Ball Aerosol Packaging India ... vs Assistant Commissioner Of Income ...
2023 Latest Caselaw 2380 Guj

     C/SCA/19340/2021                                 ORDER DATED: 20/03/2023




            IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

             R/SPECIAL CIVIL APPLICATION NO. 19340 of 2021

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         BALL AEROSOL PACKAGING INDIA PRIVATE 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
for the Respondent(s) No. 1
MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1
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 CORAM:HONOURABLE MR. JUSTICE ASHUTOSH SHASTRI
       and
       HONOURABLE MR. JUSTICE J. C. DOSHI

                             Date : 20/03/2023

                              ORAL ORDER

(PER : HONOURABLE MR. JUSTICE ASHUTOSH SHASTRI)

1. By way of this petition under Article 226 of the Constitution of India, the petitioner has challenged the legality and validity of the impugned notice dated 21 st March, 2021 which is at Annexure-A as well as the impugned order dated 22nd November, 2021 at Annexure- H to the petition.

2. The background of facts, in which, the present petition is brought is that the petitioner is a Limited Company and is engaged in the business of manufacturing of aluminum items. The petitioner filed the original return of income for the A.Y.2015-16 on 28 th

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November, 2015 declaring the total income to the extent of Rs.7,40,180/-. According to the petitioner, the return of the petitioner was processed and the case was selected for scrutiny, as a result of which, notice under Section 142(1) was issued on 23rd August, 2017 calling upon the petitioner to furnish specific details relating to increase in share capital along with confirmation and ITR of the persons from whom the same was received, the premium received on shares during the year along with the name, PAN, address and confirmation of persons from whom the premium has been received. Such details were called for by way of aforesaid notice to which the petitioner has filed a detailed reply on 5th September, 2017.

3. According to the petitioner the Assessing Officer, after having arrived at a satisfaction, has not made any addition on the said issue which was specifically explained by the petitioner, and later on, an assessment order under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act") was passed on 6 th November, 2017 accepting the returned income of the petitioner. Despite the aforesaid circumstance, according to the petitioner, the respondent authority has issued notice under Section 148 of the Income Tax Act on 21 st March, 2021 calling upon the petitioner to submit the return of income of A.Y. 2015-16. The reasons were recorded on 20th March, 2021 which were supplied to the petitioner on 19th May, 2021. After submission of

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preliminary objections on 17th June, 2021 through E-mail on 28th June, 2021 and on income e-filing portal on 9 th July, 2021, questioning the validity of notice under Section 148 of the Act. The respondent-authority, however, without considering the materials on record, disposed of the objections vide order dated 22 nd November, 2021 and simultaneously, issued notice under Section 142(1) on 22nd November, 2021 calling upon the petitioner to supply the details in relation to the assessment for the aforesaid year in question. The petitioner has submitted that the said action on the part of the respondent-authority is in conflict with the guidelines framed by this very High Court in its judgment and not in consonance with the proposition, which is well established, and as such, by raising multiple contentions, the petitioner has brought this petition under Article 226 of the Constitution of India.

4. The petition was initially entertained by considering the submissions made by the learned advocate, and vide order dated 20th December, 2021 notice came to be issued and it has been observed that without prior permission of the Court, no final assessment shall be made and with this background, the present petition has come up for consideration before us.

5. The learned advocate Mr. B.S. Soparkar appearing on behalf of the petitioner has submitted that reopening of the assessment, which has been sought, is done on the

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basis of material which is already available on record, and as such, in the absence of any fresh tangible material, after scrutiny having been over, such reopening of assessment is impermissible, and to canvass this submission, learned advocate has made a reference to the decision in the case of Shanti Enterprise vs. ITO, reported in 2016 (76) taxmann.com 184, more particularly, para-11 thereof.

6. It has further been contended by learned advocate Mr. Soparkar that during the assessment process, the Assessing Officer has already raised the query with regard to this very issue, for which, the reopening is sought for and the Assessing Officer has considered the same and accepted the income which has been projected by the petitioner, and as such, even after considering the said issue, the Assessing Officer has thought it fit not to make any addition, and as such, this entire action of reopening of assessment is based upon the change of opinion which is also in conflict with well recognized proposition of law as laid down in the case of Premium Finance (P.) Ltd. vs. Asst. CIT, reported in (2016) 73 taxman.com 369 as well as the decision in the case of Gujarat State Board of School Textbooks vs. Asst. CIT, reported in (2016) 75 taxman.com 281, and as such, considering the aforesaid well settled proposition, the learned advocate has contended that impugned order as well as the notice deserve to be quashed and set aside.

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7. The learned advocate for the petitioner has further submitted that apart from this, even this reopening which is sought for is beyond the period of four years from the end of assessment year and there was no failure on the part of the assessee to truly and fully disclose the material facts, and as such, when all facts related to issuance of share and consequential premium etc. have been disclosed before the Assessing Officer during the original scrutiny, now it is not proper on the part of the respondent-authority to reopen the assessment beyond the period of four years in the absence of any failure on the part of the petitioner in truly and fully disclosing the facts. Hence, the impugned notice is not sustainable in the eye of law. To substantiate his contention, learned advocate Mr. Soparkar has made a reference to the decision in the case of Intercontinental (India) vs. Dy. CIT, reported in 2016 (73) taxmann.com 232 (Guj) and in the case of Jivraj Tea Ltd., reported in (2016) 386 ITR 298, and as such, has contended that even on the basis of this principles also, it is not open for the authority to reopen the assessment.

8. The learned advocate Mr. Soparkar has further submitted that the income, in fact, has not escaped from assessment, particularly, when the assessee has issued shares to non-resident parent company and the share premium received is exempted from the taxation. There is no substance in the allegation of Assessing Officer in

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relation to the addition under Section 56(1) or under Section 68, and as such, the reasons even otherwise are also ex-facie bad. Hence, the learned advocate has made a reference to yet another decision in the case of Vodafone India Services (P.) Ltd., reported in (2014) 368 ITR 1 (Bombay).

9. The learned advocate Mr. Soparkar has also submitted that a specific material has already been provided with regard to the said share issues and there is a specific reference about issuance of notice dated 23 rd August, 2017 issued under Section 142(1), and as such, simply because the said issue has not been discussed at length while passing the assessment order, it cannot be said that on that basis reopening is permissible and to canvass this submission, learned advocate has made a reference to a recent pronouncement in the case of Ball Aerosol Packaging India (P.) Ltd. vs. Asst. Commissioner of Income Tax, reported in (2023) 146 taxmann.com 193 (Gujarat), and it has been emphatically submitted that this decision is relating to very same company for the subsequent A.Y.2016-17, and as such, when this being the similarity, on the same line, present petition also deserves to be allowed by granting relief as prayed for in the petition.

10. As against this, learned advocate Mr. Dev D. Patel for Mr. Varun Patel, the learned advocate appearing for

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the respondent-authority has vehemently made an attempt to oppose the petition, but then could not withstand to the circumstance that the very notice which was issued under Section 142(1) of the Act dated 23rd August, 2017 was referred to in an assessment order and also could not controvert the fact that it was not a specific case of the Department that there is a failure on the part of the assessee since the reopening is beyond the period of four years and has submitted that the facts are such where the petition may not be entertained. The learned advocate for the Revenue has not been able to confront with the proposition which has already been propounded in the case of very same assessee, i.e. the petitioner

(Gujarat), and as such, has left it to the discretion of the Court. No further submissions have been made.

11. Having heard the learned advocates appearing for the parties and having gone through the materials on record, at the very first instance, it appears that the notice dated 23rd August, 2017 issued under Section 142(1) of the Act reflecting on Page-31 contains certain queries, in which, Query No.3 specifically requires details about the share capital increased during the year along with confirmation and ITR of the person from whom the same was received, and Query No.4 requires details of premium received on shares during the relevant year including other details. The above said two queries

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raised in the aforesaid notice has been specifically replied by the petitioner on 5th September, 2017, and if we peruse the assessment order dated 6 th November, 2017 reflecting on Page-47, Annexure-E to the petition, it appears that, in the very first paragraph, there is a reference of the said notice dated 23 rd August, 2017, by virtue of which, necessary details were called for. Yet another aspect which cannot be ignored is that from the reasons recorded while disposing of the objections reflecting on page-51, more particularly paragraph Nos.1 and 2, it is quite clear that such material was very much available since the said objections came to be disposed of on the basis of verification of the case record, and as such, when that be so, it is difficult for this Court to come to a conclusion that there is a failure on the part of the assessee in disclosing true and correct facts, more particularly, when it is also not the case of the Department that there is a failure on the part of assessee in disclosing true and correct facts. Hence, when the reopening is sought beyond the period of four years, this basic element of failure on the part of the assessee is missing. Accordingly, it appears that the entire reopening which is sought by the authority is based upon a change of opinion and the law on the change of opinion is already well established, and as a result of this, a case is made out by the petitioner to call for an interference.

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12. At this stage, as we have noticed that the entire re- assessment is not on the basis of any fresh tangible material distinct from what was already available during the assessment proceedings, and as such, the petitioner has made out a case to fall within the proposition as laid in the case of Shanti Enterprise (supra). Since we have considered the same, the observations as contained in Para-11, we may deem it proper to quote herein below;

11. The contention of the Revenue that the impugned action is within the period of four years and, therefore, it is always open for the authority to reopen the assessment cannot be accepted. Simply because the action is within the period of four years would not give a leverage to the authority to just go on repeating the exercise of examining the issue which has already been gone into. There appears to be no tangible material distinct from what was made a part of the assessment proceedings and, therefore, reopening of the assessment is not permissible. The proposition of law is aptly clear, as stated above and, therefore, in our opinion, permitting the authority to reopen the assessment would not be valid. We cannot shut our eyes over the aforesaid circumstance simply because it is within the period of four years and having regard to the decisions of Apex Court which propounded that the Courts would be failing to perform their duty, if reliefs were refused without adequate reasons, we see that the action on the part of the respondent authority is impermissible in view of aforesaid set of circumstance. The observations made by the Apex Court in case of Calcutta Discount Co. Ltd. v. ITO reported in [ 41 ITR 191 at page 195 head-note (v) are worth to be reproduced

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hereafter:

"That though the writ of prohibition or certiorari would not issue against an executive authority, the High Courts had power to issue in a fit case an order prohibiting an executive authority from acting without jurisdiction. Where such action of an executive authority, acting without jurisdiction subjected, or was likely to subject, a person to lengthy proceedings and unnecessary harassment, the High Courts would issue appropriate orders or directions to prevent such consequences. The existence of such alternative remedies as appeals and reference to the High Court was not, however, always a sufficient reason for refusing a party quick relief by a writ or order prohibiting an authority acting without jurisdiction from continuing such action. When the constitution conferred on the High Courts the power to give relief it becomes the duty of the Courts to give such relief in fit cases and the courts would be failing to perform their duty if relief were refused without adequate reasons."

13. Further, as we have already discussed, there was no allegation that there is any failure on the part of the assessee, i.e., the petitioner to truly and fully disclose the material facts, and further the reopening is sought on the basis of verification of record, and as such, there was no fresh tangible material distinct from what was available at the time of assessment proceedings and by making a reference to the notice by virtue of which the petitioner

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was called upon to furnish all the details as stated herein above, the assessment order is passed, and as such, this entire exercise which is sough to be undertaken by the authority is based upon change of opinion, and as such, we are of the opinion that such attempt is impermissible by virtue of well settled proposition of law as propounded in the case of Premium Finance (P.) Ltd. (supra) as also in the case of Gujarat State Board of School Textbooks (supra). Since we have considered the same, we also deem it proper to quote the relevant paragraphs relates to this issue. The relevant paragraph Nos.14 and 16 in the case of Premium Finance (P.) Ltd. (supra) read thus;

"14. While further considering the Hon'ble Apex Court judgements it was observed that after scrutinizing the claim minutely during the Assessment proceedings if the Assessing Officer does not reject such a claim but choses not to give any reasons, such a course of action that he adopts had hardly be stated that he did not form the opinion on such a claim. Therefore, when the Assessing Officer during scrutiny assessment notices a claim of exemption deduction for such like made by the assessee having some prima facie doubt raises queries asking the assessee to satisfy him with respect to such a claim thereafter, does not make any addition in the financial year of assessment. It can be stated to have form an opinion whether or not in the financial year he give his reason for making addition and after forming an opinion on the issue, the Court further held that any such reopening would be based on a mere

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change of opinion cannot be reopened simply because the Assessing Officer did not record reasons for making no disallowance on such claim of exemption would be of a no consequence.

16. Considering this overall set of circumstances coupled with the fact that there is no other tangible material available to justify the reopening more particularly when the issue has been gone into in detail during the course of regular scrutiny assessment, it is hardly justify for the revenue to reopen the issue which has relied upon, examined and even if it is within a period of four years. The ratio laid down by the aforesaid decision referred to above would clearly clinch the issue and therefore, the action of revenue in reopening the assessment is not justified as it would tantamount to be on the basis of mere change of opinion which is not permissible as the conditions which has been retained under Section 147 is also not satisfied."

The relevant paragraph Nos.10 and 16 in the case of Gujarat State Board of School Textbooks (supra) read thus;

"10. Having heard learned counsel appearing on behalf of the respective parties and having gone through the relevant record of the petition it is transpired that for the year under consideration for which the reopening is inclined, on earlier occasion, the scrutiny assessment has taken place wherein the issue has been gone into thoroughly as has been canvassed before us. It is also prevailing on record that in the earlier year, the very same issue with respect to A.Y 2004-05 has arisen wherein also as per the record, the reopening

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proceedings were dropped and thereafter it is noticed that there is no material change in activity of the Board which is also indicative of the fact that whether the reopening in the present form is permissible or not. Learned counsel appears to have rightly submitted that with respect to year under consideration when the scrutiny assessment has taken place the issue related to this exemption has been gone into and only thereafter the assessment proceedings have been finalized and therefore, if any reopening at this stage is permitted, it would tantamount to be based upon a change of opinion which is not permissible. There is no other distinguishable material which may allow the authority to take the different view.

16. In addition to this the circumstance prevailing on record which indicates that there is no distinguishable material or there is no substantial change of circumstance of any nature after scrutiny of assessment which has taken place and thorough examination is undertaken with respect to the issue of exemption it is not proper on the part of the respondent authority to proceed further with the reopening of assessment. If that be allowed it would be clearly in contrast to the ratio laid down by the Hon'ble Apex Court which has analyze the concept of change of opinion. For this purpose, the relevant observations made by the Hon'ble Apex Court in case of Kelvinator of India Ltd (supra) reads as under:

"The concept of "change of opinion" on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution Section 147 of the Income Tax Act, 1961 by Direct Tax Laws (Amendment) Act, 1987 and 1989. After

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the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of "Change of Opinion" must be treated as an inbuilt test to check the abuse of power. Hence, after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of the belief."

14. Further, the contention with regard to escapement of income being assessed, the respondent-authority has hardly made out any case for invoking the provisions of Section 56(1) or Section 68. Since the entire exercise is sought to be undertaken on the basis of change of opinion, simply because the Assessing Officer, while passing an order of assessment, has not dealt with specifically in an elaborate form, would not be a ground for opening of an assessment. At this stage, we deem it proper to refer to the decision delivered in a recent past in the case of a very same assessee reported in (2023) 146 taxmann.com 193 (Gujarat) for the A.Y. 2016-17, in which also, the issue almost similar, has been considered by the Court and the relief was granted to the concerned petitioner. At this stage, we may deem it proper to quote the relevant observations as contained in Para-5.7, which

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reads thus;

5.7. The first decision which has been brought to the notice is a decision dated 28.09.2016 passed by the co-ordinate Bench of this Court in Special Civil Application 15068 of 2010 in which after considering several decisions, it came to be held that reopening of assessment was impermissible. Paragraph 8 of the said decision is indicating a proposition that when the issue has been thoroughly gone through during the assessment proceedings, simply because the assessing officer has not assigned any independent reasons on the issue would not amount that no opinion is formulated and in that context, following reference is taken note of, which is reproduced hereunder:

"Reference may be made to a decision in the case of Gujarat Power Corpn. Ltd. v. Assistant Commissioner of Income-Tax reported in [2013] 350 ITR 266 (Guj), which covers the issued on hand, relevant portion thereof reads as under:

"41. The powers under section 147 of the Act are special powers and peculiar in nature where a quasi-judicial order previously passed after full hearing and which has otherwise become final is subject to reopening on certain grounds.

Ordinarily, a judicial or quasi-judicial order is subject to appeal, revision or even review if statute so permits but not liable to be re-opened by the same authority. Such powers are vested by the Legislature presumably in view of the highly complex nature of assessment proceedings involving large number of assessees concerning multiple questions of claims, deductions and exemptions, which assessments have to be completed in a time

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frame. To protect the interest of the revenue, therefore, such special provisions are made under section 147 of the Act. However, it must be appreciated that an assessment previously framed after scrutiny when reopened, results into considerable hardship to the assessee. The assessment gets reopened not only qua those grounds which are recorded in the reasons, but also with respect to entire original assessment, of course at the hands of the revenue. This obviously would lead to considerable hardship and uncertainty. It is precisely for this reason that even while recognizing such powers, in special requirements of the statute, certain safeguards are provided by the statute which are zealously guarded by the courts.

Interpreting such statutory provisions courts upon courts have held that an assessment previously framed cannot be reopened on a mere change of opinion. It is stated that power to reopening cannot be equated with review.

42. Bearing in mind these conflicting interests, if we revert back to central issue in debate, it can hardlybe disputed that once the Assessing Officer notices a certain claim made by the assessee in the return filed, has some doubt about eligibility of such a claim and therefore, raises queries, extracts response from the assessee, thereafter in what manner such claim should be treated in the final order of assessment, is an issue on which the assessee would have no control whatsoever. Whether the Assessing Officer allows such a claim, rejects such a claim or partially allows and partially rejects the claim, are all options available with the Assessing Officer, over which the assessee beyond trying to persuade the Assessing Officer, would have no control whatsoever. Therefore, while framing the assessment, allowing the

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claim fully or partially, in what manner the assessment order should be framed, is totally beyond the control of the assessee. If the Assessing Officer, therefore, after scrutinizing the claim minutely during the assessment proceedings, does not reject such a claim, but chooses not to give any reasons for such a course of action that he adopts, it can hardly be stated that he did not form an opinion on such a claim. It is not unknown that assessments of larger corporations in the modern day, involve large number of complex claims, voluminous material, numerous exemptions and deductions. If the Assessing Officer is burdened with the responsibility of giving reasons for several claims so made and accepted by him, it would even otherwise cast an unreasonable expectation which within the short frame of time available under law would be too much to expect him to carry. Irrespective of this, in a given case, if the Assessing Officer on his own for reasons best known to him, chooses not to assign reasons for not rejecting the claim of an assessee after thorough scrutiny, it can hardly be stated by the revenue that the Assessing Officer can not be seen to have formed any opinion on such a claim. Such a contention, in our opinion, would be devoid of merits. If a claim made by the assessee in the return is not rejected, it stands allowed. If such a claim is scrutinized by the Assessing Officer during assessment, it means he was convinced about the validity of the claim. His formation of opinion is thus complete. Merely because he chooses not to assign his reasons in the assessment order would not alter this position. It may be a non-reasoned order but not of acceptance of a claim without formation of opinion. Any other view would give arbitrary powers to the Assessing Officer.

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43. We are, therefore, of the opinion that in a situation where the Assessing Officer during scrutiny assessment, notices a claim of exemption, deduction or such like made by the assessee, having some prima facie doubt raises queries, asking the assessee to satisfy him with respect to such a claim and thereafter, does not make any addition in the final order of assessment, he can be stated to have formed an opinion whether or not in the final order he gives his reasons for not making the addition."

9. In view of aforesaid circumstances, and in addition thereto, it is further appearing to us that the ratio laid down by the Apex Court in the case of Kelvinator of India Ltd. (supra) is also governing the controversy in question and, therefore, the relevant extract of catch-note of this decision worth to be taken note and therefore reproduced hereafter:

"The concept of "change of opinion" on the part of the Assessing Officer to reopen an assessment does not stand obliterated after the substitution of section 147 of the Income-tax Act, 1961, by the Direct Tax Laws (Amendment) Acts, 1987 and 1989. After the amendment, the Assessing Officer has to have reason to believe that income has escaped assessment, but this does not imply that the Assessing Officer can reopen an assessment on mere change of opinion. The concept of "change of opinion" must be treated as an in-built test to check the abuse of power. Hence after April 1, 1989, the Assessing Officer has power to reopen an assessment, provided there is "tangible material" to come to the conclusion that there was escapement of income from assessment. Reason must have a link with the formation of

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the belief."

15. In view of the aforesaid circumstances and the conjoint effect of the relevant discussion in consonance with the proposition of law, we are of the opinion that a case is made out by the petitioner to call for an interference. Apparently, since the action is not sustainable in the eye of law, in this peculiar background of facts, we hereby pass the following order which would meet the ends of justice;

ORDER

(i) Special civil application is allowed.

(ii) The impugned notice dated 21st March, 2021 at Annexure-A and a consequential order dated 22 nd November, 2021 at Annexure-H are hereby quashed and set aside.

(iii) Rule is made absolute to the aforesaid extent.

(iv) No order as to costs.

(ASHUTOSH SHASTRI, J)

(J. C. DOSHI,J)

VAHID