Meer Gems vs Assistant Commissioner Of Income ...
2022 Latest Caselaw 3648 Bom

                                                                     916-oswp-1021-22.doc


         Digitally
                             IN THE HIGH COURT OF JUDICATURE AT BOMBAY
         signed by
         DINESH                  ORDINARY ORIGINAL CIVIL JURISDICTION
         SADANAND
                                    WRIT PETITION NO. 1021 OF 2022
DINESH
SADANAND SHERLA
SHERLA   Date:
         2022.04.07
         11:08:25
         +0500
                      Meer Gems                                     ... Petitioner
                            V/s.
                      Assistant Commissioner of Income
                      Tax, Central Circle 3 (1) and ors.            ... Respondents

                                              ----------------
                      Mr.Sukhsagar Syal i/b Mr. Govind Javeri for the Petitioner.
                      Mr. Akhileshwar Sharma for the Respondent - Revenue.
                                              ----------------

                                                    CORAM :         K.R. SHRIRAM &
                                                                    N.R. BORKAR, JJ.

                                                    DATE     :      APRIL 05, 2022.
                      P.C.



                      1]      Petitioner is impugning notice dated 31.03.2021 issued

by respondent No.1 under section 148 of the Income Tax Act,

1961 (for short "the Act") for the Assessment Year (A.Y.)

2014-15 and the order dated 22.12.2021 rejecting the

objections fled by petitioner to reopening.

2] Petitioner had fled it's return of income on 29.11.2014

for A.Y. 2014-15. The case was selected for scrutiny under

CASS and assessment under section 143(3) of the Act was

completed on 28.12.2016 assessing total income of Rs. Nil.

                      Dinesh Sherla                                                         1/6
                                                      916-oswp-1021-22.doc


3]      Thereafter, petitioner received notice dated 31.03.2021

asserting that respondent No.1 has reasons to believe that

petitioner's income chargeable to tax for A.Y. 2014-15 has

escaped assessment within the meaning of section 147 of the

Act. Petitioner after fling fresh return of income requested

respondent No.1 to provide copy of reasons recorded for

reopening, which was provided by a letter dated 26.10.2021.

The reasons read as under :

XXXXXX

"2. Basis of forming reasons to believe and details of escapement of income - While going through the case record, it is revealed that assessee had claimed deduction on account of notional foreign exchange loss amounting to Rs. on non payment on imports. The notional foreign exchange loss amount to Rs.5,41,21,398/-. It is also noticed that the notional exchange rate loss claimed as deduction the cost of funds which were extended as loans to other parties without gain of interest. Being the funds utilized for non business purposes, deduction on account of the notional loss exchange rate should have been disallowed."

XXXXXX

4] It is settled law, as held by this Court, apex Court and

various other Courts, that reopening of assessment

completed under section 143(3) of the Act cannot be based

on change of opinion. Moreover since more than four years

Dinesh Sherla 2/6 916-oswp-1021-22.doc

have expired from the end of relevant assessment year,

proviso to section 147 of the Act would apply. As per the

proviso, there is a bar to reopening assessment unless

petitioner has failed to disclose truly and fully material facts

required for assessment.

5] Mr. Syal submits that as it could be seen from the

reasons quoted above, it is a clear cut case of change of

opinion and there is not even an allegation that there is

failure on the part of petitioner to disclose truly and fully all

material facts.

6] Mr. Sharma for respondents relied upon a judgment of

this Court in Crompton Greaves Ltd. V/s. Assistant

Commissioner of Income Tax,Circle 6 (2) 1 to submit that

even if the reason for reopening does not specifcally state

that there was any failure on the part of petitioner to disclose

fully and truly all material facts necessary for its assessment

for the relevant assessment year, it will not be fatal to the

assumption of jurisdiction under sections 147 and 148 of the

1 (2015) 55 taxmann.com59 (Bombay)

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Act. We would certainly agree with Mr. Sharma but as held in

Crompton Greaves Ltd. (Supra), this is subject to the rider

that there must be cogent and clear indication in the reasons

supplied, that in fact there was failure on the

part of the assessee to disclose fully and truly all the material

facts necessary for its assessment. If the factum of failure to

disclose can be culled from the reasons in support of the

notice seeking to reopen assessment, that will certainly not

be fatal to the assumption of jurisdiction under sections 147

and 148 of the Act. The Court held " However, if from the

reasons, no case of failure to disclose is made out, then

certainly the assumption of jurisdiction under sections 147

and 148 of the Act would be ultra vires, being in excess of the

jurisdictional restraints imposed by the frst proviso to Section

147 of the Act".

7] Having considered the reasons, factum of failure to

disclose cannot be culled from the reasons in support of the

notice seeking to reopen assessment. Therefore, it will

certainly be fatal to the assessment of

jurisdiction under sections 147 and 148 of the Act.

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                                                 916-oswp-1021-22.doc


8]      Moreover, it is case of respondent itself that while going

through the case record, it revealed that assessee has

claimed deduction on account of notional foreign exchange

loss which deduction should not have been disallowed during

assessment proceedings. Mr. Syal submits that during the

course of assessment proceedings there was a query raised

regarding details of exchange loss which have also been

provided by petitioner through it's Chartered Accountant's

letters dated 16.12.2016 and 19.12.2016.

9] As held by this Court time and again and particularly in

Aroni Commercials Ltd. Vs. Deputy Commissioner of

Income Tax -2 (1)2 that once a query is raised during the

assessment proceedings and the assessee has replied to it, it

follows that the query raised was a subject of consideration of

the Assessing Ofcer while completing the assessment.

10] There can be no doubt in the present case that the very

issue of foreign exchange loss was a subject matter of

consideration of the Assessing Ofcer. It would therefore,

follow that reopening of assessment by the impugned notice 2 (2014) 44 taxmann.com304 (Bombay)

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dated 31.03.2021 is merely on the basis of change of opinion

of the Assessing Ofcer from that held earlier during the

course of assessment proceedings. This change of opinion

does not constitute justifcation and/or reasons to believe that

income chargeable to tax has escaped assessment.

11] Therefore, petition allowed in terms of prayer clause (a)

which reads as under:

"(a) this Hon'ble Court may be pleased to issue a Writ or 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 31st March, 2021 (Exhibit-E) issued by Respondent No.1 under section 148 of the Act seeking to reopen the assessment for the assessment year 2014-15 and the order dated 22nd December, 2021 (Exhibit-J) passed by Respondent No.1, disposing of the objections raised by the Petitioner"

12]      Petition disposed.




        (N.R. BORKAR, J.)                  (K.R. SHRIRAM, J.)




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