Placid Limited vs The Assistant/Deputy ...
2021 Latest Caselaw 1728 Cal/2

                                         1



                      IN THE HIGH COURT AT CALCUTTA
                        Constitutional Writ Jurisdiction
                                 Original Side



Present :-   Hon'ble Mr. Justice Md. Nizamuddin

                               W.P.O. No. 558 of 2019

                               Placid Limited
                                     Vs.
        The Assistant/Deputy Commissioner of Income Tax, Circle-11 (2)
                               Kolkata & Ors.


      For the Petitioner            :- Mr. J.P. Khaitan, Sr. Adv.
                                       Mr. P. Jhunjhunwala, Adv.
                                       Mr. A. Choudhury, Adv.
                                       Ms. A. Dey, Adv.



      For the Respondent            :-   Mr. S. Roychowdhury, Adv.
                                         Mr. Asok Bhowmik, Adv.



      Judgement On                  :-       24 .12.2021


   MD. NIZAMUDDIN, J.

Heard Learned Counsel appearing for the parties.

In this Writ Petition petitioner has challenged the assumption of

jurisdiction under Section 147 of the Income Tax Act, 1961 by the

respondent/Assessing Officer and validity of the impugned notice under

Section 148 of the said Act dated 29th March, 2019 relating to assessment year

2012-13.

In my view the short issues which require adjudication in this Writ

Petition are as follows:

(i) Whether on the facts and in the circumstances of the case assumption

of jurisdiction under Section 147 of the Income Tax Act, 1961 by the

respondent/Assessing Officer and issuance of impugned notice under Section

148 of the Act after the expiry of 4 years from the end of the relevant

assessment year 2012-13 is bad and not tenable in the eye of law in view of

non-fulfilment of criteria under the first proviso to Section 147 of the Act and

in view of the fact that there was no omission or failure on the part of the

petitioner in disclosing fully and truly all relevant material facts necessary in

course of scrutiny assessment under Section 143 of the Income Tax Act, 1961?

(ii) Whether on the facts and in the circumstances of the case invoking of

the provision of Section 147 read with Section 148 of the Act by the Assessing

Officer on the self-same material which were very much available to the

Assessing Officer at the time of scrutiny assessment under Section 143 (3) of

the Income Tax Act, 1961, is justified by taking a view different from his

predecessor who had allowed to tax the non-compete fees in question as "Long

Term Capital Gain" in scrutiny assessment and by taking a view that the same

should be treated as income from business under Section 28 (V-A) of the

Income Tax Act, 1961 instead of "Long Term Capital Gain"?

(iii) Whether on the facts and in the circumstances of the case the

respondent assessing Officer is legally justified in reopening the assessment

under Section 147 of the Income Tax Act, 1961 by ignoring the fact that non-

compete fees in question had already been treated and taxed as "capital gains"

by the Assessing Officer during the scrutiny assessment proceedings under

Section 143 (3) of the Act by accepting the claim of the petitioner after

examining, verifying and scrutinising all the facts, relevant documents, details

and particulars which were requisitioned by the assessing officer in course of

scrutiny assessment and which are matters of records?

(iv) Whether on the facts and in the circumstances of the case reopening of

assessment by invoking Section 147 and issuance of notice under Section 148

of the Income Tax Act, 1961, after expiry of 4 years from the end of relevant

assessment year on the basis of information received from investigation wing

which are nothing new and are the same materials which were already

available before the Assessing Officer and were considered at the time of

scrutiny assessment under Section 143 (3) of the Act, and taking a different

view on the self-same material is a mere change of opinion?

Facts involve in the instant case in brief as appear on perusal of relevant

records available are as follow:

On 29th March, 2011 the petitioner company entered into a share

purchase agreement with the purchaser for sale of shares of Andhra Pradesh

Paper Mills Ltd. (Andhra Pradesh Paper) and the petitioner company also

entered into a non-compete and business waiver agreement.

Petitioner filed his return of income relates to relevant assessment year

2012-13 on 30th September, 2012. In course of regular assessment proceeding

under Section 143 of the Act, notices under Section 143 (2) and 142 (1) of the

Act were issued to the petitioner company on 20th August, 2013. Thereafter,

series of letters were issued by the Assessing Officer from time to time making

requisitions for producing relevant documents relating to relevant agreements

and non-compete fees in question and also asked the petitioner for providing

explanation from time to time as appears from record and which are part of the

Writ Petition and finally considering the relevant documents and explanations

provided by the petitioner company in course of regular assessment, order

under Section 143 (3) of the Act was passed on 31st March, 2015 and in the

said regular assessment non-compete fees in question was treated as "Capital

Gain".

A rectification petition under Section 154 of the Act was filed by the

petitioner before the Assessing Officer requesting him to correct the taxation of

Long Term Capital Gain of Rs. 411.69 Crores from the sale of shares of Andhra

Pradesh Paper at the rate of 20% instead of 10% as provided in Section 12 of

the Act and on 16th April, 2015 order on the aforesaid rectification application

order was passed by correcting computational error accordingly.

The respondent Assessing officer issued impugned notice under Section

148 of the Act on 29th March, 2019 relating to the relevant assessment year

2012-13 admittedly after expiry of 4 years from the end of relevant assessment

year on the ground of escapement of income chargeable to tax on the non-

compete fees in question by contending that it was taxable as business income

under Section 28 (V-A) of the Act instead of income under the head "capital

gain" and recorded reason was furnished to the petitioner on 19th June, 2019

to which the petitioner had made an objection on 19th September, 2019 which

was rejected by the respondent Assessing Officer by his order dated 19th

September, 2019 which is annexed to the Writ Petition being annexure P-15 at

Page - 305 and Paragraph 3 of the said rejection order is very relevant in this

case which is quoted hereunder:

"in this regard I would like to state that the assessee has itself confirmed that these transactions have taken place during the financial year under consideration and non-compete fees have been offered to taxation as LTCG. However, as per the provisions of Section 28 (V-A) of the Income Tax Act, 1961 these receipts of "non-compete fees" qualifies to be business receipt and should be taxed @ 30%."

It appears from the aforesaid recording by the Assessing Officer that he

himself in his ground of rejection of petitioner's objection against impugned

notice under Section 148 of the Act, admits that the income from non-compete

fees in question were already disclosed by the assessee in course of regular

assessment and it had offered for taxation as "Long Term Capital Gain" and as

such there can be no question of suppression or non-discloser of the said

income and it is admitted position that it was accepted by his predecessor as

income from "Long Term Capital Gain" and the only ground for reopening of

assessment by the Assessing Officer by invoking Section 147 of the Act is that

though under the scrutiny assessment it was treated as Long Term Capital

Gain and offered for taxation but now his view is that it should be treated as

business receipt and should taxed as income from business under Section 28

(V-A) of the Act.

This recording by the Assessing Officer in his order of rejection itself

shows that the instant case does not fulfil the criteria of proviso to Section 147

of the Act of non-discloser or failure or omission on the part of the assessee to

disclose fully and truly all material facts necessary for its assessment or that

there was any failure or omission on the part of the assessee petitioner

company in the aforesaid regard. The aforesaid recording itself shows that the

materials upon which the present Assessing Officer wants to invoke Section

147 of the Act were already available and records of the case show that the

petitioner's claim of the aforesaid non-compete fee as "Long Term Capital Gain"

was allowed in scrutiny assessment under Section 143 (3) of the Act and which

was accepted after scrutinisation and verification of the documents and

materials requisitioned by the Assessing Officer from time to time in course of

regular assessment under Section 143 (3) of the Act. Invoking of Section 147 of

the Act for the purpose of charging the tax under a different heading on the

self-same material and the documents which were already available and

considered during the course of regular assessment by the Assessing Officer is

nothing but a mere change of opinion and the contention of the Assessing

Officer that the materials upon which it wants to rely was the information

received from the investigating wing subsequent to the regular assessment, is

nothing new and it is the same material which were already available at the

time of regular assessment and were considered.

It also appears from the order of rejection of the petitioner's objection to

the impugned notice under Section 148 of the Act that the Assessing Officer

himself has not referred or discussed at all or reiterated about his stand of

reliance on the information received from the office of the investigating wing in

his recorded reason and the Assessing Officer in this regard is totally silent in

its order of rejection of the objection of the petitioner against the impugned

notice under Section 148 of the Act. In his order of rejection of objection of the

petitioner he has simply justified the reopening of assessment under Section

147 of the Act only on the ground that the non-compete fees in question which

were offered for taxation as Long Term Capital Gain was qualified for taxation

under Section 28 (V-A) of the Act and under the heading "business receipt".

Learned Advocate appearing for the petitioner in support of his contention

has relied on the decision of the Hon'ble Supreme Court in the case of

Assistant Commissioner of Income Tax & Ors. -vs- ICICI Securities Primary

Dealership Ltd reported in [2012] 348 ITR 299 (SC) and relevant portion of the

said decision is hereunder:

"In the facts of the present case, there is nothing new which has come to the notice of the Revenue.

The accounts had been furnished by the petitioner when called upon. Thereafter, the assessment was completed under Section 143 (3) of the Income Tax Act. Now, on a mere relook, the officer has come to the conclusion that the income has escaped assessment and he is of course justified in his analysis. In our view, this is not something which is permissible under the proviso to Section 147 of the Income Tax Act which speaks about a failure on the part of the assessee to make a proper return. In the present case, no such case is made out on the record. In the circumstances, we allow this petition in terms of prayer (a) and quash and set aside the notice dated March 27, 2006, directing reopening of the assessment for the year 1999-2000."

Petitioner has also relied on another decision of the Hon'ble Supreme

Court in the case of Income Tax Officer, Ward No. 16 (2) -vs- TechSpan India

(P.) Ltd. reported in [2018] 92 taxmann.com 361 (SC) and relevant paragraph of

the said decision is hereunder:

"The fact in controversy in this case is with regard to the deduction under Section 10A of the IT Act

which was allegedly allowed in excess. The show cause notice dated 10.02.2005 reflects the ground for re-assessment in the present case, that is, the deduction allowed in excess under Section 10A and, therefore, the income has escaped assessment to the tune of Rs. 57,36,811. In the order in question dated 17.08.2005, the reason purportedly given for rejecting the objections was that the assessee was not maintaining any separate books of accounts for the two categories, i.e., software development and human resource development, on which it has declared income separately. However, a bare perusal of notice dated 09.03.2004 which was issued in the original assessment proceedings under Section 143 makes it clear that the point on which the re-

assessment proceedings were initiated, was well considered in the original proceedings. In fact, the very basis of issuing the show cause notice dated 09.03.2004 was that the assessee was not maintaining any separate books of account for the said two categories and the details filed do not reveal proportional allocation of common expenses be made to these categories. Even the said show cause notice suggested how proportional allocation should be done. All these things leads to an unavoidable conclusion that the question as to how and to what extent deduction should be allowed under Section 10A of the IT Act was well considered in the original assessment proceedings itself. Hence, initiation of the re-assessment proceedings under Section 147 by issuing a notice under Section 148 merely because of the fact that now the Assessing Officer is of the view that the deduction under Section 10A was allowed in excess, was based on nothing but a change of opinion on the same facts and circumstances which were already in his knowledge even during the original assessment proceedings."

Mr. Roychowdhury Learned Advocate appearing for the respondent Income

Tax authority opposing the Writ Petition has simply relied on the recorded

reason for reopening of the assessment in question and justified the order of

rejection of petitioner's objection to the impugned notice under Section 148 of

the Act in his submission and in the affidavit-in-opposition to the Writ Petition

and he could not distinguish the decisions relied upon by the petitioners.

Considering the submission of the parties and facts as appear on perusal

of relevant records available, provisions of law and the judgments referred

above, I am inclined to quash the impugned notice dated 29th March, 2019

relating to assessment year 2012-13 issued under Section 148 of the Income

Tax Act, 1961 and set aside all further proceedings on the basis of the

aforesaid impugned notice by holding as follows:

(i) In the facts and circumstances of the case assumption of jurisdiction

under Section 147 of the Income Tax Act, 1961 by the respondent/Assessing

Officer and issuance of impugned notice under Section 148 of the said Act after

the expiry of 4 years from the end of the relevant assessment year 2012-13 is

bad and not tenable in the eye of law in view of non-fulfilment of criteria under

the first proviso to Section 147 of the Act and in view of the fact that the

respondent Assessing Officer could not establish from record that there was

any omission or failure on the part of the assessee petitioner in disclosing fully

and truly all relevant material facts necessary in course of scrutiny assessment

under Section 143 (3) of the Income Tax Act, 1961.

(ii) In the facts and circumstances of the case invoking of provision of

Section 147 read with Section 148 of the Act by the Assessing Officer for

reopening the assessment of the assessee on the self-same material which were

very much available to the Assessing Officer at the time of scrutiny assessment

under Section 143 (3) of the Income Tax Act, 1961 is not justified by taking a

view different from his predecessor who had already allowed to tax the nom-

compete fees in question as Long Term Capital Gain in scrutiny assessment

and by taking a view that the same should be treated as income from business

under Section 28 (V-A) of the Income Tax Act, 1961 instead of Long Term

Capital Gain.

(iii) In the facts and in the circumstances of the case the respondent

assessing authority is legally not justified in reopening the assessment in

question under Section 147 of the Income Tax Act, 1961 by ignoring the fact

that non-compete fees in question had already been treated and taxed as

capital gains by the Assessing Officer during the scrutiny assessment

proceedings under Section 143 (3) of the Act by accepting the claim of the

petitioner after examining, verifying and scrutinising all the facts, relevant

documents, details and particulars which were requisitioned by the assessing

officer in course of scrutiny assessment and which are matters of records.

(iv) In the facts and in the circumstances of the case reopening of

assessment by invoking Section 147 and issuance of notice under Section 148

of the Income Tax Act, 1961, after expiry of 4 years from the end of relevant

assessment year on the basis of information received from investigation wing

which are nothing new and are the same material which were already available

before the Assessing Officer and were considered at the time of scrutiny

assessment under Section 143 (3) of the Act, and taking a different view on the

self-same material is a mere change of opinion.

In view of the discussion made above, this Writ Petition being W.P.O No.

558 of 2019 is accordingly disposed of by allowing the same. No order as to

costs.

Urgent certified photocopy of this judgment, if applied for, be supplied to

the parties upon compliance with all requisite formalities.

[MD. NIZAMUDDIN, J.]