Held
when it is found that the entire issue was gone into by the Assessing Officer while framing the scrutiny assessment under Section 143(3) of the Act and thereafter reopening of the assessment on the very issue can be said to be change of opinion, which is not permissible,
HIGH COURT OF GUJARAT
Manan Exports (P.) Ltd.
v.
Income-tax Officer
SPECIAL CIVIL APPLICATION NO. 21452 OF 2016
JANUARY 31, 2017
R.K. Patel and Darshan R. Patel, Advs. for the Petitioner. Sudhir M. Mehta, Adv. for the Respondent.
JUDGMENT
M.R. Shah, J. – RULE. Shri Sudhir Mehta, learned Counsel waives service of notice of rule on behalf of the respondent.
2. In the facts and circumstances of the case and with the consent of the learned advocates appearing on behalf of the respective parties, the present petition is taken up for final hearing today.
3. By way of this petition under Article 226 of the Constitution of India the petitioner – assessee has prayed for an appropriate writ, order or direction to quash and set aside the impugned notice dated 30/03/2016 issued by the respondent – Assessing Officer by which the Assessing Officer has sought to reopen the assessment for the Assessment Year 2009-10 in exercise of powers under Section 148 of the Income Tax Act (hereinafter referred to as “the Act”) on the ground that the income chargeable to tax has escaped the assessment within the meaning of Section 147 of the Act.
4. The facts leading to the present Special Civil Application in a nutshell are as under;
4.1 The petitioner – assessee filed the return of income for the Assessment Year 2009-10. Thereafter, on the basis of the information supplied by the DRI, pursuant to the show cause notice issued by the DRI, the case was taken under scrutiny. Detailed questionare were asked by the Assessing Officer with respect to the transactions of rough diamonds alleged to have been purchased by the petitioner – assessee. After detailed scrutiny, Assessing Officer framed the scrutiny assessment under Section 143(3) of the Act on 23/12/2011 and considering the material on record there was no addition made by the Assessing Officer. Thereafter, the Assessing Officer has issued the impugned notice beyond the period of four years from the date of assessment and has sought to reopen the assessment for the Assessment Year 2009-10 alleging inter alia that the income chargeable to tax under Section 147 of the Act has escaped the assessment. At the request of the petitioner – assessee, the Assessing Officer furnished the reasons recorded to reopen the assessment for the Assessment Year 2009-10, which reads as under;
| “1. | Assessee company had e-filed its return of income for AY 2009-10 on 26/09/2009 vide e-filing acknowledgment No. 92109960260909 declaring therein total income of Rs. 1,80,080/-. The return was processed under Section 143(1) of the Act on 30/10/2010. Thereafter, scrutiny assessment was completed on 23/12/2011 determining the assessed income at Rs. 23,26,430/-. | |
| 2. | Subsequently, information has been received from the office of the Deputy Director of Income-tax (Investigation), Unit-I, Surat vide confidential letter No. SRT/DDIT (Inv.)/Inquiry/2015-16 dated 24/07/2015. As per the information, the Directorate of Revenue Intelligence (DRI) on 27/11/2008 had confiscated six consignment of imported rough diamonds weighing 37546 carats of the assessee company at Surat Hira Bourse, Surat on the basis of intelligence input of over invoicing of imported rough and cut and polished diamonds by the Indian importers with nexus with Singapore based exporters. In this respect, the DRI authorities have issued show cause notice to assessee company and other its a compliance. In the assessee’s case, as per the imported documents the declared total value of the imported rough diamonds i.e. six consignment of diamonds in is US$ 21750437. However, subsequently, the assessee Company had amended the declared value of the six consignments of rough diamond at US$ 83512.60 only. Thus, it is clear evident on record of over invoicing the purchase value of the imported goods with a view to siphon off huge foreign exchange to park money abroad for unlawful activities. | |
| 3. | The over invoicing of purchase value of the goods, in the instant case comes to in US$ 21666925 (21750437 – 83512.60) value in Indian currency comes to Rs. 107,35,96,133/- (considering the exchange rate @ Rs. 49.55 per US$ as on 22/11/2008). I have perused and noted the content of the show-cause notice issued by the DRI authority. | |
| 4. | On verification of the relevant assessment records for the AY 2009-10 vis-a-vis the facts drawn by the DDIT (Inv.), Unit-I, Surat, the issue of seizure of six consignment of imported rough diamonds of the assessee company by the DRI & the issue of over invoicing of purchase goods, were not covered during the original assessment proceedings. By hiding the issue of seizure of the six consignment of imported rough diamonds by the DRI, the assessee has not furnished truly and fully all the material requirement before the AO during the original assessment proceedings. | |
| 5. | In view of the above facts, I have reason to believe that the income to the extent of Rs. 107,35,96,133/- has escaped assessment within the meaning of Section 147 of the Act in the case of the assessee. Therefore, this case is a fit case for issuing notice under Section 148 of the Act.” |
4.2 On receipt of the reasons recorded, the petitioner – assessee raised detailed objections submitting that the entire issue for which the assessment is sought to be reopened was in fact gone into by the Assessing Officer while framing the scrutiny assessment under Section 143(3) of the Act, and therefore, firstly there was no failure on the part of the petitioner – assessee in not disclosing true and correct facts and secondly the reopening is based on change of opinion by the subsequent Assessing Officer. The objections raised by the petitioner – assessee has been disposed of by the Assessing Officer vide communication dated 10/11/2016 by which the Assessing Officer has not agreed with the objections raised by the petitioner – assessee. Hence, the petitioner has preferred the present Special Civil Application under Article 226 of the Constitution of India challenging the impugned notice under Section 148 of the Act and challenging the impugned reassessment proceedings for the Assessment Year 2009-10.
5. Shri R.K. Patel, learned Counsel appearing on behalf of the petitioner – assessee has vehemently submitted that the impugned notice under Section 148 of the Act and the impugned reassessment proceedings are bad in law and are contrary to the provisions of Section 147 of the Act. It is further submitted by Shri Patel, learned advocate appearing on behalf of the petitioner – assessee that as such the conditions to reopen the assessment beyond four years as mentioned/provided in Section 147 of the Act has not been satisfied. It is submitted that as such there was no failure on the part of the petitioner – assessee in not disclosing true and correct facts. It is submitted that the assumption of jurisdiction by the Assessing Officer to reopen the assessment beyond four years is bad in law and contrary to the provisions of Section 147 of the Act. It is further submitted that even otherwise the entire issue with respect to the transactions for which now the Assessing Officer has reopened the assessment was in fact gone into by the Assessing Officer while framing the scrutiny assessment under Section 143(3) of the Act. It is submitted that as such on the basis of the show cause notice issued by the DRI, on the basis of which now the assessment is sought to be reopened, original assessment was taken under scrutiny and after detailed inquiry the Assessing Officer thereafter framed the scrutiny assessment under Section 143(3) of the Act. It is submitted that therefore the subsequent reassessment on the basis of the same material is nothing but change of opinion, and therefore, the reassessment proceedings is not permissible. In support of his above submissions, he has heavily relied upon the decision of the Hon’ble Supreme Court in the case of CIT v. Kelvinator of India Ltd. [2010] 320 ITR 561 . He has also relied upon the decision of the Hon’ble Supreme Court in the case of Parashuram Pottery Works Co. Ltd. v. ITO [1977] 106 ITR 1. In support of his above submissions and relying above the above decisions, he has requested to allow the present petition.
6. Shri Sudhir Mehta, learned Counsel appearing on behalf of the revenue has tried to oppose the present petition by submitting that while submitting the return the petitioner – assessee did not disclose the issuance of show cause notice by the DRI, which the Assessing Officer came to know on the basis of the information supplied by the DRI. It is submitted that therefore it can be said that there was failure on the part of the petitioner – assessee in not disclosing true and correct facts. It is submitted that therefore the conditions precedent for invoking the jurisdiction under Section 147 of the Act has been satisfied. It is submitted that therefore the impugned notice under Section 148 of the Act cannot be said to be either illegal and/or contrary to Section 147 of the Act. It is submitted that after receipt of the communication dated 24/07/2015 of DDIT (Investigation) Unit I, Surat and having been satisfied that the petitioner – assessee did not disclose true and correct facts of issuance of notice by DRI while submitting the return of income, and therefore, there was failure on the part of the petitioner – assessee in not disclosing true and correct facts, the Assessing Officer is justified in issuing the impugned notice and reopening the assessment for the Assessment Year 2009- 10.
Making the above submissions, it is requested to dismiss the present petition.
7. Heard the learned advocates appearing on behalf of the respective parties at length. At the outset, it is required to be noted that by the impugned notice the Assessing Officer has sought to reopen the assessment for the Assessment Year 2009-10, and therefore, unless and until the condition precedent as mentioned in proviso to Section 147 of the Act is satisfied, there may not be any reopening of the assessment. As per proviso to Section 147 of the Act if it is found by the Assessing Officer that there was failure on the part of the petitioner – assessee in not disclosing true and correct facts and due to which the amount chargeable to tax has escaped the assessment, the Assessing Officer is justified in reopening the assessment.
8. From the reasons recorded, it appears that on the basis of the information received from the DDIT (Investigation) Unit I, Surat, show cause notice has been issued by the DRI with respect to six consignments of imported rough diamonds, which was alleged to have been purchased by the petitioner – assessee and according to DRI there was over invoicing of the purchase goods. According to the Assessing Officer, so mentioned in the reasons recorded, the petitioner – assessee while filing the return of income did not disclose the show cause notice issued by the DRI with respect to the seizure of six consignments of rough diamonds by DRI, and therefore, the petitioner – assessee did not furnish truly and fully all material required before the Assessing Officer for the assessment proceedings. However, from the material on record, it appears that it is not in dispute that on the basis of the information supplied/given by DRI who issued the show cause notice with respect to six consignments of the imported rough diamonds, more particularly, with respect to over invoicing of the goods original assessment was taken under scrutiny assessment. The Assessing Officer as such issued questionare to the petitioner – assessee and thereafter considered the aforesaid and made some additions, and therefore, the entire issue with respect to the aforesaid six imported consignments of rough diamonds was in fact gone into by the Assessing Officer and considered in detail and thereafter the Assessing Officer framed the scrutiny assessment under Section 143(3) of the Act, and therefore, subsequent reassessment proceedings and/or reopening of the assessment on the very issue, more particularly, with respect to the consignment of the imported six rough diamonds can be said to be mere change of opinion. As observed hereinabove, the issue was gone into in detail by the Assessing Officer while framing the scrutiny assessment under Section 143(3) of the Act. Under the circumstances, considering the decision in the case of Kelvinator of India Ltd. (supra) merely on the basis of the change of opinion by the subsequent Assessing Officer/Assessing Officer reopening of the assessment is not permissible. In the present case, it is required to be noted that even reopening is beyond the period of four years. In any case, when it is found that the entire issue was gone into by the Assessing Officer while framing the scrutiny assessment under Section 143(3) of the Act and thereafter reopening of the assessment on the very issue can be said to be change of opinion, which is not permissible, and, therefore, the impugned notice and the reassessment proceedings deserves to be quashed and set aside. The present petition succeeds. The impugned notice dated 30/03/2016 and the reassessment proceedings are hereby quashed and set aside. Rule is made absolute accordingly. No order as to costs.