Gujarat High Court
Alpha Plastomers Private Limited vs The Assistant Commissioner Of Income ... on 30 September, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/6359/2022 JUDGMENT DATED: 30/09/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 6359 of 2022
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA Sd/-
and
HONOURABLE MRS. JUSTICE MAUNA M. BHATT Sd/-
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1 Whether Reporters of Local Papers may be allowed No
to see the judgment ?
2 To be referred to the Reporter or not ? No
3 Whether their Lordships wish to see the fair copy No
of the judgment ?
4 Whether this case involves a substantial question No
of law as to the interpretation of the Constitution
of India or any order made thereunder ?
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ALPHA PLASTOMERS PRIVATE LIMITED
Versus
THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(1) &
ANR.
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Appearance:
MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1
MRS KALPANA K RAVAL(1046) for the Respondent(s) No. 1
SERVED BY RPAD (N) for the Respondent(s) No. 2
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MRS. JUSTICE MAUNA M. BHATT
Date : 30/09/2024
ORAL JUDGMENT
(PER : HONOURABLE MRS. JUSTICE MAUNA M. BHATT)
1. Heard learned Senior Advocate Mr.Tushar Hemani for learned advocate Ms.Vaibhavi Page 1 of 13 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Thu Oct 10 2024 Downloaded on : Sat Oct 12 22:32:01 IST 2024 NEUTRAL CITATION C/SCA/6359/2022 JUDGMENT DATED: 30/09/2024 undefined K.Parikh for the petitioner and learned Senior Standing Counsel Mr.Karan Sanghani for the respondent.
2. Rule returnable forthwith. Learned Senior Standing Counsel Mr.Karan Sanghani waives service of notice of rule for the respondent no.1.
3. This petition under Article 226 of the Constitution of India is filed challenging notice under Section 148 of the Income Tax Act 1961 dated 28.03.2021 for Assessment Year 2016-17 primarily on the ground that notice issued is without jurisdiction on account of change of opinion by the Assessing Officer. The consequential order of assessment under Section 147 read with Section 144B dated 31.03.2022 and the notice of demand under section 156 dated 31.03.2022 are also challenged.
4. Considering the issue involved and with the consent of learned advocates for the respective parties the matter is taken up for final hearing.
5. The facts in brief as referred in the Page 2 of 13 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Thu Oct 10 2024 Downloaded on : Sat Oct 12 22:32:01 IST 2024 NEUTRAL CITATION C/SCA/6359/2022 JUDGMENT DATED: 30/09/2024 undefined petition are as under:
5.1. The petitioner is a company incorporated under the provisions of the Companies Act and engaged in the business of manufacturing of plastic packaging products. The petitioner-
assessee filed its return of income for Assessment Year 2016-17 declaring total income at Rs. 5,38,92,730/- after claiming deduction of Rs.1,21,59,856/- under Section 80IC of the Income Tax Act, 1961 (for short 'the Act'). The case of assessee was thereafter selected for scrutiny under CASS criteria. Consequently, the Assessing Officer issued notice dated 22.11.2018 under Section 142(1) of the Act and called for various details including details in relation to deduction under section 80IC of the Act.
5.2. The assessee responded to said notice by furnishing details including details in relation to deduction under Section 80IC of Act and thereafter order of assessment dated 22.12.2018 under Section 143(3) of the Act was framed. Subsequently, notice under Section 148 of the Act dated 28.03.2021 was issued seeking to reopen the Assessment for the Year 2016-17. In response thereto, the Page 3 of 13 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Thu Oct 10 2024 Downloaded on : Sat Oct 12 22:32:01 IST 2024 NEUTRAL CITATION C/SCA/6359/2022 JUDGMENT DATED: 30/09/2024 undefined assessee filed its return of income and requested for reasons recorded. Upon receipt of reasons, the assessee raised objections on 14.08.2021. In objections various details were supplied with the submission that at the original stage, the issue of deduction under Section 80 IC has been gone into by the Assessing Officer, despite that the order rejecting objections dated 23.03.2022 was passed aggrieved by which this petition is filed. During pendency of this petition, Assessment Order dated 31.03.2022 under Section 147 read with Section 144B was passed and demand was raised.
6. Learned Senior Advocate Mr.Tushar Hemani for the petitioner-assessee submitted that the notice issued under Section 148 of the Act dated 28.03.2021 for Assessment Year 2016-17, is bad in law on the following grounds:
6.1. In this case the assessee has fully and truly disclosed all material facts necessary for assessment for A.Y. 2016-17.
6.2. Reason to believe by the Assessing Officer that income chargeable to tax has escaped assessment is on erroneous consideration Page 4 of 13 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Thu Oct 10 2024 Downloaded on : Sat Oct 12 22:32:01 IST 2024 NEUTRAL CITATION C/SCA/6359/2022 JUDGMENT DATED: 30/09/2024 undefined because at the original stage specific query in relation to deduction claimed under Section 80IC of the Act was asked to which the assessee replied. The documents called for pursuant to notice under Section 142(1) of the Act had been supplied and after consideration of reply and the documents placed, the order of assessment under Section 143(3) was passed and therefore no notice can be issued on the ground of change of opinion.
In this case the notice has been issued merely on the basis of change of opinion and therefore illegal and without jurisdiction.
6.3. Original assessment in this case was framed under Section 143(3) of the Act, wherein reference to notice dated 22.11.2018, and assessee's response dated 08.12.2018 has been made. Since, the original assessment was framed after verifying the details provided in relation to deduction under Section 80IC of the Act, the notice issued being mere change of opinion is bad in Law.
6.4. The condition preceding for reopening of the assessment is that there must be escapement of income chargeable to tax. In this case, no income has escaped assessment, since, even on Page 5 of 13 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Thu Oct 10 2024 Downloaded on : Sat Oct 12 22:32:01 IST 2024 NEUTRAL CITATION C/SCA/6359/2022 JUDGMENT DATED: 30/09/2024 undefined merits the addition under Section 80IC of the Act as recorded in the reasons cannot be made. Therefore, the notice under Section 148 for the Assessment Year 2016-17 being bad in law, deserves to be quashed and set aside.
6.5. Learned Senior Advocate relied upon decision of Hon'ble Supreme Court in case of CIT Vs. Kelvinator of India Ltd. reported in (2010) 320 ITR 561. Reliance is also placed on the decision of this Court in Special Civil Application No.5651 of 2021 decided on to submit that reopening on the ground of mere change of opinion is not permissible.
7. Opposing the petition, learned Senior Standing Counsel Mr.Karan Sanghani for the respondents submitted that notice under Section 148 of the Act was issued since the income chargeable to tax has escaped assessment in relation to deduction claimed by the assessee under Section 80IC of the Act.
7.1. Further from the body of assessment order, it is evident that the issue in relation to deduction under Section 80IC of the Act has not been referred to and therefore the Page 6 of 13 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Thu Oct 10 2024 Downloaded on : Sat Oct 12 22:32:01 IST 2024 NEUTRAL CITATION C/SCA/6359/2022 JUDGMENT DATED: 30/09/2024 undefined contention of the assessee on change of opinion is not correct.
7.2. On merits learned Senior Standing Counsel Mr.Karan Sanghani submitted that as per provision of Subsection (12) and (12A) of Section 80IA of the Act, the assesse's undertaking is not eligible for deduction under Section 80IC of the Act. These facts were noticed subsequently by Assessing Officer that income to the extent of Rs.1,21,59,856/- has escaped assessment on account of no full and true disclosure by the assessee and therefore notice under section 148 of the Act was rightly issued. Further, the procedure contemplated under the Act has been followed and there being no merit in the case, no interference is called for.
8. Considering the submissions and upon revisitation of the facts, it is noticed that the return filed by the assessee for the Assessment Year 2016-17 was selected for scrutiny and thereafter the assessment order under Section 143(3) dated 24.12.2018 was passed. Prior to assessment order under Section 143(3), a notice under Section 142(1) dated 22.11.2018 was issued whereby details Page 7 of 13 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Thu Oct 10 2024 Downloaded on : Sat Oct 12 22:32:01 IST 2024 NEUTRAL CITATION C/SCA/6359/2022 JUDGMENT DATED: 30/09/2024 undefined with regard to claim of deduction under Section 80IC of the Act were called for. The details called for, in the notice under Section 142(1) dated 22.11.2018 read as under:
"4. On perusal of details furnished by you, it is seen that you have claimed deduction u/s.80IC of the Act during the year under consideration. Whether you have fulfilled all the condition laid down for claiming deduction u/s.80IC of the Act alongwith supporting documents. Please furnish the date of incorporation of Roorki Unit as the said unit claimed 80IC with supporting documents."
9. To the said notice, assessee responded on 08.12.2018 with the details called for in relation to deduction under Section 80IC of the Act. Thereafter, assessment order under Section 143(3) dated 24.12.2012 was passed accepting the return.
9.1. Thereafter, notice under section 148 was issued for the reason that the assessee has stated that M/s. Alpha Pharma Roorkee was Page 8 of 13 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Thu Oct 10 2024 Downloaded on : Sat Oct 12 22:32:01 IST 2024 NEUTRAL CITATION C/SCA/6359/2022 JUDGMENT DATED: 30/09/2024 undefined merged with assessee company w.e.f. 01.10.2014. Further, the assessee company as stated above has claimed deduction u/s. 80IC of the Act to the tune of Rs.1,21,59,856/- in respect of profit earned by Alpha Pharma Roorkee (undertaking). Since, the undertaking availing deduction u/s. 80IC was merged with the assessee company w.e.f. 01.10.2014, as per the provision of sub-section 12 of Section 80IA r.w.s. 12A of the Act, the undertaking is not eligible for tax benefit u/s.80IC of the Act.
9.2. In view of above facts/material available on records and after analyzing the same, I have reason to believe that income of the assessee to the extent of Rs.1,21,59,856/- has escaped assessment for A.Y.2016-17 within the meaning of section 147 of the I.T.Act, because of the non-disclosure of fully and truly all the material facts necessary for assessment for A.Y.2016-17.
9.3. Thus, from the record it is evident that the assessee at the original assessment stage disclosed fully and truly all material facts relevant for assessment. The details in relation to deduction claimed under Section Page 9 of 13 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Thu Oct 10 2024 Downloaded on : Sat Oct 12 22:32:01 IST 2024 NEUTRAL CITATION C/SCA/6359/2022 JUDGMENT DATED: 30/09/2024 undefined 80IC were called for and responded by the assessee. Therefore, the assesse's contention of reopening based on mere change of opinion merits acceptance.
9.4. Further, in the decision of the Hon'ble Supreme Court in case of Kelvinator India Ltd. (Supra), it has been held as under:
"6. ............prior to Direct Tax Laws (Amendment) Act, 1987, re-opening could be done under above two conditions and fulfillment of the said conditions alone conferred jurisdiction on the Assessing Officer to make a back assessment, but in section 147 of the Act [with effect from 1st April, 1989], they are given a go-by and only one condition has remained, viz., that where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider, However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Page 10 of 13 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Thu Oct 10 2024 Downloaded on : Sat Oct 12 22:32:01 IST 2024 NEUTRAL CITATION C/SCA/6359/2022 JUDGMENT DATED: 30/09/2024 undefined Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re-open. We must also keep in mind the conceptual difference between power to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-
assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re- opening the assessment, review would take place. One must treat the concept of "change of opinion" as an in-built test to check abuse of power by the Assessing Officer...."
9.5. Moreover, in the decision of this Court in the Special Civil Application No.5651 of 2021, it is held as under:
"11. In view of such undisputed facts, the reasons recorded for reopening would amount to mere change of opinion of the respondent without there being any live link or nexus with the Page 11 of 13 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Thu Oct 10 2024 Downloaded on : Sat Oct 12 22:32:01 IST 2024 NEUTRAL CITATION C/SCA/6359/2022 JUDGMENT DATED: 30/09/2024 undefined material relied upon as during the regular assessment proceedings.
12. The Assessing Officer had examined the claim under section 80IA(4)(iv) in detail by raising various queries which were duly answered by the petitioner-assessee. It is true that the specific query with regard to the issue pertaining to claim under section 80IA on account of amalgamation may not have been under consideration of the Assessing Officer, however, the entire claim made by the petitioner for deduction under section 80IA of the Act was before the Assessing Officer which was processed while passing the assessment order under section 143(1)(3) of the Act."
9.6. In this case also it is not a case where the details called for in relation to deduction under Section 80IC of the Act were not submitted by the assessee. The query raised and responded shows that the deduction claimed by the assessee was fully explained and thereafter the order of assessment under Section 143(3) Page 12 of 13 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Thu Oct 10 2024 Downloaded on : Sat Oct 12 22:32:01 IST 2024 NEUTRAL CITATION C/SCA/6359/2022 JUDGMENT DATED: 30/09/2024 undefined was passed. Therefore, in our opinion, the reasons recorded for reopening of the assessment under Section 147 for Assessment Year 2016-17 would amount to mere change of opinion by the respondents.
9.7. In view of the above facts, we are of the opinion that the notice dated 28.03.2021 for reopening of assessment cannot be sustained. In this view of the matter validity or otherwise of the claim for deduction under section 80IC of the Act is not necessary to be examined.
10. In the result, the petition succeeds and is accordingly allowed. Impugned notice under Section 148 dated 28.03.2021 is hereby quashed and set aside. Consequently, Assessment Order under Section 147 read with Section 144B dated 31.03.2022 and demand notice dated 31.03.2022 are also quashed and set aside. Rule is made absolute to the aforesaid extent. No order as to cost.
Sd/-
(BHARGAV D. KARIA, J) Sd/-
(MAUNA M. BHATT,J) URIL RANA Page 13 of 13 Uploaded by URIL KRISHNAKUMAR RANA(HC01406) on Thu Oct 10 2024 Downloaded on : Sat Oct 12 22:32:01 IST 2024