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2024 Supreme(Bom) 593
IN THE HIGH COURT OF BOMBAY
Bharat P.Deshpande, Valmiki Sa Menezes, JJ.
Sociedade De Fomento Industrial Pvt Ltd - Appellant
Versus
Assistant Commissioner of Income Tax - Respondent
Writ Petition No. 233 of 2015
Decided On : 19-01-2024
P.Pardiwala, Advocate, A.D.Bhobe, Advocate, A.Razaq, Advocate, S.S.Kantak, Advocate, P.Rao, Advocate, P.Talaulikar, Advocate, K.Ceasar Simoes, Advocate, R.Vazarkar, Advocate, N.Kholkar, Advocate, A.Parrikar, Advocate, S.Linhare, Advocate, E.Fernandes, Advocate
IMPORTANT POINT
The reopening of income tax assessments requires the Assessing Officer to have a valid reason to believe that income has escaped assessment, supported by tangible material and independent inquiry, rather than relying solely on external reports.
Headnote:
REOPENING - INCOME TAX ASSESSMENT - Sec. 10B, Sec. 14A, Sec. 147, Sec. 148, Sec. 143(1) - The court analyzed the provisions of the Income Tax Act, particularly Sections 10B and 148, which govern the reopening of assessments. It emphasized that the Assessing Officer must have tangible material to justify the reopening and that mere reliance on external reports, such as the Shah Commission's findings, without independent inquiry, is insufficient. The court concluded that the reopening notices were invalid as they did not meet the legal requirements for establishing a reason to believe that income had escaped assessment.
Fact of the Case:
The petitions involved challenges to reopening of income tax assessments for the Assessment Years 2008-09 and 2011-12. The petitioners claimed exemptions under Sec. 10B for profits from exports, which were later contested by the Revenue based on findings from the Shah Commission regarding illegal mining and under invoicing. The Assessing Officer issued notices under Sec. 148, asserting that income had escaped assessment, relying heavily on the Commission's report without conducting independent inquiries.
Finding of the Court:
The court found that the Assessing Officer's reliance on the Shah Commission's report and the Directorate of Revenue Intelligence (DRI) findings was insufficient to justify the reopening of assessments. It ruled that the reasons provided did not demonstrate a rational connection to the belief that income had escaped assessment, as there was no independent inquiry conducted by the Assessing Officer.
Issues: Whether the reopening of assessments under Sec. 148 was justified based on the reasons provided by the Assessing Officer, particularly in light of the reliance on external reports without independent verification.
Ratio Decidendi: The court held that the Assessing Officer must have tangible material and conduct an independent inquiry to form a valid belief that income has escaped assessment. Mere reliance on external reports, without demonstrating a rational connection to the specific case, does not satisfy the legal requirements for reopening assessments.
Final Decision: The court quashed the reopening notices under Sec. 147 of the Income Tax Act, ruling that the conditions for reopening assessments were not met, as the Assessing Officer failed to provide sufficient independent justification for the belief that income had escaped assessment.
JUDGMENT/ORDER
BHARAT P. DESHPANDE, J. - Both these petitions were earlier part of the group of matters in which leading matter was Writ Petition No.141 of 2015. Said group along with present petitions were heard by the Coordinate Bench of this Court. While disposing of some of the petitions, Coordinate Bench of this Court (S. C. Gupte and Nutan D. Sardessai, JJ) vide order dtd. 9/7/2019, detagged the present petitions since some additional grounds were involved than the one which were decided by order dtd. 19/7/2019. Paragraph 28 of the order dtd. 9/7/2019 while deciding the group of petitions reads thus:-
"28. The following petitions, Writ Petition Nos.141 and 233 of 2015, 198, 199, 262, 264, 265, 271, 272, 879, 880, 881, 882, 883 of 2016 are all petitions where reopening notices contained additional reasons involving issue under Sec. 10B of the Act or Sec. 14A of the Act or commission paid to foreign agents or other reasons. These petitions deserve to be detagged from the group of petitions to be disposed of by this order."
2. Accordingly, present petitions along with others were listed together. However, present two petitions were finally heard. Learned counsel for respective parties would submit that since additional grounds in other petitions are involved independently, present two petitions could be disposed of whereas remaining petitions be detagged.
3. Accordingly, Writ Petition Nos. 141 of 2015, 196, 199, 264, 265, 271, 272, 879, 880, 881 and 882 of 2016 are detagged.
4. We have heard learned Senior Counsel Mr S. S. Kantak along with learned Counsel Mr P. Rao, Mr P. Talaulikar, Mr. K. Ceasar Simoes, Mr. R. Vazarkar, Ms N. Kholkar and Mr A. Parrikar for the petitioners and Ms S Linhare, learned Standing Counsel along with learned Counsel Ms. E. Fernandes for the Revenue argued on behalf of the respondents in Writ Petition No.233/2015.
5. Learned Senior Counsel Mr P. Pardiwala along with learned Counsel Mr A. D. Bhobe, Ms S Shaikh and Mr S. Sayal for the petitioners and Ms. A. Razaq, learned Standing Counsel for the Revenue advanced arguments on behalf of the respondents/revenue in Writ Petition No.883/2016.
Facts in Writ Petition No. 233 of 2015 (Sociedade de Fomento Industrial Pvt. Ltd.)
6. In the nutshell, it is the contention of the petitioner that they filed returns of their income for the Assessment Year 2008-2009 after claiming exemption under Sec. 10B towards profits derived from its export of iron ore produced in its 100% EOU known as Greater Ferro-met. Such iron order produce consist of ore from which raw material was purchased by the petitioner from other mine owners as also extracted from its own mine. Returns were processed by Revenue under Sec. 143(1) of the Income Tax Act (for short "the Act") on 16/2/2010. On 9/1/2012, petitioner's case for assessment for the Assessment Year 2008-09 was reopened by notice under Sec. 148 of the Act. On 6/2/2012, a survey was conducted at the premises of the petitioner under Sec. 133A of the said Act. On the same day petitioner addressed a letter to the Assessing Officer requesting that the returns already filed on 30/9/2008 may be treated as the returns filed in response to notice under Sec. 148 of the said Act and requested for the reasons for reopening of the Assessment. The reasons were furnished to the petitioner vide letter dtd. 8/2/2012.
7. On 16/2/2012, the petitioner filed objections challenging the jurisdiction under Sec. 148 of the Act.
8. Revenue by its order dtd. 2/3/2012 rejected the objections filed by the petitioner. Vide order dtd. 23/3/2012 and after detailed scrutiny, the exception claimed by the petitioner under Sec. 10B of the Act was rejected by respondent no.2 mainly on the ground that petitioner has already availed such exemption for the Assessment Year 1990-91 to 1994-95 and thus, exhausted the entire tax holiday granted to it and secondly the activities of the petitioner did not amount to production or manufacture within the meaning of Sec. 10B of th
