ACIT & Anr. Vs Venture Real Estate & Anr. (Supreme Court of India)
The Supreme Court considered the Revenue’s challenge to the Bombay High Court judgment in Sesa Sterlite Limited (Formerly known as Sesa Goa Limited) Vs ACIT (Bombay at Goa High Court), concerning reopening of assessments under Sections 147 and 148 of the Income Tax Act, 1961 on the basis of the Shah Commission’s report alleging under-invoicing of iron ore exports. The Bombay High Court had quashed the reassessment notices, holding that the Assessing Officer could not form the requisite “reason to believe” merely from the Shah Commission’s conclusions without independently applying his mind to primary facts and establishing a direct nexus or live link with alleged escapement of income.
Read Bombay HC Judgment in this case: Bombay HC Quashes Reopening Based Solely on Shah Commission Under-Invoicing Report
Reopening Based on Shah Commission Report
The underlying proceedings arose after the Shah Commission, constituted to inquire into illegal mining and trading of iron and manganese ore, reported alleged under-pricing of exports. In the lead case, the assessee’s assessment for AY 2008-09 had originally been completed under Section 143(3). The subsequent Section 148 notice relied principally on the third Shah Commission report and alleged under-invoicing, illegality of mining activity and failure to disclose fully and truly all material facts. The Assessing Officer quantified alleged escapement at Rs.116,75,46,110.
The assessee contended that the reopening was based solely on the Shah Commission report, which represented an opinion rather than an adjudicated finding, and that the recorded reasons disclosed no direct nexus between differences in export prices and any income actually escaping assessment.
The Bombay High Court examined the requirements of Sections 147 and 148, including the principle of a rational connection or “direct nexus or live link” between information and the belief of escapement. Relying, among others, on Commissioner of Income Tax, Gujarat V/s. A. Raman and Co. and Income Tax Officer V/s. Lakhmani Mewal Das, the Court held that the material relied upon had to be reasonably capable of supporting formation of the belief.
Bombay High Court’s Ruling
The High Court found that the Shah Commission’s conclusion that lower export prices constituted under-invoicing was an expression of opinion and not itself a primary fact. The mere fact that some prices charged by the assessee were lower than prices charged by other exporters did not establish that income had escaped assessment. The Court also noted the absence of material showing that any corresponding income had accrued to the assessee or another person through a device or other method.
The Court distinguished Central Provinces Manganese Ore Co. Ltd. V/s. Income Tax Officer, observing that there the customs authorities had conducted an inquiry, reached a definite factual finding of systematic under-invoicing and passed final orders under the Customs Act. In contrast, the Shah Commission’s report did not constitute such a final adjudication.
The High Court further held that the Assessing Officer could not supplement the recorded reasons by subsequently relying upon a new ground concerning disallowance of expenditure under Section 37(1). It accordingly held that the Section 148 notice could not be sustained and set it aside. The same reasoning was applied to the specified groups of companion petitions involving reopening within and beyond four years, while petitions containing additional issues were directed to be detagged.
Supreme Court Decision
Against the Bombay High Court judgment, the Revenue approached the Supreme Court in ACIT & Anr. Vs Venture Real Estate & Anr. The Supreme Court first condoned the delay. After hearing the parties and considering the materials on record, it stated that it was of the view that it should not interfere with the impugned judgment passed by the High Court. The petitions therefore failed and were dismissed.
Thus, the Supreme Court’s disposition was one of non-interference with the Bombay High Court judgment and dismissal of the petitions. The supplied Supreme Court order does not set out an independent discussion or additional reasoning on the substantive Section 147/148 issues. Accordingly, the broader reasoning concerning the Shah Commission report, the absence of a direct nexus between export-price differences and escapement of income, and the recorded-reasons requirement remains attributable to the Bombay High Court judgment and should not be presented as an independently reasoned Supreme Court holding.
The supplied material therefore establishes that the Supreme Court declined to interfere with the High Court’s decision quashing the reassessment notices. The Supreme Court order does not expand upon, modify or separately decide the substantive reasoning recorded by the High Court.
Cases Discussed
- Commissioner of Income Tax, Gujarat V/s. A. Raman and Co. (Supreme Court), 1968 (67) ITR 11
- Income Tax Officer V/s. Lakhmani Mewal Das (Supreme Court), (1976) 103 FIR 437 (SC)
- Fomento Resources Private Ltd. & Anr. V/s. Union of India & Ors. (Bombay High Court), Writ Petition No.6o6 of 2014 decided on 2nd July, 2019
- State of Karnataka V/s. Union of India (Supreme Court), (1977) 4 SCC 608
- Calcutta Discount Company Ltd. Vs Income Tax Officers (Supreme Court), (1961) 41 ITR 191 (SC)
- Phool Chand Bajranglal (Supreme Court), 203 ITR 456 (SC)
- I.P. Patel & Co. v/s. Dy. Commissioner of Income tax (Gujarat High Court), 346 ITR 0207 (Guj)
- Income Tax Officer V/s. Selected Dalurband Coal Co. (P). Ltd. (Supreme Court), 217 1TR 0597 (SC)
- Rattan Gupta v/s. Union of India (Delhi High Court), 234 1TR 220 (Del)
- AGR Investment Ltd. vs. Addl. Commissioner of Income Tax (Delhi High Court), 333 ITR 97 (Del)
- Raymond Wollen Mills Ltd. v/s. Income Tax Officer (Supreme Court), (1999) 236 ITR 34 (SC)
- ACIT v/s. Rajesh Jhaveri Stock Brokers (P) Ltd. (Supreme Court), (2007) 291 ITR 500 (SC)
- Hindustan Lever Ltd. V/s. R.B. Wadkar (Bombay High Court), 268 ITR 332 (Bombay)
- Sarada Mines Pvt. Ltd. V/s State of Orissa (Orissa High Court), 2017(I) ILR-CUT949
- Hemant Traders Vs Income Tax Officer (Bombay High Court), (2015) SCC Online Bom 4244
- Hubtown Ltd. Vs. Deputy Commissioner of Income-tax (Bombay High Court), (2016) 74 taxmann.com 18 (Bombay)
- Akshar Developers Vs. Assistant Commissioner of Income-tax (Bombay High Court), (2019) 411 1TR 602
- Assistant Commissioner of Income-tax Vs. Dhariya Construction Co. (Supreme Court), [2010] 328 ITR 515 (SC)
FULL TEXT OF THE JUDGMENT/ORDER OF SUPREME COURT OF INDIA
Delay condoned.
2. Having heard the learned counsel appearing for the parties and having gone through the materials on record, we are of the view that we should not interfere with the impugned judgment passed by the High Court. The petitions fail and hereby dismissed.
SLP(C) Nos. 20045/2019, 20535/2019, 21295/2019 and 21242/2019
Detag the matters from SLP (C) No. 4575/2020.
2. List the matters after four weeks.
