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Gujarat Fluorochemicals Ltd. Versus Assistant Commissioner of Income-tax - 2013 (8) TMI 287 - GUJARAT HIGH COURT - Income Tax
Notice u/s 148 - Held that:- Letter of approval from CIT does not bear any reference to the reasons recorded by the Assessing Officer - Assessing Officer did not agree with the audit objection and stuck to her position that she was right in law as well as in the facts while framing the original assessment and that, therefore, the audit objection should be dropped, has not been denied by the Assessing Officer though she herself filed an affidavit before this court in response to such averments made in the petition. All that she had to state was that she was surprised that the petitioner could claim access to inter-departmental correspondence which was strictly confidential in nature - Assessing Officer can form an independent opinion on an issue which may have been brought to his/her notice by the audit party and seek to reopen the assessment, provided it is the Assessing Officer's independent belief that income chargeable to tax has escaped assessment - Therefore, notice of reassessment unsustainable - Decided in favour of assessee.
.............. ves such authority. It was in this context extremely important for us to know whether recording of the reasons and consequent issuance of notice (even if it was in that sequence in the present case) was on the basis of an independent opinion of the Assessing Officer on the question of law and facts which may have been brought to her notice by the audit party or whether she eventually held a belief that such grounds were not valid and that she was under compulsion to reopen the assessment solely under insistence of the audit party. The Revenue not having either denied such clear averments of the petitioner made in the petition on oath nor having produced the original files to demonstrate the independent formation of opinion by the Assessing Officer, though sufficient time was made available, issue stands firmly concluded. Under the circumstances notice for reopening cannot be sustained. The same is quashed. The petition is disposed of. Rule made absolute. No order as to costs.
AKIL KURESHI AND HARSHA DEVANI MS. JJ. JUDGMENT The judgment of the court was delivered by Akil Kureshi J.-The petitioner has challenged the notice dated August 3, 2004, issued for the purpose of reopening assessment for the assessment year 2000-01. The petition arises in the following factual background The petitioner is a company registered under the Companies Act and is regularly assessed to tax. For the assessment year 2000-01, the petitioner filed its original return of income on November 29, 2000, declaring a total income of Rs. 23,75,74,840. The return was selected for scrutiny. The Assessing Officer framed assessment under section 143(3) of the Act computing the total income of the assessee at Rs. 26,01,66,900. The petitioner carried the assessment order in appeal. With respect to such appeal and outcome thereof, we are not directly concerned in this proceeding. The Assessing Officer issued the impugned notice on August 3, 2004, seeking to reopen the assessment of the petitioner for the year 2000-01. At the request of the petitioner, reasons for reopening were supplied which read as under Reasons for reopening are as under (1) The amount of Rs. 3,90,700 on account of penalty for non-fulfilment of export obligation to be disallowed in view of the decision of the Delhi High Court in the case of CIT v. Orissa Cement Ltd. 2002 258 ITR 365 (Delhi). (2) The A has income of insurance claim of Rs. 14,72,186 during the year under consideration but while working the deduction under section 80HHC, 90 per cent. of the insurance claim has not been reduced from the profit of the business. (3) The A has invested Rs. 10 crores in the units of Prudential ICICI Growth Plan and earned 4.27 crores as dividend income which is exempted. On a perusal of the records it has been seen that the units has been purchased on 16th March and sold on 28th March and incurring a huge loss of Rs. 3.51 crores. This transaction entered by A is beyond the ambit of the tax planning and indeed falls under the category of colourable devices. The decision of McDowells ratio is squarely applicable here. The petitioner under communication dated December 24, 2004, raised detailed objections to such reopening of assessment. Primarily the contention of the assessee was that all the three grounds on which the Assessing Officer desired to reopen the assessment were examined in the original scrutiny assessment and that, therefore, reopening on such basis was not permissible. It was also contended that there was no failure on the part of the assessee to make a return or disclose truly and fully all material facts necessary for assessment. Such objections were rejected by the Assessing Officer by an order dated December 28, 2004. At that stage, the petitioner filed the present petition challenging the notice for reopening of assessment itself. The learned senior counsel, Shri Soparkar, submitted that the reasons were not recorded by the Assessing Officer before issuance of notice for reopening. He submitted that recording of reason being the sine qua non for assuming jurisdiction for reopening the assessment, issuance of notice without recording such reasons would be wholly impermissible. Our attention was drawn to an order dated February 7, 2005, passed in the present petition, wherein the court had an occasion to peruse the original files in the context of this controversy. 6. (1) Counsel further submitted that the Assessing Officer held no independent belief that income chargeable to tax had escaped assessment. He submitted that the Assessing Officer was under compulsion by the audit party to issue notice for reopening of assessment though she herself held a firm belief that no income had escaped assessment. In this context, our attention was drawn to the averments made in the petition, particularly, in paras. 2.8 and 3.3 thereof. Counsel also drew our attention to the reply statement of the respondent in which while replying to such paragraphs, according to him such averments were not specifically denied. 6.(2) Counsel relied on the decision of the Division Bench in the case of Adani Exports v. Deputy CIT (Assessments) reported in 1999 240 ITR 224 (Guj), wherein it was held that the opinion of the audit party in regard to the income escaping assessment cannot be the basis of the Assessing Officer s firm opinion that income chargeable to tax had escaped assessment. In every case, the Assessing Officer must determine for himself what is the effect and consequence of the law mentioned in the audit note. On the other hand, learned counsel, Shri Parikh, for the Department opposed the petition contending that the Assessing Officer had recorded proper reasons before issuing notice. Such notice was issued within a period of four years from the end of the relevant assessment year. He further submitted that the Assessing Officer being satisfied that income chargeable to tax had escaped assessment, had issued such notice. Even if certain aspects were brought to her notice by the audit party, that by itself would not vitiate the notice to reopen the assessment. Having thus heard learned counsel for the parties and having perused the documents on record, we may examine the two principal contentions raised by the counsel for the petitioner. Firstly, we may advert to the question of recording of reasons before issuing notice. The learned counsel for the Revenue has made available the original files pertaining to the reopening of the assessment. Such file starts with a document recording reasons by the then Assessing Officer. She has placed the date of August 3, 2004, on such document. Right next to such document, we find original of the notice for reopening the assessment which is also dated August 3, 2004. In such notice, it is stated that this notice is being issued after obtaining the necessary satisfaction of the Commissioner of Income-tax (1), Baroda, the Central Board of Direct Taxes . We are intrigued to notice that such satisfaction w.................