NEUTRAL CITATION
C/TAXAP/280/2023 ORDER DATED: 04/09/2023
undefined
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 280 of 2023
==========================================================
PRINCIPAL COMMISSIONER OF INCOME TAX
Versus
SEASTEM LTD
==========================================================
Appearance:
MRS KALPANA K RAVAL(1046) for the Appellant(s) No. 1
for the Opponent(s) No. 1
==========================================================
CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 04/09/2023
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV)
1. This tax appeal is filed for consideration of following question of law: Whether the Ld. Tribunal was justified in quashing reassessment proceedings by holding that there is no failure on the part of the assessee to make true and full disclosure without considering Explanation 1 to Section 147 of the Act appropriately?
2. This Tax Appeal has been filed under section 260A of the Income Tax Act ['the Page 1 of 9 Downloaded on : Sat Sep 16 15:54:21 IST 2023 NEUTRAL CITATION C/TAXAP/280/2023 ORDER DATED: 04/09/2023 undefined Act' for short] challenging the order of the Tribunal dated 07.09.2023.
3. Facts in brief are that, the company had filed its return of the income on 13.10.2022. The return was assessed under section 143(1) of the Act, on 21.05.2011. The case was selected for scrutiny of assessment under section 143(3) and assessment order was passed on 28.03.2013. The Assessing Officer was of the view that the assessee-company had debited an amount of Rs. 4,75,495/- towards the profit on sales of barge and since the barge is depreciable asset and the same should have been deducted from the block of assets in the category of ships in the depreciation chart, an amount of Rs. 4,75,495/- debited to profit and loss account was required to Page 2 of 9 Downloaded on : Sat Sep 16 15:54:21 IST 2023 NEUTRAL CITATION C/TAXAP/280/2023 ORDER DATED: 04/09/2023 undefined be added back while computing total income from business and profession but the same was not added back by the assessee-company Therefore, notice under section 148 of the Act was issued on 21.03.2017 to reopen the assessment, relevant portion of which read as under:
"On going through the case records, it is noticed that you have debited an amount of Rs. 4,75,495/- towards the profit on sale Barge. Moreover, it is further noticed that on scruity of ledger a/c. Of M V Royal Aditi (Barge) revealed that there was debit balance of Rs. 4,75,495/- on sale barge since the MV Aditi Barge is depreciable asset and the same should be deducted from the block of assets in Ships in depreciation statement. Hence, an amount of Rs. 4,75,495/- debited to the P & L Account was required to be added back while computing total income from business and profession but the same was not added back. In Page 3 of 9 Downloaded on : Sat Sep 16 15:54:21 IST 2023 NEUTRAL CITATION C/TAXAP/280/2023 ORDER DATED: 04/09/2023 undefined view of the above, you are hereby show cause as to why an amount of Rs. 4,75,495/- towards the profit on sale of Barge should not be disallowed and added to the total income."
4. The CIT(Appeals) confirmed the order passed by the Assessing Officer. The Tribunal however, partly allowed the appeal preferred by the assessee holding as under:
"12. We have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the regular assessment under section 143(3) of the Act was completed and thereafter the assessment was reopened for escapement of income. On perusal of the reason recorded, we find that the AO used the word "On going through the case record". Hence it is deduced that there was no new material before the AO which suggest that the income was Page 4 of 9 Downloaded on : Sat Sep 16 15:54:21 IST 2023 NEUTRAL CITATION C/TAXAP/280/2023 ORDER DATED: 04/09/2023 undefined escaped. As such the reason to believe of the AO is based on same set of document which amount to change of opinion which is not permissible under the provision of section 147 of the Act. In this regard, we draw support and guidance from the judgment of Hon'ble Supreme Court in case of CIT vs. Kalvinator of India Ltd (supra) wherein it was held as under:
one needs to give a schematic interpretation to the words 'reason to believe; failing which section 147 would ge arbitrary powers to the Assessing Officer to reopen assessments on the basis of 'mere change of opinion', which cannot be per se reason to reopen. One must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess, but the reassessment has to be based on fulfilment of certain pre- conditions and if the concept of 'change of opinion' is removed as contended on behalf of the department, then in the garb of reopening the assessment, review would take place.
Page 5 of 9 Downloaded on : Sat Sep 16 15:54:21 IST 2023
NEUTRAL CITATION C/TAXAP/280/2023 ORDER DATED: 04/09/2023 undefined One must treat the concept of 'change of opinion' as an in-built test to check abuse of power by the Assessing Officer. Hence, after 1-4-1989, the Assessing Officer has power to reopen, provided there is 'tangible material' to come to conclusion that there is escapement of income from assessment.
5. In light of the questions already decided by the Supreme Court in case of CIT vs. Kelvinator of India Ltd reported in (2010) 320 ITR 561(SC), the Tribunal found that since the reopening was on the basis of the material already available on record and there was no new tangible material available before the Assessing Officer to reopen the assessment after expiry of period of four years and it was not a case where there was any failure on the part of the assessee to disclose all the material Page 6 of 9 Downloaded on : Sat Sep 16 15:54:21 IST 2023 NEUTRAL CITATION C/TAXAP/280/2023 ORDER DATED: 04/09/2023 undefined facts necessary for assessment, the Tribunal held as under:
12.1 Moving forward, it is also pertinent to note that in case where the regular assessment under section 143(3) was completed then reopening of assessment after the expiry of four years from the end of relevant assessment year can only be made if there is failure on the part of the assessee to disclose all the materials facts necessary for assessment. In the case on hand, the reopening was made after the expiry of 4 year, however the AO nowhere has brought on record that the assessee failed to disclose all the material facts necessary for assessment. In this regard we find support and guidance form the order of Hon'ble Gujarat High court in case Vodafone West Ltd va. ACIT (supra) where it was held as under:
In the case of Calcutta Discount Co. Ltd. v. ITO [1961] 41 ITR 191, the Consttution Bench of Page 7 of 9 Downloaded on : Sat Sep 16 15:54:21 IST 2023 NEUTRAL CITATION C/TAXAP/280/2023 ORDER DATED: 04/09/2023 undefined Supreme Court held and observed that to confer jurisdiction on assessee to issue notice off reopening of assessment beyond a period of four years, two conditions are required to be simultaneously satisfied. Such conditions are that the Assessing Officer must have reason to believe that income, profits or gains chargeable to income-tax have been under assessed and the second is that he must also have reason to believe that such under assessment has occurred by reason of either omission or failure on part of the assessee to make return of his income or omission or failure on part of the assessee to disclose fully and truly all material facts necessary for his assessment for that year. Both these conditions are conditions precedent to be satisfied before the taxing officer could have jurisdiction to issue notice for the assessment or reassessment beyond a penod of four years.Page 8 of 9 Downloaded on : Sat Sep 16 15:54:21 IST 2023
NEUTRAL CITATION C/TAXAP/280/2023 ORDER DATED: 04/09/2023 undefined 12.2 In view of the above and after considering facts in totality we find that there was no fresh tangible material before the AO or the assessee failed to disclose all the material facts necessary for assessment. Hence, we hereby quash the reopening/re-assessment order being not sustainable under the law. Thus the ground of appeal of the assessee is hereby allowed."
6. No substantial question of law arises. The appeal is dismissed.
(BIREN VAISHNAV, J) (BHARGAV D. KARIA, J) JYOTI V. JANI Page 9 of 9 Downloaded on : Sat Sep 16 15:54:21 IST 2023