Gujarat High Court
Commissioner Of Income Tax-Vadodara-2 vs Ranbaxy Laboratories ... on 5 July, 2017
Author: Akil Kureshi
Bench: Akil Kureshi, Biren Vaishnav
O/TAXAP/439/2017 ORDER
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
TAX APPEAL NO. 439 of 2017
==========================================================
COMMISSIONER OF INCOME TAX-VADODARA-2,....Appellant(s)
Versus
RANBAXY LABORATORIES LIMITED....Opponent(s)
==========================================================
Appearance:
MR KM PARIKH, ADVOCATE for the Appellant(s) No. 1
==========================================================
CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI
and
HONOURABLE MR.JUSTICE BIREN VAISHNAV
Date : 05/07/2017
ORAL ORDER
(PER : HONOURABLE MR.JUSTICE AKIL KURESHI)
1. The Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal dated 12.1.2017. Though two questions are framed by the appellant, however, we may notice only first of them for understanding the grievances of the Revenue since the remaining question is more in the nature of contention. Such question reads as under :
"Whether on the facts and circumstances of the case and in law the Hon'ble ITAT was justified in holding that the Assessing Officer had the jurisdiction to reassess issues other than issues in respect of which proceedings are initiated, but he was not justified when the reasons for the initiation of those proceedings ceased to survive?"Page 1 of 5
HC-NIC Page 1 of 5 Created On Sun Jul 23 13:31:45 IST 2017 O/TAXAP/439/2017 ORDER
2. This appeal arises out of the assessee's return for the assessment year 20012002 and the issue pertains to the validity of reopening of the assessment which was previously framed after scrutiny. Assessing Officer had recorded detailed reasons for issuing notice for reopening. During the course of reassessment, as it so happened, the Assessing Officer made no addition on any of the grounds recorded in the reasons. He however, made adjustments on completely unrelated issues pertaining to deduction under section 80HHC of the Income Tax Act and MAT provision of section 115JB. The assessee therefore, took up a contention before the higher forum that the Assessing Officer could not have framed reassessment when on none of the grounds recorded in the reasons, it was possible to make additions. The Tribunal by the impugned judgment relying on the decision of Delhi High Court in case of Ranbaxy Laboratories Ltd. v. Commissioner of Income tax reported in (2011) 336 ITR (Delhi), accepted the assessee's contention. Against such judgment of the Tribunal, the Revenue is in appeal.
3. Counsel for the Revenue submitted that against the judgment of Ranbaxy Laboratories Ltd. (supra), the Revenue has filed SLP before the Supreme Court and the same is pending. However, we notice that identical issue came up for consideration before this Court also in case of Commissioner of Incometax v. Mohmed Juned Dadani reported in (2013) 355 ITR 172 (Guj). The Division Bench of this Court in the said decision held as under :
"28. Explanation 3 to Section 147 of the Act thus does not in any manner, even purport to expand the powers of the Page 2 of 5 HC-NIC Page 2 of 5 Created On Sun Jul 23 13:31:45 IST 2017 O/TAXAP/439/2017 ORDER Assessing Officer under Section 147 of the Act. In any case, an explanation cannot expand the scope and sweep of the main body of the statutory provision. In case of S.Sundaram Pillai Vs. V.R.Pattabiraman reported in AIR 1985 Supreme Court 582 the Supreme Court observed that, an explanation added to a statutory provision is not a substantive provision but as the plain meaning of the word itself shows it is merely meant to explain or clarify certain ambiguities which may have crept in the statutory provision. It was observed as under:
52. Thus, from a conspectus of the authorities referred to above, it is manifest that the object of an Explanation to a statutory provision is
(a) to explain the meaning and intendment of the Act itself,
(b) where there is any obscruity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to subserve.
(c) to provide an additional support to the dominant object of the Act in order to make it meaningful and purposeful.
(d) an Explanation cannot in any way interfere with or change the enactment or any part thereof but where some gap is left which is relevant for the purpose of the Explanation, in order to suppress the mischief and advance the object of the Act it can help or assist the Court in interpreting the true purport and intendment of the enactment, and
(e) It cannot, however, take away a statutory right with which any person under a statute has been clothed or set at naught the working of an Act by becoming an hindrance in the interpretation of the same.
Page 3 of 5
HC-NIC Page 3 of 5 Created On Sun Jul 23 13:31:45 IST 2017
O/TAXAP/439/2017 ORDER
29. Above decision has been referred to and relied upon in several subsequent decisions. Above proposition being well settled, it is not necessary to refer to all such decisions.
30. We may also approach the question from a slightly different angle. It is not in dispute that once an assessment is reopened by a valid exercise of jurisdiction under Section 147 of the Act, it is open for the Assessing Officer to assess or reassess any income which had escaped assessment which comes to his light during the course of his assessment proceedings which was not mentioned in the reason for issuing notice under Section 148 of the Act. In a notice for reassessment which has been issued beyond a period of four years from the end of relevant assessment year, the condition that income chargeable to tax has escaped assessment for the reason of the failure on the part of the assessee to disclose truly and fully all material facts for the purpose of assessment must also be established unless ofcourse some other ground viz. non filing of the return at all etc. is available to the Assessing Officer. If such nondisclosure of material facts is established with respect to the reason recorded for issuing notice for reopening the assessment, it would be open for the Assessing Officer to thereafter even assess other income which might have escaped assessment but which may not necessarily satisfy the requirement of non disclosure of true and full material facts. If in such a situation, the stand of the revenue is accepted, a very incongruent situation would come about if ultimately the Assessing Officer were to drop the ground on which notice for reopening had been issued but to chase some other grounds not so mentioned for issuance of the notice. In such a situation, even if a case where notice for reopening has been issued beyond a period of four years, the assessment would continue even though on all the grounds on which the additions are being made, there was no failure on the part of the assessee to disclose true and full Page 4 of 5 HC-NIC Page 4 of 5 Created On Sun Jul 23 13:31:45 IST 2017 O/TAXAP/439/2017 ORDER material facts. In such a situation an important requirement of failure on part of the assessee to disclose truly and fully all material facts would be totally circumvented.
31. As already noted, except for the Punjab and Haryana High Court in case of Majinder Singh Kang Vs. Commissioner of IncomeTax and anr (supra) all courts have uniformly taken a view that Explanation 3 to Section 147 of the Act does not change the situation insofar as the present controversy is concerned. Leading decision of Bombay High Court in case of CIT. vs. Jet Airways (I) Ltd. has been followed by different High Courts. In case of CIT. vs. Jet Airways (I) Ltd.,the High Court, in its elaborate decision considering the statutory provisions, different judicial pronouncements and the explanatory memorandum for introduction of Explanation 3 to Section 147 of the Act, ruled in favour of the assessee.
32. Punjab and Haryana High Court in case of Majinder Singh Kang Vs. Commissioner of IncomeTax and anr (supra) ofcourse has sounded a different note. We may, however, notice that the explanatory memorandum to Explanation 3 to Section 147 of the Act was not brought to the notice of the High Court in the said decision. The High Court gave considerable importance on such Explanation 3 to Section 147 of the Act and the language used therein."
4. In the result, Tax Appeal is dismissed.
(AKIL KURESHI, J.) (BIREN VAISHNAV, J.) raghu Page 5 of 5 HC-NIC Page 5 of 5 Created On Sun Jul 23 13:31:45 IST 2017