Rajena Agro Products Pvt. Ltd. vs The Assistant Commissioner Of ...
2021 Latest Caselaw 3601 Guj

         C/SCA/20478/2019                                        ORDER



            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

             R/SPECIAL CIVIL APPLICATION NO. 20478 of 2019
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                     RAJENA AGRO PRODUCTS PVT. LTD.
                                 Versus
               THE ASSISTANT COMMISSIONER OF INCOME TAX
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Appearance:
MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1
MRS MAUNA M BHATT(174) for the Respondent(s) No. 1
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  CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA
         and
         HONOURABLE MR. JUSTICE ILESH J. VORA
                         Date : 01/03/2021
                          ORAL ORDER

(PER : HONOURABLE MR. JUSTICE ILESH J. VORA)

1. By filing this writ application under Article 226 of the Constitution

of India, the writ applicant seeks to challenge the Notice dated

27.03.2019 issued by the respondent under Section 148 of the

Income Tax Act, 1961 (for short "The Act, 1961") seeking to reopen

the applicant's income tax assessment for the A.Y 2014-15.

2. The brief facts giving rise to filing of the present writ application

are as follows:

2.1 The writ applicant - Rajena Agro Products Pvt. Ltd. is

engaged in the activities of manufacturing of DOC & Caster Oil as

well as trading of agricultural products.

2.2 The assessee company filed its return of income on

29.11.2014 for the relevant year A.Y. 2014-15 declaring its income

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at Rs.58,08,013/- and the same was processed under Section 143(1)

of the Act.

2.3 The case of the assessee company for the year under

consideration was selected for scrutiny assessment and various

details were called for by issuing the notice dated 08.06.2016 under

Section 142(1) of the Act and the same was complied with by the

assessee. The respondent vide Notice dated 09.12.2016 issued

under Section 142(1) of the Act called upon the assessee company

to show cause as to why the amount of VAT payable Rs.78,79,941/-

for the year 2013-14 should not be disallowed under Section 43 B

of the Act, since it being a statutory liability had not paid before

the due date of filing of the return. The assessee company vide

letter dated 16.12.2016 had furnished its explanation. Despite of

this, the revenue after considering various details furnished by the

assessee company framed the assessment under Section 143(3) of

the Act vide order dated 22.12.2016, whereby, the total income

was determined at Rs.95,03,166/- and made certain additions to

the return of income including the addition of Rs.10,41,320/- in

respect of the VAT refund. The assessee company carried the

assessment order in appeal before the Commissioner of Income

Tax (Appeals) and the issue of addition of Rs.10,41,320/- made in

respect of VAT refund was confirmed. Being aggrieved by the order

of the CIT (Appeals), confirming the addition of Rs.10,41,320/-, the

assessee had challenged the same before the Income Tax Appellate

Tribunal and the Tribunal vide order dated 21.10.2019 deleted the

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amount of addition of Rs.10,41,320/-.

2.4 The revenue has issued the impugned Notice dated

27.03.2019 under Section 148 of the Act for reopening of the

assessment for the year under consideration.

2.5 Pursuant to the notice dated 27.03.2019, the assessee

company filed its return of income and requested the respondent

to supply the reasons for reopening, which has been provided by

email dated 05.07.2019. The reasons recorded reads thus :

Reasons for reopening :-

"Reasons for reopening of the assessment in the case of M/s. Rajena Agro Products Pvt. Ltd. AY. 2014-15 u/s. 147 of the I.T.Act.

1. Brief Details of the Assessee:-

In this case, the assessee has filed her Return of Income for A.Y, 2014-15 on 29.11.2014 declaring total income of Rs.58,08,013/-. The assessment u/s. 143(3) was finalized on 22.09.2016 by assessing total income of Rs. 95,03,166/-.

2. Brief details of information collected /received b the AO: On verification of the details submitted by the assessee it is seen that the assessee has received a VAT refund of Rs. 79,78,941/- during the year, and same is being reflected in the bank statement also. However, the assessee has not declared the same while filing the return of income. Thus, the entire amount of Rs. 79,78,941/- was liable for taxation and was required to be added to the total income of the assessee,

3. Analysis of information collected /received :

The requirement to initiate proceedings u/s. 147 of the Act are reason to believe that income for the year under consideration has escaped because of faihire on part of the assessee to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration. It is pertinent to mention here that reason to believe that income has escaped assessment for the year under consideration have been recorded above in paragraph have carefully considered that assessment records containing the submissions made by the assessee in response to various notices issued during the assessment proceedings and have

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noted that the assessee has not fully and truly disclosed the material facts necessary for its assessment for the year under consideration.

4. Enquiries made by the AO as sequel to information collected/received:

The copy of balance-sheet, profit and loss a/c and submission received the assessee has filed its return of income on 22.12.2016 are available in assessment records. The information received is processed and examined from the assessment records and material available on record with the department.

5. Finding of the AO :

On verification of the bank statement it is seen that the assessee company has received VAT refund of Rs.79,78,941/- during the year. The assessee has already availed the deduction in the form of purchase which includes VAT expenses. As such the entire amount of Rs. 79,78,941/- liable for tax when it has escaped from the assessed income.

6. Basis of forming reason to believe and details of escapement of income:-

The assessee had received a sum of Rs. 79,78,941/- as VAT refund, and Same is being reflected in the bank statement. However, the assessee has failed to disclosed such VAT refund of Rs.79,78,941/in his return of income. This has resulted into under assessment of income of Rs.79,78,941/-. Therefore, I have reason to believe that the income to the tune of Rs.79,78,941/- has been escaped from the assessment.

8. Applicability of the provisions of section 147 151 to the facts of the case:

In this case, as stated in Para 5 that the assessee had received a sum of Rs. 79,78,941/as VAT refund, but in absence of the details that, when entire amount of Rs.79,78,941/- has been received and same is being reflected in the bank statement. This has resulted into under assessment of income of Rs.79,78,941/-. Therefore I have reason to believe that the income to the tune of Rs.79,78,941/has been escaped from the assessment. Accordingly, in this the only requirement to initiate proceedings u/s. 147 is reason to believe which has been recorded in Para 6.

Income chargeable to tax has been escaped by an amount of Rs.79,78,941/-

In view of the above, I have reason to believe that the income to the above extent i.e. Rs.79,78,941/- which is chargeable to tax has escaped assessment for the previous year relevant to A.Y. 2014-15

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within the meaning of clause (c) of section 151 of the Act."

2.6 The writ applicant filed its objections vide its communication

dated 09.07.2019 and the same came to be rejected by the

Revenue vide order dated 24.10.2019.

3. Being dissatisfied with the decision of reopening the assessment,

the writ applicant has come up before this Court with the present

writ application.

4. The case of the revenue for reopening of the assessment mainly on

the ground that, the assessee has received VAT refund of

Rs.79,78,941/- during the year under consideration and the same

was not declared while filing of the return of income.

5. The assessee had raised the objections against reopening, inter

alia, stating that, the issue of VAT refund received has already

examined in the assessment order passed under Section 143(3) of

the Act and the order is challenged before the competent

authority, therefore, in this circumstances, fresh assessment by

reviewing the materials already examined, which were available on

the assessment record by the Assessing Officer due to change of

opinion is not permissible.

6. We have heard Mr. Tushar Hemani, the learned Senior Counsel

assisted by Ms. Vaibhavi K. Parikh, the learned counsel appearing

for the writ applicant and Mrs. Mauna M. Bhatt, the learned Senior

Standing Counsel assisted by Mr. Karan Sangani, the learned

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counsel appearing for the Revenue.

7. Learned counsel appearing for the writ applicant has submitted the

following contentions:-

(i) It was submitted that, the impugned notice is illegal, bad in law,

barred by limitation and without jurisdiction and therefore, the

same deserves to be quashed and set aside;

(ii) It was pointed out that, mere a change of opinion is not

sufficient to reopen any completed assessment. He further

submitted that, the assessing officer cannot take any action under

Section 147 of the Act merely because of the fact that, the

assessing officer has change of opinion on the same set of facts. In

this regard, it was submitted that, the case of the assessee

company was selected for scrutiny and the issue of the VAT

amount was examined at the stage of original assessment by the

then assessing officer and the differential amount of Rs.10,41,320/-

(Rs.79,78,941/- minus Rs.69,37,621/- = Rs.10,41,320/-) was added as

income being an excess refund received by the assessee company

and consciously not to choose the entire sum of VAT refund

received during the year under consideration. Under the

circumstances, the learned counsel submitted that, the

reassessment is totally unwarranted, invalid, bad and illegal in the

eye of law.

8. In view of the aforesaid contentions, the learned counsel appearing

for the writ applicant submits that, the impugned notice is bad,

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illegal, contrary to law and is required to be quashed and set aside.

9. On the other hand, the writ application has been vehemently

opposed by Mrs. Mauna Bhatt, the learned Sr. Standing Counsel

appearing for the Revenue. Mrs. Bhatt has submitted that, the

revenue is justified in reopening the assessment for the year under

consideration as the assessee company failed to disclose the

amount of VAT while filing the return of income, which resulted

into under assessment of income for which the assessing officer

has reason to believe that, the income to the tune of Rs.79,78,941/-

has escaped assessment.

10. In view of the contentions raised by the Revenue, Mrs. Bhatt, prays

that, there being no merits in the writ application, the same may

be rejected.

11. Having heard the learned counsel appearing for the parties and

having gone through the materials on record, the only question

that falls for our consideration is whether the revenue is justified in

reopening the assessment for the year A.Y. 2014-15 ?

12. It appears from the record that, after filing of the return for the

year under consideration, the case was selected for scrutiny and

the notice under Section 143(1)(3) of the Act was issued and

certain details and information were called for to substantiate the

claim made in the return of income and the same was complied

with by the assessee and after considering the various details as

well as the explanation furnished by the assessee, the revenue had

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framed the assessment under section 143(3) of the Act vide order

dated 22.12.2016, whereby, the total income was determined at

Rs.95,03,166/- after making certain additions to the return of

income including the addition of Rs.10,41,320/- in respect of VAT

refund. During the course of assessment proceedings, the details of

VAT returns and VAT refund of Rs.79,78,941/- were called for and

the Revenue had partially accepted the explanation submitted by

the Revenue and had made addition of Rs.10,41,320/- (addition for

VAT refund received Rs.79,78,941/- minus Rs.69,37,061/-) towards

the VAT refund receivable adjusted erroneously in the assessment

order.

13. It is a settled principle of law that, a mere fresh application of mind

to the same set of facts or mere a change of opinion does not

confer jurisdiction upon the Assessing Officer to issue notice under

Section 148 of the Act.

14. In the case of CIT Vs. Kelvinator of India Ltd., the expression

"change of opinion" has been interpreted and held that, the

reopening of the assessment on the basis of "mere a change of

opinion" cannot be per say reason to open. The relevant paras 5, 6

& 7 reads thus:

"5......where the Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open the assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, Section 147 would give arbitrary powers to the Assessing Officer to re-open assessments on the basis of "mere change of opinion", which cannot be per se reason to re- open.

6. We must also keep in mind the conceptual difference between power

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to review and power to re-assess. The Assessing Officer has no power to review; he has the power to re-assess. But re-assessment has to be based on fulfillment of certain pre-condition and if the concept of "change of opinion" is removed, as contended on behalf of the Department, then, in the garb of re-opening the assessment, review would take place.

7. 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 1st April, 1989, Assessing Officer has power to re-open, provided there is "tangible material" to come to the conclusion that there is escapement of income from assessment. Reasons must have a live link with the formation of the belief."

15. A careful analysis of the judgment of the Apex Court, it is settled

that, mere a fresh application of mind to the same set of facts or

mere a change of opinion does not confer jurisdiction to issue

Notice under Section 148 of the Act. In light of the above law, we

shall now deal with the facts of the present case.

16. It is an undisputed fact that, the issue of the amount of

Rs.79,78,941/- under the VAT received during the year under

consideration was examined during the course of the scrutiny

assessment as item no.3 of the assessment order dated 22.12.2016.

During the course of the scrutiny assessment, various details were

called for by the revenue and accordingly, the assessee company

had furnished the necessary primary materials pertaining to the

TDS and VAT refund. It appears from the record that, the assessee

company had responded to the show-cause notice by written

explanation along with the necessary balance-sheet, bank

statement and other relevant materials. It is also an undisputed fact

that, the then assessing officer had framed the assessment vide

order dated 22.12.2016, whereby, the total income was determined

at Rs.95,03,166/- and made certain additions including the addition

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of Rs.10,41,320/- in respect of the VAT refund and the same was

deleted by the Income Tax Appellate Tribunal vide order dated

21.10.2019.

17. In the background of the aforesaid facts, we have examined all the

material facts as well as the reasons recorded for reopening of the

assessment for the year under consideration. We are of the opinion

that, the impugned action on the part of the respondent to issue

Notice under Section 148 of the Act is without authority of law and

therefore, the same is required to be quashed and set aside for the

following reasons:-

(i) The issue of VAT amount thoroughly examined at the stage of

the original assessment by the then assessing officer and had

considered various details and consciously, he arrived at a

conclusion not to make an addition in respect of the entire

amount of Rs.79,78,941/- and add only differential amount of

Rs.10,41,320/- and the same was deleted by the Income Tax

Appellate Tribunal vide order dated 21.10.2019. A perusal of the

reasons recorded, it reveals that, the assessment is sought to be

reopened mainly on the ground that, "the assessee was failed to

disclose the VAT refund of Rs.79,78,941/- in his return of income

which has resulted into under assessment of income". Considering

the scrutiny assessment order, it appears that, the assessee had

disclosed fully and truly all primary material facts with regard to

VAT amount and accordingly, the then assessing officer had

framed the assessment. In this circumstances, when there was no

any failure on the part of the assessee to disclose fully and truly

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material facts for the purpose of relevant assessment, now it is not

open to change that opinion on the very same set of facts which

were available at the time of original assessment. Therefore, in the

present case, the reasons recorded by the assessing officer led to

belief about the escapement of assessment is nothing, but mere a

change of opinion, which cannot sustainable in law.

(ii) It is not the case of the revenue that, subsequently i.e. after the

order of scrutiny assessment, the assessing officer has received

"tangible material" to come to the conclusion that, there is

escapement of income. We have also examined the aspect whether

any tangible material exists or not. We do not find any tangible

material in the hands of the assessing officer to form a prima facie

opinion that, the income has escaped assessment. Therefore, in the

present case, in the absence of element of non-disclosure of

relevant materials fully and truly necessary for assessment, the

assessing officer has no right to reopen the assessment.

18. For the foregoing reasons, the writ application succeeds and is

hereby allowed. The impugned notice dated 27.03.2019 is hereby

quashed and set aside.

(J. B. PARDIWALA, J)

(ILESH J. VORA,J) SUCHIT