Wp/1410/2022 Of Hindoostan Mills Ltd v. Deputy Commissioner Of Income - Tax. 2(1)(1) And 3 Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 1410 OF 2022 WP-1410-22 1/6 Stadium, Delhi – 110003. CORAM: DHIRAJ SINGH THAKUR KAMAL KHATA, JJ. PRONOUNCED ON : 27THE JUNE 2023 KAMAL KHATA, JJ. JUDGMENT : [PER KAMAL KHATA, J.] 1. This Petition under Article 226 of the Constitution filed on2[nd] March 2022 impugns notice dated 30[th] March 2021issued under section (u/s) 148 of the Income Tax Act, 1961(Act) for Assessment Year (AY) 2014-15 and the order dated14[th] February 2022 disposing of the objections raised forreassessment.2[nd] March 2022 impugns notice dated 30[th] March 2021issued under section (u/s) 148 of the Income Tax Act, 1961(Act) for Assessment Year (AY) 2014-15 and the order dated14[th] February 2022 disposing of the objections raised forreassessment. 2. The record indicates that the notice dated 30[th] March 2021u/s 148 of the Act is issued after expiry of four years and theproviso to section 147 of the Act applies. Respondents haveto show there was failure to truly and fully disclose materialfacts as decided by this Court in Ananta Landmark (P) Ltd.v DCIT CC 5(3) Mumbai.[1]u/s 148 of the Act is issued after expiry of four years and theproviso to section 147 of the Act applies. Respondents haveto show there was failure to truly and fully disclose materialfacts as decided by this Court in Ananta Landmark (P) Ltd.v DCIT CC 5(3) Mumbai.[1] [2021] 131 taxmann.com 52 3. We have examined the reasons for initiation of proceedings u/s 147 of the Act annexed to the Petition that are evidentlypremised on the statement ‘It is seen from the case records”.The Assessment Officer (AO) recorded that: “2. .... the assessee had claimed set off of broughtforward loss of 5,63,29,331 (to the extent of income)�and claimed ‘carry forward’ of remaining loss of AY2011-12 of �72,15,93,165 ( 77,79,22,496 less��5,63,29,331) which was accepted during scrutinyassessment. It is seen from the case records of AY-2011-12that, the total ‘carry forward’, claimed by the assesseeduring AY 2011-12 was of 88,20,53,360, which was�claimed after ‘set off’ of ‘brought forward’ losses of�95,39,09,867 (incorrectly claimed as 95,39,99,867).This loss included ‘business loss’ of 93,40,99,039 i.e.�total of (� 55,82,30,163 for AY 2003-04 and�37,58,68,876 for AY 2004-05) pertaining to theamalgamated unit M/s. The Hindoostan Spinning andWeaving Mills Ltd. 2(a)Further it is seen from the order u/s 263 dated21[st] March 2016, the Pr. CIT had directed theAssessing Officer to verify the fact existing in the caseof ‘amalgamating’ as well as ‘amalgamated company’with reference to the conditions laid down in Section72A(2)(a) and (b) of the Act and decide about theallowable ‘carry forward’ and ‘set off’ of accumulatedloss and unabsorbed depreciation allowance ofWP-1410-22 3/6wadhwa Hindoostan Spinning and Weaving Mills Ltd. in theamalgamated company. On the basis of this order, casewas reopened for AY 2011-12 and order u/s 143(3)r.w.s. 263 of the Act was passed on 27[th] December2016 wherein vide para 6.3 the assessing officer hasconcluded that as per section 72A(2) of the Act, thelosses on amalgamation get fresh life for further 8years from the date of amalgamation. Thus, it is simply clear from the reading of 72A(2) ofthe Act that, though the ‘carried forward’ losses ofamalgamated company will become the loss ofamalgamated company in the year of amalgamation,but other provisions of the Act (viz. ‘carry forward’ ofa maximum period of 8 years) will apply accordingly.Hence the amalgamated company will be entitled forthe claim for only the unexpired period and not full 8years afresh. Hence the assessee is not entitled for setoff of losses of M/s The Hindoostan Spinning and--Weaving Mills for AY 200304 and AY 200405 as ithas exceeded the period of carry forward of 8 years asprescribed in Section 72(3) of the Act....” 4. Upon examination of the recorded reasons, we find nothing Thus, it is simply clear from the reading of 72A(2) ofthe Act that, though the ‘carried forward’ losses ofamalgamated company will become the loss ofamalgamated company in the year of amalgamation,but other provisions of the Act (viz. ‘carry forward’ ofa maximum period of 8 years) will apply accordingly.Hence the amalgamated company will be entitled forthe claim for only the unexpired period and not full 8years afresh. Hence the assessee is not entitled for setoff of losses of M/s The Hindoostan Spinning and--Weaving Mills for AY 200304 and AY 200405 as ithas exceeded the period of carry forward of 8 years asprescribed in Section 72(3) of the Act....” 4. Upon examination of the recorded reasons, we find nothing to indicate failure to disclose any material fact. Uponexamining the order u/s 143(3) r.w.s 263 of the Act, we findthat the AO has considered all submissions and documentsand accepted the Loss of �88,07,62,670/- to be carriedforward. Furthermore, with regard to section 72A(2) of the 2 Act, he held that the losses on the amalgamated assesseecompany are carried forward and on amalgamation getfresh life for further 8 years from the date of amalgamation.The impugned order dated 14[th] February 2022 rejecting theobjections place reliance on the judgement of the SupremeCourt in the case of Kalyanji Mavji & Co v CIT[2] to contendthat when an income liable to tax has escaped assessment inthe original assessment proceedings ‘owing to inadvertenceor oversight or other lacuna attributable to the assessingauthorities” the case could be reopened. In our view in thefacts of this case this judgement would not be applicablesince it is not inadvertence or oversight or a lacuna butclearly a change of opinion. 5. This passage from the Reply filed by the Respondent on 5[th]May 2022 crystalizes our view:May 2022 crystalizes our view: “…the assessee has claimed losses of amalgamatingcompany, which were not allowable as per the provisions ofthe Act as such losses have already lapsed. Therefore, thefacts reported in the ITR and the submissions made at timeof assessment, the view drawn by the then Assessing Offceris not as per the provisions of Section 72A of the Act. The102 ITR 287 (S.C) incorrect claim of such losses and allowed in the assessmenthas been brought out by the Revenue Audit, which is one ofthe agencies identifying the revenue leakages and hencereopening proceedings have been rightly initiated which iswithin the ambit of law.” 6. There appears no new tangible material available on recordto conclude that income had escaped assessment. In ourview it is clearly an exercise to review the originalassessment order based on a ‘change of opinion’ which isimpermissible as held in CIT v Kelvinator of India Ltd.[3]to conclude that income had escaped assessment. In ourview it is clearly an exercise to review the originalassessment order based on a ‘change of opinion’ which isimpermissible as held in CIT v Kelvinator of India Ltd.[3] 7. In view of all the reasons aforesaid, we pass the followingorder-order- i.The impugned notice dated 30[th] March 2021 and theorder dated14[th] February 2022, issued by RespondentNo.1 for AY 2014-15 are quashed and set aside and allfurther action in respect thereof is prohibited;order dated14[th] February 2022, issued by RespondentNo.1 for AY 2014-15 are quashed and set aside and allfurther action in respect thereof is prohibited; ii. Rule made absolute in above terms. No costs. (KAMAL KHATA, J.) (DHIRAJ SINGH THAKUR,J.) 3 WP-1410-22 6/6wadhwa 320 ITR 561 (S.C)