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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, NIRAL R. MEHTA, JJ.
Gokul Agro Resources Limited – Petitioner
Versus
Deputy Commissioner of Income Tax, Ahmedabad – Respondent
Special Civil Application Nos. 4383, 4986 of 2022
Decided On : 22-04-2024
Income Tax Act - Reopening of Assessment - Section 148 - Section 147 - Section 143(3) - Section 133A - Foreign Remittances - Accounting Principles
Fact of the Case:
The petitioner, a public limited company, challenged the notice issued by the respondent under Section 148 of the Income Tax Act, 1961 for A.Y. 2016-17 and 2017-18. The notice was based on a survey action conducted on a bank, which led the Assessing Officer to believe that the income had escaped assessment.
Finding of the Court:
The court found that the Assessing Officer's belief that income had escaped assessment was not based on fresh tangible material, and the notice issued amounted to a change of opinion. The court quashed and set aside the show cause notices under Section 148 of the Act.
Issues: The issues revolved around the validity of the notice issued under Section 148, the sufficiency of the reasons recorded for reopening the assessment, and the application of accounting principles in assessing the foreign remittances.
Ratio Decidendi: The court held that the Assessing Officer's belief must be based on fresh tangible material and not a mere change of opinion. It emphasized the importance of the 'change of opinion' test to prevent abuse of power by the Assessing Officer.
Final Decision: The court allowed the petitions, quashed the show cause notices under Section 148 of the Act, and made the rule absolute.
JUDGMENT :
BHARGAV D. KARIA, J.
1. Heard Mr. Tushar Hemani, learned Senior Counsel with Mr. Hardik Vora, learned advocate for the petitioner and Mr. Varun K. Patel, learned Senior Standing Counsel for the respondent.
2. Both these petitions are arising for A.Y. 2016-17 and 2017-18 and Special Civil Application no. 4383 of 2022 be treated as lead matter.
3. Rule returnable forthwith. Mr. Varun K. Patel, learned Senior Standing Counsel waives service of notice of rule on behalf of the respondent.
4. Having regard to the controversy in narrow compass with the consent of the learned advocates for the respective parties, the matter is taken-up for hearing.
5. By these petitions under Article 226 of the Constitution of India, the petitioner has challenged the notice dated 30th March, 2021 issued by the respondent u/s. 148 of the Income Tax Act, 1961 (for short ‘the Act’) for A.Y. 2016-17 and 2017-18.
6. The brief facts of the case are that the petitioner is a public limited company engaged in the business of processing and manufacturing of various edible and non-edible oil and allied products.
6.1 The petitioner company has filed its return of income for A.Y. 2016-17 declaring total income of Rs. Nil on 1st September, 2016. The case of the petitioner was selected for complete scrutiny under CASS.
6.2 The Assessing Officer during the course of regular assessment called-upon the petitioner company to provide details of party wise foreign outward remittances along with nature, purpose and source of foreign remittance vide notice dated 2nd August, 2018. In response to the notice, the petitioner furnished details along with Form 15CA containing the name of the party, amount of foreign remittance, nature and purpose of transaction along with relevant DTAA.
6.3 It is the case of the assessee that on furnishing all the details, the assessment order u/s. 143(3) of the Act was passed on 12th December, 2018. The respondent has issued notice u/s. 148 of the Act after obtaining the necessary satisfaction of Range 2(1), Ahmedabad.
6.4 The petitioner filed return of income in response to the notice and requested for reasons recorded by the respondent Assessing Officer. By notice u/s. 143(2) dated 21.05.2021, the reasons recorded for reopening of assessment was provided, which reads as under:
As per the information received from the credible sources that a survey action u/s. 133A of the I.T. Act, 1961 was conducted on J & K bank corporate Headquarter MA Road, Srinagar on 11 June 2019. The survey was limited in nature conducted for collection of information related to third parties. Among the various fields of information data related to inward and outward remittances (above 20 Lakh) was also obtained for the various financial years. Information related to inward remittances for the F.Y. 2012-13 to F.Y. 2016-17 has been analyzed. At the outset it is mentioned that during the analysis of remittances data/information it was observed that the amount reflected in the remittance data (bill IDs) obtained from the bank does not tally with the amounts reflected in the bank statement of the particular assessees. Accordingly clarification was sought from the Forex department of J&K bank, corporate HQ and Srinagar for explaining the differences.
The Bank stated that after received the bill from party/customers, bill amount is firstly calculated on notional rate (decided by the bank from time to time), however finally at the time of realization of bill, it is calculated on the actual settlement rate/Exchange rate on that day.
The same was explained by the Bank through the following examples:
In the case of M/s Aalia Leathers Prop. Kashif Zafar (PAN: AADPZ1640A) it was noted the remittance received has been shown against the bill ID KUM00154012 dated 07/02/2012 for an Rs. 24,57,150. Similarly against the bill ID KUM00185112 dated 16/10/2012 an amount of Rs. 20,73,474/- has been shown.
On perusal of bank account statement (account no
Reopening of income tax assessments requires new tangible material; mere change of opinion is insufficient.
Assessee’s objections raised against the reopening proceedings are not acceptable as the case warrants scrutiny on the same lines. Accordingly, the objections so raised are hereby disposed off accord....
The court emphasized the need for tangible material to believe that income had escaped assessment and held that the power to grant approval for re-opening an assessment is coupled with a duty and can....
Point of Law : Sufficiency of the evidence or material is not open to scrutiny by the Court but the existence of the belief is the sine qua non for a valid exercise of power.
Reopening of assessment under section 148 requires new tangible material; reliance on previously considered facts constitutes a change of opinion, which is impermissible.
Reopening of assessment under the Income Tax Act requires fresh tangible information; reliance on previously available data constitutes a change of opinion, which is impermissible.
Taxation - Escapement of assessment - Assessee had disclosed all material facts truly and fully for assessment of income for year under consideration. In other words there was no failure to disclose ....
The duty of the assessee is to disclose all primary facts, and once done, no further assistance is required for the assessing authority to make its decision.
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