Gujarat High Court
National vs Deputy on 6 April, 2011
Author: Harsha Devani
Bench: Harsha Devani
Gujarat High Court Case Information System
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SCA/14449/2010 10/ 10 JUDGMENT
IN
THE HIGH COURT OF GUJARAT AT AHMEDABAD
SPECIAL
CIVIL APPLICATION No.14449 of 2010
For
Approval and Signature:
HONOURABLE
MS.JUSTICE HARSHA DEVANI
HONOURABLE
MS.JUSTICE B.M.TRIVEDI
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1
Whether
Reporters of Local Papers may be allowed to see the judgment ?
2
To be
referred to the Reporter or not ?
3
Whether
their Lordships wish to see the fair copy of the judgment ?
4
Whether
this case involves a substantial question of law as to the
interpretation of the constitution of India, 1950 or any order
made thereunder ?
5
Whether
it is to be circulated to the civil judge ?
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NATIONAL
DAIRY DEVELOPMENT BOARD - Petitioner(s)
Versus
DEPUTY
COMMISSIONER OF INCOME TAX ANAND CIRCLE - Respondent(s)
=========================================================
Appearance
:
MRS
SWATI SOPARKAR for
Petitioner(s) : 1,
NOTICE SERVED for Respondent(s) : 1,
MR KM
PARIKH for Respondent(s) :
1,
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CORAM
:
HONOURABLE
MS.JUSTICE HARSHA DEVANI
and
HONOURABLE
MS.JUSTICE BELA TRIVEDI
Date
: 24/03/2011
ORAL
JUDGMENT
(Per : HONOURABLE MS.JUSTICE HARSHA DEVANI)
1. By this petition under Article 226 of the Constitution of India, the petitioner has challenged the notice dated 25.3.2010 issued by the respondent under section 148 of the Income Tax Act, 1961 (the Act) re-opening the petitioner's assessment for the assessment year 2003-2004.
2. The petitioner is a Corporation constituted under the National Dairy Development Board Act, 1987 (NDDB Act). Earlier, in view of the provisions of section 44 of the NDDB Act, the petitioner was exempted from the application of the Income Tax Act. However, vide section 162 of the Finance Act, 2002, section 44 of the NDDB Act, came to be omitted with effect from 1.4.2003. The petitioner Board, therefore, became a taxable entity for and from assessment year 2003-2004.
The petitioner filed return of income on 15.11.2003 declaring taxable income of Rs.81,03,26,249/- for the assessment year 2003-2004. Initially, return was processed under section 143(1) of the Act and refund arising thereon of Rs.15,26,18,119/- came to be issued to the petitioner. Subsequently, on a rectification application made by the petitioner, vide order dated 6.8.2004 further refund of Rs.16,13,021/- came to be issued. Subsequently, notice came to be issued under section 143(2) of the Act along with various questionnaires. The petitioner, in response to the notice and the questionnaires, submitted written submissions vide various letters. On the basis of the written submissions and after discussion, the assessment was completed vide order dated 15.6.2005 by allowing and disallowing certain claims of the petitioner. Being aggrieved, the petitioner went in appeal to the Commissioner (Appeals. The said appeal came to be partly allowed. The order of the Commissioner (Appeals) came to be carried in appeal before the Tribunal, who, vide order dated 17.8.2007 partly allowed the appeal. Thereafter, by the impugned notice, the assessment of the petitioner is sought to be re-opened for the assessment year 2003-04.
Vide letter dated 28.4.2010, the petitioner filed its objections to the reasons recorded by the Assessing Officer and requested the respondent to drop the re-assessment proceedings. Thereafter, the respondent vide letter dated 14.10.2010 disposed of the objections and rejected the same in totality. Being aggrieved, the petitioner has filed the present petition challenging the above referred notice.
Assailing the impugned notice under section 148 of the Act, Mr. S.N. Soparkar learned Senior Advocate appearing on behalf of the petitioner submitted that the assumption of jurisdiction by the Assessing Officer under section 147 of the Act, is invalid. It was submitted that the notice in the present case has been issued on 25.03.2010 in relation to assessment year 2003-04, hence, the re-opening is clearly beyond a period of four years for the end of the relevant assessment year. It was submitted that, in case, where earlier an assessment has been framed under section 143(3) of the Act, then for the purpose of re-opening of assessment after the expiry of period of four years from the end of the relevant assessment year, the Assessing Officer is required to record two fold satisfaction. Firstly, that the income chargeable to tax has escaped assessment; and secondly, that such escapement is by reason of failure on the part of the assessee: (i) to file a return under section 139 or in response to notice issued under section 142(1) or section 148 of the Act; or (ii) failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration. It was submitted that in the present case admittedly, the first situation does not exist. Insofar as the second situation is concerned, attention was invited to the reasons recorded to point out that there is not even a whisper in the entire reasons to indicate any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment.
It was further submitted that the assessment is sought to be re-opened on two grounds. Insofar as the second ground pertaining to claim of depreciation is concerned, the said issue was subject matter of challenge by the petitioner before the Tribunal and was decided in favour of the petitioner. Attention was invited to the provisions of second proviso to section 147 of the Act to submit that in light of the said provision, once the income involved is subject matter of any appeal, reference or refund, it is not permissible for the Assessing Officer to re-assess or assess such income. It was submitted that in the circumstances, insofar as the second ground is concerned, the Assessing Officer lacks jurisdiction to re-open the assessment on the said ground. In conclusion, it was submitted that in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment, the assumption of jurisdiction under section 147 of the Act is invalid and as such the impugned notice under 148 is required to be quashed and set aside.
The learned counsel has also made submissions on the merits of the first ground on which the assessment is sought to be reopened, however, considering the view that the Court is inclined to take in the matter, it is not necessary to refer the said contentions in detail.
Resisting the petition, Mr. K.M. Parikh learned Standing Counsel appearing on behalf of the respondent has submitted that in light of the reasons recorded, it is apparent that income chargeable to tax has escaped assessment for the year under consideration and as such the basic requirement for reopening assessment is fulfilled. On the question of failure on the part of the petitioner to disclose fully and truly all material facts, reliance was placed upon the contents of the order disposing of the objections to submit that the said order clearly indicates that the income has escaped assessment on account of failure or omission on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment. Reliance was also placed on the affidavit-in-reply filed by the respondent to submit that for the purpose of re-opening of the assessment under section 147 of the Act, the cases where assessment has been made but the income chargeable to tax has been under assessed or such income has been made the subject matter of excessive relief or excessive loss or depreciation allowance or any other allowance under the Act are also deemed to be cases where income chargeable to tax has escaped assessment within the meaning of the Explanation 2(c) of section 147 of the Act. It was contended that it is not all the time required that there is failure on the part of the assessee to disclose fully and truly all the material facts necessary for his assessment. According to the learned counsel the assumption of jurisdiction by the Assessing Officer is valid and proper, and that, there is no warrant for any intervention by this Court.
From the facts noted hereinabove, it is apparent that the impugned notice dated 25.3.2010 under section 148 of the Act whereby assessment for the assessment year 2003-04 is sought to be reopened has been issued after the expiry of period of four years from the end of the relevant assessment year. In the circumstances, for the purpose of invoking the provisions of section 147 of the Act the Assessing Officer is required to record two-fold satisfaction. Firstly, that income chargeable to tax has escaped assessment, and secondly, that such escapement is by reason of failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment.
A perusal of the reasons recorded indicates that the Assessing Officer has re-opened the assessment on two grounds. Firstly, on the ground that while computing the taxable income, from the net profit and income and expenditure account, the petitioner had deducted under the head "provision written back of Rs.47,40,43,904/-"
(as per audit note No.10) of Notes forming the part of the Income-Tax Return for the assessment year 2003-04. According to the Assessing Officer, the provision written back of Rs.47,40,43,904/- includes write back of excess provision for the debts detailed in therein as per RBI prudential norms, provision for contingency etc. made in the earlier year which are not in the nature of income and not liable to tax under section 41(1) of the Act and hence excluded while computing total income, therefore, the written back provision of Rs.47,40,43,904/- is the income of the assessee for the year under consideration, which has escaped assessment. As is apparent from the reasons recorded, the aforesaid satisfaction is based upon verification of the return of the petitioner company. In other words the said ground of reopening is based upon material disclosed by the petitioner. Insofar as the second ground is concerned, which relates claim of depreciation of Rs. 33,75,40,636/-, the said ground is based on the fact that in view of the introduction of Explanation 6(b) to section 43 of the Act by Finance Act, 2008, which has been made retrospectively effective from 1.4.2003, the assessee's claim requires to be restricted to Rs.12,42,38,986/-. The Assessing Officer was of the view that in the light of the amendment brought in by the Finance Act, 2008, the petitioner has been allowed excessive depreciation.
Thus, insofar as the first ground is concerned, the satisfaction of the Assessing Officer is based upon the material placed on record by the petitioner. The second ground which was subject matter of appeal is based upon a subsequent amendment brought in by the legislature. However, in either case, there is nothing whatsoever in the reasons recorded to indicate that there is any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration.
It is by now well settled that, in case where earlier an assessment has been framed under section 143(1) of the Act and such assessment is sought to be re-opened after the expiry of a period of four years from the end of relevant assessment year, the conditions prescribed under the proviso to section 147 of the Act are required to be satisfied. In the present case, from the facts noted hereinabove, it is apparent that the condition precedent for invoking the proviso to section 147 of the Act, viz., failure on the part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration, is clearly not satisfied. In the circumstances, the assumption of jurisdiction under section 147 of the Act, is not valid and as such, the impugned notice under section 148 of the Act, cannot be sustained.
As regards the contention based upon Explanation 2(c) of section 147 of the Act, the same requires to be stated only to be rejected. The said Explanation only lays down the certain categories of cases which shall be deemed to be cases where income chargeable to tax has escaped assessment. The Explanation does not in any manner override the provisions of the first proviso to section 147 of the Act.
Moreover, insofar as the second ground for reopening of assessment is concerned, it may be noted that the second proviso to section 147 of the Act expressly provides that the Assessing Officer may assess or reassess such income, other than the income involving matters which are subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Thus by virtue of the second proviso to section 147 of the Act, income involving matters which are subject matters of any appeal, reference or revision has expressly been taken out of the purview of the said section. In the circumstances, insofar as the income stated to have escaped assessment under the second ground is concerned, the same having been subject matter of appeal would not fall within the ambit of section 147 of the Act and as such the Assessing Officer lacks jurisdiction to reopen the assessment on the said ground.
For the foregoing reasons, the petition succeeds and is accordingly allowed. The impugned notice dated 25.3.2010 issued by the respondent under section 148 of the Act (Annexure-A to the petition) is hereby quashed and set aside. Rule is made absolute accordingly with no order as to costs.
(HARSHA DEVANI, J.) (BELA TRIVEDI, J.) mandora/ Top