GUJARAT AMBUJA EXPORTS LTD. V. THE ASSISTANT COMMISSIONER OF INCOME TAX

SCA/18098/2019

AI Insights

The case involves Gujarat Ambuja Exports Ltd., which faced a notice for reopening of its income tax assessment for the year 2012-13 under section 148 of the Income Tax Act. The original return was scrutinized, and deductions under section 80-IA were allowed. However, a subsequent notice claimed that there was an underassessment due to non-setoff of brought forward losses against the income of the current year, leading to an excess deduction claim. The assessee contested the notice, arguing that all material facts were disclosed and that the reopening was beyond the permissible period. The court agreed with the assessee, emphasizing that the reopening was based on a mere change of opinion and not on any undisclosed facts.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 749796 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 24-03-2021
• Assessment Year: misc
• Other Referred Cases: GKN Drive Shaft (India) Ltd. vs. ITO (259 ITR 19)
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: VAIBHAVI PARIKH
• Keywords: Assessment Year 2012-13; Deduction under section 80-IA; Income Tax; Reopening of assessment
• Section: 148; 143(3); 80-IA; 80-IA

Judgement Text

"C/SCA/18098/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 18098 of 2019 ========================================================== GUJARAT AMBUJA EXPORTS LTD. Versus THE ASSISTANT COMMISSIONER OF INCOME TAX ========================================================== Appearance: MS VAIBHAVI K PARIKH(3238) for the Petitioner(s) No. 1 MRS MAUNA M BHATT(174) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 24/03/2021 ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA) 1. By this writ application under Article 226 of the Constitution of India, the writ applicant (assessee) has prayed for the following reliefs; “(A) quash and set aside the impugned notice at Annexure-A to this petition; (B) pending the admission, hearing and final disposal of this petition, to stay the implementation and operation of the notice at Annexure-A to this petition and stay the further proceedings for the Assessment Year 2012-13; (C ) any other and further relief deemed just and proper be granted in the interest of justice; (D) to provide for the cost of this petition.” 2. The present litigation is one of reopening of the assessment for the A.Y.2012-13 in a case where the original Page 1 of 11 C/SCA/18098/2019 ORDER return was taken in scrutiny and an order of assessment under Section 143(3) of the Act was passed. This is a case in which the reopening is beyond the period of four years. 3. The case of the writ applicant may be summarized as under; “2.2 The writ applicant, during the Financial Year 2011- 12 relevant to Assessment Year 2012-13 (i.e. the year under consideration), was engaged in the business of manufacturing and trading of agro processing as well as maize processing. The writ applicant also operated wind mills for power generation. The writ applicant filed the original return of income for the year under consideration on 29.11.2012 declaring total income at Rs.36,73,42,030/- after claiming deduction of Rs.3,72,55,271/- under section 80-IA of the Act. Later, the writ applicant filed revised return of income on 18.01.14 declaring total income at Rs.30,62,30,930/- wherein the claim of deduction under section 80-IA of the Act was enhanced to Rs.9,92,13,248/-. Copy of acknowledgment of original return of income and computation of income is annexed herewith and marked as Annexure-B (Colly). Copy of acknowledgment of revised return of income and computation of income is annexed herewith and marked as Annexure-C (Colly). 2.3 The case of the writ applicant for the year under consideration was selected for scrutiny assessment. Various details and information were called for by the then Assessing Officer and the same were duly furnished by the writ applicant from time to time. The the Assessing Officer, vide notice dated 22.08.14, called upon the writ applicant to furnish various details including the details with respect to the claim of deduction under section 80-IA of the Act (Point No.34). Copy of notice dated 22.08.14 issued under section 142(1) of the Act is annexed and marked as Annexure-D. 2.4 The writ applicant, vide letter dated 14.11.14, furnished various details and information called for by the then Assessing Officer including details pertaining to the claim of deduction under section 80-IA of the Act as Page 2 of 11 C/SCA/18098/2019 ORDER well as explanation for revising the return of income with respect to the said claim. It was submitted that the writ applicant had claimed deduction of Rs.3,72,55,271/- under section 80-IA of the Act in the original return of income whereas such deduction was enhanced to Rs.9,92,13,248/- in the revised return of income. It was stated therein that in view of provisions of section 80-IA of the Act as well as various judicial pronouncements, deduction under section 80-IA of the Act is to be computed on standalone basis for the initial assessment years and subsequent years without setting off brought forward notional business loss / depreciation of years prior to the initial assessment year against the current year's eligible business income. Revised Tax Audit Report in the Form No.3CD as well as revised Form No.10CCB have also been obtained. In view of the same, the return of income was revised and claim of deduction under section 80-IA of the Act was taken at Rs.9,92,13,248/- as against Rs.3,72,55,271/- claimed in the original return of income Copy of letter dated 14.11.14 addressed to the Assessing Officer is annexed and marked as Annexure-”E”. 2.5 The then Assessing Officer, after considering the details and information furnished by the writ applicant, consciously chose not to disturb the claim of deduction under section 80-IA of the act while framing assessment under section 143(3) of the Act vide order dated 21.02.15. Copy of Assessment Order dated 21.02.15 under section 143(3) of the Act is annexed herewith and marked as Annexure-”F”. 2.6 Suddenly thereafter, the Respondent issued the impugned notice dated 25.03.19 under section 148 of the Act seeking to reopen the case of the writ applicant for the year under consideration. 2.7 The writ applicant filed return of income on 06.04.19 in response to the notice issued under section 148 of the Act. The writ applicant, vide letter dated 08.04.19, informed the said fact to the respondent and further requested the respondent to supply copy of reasons recorded for reopening.” 4. The reasons assigned by the Assessing Officer vide Page 3 of 11 C/SCA/18098/2019 ORDER communication dated 10.04.2019, Annexure-G to this writ application, reads as under; “1. The Assessee Company is engaged in the business of Manufacturing and Trading of Agro Processing, Maize Processing, Cotton Spinning. The assessee has been operating Wind Mill for power generation and has claimed deduction under section 80IA of the Act for the same. The assessee, M/s Gujarat Ambuja Exports Limited, filed its return of income for the A.Y. 2012-13 on 29.11.2012 declaring total income of Rs.38,73,42,030/-. Further, the assessee filed revised return of income on 18.01.2014 declaring total income of Rs.30,62,30,930/-. The case was selected for scrutiny and the same was finalized under section 143(3) of the Act on 21.02.2015 deciding total income at Rs.33,11,28,600/-. Subsequently, on verification of assessment records, i.e., revised computation of income and revised 10CCB revealed that deduction u/s.80IA of Rs.9,92,13,248/- was claimed and allowed. Further, it was seen from assessment records of A.Y.2010-11 & 2011-12 that the assessee had incurred a loss from operation of the aforesaid windmill which had been adjusted against income of the taxpayer from other business activities. However, it was seen from Form 10CCB filed with original return of income that the said B/F losses/depreciation were set off and remaining profit was claimed as deduction. However, the assessee had filed revised 10CCB with revised return of income without set off of B/F losses/depreciation and enhanced the deduction u/s. 80IA for Rs.6,19,57,977/-. In view of the provisions of section 80IA the brought forward loss and depreciation in respect of the aforesaid windmill for earlier years (upto A.Y.2010-11) were required to be set off first and the remaining income to be claimed as deduction. Thus after set off of B/F losses/depreciation there was nil income in case of unit at Sr. No.1 to 8 of table above. Therefore, the deduction was only available for units at Sr. No.9 and 10 of table no.1 which works out to Rs.3,73,55,623/-. By not doing Page 4 of 11 C/SCA/18098/2019 ORDER set off of B/f losses/depreciation resulted in excess allowable of deduction and under assessment of income of Rs.6,18,57,625/-. 3. In view of the above, it is substantiated that during the year under consideration, the assessee has failed in setting off carried forward losses/depreciation before claiming the deductions u/s.80IA of the Act. The deduction u/s 80IA of the Income Tax Act cannot be allowed to the assessee without setting off of the previous losses/depreciation. Therefore, the aforementioned amount of Rs.6,18,57,625/- has escaped assessment within the meaning of section 147 of the I.T. Act. Further, on perusal of record of original assessment proceedings u/s. 143(3) of the Act in assessee's case for the year under consideration, it is seen that assessee has not submitted specific details regarding unabsorbed loss/depreciation of previous years in respect of windmill operated by the assessee. Therefore, there is failure on the part of the assessee to disclose fully and truly material facts on above stated fact which was necessary for its assessment for the year under consideration.” 5. To the aforesaid reasons, following objections were filed by the writ applicant vide communication dated 06.05.2019, Annexure-H to this writ application. “1. The claim u/s.80IA is made in view of the above facts of the case, case laws and CBDT circular, it is submitted that there were no unabsorbed depreciation or loss of the eligible undertakings and the same were already absorbed in the earlier years. There is a positive profit during the relevant year. 2. Complete details of claim u/s.80IA were provided by assessee for claim in original return, claim in revised return and justification thereon. 3. There is no escapement of income on the part of assessee. Full and correct disclosure was made in the assessment proceedings, as order u/s. 143(3) was made considering the facts, submissions and case laws. 4. In view of the decision of the Apex Court in the case Page 5 of 11 C/SCA/18098/2019 ORDER of GKN Drive Shaft (India) Ltd. vs. ITO (259 ITR 19), the assessee request your goodself to pass a speaking order dealing with the objections raised against the reasons provided by you prior to starting proceedings u/s.148 of the I.T. Act.” 6. The aforesaid objections came to be disposed of by the Assessing Officer vide communication dated 05.10.2019; “The contention of the assessee cannot be agreed upon. The assessee has argued that assessment u/s.143(3) has already been completed and it has made full and corect disclosure. In this connection reference is invited to the provisions of clause (c ) of Explanation 2 of section 147, which depict as under; Where an assessment has been made, but:- 1. Income chargeable to tax has been under assessed; or 2. such income has been assessed at too low rate; or 3. such income has not been made the subject of excessive relief under this Act; or 4. excessive loss or depreciation allowance or any other allowance under this Act has been computed.” 7. In such circumstances, referred to above, the writ applicant is here before this Court with the present application. 8. At the time of issuing notice, the following order dated 15.10.2019 was passed by a Coordinate Bench; “1. Mr. Tushar Hemani, Senior Advocate, learned counsel with Ms. Vaibhavi Parikh, learned advocate for the petitioner, invited the attention of the court to the reasons recorded by the Assessing Officer for reopening the assessment, to submit that the same are based upon the material already on record. It was submitted that in this case, the impugned notice under section 148 of the Income Tax Act, 1961 (hereinafter referred to as “the Page 6 of 11 C/SCA/18098/2019 ORDER Act”) has been issued in relation to the assessment year 201213, which is clearly beyond a period of four years from the end of relevant assessment year and hence, in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts, the assumption of jurisdiction on the part of the Assessing Officer under section 147 of the Act lacks validity. 2. It was further pointed out that in the present case, the petitioner had filed a revised return of income in respect of the very issue for which the assessment is sought to be reopened. It was submitted that during the course of scrutiny assessment, the Assessing Officer had called for details with regard to deduction claimed under section 80IA of the Act in the revised return of income. It was submitted that the petitioner had furnished an explanation and after going through the issue, the Assessing Officer had accepted the explanation given by the petitioner and had allowed the deduction claimed under section 80IA of the Act. It was submitted that, therefore, the Assessing Officer seeks to reopen the assessment on a mere change of opinion, which is not permissible in law. It was submitted that even on merits, the reopening of assessment is bad. 3. Having regard to the submissions advanced by the learned counsel for the petitioner, issue Notice, returnable on 03.12.2019. By way of ad-interim relief, the respondent is restrained from proceeding further pursuant to the impugned notice dated 25.03.2019 issued under section 148 of the Act for the assessment year 201213. Direct service is permitted.” 9. Mr. Tushar Hemani, the learned senior counsel raised the following contentions; (Ii That there was no failure on the part of the assessee to disclose truly and fully all the materials facts necessary for the assessment. Page 7 of 11 C/SCA/18098/2019 ORDER (ii) The notice for reopening has been issued beyond the period of four years from the end of relevant assessment year. (iii) The original return was taken in scrutiny and a scrutiny assessment order was passed under Section 143(3) of the Act. He would submit that in the scrutiny asssessment, the Assessing Officer had examined the claim of the assessee for deduction under Section 80IA of the Act and had raised various queries. (iii) The assessee had furnished detailed replies and only thereupon the claim was accepted and in the final order of assessment, no disallowance was made under this head. 10. On the other hand, Mr. Manish Bhatt, the learned senior counsel appearing for the Revenue vehemently opposed this writ application contending that from the return of income and revised 10CCB form, it is clear that the assessee had claimed a deduction of Rs.9,92,13,24,248/- under Section 80IA in respect of its operation from the windmill units. The assessment records of A.Y.2010-11 and 2011-12 would indicate that the assessee had incurred loss from the operation of the said windmill units. However, while claiming deduction under Section 80IA from the said unit in A.Y.2012-13, i.e, the year declared by the assessee as the initial assessment year for the said deduction, the assessee had not set off brought forward losses/unabsorbed depreciation of the said unit pertaining to A.Y.2010-11 and 2011-12 against the income of A.Y.2012-13 of the said eligible scrutiny. It is submitted that thereby the assessee enhanced the deduction of Rs.6,18,57,625/- under Page 8 of 11 C/SCA/18098/2019 ORDER Section 80IA of the Act. Mr. Bhatt would submit that the same is contrary to the provisions of sub-section (5) of 80-IA of the Act. 11. Mr. Bhatt would submit that in view of the provisions of Section 80IA of the Act, the brought forward loss and depreciation in respect of the windmill for the earlier years, (upto A.Y.2010-11) were required to be set off first and the balance income could have been claimed as deduction by not setting off the brought forward losses/depreciation resulted in excess allowance of deduction and under assessment of income of Rs.6,18,57,625/-. In such circumstances, referred to above, Mr. Bhatt prays that there being no merit in this writ application, the same be rejected. 12. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the impugned notice of reopening should be quashed and set aside. 13. We must decide this writ application, more particularly, the issue whether the impugned notice should be quashed or not bearing in mind the fact that such notice has been issued beyond the period of four years from the end of the relevant year. Our prime consideration, therefore, should be whether before the Assessing Officer could assume jurisdiction, the important requirement of the proviso to Section 147 of the Act, namely, income chargeable to tax had escaped assessment due to the failure of the assessee to disclose truly and fully all Page 9 of 11 C/SCA/18098/2019 ORDER the material facts necessary for the assessment, could be said to have been satisfied. 14. The reasons itself record that “on verification of the case records, it is also observed that …..”. Thus, the observations of the Assessing Officer found in the reasons recorded are based on the assessment records of the year under consideration. It is not the case of the Revenue that full details pertaining to the assessee's claim for deduction under Section 80IA were not furnished. Even the assessment order passed under Section 143(3) of the Act contains a reference to the claim of deduction under Section 80IA of the Act. Merely because while framing assessment for the subsequent year, the Assessing Officer noticed certain irregularity in the claim by itself would not be sufficient to satisfy requirements of the proviso to Section 147 of the Act. It is possible that the specific angle of the depreciation earlier claimed to be set off against the income of the current year of the eligible business may not have been in the mind of the Assessing Officer. Nevertheless, the entire claim of the assessee for deduction under Section 80IA of the Act along with the reasons for revising the return of income with respect to claim under Section 80IA of the Act was before the Assessing Officer and such claim was also processed. 15. Such being the facts, in our opinion, the notice for reopening issued beyond four year, cannot be sustained. In that view of the matter, we do not find it necessary to examine the rival contentions with respect to the validity or otherwise of being the writ applicant's claim for deduction. Page 10 of 11 C/SCA/18098/2019 ORDER 16. In the result, the writ application is allowed. The impugned notice at Annexure-A is quashed. (J. B. PARDIWALA, J) (ILESH J. VORA,J) Vahid Page 11 of 11 "