Bombay High Court
Bajaj Auto Limited vs Deputy Commissioner Of Income Tax ... on 26 February, 2024
Author: K.R.Shriram
Bench: K. R. Shriram, Neela Gokhale
2024:BHC-OS:3206-DB
1/14 414-oswp-2002-2022-J.doc
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 2002 OF 2022
Bajaj Auto Limited,
having its office at Bajaj Auto Complex, Mumbai
Pune Road, Akurdi, Pune 411 035. ...Petitioner
Versus
1. Deputy Commissioner of Income Tax, Circle
-3(4), Mumbai,
having his office at 29th Floor, World Trade
Centre-1, Cuffe Parade, Mumbai 400 005.
2. Additional/Joint/Deputy/Assistant
Commissioner of Income Tax/Income Tax
Officer,
National Faceless Assessment Centre, Delhi.
3. Additional Commissioner of Income Tax,
Range-3(4),
having his office at 29th Floor, Aayakar
Bhavan, Maharishi Karve Road, Mumbai
400 020.
4. Union of India,
Through the Secretary, Department of
Finance, Ministry of Finance, Government
of India, North Block, New Delhi 110 001. ...Respondents
Mr. P. J. Pardiwalla, Senior Advocate, with Ms. Vasanti B. Patel, for
Petitioner.
Mr. Suresh Kumar, for Respondents-Revenue.
CORAM : K. R. SHRIRAM &
DR. NEELA GOKHALE, JJ.
DATED : 26th February 2024.
ORAL JUDGMENT: (Per K.R.Shriram, J.)
1. Rule. Rule made returnable forthwith. By consent of parties taken up for final hearing.
Gaikwad RD
2/14 414-oswp-2002-2022-J.doc
2. Petitioner, for Assessment Year 2016-17, filed return of income on 29th November 2016 declaring total income of Rs.4860,25,58,663/-. The assessment was completed under Section 143(3) of the Income Tax Act, 1961 ("the Act") assessing the total income Rs.5163,85,46,552/-.
3. Petitioner received a notice dated 27 th March 2021 under Section 148 of the Act stating that there were reasons to believe Petitioner's income chargeable to tax for AY 2016-17 has escaped assessment within the meaning of Section 147 of the Act. By a communication dated 17th February 2021, Petitioner was provided the reasons for reopening. The same reads as under:
"1. The assessee Bajaj Auto Ltd., having PAN:
AADCB2923M is assessed to tax in this charge. In this case return of income was filed on 29.11.2016 declaring total income Rs.48,60,25,58,663/-. The assessment was completed u/s.143(3) of the IT Act assessing the total taxable income of Rs.51,63,85,46,552/-.
2. It is found from the return and the details available on record that, the assessee's income chargeable to tax has been under assessed on account of following issues:
2.1 Claim of provisions against unascertained liabilities:
The assessee claimed year end provisions for Press Including production, and Television under sub-head Advertising and Publicity for Rs.38,26,02,038/- and Rs.16,24,90,310/- respectively and Export Markets under sub-head Advertising expenses for Rs.34,66,34,334/- under the head Advertisement of Note 24 of Other Expenses. This provision of Rs.89,17,26,682/- was made against the unascertained liability which is contingent in nature. Hence, the provision of Rs.89,17,26,682/- was not an allowable expense which is required to be disallowed.
2.2 Claim of excessive deduction u/s.35(2AB) of the Act:
The assessee in their computation claimed Rs.6,38,97,55,364/- as deduction u/s 35(2AB) in respect of scientific research as revenue expenditure. The tax auditor in Form 3CD qualified Gaikwad RD 3/14 414-oswp-2002-2022-J.doc that amount allowable is Rs.6,38,97,55,364/- u/s 35(2AB) and that amount was claimed and accordingly debited to the Profit and loss account. It is however found from the record that, the total amount allowed for weighted deduction @ 200% is Rs.545,47,95,980/-, however the assessee has claimed Rs.638,97,55,364/- which resulted in excess claim of deduction of Rs.93,49,59,384/-. Hence, this excess claim is required to be disallowed.
2.3 Deduction claimed on account of CSR Expenses and Donations:
Assessee's computation of income revealed that the assessee had added back an amount of Rs.86,72,16,104/- which was debited in the P&L A/c towards CSR expenses. However, these CSR expenses were claimed by the assessee under section 80G of the Act to the extent of Rs.48,56,48,000/-. Thus, the total CSR expenditure of Rs.48,56,48,000/-, which was originally disallowed as CSR expenses was again claimed through the route of 80G deductions in its computation of income which was allowed in completion of assessment. Hence treating the same expense under two different heads would amount to double deduction which was not an allowable deduction claimed by assessee and allowed in assessment, which is required to be disallowed.
2.4 Excess allowance of deduction u/s.80IC of the Act.:
In completing the scrutiny assessment under section 143(3) the deduction u/s 80IC to the extent of Rs. 51,43,22,812/- was disallowed based on apportionment of expenses. It is seen from record that, while computing the disallowable expenses, the figure adopted under heading Expenses disallowed to the extent they are shown under Akurdi column was wrongly taken at Rs.1,26,37,52,949/- as against the actual expense of Rs.1,11,70,46,796/-,which resulted in short apportionment of Rs.14,67,06,153/-. Secondly, expenses on Advertisement, under heading- Expenses related to exports, commercial vehicles (three and four wheelers) and other business segments not at all relatable to Pantnagar units, amounting to Rs.4,14,13,93,062/- was deducted from the common expenses under account of head office and it is mentioned that these expenses are related to the exports of the company/commercial vehicles and the Pantnagar units are focussed on domestic sales of only two- wheelers and do not cater to export markets/commercial vehicles which are not allocable to the said units. However, the advertisement expenses under sub-head Press Including production, Television, Hoarding including production, Misc. Production expenses Publicity material printing expenses and Internet and Telecommunication shown under head Advertisement and Publicity of Annexure 7 are common in nature. Hence, these amounts should be taken for computation of apportionment of expenditure. Details of the item wise expenses are as under:-
Gaikwad RD
4/14 414-oswp-2002-2022-J.doc
Press incl production Rs.91,66,29,505/-
Television Rs.90,01,42,033/-
Hoarding incl production Rs.7,73,20,010/-
Misc. Production expenses Rs.39,53,19,715/-
Publicity material printing Rs.1,83,64,734/-
expenses
Internet and Rs.8,29,74,459/-
Telecommunication
Total Rs.239,07,50,456/-
Total amount of Rs.253,74,56,609/- (Rs.14,67,06,153/- + Rs.2,39,07,50,456/-) should be added to the balance amount of Rs.759,70,58,532/- for computation of allocable expenses. Thus the actual common expenses works out to Rs.1013,45,15,141/- as against Rs.759,70,58,532/- worked out in the assessment. The incorrect computation resulted short apportionment of allocable expenses to Pantnagar Unit-II to the extent of Rs.68,56,53,520/- which was worked out by multiplication of common expenses with the ratio of Gross income of Pantnagar unit-II and Gross income of M/s Bajaj Auto Ltd. (BAL) (Rs.15,96,72,31,956/2,36,00,86,38,660 X Rs.10,13,45,15,141/-). In the concluded assessment expenses of Rs.51,39,81,168/- are already allocated to the Pantnagar Unit-II as per Para No.3.34, Page No.34 of the assessment order, hence there was short apportionment of Rs.17,16,72,352/-. As the assessee is claiming 30% of income as deduction u/s 80-IC, the said short apportionment leads to excess deduction of Rs.5,15,01,705/- (30% of Rs.17,16,72,352/-) which needs to be disallowed and taxed."
4. It is Petitioner's case that even though the proposed reopening is within four years of the end of the relevant assessment year, unless there is tangible material, reopening is not permissible on the basis of change of opinion. Mr. Pardiwalla submitted that all the four items, i.e., claim of provision against unascertained liabilities, claim of excessive deduction under Section 35(2AB) of the Act, deduction claimed on account CSR expenses and donations and excess allowance of deduction under Section 80IC of the Act were all subject matter of discussion during the assessment proceedings. Mr. Pardiwalla further submitted that claim of provisions against Gaikwad RD 5/14 414-oswp-2002-2022-J.doc unascertained liabilities and excess allowance of deduction under Section 80IC of the Act has also been discussed in the assessment order dated 26th December 2019.
5. Mr. Suresh Kumar opposed the petition and submitted that claim of excessive deduction under Section 35(2AB) of the Act and deduction claimed on account CSR expenses and donations have not been discussed in the assessment order and, therefore, the AO has not formed an opinion and when the AO has not formed an opinion, there cannot be a change of opinion by the succeeding AO. Mr. Suresh Kumar also submitted that as regards claim of excessive deduction under Section 35(2AB) of the Act, Assessee has claimed excess deduction of Rs.93,49,59,384/-.
6. Having heard the counsels and considered the pleading, in our view, the petition has to be allowed.
7. All the four items, as submitted by Mr. Pardiwalla, which form the basis for reason to believe escapement of income have been considered during the assessment proceedings. In the first notice dated 26th August 2019 that Assessee received under Section 142(1) of the Act, Petitioner was called upon to furnish deduction claimed under Chapter VIA with documentary evidences and also details of deductions claimed under Section 35 of the Act with supporting documents. Another communication dated 14 th November 2019 was Gaikwad RD 6/14 414-oswp-2002-2022-J.doc received by Petitioner under Section 142(1) of the Act calling upon Petitioner to provide data in the format prescribed for deduction claimed under Section 80IC of the Act, details of products manufactured at 80IC Units and details of products sold from these Units, item-wise details of direct expenses which has been considered for allocation to 80IC Units, details of claim under Section 35 along with DSIR certificate of expense in Form 3CL and any other certificate obtained or required to be obtained in this regard, details of R & D activity being carried on in respect of which deduction has been claimed and details of expenditure in CSR for which deduction under Section 80G has been claimed. Petitioner through its Chartered Account's letter dated 10th December 2019 gave data in connection with deduction claimed under Section 80IC of the Act and details of expenditure in CSR for which deduction under Section 80G was claimed. Thereafter, by Chartered Accountant's letter dated 16 th December 2019, Petitioner furnished details of deduction claimed under Chapter VIA of the Act with documentary evidences. This was followed by another letter dated 18 th December 2019 from Petitioner's Chartered Accountant providing details of provisions debited to P & L account during the year and whether the liability was ascertained or contingent in nature and details of claim under Section 35 of the Act along with DSIR certificate.
8. In the assessment order dated 26 th December 2019, it is Gaikwad RD 7/14 414-oswp-2002-2022-J.doc accepted that questionnaire along with notices dated 26 th August 2019 and 14th November 2019 under Section 142(1) of the Act were issued and the further details were called for from time to time during the course of assessment proceedings and Petitioner from time to time furnished the details called for. In the assessment order, the AO has also dealt with Petitioner's claim for deduction under Section 80IC and disallowed certain deductions. Likewise, the AO also disallowed certain provision for expenses under Section 37 of the Act.
9. Therefore, the fact that the four issues raised in reason to believe for escapement of income have been subject matter of consideration during the assessment proceedings cannot be disputed. Mr. Suresh Kumar's submissions that all the four items do not find the mention in the assessment proceedings and, therefore, it cannot be stated that the AO had formed an opinion while writing the assessment order also cannot be accepted. As held by this Court in Aroni Commercials Limited v. Deputy Commissioner of Income Tax- 2(1)1 once a query is raised during the assessment proceedings and Assessee has replied to it, it follows that the query raised was a subject of consideration of the AO while completing the assessment. It is also not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. Therefore, the reopening of the assessment, in our 1 (2014) 44 taxmann.com 304 (Bombay).
Gaikwad RD
8/14 414-oswp-2002-2022-J.doc
view, is merely on the basis of change of opinion of the AO from that held earlier during the course of assessment proceedings and this change of opinion does not constitute justification and/or reason to believe that income chargeable to tax has escaped assessment. Paragraph 14 of Aroni Commercials Limited (supra) reads as under:
"14. We find that during the assessment proceedings the petitioner had by a letter dated 9 July 2010 pointed out that they were engaged in the business of financing trading and investment in shares and securities. Further, by a letter dated 8 September 2010 during the course of assessment proceedings on a specific query made by the Assessing Officer, the petitioner has disclosed in detail as to why its profit on sale of investments should not be taxed as business profits but charged to tax under the head capital gain. In support of its contention the petitioner had also relied upon CBDT Circular No.4/2007 dated 15 June 2007. (The reasons for reopening furnished by the Assessing Officer also places reliance upon CBDT Circular dated 15 June 2007). It would therefore, be noticed that the very ground on which the notice dated 28 March 2013 seeks to reopen the assessment for assessment year 2008-09 was considered by the Assessing Officer while originally passing assessment order dated 12 October 2010. This by itself demonstrates the fact that notice dated 28 March 2013 under Section 148 of the Act seeking to reopen assessment for A.Y. 2008-09 is based on mere change of opinion. However, according to Mr. Chhotaray, learned Counsel for the revenue the aforesaid issue now raised has not been considered earlier as the same is not referred to in the assessment order dated 12 October 2010 passed for A.Y. 2008-
09. We are of the view that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the assessment order must record all the questions raised and the satisfaction in respect thereof of the Assessing Officer. The only requirement is that the Assessing Officer ought to have Gaikwad RD 9/14 414-oswp-2002-2022-J.doc considered the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings. There can be no doubt in the present facts as evidenced by a letter dated 8 September 2012 the very issue of taxability of sale of shares under the head capital gain or the head profits and gains from business was a subject matter of consideration by the Assessing Officer during the original assessment proceedings leading to an order dated 12 October 2010. It would therefore, follow that the reopening of the assessment by impugned notice dated 28 March 2013 is merely on the basis of change of opinion of the Assessing Officer from that held earlier during the course of assessment proceeding leading to the order dated 12 October 2010. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment."
10. A similar issue came for consideration in Marico Ltd. v. Assistant Commissioner of Income Tax, 12(3)(2) 2 where the Court held once a query has been raised by the AO during the assessment proceedings and Assessee has responded to that query, it would necessary follow that the AO has accepted Petitioner's/Assessee's submission so as to not deal with that issue in the assessment order. An assessment order passed under Section 143(3) of the Act even if it does not reflect any consideration of the issue it must follow that no opinion was formed by the AO in the regular assessment proceedings cannot be accepted. The Court held that where queries have been raised during the assessment proceedings and Assessee has responded to the same then the non-discussion of the same or the non-rejection of response of Assessee would necessarily mean that the AO has formed an opinion accepting the view of Assessee, thus taking a view/forming an opinion. Paragraph 6,7,9,10,11,12 read as under:
2 (2019) 111 taxmann.com 253.
Gaikwad RD 10/14 414-oswp-2002-2022-J.doc
6. We have considered the rival submissions. It is a settled position in law that the power to reopen an assessment within a period of four years from the end of the relevant assessment year, even when the assessment has been made under Section 143(3) of the Act, is not curtailed by the proviso to Section 147 of the Act. Therefore, even where an assessee has disclosed all material facts truly and fully for assessment and assessment is completed under Section 143(3) of the Act, the reopening is permissible within a period of four years from the end of the relevant assessment year. The only condition precedent for exercising the jurisdiction to reopen an assessment, is the Assessing Officer should have reasonable belief that income chargeable to tax has escaped assessment. This reason to believe that income chargeable to tax has escaped assessment should not be on the basis of change of opinion, as otherwise the power of reassessment would become a power of review, which it is not.
7. The Apex Court in Kelvinator of India Ltd. (supra), has while setting out the parameters for the exercise of powers of reopening an assessment had inter alia observed as under:-
"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 Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. But reassessment has to be based on fulfilment of certain preconditions and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of reopening the assessment, review would take place. One must treat the concept of "change of opinion" as an inbuilt test to check abuse of power by the Assessing Officer. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief."
9. It is made clear that for the purpose of this petition, we are not called upon to and therefore not examining the correctness or otherwise of the disallowance of depreciation to arrive at book profits. Our examination is limited only to jurisdiction of the Assessing Officer to reopen the assessment.
10. It is undisputed position before us, that query was raised on the very issue of reopening during regular Assessment proceedings. The parties have responded to it and the Assessment Order dated 30 January 2018, makes no reference to the above issue at all. However, once a query has been raised by the Assessing Officer during the assessment proceedings and the assessee has responded to that query, it Gaikwad RD 11/14 414-oswp-2002-2022-J.doc would necessarily follow, held by our Court that the Assessing Officer has accepted the Petitioner's/Assessee's submissions, so as to not deal with that issue in the assessment order. In fact, our Court in GKN Sinter Metals Ltd. v. Ms. Ramapriya Raghavan, Asstt. CIT [2015] 55 taxmann.com 438/232 Taxman 386/371 ITR 225 (Bom.) had occasion to dealt with the similar/identical submissions on behalf of the Revenue viz. that an assessment order passed under Section 143(3) of the Act does not reflect any consideration of the issue, it must follow that no opinion was formed by the Assessing Officer in the regular assessment proceedings. This submission was negatived by this Court by observing as follows:-
"14. According to the Revenue, it could only be when the assessment order contains discussion with regard to particular claim can it be said that the Assessing Officer had formed an opinion with regard to the claim made by the assessee. This Court in Idea Cellular Ltd. v. Deputy Commissioner of Income Tax 301 ITR 407 has expressly negatived on identical contention on behalf of the Revenue. The Court held that once all the material was placed before the Assessing Officer and he chose not to refer to the deduction/claim which was being allowed in the assessment order, it could not contended that the Assessing Officer had not applied his mind while passing the assessment order. Moreover in this case, it is evident from the letter dated 6th August, 2007, addressed by the Assessing Officer to the Petitioner containing the reasons recorded for issuing the impugned notice also record the fact that during the regular assessment proceedings, the Petitioner has been asked to furnish details in support of the claim for exemption under Section 80-IA/IB of the Act. The letter further records that the details sought for were furnished and it is now observed that there has been a disproportionate distribution of expenses between various units belonging to the Petitioner for claiming deduction under Section 80-IA/IB of the Act. This is a further indication of the fact that the Assessing Officer had during the regular assessment proceedings for Assessment Year 2002-03 sought information in respect of the allocation of expenses and the explanation offered by the Petitioner was found to be satisfactory. This is evident from query dated 27 th December, 2004, and the Petitioner's response to the same on 25 th January, 2005, explaining the manner of distribution of common expenses for delaying the process of claiming deduction under Section 80-IA/IB of the Act. All this would indicate that Assessing Officer had formed an opinion while passing the order dated 9th March, 2005. This Court in Aroni Commercials Ltd. v. Assistant Commissioner of Income Tax 367 ITR 405 had occasion to consider somewhat similar submission made by the Revenue and negatived the same by holding that when a query has been raised with regard to a particular Gaikwad RD 12/14 414-oswp-2002-2022-J.doc issue during the regular assessment proceedings, it must follow that the Assessing Officer had applied his mind and taken a view in the matter as is reflected in the Assessment Order. Besides, the manner in which an Assessing Officer would draft/frame his order is not within the control of an assessee. Moreover, if every contention raised by the assessee which even if accepted is to be reflected in the assessment order, then as observed by the Gujarat High Court in CIT v. Nirma Chemicals Ltd. 305 ITR 607, the order would result into an epic tomb. Besides, it would be impossible for the Assessing Officer to complete all the assessments which have to undergone scrutiny at its hand. In the above view, it is clear that once a query has been raised during the assessment proceedings and the Petitioner has responded to the query to the satisfaction of the Assessing Officer as is evident from the fact that the Assessment Order dated 9th March, 2005, accepts the Petitioner's claim for deduction under Section 80-IA/IB of the Act. It must follow that there is due application of mind by the Assessing Officer to the issue raised."
The above observations apply on all fours to this Petition, so far as the Revenue's submission of no change of opinion is concerned.
11. The further submission of Mr. Walve that in the absence of the Assessing Officer adjudicating upon the issue it cannot be said that the Assessing Officer had formed an opinion during the regular assessment proceedings leading to the order dated 30 January 2018. An adjudication would only be on such issue where the assessee's submissions are not acceptable to the Revenue, then the occasion to decide a lis would arise i.e. adjudication. However, where the Revenue accepts the view propounded by the assessee in response to the Revenue's query, the Assessing Officer has certainly to form an opinion whether or not the stand taken by the assessee is acceptable. Therefore, it must follow that where queries have been raised during the assessment proceedings and the assessee has responded to the same, then the non-discussion of the same or non-rejection of the response of the assessee, would necessarily mean that the Assessing Officer has formed an opinion accepting the view of the Assessee. Thus an opinion is formed during the regular Assessment proceedings, bars the Assessing Officer to reopen the same only on account of a different view"
The Revenue's challenge before the Apex Curt was dismissed by an order dated 1st June 2020 in Assistant Commissioner of Income Tax 12(3)(2) v Marico Ltd.3 3 (2020) 16 SCC 354.
Gaikwad RD
13/14 414-oswp-2002-2022-J.doc
11. Mr. Suresh Kumar's submission that this would amount to permitting Assessee an excess claim of deduction of Rs.93,49,59,384/- under Section 35(2AB) of the Act has to be rejected in view of what is held by the Apex Court in Gemini Leather Stores v Income Tax Officer.4 In that case Court held that an AO cannot take recourse to remedy the error resulting from his own oversight. The relevant portion reads as under:
"In the case before us the assessee did not disclose the transactions evidenced by the drafts which the Income-Tax Officer discovered. After this discovery the Income-tax Officer had in his possession all the primary facts, and it was for him to make necessary enquiries and draw proper inferences as to whether the amounts invested in the purchase of the drafts could be treated as part of the total income of the assessee during the relevant year. This the Income-tax officer did not do. It was plainly a case of oversight, and it cannot be said that the income chargeable to tax for the relevant assessment year had escaped assessment by reason of the omission or failure on the part of the assessee to disclose fully and truly all material facts. The Income-tax officer had all the material facts before him when he made the original assessment. He cannot now take recourse to section 147 (a) to remedy the error resulting from his own oversight."
12. In the circumstances, petition is allowed in terms of prayer clause (a) which reads as under:
"(a) this Hon'ble Court may be pleased to issue a Writ of Certiorari or a writ in the nature of Certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India calling for the records of the Petitioner's case and after examining the legality and validity thereof quash and set aside the notice dated March 27, 2021 (Exhibit- L) (together with consequential notices and orders) issued by Respondent No. I under section 148 of the Act seeking to reopen the assessment for AY 2016-17 and the order disposing the objections and show 4 (1975) 100 ITR 1 (SC).
Gaikwad RD 14/14 414-oswp-2002-2022-J.doc cause notice dated March 11, 2022 and March 25, 2022, respectively, issued by Respondent No. 2 (Exhibit-L and Exhibit-Y) respectively;"
13. Petition disposed.
(DR. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.)
Signed by: Raju D. Gaikwad
Designation: PS To Honourable Judge
Gaikwad RD
Date: 28/02/2024 15:45:32