Gujarat High Court
Principal Commissioner Of Income ... vs Seastem Ltd on 4 September, 2023
Bench: Bhargav D. Karia
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 280 of 2023
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PRINCIPAL COMMISSIONER OF INCOME TAX
Versus
SEASTEM LTD
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Appearance:
MRS KALPANA K RAVAL(1046) for the Appellant(s) No. 1
for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BIREN VAISHNAV
and
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
Date : 04/09/2023
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BIREN VAISHNAV)
1. This tax appeal is filed for consideration
of following question of law:
Whether the Ld. Tribunal was justified in
quashing reassessment proceedings by
holding that there is no failure on the
part of the assessee to make true and full
disclosure without considering Explanation
1 to Section 147 of the Act appropriately?
2. This Tax Appeal has been filed under
section 260A of the Income Tax Act ['the
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Act' for short] challenging the order of
the Tribunal dated 07.09.2023.
3. Facts in brief are that, the company had
filed its return of the income on
13.10.2022. The return was assessed under
section 143(1) of the Act, on 21.05.2011.
The case was selected for scrutiny of
assessment under section 143(3) and
assessment order was passed on 28.03.2013.
The Assessing Officer was of the view that
the assessee-company had debited an amount
of Rs. 4,75,495/- towards the profit on
sales of barge and since the barge is
depreciable asset and the same should have
been deducted from the block of assets in
the category of ships in the depreciation
chart, an amount of Rs. 4,75,495/- debited
to profit and loss account was required to
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be added back while computing total income
from business and profession but the same
was not added back by the assessee-company
Therefore, notice under section 148 of the
Act was issued on 21.03.2017 to reopen the
assessment, relevant portion of which read
as under:
"On going through the case records, it
is noticed that you have debited an
amount of Rs. 4,75,495/- towards the
profit on sale Barge. Moreover, it is
further noticed that on scruity of
ledger a/c. Of M V Royal Aditi (Barge)
revealed that there was debit balance
of Rs. 4,75,495/- on sale barge since
the MV Aditi Barge is depreciable
asset and the same should be deducted
from the block of assets in Ships in
depreciation statement. Hence, an
amount of Rs. 4,75,495/- debited to
the P & L Account was required to be
added back while computing total
income from business and profession
but the same was not added back. In
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view of the above, you are hereby show
cause as to why an amount of Rs.
4,75,495/- towards the profit on sale
of Barge should not be disallowed and
added to the total income."
4. The CIT(Appeals) confirmed the order
passed by the Assessing Officer. The
Tribunal however, partly allowed the
appeal preferred by the assessee holding
as under:
"12. We have heard the rival
contentions of both the parties and
perused the materials available on
record. Admittedly, the regular
assessment under section 143(3) of the
Act was completed and thereafter the
assessment was reopened for escapement
of income. On perusal of the reason
recorded, we find that the AO used the
word "On going through the case
record". Hence it is deduced that
there was no new material before the
AO which suggest that the income was
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escaped. As such the reason to believe
of the AO is based on same set of
document which amount to change of
opinion which is not permissible under
the provision of section 147 of the
Act. In this regard, we draw support
and guidance from the judgment of
Hon'ble Supreme Court in case of CIT
vs. Kalvinator of India Ltd (supra)
wherein it was held as under:
one needs to give a schematic
interpretation to the words 'reason to
believe; failing which section 147
would ge arbitrary powers to the
Assessing Officer to reopen
assessments on the basis of 'mere
change of opinion', which cannot be
per se reason to reopen. One must also
keep in mind the conceptual difference
between power to review and power to
reassess. The Assessing Officer has no
power to review; he has the power to
reassess, but the reassessment has to
be based on fulfilment of certain pre-
conditions and if the concept of
'change of opinion' is removed as
contended on behalf of the department,
then in the garb of reopening the
assessment, review would take place.
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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 1-4-1989, the
Assessing Officer has power to reopen,
provided there is 'tangible material'
to come to conclusion that there is
escapement of income from assessment.
5. In light of the questions already decided
by the Supreme Court in case of CIT vs.
Kelvinator of India Ltd reported in (2010)
320 ITR 561(SC), the Tribunal found that
since the reopening was on the basis of
the material already available on record
and there was no new tangible material
available before the Assessing Officer to
reopen the assessment after expiry of
period of four years and it was not a case
where there was any failure on the part of
the assessee to disclose all the material
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facts necessary for assessment, the
Tribunal held as under:
12.1 Moving forward, it is also
pertinent to note that in case where
the regular assessment under section
143(3) was completed then reopening
of assessment after the expiry of
four years from the end of relevant
assessment year can only be made if
there is failure on the part of the
assessee to disclose all the
materials facts necessary for
assessment. In the case on hand, the
reopening was made after the expiry
of 4 year, however the AO nowhere
has brought on record that the
assessee failed to disclose all the
material facts necessary for
assessment. In this regard we find
support and guidance form the order
of Hon'ble Gujarat High court in
case Vodafone West Ltd va. ACIT
(supra) where it was held as under:
In the case of Calcutta Discount
Co. Ltd. v. ITO [1961] 41 ITR
191, the Consttution Bench of
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Supreme Court held and observed
that to confer jurisdiction on
assessee to issue notice off
reopening of assessment beyond a
period of four years, two
conditions are required to be
simultaneously satisfied. Such
conditions are that the Assessing
Officer must have reason to
believe that income, profits or
gains chargeable to income-tax
have been under assessed and the
second is that he must also have
reason to believe that such under
assessment has occurred by reason
of either omission or failure on
part of the assessee to make
return of his income or omission
or failure on part of the
assessee to disclose fully and
truly all material facts
necessary for his assessment for
that year. Both these conditions
are conditions precedent to be
satisfied before the taxing
officer could have jurisdiction
to issue notice for the
assessment or reassessment beyond
a penod of four
years.
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12.2 In view of the above and after
considering facts in totality we
find that there was no fresh
tangible material before the AO or
the assessee failed to disclose all
the
material facts necessary for
assessment. Hence, we hereby quash
the reopening/re-assessment order
being not sustainable under the law.
Thus the ground of appeal of the
assessee is hereby allowed."
6. No substantial question of law arises. The
appeal is dismissed.
(BIREN VAISHNAV, J)
(BHARGAV D. KARIA, J)
JYOTI V. JANI
