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2022 Supreme(Bom) 628
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
K.R. SHRIRAM, N.R. BORKAR, JJ.
Voltas Limited being a Company incorporated under the Companies Act, 1913 - Appellant
Versus
Assistant Commissioner of Income Tax Circle-8(3) (1), Mumbai – Respondent
Writ Petition No. 1180 of 2022
Decided on : 05-04-2022
Advocate Appeared:
For the Appellant : Mr. Nitesh Joshi a/w. Mr Rajesh Poojary i/b Mulla and Mulla and Craigie Blunt and Caroe
For the Respondent: Ms Swapna V. Gokhale, Mr. Yashraj Nain, Adv
Headnote:
Companies Act, 2013 - Section 135 - Income Tax Act, 1961 - Sections 35AC, 80G, 37, 143(3), 92CA, 142(1), 148, 147, 151 and 2(22)(e) - Company - Assessment Year - Claimed Deduction In Return Of Income - Petitioner is a company engaged in business, inter alia, of air conditioning and refrigeration etc - During year under consideration, i.e., Assessment Year (A.Y.) petitioner incurred expenses towards Corporate Social Responsibility (CSR) - This fact was disclosed in “Note 25” of notes forming part of Annual Accounts and Annual Reports in CSR activities - Petitioner had also claimed deduction in return of income – Held, Admittedly in this case, four years from end of relevant assessment year has expired before issuance of notice and approval also has been obtained from Additional Commissioner of Income Tax and not Principal Commissioner of Income Tax - In affidavit-in-reply filed through Yashraj Nain, affirmed these facts have not been disputed but according to respondents, approval granted by Additional Commissioner of Income Tax was a valid approval - Even for a moment, Court agree with view expressed by respondents, still it applies to only cases where limitation was expiring - In case at hand, assessment year and, therefore, six years limitation will expire - Certainly, therefore, Relaxation Act provisions will not be applicable - In any event, time to issue notice may have been extended but that would not amount to amending provisions of Section 151 of Act - In Court view, since four years had expired from end of relevant assessment year, as provided under Section 151(1) of Act, it is only Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner who could have accorded approval and not Additional Commissioner of Income Tax - On this ground alone, Court will have to set aside notice issued under Section 148 of Act, which is impugned in this petition – Petition disposed of.
JUDGMENT :
K.R.SHRIRAM, J.
1. Petitioner is a company engaged in the business, inter alia, of air conditioning and refrigeration etc. During the year under consideration, i.e., Assessment Year (A.Y.) 2015-16, petitioner incurred expenses of Rs.3,30,82,713 towards Corporate Social Responsibility (CSR) as per section 135 of the Companies Act, 2013. This fact was disclosed in “Note 25” of the notes forming part of Annual Accounts and Annual Reports in CSR activities. Petitioner had also claimed deduction in return of income under sections 35AC and 80G of the Income Tax Act, 1961 (“the Act”) for donations made to various institutions.
2. It is petitioner’s case that since the entire amount of donations had come out of CSR and CSR amount already debited to the profit and loss account, the donations in other expenses were shown as Nil in “Note 25”. The claim of deductions under sections 35AC and 80G of the Act was also reflected in clauses 19 and 33 respectively of the Tax Audit Report.
3. Petitioner filed it’s return of income for A.Y. 2015-16 on 18.11.2015 which came to be revised on 20.02.2017 declaring total income of Rs.396,12,52,460. In the return of income, petitioner made disallowance of the amount of Rs.3,30,82,713 being the CSR amount in accordance with Explanation 2 to section 37 of the Act. According to petitioner, since the donations made to various institutions qualified for deduction under section 35AC and 80G of the Act, it claimed the same.
4. Petitioner’s return of income was selected for scrutiny and assessment order came to be passed under section 143(3) read with section 92CA of the Act on 18.02.2019. During the course of assessment proceedings, petitioner was asked queries including one in notice dated 08.10.2018 under section 142(1) of the Act. Petitioner was called upon to furnish evidence for claim of deduction under section 35AC and 35(2AB) and for claim of deduction under section 80G of the Act. Petitioner filed an elaborate reply dated 24.10.2018 to which petitioner annexed evidence for deduction claimed under section 35AC and 80G of the Act.
5. Thereafter, petitioner received a notice dated 31.03.2021 under section 148 of the Act for A.Y. 2015-16 asserting that there are reasons to believe that petitioner’s income chargeable to tax for A.Y. 2015-16 has escaped assessment within the meaning of section 147 of the Act. In response, petitioner filed it’s return and requested for copy of reasons for reopening. The reasons for reopening was provided by communication dated 18.11.2021. From the said communication, it is quite clear that the reopening is based on change of opinion relying on materials already considered by Assessing Officer during the assessment proceedings in order to take a diferent view, which is not permissible, on the basis of audit scrutiny.
6. In the petition, petitioner has also raised an objection that the sanction obtained under section 151 of the Act was not a valid sanction since the proposed reopening is more than 4 years after expiry of relevant assessment year. As provided under sub-section (1) of section 151 of the Act only a Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner could grant the sanction. Since in this case, admittedly, sanction has been granted by an Additional Commissioner of Income Tax, it is not a valid sanction and therefore, notice issued based on an invalid sanction is also not valid and has to be quashed.
7. One more point raised is 4 years having expired from the end of relevant assessment year, proviso to section 147 of the Act would apply and there is a bar in reopening unless respondent discharges its onus to show that there has been escapement of income due to failure on the part of assessee to truly and fully disclose material facts in the relevant assessment year.
8. The reason why we say it is nothing but a change of opinion is because in this case, admittedly, the assessment proceedings have been completed under sectio
