Wp/129/2022 Of Housing Development Finance Corporation Ltd v. Deputy Commissioner Of Income Tax Circle-1(1) And 3 Ors

Digitallysigned byPURTIPURTIPRASADPRASADPARAB IN THE HIGH COURT OF JUDICATURE AT BOMBAYPARABDate:2022.02.21 ORDINARY ORIGINAL CIVIL JURISDICTION10:52:40+0530 WRIT PETITION NO. 129 OF 2022 Housing Development Finance Corporation Ltd. V/s. Deputy Commissioner of Income Tax Circle 1(1)(1), Mumbai and Ors. ….Petitioner …Respondents ---- Mr. Nitesh Joshi i/b Mr. Atul K. Jasani for Petitioner.Mr. Suresh Kumar for Respondents. ---- CORAM : K.R. SHRIRAM & N. J. JAMADAR, JJ. DATED : 15[th] FEBRUARY, 2022 P.C. : 1.Petitioner is impugning a notice dated 31[st] March, 2021 issuedunder Section 148 of the Income Tax Act, 1961 (the Act) for A.Y. 2013-14alongwith order dated 15[th] November, 2021 rejecting the objections. 2.Mr. Joshi’s submissions are - (a) Notice under Section 148 ofthe Act is unsigned. In the notice digital signature is missing. Mr. Joshi says even manually signed notice has not been served and on this ground alonethe notice has to be set aside, and (b) The reasons recorded clearlyindicate change of opinion which is not permissible in law to re-open theassessment. 3.On the first point of no digital signature or manual signature inthe notice issued under Section 148 of the Act, we have to observe that in another matter, viz., Writ Petition No.11 of 2022 also the same officerMr.Neeraj Kumar Agarwal, Circle 1(1)(1) Mumbai had issued the noticewhere there was no digital signature. 4.On the second argument of Mr. Joshi that reasons are based onchange of opinion, having considered the reasons recorded we are inagreement with Mr. Joshi. The relevant portions of the reasons are as under: “xxxxxxx In the assessment, the assessing office had reworked the ratioof above mentioned allocation of expenses. In respect ofinterest expenses the ratio was reduced to 59.77:40.23treating part of interest cost relatable to tax free income andcapital gains as well. In respect of other expenses (such asstaff expenses, establishment expenses and othermiscellaneous expenses) due to non submission of specificdetails by the assessee, 80% of such expenses were adopted tobe relatable to main business before tax at Rs.2805,07,20,574and allowed deduction of Rs.561,01,44,115 u/s. 36(1)(iii)computed at 20% of 2805,07,20,574. On verification of the records, it was observed that theAssessing Officer, vide para no. Para 3.10 and 3.13 ofAssessment Order had discussed that the incidental chargesreceived by the assessee amounting to Rs.8,50,04,633 was notan income derived from its main business hence was requiredto be excluded for the purpose of computing deduction u/s36(1)(viii). However, while computing the income from themain business, it remained included in the income from mainbusiness eligible for the said deduction (point no.9 ofAnnexure A of the Assessment Order). xxxxxxx However the Assessing Officer, although applied ratio of 90%in respect of other components of the other expenses did notallocate any portion of the aforesaid provision under income ofmain business at all the entire amount of this provision wasshown as a deduction against the other income only. This ledto enhanced profit before tax and thereby excess computation of deduction u/s. 36(i)(vii) to the extent of allocation not donethen the said provision. xxxxxxx As the housing finance was the main business of the assessee ithad himself allocation part of the provisions against the mainbusiness made a reduced claim u/s. 36(1)(viii), hence insteadof enhancing this allocation in the ratio of 80% adopted by itfor other expenses, the treatment given by the department tonot allocate any portion of this provision to main business wasnot in order. This resulted in enhanced profit before tax underthe head of main business by at least the amount alreadyallocated by assessee i.e., Rs.100,63,00,000. xxxxxxx” of deduction u/s. 36(i)(vii) to the extent of allocation not donethen the said provision. xxxxxxx As the housing finance was the main business of the assessee ithad himself allocation part of the provisions against the mainbusiness made a reduced claim u/s. 36(1)(viii), hence insteadof enhancing this allocation in the ratio of 80% adopted by itfor other expenses, the treatment given by the department tonot allocate any portion of this provision to main business wasnot in order. This resulted in enhanced profit before tax underthe head of main business by at least the amount alreadyallocated by assessee i.e., Rs.100,63,00,000. xxxxxxx” 5.From the quoted portion above, it is obvious that the officerwho proposes to re-open the assessment has a different opinion on theassessment order passed. It is settled law that the Assessing Officer haspower to re-open the assessment under Section 147 of the Act providedthere is a tangible material to come to a conclusion that there is escapementof income from assessment. Further when a power under Section 147 of theAct is to be exercised, concept of change of opinion must be treated as aninbuilt test to check abuse of power of Assessing Officer and hence “reasonto believe” in context of Section 147 of the Act cannot be bound on merechange of opinion of Assessing Officer. It is also settled law that oversight,inadvertence or mistake of Assessing Officer or error discovered by him onthe reconsideration of material is mere change of opinion and does not givehim power to re-open the concluded assessment. [Dell India (P.) Ltd. vs.Joint Commissioner of Income Tax, LTU, Bangalore1] 1 [2021] 123 taxmann.com 468 (Karnataka) 6.In the circumstances, we are satisfied that it is a fit case to interfere by this court in its jurisdiction under Article 226 of the Constitution of India. Therefore, petition is allowed in terms of prayer clause – (a) which reads as under : (a)that this Hon’ble Court may be pleased to issue awrit of Certiorari or a writ in the nature of Certiorari or anyother appropriate writ, order or direction under Article 226 ofthe Constitution of India calling for the records of thePetitioner’s case and, after examining the legality and validityof the impugned notice dated 31.03.2021 issued undersection 148 of the Act (being Exhibit ‘K’ hereto) and theimpugned order dated 15.11.2021 (being Exhibit ‘O’ hereto)quash and set aside the same. 7.Petition disposed. (N. J. JAMADAR, J.) (K.R. SHRIRAM, J.)