Devkant Synthetics India Pvt. Ltd. Vs Additional/Joint/Deputy/Assistant Commissioner of Income Tax Officer (Bombay High Court)
Bombay High Court held that initiation of reassessment proceeding under section 148 of the Income Tax Act, in absence of any failure on the part of the assessee to disclose any material facts fully and truly during the regular assessment proceedings, is mere change of opinion and hence liable to be quashed.
Facts- The petitioner in the present petition challenges the reassessment proceedings initiated pursuant to a notice, dated 31st March 2022 issued u/s. 148 of the Income Tax Act, 1961 (‘the Act’) leading to the fnal order of reassessment, dated 26th March 2022 relevant to the assessment year 2013-14. Demand notices as also the penalty notice, both dated 26th March 2022, pursuant to the passing of the order of reassessment are also challenged in the present petition.
The case of the petitioner is that it was only after the Assessing Officer had satisfied itself thoroughly on all the issues which had been identified during the proceedings that a final order of assessment, dated 29th March 2016 came to be passed under section 143(3) of the Act assessing the petitioner’s income at Rs.37,36,365/-.
Conclusion- We hold that there was no basis to hold that there was any failure on the part of the assessee to disclose any material facts fully and truly during the regular assessment proceedings and further that reassessment proceedings are nothing but a change of opinion.
For the reasons mentioned above, in our opinion, the impugned notice also the order of reassessment are without jurisdiction, and are, therefore, quashed and set aside. All consequential orders and or notices viz. demand and or penalty notices are also quashed.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. The petitioner in the present petition challenges the reassessment proceedings initiated pursuant to a notice, dated 31st March 2022 issued under section 148 of the Income Tax Act, 1961 (‘the Act’) leading to the fnal order of reassessment, dated 26th March 2022 relevant to the assessment year 2013-14. Demand notices as also the penalty notice, both dated 26th March 2022, pursuant to the passing of the order of reassessment are also challenged in the present petition.
2. Briefy stated the material facts are as under :
2.1 The petitioner is a company engaged in the business, inter-alia, of trading in shares and securities. It is stated that during the previous year relevant to the assessment year 2013-14, shares and securities amounting to Rs.36,04,65,386/- were traded. It is stated that after considering the purchase costs and other business expenditures, the petitioner reported a profit before tax of Rs.63,68,739/- in its Profit and Loss account for the year ending 31st March 2013.
2.2 A return of income for the assessment year 2013-14 was filed declaring a total income at Rs.23,16,530/-, which included the income earned from the sale of shares and securities under the head of ‘Profits and Gains from Business and Profession’. Subsequently, the Assessing Officer issued a notice, dated 9th September 2014/9th June 2015 in terms of section 143(2) of the Act calling inter-alia for further information as regards certified copies of auditor’s report, balance-sheet, profit and loss account etc. The information was furnished by the petitioner vide communication dated 3rd September 2015.
3. Respondent No.2 then issued a notice under section 142(1) of the Act on 30th October 2015 calling upon the petitioner to furnish the scrip-wise details of opening stock purchases, sales and closing stock in the prescribed format. It also required the petitioner to submit a copy of Form No.10DB which is a Form evidencing payment of securities transaction tax on the transactions entered in a recognised stock exchange, duly certified and reconciled with the audited accounts. The petitioner was also required to submit a copy of all the demat accounts of the assessee-company for the financial year 2012-13. All these documents were then furnished to the Assessing Officer. The petitioner then proceeded to file partial details called for by the respondents.
4. In between, the petitioner states that it was handed over a copy of the Annual Information Report (‘AIR’), dated 22nd January 2016 which contained the details of the transactions made by the petitioner with respect to the purchase and sale of shares/ derivatives for the assessment year under consideration as available on the records of the Income Tax Department. The petitioner was directed to reconcile all the entries as per the petitioner’s books and to provide documentary evidence for the same.
5. The petitioner further submitted the requisite documents vide communication dated 28th January 2016, furnished all the requisite documents to the Assessing Officer, including a copy of Form 10DB and the scrip-wise details of opening stock purchase of shares, sale of shares and closing stock. The petitioner also claims that it submitted a statement reconciling the transactions mentioned in the Annual Information Report of the department with the transactions entered into in the books of accounts of the petitioner. A copy of the said reconciled statement is also on record.
6. The case of the petitioner is that it was only after the Assessing Officer had satisfied itself thoroughly on all the issues which had been identified during the proceedings that a final order of assessment, dated 29th March 2016 came to be passed under section 143(3) of the Act assessing the petitioner’s income at Rs.37,36,365/-.
7. Nishant Thakkar, learned counsel for the petitioner further stated that the order of assessment under section 143(3) of the Act was thereafter scrutinized by respondent No.3-The Principal Commissioner of Income Tax in exercise of the powers under section 263 of the Act. It was stated that after scrutiny, the said respondent No.3 found that disallowance under section 14(A) made was erroneous and prejudicial to the interest of revenue, and therefore, took steps to revise the original assessment order to that extent while the assessment order on the other issues was not interfered with.
8. Notice dated 31st March 2021 was issued by the Assessing Offcer under section 148 of the Act seeking to reopen the assessment on the ground that the income chargeable to tax had escaped assessment. The reasons furnished to the petitioner following the mandate of the Supreme Court in the case of GKN Driveshafts (India) Ltd vs Income Tax Offcer And Ors. 1 were furnished to the petitioner which read as under :
“… Assessee Company has filed return of income for A.Y. 2013-14 on 24.09.2013 declaring total income at Rs.23,16,530/-. The case was selected under CASS and the assessment was completed on 29.03.2016 u/s. 143(3) at 25,37,651/-.
