Wp/3555/2019 Of Godrej And Boyce Manufacturing Co. Ltd v. Assistant Commissioner Of Income Tax, Circle 14(1)(2) And Anr

GAURIAMITGAEKWAD Digitallysigned byGAURI AMITGAEKWADDate:2022.01.1712:11:31+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3555 OF 2019 Godrej and Boyce Manufacturing Co. Ltd. ….Petitioner V/s. Assistant Commissioner of IncomeTax, Circle 14 (1)(2) & Ors. ….Respondents ---- Mr. Percy Pardiwalla, Senior Advocate a/w. Mr. Atul K. Jasani for petitioner.Mr. Suresh Kumar for respondents. ---- CORAM : K.R. SHRIRAM &N.R. BORKAR, JJ. DATED : 13[th] JANUARY 2022 P.C. : 1Petitioner had filed its return of income for Assessment Year2012-2013 on 26[th] November 2012 declaring total income atRs.5,23,81,63,452/- and book profit under Section 115JB of the Income TaxAct, 1961 (the said Act) of Rs.9,85,40,05,783/-. The assessment wascompleted under Section 143(3) of the said Act dated 20[th] March 2015determining the total income at Rs.5,37,56,77,667/- and the tax iscalculated on the book profit under Section 115JB of the said Act ofRs.10,07,45,28,003/-. 2After the assessment was completed and the assessment orderwas passed, the Principal Commissioner of Income Tax - 14 issued a noticedated 29[th] June 2016 under Section 263 of the said Act for Assessment Year2012-2013 and it reads as under : ……… 2. In the instant case, return of income for A.Y. 2012-13 wasfiled on 26.11.2012 declaring Total Income ofRs.5,23,81,63,542/- and book profit of Rs.9,85,40,05,783/-.Further, order u/s 143(3) of the Act, was passed on23.03.2015 determining the total income of Rs.5,37,56,77,667/- under the normal provisions of the Act. 3. On perusal of the records it is observed that the assesseehas debited an amount of Rs.43,02,00,000/- on account ofDiminution in the value of investment in a subsidiary. Thediminution in the value of investment is adjusted where theloss (the difference between the purchase price and the valueas on the valuation date) is booked in accounts and this lossis a notional loss as no sale has taken place and the assetcontinues to be owned by the company. 4. As per Income tax Act-1961, there is no provision torecognize a decline in the value of investments. Only if theinvestment is disposed of, the profit/loss on account of thesame is recognized. In the instant case, the assessee companyhas added back this deduction under normal provisions ofthe Act but the same was not added while computing incomeunder MAT provisions u/s 115JB of the Act. Hence, theAssessing Officer has erred while making addition in theassessment order. ……….. 3Petitioner responded by a letter dated 21[st] July 2016 through itsChartered Accountants and explained to the Principal Commissioner ofIncome Tax - 14 as to why his opinion that there was an error in theassessment order passed under Section 143(3) of the said Act waserroneous. After considering the reply and also a personal hearing, thePrincipal Commissioner of Income Tax - 14 passed an order dated 18[th] August 2016, which reads as under : …………. In connection with the above, I am directed to inform thatthe proceedings initiated u/s 263 of the I.T. Act in the abovecase for the A.Y. 2012-13 are dropped. Further, I am directed to request that Revenue Audit mayaccordingly be informed that the objection raised is notaccepted and may be requested to withdraw the objection onthe basis of facts of the case which is different than that of the judicial pronouncement relied upon by the audit party.………. 18[th] August 2016, which reads as under : …………. In connection with the above, I am directed to inform thatthe proceedings initiated u/s 263 of the I.T. Act in the abovecase for the A.Y. 2012-13 are dropped. Further, I am directed to request that Revenue Audit mayaccordingly be informed that the objection raised is notaccepted and may be requested to withdraw the objection onthe basis of facts of the case which is different than that of the judicial pronouncement relied upon by the audit party.………. 4Subsequently, petitioner received a notice under Section 148 ofthe said Act stating that the Jurisdictional Assessing Officer has reasons tobelieve that petitioner's income for Assessment Year 2012-2013 has escapedassessment. On petitioner's request, reasons were provided as also theapproval granted under Section 151 of the said Act by the PrincipalCommissioner of Income Tax - 14. Two grounds have been raised in thereasons. One is regarding fair value of land/transferable development rightsrelating to 24,872.83 sq. mtrs. of land and the second one is the diminutionin the value of investment in a subsidiary and debit by petitioner from theprofit and loss account an amount of Rs.43,02,22,000/-. 5As could be seen from what is noted by us earlier, the secondpoint in the reasons for reopening has already been considered by thePrincipal Commissioner of Income Tax - 14 when he wished to review theassessment order under Section 263 of the said Act and the PrincipalCommissioner of Income Tax - 14 has also passed an order directing theproceedings initiated under Section 263 of the said Act to be dropped andthe Revenue Audit to be accordingly informed that the objection raised wasnot accepted. Notwithstanding this order passed by the PrincipalCommissioner of Income Tax - 14, a notice is issued under Section 148 ofthe said Act and one of the ground is the same point which was directed tobe dropped by the Principal Commissioner of Income Tax - 14 and the same Principal Commissioner of Income Tax - 14 has accorded the approval underSection 151 of the said Act on 30[th] March 2019. Therefore, this only showsthat there has been total non application of mind by the PrincipalCommissioner of Income Tax - 14 while according the approval. If thePrincipal Commissioner of Income Tax - 14 had only applied his mind andconsidered all documents including his own order passed on 18[th] August2016, he would not have granted the approval for the reasons as recorded.Mr. Suresh Kumar submitted that there are two reasons for reopening whichare distinct. One is regarding the fair market value of land/transferabledevelopment rights and the other regarding diminution in the value ofinvestment in a subsidiary and both can be segregated. It is true that bothare totally different points but the fact, which is indisputable, is how couldthe Principal Commissioner of Income Tax - 14 grant approval for reopeningrelying on the reasons one of which is on an issue which the PrincipalCommissioner of Income Tax - 14 himself has passed an order saying thatthe objection raised was not correct. 6Mr. Pardiwalla relied on judgment of this Court in GermanRemedies Ltd. V/s. Deputy Commissioner of Income-Tax1 to submit that togrant or not to grant approval under Section 151 of the said Act to re-openan assessment is coupled with a duty and the commissioner was duty boundto apply his mind to the proposal put up to him for approval in the light ofthe material relied upon by the Assessing Officer. Mr. Pardiwalla submitted 1. [2006] 287 ITR 494 (Bom) that such power cannot be exercised casually, in a routine and perfunctorymanner. 6Mr. Pardiwalla relied on judgment of this Court in GermanRemedies Ltd. V/s. Deputy Commissioner of Income-Tax1 to submit that togrant or not to grant approval under Section 151 of the said Act to re-openan assessment is coupled with a duty and the commissioner was duty boundto apply his mind to the proposal put up to him for approval in the light ofthe material relied upon by the Assessing Officer. Mr. Pardiwalla submitted 1. [2006] 287 ITR 494 (Bom) that such power cannot be exercised casually, in a routine and perfunctorymanner. 7We have to note that in the affidavit in reply also respondentsadmit that the PCIT is required to accord approval on reasons recorded bythe Assessing Officer after having satisfied himself that such reasons wereon the basis of the technical information in possession. As held in GermanRemedies Ltd.(Supra) to grant or not to grant approval under Section 151of the said Act to re-open an assessment is coupled with a duty and theCommissioner was duty bound to apply his mind to the proposal put up tohim for approval in the light of the material relied upon by the AssessingOfficer. Such power cannot be exercised casually, in a routine andperfunctory manner. We have to observe that if only the PCIT had read the file, hewould not have been satisfied with the reasons. 8In the circumstances, on this ground alone, without going intothe other grounds, which Mr. Pardiwalla raised for quashing the notice aswell as the order on objections, the petition is allowed in terms of prayer clause - (a), which reads as under : (a) this Hon’ble Court may be pleased to issue a Writ ofCertiorari or a writ in the nature of Certiorari or any otherappropriate writ, order or direction under Article 226 of theConstitution of India calling for the records of the petitioner’scase and after examining the legality and validity thereofquash and set aside the notice dated 30[th] March 2019 (ExhibitA) issued by respondents under Section 148 of the Actseeking to reopen the assessment for the assessment year2012-13; and order rejecting objections (Exhibit X) dated1[st] November 2019.Certiorari or a writ in the nature of Certiorari or any otherappropriate writ, order or direction under Article 226 of theConstitution of India calling for the records of the petitioner’scase and after examining the legality and validity thereofquash and set aside the notice dated 30[th] March 2019 (ExhibitA) issued by respondents under Section 148 of the Actseeking to reopen the assessment for the assessment year2012-13; and order rejecting objections (Exhibit X) dated1[st] November 2019. 9Petition disposed. (N.R. BORKAR, J.) (K.R. SHRIRAM, J.)