Bombay High Court
P.A.No. Aaccs5263N vs Deputy Commissioner Of Income on 30 March, 2012
Author: D.Y.Chandrachud
Bench: D.Y.Chandrachud, M.S.Sanklecha
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 590 OF 2012
Sound Casting Pvt.Ltd. )
E-2, MIDC, Shiroli, Kolhapur-416 122 )
P.A.No. AACCS5263N ) ..Petitioner
Vs.
1. Deputy Commissioner of Income )
Tax, Crcle-2, having his office at )
Ayakar Bhavan, 31, C/2, Tarabai )
Park, Kolhapur - 416 003
ig )
2. Assistant Commissioner of Income )
Tax, Circle-2, having his office at )
31-C/E, Aayakar Bhavan, Tarabai )
Park, Kolhapur - 416 003 )
3. Commissioner of Income Tax - 2, )
having his office at Aayakar Bhavan, )
Tarabai Park, Kolhapur - 416 003. ) ..Respondents
Mr. K. Gopal with Mr. Jitendra Singh and Mr. Satyendra Pandey, for the
Petitioner.
Mr.N.N. Singh, for the Respondents.
CORAM: DR.D.Y.CHANDRACHUD AND
M.S.SANKLECHA, JJ.
DATE : 30th March, 2012.
JUDGMENT :(PER DR.D.Y.CHANDRACHUD,J).
1. Rule, by consent,made returnable forthwith. Counsel appearing on behalf of the ::: Downloaded on - 09/06/2013 18:22:31 ::: Mhi 2 WP-590-12 Respondents waives service. By consent the Petition is taken up for hearing and final disposal.
2. The challenge in these proceedings is to a notice under Section 148 of the Income Tax Act, 1961 purporting to reopen the assessment for A.Y.2005-06.
The original assessment was completed under Section 143(3) on 29 November 2007. Prior thereto, a notice was issued to the assessee on 21 August 2007 under Section 143(2). The assessee stated that during the course of the assessment proceedings, the Assessing Officer verified the books of accounts and the claim of expenses made in the profit and loss account. The notice for reopening has admittedly been issued beyond a period of four years from the end of the relevant assessment year. The following reasons have been furnished for reopening the assessment :-
"Since, the assessment was completed on 14/12/2007 accepting the melting loss @ 7.75% in the similar line of business the melting loss @ 5.5% in the similar line of business the melting loss claimed by the assessee and allowed to the assessee is excess. Therefore, I have reason to believe that in the assessment completed u/s. 143(3) of the I.T. Act, 1961 on 14/12/2007, income has escaped assessment for the A.Y.2005-06, within the meaning of Sec.147 of the I.T.Act, 1961"
The assessee filed its objections to the reopening of the assessment on 12 ::: Downloaded on - 09/06/2013 18:22:31 ::: Mhi 3 WP-590-12 December 2011 and moved this Court in a Writ Petition under Article 226 for a direction to the Assessing Officer to dispose of the objections. The Petition was disposed of by a Division Bench of this Court on 23 December 2011 with the following directions :-
"In response to a notice issued to the Petitioner under Section 148 of the Income Tax Act, 1981, on 9 March 2011 and the reasons disclosed under a letter dated 7 December 2011, the Petitioner submitted objections for reopening of the assessment on 12 December 2011. In terms of the decision of the Supreme Court in GKN Driveshafts (India) Ltd. vs. Income Tax Officer (2003 (259) ITR 19), we direct the Assessing Officer to dispose of the objections by a reasoned order within a period of four weeks from today. Until then, no steps shall be taken in pursuance of the notice dated 7 March 2011 and in the event that an adverse order is passed, for a further period of four weeks thereafter. The Petition is accordingly disposed of."
The fact that this Court had passed its order on 23 December 2011 was intimated to the Assessing Officer by the Petitioner's Advocate on 27 December 2011. On 28 December 2011, the Assessing Officer informed the Petitioner that in absence of a copy of the order of the Court he was proceeding to complete the assessment which was becoming time-barred on 31 December 2011. On 30 December 2011, the Assessing Officer addressed a communication to the Panel Advocate for the Revenue and eventually passed an order of assessment on the same day.
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2. The reopening of the assessment has admittedly taken place beyond a period of four years from the end of the relevant Assessment Year. There is no allegation in the reasons which have been disclosed to the assessee that there was any failure on his part to fully and truly disclose material facts necessary for assessment for that assessment year. Hence, we find merit in the contention that the jurisdictional condition for reopening the assessment beyond a period of four years has not been fulfilled. Even during the course of hearing, it has not been the submission of the Revenue that there was any suppression of material facts on the part of the Petitioner.
3. That apart, the reasons on the basis of which the assessment is sought to be reopened are similar to those which came up for consideration recently before a Division Bench of this Court on March 14, 2012 in Shriram Foundry Ltd. vs. Deputy Commissioner of Income Tax, Circle 2 & Ors. (Writ Petition No.10957 of 2011). In that case, the reasons which were disclosed to the assessee were as follows :
"Please note, on verification of your records for the year under consideration, melting loss claimed by you was found on higher side as compared to the rulings in that respect of the Hon'ble Income-Tax Appellate Tribunal, Pune Bench, Pune, in their judgment passed in ITA No.696/PN/2006 for A.Y.2001-02 in the case of Saroj Castings Pvt.Ltd., Kolhapur. Normal ::: Downloaded on - 09/06/2013 18:22:31 ::: Mhi 5 WP-590-12 allowable melting loss was ruled out at 5.5%, whereas, in your case it was claimed at 7.24%. In view of this fact, it was concluded, to the extent the assessment framed on 31/10/2006 has escaped the assessment by allowing excess claim of loss within the provisions of Sec.147 of the Act."
In that case as well the reopening of the assssement was beyond four years. While allowing the Petition, this Court held as follows :-
"The original assessment was completed under Section 143(3). The assessment is sought to be reopened beyond a period of four years from the end of the relevant Assessment Year. The jurisdictional condition is that in such case before an assessment can be validly reopened, there must be a failure on the part of the assessee to state fully and truly all the material facts necessary for the assessment. There is no such allegation in the reasons which have been disclosed to the assessee. The Assessing Officer has purported to reopen the assessment only recording that according to him the melting loss of 7.24% which was claimed by the assessee is higher than what is found in a similar line of business. This ex facie would amount merely to a change of opinion. As regards the contention of the counsel appearing for the Revenue that there was no discussion in the original order of assessment under Section 143(3) on the aspect of melting loss, it is evident that when the claim of the assessee was accepted during the course of the assessment proceedings, the Assessing Officer, as is normal in such cases, had not adverted to the melting loss claimed by the assessee or the reasonableness thereof. The claim of the assessee was nonetheless accepted by the Assessing Officer in the course of the order of assessment under Section 143(3). The order which has been passed by the Assessing Officer while disposing of the objections of the assessee would in fact indicate that it was on a verification of the records of the assessee for the year under consideration that the Assessing Officer came to the conclusion that the ::: Downloaded on - 09/06/2013 18:22:31 ::: Mhi 6 WP-590-12 melting loss was found to be on a higher side. The decision of the Tribunal in the case of Saroj Castings, which has been adverted to in the order of the Assessing Officer dated 9 December 2011, was rendered on 30 May 2008. The Assessing Officer could not have reopened the assessment on the basis of this subsequent decision of the Tribunal unless the jurisdictional requirements in the proviso to Section 147 were fulfilled. Moreover, the order of the Tribunal in Saroj Castings, a copy of which has been produced on record by the counsel for the assessee, does not indicate that any general principle of law was laid down in that case by the Tribunal. All that the Tribunal held there was that the Commissioner (Appeals) had properly worked out the reasonable wastage percentage as 5.5% as against 6.6% shown by the assessee in that case. As a matter of fact, the order of the Tribunal would also indicate that it was only the Revenue which was in appeal against the determination made by the Commissioner (Appeals) which was not challenged by the assessee. Hence, looked at from every perspective, it is evident that the Assessing Officer has transgressed the limits on his jurisdiction for seeking to reopen an assessment beyond a period of four years from the end of the relevant assessment year. Counsel appearing on behalf of the assessee has drawn the attention of the Court to the fact that on 21 December 2011, this Court while issuing notice to the respondents had passed an ad-interim order in terms of prayer clause (c) restraining the respondents from acting on the impugned notice or proceeding further by way of re-assessment for A.Y. 2004-05. A communication was addressed to the Assessing Officer on 27 December 2011 drawing the attention of the officer to the order passed by this Court. The Assessing Officer passed an order of assessment on 30 December 2011 since the period of limitation was to expire. The assessee has filed an application dated 10 February 2012 before the Assessing Officer. Since the reopening of the assessment under Section 148 is not valid, the consequential assessment order dated 30 December 2011 would have to be quashed and set aside."::: Downloaded on - 09/06/2013 18:22:31 :::
Mhi 7 WP-590-12 The present case stands on the same foundation
4. It would appear that the Assessing Officer passed an order of assessment on 30 December 2011 since the assessment was becoming time-barred on 31 December 2011 which was a Saturday. Though the website of the High Court disclosed that the earlier Petition had been disposed of as on 23 December 2011, it appears that the certified copy of the order was not made available until Saturday. Be that as it may, since the basis of the reopening of the assessment under Section 148 beyond a period of four years cannot be sustained, the consequential order of assessment would also have to be set aside.
5. Accordingly, we allow the Petition by setting aside the notice dated 7 March 2011 and the order of assessment dated 30 December 2011. Rule is made absolute in the aforesaid terms. There shall be no order as to costs.
(DR.D.Y.CHANDRACHUD, J.)
(M.S.SANKLECHA,J.)
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