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2024 Supreme(Guj) 1473
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
BHARGAV D. KARIA, NIRAL R. MEHTA, JJ.
Facets Gems Polishing Works Private Limited - Petitioner
Versus
The Deputy Commissioner of Income Tax, Circle 1(1)(1) - Respondent
R/Special Civil Application No. 5651 of 2021
Decided On : 05-07-2024
For the Petitioner: Ms. Vaibhavi K. Parikh.
For the Respondent: Mrs. Kalpana K. Raval.
IMPORTANT POINT
The court established that reopening assessments beyond four years requires new information or failure to disclose material facts, which was not present in this case.
Headnote:
Income Tax - Reopening Assessment - Section 148, 80IA - The court held that the reopening of assessment beyond four years was unjustified as the petitioner had fully disclosed all material facts during the original assessment.
Fact of the Case:
The petitioner challenged a notice issued under section 148 of the Income Tax Act for reopening the assessment for A.Y. 2014-15, claiming deductions under sections 35DD and 80IA, which were previously scrutinized and allowed.
Finding of the Court:
The court found that the reasons for reopening the assessment were based on a mere change of opinion and that the petitioner had made full and true disclosures during the original assessment.
Issues: Whether the notice for reopening the assessment under section 148 was valid given that it was issued beyond the four-year limit and the petitioner had disclosed all material facts.
Ratio Decidendi: The court concluded that the reopening of assessment was not justified as there was no new information or failure to disclose material facts by the petitioner.
Result: The petition is allowed, and the notice under section 148 is quashed.
JUDGMENT :
Bhargav D. Karia, J.
1. Heard learned Senior Advocate Mr. Tushar Hemani with learned advocate Ms. Vaibhavi Parikh for the petitioner and learned Senior Standing Counsel Mr. Karan Sanghani for learned advocate Mrs. Kalpana K. Raval for the respondent.
2. Rule returnable forthwith. Learned Senior Standing Counsel Mr. Sanghani waives service of notice of rule on behalf of the respondent.
3. Having regard to the controversy involved which in a narrow compass with the consent of the learned advocates for the respective 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 19.03.2020 issued under section 148 of the Income Tax Act,1961 [for short ‘the Act’] for A.Y. 2014-15.
5. The petitioner is engaged in the business of manufacturing and cut of polished diamond on job work basis and trading of diamonds and power generation through windmill.
5.1 During the Financial Year 2013-14 relevant to A.Y. 2014-15, the tax audit report of the petitioner contained various disclosures relating to deduction under section 35DD of the Act [i.e. amortization of expenditure in case of amalgamation or demerger], and deduction of Rs.76,27,934/- under section 80IA(4)(iv) of the Act.
5.2 The petitioner filed return of income for A.Y.2014-15 on 25.09.2014 declaring total income at Rs. 2,76,59,430/- after claiming amalgamation expenses and deduction under section 80IA(4)(iv) of the Act.
5.3 Case of the petitioner was selected for scrutiny assessment. The Assessing Officer called for various details which were duly furnished by the petitioner. The Assessing Officer issued notice dated 19.04.2016 under section 142(1) of the Act calling upon the petitioner to provide copy of balance- sheet, Profit and Loss Account, Tax Audit Report etc. which were supplied by the petitioner vide letter dated 03.05.2016. Thereafter, notice dated 19.07.2016 was issued under section 142(1) of the Act calling for explanation along with evidence in respect of deduction claimed under Chapter-VIA of the Act.
5.4 The petitioner by letter dated 08.10.2016 submitted the details of deduction claimed under Chapter-VIA. Thereafter, notice dated 15.11.2016 was issued under section 142(1) of the Act requiring the petitioner to furnish details pertaining to claim of deduction under section 80IA(4) and various other details. The petitioner, by letter dated 22.11.2016 furnished the details sought for by the Assessing Officer.
5.5 The Assessing Officer passed an assessment order under section 143(3) on 30.11.2016 making disallowance of Rs.2,28,898/- in 20% of total expenses of Rs.11,44,492/- comprising of factory expenses, Office and General expenses.
5.6 The respondent thereafter issued the impugned notice dated 19.03.2020 under section 148 of the Act to reopen the assessment of the petitioner for the year under consideration.
5.7 The petitioner in response to the said notice filed return of income on 05.05.2020 and further requested the respondent to supply copy of reasons recorded for reopening.
5.8 The respondent supplied copy of reasons for reopening along with notice dated 04.06.2020 issued under section 143(2) of the Act which reads as under :
“During the A.Y. 2017-18, the assessee company has claimed deduction u/s. 80IA for generation of the electricity through windmill. On verification of the details furnished by the assessee company, it has under gone the reconstruction and reorganization of the business under the scheem of amalgamation. It is evident from the order dated 23.03.2012, of the Hon’ble High Court of Gujarat M/s. FACETS POLISHING WORKS PRIVATE LIMITED amalgamated with the M/s. TIRUPATI ORAGANISERS PRIVATE LIMITED (now known as M/s FACETS GEMS POLISHING WORKS PRIVATE LIMITED). In the instant case, on perusal of the copy of the agreement, the above electricity generating unit was originally an enterprise or undertaking of M/s. FACET POLISHING WORKS PRIVATE LIMITED (the amalg
