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P.C. Patel And Company Versus Deputy CIT, Gandhidham Circle

2015 (8) TMI 722 - GUJARAT HIGH COURT

Validity of reopening of assessment - Held that:- even while sending the proposal/proforma report to the higher authority to grant approval for reopening the assessment, the Assessing Officer continued to maintain that the audit objection raised by the audit party is not acceptable and only with a view to protect the revenue and/or safeguards the interest of the revenue, it was proposed to reopen the assessment under section 147 of the Act. There is no independent formation of opinion by the Ass .....

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ment proceedings for AY 2010-11 is not valid and permissible. - Decided in favour of assessee. - Special Civil Application No. 3023 of 2015 - Dated:- 6-5-2015 - M. R. Shah And S. H. Vora, JJ. For the Petitioner : Mr Vivek Chavda for Mr Sn Divatia, Adv. For the Respondent : Mr Pranav G Desai, Adv. JUDGMENT (Per : Honourable Mr. Justice M. R. Shah) 1. By way of this petition under Article 226 of the Constitution of India to quash and set aside the impugned notice dated 13.8.2013 (Annexure A) issue .....

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e with notice under section 142(1) and after considering the details submitted by the petitioner in response to the said notice. 2.1 That thereafter, the respondent has issued the impugned notice dated 13.8.2013 under section 148 of the Act for AY 2010-11 to reassess the total income. That in response to the said notice, the petitioner vide letter dated 22.8.2013 requested the Assessing Officer to treat the original return filed on 5.10.2010 as in response to the impugned notice under section 14 .....

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Special Civil Application under Article 226 of the Constitution of India challenging the impugned notice under section 148 of the Act to reopen the completed assessment for AY 2010-11. 2.3 As during the pendendy of the present petition, the Assessing Officer has passed the order of assessment under section 143(3) of the Act read with section 147 of the Act, the petitioner has also challenged the impugned order of assessment also. 3. Shri Vivek Chavda, for Shri SN Divetia, learned Advocate appear .....

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ections raised by the petitioner against reopening of the assessment, it was specifically stated that reopening of the assessment is at the instance of the audit party and/or on the audit objections raised by the audit party only, the Assessing Officer while disposing off the objections has not dealt with the same at all. 3.2 It is further submitted that even in the present Special Civil Application though the petitioner has raised the specific ground on the aforesaid, in the affidavit in reply, .....

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ing of the assessment for AY 2010-11. 4. Present petition is opposed by Shri Pranav G. Desai, learned Advocate appearing on behalf of the Revenue. He has heavily relied upon the affidavit in reply filed on behalf of the respondent. 4.1 Shri Desai, learned advocate appearing on behalf of the Revenue has vehemently submitted that the impugned reopening proceedings to reopen the assessment for AY 2010- 11 is absolutely just and proper and in consonance with Section 147 of the Act. It is vehemently .....

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s submitted that therefore, having formed an independent opinion, that an amount of ₹ 3,26,65,256/- (depreciation being restricted to 15% as against 30% as claimed) has escaped assessment, the Assessing Officer has rightly reopened the assessment and has rightly issued notice under section 148 of the Act. 4.2 It is further submitted by Shri Desai, learned advocate appearing on behalf of the revenue that now when the reassessment order is already passed under section 143(3) r/w section 147 .....

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Shri Desai, learned Advocate appearing on behalf of the petitioner has vehemently submitted that the Assessing Officer had formed an independent opinion that the income of ₹ 3,26,65,256/- had escaped assessment. It is submitted that therefore this is not a case where the assessment is reopened solely at the instance of the audit party and/or audit objection raised by the audit party. It is submitted that therefore the decisions upon which the reliance has been placed by the learned advoca .....

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arned Advocate appearing on behalf of the Revenue that as observed by the Hon ble Supreme Court in the aforesaid decision and the Division Bench of this Court, on the basis of the information given by the audit party and/or the objection raised by the audit party, reopening of the assessment is permissible. It is submitted that therefore even in case where the assessment is reopened on the basis of the objection raised by the audit party and on the information received by the Assessing Officer p .....

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t by which the assessment for AY 2010-11 has been reopened. The reasons recorded for reopening of the assessment proceedings for the AY 2010-11 reads as under: "The assessee firm had filed return of income of ₹ 6,63,27,750/- for AY 2010-11 on 5.10.2010. The case was selected for scrutiny and the assessment was completed u/s 143(3) of the IT Act with total income assessed at ₹ 7,88,27,750/-. The assessee firm is engaged in the business of construction and mining contractor. For t .....

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s from earthwork and contract income, and is not in business of transportation. The above fact was not brought the course of assessment proceedings, therefore, the assessee has failed to disclose fully and truly all material facts necessary for assessment. Consequently, an amount of ₹ 3,26,65,256/- (depreciation being restricted to 15% as against 30% as claimed) has escaped assessment." 5.1 The aforesaid reopening of the assessment/reassessment proceedings has been challenged mainly o .....

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nst reopening of the assessment proceedings, the petitioner specifically raised the above ground, the Assessing Officer while disposing off the objections has not dealt with the same. Even in the petition the said ground is raised, however the same has not been dealt with in the affidavit in reply. In the affidavit in reply it is the case on behalf of the Revenue that while recording the reasons for reopening of the assessment and/or while reopening of the assessment for AY 2010-11, the Assessin .....

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essing Officer that the income has escaped assessment, we called upon the Revenue to produce the relevant file/s and Shri Desai, learned Advocate appearing on behalf of the Revenue has produce the file/s before this Court for perusal. 5.3 From the file, it appears that the case was audited by the revenue audit party. The audit party issued LAR 2497, para 3. It also appears that the same was sent to the Assessing Officer and Asst. Commissioner of Income Tax, Gandhidham and audit objection was bro .....

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as not accepted by the audit party. 5.4 From the file, it appears that thereafter, the Commissioner of Income Tax, Rajkot on 8.8.2013 communicated to the Joint Commissioner of Income Tax, Gandhidham that the audit objection raised are acceptable and therefore, proceedings to reopen the cases under section 147 of the Act may be initiated, in the prescribed manner in view of the CBDT instructions on the matter. From the file, it appears that thereafter, the Deputy Commissioner of Income Tax sent a .....

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by the Commissioner of Income Tax to reopen the assessment for AY 2010-11, the Assessing Officer has issued the notice under section 148 of the Act in the proforma report while not allowing that and/or accepting the audit objection, the Deputy Commissioner of Income Tax/ Assessing Officer has stated as under: "(i)Assessee-firm is engaged in the business of providing equipments, motor Vehicles on hire, the same fact has been duly stated by the auditors in form No.3CD. Further, the claim of t .....

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nder consideration, Here it was held that when the vehicles are not used for the purpose of the owner, it is covered under the word HIRE. In this case vehicles are not used for the purpose of the owner and hence it is appropriate to conclude that the same has been HIRED TO THIRD PARTY. Once the vehicles are established as having been given on hire, the higher Claim of depreciation can be claimed. However, the case was reopened u/ 5.147 of the Act, to safeuards of the revenue." 5.5 From the .....

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amount of ₹ 3,26,65,256/- has escaped assessment. The complete assessment has been reopened only at the instance of the audit party and/or on the audit objection raised by the audit party, which is not permissible. Therefore, in the facts and circumstances of the case, formation of opinion by the Assessing Officer while reopening the completed assessment and his reason to believe that the income as escaped assessment has been vitiated and therefore, reopening assessment proceedings for AY .....

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out the Assessing Officer himself having reason to believe that the income chargeable to tax has escaped the assessment must fail. Similar view has been taken by the Division Bench of this Court in the case of Raajratna Metal Industries Ltd. (Supra). 5.7 Now, so far as the reliance placed upon the decision of the Hon ble Supreme Court in the case of P.V.S. Beedies Pvt. Ltd. (Supra) and the decision of the Division Bench of this Court in the case of N.K. Industries Ltd. (Supra) by Shri Desai, lea .....

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ed the audit objection by giving reply to the audit party on the audit objection as normally it is the human tendency to stick to what is held and/or decided. However, subsequently, there can be a formation of the opinion by the Assessing Officer on rethink of the entire issue and even considering the audit objection and may form an independent opinion and/or may have a reason to believe independently that the income chargeable to tax has escaped assessment. However, in a case like this where ev .....

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