Bombay High Court
Dilip S. Dahanukar vs Samir Tekriwal, Assistant ... on 22 February, 2000
Equivalent citations: [2001]248ITR147(BOM)
Bench: S.H. Kapadia, A.P. Shah
JUDGMENT
1. By this petition, the petitioner seeks to challenge a notice dated March 18, 1998, under Section 148 of the Income-tax Act, 1961, seeking to reopen the assessment for the assessment year 1994-95.
2. The petitioner is an individual. At the relevant time, he was carrying on business in the name and style of Biobasix Industrial Undertaking at Daman (hereinafter referred to as "the BIU"). The petitioner is a chemical engineer from IIT, Powai. He developed a new product of high value for production of organic manure, which was a research-based product. It was based on agro-waste material like gobar, etc. The BIU was started in 1993. It was a proprietary concern.
3. For the relevant assessment year 1994-95, the petitioner filed his return of income on October 27, 1994, declaring a total income of Rs. 6.74 lakhs. Vide intimation under Section 143(l)(a), the return came to be accepted after making a small adjustment. However, the case of the petitioner for the said assessment year was taken up for scrutiny. Finally, vide order dated May 20, 1996, after examining the claim for deduction under Section 80-IA, an assessment order was passed. By the said order, the claim for deduction was granted.
4. For the next assessment year 1995-96, the petitioner once again claimed deduction under Section 80-IA. However, respondent No. 1 disallowed the claim on the basis of the survey, under Section 131 of the Income-tax Act. carried out by the Department when it was found that there was no electricity nor plant and machinery at site. There was also no water connection nor furniture. Being aggrieved, the petitioner filed an appeal to the Commissioner of Income-tax (Appeals). After consideration, the appellate authority allowed the appeal and came to the conclusion that the claim for deduction under Section 80-IA was genuine. This was vide order dated March 31, 1999.
5. At this stage, it is important to note that for the assessment year 1994-95, a decision to reopen the assessment was taken pursuant to the reasons recorded on March 11, 1998, i.e., much prior to the appeal being allowed by the Commissioner of Income-tax for the assessment year 1995-96. According to the said reasons, the claim for deduction under Section 80-IA was found and proved to be fraudulent inasmuch as during the survey it was found that the assessee did not have a factory, plant and machinery, workers, etc. There was no water nor electricity and furniture. Pursuant to the said reasons, the Department decided to reopen the assessment which is the subject-matter of challenge in this writ petition.
6. Mr. Dastur, learned senior counsel appearing on behalf of the assessee, contends that in the present matter, the claim for deduction under Section 80-IA was rejected by the Assessing Officer for the assessment year 1995-96. Against the said order, the matter was carried in appeal in which the appellate authority has gone into the entire gamut of the survey and the appellate authority concluded that looking to the nature of the activity of the assessee, there was no necessity of having a factory, plant and machinery, workers, etc. Mr. Dastur further pointed out that the BIU had sold its products to Good Value Agro Products Limited for Rs. 24 crores under an agreement dated June 23, 1993, which fact was also considered by the appellate authority. Mr. Dastur, further contended that the petitioner was on the board of directors of Good Value Agro Products Limited. That Good Value Agro Products Limited was a company registered under the Companies Act. That this company subsequently merged with Good Value Marketing Company Limited, which was approved by this court. Mr. Dastur further pointed out that each of the above aspects has been considered by the Commissioner (Appeals) and, therefore, respondent No. 1 was merely trying to review the same facts by ordering reopening of the assessment. In the circumstances, Mr. Dastur contends that this matter clearly shows that the reopening of the assessment is sought on the basis of change of opinion and there is no material on record to show that the Assessing Officer had reason to believe that income has escaped assessment. Learned counsel for the petitioner further contended that it is not open to the Department to rely upon the statements recorded after issuance of the impugned notices. He contended that in the present matter, the court must only look at the reasons recorded for reopening the assessment and if those reasons have been considered by the appellate authority, which has recorded a finding that the claim was not fraudulent then in that event merely on the basis of change of opinion there cannot be reopening of the assessment. Mr. Dastur also placed reliance on several judgments of the various High Courts in that connection.
7. By order dated May 20, 1996, passed under Section 143(3) in respect of the assessment year 1994-95, the claim of the petitioner for deduction under Section 80-IA came to be granted. On October 23, 1997, survey under Section 131 of the Act was carried out. For the assessment year 1995-96, the claim for deduction under Section 80-IA came to be rejected vide order dated March 9, 1998, passed by the Assessing Officer under Section 143(3). Being aggrieved by the said order, the assessee preferred an appeal on April 13, 1998, to the Commissioner of Income-tax (Appeals). By judgment and order dated March 31, 1999, the appellate authority allowed the appeal. However, it is interesting to note that the reasons recorded for reopening the assessment for the assessment year 1994-95 are dated March 11,1998. These reasons clearly indicate a large number of facts which have been brought on record, which prima facie, indicate that the assessee had fraudulently claimed deduction under Section 80-IA. The reasons also indicate the statement of Shri Patil, the representative of the assessee, who has stated that he was a worker in BIU, Daman. That he had never come across manufacturing activity at BIU. That there was no factory nor any plant and machinery at Daman. That there was no electricity, water supply, etc. There were no finished goods at site. That the so-called industry was not even registered with the Excise Department and a large number of other facts have been reflected in the reasons for reopening the assessment. Under the said reasons, it is further pointed out that BIU sold its products to Good Value Products Limited for Rs. 24 crores. That Good Value Products Limited never filed the return of income. That BIU was a proprietary concern of the petitioner. That the petitioner was the chairman of Good Value Products Limited. In the circumstances, it cannot be said that the reopening of the assessment is based only on change of opinion. The reasons indicate that the Assessing Officer had reason to believe that income has escaped the assessment. In this case, we are only concerned with reopening of the assessment for the year 1994-95. The reasons are given even prior to the decision of the appellate authority dated March 31, 1999. In the circumstances, we do not see any reason to interfere with the impugned notice for reopening of the assessment.
8. In the case of Jumna Lal Kabra v. ITO [1968] 69 ITR 461, the Allahabad High Court has held that reasons for reopening the assessment are of significance because they indicate the grounds which the officer had in mind for believing that the income had escaped assessment and it is not open to the officer to refer to reasons other than those recorded by him pursuant to Section 148(2). We do not see any dispute regarding the legal position. It is essentially a matter of application of law to the facts of a given case. In the present case, the reasons clearly indicate that there was material on basis of the survey and statements of persons to show that the assessee had wrongfully claimed deduction under Section 80-IA. To the same effect is the ratio of the Calcutta High Court in the case of East Coast Commercial Co. Ltd. v. ITO [1981] 128 ITR 326. In the case of Saradbhai M. Lakhani v. ITO [1998] 231 ITR 779 (Guj), it has been held that change of opinion of the Assessing Officer is not a ground for reassessment. It is further held that it is not open to the authorities to justify the action of reopening on the basis of further reasons supplied in the form of affidavit. As stated hereinabove, the legal position is well-settled. However, on facts, we are satisfied that there is material on record on the basis of which the Assessing Officer had reason to believe that income had escaped assessment. The above observations on the merits are tentative in nature. It is made clear that this order will not prevent the petitioner from placing reliance on the order of the Commissioner for the assessment year 1995-96 in the reassessment proceedings.
9. Under the above circumstances, we do not find any merit in this petition. Accordingly, the same stands rejected.
10. Mr. Dastur applies for stay of the above order for four weeks. Stay to operate till March 22, 2000. No further extension will be granted.
11. C. C. expedited.