Wp/3617/2018 Of Raychem Rpg Pvt Limited v. Assitant Commissioner Of Income-Tax Circle-8(1)(1) And 2 Ors

Priya Soparkar 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3617 OF 2018 Raychem RPG Private Limited… Petitioner V/s. Assistant Commissioner of Income-tax, Circle – 8(1)(1) and ors.… Respondents --- Mr.Madhur Agrawal with Mr. Atul Jasani for the Petitioner.Mr.N.C.Mohanty for the Respondent. --- CORAM : AKIL KURESHI AND M.S.SANKLECHA, JJ. DATE : JANUARY 24, 2019. P.C.:- 1.We heard the parties finally at the stage of admission. Thispetition under Article 226 challenges a notice dated 27[th] March,2018 issued under Section 148 of the Income Tax Act, 1961 (theAct). The impugned notice seeks reopening of assessment forAssessment Year 2011-12. 2.The facts giving rise to this petition are as under :- (a)On 30[th] November, 2011, the petitioner filed its return of income declaring a total income of Rs.1.76 crores. Alongwithits above return of income the petitioner also filed Form 29-B forthe purpose of computation of book profit under Section 115-JBof the Act. (b) During the course of assessment proceedings, the AssessingOfficer made inquiries with regard to the provision for doubtfuldebts. This on examination of detailed note given by thepetitioner in Form No.29-B accompanying the return of income.The Assessing Officer being satisfied did not make any additionfor the provision of doubtful debt while computing the profitsunder Section 115-JB of the Act and finally made an assessmenton 17[th] March, 2015 under Section 143(3) Act. (c)Thereafter, the impugned notice dated 27[th] March, 2018 wasissued seeking to reopen the assessment for Assessment Year2011-12. The reasons in support of the impugned notice read asunder :- “Reason for reopening of the assessment inthe case of M/s Raychem RPG Private Ltd. 1.Brief details of the Assesse: In the instantcase, the assessee has filed return of income forthe A.Y. 2011-12 on 30.11.2011 declaring totalincome of Rs.1,76,28,270/-. The same wasprocessed u/s. 143(1) of the Act. Further,assessment u/s 143(3) of the Act was completedon 17.03.2015 assessing total income atRs.2,76,13,880/-. The assessee company isengaged in the business of telecommunicationand power cables accessories. 2.Brief details of information collected/received by the AO: In the year under consideration, the assesseehas offered income u/s 115JB but not addedRs.8,69,58,000/- as provision for doubtful debtsdebited in P/L a/c . in computation of book profit.Citing supreme court judgment 323 ITR 166wherein the amount held that, where theprovisions for doubtful debt is reduced from thedebtors balance, the debts can properly beregarded as being written off, without their writtenoff in the individual debtors account. Omission toadd Rs.8,69,58,000/- in computation of Bookprofit u/w 115JB resulted in under assessment tothe extent of Rs.8,69,58,000/-. In view of the totality of the facts anddocuments on record, in computation I havereason to believe that to the extent ofRs.8,69,58,000/- chargeable to tax for F.Y. 2010-11 relevant to A.Y. 2011-12 has escapedassessment. Therefore, it is proposed to reopenthe assessment by issuing notice u/s. 148 of theAct in the aforesaid assessee company's case forA.Y. 2011-12. 3.Analysis of information collected/received:On the basis of information collected asmentioned in para 2 above, it can be concluded that the assessee has offered income u/s 115JBbut not added Rs.8,69,58,000/- chargeable to taxfor F.Y. 2010-11 relevant to A.Y. 2011-12 hasescaped assessment. 4.Enquiries made by the AO as sequel toinformation collect/received: In view of the totality of the facts anddocuments on record, in computation I havereason to believe that to the extent ofRs.8,69,58,000/- chargeable to tax for F.Y. 2010-11 relevant to A.Y. 2011-12 has escapedassessment. Therefore, it is proposed to reopenthe assessment by issuing notice u/s. 148 of theAct in the aforesaid assessee company's case forA.Y. 2011-12. 3.Analysis of information collected/received:On the basis of information collected asmentioned in para 2 above, it can be concluded that the assessee has offered income u/s 115JBbut not added Rs.8,69,58,000/- chargeable to taxfor F.Y. 2010-11 relevant to A.Y. 2011-12 hasescaped assessment. 4.Enquiries made by the AO as sequel toinformation collect/received: From perusal of paragraph 2 & 3 above, thematerial evidence gathered and discussed givesenough insights that income has escapedassessment . It is only during the course ofproceedings u/s 148 of the Act that the assessee'sexplanation will be examined vis-a-vis the findingsenumerated in paragraph 2& 3 above. 5Findings of the AO:As mentioned in the paragraph 2 & 3 above. 6.Basis of forming reason to believe anddetails of escapement of Income:As mentioned in the paragraph 2 & 3 above. 7.Seventh paragraph will include escapementof income chargeable to tax in relation to anyassets (including financial interest in any entity)located outside India:N.A. 8.Finding of AO on true and full disclosure ofthe material facts necessary for assessment underProviso to section 147: In view of the reason for reopening asmentioned above and totality of the facts anddocuments on record coupled with the informationgathered, I have reason to believe thatRs.8,69,58,000/- chargeable to tax for F.Y. 2010-11 relevant to A.Y. 2011-12 has escapedassessment, as assessee has failed to disclose fullyand truly all material facts (the facts disclosed bythe assessee are in such a manner to suite its convenience) necessary for its correct assessmenttherefore it is proposed to reopen the assessmentby issuing notice u/s 148 of the Act in theaforesaid assessee company's case for A.Y. 2011-12. 9.Applicability of the provisions of section147/151 to the facts of the case:147/151 to the facts of the case: In this case a return of income was filed forthe year under consideration and regularassessment u/s 143(3) and reassessment u/s 1 47was also made. Since, 4 years from the end of therelevant year has expired int his case, therequirements to initiate proceedings u/s 147 ofthe Act are reason to believe that income for theyear under consideration has escaped assessmentbecause of failure on the part of the assessee todisclose fully and truly all material facts necessaryfor his assessment for the assessment year underconsideration. It is pertinent to mention here thatreasons to believe that income has escapedassessment for the year under consideration havebeen recorded above (refer paragraph1). I havecarefully considered the assessment recordscontaining the submissions made by the assessee inresponse to various notices issued during theassessment /re-assessment proceedings and havenoted that the assessee has not fully and trulydisclosed the following material facts necessary forhis assessment for the year under consideration:It is evident from the above facts that the assesseehad not truly and fully disclosed material factsnecessary for his assessment for the year underconsideration thereby necessitating reopening u/s147 of the Act. It is true that the assessee has filed a copy ofannual report an audited P & L account andbalance sheet along with return of income where It is true that the assessee has filed a copy ofannual report an audited P & L account andbalance sheet along with return of income where various information/material were disclosed.However, the requisite full and true disclosure ofall material facts necessary for assessment has notbeen made as noted above. It is pertinent tomention here that even though the assessee hasproduced books of accounts, annual report,audited P & L account and balance sheet or otherevidence as mentioned above, the requisitematerial facts as noted above in the reasons forreopening were embedded in such a mannerthat material evidence could not be discovered bythe AO and could have been discovered with duediligence, accordingly attracting provisions ofExplanation 1 of section 147 of the Act. It is evident from the above discussion that in thiscase, the issue under consideration were neverexamined by the AO during the course of regularassessment /reassessment. This fact is corroboratedfrom the contents of notices issued by the AO u/s143(2) / 142(1) and order sheet entries recordedduring the 143(3)/147 proceedings. It is importantto highlight here that material facts relevant for theassessment proceedings and the same may beembedded in annual report, audited P & Laccount, balance sheet and books of account insuch a manner that it would required due diligenceby the AO to extract these information. Forafforested reasons, it is not a case of change ofopinion by the AO. In this case more than four years have lapsed fromthe end of assessment year under consideration.Hence, necessary sanction to issue notice u/s148 has been obtained separately from PrincipalCommissioner of Income tax as per the provisionsof section 151 of the Act.” (d)On receipt of the above reasons in support of the impugnednotice, the petitioner filed its objection dated 15[th] November, 2018 to its validity. On 3[rd] December, 2018 the Assessing Officerrejected the petitioner’s objection to the impugned reopeningnotice on the basis of the reasons recorded. (e) This resulted in filing of the present petition, challengingthe jurisdiction of the Assessing Officer to issue the impugnednotice dated 27[th] March, 2018, seeking to reopen the assessmentfor Assessment Year 2011-12. 3.We have heard the parties at length. We note from therecord it is evident that the impugned notice has been issued on27[th] March, 2018 i.e. beyond the period of 4 years from the endof the relevant assessment year i.e. 2011-12. This coupled withthe fact that the regular assessment proceedings for the subjectassessment year were completed on 17[th] March, 2015 underSection 143(3) of the Act. The reasons in support the impugnednotice do not indicate that there was any failure on the part ofthe petitioner to truly and fully disclose all material and primaryfacts necessary for assessment truly and fully, during the regularproceedings under Section 143(3) of the Act. Thus, on this short 820 wp 3617-18-o-s ground itself the impugned notice is hit by the proviso to Section147 of the Act and is without jurisdiction. Besides, we noticeinfact that during the assessment proceeding queries were raisedby the Assessing Officer with regard to the petitioner’s claim forprovision for doubtful debts and petitioner had responded tosame in detail by its letter dated 12[th] January, 2015. It was afterAssessing Officer satisfying himself with the petitioner’s reply thatthe petitioner's book profit were determined under section 115-JB of the Act. This would indicate that the impugned notice is anattempt to review the order dated 17[th] March, 2015 under Section143(3) of the Act, which is clearly not permissible. 820 wp 3617-18-o-s ground itself the impugned notice is hit by the proviso to Section147 of the Act and is without jurisdiction. Besides, we noticeinfact that during the assessment proceeding queries were raisedby the Assessing Officer with regard to the petitioner’s claim forprovision for doubtful debts and petitioner had responded tosame in detail by its letter dated 12[th] January, 2015. It was afterAssessing Officer satisfying himself with the petitioner’s reply thatthe petitioner's book profit were determined under section 115-JB of the Act. This would indicate that the impugned notice is anattempt to review the order dated 17[th] March, 2015 under Section143(3) of the Act, which is clearly not permissible. 4.In the above view,the impugned notice is withoutjurisdictionas it is hit by the first proviso to Section 147 of the Act. This in theabsence of there being any failure to disclose truly and fully allmaterial facts. Besides during the regular proceedings theAssessing Officer has occasion to examine the issue of provisionfor doubtful debts in the context of arriving of book profit ofthe petitioners. These reasons amounted to change of opinionand an attempt to review its order dated 17[th] March, 2015. Therefore, the impugned notice dated 27[th] March, 2018 is without jurisdiction. Hence, quashed and set aside. 5.Petition is disposed of accordingly. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.)….