MAYUR WOVENS PVT LTD V. INCOME TAX OFFICER

SCA/3708/2014

AI Insights

Mayur Wovens Pvt Ltd challenged the initiation of reassessment proceedings under Section 148 of the Income Tax Act for the Assessment Years 2008-09 and 2009-10. The reassessment was based on audit objections. The petitioner argued that the reassessment was a colorable exercise of jurisdiction as it was solely based on these objections without any subjective satisfaction from the Assessing Officer. The court examined the original files and found that the reassessment was indeed initiated at the instance of the audit party based solely on audit objections. Citing precedents from the cases of Shilp Gravures Ltd. and Vodafone West Ltd., the court held that such reassessment proceedings cannot be sustained if they lack independent application of mind by the Assessing Officer.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 695660 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 08-07-2014
• Assessment Year: misc
• Other Referred Cases: Commissioner of Income-tax, Ahmedabad \/ IV Vs. Shilp Gravures Ltd., Vodafone West Ltd. Vs. Assistant Commissioner of Income-tax
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAUNA M BHATT
• Assessee Lawyers: B S SOPARKAR
• Keywords: Audit objections; Income Tax; Reassessment proceedings; Subjective satisfaction
• Section: 148

Judgement Text

"C/SCA/3707/2014 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 3707 of 2014 With SPECIAL CIVIL APPLICATION NO. 3708 of 2014 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE K.J.THAKER ====================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ====================================== MAYUR WOVENS PVT LTD....Petitioner(s) Versus INCOME TAX OFFICER & 1....Respondent(s) ====================================== Appearance: MR B S SOPARKAR, ADVOCATE for the Petitioner(s) No. 1 MRS MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 1 - 2 ====================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE K.J. THAKER Date : 08/07/2014 Page 1 of 5 C/SCA/3707/2014 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1. RULE. Ms. Mauna Bhatt, learned advocate waives service of notice of rule on behalf of the respondents in both the petitions. 2. In the facts and circumstances of the case and with the consent of the learned advocates appearing on behalf of the respective parties, both the petitions are taken up for final hearing today. 3. As common question of law and facts arise in both these petitions, they are disposed of by this common judgment and order. 4. In both these petitions the common petitioner-assessee has challenged the initiation of the re-assessment proceedings under Section 148 of the Income Tax Act (hereinafter referred to as ‘the Act’). 5. The assessment proceedings came to be concluded for the Assessment Years 2008-09 and 2009-10 vide Assessment Orders dated 30/09/2010 and 30/03/2011 respectively. The notice under Section 148 of the Act came to be issued on 23/08/2012 in both the cases. At the instance of the petitioner, reasons for reopening of the assessments were supplied to the petitioner. The petitioner raised various objections on merits as well as on the ground that the reassessment proceedings have been initiated on the audit objections and, therefore, it was requested to drop the Page 2 of 5 C/SCA/3707/2014 JUDGMENT reassessment proceedings. Thereafter, vide separate orders dated 17/02/2014 the Assessing Officer has disposed of the said objections. The petitioner was thereafter called upon to show-cause as to why refund of excess duty and accrued VAT should not be added to the total income for the Assessment Year 2009-10 and the petitioner was also informed that if the petitioner fails to comply with the said notice the assessment will be finalized on merits. At that stage, the common petitioner has preferred the present Special Civil Applications under Article 226 of the Constitution of India challenging the initiation of the reassessment proceedings for the Assessment Years 2008-09 and 2009-10. 6. Shri Monall Davawala, learned advocate appearing on behalf of the petitioner has vehemently submitted that the initiation of the reassessment proceedings for the Assessment Years under consideration is absolutely illegal and bad in law. It is submitted that as such the reassessment proceedings have been initiated solely on the audit objections raised by the audit party and, therefore, the same is colourable exercise of jurisdiction by the Assessing Officer. It is submitted that as such the reassessment proceedings cannot be initiated merely on the basis of the audit objections, more particularly, when the Assessing Officer has no subjective satisfaction. Relying upon the decisions of the Division Bench of this Court in the case of Commissioner of Income-tax, Ahmedabad – IV Vs. Shilp Gravures Ltd. reported in [2013] 40 Taxmann 309 (Gujarat) and in the case of Vodafone West Ltd. Vs. Assistant Commissioner of Income-tax reported in [2013] 37 Taxmann 158 (Gujarat), it is requested to allow the present Special Civil Applications and quash and set aside the Page 3 of 5 C/SCA/3707/2014 JUDGMENT reassessment proceedings. 7. To satisfy ourselves whether the reassessment proceedings have been initiated solely at the instance of the audit part and solely on the audit objections, we called for the original file from the office of the Assessing Officer. Ms. Bhatt, learned advocate appearing on behalf of the revenue has produced the relevant files from the office of the Assessing Officer. On perusal of the files and the notings and the relevant documents, it appears that the reassessment proceedings have been initiated at the instance of the audit party solely on audit objections. It is also found that as such the Assessing Officer tried to sustain his original assessment order and even submitted to the audit party to drop the objections. Under such factual aspects, the present petitions are required to be considered. 8. The issue involved in the present Special Civil Applications is squarely covered by the decision of the Division Bench of this Court in the case of Shilp Gravures Ltd. (Supra) and in the case of Vodafone West Ltd. (Supra) by which a view is taken that if the reassessment proceedings are initiated merely and solely at the instance of the audit party and when the Assessing Officer tried to justify the Assessment Orders and requested the audit party to drop the objections and there was no independent application of mind by the Assessing Officer with respect to subjective satisfaction for initiation of the reassessment proceedings, the impugned reassessment proceedings cannot be sustained and the same deserves to be quashed and set aside. Page 4 of 5 C/SCA/3707/2014 JUDGMENT 9. In view of the above and for the reasons stated hereinabove, both these petitions succeed and the impugned reassessment proceedings are hereby quashed and set aside. Rule is made absolute to the aforesaid extent. In the facts and circumstances of the case, there shall be no order as to costs. (M.R. SHAH, J.) (K.J. THAKER, J.) Siji Page 5 of 5 "