Wp/683/2012 Of Tata Sons Limited v. Deputy Commissioner Of Income Tax, Range 2(3), Mumbai Room

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 683 OF 2012 Digitallysigned byTata Sons LimitedSHRADDHASHRADDHAKAMLESHKAMLESHTALEKARa Company incorporatedTALEKARDate:2022.02.14under the Companies Act, 1913,10:14:49+0530and having its registered offceat Bombay House, 24 Homi Mody Street,Mumbai 400 001.....PetitionerVs.1. Deputy Commissioner of IncomeTax, Range 2(3), MumbaiRoom No. 555, Aayakar Bhavan, M.K. Marg, Mumbai 400 020.SHRADDHASHRADDHAKAMLESHKAMLESHTALEKARa Company incorporatedTALEKARDate:2022.02.14under the Companies Act, 1913,10:14:49+0530and having its registered offceat Bombay House, 24 Homi Mody Street,Mumbai 400 001.....PetitionerVs.1. Deputy Commissioner of IncomeTax, Range 2(3), MumbaiRoom No. 555, Aayakar Bhavan, M.K. Marg, Mumbai 400 020. 2. Assistant Commissioner of IncomeTax, Range 2(3), Mumbai,Aayakar Bhavan, Mumbai. 3. The Commissioner of Income Tax,Range 2, Aayakar Bhavan, Mumbai.400 020. 4. Union of India,through the Secretary,Ministry of Finance. *** ...Respondents Mr.P.J. Pardiwalla, Senior Advocate a/w. Mr.Anil Wani i/b ANSLaw Associates for petitioner. Mr.Arvind Pinto for respondents-Revenue. CORAM :K.R. SHRIRAM &N. J. JAMADAR, JJ.DATE :3[rd] FEBRUARY, 2022(THROUGH VIDEO CONFERENCE) JUDGMENT (PER N.J. JAMADAR, J.) : 1.By this petition under Article 226 of the Constitution ofIndia, the petitioner assails the notice dated 31[st] March 2010under section 148 of the Income Tax Act, 1961 (‘the Act, 1961’),issued by the respondent No.1-Deputy Commissioner of IncomeTax, Range 2(3), Mumbai seeking to reopen the assessment for theassessment year 2003-04, and the order dated 30[th] November2010 passed by respondent No.1 rejecting the petitioner’sobjection to reopening of the assessment for the assessment year2003-04. 2.The background facts, leading to this petition, can be statedin brief as under :in brief as under : 2.1)The petitioner is a company incorporated under theCompanies Act, 1913. The petitioner is an investmentholding company of Tata Group’s Companies. For theassessment year 2003-04, the petitioner fled return ofincome on 28[th] November 2003 declaring total income ofRs.10,53,46,561/-. Along with the Return, the petitionerhad, inter-alia, annexed the income tax summary containingdetails of the computation of income under each head ofCompanies Act, 1913. The petitioner is an investmentholding company of Tata Group’s Companies. For theassessment year 2003-04, the petitioner fled return ofincome on 28[th] November 2003 declaring total income ofRs.10,53,46,561/-. Along with the Return, the petitionerhad, inter-alia, annexed the income tax summary containingdetails of the computation of income under each head of income, the quantum of deduction claimed under sections10A and 80HHE as well as the income from business, grossand net income. The petitioner had also annexed AuditReport, Director’s Report and the Audited Accounts for theyear ended 31[st] March 2003. 2.2) The petitioner’s case was selected for scrutinyassessment. Multiple notices and questionnaires wereserved on the petitioner on a variety of issues, including thedeductions claimed under section 10A, 80HHE and 80G,dis-allowance of interest etc. The petitioner claimed to havegiven explanations and furnished documents in supportthereof. 2.3)On 21[st] March 2006, an assessment order was passedunder section 143(3) determining a total income ofRs.858,87,52,290/-. 2.4)Being aggrieved, the petitioner preferred an appealagainst the said assessment before Commissioner of IncomeTax (Appeals)-XXXIII, Mumbai (‘CIT-[A]’). The said appealwas disposed of by CIT-[A] by an order dated 16[th] March2007. 2.5)The Assessing Offcer-respondent No.2 passed an orderin conformity with, and giving effect to, the order of CIT [A]and determined the revised total income of the petitioner atRs.98,55,51,776/-. 2.3)On 21[st] March 2006, an assessment order was passedunder section 143(3) determining a total income ofRs.858,87,52,290/-. 2.4)Being aggrieved, the petitioner preferred an appealagainst the said assessment before Commissioner of IncomeTax (Appeals)-XXXIII, Mumbai (‘CIT-[A]’). The said appealwas disposed of by CIT-[A] by an order dated 16[th] March2007. 2.5)The Assessing Offcer-respondent No.2 passed an orderin conformity with, and giving effect to, the order of CIT [A]and determined the revised total income of the petitioner atRs.98,55,51,776/-. 2.6)On 23[rd] July 2008, the respondent No.2 issuednotices under section 154 seeking to rectify the assessmentorder dated 26[th] April 2007 passed by the Assessing Offcer.In the meanwhile, on 5[th] April 2010, the petitioner wasserved with the notice under section 148 of the Act issued byrespondent No.1, purportedly dated 31[st] March 2010, to theeffect that the Assessing Offcer had reason to believe thatincome chargeable to tax for assessment year 2003-04 hasescaped assessment within the meaning of section 147 ofthe Act, 1961, and, thus, it was proposed to reopen theassessment. Upon request being made, the respondent No.1furnished reasons recorded for reopening the assessment. 2.7)The petitioner fled its objections on the reasons for theproposed reopening. By the impugned order dated 30[th]November 2010, the respondent No.1 disposed the objectionsfled by the petitioner. 3.The petitioner has thus invoked the writ jurisdiction of thisCourt. The principal grounds of challenge are, frstly, theassessment is proposed to be reopened beyond the period of sixyears from the end of assessment year 2003-04. Though, thenotice under section 148 purports to have been issued on 31[st]March 2010, yet it was dispatched on 3[rd] April 2010. On this countalone, the impugned notice and the consequent action deserve tobe quashed and set aside. Secondly, there was no tangiblematerial which would justify the recourse to the provisionscontained in section 147 of the Act, 1961. Thirdly, there is noallegation much less cogent material to demonstrate that theincome escaped assessment on account of suppression of materialfacts on the part of the petitioner. Fourthly, the reasons recordedby the Assessing Offcer ex-facie indicate that they are notsuffcient to form the belief that the income escaped assessmentand, conversely, the entire exercise is infuenced by a mere changeof opinion on the same material. Lastly, since there was not onlyscrutiny assessment under section 143(3) of the Act, 1961 butalso, a further consideration at the level of CIT [A], and theassessment order was fnalized pursuant to the order of CIT [A],there was no justifable reason to resort to the provisions contained in section 147 of the Act, 1961 as all the issues wereconsidered threadbare not once but twice. 4.On 15[th] October 2012, Rule was issued. 5.An affdavit-in-reply was fled on behalf of respondent Nos.1and 2. The respondent Nos.1 and 2 have endeavoured to justifythe impugned action. It was specifcally denied that the notice wasissued after six years. Controverting the claim of the petitionerthat the notice was dispatched on 3[rd] April 2010, and not on 31[st]March 2010 (which date the notice bears), the respondent No.1sought to bank upon an extract of the dispatch register whichindicates that the notice was dispatched on 31[st] March 2010 byEMS Speed Post, Churchgate Post Offce. On merits, therespondents have contended that the reasons recorded by theAssessing Offcer justify the invocation of the power contained insection 147 of the Act, 1961. 6.We have heard Mr.Pardiwalla, the learned Senior Counsel forthe petitioner and Mr. Pinto, the learned counsel for therespondents-Revenue. 7.We have perused the material on record, especially thereasons recorded for the proposed reopening of the assessment, 6.We have heard Mr.Pardiwalla, the learned Senior Counsel forthe petitioner and Mr. Pinto, the learned counsel for therespondents-Revenue. 7.We have perused the material on record, especially thereasons recorded for the proposed reopening of the assessment, the order disposing the objections, and the resistance sought tobe put-forth by the respondents by way of affdavit-in-reply. 8.Mr.Pardiwalla submitted that the petitioner is in a positionto demonstrate that the impugned notice was not dispatched on31[st] March 2010, as claimed by the respondents. Attention of theCourt was invited to the postal-tracking report which, inter-alia,shows that the article in question was booked on 3[rd] April 2010.Mr.Pardiwalla, however, submitted that the petitioner has a strongcase on merits and, therefore, the petitioner may not be requiredto solely bank upon the technical objection on the point oflimitation. 9.Mr. Pardiwalla would urge that from the bare perusal of thereasons recorded by the Assessing Offcer, it becomes explicitlyclear that there was no reason to form the belief that income hasescaped assessment. The Assessing Offcer, according to Mr.Pardiwalla, made no endeavour to refer to any tangible material,which would justify recourse to section 147 of the Act, 1961. Northe Assessing Offcer claimed that there was any suppression ofmaterial facts attributable to the petitioner. Since the assessment was done under section 143(3) of the Act, 1961, and that toopursuant to the order passed by CIT [A], and the assessment wassought to be reopened beyond four years of the end of assessmentyear 2003-04, the jurisdictional condition for reopening of theassessment, namely, escapement of income on account of non-disclosure of material facts by the assessee, must be fulflled. Inthe case at hand, according to Mr.Pardiwalla, there is no assertionmuch less proof of the suppression of material facts. 10.The legal position as regards the exercise of power ofreassessment under section 147 of the Act, 1961 is fairlycrystallized. Existence of reason to believe that income chargeableto tax has escaped assessment is a jurisdictional condition forinvoking the power under section 147 of the Act, 1961, bothwithinand beyond a period of four years from the end of relevantassessment year. In case the assessment is proposed to bereopened beyond the period of four years, where the assessmentwas completed under section 143(3) of the Act, an additionalcondition is required to be satisfed, namely, recording asatisfaction that the income has escaped assessment on accountof failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. Whether thesejurisdictional conditions are satisfed, has to be ascertained fromthe reasons recorded by the Assessing Offcer. The existence ofreasons which propel the formation of belief that income hasescaped assessment is further qualifed by the fact that thosereasons should be based on tangible material. A bald assertion bythe Assessing Offcer that he has reason to believe that incomehas escaped assessment un-substantiated by tangible material, isof no avail. 11.Moreover, the reasonable belief so recorded should notpartake the character of a mere change in opinion in respect ofthe same material and facts, which were already considered at thetime of original assessment. The reason is not far to seek. Thepower is of reassessment and not review. It is thus postulated thatwhere the primary facts necessary for assessment are fully andtruly disclosed and the Assessing Offcer took a conclusive viewthereon, it is impermissible to reopen the assessment based onthe very same material on the premise that the said materialsustains a different opinion. 11.Moreover, the reasonable belief so recorded should notpartake the character of a mere change in opinion in respect ofthe same material and facts, which were already considered at thetime of original assessment. The reason is not far to seek. Thepower is of reassessment and not review. It is thus postulated thatwhere the primary facts necessary for assessment are fully andtruly disclosed and the Assessing Offcer took a conclusive viewthereon, it is impermissible to reopen the assessment based onthe very same material on the premise that the said materialsustains a different opinion. 12.The aforesaid principles are deducible from the judgments ofthe Supreme Court in the case of Commissioner of Income-TaxVs. Kelvinator of India Ltd. & Anr.[1]wherein the concepts of“tangible material” and “change of opinion” were enunciated, anda Division Bench of this Court in case of Aroni Commercials Ltd.Vs. Deputy Commissioner of Income-tax 2(1)[2], wherein the legalprinciples were culled out. 13.On the aforesaid touchstone, re-adverting to the facts of thecase, frst and foremost, it is imperative to note that the reasonsrecorded for the proposed reopening are conspicuously silent onthe aspect that the income escaped assessment on account offailure to make full and true disclosure of all material factsrelevant for the assessment, by the assessee. An assertion thatthe petitioner suppressed facts is singularly lacking. Whataccentuates the situation is the fact that after initial scrutinyassessment under section 143(3) of the Act, 1961, the petitionerpreferred an appeal before CIT [A] and thereafter pursuant to theorder passed by CIT [A], the assessment was fnalized on 26[th] April2007. In this context, the assertion of the petitioner that it had 1[2010] 320 ITR 561 (SC)2[2014] 44 taxmann.com 304 (Bombay)2[2014] 44 taxmann.com 304 (Bombay) furnished explanation and submitted documents in response tothe multiple notices at the stage of initial assessment could not becontroverted. To add to this, in the reasons for the proposedreopening, there is not a whisper about the non-disclosure on thepart of the petitioner. Since the assessment order was sought tobe reopened beyond four years and post-assessment under section143(3) of the Act, 1961, failure to demonstrate that there was afailure on the part of the petitioner to make a true and fulldisclosure of all material facts, erodes the legality of the exerciseof power under section 147 of the Act, 1961. 14.We fnd substance in the submission of Mr.Pardiwalla thatthe case at hand is nothing but an instance of mere change ofopinion. A bare perusal of the reasons indicates that the exercisewas infuenced by a mere change of opinion. To start with, it isimperative to note that the Assessing Offcer has commenced therecording of reasons with the expression, “On perusal of records,it is seen that 10% of the eligible profts under section 10A werenot fully taxed and yet, set off of the losses of local units to theextent of Rs.54,27,79,336/- was allowed and this resulted inshort levy of tax.” Evidently, this assessment of the Assessing Offcer betrays an intent to question the original assessment onthe strength of very same material, by substituting his view forthe conclusion recorded by the Assessing Offcer at the time ofinitial assessment. Offcer betrays an intent to question the original assessment onthe strength of very same material, by substituting his view forthe conclusion recorded by the Assessing Offcer at the time ofinitial assessment. 15.The alleged escapement of the income articulated undersecond head “Correct computation of Business Income” alsosuffers from the same vice of mere change of opinion. The thirdhead under which the income allegedly escaped assessment,under the caption, ‘Excess DIT Relief’ stands on a much weakerfoundation. The Assessing Offcer explicitly refers to theavailability of two options for computation of deduction undersection 10A and 80 HHE, namely, (i) exclusive method; and (ii)alternatively, proft of 10A units shall form part of calculation of80 HHE and export turnover of 10A is to be excluded therefrom.According to the Assessing Offcer, the choice of the secondmethod by the department resulted in escapement of income asexcess DIT relief to the extent of Rs.3,67,31,204/- had beenallowed. This inference is a classic example of change of opinionas it is rooted in expediency of exercise of one option over another. 16.The conspectus of the aforesaid consideration is that the impugned notice and the consequent action is legallyunsustainable as the Revenue fails to satisfy the twin tests.Firstly, there is no assertion, much less material to indicate, thatthe income escaped assessment on account of failure on the partof the petitioner to disclose fully and truly all material factsnecessary for the assessment, and, secondly, the reasons recordedby the Assessing Offcer should not fall within the ambit of “merechange of opinion” on the very same material. Consequently, weare persuaded to hold that there was no material to justify theformation of a reason to believe that income escaped assessmentand invoke the power under section 147 of the Act, 1961. Thepetition, therefore, deserves to be allowed. 17.Hence the following order : O R D E R The petition stands allowed in terms of prayer clause (a), which reads as under : (a)For a writ of certiorari or a writ, direction ororder in the nature of certiorari or any otherappropriate writ, direction or order under Article226 of the Constitution of India calling for therecords of the case pertaining to the impugnednotice dated 31.3.2010 issued by the RespondentNo.1 under Section 148 of the said Act to reopenthe assessment for the assessment year 2003-04and the order dated 30.11.2010 rejecting the objections of the Petitioner to the issuance of thenotice under section 148 of the said Act and afterconsidering the legality thereof quashing andsetting aside the same.” No costs. Rule made absolute in the aforesaid terms. (N. J. JAMADAR, J.) (K.R. SHRIRAM, J.)