Wp/178/2005 Of M/S. Sanghvi Woods Ltd v. R. Andiappan Asst. Commissioner Of Income-Tax Mumbai And Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 178 OF 2005 M/s. Sanghvi Woods Ltd. ….Petitioner V/s.R. Andiappan Asst. Commissioner of IncomeTax Mumbai and Ors. …Respondents ---- Mr. P.J. Pardiwalla, Senior Advocate a/w Mr. Madhur Agrawal i/b Mr. Atul K.Jasani for Petitioner.None for Respondents. ---- CORAM : K.R. SHRIRAM & AMIT B. BORKAR, JJ. DATED : 2[nd] DECEMBER, 2021 P.C. : 1.Petitioner is impugning a notice dated 30[th] March, 2004 issuedunder Section 148 of the Income Tax Act, 1961 (the Act) proposing toreopen petitioner's assessment proceedings for the Assessment Year 1997-98. 2.The petition was admitted on 7[th] March, 2005 and ad-interimrelief in terms of prayer clause (d) which was granted on 1[st ]February,2005 was continued. On 1[st] February, 2005 and 7[th] March, 2005 respondentswere represented by Mr. R.V. Desai, Senior Counsel. Service was waived bythe counsel. Affidavit in reply has also been filed by Respondent No.1. Ashas been happening in most of these ancient matters, respondents areunrepresented to assist the court. Therefore we had to hear the matter only with the assistance of petitioner's counsel. Perhaps respondents’ officers arenot interested in protecting the interest of Revenue for whatever reasons. 3.Petitioner had filed its return of income for the Assessment Year1997-98 on 28[th] November, 1997 in which it declared income ofRs.90,67,500/-. Petitioner had annexed computation of its taxable income,tax audit report under Section 44AB of the Act and copy of annual accountsto the return of income. In its return of income it claimed deduction underSection 80 IA of Rs.15,02,853/- in respect of profits derived from itsUmbergaon Unit. Petitioner's return was originally processed under Section143 (1) of the Act on 16[th] December, 1999 without any adjustment. Later anotice under Section 148 of the Act was issued on 5[th] September, 2000 forreopening for the Assessment Year 1997-98. One of the reasons forreopening being interest of Rs.80,69,288/- shown under Head Office oughtto have been apportioned to all the units including Umbergaon Unit whichhas resulted in reduction of profit of Umbergaon Unit and consequentialdeduction under Section 80 IA of the Act would also be reduced.Petitioner’s assessment was thus taken up for scrutiny and through thescrutiny of assessment Respondent No.1 called for various information.Petitioner complied with requirements of Respondent No.1 and taken astand that the deduction under Section 80 IA of the Act had been claimedafter apportionment of expenditure. The assessment for the Assessment Year1997-98 was thereafter completed under Section 143 (3) read with Section 147 of the Act by order dated 28[th] March, 2002 determining petitioner'stotal income at Rs.1,02,02,250/-. Respondent No.1 allowed the deductionunder Section 80 IA of the Act at Rs.3,67,800/- against petitioner's claim ofRs.15,02,852/-. Petitioner impugned this assessment order before theCommissioner of Income Tax (Appeals) who by an order dated 27[th]December, 2002 allowed the deduction of Rs.15,02,852/- under Section 80IA of the Act as originally claimed by petitioner. 4.In the meanwhile, there was search action under Section132(1) of the Act carried out at the business premises of petitioner on 7[th]November, 2001. Consequently, an order dated 30[th] January, 2004 waspassed under Section 158BC read with Section 143 (3) of the Act for theblock period 1[st] April, 1995 to 5[th] January, 2002 holding that petitioner hadnot satisfied the conditions laid down in Sections 80I, 80-HHA and 80IA ofthe Act and thus disallowing deductions claimed under these sections.During block assessment proceedings petitioner had contended that theissue regarding eligibility of deduction under Section 80HH/HHA/IA of theAct were governed by the regular provisions. Therefore, deduction thatpetitioner had claimed under Section 80IA of Rs.15,02,852/- had beendisallowed in this block assessment order dated 30[th] January, 2004. 5.On 30[th] March, 2004 Respondent No.1 issued a notice underSection 148 of the Act which is impugned in this petition alleging thatpetitioner’s income chargeable to tax for the Assessment Year 1997-98 had escaped assessment and called upon petitioner to file a return of its incomewithin 30 days. 6.Mr. Pardiwalla brought to our notice the reasons for reopeningissued and the reasons read as under : “The Assessee himself has admitted during the course of Blockassessment proceedings that the issue regarding the eligibilityof deduction u/s 80HH/HHA/I/IA etc. are governed by theregular provision of the Act, not by the chapter XVIB of the ITAct. The claim under section 80HH/ HHA/I/IA etc. has notbeen examined properly in the regular assessment completedin this case. In this circumstances, there is a reason to believethat the income chargeable to tax has escaped assessment forA.Y. 1997-98 due to excessive claim and allowance ofdeduction under the above said provisions of act. Therefore,it appears to be a fit case for issue of notice under section 148of I.T. Act. The Honourable Commissioner may accord theapproval under section 151 (1) of I.T. Act, if found in order”. 7.Therefore, it is respondents case that the deduction whichpetitioner had claimed under Section 80HH/HHA/I/IA has not beenexamined properly in the regular assessment. Admittedly, in this case noticehas been issued after expiry of four years from the date of relevantassessment year. The proviso of Section 147 of the Act shall therefore apply. Under Section 147 of the Act the assessment under Sub Section (3) ofSection 143 of the Act can be reopened after a period of four years only ifthe assessee has failed to disclose fully and truly all material facts necessaryfor his assessment in that Assessment Year. The reasons as quoted abovedoes not indicate initially what was the material fact that has not beendisclosed fully and truly by petitioner. Therefore, on this ground alone,notice dated 30[th] March, 2004 has to be set aside. 8.Moreover, in the assessment order dated 30[th] January, 2004 thededuction claimed by petitioner have been disallowed and thereforequestion of any income escaping assessment also will not arise. Therefore,on the date when the impugned notice dated 30[th] March, 2004 was issuedthe Assessing Officer could not have any reason to believe that incomechargeable to tax has escaped assessment under Section 148 of the Act. Asnoted earlier in the block assessment order dated 30[th] January, 2004 thededuction claimed under Section 80I, 80 HA and 80 IA of the Act had beendisallowed. 9.Moreover, under Section 158 BA (2) of the Act, there is astatutory bar prohibiting Respondent/Revenue from subjecting to taxincome under regular assessment as the same has already been subjected totax as block assessment under Chapter XVIB of the Act. We find support in theunreported order of this court in Writ Petition No.1227 of 2006 dated 1[st]October, 2014 where paragraph no.7 and 9 reads as under : 7)Moreover, Chapter XIV-B of the Act deals with specialprocedure for assessment of search cases. Section 158BA of theAct therein specially deals with assessment of undisclosed incomefound during search. The explanation to Section 158BA(2) of theAct clearly states that income assessed in block assessment underChapter XIV-B of the Act shall not be included in the regularassessment for any previous year which has been included inblock assessment. The block assessment order covers the periodAY 1996-97 to 2001-02. Therefore, there is statutory barprohibiting the respondent revenue from subjecting to tax incomeunder regular assessment as the same has already been subjectedto tax as block assessment under Chapter XVIB of the Act. 7)Moreover, Chapter XIV-B of the Act deals with specialprocedure for assessment of search cases. Section 158BA of theAct therein specially deals with assessment of undisclosed incomefound during search. The explanation to Section 158BA(2) of theAct clearly states that income assessed in block assessment underChapter XIV-B of the Act shall not be included in the regularassessment for any previous year which has been included inblock assessment. The block assessment order covers the periodAY 1996-97 to 2001-02. Therefore, there is statutory barprohibiting the respondent revenue from subjecting to tax incomeunder regular assessment as the same has already been subjectedto tax as block assessment under Chapter XVIB of the Act. 9)The view taken by us above is also supported by thedecision of this Court in CIT vs. H.N. Shindore 113 ITR 679wherein revised assessment orders for A.Y. 1943-44 to 1946-47were passed on 31 January 1953 on the basis of the report of theInvestigation Commission. Thereafter, on 20 March 1956 noticeswere issued under Section 34(1A) of the Income Tax Act,1922(similar to Section 148 of the Act) seeking to reopen assessmentfor AY 1943-44 to 1946-47. This Court quashed the notices on theground that on 20 March 1956 when the notices for reopeningwere issued, the Assessing Officer could not have had reason tobelieve that income chargeable to tax has escaped assessment, asthe said income had already been assessed to tax on 31 January1953, consequent to the report of the Investigation Commission.In the present case also the date when the impugned notices wereissued, the block Assessment Order in favour of the Revenuebringing to tax the income alleged to have escaped assessment isin force. 10.In the circumstances and for reasons noted above, Rule is made absolute in the above terms with no order as to costs. 11.Petition disposed. (AMIT B. BORKAR, J.) (K.R. SHRIRAM, J.)