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2015 (7) TMI 363 - BOMBAY HIGH COURT

2015 (7) TMI 363 - BOMBAY HIGH COURT - TMI - Reopening of assessment - Escapement of Income - Non speaking order - Non application of mind by Assistant Commissioner - Held that:- The Court is required to make detailed reference to all this simply because in a proceeding which is as serious as this, the stand of the revenue appears to be mechanical. The attitude is light hearted and casual. During the course of arguments as well the Advocate refers to the instructions issued to the counsel for th .....

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f her deposition before the Court is based on records then the least that is expected is such records are perused by the officers before deposing on oath.

We do not find any application of mind by the Assistant Commissioner of Income Tax to these aspects at all. She rejected the objections on 26th February, 2015. We are surprised that neither she makes any reference to the Assessment and Appellate proceedings, the specific disallowance but files an affidavit in reply in the Court and .....

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essee's objections refer to the materials which were before the assessing officer for the earlier assessment year, some of which were also the subject matter of revisional/Appellate proceedings, then, we would be failing in our duty if we do not interfere with the Notice in our writ jurisdiction. Once we come to this conclusion, then, we do not find any substance in the contention of Mr. Pinto that this Court cannot invoke its writ jurisdiction. As part of our further duty and to reinforce our c .....

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Pinto ORDER 1. This Writ Petition under Article 226 of the Constitution of India seeks the following reliefs:- (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 28th March, 2014 (Exhibit 'A') .....

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rch, 2014 (Exhibit 'A') issued by Respondents under section 148 of the Act seeking to reopen the assessment for the assessment year 2007-08; 2. Since the affidavit in reply has been filed and Mr.Irani states he is proceeding on the basis of denial and records that we have heard both sides extensively. 3. Rule. Respondents waives service. By consent the petition is heard finally. 4. The petitioner before us is a company engaged in the business of manufacturing and trading in industrial ch .....

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n in the electronic form was filed by the petitioner and it declared income of ₹ 21,86,10,187/-. On 7th August, 2008 the said return was selected for scrutiny by issuing notice under section 143(2)/142(1) of the I.T. Act. Annexure-B is a copy of notice dated 29th July, 2009 in respect thereof. 8. On 17th August, 2009, the first respondent issued a detailed questionnaire calling for various details. It is alleged that these details were sought on several items such as loans and advances, ad .....

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worked out. There were further details filed on 9th September, 2009 based on discussions during the course of assessment proceedings and questionnaire issued. Further additional details pertain to sale of fixed assets, etc. The process continued inasmuch as, certain details came to be forwarded in October and November, 2009 vide annexures - F & G. At the end of all this, an order of assessment was passed by the first respondent under section 143(3) of the I.T. Act on 21st December, 2009 asse .....

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Commissioner of Income Tax (Appeals). A copy of the memo of the appeal is annexed at annexure-I to the writ petition and pertinently on 3rd February, 20011 the above appeal was partly allowed by the Commissioner. A copy of that order is at annexure-J. 11. It is stated in para 3 (k) that being aggrieved by this appellate order, both sides namely the assessee and the respondent filed cross appeals before the Tribunal and the Tribunal decided the same on 28th August, 2014 by a common order. 12. Th .....

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he provision for doubtful debts while computing the book profit under section 115JB of the I.T. Act and reduced the claim of additional depreciation. This is contained in the order at annexure-O to the petition. 13. On 29th March, 2014 the first respondent also passed an order in reassessment proceedings initiated in the case of the petitioner for immediately preceding assessment year 2006-07. The issues concern the depreciation on windmills and reconciliation of the tax deducted at source on th .....

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n 148 of the I.T. Act dated 28th March, 2014 (impugned notice) seeking to reopen/reassessment completed during the assessment for the assessment year 2007-08. On receipt of this notice, the petitioner addressed two letters dated 1st April, 2014 and 7th April, 2014 requesting the respondents to forward the reasons for reopening, since they had not been communicated. The petitioner also and we are informed in terms of a routine procedure stated by letter dated 7th April, 2014 that the original ret .....

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ereupon, the petitioner on 23rd February, 2015 filed detailed objections and contended that initiation of proceedings is invalid and illegal. The reopening is in terms of a power conferred by the first proviso under sub-section (1) of section 147 of the I.T. Act, therefore, there ought to be failure to disclose all material facts. In the present notice, no such case is made out and, therefore, there being no tangible material nor the allegation being specific, that notice be withdrawn. One of th .....

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was moved before us on 25th March, 2015. On that day we passed an order directing that no orders pursuance to impugned notice and the refusal to entertain objections and accept them shall be passed by the competent authority. That ad-interim order continues till today. 19. Mr.Irani, learned counsel appearing on behalf of the petitioner submitted that the impugned notice is ex-facie illegal and invalid. He would submit that the assessment year 2007-08 is the year in which the assessment was made .....

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ubmits that the impugned notice falls short of this requirement and the legal mandate. He has tendered a chart/table for our benefit and convenience and a copy of which is handed over to respondents' Advocate Mr. Pinto. 20. Mr.Irani submits that the first issue is disallowance under section 14A of the I.T. Act. The reasons for re-opening are that the disallowance has been calculated in terms of this section after considering interest income of ₹ 6.22 crores as against the gross interes .....

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of Income Tax (Appeals). He invites our attention to pages 313 to 321 of the paper-book and pages 350, 359 including 358 of the paper-book. The cash flow statement was provided in terms of a clarification. The questionnaire and the correspondence giving true disclosures and details of interest paid on which a specific query was raised during the original assessment, there is response given. The response is clearly detailed. Our attention is invited to pages 43 & 44, 62, 294, 297, 308 to 311 .....

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ereof at pages 391 and 392 of the paper-book which shows that this amount was already disallowed under section 115JB of the I.T. Act. Our attention is invited to the third issue namely interest allocation to capital gains. The Notice alleges that the assessee has not provided any separate cash flow which resulted in excess interest on borrowed funds being claimed by the assessee. The assessee pointed out that there is cash flow which is provided (page 56), facts fully disclosed in the audited ac .....

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ssessment. There is a detailed response to the query. The discussion on depreciation in the assessment order pages 327 to 329 is relied upon claiming that in the absence of these disclosures, it would not have been possible for the assessing officer to discuss this issue and to render any finding on the same. Pertinently, the argument is that this issue was also raised in reassessment proceedings in the immediately preceding assessment year 2006-07 but no addition/disallowance was made on this g .....

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amely, the reassessment order and the impugned notice. 22. With regard to the issue of reconsideration of TDS, Mr.Irani sought to read the reasons and as recorded. He submits that if the petitioner-assessee had received ₹ 47.92 crores under various heads like rent, professional fees, contract payment, commission, etc., then, in the absence of any details, the assessing officer would not have been in a position to identify the payments from the parties. Even otherwise, specific query was ra .....

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ed fall short of the statutory mandate. There is absolutely no material for the assessing officer to form a reasonable opinion and belief. Mr.Irani submits that the reassessment cannot be initiated to review an order passed by the earlier officer. It is not a power so as to record a contrary opinion. Once the issue was examined during the course of the original assessment and a particular view has been taken, then, in the absence of any new/fresh tangible material, the assessment could not have .....

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or all these reasons, he submitted that the writ petition be allowed. 23. On the other hand, Mr.Pinto, appearing for the respondents submits that this Court cannot go into the sufficiency or inadequacy of the reasons. This Court cannot consider the issue in such details and as proposed by the petitioner. In his submission, the writ jurisdiction cannot be exercised to resolve a factual dispute or any issue which touches the merits of the controversy. Therefore, the recorded reasons were enough to .....

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page 38 of the paper-book is the impugned notice and it states that respondent No.1 has reasons to believe that income chargeable to tax for the assessment year 2007-08 has escaped assessment within the meaning of section 147 of the I.T. Act. At annexure-B is a letter from the Additional Commissioner of Income Tax addressed to the petitioner on 29th July, 2009 which refers to certain points in connection with the return of income submitted by the petitioner on which he sought further informatio .....

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ion of actual profit and loss, additions to fixed assets/sale thereof and item 36 pertains to statement of different head-wise income comprised in TDS credit claimed by the assessee and the break-up of the income actually credited in the profit and loss account for the year under consideration. There is a query raised that if any income in respect of which the TDS is claimed during the year has not been accounted for as income, then, the same should be specified. 26. Thereafter, the petitioner r .....

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detailed questionnaire in the original assessment had touched upon the issues that were the subject matter of the reassessment proceedings. There is a denial of the averment that all material facts were disclosed. However, we do not find any statement which refutes or disputes the communications to which we have made reference hereinabove. Pertinently, there is reference made to the submissions made on 9th September, 2009 and the additional details filed by the petitioner in the submissions date .....

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ith others made on an affidavit on oath. Pertinently, the deponent of the affidavit is present in the Court. She is supposed to have dealt with the objections to the reasons recorded in the impugned notice. When her attention was invited to the objections and which have been raised by the petitioner-assessee from pages 454 to 459 of the paper-book, we find that the said detailed objections running into about 7-8 pages, the deponent had no knowledge of the same. Therefore, no reference is made in .....

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o say that the impugned notice has been issued only after I had reasons to believe that income has escaped assessment by reasons of the failure of the petitioner to truly and fully disclose all material facts pertaining to the assessment sought to be reopened." If this is a bold assertion, nothing further and more was required. Yet we find that at page 484 of the paper-book, reference is made to the additional details, submissions including the appeal and cross appeal and the grounds thereo .....

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assed the order rejecting the objections, then, the least that was expected of her was to refer to the specific objections. 29. The Court is required to make detailed reference to all this simply because in a proceeding which is as serious as this, the stand of the revenue appears to be mechanical. The attitude is light hearted and casual. During the course of arguments as well the Advocate refers to the instructions issued to the counsel for the revenue as reflected in the reply affidavit. The .....

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ds then the least that is expected is such records are perused by the officers before deposing on oath. 30. At page 451 of the paper-book is a specific para in the reasons recorded for re-opening the assessment for assessment year 2007-08. That refers to dissallowance under section 14A of the I.T. Act. Then, in para 3 at the same page, the provision for bad and doubtful debts and in para 4 there is a reference to non production of a separate cash flow statement. So also, the claim with regard to .....

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the Commissioner, an order under section 143(3) read with section 263 of the I.T. Act dated 4th December, 2012 was passed, wherein the provision for bad debts was added to the book profit under section 115JB of the I.T. Act and additional depreciation on plant and machinery used for one hundred and eighty two days or less was restricted to 50% of additional depreciation allowable. 31. With regard to disallowance under section 14A, we find at page 454, 455 & 456 of the paper-book that there i .....

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e is a reference made to the memo of appeal before the first appellate authority and subsequently to the order of the Commissioner where disallowance has not been entirely set aside and to the satisfaction of the petitioner. There is reference to the cross appeals. 32. We do not find any application of mind by the Assistant Commissioner of Income Tax to these aspects at all. She rejected the objections on 26th February, 2015. We are surprised that neither she makes any reference to the Assessmen .....

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e parties like the petitioner to object to the reasons recorded and require that the objections be dealt with by passing a speaking order. The present case is a complete go-bye to the mandate in the orders and directions of this Court and equally the Hon'ble Supreme Court. The reproduction of the reasons and reiterating them again is no compliance with the law laid down by this Court. A speaking order is required to be passed dealing with the objections. If the objections are not found to be .....

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income. If that has escaped in the assessment proceedings and such fact has come to the Assessing Officer's notice, then, that assessee is required to be dealt with to recover the revenue legitimately and lawfully due. If this is the object of enacting section 147 of the I.T. Act and the power that is conferred in the assessing officer is in the nature of a trust, then we would not countenance such an order as has been passed on 26th February, 2015. 33. We do not find that all matters conce .....

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e justification for the same ought to be spelt out and that is how a speaking order would meet the requirement of law. 35. We have found that on each of the factual materials and which have been tabulated before us, there is absolutely nothing in the order dated 26th February, 2015. We also find on reading of the notice that apart from it being vitiated by total non application of mind, it does not even make reference to the proviso and the satisfaction in terms of the contents of the same. Once .....

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