Adani Enterprises Limited vs Assistant Commissioner Of Income ...
2023 Latest Caselaw 6156 Guj

                                                                                 NEUTRAL CITATION




    C/SCA/18210/2021                             JUDGMENT DATED: 22/08/2023

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            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD


              R/SPECIAL CIVIL APPLICATION NO. 18210 of 2021


FOR APPROVAL AND SIGNATURE:


HONOURABLE MR. JUSTICE BIREN VAISHNAV

and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA

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1    Whether Reporters of Local Papers may be allowed
     to see the judgment ?

2    To be referred to the Reporter or not ?

3    Whether their Lordships wish to see the fair copy
     of the judgment ?

4    Whether this case involves a substantial question
     of law as to the interpretation of the Constitution
     of India or any order made thereunder ?


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                  ADANI ENTERPRISES LIMITED
                            Versus
      ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(1),
                         AHMEDABAD
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Appearance:
MR B S SOPARKAR(6851) for the Petitioner(s) No. 1
MS MAITHILI D MEHTA(3206) for the Respondent(s) No. 1
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    CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
          and
          HONOURABLE MR. JUSTICE BHARGAV D. KARIA


                             Date : 22/08/2023

                            ORAL JUDGMENT

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C/SCA/18210/2021 JUDGMENT DATED: 22/08/2023

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(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV)

Heard learned advocate Mr.B.S.Soparkar for

the petitioner and learned Senior Standing

Counsel Ms.Maithili D. Mehta for the

respondent No.1.

1. Rule, returnable forthwith. Learned Senior

Standing Counsel Ms.Maithili Mehta waives

service of notice of rule for and on behalf of

the respondent No.1.

2. With the consent of learned advocates for

both the sides, we have taken up this matter

for final hearing.

3. By way of this petition under Article 226

of the Constitution of India, the petitioner

has prayed for quashing and setting aside the

order dated 9th November, 2021 by which the

objections raised by the petitioner were

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disposed of. The petitioner has also prayed

for setting aside the impugned notice issued

on 31st March, 2021 under Section 148 of the

Income Tax Act, 1961 (for short 'the Act,

1961').

4. The facts in brief are as under :

4.1. The petitioner Company filed it's

original return of income for the Assessment

Year 2014-2015 on 25th November, 2014

declaring a total loss of Rs.592,36,08,345/-.

The petitioner-Company was selected for

scrutiny and questionnaires were issued to

which the petitioner had replied. To the

specific question which related to the issue

of exchange rate difference in response to the

notice dated 30th October, 2017, the

petitioner provided details vide reply dated

13th November, 2017. Pursuant to the response,

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assessment order was passed on 4th January,

2018 determining total income at loss of

Rs.512,04,70,844/-. Being aggrieved, the

petitioner filed an appeal before the

Commissioner of Income Tax which was partly

allowed on 5th March, 2020.

4.2. By the impugned notice dated 31st

March, 2021, it was the case of the Revenue

that on verification of balance-sheet, profit

and loss account and 3CD report, computation

of income and submission of the assessee dated

13th November, 2017, it was noticed from the

details furnished that the assessee has a net

loss of Rs.148,57,55,961/- in 8,722 accounts

of unrealized profit/loss as on 31st March,

2014. According to the Revenue, as these

transactions have resulted in net capital loss

on foreign exchange derivatives, being

notional and contingent in nature, it is not

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an allowable expenditure under Section 37(1)

of the Income Tax Act, 1961 read with the CBDT

instruction No.3/2010. The petitioner filed

his objections on 5th July, 2021. The

objections were disposed of vide order dated

9th November, 2021.

5. Mr.B.S.Soparkar, learned advocate for the

petitioner would essentially challenge the

notice as well as the order on four grounds.

Firstly, Mr.Soparkar, learned advocate would

submit that the impugned notice is bad as the

re-opening is beyond a period of four years

from the end of the Assessment Year. The

reasons themselves record that they are based

on the submissions made and that there is in-

fact no failure to disclose such information

and therefore the action is hit by the proviso

to Section 147 of the Act, 1961.

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6. The second argument of Mr.Soparkar,

learned advocate would be on the concept of

change of opinion. Reading the annexure to the

impugned notice, Mr.Soparkar, learned advocate

would submit that the information which is

elicited by the authority as it is evident

from reading the annexure would indicate that

it is based on the very submission of the

assessee dated 13th November, 2017. Taking the

Court to the submissions filed pursuant to the

information sought for by the respondents in

response to the notice under Section 142(1) of

the Act, 1961, initially Mr.Soparkar, learned

advocate would invite the Court's attention to

the notice dated 30th October, 2017 which also

had the issue relating to the exchange rate

difference and the net exchange rate

difference which was part of the notice.

Further inviting the Court's attention to the

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response dated 13th November, 2017,

Mr.Soparkar, learned advocate would submit

that the explanation was offered and

therefore, if the very basis of the re-opening

of the assessment pursuant to an exercise

already undertaken after issuance of the

notice under Section 142 of the Act, 1961 and

after having passed an assessment order on 4th

January, 2018, the exercise was bad on the

concept of "change of opinion". He would

therefore submit that the alternative

submission with regard to the audit objection

is also a case on hand provided the petitioner

would fail on the other submissions basically

on the change of opinion and the re-opening of

the assessment beyond the period of four

years.

7. Ms.Maithili Mehta, learned Standing Senior

Counsel appearing for the Revenue has taken us

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to the reasons recorded and would submit that

the basis for issuance of notice was the fact

that the requisite materials as noted in the

reasons were embedded in such a manner that

material evidence would not be discovered by

the Assessing Officer and could have been

discovered with due diligence and therefore,

the provisions for Explanation-1 of Section

147 of the Act, 1961 would attract.

8. Having considered the submissions made by

the learned counsels for the respective

parties on reading the reasons recorded it is

evident that it was for the Assessment Year

2014-15 and while recording the brief details

of the assessment that fact is taken note of.

Admittedly therefore, it is a case where the

assessment or exercise of re-opening the

assessment is beyond the period of four years

and therefore, the petitioner would succeed

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only on this ground.

9. Even otherwise, on the submission of the

concept of "change of opinion" having

considered the fact that for the very issue,

when a notice under Section 142(1) of the Act,

1961 was given to the petitioner to which the

petitioner responded on 13th November, 2017

and that very submission was the basis to have

triggered the reassessment exercise, it is

clearly an exercise which would tantamount to

have undertaken on the basis of change of

opinion. In light of the decision in case of

Commissioner of Income Tax versus Kelvinator

of India Limited reported in (2010) 320 ITR

561 (SC) the petition succeeds on this ground

too.

10. For the aforesaid reason, the petition is

allowed. Impugned notice dated 31st March,

2021 and the order rejecting the objections

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dated 9th November, 2021 are quashed and set

aside. Rule is made absolute with no order as

to costs.

(BIREN VAISHNAV, J)

(BHARGAV D. KARIA, J) PALAK