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2022 Supreme(Guj) 1351
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
N.V. ANJARIA, BHARGAV D. KARIA, JJ.
HINDUSTAN MARBLE PVT. LTD. – Petitioner
Versus
ASSISTANT COMMISSIONER OF INCOME TAX – Respondent
Special Civil Application No. 18767 of 2018
Decided On : 21-10-2022
Advocate Appeared:
For the Petitioner: S.N. DIVATIA.
For the Respondent: M.R. BHATT.
The power to reopen the assessment is not based on a mere change of opinion, and there must be tangible material available to the Assessing Officer to form a reason to believe that income has escaped assessment.
Headnote:
Income Tax - Reopening of Assessment - Section 148 of the Income Tax Act, 1961 - Section 147 - Section 142(1) - Section 143(3) - Section 151(2) - Gujarat Minor Mineral Concession Rules, 2010 - Change of Opinion - Reason to Believe
Fact of the Case:
The petitioner, a private limited company, filed a petition under Article 226 of the Constitution to set aside a notice dated 23.9.2018 under Section 148 of the Income Tax Act, 1961, seeking to reopen the assessment for the year 2013-14. The petitioner argued that the notice and the order disposing of the objections were without jurisdiction and that the conditions required to be satisfied for reopening the assessment under Section 147 were not met.
Finding of the Court:
The court found that the Assessing Officer's decision to reopen the assessment was based on a clear change of opinion and that the officer had erred in law in seeking to reassess the income on the ground of mined and produced. The court held that the notice under Section 148 and the order rejecting the objections were set aside.
Issues: Jurisdiction of the notice and order under Section 148, Conditions required for reopening the assessment under Section 147, Change of Opinion, Reason to Believe
Ratio Decidendi: The court emphasized that the power to reopen the assessment is not based on a mere change of opinion and that there must be tangible material available with the Assessing Officer to form a reason to believe that income has escaped assessment. The court also highlighted the requirement for the Assessing Officer to have reason to believe that income chargeable to tax has escaped assessment, regardless of whether the return was accepted under section 143(1) without scrutiny or after scrutiny under section 143(3).
Final Decision: The petition was allowed, and the notice under Section 148 of the Income Tax Act, 1961 in respect of the assessment year 2013-14 was set aside, along with the order rejecting the objections.
JUDGMENT :
N.V. ANJARIA, J.
1. Heard learned advocate Mr. S.N. Divatia for the petitioner and learned senior advocate Mr. M.R. Bhatt assisted by learned advocate Mr. Karan Sanghani for M.R. Bhatt and Co. for the respondent, at length.
2. By filing this petition under Article 226 of the Constitution, the petitioner has prayed to set aside notice dated 23.9.2018 under Section 148 of the Income Tax Act, 1961 in respect of the assessment year 2013-14, seeking to reopen the assessment for the year under consideration. Also prayed is to set aside order dated 28.9.2018 whereby the objections of the petitioners came to be rejected and disposed of by Assistant Commissioner of Income Tax.
2.1 In the aforesaid notice dated 23.9.2018, it was stated by the Assessing Officer that income of the petitioner-assessee chargeable to tax for the assessment year 2013-14 had escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961 (hereinafter to be referred to as the ‘the Act’).
3. Noticing the facts, the petitioner happens to be private limited company incorporated under the Companies Act, 1956. It is stated that the petitioner maintains regular books of accounts which are subject to statutory and tax audit. The petitioner filed its return on income for the assessment year 2013-14 on 29.9.2013 declaring total income of Rs. 8,56,16,970/-. It is further stated that respondent initially issued notice under Section 142(1) of the Act on 21.7.2015 seeking several details and documents. The regular assessment was completed after making detailed scrutiny and after making relevant record, stated the petitioner.
3.1 The petitioner has further stated that in the regular assessment the detail regarding about royalty and surface rent expenses were asked for and by reply dated 5.1.2016, such details were furnished. It was stated that the ledger account relating to royalty and rubble expenses for financial year 2012-13 were also furnished. The petitioner further stated that by reply cum communication dated 18.8.2015, the petitioner gave month wise details of opening stock, production- sales and closing stock relating to different accounts of material including the marble rubbles. The regular assessment was accordingly completed and total income of Rs. 8,56,91,750/- was assessed.
3.2 Thereafter respondent issued the aforementioned notice under Section 148 of the Act for assessment year 2013-14 proposing reassessment of the total income of the petitioner. It is this notice which is brought under challenge in this petition. By letter dated 6.4.2018 the petitioner requested the respondent to supply the copy of reasons recorded by the Assessing Officer for reopening the assessment. Reasons were supplied to the petitioner on 14.8.2018. The petitioner e-mailed its objections on 1.9.2018 and the petitions were disposed of by order dated 28.9.2018.
4. Learned advocate for the petitioner submitted that the notice under Section 148 of the Act and the order disposing of the objections were without jurisdiction. It was next submitted that for reopening the assessment under Section 147 of the Act, certain conditions were required to be satisfied. Firstly, the Officer must form a tentative opinion that there was an escapement of the income during the year under consideration and that he must record such prima-facie opinion in writing. It was submitted that it should be demonstrated on the information available and the reasons recorded that the opinion so formed was not mere suspicion. It was further submitted that the condition to be satisfied is that the information and documents available on record must show nexus to the opinion and the factum of escapement of the income. It was submitted that the words ‘reason to believe’ do not give arbitrary powers to the Assessing Officer to reopen the assessment.
4.1 It was emphasized that mere change of opinion could not be a ground to invoke the powers of reassessment. It was further submitted in that regard that the fa
