Wp/1427/2022 Of Ponds Exports Limited v. Principal Chief Commissioner Of Income Tax (Nfac) And 3 Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYPURTIPRASAD ORDINARY ORIGINAL CIVIL JURISDICTIONPARABDigitally signed byPURTI PRASADPARABDate: 2023.11.09WRIT PETITION NO. 1427 OF 202211:26:55 +0530 Ponds Exports Limited ….Petitioner V/s.Principal Chief Commissioner of Income Tax (NFAC) and Ors.…Respondents ---- Ms. Sofiya Shanmugam i/b Lumiere Law Partners for Petitioner.Mr. Suresh Kumar for Respondents. ---- CORAM : K.R. SHRIRAM & DR. NEELA GOKHALE, JJ. DATED : 7[th] NOVEMBER 2023 P.C. : 1. Since the pleadings are completed, with the consent of counsel we decided to take up the petition for final hearing at the this stage itself. 2.Rule. Rule made returnable forthwith. 3.Petitioner has impugned a notice dated 30[th] March 2021 issuedunder Section 148 of the Income Tax Act, 1961 (the Act) and the orderdated 15[th] December 2021 rejecting petitioner’s objections. 4.According to petitioner, the reopening is bad in law in as much as there is nothing in the reasons recorded to believe there is escapement ofincome that indicates failure to truly and fully disclose material facts bypetitioner. 5.This was a case where petitioner had filed its return of incomefor Assessment Year 2014-15 on 28[th] November 2014 admitting NIL income.The case was selected for scrutiny under CASS and the assessment wascompleted under Section 143(3) of the Act on 28[th] December 2016 afteraccepting the returned income. Almost six years later the notice underSection 148 of the Act has been issued and the reasons for reopening reads as under : 1. As seen from the Profit and Loss A/c. (Notes 26 - MovementEmployees Benefits Expenses), the assessee had debited provisionfor employee related disputes to the extent of Rs.3,10,00,000.However, in the statement of computation of income, whilearriving at the income as per normal provisions, only an amount ofRs.2,80,00,000 was added as VRS employee court cases. As theabove amount of Rs.3,10,00,000 is a provisional liability, theremaining provision debited in the profit and loss account ofRs.30,00,000 needs to be brought to tax. As per section 115JB, any provision created for unascertainedliabilities has to be added back to the book profit. Hence, theprovision for employee related disputed i.e. provision for non-VRSemployees court cases has to be added back to the net profit forcomputing book profit. Hence, an amount of Rs.2,80,00,000/-needs to be brought to tax. Hence, I have reason to believe that income has escapedassessment. 6. 6.The proviso to Section 147 of the Act provides that notice toreopen can be issued only if there is failure to truly and fully disclosed if thenotice is being issued after the expiry of four years from the end of relevant assessment year. The assessment year is A.Y. 2014-15 and the notice isdated 30[th] March 2021. Hence the proviso will apply. 7. From the reasons as quoted above, it is quite clear that the material on which the Assessing Officer (A.O.) has relied upon are thoseavailable from the documents filed by petitioner. The reasons state “As seenfrom the Profit & Loss Account (Notes 26 – Movement Employee BenefitsExpenses), assessee had debited provision for employee related disputes tothe extent of Rs.3,10,00,000. However, in the statement of computation ofincome, while arriving at the income as per normal provisions …….. theremaining provision debited in the Profit & Loss Account of Rs. 30,00,000needs to be brought to tax. ………” assessment year. The assessment year is A.Y. 2014-15 and the notice isdated 30[th] March 2021. Hence the proviso will apply. 7. From the reasons as quoted above, it is quite clear that the material on which the Assessing Officer (A.O.) has relied upon are thoseavailable from the documents filed by petitioner. The reasons state “As seenfrom the Profit & Loss Account (Notes 26 – Movement Employee BenefitsExpenses), assessee had debited provision for employee related disputes tothe extent of Rs.3,10,00,000. However, in the statement of computation ofincome, while arriving at the income as per normal provisions …….. theremaining provision debited in the Profit & Loss Account of Rs. 30,00,000needs to be brought to tax. ………” 8.In the affidavit in reply filed through one Ms. R.P. Anuradhaaffirmed on 30[th] October 2023 it is admitted that assessee has furnishedcomplete details, information, documentary evidences and explanation asrequired by the learned A.O. during the assessment proceedings butstrangely it is stated that the requisite material fact as noted in the reasonsfor reopening were embedded in such a manner that material evidencecould not be discovered by the A.O. This is nothing but a bald statementbecause the reasons itself indicates that the material fact was picked upfrom the Profit & Loss Account Notes 26 and the statement of computationof income while arriving at the income as per normal provisions. Thereasons does not also state that the material fact was embedded in such amanner that material evidence could not be discovered. It is settled lawthat what is not there in the reasons cannot be improved upon in theaffidavit or during the course of argument. 9.In the circumstances, we are satisfied that there is nothing to indicate failure on the part of assessee to truly and fully disclose material fact. 10.Therefore, Rule is made absolute in terms of prayer clause – (a) which reads as under : (a) that this Hon’ble Court be pleased to issue a Writ of Certiorarior any other writ order or direction under Article 226/227 of theConstitution of India calling for the records of the case leading tothe issue of the Impugned Notice dated March 30, 2021 (ExhibitE), issuance of Impugned Scrutiny Notice dated November 15,2021 (Exhibit J) and passing of the Impugned Order datedDecember 15, 2021 (Exhibit L) and after going through the sameand examining the question of legality thereof quash, cancel andset aside the Impugned Notice dated March 30, 2021 (Exhibit E),Impugned Scrutiny Notice dated November 15, 2021 (Exhibit J)and Impugned Order dated December 15, 2021 (Exhibit L); 11.Petition disposed. (DR. NEELA GOKHALE, J.) (K.R. SHRIRAM, J.)