Bombay High Court
Geopreneur Realty Private Limited vs Union Of India Through The 3 Ors on 15 January, 2024
Author: K.R. Shriram
Bench: K. R. Shriram, Neela Gokhale
2024:BHC-OS:849-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.2095 OF 2022
Geopreneur Realty Private Limited )
having its office at 1001, 10th Floor, First )
Avenue, Above Mercedes Benz Showroom, )
Goregaon Mulund Link Road, Malad West, )
Mumbai - 400 053, Maharashtra ) ....Petitioner
V/s.
1. Union of India )
Through the Secretary, Ministry of Finance, )
Department of Revenue, North Block, )
Secretariat Building, New Delhi - 110 001 )
2. The Deputy Commissioner of Income Tax )
- Circle 1(3)(1), Mumbai having his office )
at Aaykar Bhawan, M.K. Road, Mumbai - )
400 020 )
3. The Additional/Joint/Deputy/Assistant )
Commissioner of Income Tax/Income Tax )
Officer National Faceless Assessment Centre, )
having his office at Room No.401, 2nd Floor, )
E-Stamp, Jawaharlal Nehru Stadium, Delhi )
- 110 003 )
4. The Principal Commissioner of Income )
Tax - 1, Mumbai having office at Aaykar )
Bhawan, M.K. Road, Mumbai - 400 020 ) ....Respondents
----
Ms. Neha Anchlia a/w. Ms. Ujjwala Chaturvedi for petitioner.
Mr. Suresh Kumar for respondents.
----
CORAM : K. R. SHRIRAM &
DR. NEELA GOKHALE, JJ.
DATED : 15th JANUARY 2024
ORAL JUDGMENT : (PER K.R. SHRIRAM, J.) :
1 Petitioner is impugning a notice dated 30 th March 2021 issued
under Section 148 of the Income Tax Act, 1961 (the Act) for Assessment
Year 2017-2018.
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2 Petitioner is engaged in the business of real estate development
and construction. For Assessment Year 2018-2019 petitioner filed its return
of income on 30th October 2017, which was revised on 1st June 2018,
declaring a total loss of Rs.1,41,16,482/-. Petitioner's case was selected for
scrutiny assessment and notices were issued under Section 142(1) read
with Section 129 of the Act. Petitioner responded to the notices and also
filed documents. An assessment order dated 20th December 2019 came to
be passed in which petitioner's loss was assessed at Rs.1,05,42,877/-.
3 Subsequently petitioner received a notice dated 30 th March
2021 under Section 148 of the Act that there are reasons to believe that
petitioner's income chargeable to tax for Assessment Year 2017-2018 has
escaped assessment. Petitioner was also provided reasons for reopening of
assessment. The reasons read as under :
REASONS FOR REOPENING OF ASSESSMENT
In the above mentioned case, the assessee has e-filed its return
of income of A.Y. 2017-18 on 30/10/2017 declaring total loss of
Rs.(-) 1,42,40,038/-. The case was selected for scrutiny and
assessment u/s 143(3) of the Act was completed on 20.12.2019
assessing total loss at Rs.(-) 1,05,42,877/-.
2. On perusal of the assessment records of the assessee for A.Y.
2017-18, it is seen that the assessee has taken short-term/long
term borrowings in F.Y. 2015-16 which is still outstanding of
Rs.362825259/- on 31st March, 2017. The assessee has not
commenced the project as stated in Notes to Accounts that due
to delay in commencement of a project with finance cost, the
net worth of the company as on 31.03.2017 has become
negative and management is quite confident on completion of
the said project to continue its business as a going concern.
During the year under consideration, the assessee has debited
financial costs of Rs.5,67,95,525/- in Profit and Loss Account
and arrived business loss of Rs.(-) 1,41,16,482/- due to above
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expense. Since there is no business activity during the year
under consideration and project is yet to be commenced, hence
the amount of financial cost of Rs.5,67,95,525/- along with
depreciation of Rs.19,03,026/- and other expenses of
Rs.18,02,593/- should be capitalized as preliminary expenses
under the head work in progress. The fact was not verified by
the assessing officer while finalizing the assessment. The same
has not been brought to the notice of the assessing officer by the
assessee with a view to conceal the above facts from the
assessing officer
3. In view of the above, amount of financial cost of
Rs.5,67,95,525/- has to be disallowed and added to the total
income of the assessee.
4. Hence, it is clear that there is failure on the part of assessee to
disclose fully and truly all material facts necessary for the
assessment for the year in question within the meaning of First
provision to section 147(1) of the Act.
5. In view of the above, I have reason to believe that income
chargeable to tax to the tune of Rs.5,67,95,525/- has escaped
assessment within the meaning of section 147 of the Act for the
A.Y. 2017-18. It is therefore proposed to issue notice u/s 148 of
the Income-tax Act, 1961 for A.Y. 2017-18 to reassess such
income and also any other income chargeable to tax which has
escaped assessment and which may come to notice subsequently
in the course of proceedings under this section.
4 Petitioner's case is the issue of petitioner's short term/long term
borrowings and non commencement of project, the financial cost, etc. came
up for discussion during the assessment proceedings.
5 Ms. Anchlia submitted that the entire basis of reopening could
be change of opinion because once the Assessing Officer has raised query
and petitioner has responded that would mean that it was under
consideration of the Assessing Officer during the proceedings and,
therefore, on the same basis there cannot be reopening of assessment.
Ms. Anchlia submitted that even if the queries raised does not find a
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mention in the assessment order, it would still mean it was under active
consideration of the Assessing Officer and relies upon Aroni Commercials
Limited V/s. The Deputy Commissioner of Income Tax1.
6 Mr. Suresh Kumar in response submitted that since there was
no business activity during the year under consideration and the project
was yet to be commenced, the financial cost alongwith depreciation and
other expenses should be capitalised as preliminary expenses under the
head work in progress. Mr. Suresh Kumar also submitted that even though a
query has been raised during the assessment proceedings, the same has not
been discussed in the assessment order and, therefore, there is no question
of change of opinion. Mr. Suresh Kumar stated that in the order disposing
the objections, the Assessing Officer has relied upon certain judgments.
7 During the assessment proceedings, petitioner received a notice
dated 21st June 2019 in which petitioner was called upon to provide
working of depreciation claimed as per the IT Act and partywise details
(name, address and amount) of interest on unsecured loan claimed at
Rs.96,32,590/- alongwith details of TDS compliance. Petitioner was also
asked to provide partywise details of unsecured loans alongwith compliance
to requirement of Section 68 of the Act and also partywise details of loan
from NBFCS/others. Petitioner responded to the same and provided the
details. Subsequently, petitioner received another notice dated
1. 2014 (44) taxmann.com 304 (Bombay)
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4th September 2019 under Section 142(1) of the Act calling upon petitioner
to provide details of the loans, advances and deposits received and given in
the format prescribed and also details of all expenses above Rs.1 lakh
debited under each head of Profit and Loss account alongwith comparative
analysis with previous year's figures. Petitioner provided these details.
8 It is true that in the assessment order there is no elaborate
discussion regarding these items but there has been disallowance on
interest on TDS amounting to Rs.1,22,956/- debited to Profit and Loss
account. This is an indication that the subject matter of financial cost and
other expenses has been discussed during the assessment proceedings.
9 Moreover, as held in Aroni Commercials Limited (Supra), 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 Officer while completing the assessment. It is not necessary
that an assessment order should contain reference and/or discussion to
disclose its satisfaction in respect of the query raised. The only requirement
is that the Assessing Officer ought to have considered the objection now
raised in the grounds for issuing notice under Section 148 of the Act during
the original assessment proceedings. Therefore, it is obvious that the
reopening of the assessment by impugned notice dated 30 th March 2021 is
merely on the basis of change of opinion of the Assessing Officer from that
held earlier during the course of assessment proceeding leading to the
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assessment order dated 20th December 2019. This change of opinion does
not constitute justification and/or reasons to believe that income chargeable
to tax has escaped assessment. Paragraph 14 of Aroni Commercials Limited
(Supra) reads as under :
14. We find that during the assessment proceedings the
petitioner had by a letter dated 9 July 2010 pointed out that
they were engaged in the business of financing trading and
investment in shares and securities. Further, by a letter dated 8
September 2010 during the course of assessment proceedings
on a specific query made by the Assessing Officer, the petitioner
has disclosed in detail as to why its profit on sale of investments
should not be taxed as business profits but charged to tax under
the head capital gain. In support of its contention the petitioner
had also relied upon CBDT Circular No.4/2007 dated 15 June
2007. The reasons for reopening furnished by the Assessing
Officer also places reliance upon CBDT Circular dated 15 June
2007. It would therefore, be noticed that the very ground on
which the notice dated 28 March 2013 seeks to reopen the
assessment for assessment year 2008-09 was considered by the
Assessing Officer while originally passing assessment order
dated 12 October 2010. This by itself demonstrates the fact that
notice dated 28 March 2013 under Section 148 of the Act
seeking to reopen assessment for A.Y. 2008-09 is based on mere
change of opinion. However, according to Mr. Chhotaray,
learned Counsel for the revenue the aforesaid issue now raised
has not been considered earlier as the ASN 18/23 WP-137-
14 .sxw same is not referred to in the assessment order dated 12
October 2010 passed for A.Y. 2008-09. We are of the view 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 Officer while
completing the assessment. It is not necessary that an
assessment order should contain reference and/or discussion to
disclose its satisfaction in respect of the query raised. If an
Assessing Officer has to record the consideration bestowed by
him on all issues raised by him during the assessment
proceeding even where he is satisfied then it would be
impossible for the Assessing Officer to complete all the
assessments which are required to be scrutinized by him under
Section 143(3) of the Act. Moreover, one must not forget that
the manner in which an assessment order is to be drafted is the
sole domain of the Assessing Officer and it is not open to an
assessee to insist that the assessment order must record all the
questions raised and the satisfaction in respect thereof of the
Assessing Officer. The only requirement is that the Assessing
Officer ought to have considered the objection now raised in the
grounds for issuing notice under Section 148 of the Act, during
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the original assessment proceedings. There can be no doubt in
the present facts as evidenced by a letter dated 8 September
2012 the very issue of taxability of sale of shares under the head
capital gain or the head profits and gains from business was a
subject matter of consideration by the Assessing Officer during
the original ASN 19/23 WP-137-14 .sxw assessment proceedings
leading to an order dated 12 October 2010. It would therefore,
follow that the reopening of the assessment by impugned notice
dated 28 March 2013 is merely on the basis of change of
opinion of the Assessing Officer from that held earlier during the
course of assessment proceeding leading to the order dated 12
October 2010. This change of opinion does not constitute
justification and/or reasons to believe that income chargeable to
tax has escaped assessment.
10 In the circumstances, we are inclined to allow the petition in
terms of prayer clause - (a) which reads as under :
(a) that this Hon'ble Court be pleased to issue a writ of
Certiorari or a writ in the nature of Certiorari or any
other appropriate writ under Article 226 of the
Constitution of India, calling for records pertaining to
the impugned notice u/s 148 of the Act dated
30.03.2021 for AY 2017-18 by the Respondent No.3
and after going into the validity and legality thereof to
quash and set aside the same.
11 Petition disposed.
(DR. NEELA GOKHALE, J.) (K. R. SHRIRAM, J.)
Signed by: Gauri A. Gaekwad
Gauri Gaekwad
Designation: PS To Honourable Judge
Date: 17/01/2024 11:20:01
