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2015 (7) TMI 811 - BOMBAY HIGH COURT

2015 (7) TMI 811 - BOMBAY HIGH COURT - TMI - Reopening of assessment - Validity of reasons recorded - Held that:- in this case, in fact, the reasons indicate that the basis of the impugned notice is the declaration made by the petitioner in its profit and loss account and its balance sheet read with its notes to the accounts. These clearly show that the petitioner had claimed higher depreciation in view of reestimation of the written down value of its assets over the remaining revised useful lif .....

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book profits, resulting in lower tax payable under the MAT provision i.e. Section 115JB of the Act. In the course of submissions, even the Revenue accepted that there was no failure on the part of the appellant to disclose all material facts necessary for assessment.

It is not permissible to the Revenue to draw inferences from the reasons recorded that all material facts, though fully disclosed, are not truly disclosed. Even otherwise, the Revenue was not able to show the facts, which .....

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Reis And M. S. Sanklecha, JJ. For the Petitioner : Mr. Farrokh Irani with Ms. Priyanka Kamat, Adv For the Respondent : Ms. Asha Desai, Adv JUDGMENT ( Per M. S. Sanklecha, J. ) These petitions challenge two notices both dated 22/03/2011 issued by the Assessing Officer under Section 148 of the Income Tax Act, 1961 (the Act) seeking to reopen the petitioner's assessment for the assessment years 2004-05 and 2005-06. 2. Writ Petition No.639/2011 challenges the notice dated 22/03/2011 seeking to .....

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he other. In view of the above, for the sake of convenience we refer to the facts set out in Writ Petition No.640/2011 dealing with the assessment year 2004-05. 3. Briefly the facts leading to this petition are as under: (a) The petitioner is engaged in manufacture and sale of plastic and laminated collapsible tubes for dental and healthcare products. For the assessment year 2004-05, the petitioner on the basis of technical evaluation re-estimated the useful life of certain plant and machinery. .....

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filed on 29/10/2004 its return of income for the subject assessment year. In its return of the income, the petitioner declared nil income under normal provisions of the Act and ₹ 4.08 crores under Section 115JB of the Act (MAT provision). (c) On 7/12/2006, the Assessing Officer after subjecting the return of income to scrutiny assessment, passed an assessment order under Section 143(3) of the Act. By the above Assessment Order, the petitioner's returned book profit, as consequence of a .....

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ct and books profits of ₹ 4,08,06,697/- u/s 115JB of the IT Act. The assessee is carrying on the business of manufacturing and sale of plastic, collapsible tubes for dental and healthcare products. The assessment u/s 143(3) was completed on 07/12/2006 determining and the total taxable income at Rs.NIL after setting off carried forward business loss and depreciation loss, however the book profit were determine at ₹ 4,77,13,260/-. The assessee has stated in its notes on account which i .....

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been reflected in the Profit and Loss Account as an exceptional and non recurring item with consequential impact on the profit for the year and on the net worth of the Company. On account of this it is noticed that the depreciation charge for the year under consideration is higher by ₹ 5,03,67,000/-. In other words the depreciation charge debited to P&L account is more by ₹ 5,03,67,000/- with a result suppression of book profit by that amount. The corresponding amount should have .....

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e end of the relevant assessment year was without jurisdiction as there was no failure to disclose all material facts necessary for assessment. Besides, it was also contended that in any event, the proposed reopening is only on the basis of a change of opinion and the reasons recorded for reopening are contrary to the provisions of Section 115JB of the Act. In particular, the petitioner in its objections pointed out that all facts and materials relevant for assessment were disclosed by the petit .....

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ts the petitioner's contention that there was no failure to disclose all material facts necessary for assessment on the ground that as additional depreciation was claimed by the petitioner, the book profits of the petitioner were reduced, leading to escapement of income chargeable to tax on application of MAT under Section 115JB of the Act. The other two objectives of the petitioner, though adverted to, were not dealt with. 4. Both the petitions were admitted on 23/11/2011 and stay of procee .....

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nd fully all material facts necessary for assessment. In this case, all material fact necessary for assessment has been truly and fully disclosed. Thus, the impugned notices are without jurisdiction. (B) The reasons recorded in support of the impugned notices itself proceed on the basis of information disclosed by the petitioner in their profit and loss account and balance sheet filed as a part of the return of Income, disclosing the fact that additional depreciation had been claimed. Thus there .....

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nder: (A) It is not disputed that all facts necessary for assessment were fully disclosed by the petitioner in its return of income. However, the requirement under the Act for ousting the jurisdiction of the Assessing Officer in case of notices issued beyond period of 4 years is there must have been no failure to fully and truly disclose all material facts necessary for assessment. It is submitted that in view of the excess depreciation taken by the petitioner, it had failed to truly disclose al .....

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ued beyond the period of 4 years from the end of the relevant assessment year. It is a settled position that in cases where the assessment sought to be reopened is beyond the period of 4 years from the end of the assessment year, the jurisdictional requirement for issuing a notice under Section 148 of the Act is not only the Assessing Officer must have reason to believe that income chargeable to tax has escaped assessment but there must also be a failure on the part of the assessee to disclose f .....

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d. Vs. Dy. CIT, 369 ITR 648 that the mere absence of the words 'failure to disclose' in the reasons by itself would not be fatal to the notice. However, if on reading of the reasons in support of the notice as a whole, do not indicate any failure to disclose fully and truly facts material to the assessment, then, the reopening notice is without jurisdiction. In this case, in fact, the reasons indicate that the basis of the impugned notice is the declaration made by the petitioner in its .....

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e part of the petitioner to disclose all material facts necessary for assessment. However, the Assessing Officer seeks to draw an inference from the facts which were already available that in view of claiming higher depreciation, there was suppression of book profits, resulting in lower tax payable under the MAT provision i.e. Section 115JB of the Act. In the course of submissions, even the Revenue accepted that there was no failure on the part of the appellant to disclose all material facts nec .....

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lsi'. The reason recorded for reopening of assessment do not even whisper that there has been any false declaration made by the petitioner. The reliance by the respondents - Revenue that reopening notice is sustainable in view of the fact that as a result of claiming higher depreciation (which is admittedly disclosed) the book profits were reduced resulting in lower tax under Section 115JB of the Act. This claiming of a particular amount as a depreciation whether eligible or not is completel .....

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he appellant to disclose truly all material facts necessary for assessment. This inference is being drawn on the basis that it is the result of claiming higher depreciation (admittedly disclosed) that the book profits of the petitioner was reduced. We are not able to understand what facts were not truly disclosed that is either falsely declared or were so disclosed that the true facts were suppressed in the form of suppresso veri. We find no such indication in the reasons recorded in support of .....

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sessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach the conclusion as to whether there was .....

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ld be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide the link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to estab .....

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