Wp/1897/2022 Of Maharashtra State Textile Corporation Ltd v. Dy. Commissioner Of Income Tax Circle 1(2)(2), Mumbai And 2 Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTIONWRIT PETITION NO.1897 OF 2022 Maharashtra State Textile Corporation Ltd. V/s.Dy. Commissioner of Income Tax,Circle 1(2)(2), Mumbai & Ors. ….Petitioner …Respondents ---- Mr. Tanzil Padvekar a/w Ms Tejal Kharkar for Petitioner.Mr. Suresh Kumar for Respondents. ---- CORAM : K.R. SHRIRAM & M.M. SATHAYE JJ DATED : 13[th] JUNE 2023 P.C. : 1Petitioner is impugning the notice dated 30[th] March 2021 issued underSection 148 of the Income Tax Act 1961 (the Act), stating that there arereasons to believe that income chargeable to tax for A.Y.-2013-2014 hasescaped assessment within the meaning of Section 147 of the Act. Since theproposed re-opening is after expiry of 4 years from the end of the relevantassessment year, the proviso to Section 147(1) would apply. The re-openingis permissible only if, there is failure to disclose fully and truly all materialfacts necessary for assessment. 2We have considered the reasons to believe and there is nothing toindicate that there was any failure on the part of petitioner to truly and fullydisclose all material facts. 3Petitioner is a company wholly owned by Government of Maharashtra undertaking, who at the relevant time was engaged in setting up andrunning textile mills in State of Maharashtra. Paragraphs 3, 4 and 5 of the reasons read as under: “3. During the course of regular observation, it is found that the Govtof Maharashtra has decided to transfer the ownership of mill chawlsof six MSTC managed mills including that of four unit mills to theexisting residents. Accordingly the unit mills chawl have been handedover to the residents/co-operative Society formed by them exceptexecution of conveyance which is pending for want of Govt.permission. However, even though the possession has been handedover to the residents/co-operative Society formed by them the amountof deposit of Rs. 1,61,37,000/- has not been credited to the profit andloss account and taken as deposit from others. Since the decision totransfer the ownership was taken by the Govt. and the possession hasalready been handed over the income arising out of this transactionalso needs to be credited. Failure to do so has resulted into underassessment of Rs. 1,61,37,000/- and short levy of tax of Rs.52,35,650. 4. Again it is seen that the assessee has claimed Rs. 37,18,71,000/- asfinance cost which includes interest on Government loans of Rs.37,18,33,000/- (Normal Interest Rs. 26,08,62,000/- and penalinterest Rs. 11,09,71,000/-). In the note 4.1 furnished alongwithaccounts it was certified by the auditor that out of the loan of Rs.2801,92,22,000/- received from Govt. of Maharashtra an amount ofRs. 173,91,01,000/- is still outstanding and repayment period ofwhich is over. The entire outstanding loan is overdue and the interestand penal interest is calculated on the basis of old due dates. Theprincipal amount of Govt. loan equity and interest is subject toreconciliation. The difference in equity is of Rs. 1,37,00,000/- and inloan Rs. 15,01,00,000/-for which reconciliation is in process. Fromthe above it is clear that the assessee is not making any payment ofinterest and penal interest and merely provided an amount towardsthe above payment for which the loan and equity is underconciliation. As such these amount needs to be added back to the totalincome of the assessee. Failure to do so has resulted into underassessment of Rs. 37,18,33,000/- and short levy of tax of Rs.12,06,41,217/-. 5. It is also seen from the P&L account that the assessee made aprovision for reduction in value of investment of Rs.2,53,000/-whichremains to be added back while computing the total income of theassessee. This has resulted into under assessment of Rs. 2,53,000/-and short levy of tax of Rs.78,177/-” 4Apart from there being not even any mention that there has been a failure to truly and fully disclose, the reasons itself indicate that it has been 5. It is also seen from the P&L account that the assessee made aprovision for reduction in value of investment of Rs.2,53,000/-whichremains to be added back while computing the total income of theassessee. This has resulted into under assessment of Rs. 2,53,000/-and short levy of tax of Rs.78,177/-” 4Apart from there being not even any mention that there has been a failure to truly and fully disclose, the reasons itself indicate that it has been picked up from what has been disclosed by petitioner. Paragraph 3 startswith the following words “During the course of regular observation, it isfound that ……………………….. Paragraph 4 states, “……………….. in thenote 4.1 furnished alongwith accounts……………...”. Paragraph 5 says “ itis also seen from P & L account that the assessee made provisionfor……………...”. In fact what is stated in paragraphs 3 and 4 can be foundin note 4.1 and 4.2 of the financial statement annexed to the statement ofprofit and loss for the year ended 31[st] March 2013. The Assessing Officerhas simply picked up the same from note 4.1 and 4.2 of the financialstatement and put it in the reasons to believe. 5In the circumstances, since no case has been made out that there wasfailure on the part of petitioner to truly and fully disclose, on this groundalone the petition has to succeed. 6Petition accordingly stands allowed and disposed in terms of prayerclause (b) which reads as under: “(b) Issue a writ of certiorari or a writ in the nature of certiorari or anyother appropriate writ, order or direction under Article 226 of theConstitution of India quashing and setting aside impugned Noticedated 30/03/2021 for A.Y. 2013-2014 (Exhibit -A) and also orderdisposing objections dated 14/02/2022 (Exhibit D) and quashing, ifany, re-assessment order is passed, if any, during pendency of this writpetition may also be set aside & quashed.” 7We have to also note our great disappointment that on 22[nd] March 2022 three weeks time to file reply was granted. On 2[nd] May 2022 time tofile reply was extended to 15[th] June 2022. On 25[th] July 2022 further fourweeks time was granted to file reply. On 6[th] September 2022 further six weeks was granted to file reply. On 30[th] January 2023 further four weekstime to file reply was granted. On 27[th] March 2023 further six weeks timewas granted to file reply. Till date there is no reply on record. Copy of thisorder to be sent to Learned Additional Solicitor General of India forMaharashtra to take it up with all Principal Commissioners so that theinterest of revenue is not prejudiced by the revenue’s officers in not filingtheir reply. More so, when an injunction has been in force against acting onthe impugned notice or proceeding with assessment. Perhaps a method totake disciplinary action against the concerned officers has to be worked out,otherwise it will be a loss to the nation. (M. M. SATHAYE, J.) (K.R. SHRIRAM, J.)