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2024 Supreme(Guj) 1266
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, NIRAL R. MEHTA, JJ.
Mastek Ltd – Appellant
Versus
Deputy Commissioner Of Income Tax – Respondent
R/Special Civil Application No. 2046 of 2022
Decided on : 13-08-2024
Advocate Appeared
For the Appellant : MR B S SOPARKAR
For the Respondent: MR.VARUN K.PATEL
The court established that reassessment under Section 148 requires new material facts and cannot be based solely on audit objections after the four-year limit.
Headnote:
Income Tax - Reassessment - Section 148, 147, 143(3) - The court interpreted the provisions regarding reassessment and full disclosure, concluding that the notice for reopening was invalid due to lack of new material facts and the expiration of the four-year limit.
Fact of the Case:
The petitioner challenged a notice under Section 148 of the Income Tax Act for the Assessment Year 2013-14, claiming full disclosure of income and arguing that the reassessment was based on mere change of opinion.
Finding of the Court:
The court found that the petitioner had made full and true disclosure of all material facts and that the reassessment notice was issued beyond the four-year limit, thus quashing the notice.
Issues: Whether the reassessment notice issued under Section 148 was valid given the claims of full disclosure and the four-year limitation.
Ratio Decidendi: The court held that the reassessment notice was invalid as it was based on audit objections without new material facts and was issued beyond the statutory time limit.
Result: The notice under Section 148 is quashed and set aside.
ORDER :
PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
[1] Heard learned advocate Mr. B. S. Soparkar for the petitioner and learned Senior Standing Counsel Mr. Varun Patel for the respondent.
[2] Rule returnable forthwith. Learned advocate Mr. Patel waives service of notice of Rule for the respondent.
[3] Having regard to the controversy in narrow compass and with the consent of learned advocates for the parties, the matter is taken up for hearing.
[4] By this petition under Article 226 of the Constitution of India, the petitioner has challenged the notice dated 27th March 2021 issued under Section 148 of the Income Tax Act, 1961 (for short, “the Act”) for the Assessment Year 2013-14.
[5] The brief facts of the case are that the petitioner filed its original return of income declaring total income of Rs.17,93,76,980/- under normal provisions and Book Profit of Rs.49,64,29,959/- and claiming Long Term Capital Loss of Rs.1,73,77,183/- on account of capital reduction of shares in Mastek Asia Pacific Pte. Ltd (MAP).
[5.1] The petitioner thereafter filed a revised return for the year under consideration. In view of the assessment order for the Assessment Year 2011-12, the petitioner had withdrawn the Long Term Capital Loss of Rs.1,73,77,183/- claimed on account of capital reduction in MAP as same was in nature of Long Term Capital loss and instead thereof, claimed Long Term Capital Loss of Rs.2,01,32,777/- incurred on actual sale of shares of Mastek GmbH for the year under consideration which was disallowed in Assessment Year 2011- 12.
[5.2] It was also disclosed by the assessee that the capital gain was inclusive of foreign exchange fluctuation gain of Rs.1,88,72,839/- which was reduced from the total income of the petitioner.
[5.3] The petitioner has also filed return of income for the Assessment Year 2016-17 on 30th November, 2016 where the foreign exchange fluctuation gain of Rs.1,88,72,839/- was given effect in computing the capital gain on sale of investment in MAP.
[5.4] The case of the petitioner was selected for scrutiny for the Assessment Year 2013-14 and a detailed scrutiny was undertaken on both the issues of Transfer of Pricing as well as other issues under the Income Tax Act. The transactions of the petitioner with Mastek UK (MUK) were scrutinized in the Transfer Pricing Assessment thoroughly after the notice dated 9th September, 2016 was issued with regard to transaction of software services distributed by MUK as marketing support services and taking MUK as tested party and risk adjusted margin comparable on cost (VAE) at 11.99% as the Arm’s Length Return for MUK. The petitioner filed reply dated 30th September 2016. However, disregarding the submissions of the petitioner, the Transfer Pricing Officer (TPO) made upward adjustment in relation to transactions with MUK at Rs.9,46,41,120/- vide order dated 25th October, 2016 passed under Section 92CA(3) of the Act.
[5.5] The Assessing Officer during the course of regular assessment proceedings issued notice under Section 142(1) of the Act on 29th July 2016 asking details relating to debits/credits in profit and loss account on account of foreign exchange fluctuations. The petitioner filed detailed submissions on 16th September, 2016, 7th October, 2016 and 22nd November, 2016. Thereafter, the assessment order under Section 143(3) of the Act was passed on 30th December, 2016 assessing the income of the petitioner at Rs.54,73,25,590/- inter alia making Transfer Pricing addition of Rs.9,50,69,182/-.
[5.6] The petitioner thereafter received notice under Section 133(6) dated 14th August, 2018 asking explanation and necessary details with documentary evidence regarding foreign exchange gain of Rs.1,88,72,839/- relating to shares of MAP which was reduced from computation of income. The petitioner filed detailed reply on 20th August, 2018 with explanation and necessary details and documentary evidence. It appears that being not satisfied with the reply of the petitioner, impugned notice date
