 rejecting the objections raised by the assessee for reopening of the assessment and the re-assessment order dated 26th November 2010 passed under Section 143(3) read with Section 147 of the Income Tax Act, 1961. 3.The reasons recorded for reopening of the assessment reads thus : "The assessee company has distributed dividends to the shareholders after 31-03-2003 (i.e. 23-09-2003) which is covered by Section 115-O of the I.T. Act, 1961. As the assessee company has distributed the dividend after 31-03-2003 (i.e. 23-09-2003), the assessee is not eligible for any deduction u/s.80M during the A.Y. 2003-04. In view of these facts, the deduction u/s.80-M claimed is not in order and has resulted in under assessment of income to the extent of Rs.47,57,125/- within the meaning of section 147 of the I.T. Act, 1961. This is because of failure on the part of the assessee to disclose fully and truly all material facts as stated above necessary for its assessment for A.Y. 2003-04. On perusal of the assessee's submission dated 22-12-2005, it is noticed that under the head miscellaneous expenses, the assessee has claimed patent expenses of Rs.22,21,772/- as revenue expenditure which is not in order. Since it is a capital expenditure, the amount exceeding the depreciation at 25% of this expenditure working out to Rs.16,66,329/- has escaped assessment. This is because of failure on the part of the assessee to disclose fully and truly all material facts as stated above necessary for its assessment for A.Y. 2003-04. I have therefore reasons to believe that the income of Rs.64,23,454/- (47,57,125 + 16,66,329) has escaped assessment under the provisions of Income-tax Act, 1961 for the AY 2003-04 and remedial action by issuance of notice u/s.148 will be appropriate in the case because all the conditions for issue of such notice are fulfilled in this case. Hence, the assessment for A.Y. 2003-04 is hereby re-opened. This assessment is being re-opened with the prior approval of CIT-1, Mumbai vide letter No.CIT-1/Mum/Sanctionu/s.147/2009-10/2233dated 26-3-2010." officer, it is evident that the assessment is being re-opened on two grounds. The first ground is that deduction under Section 80M has been allowed in the original assessment, in spite of the fact that the dividend was distributed after 31[st] March 2003. This fact was known to the assessing officer at the time of assessment. Therefore, it cannot be said that deduction under Section 80M has been allowed to the assessee on account of failure on the part of the assessee to disclose all material facts relevant for the purpose of assessment. 5.As regards the second ground is concerned, the fact that deduction of an expenditure has been allowed (assuming erroneously) would not amount to any failure on the part of the assessee to disclose fully and truly all material facts relevant for the purpose of assessment. 5.As regards the second ground is concerned, the fact that deduction of an expenditure has been allowed (assuming erroneously) would not amount to any failure on the part of the assessee to disclose fully and truly all material facts relevant for the purpose of assessment. 6.In the present case, the assessment is sought to be re-opened beyond four years from the end of the relevant assessment year. As per the proviso to Section 147, assessment beyond four years from the end of the relevant assessment year cannot be re-opened, if there is no failure on the part of the assessee to disclose fully and truly all material facts relevant for the purpose of assessment. In the present case, reasons recorded for re-opening of the assessment do not disclose any failure on the part of the assessee to disclose fully and truly all material facts. In this view of the matter, re-opening of the assessment cannot be said to be valid. Consequently, the impugned notice as well as the orders rejecting the objections and the re-assessment order are quashed and set aside. 8. Rule is made absolute in the above terms with no order as to costs. (A.A. Sayed, J.) (J.P. Devadhar, J.)