SAHAJANAND MEDICAL TECHNOLOGIES PVT. LTD. V. DY. COMMISSIONER OF INCOME TAX CIRCLE 2(1)(2)

SCA/14840/2018

AI Insights

In this case, Sahajanand Medical Technologies Pvt. Ltd. challenged the notice issued by the Deputy Commissioner of Income Tax for reopening their assessment for the assessment year 2012-13. The reopening was based on the grounds that the company had claimed excess deductions under section 35 of the Income-Tax Act, 1961, related to research and development expenditures. The court examined whether the reopening was justified, considering it was beyond the usual four-year period allowed for such actions. The primary legal contention was whether there was a 'change of opinion' or if new tangible material had come to light that warranted the reopening of the assessment. The court concluded that the objections raised by the assessee were not adequately addressed and that the reasons for reopening did not meet the legal standards required for such an action.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 749816 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 17-03-2021
• Assessment Year: misc
• Laws Referred To: Income-Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: KALPANAK RAVAL
• Assessee Lawyers: DARSHAN PATEL
• Keywords: Excess Deduction; Income Tax; Reassessment; Research and Development Expenditure; Under-assessment of income; Writ of Certiorari; Writ of Mandamus
• Section: 147; 148; 143(3); 35(2AB); 35(1)(i); 35(1)(iv)

Judgement Text

"C/SCA/14840/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 14840 of 2018 ========================================================== SAHAJANAND MEDICAL TECHNOLOGIES PVT. LTD. Versus DY. COMMISSIONER OF INCOME TAX CIRCLE 2(1)(2) ========================================================== Appearance: DARSHAN R PATEL(8486) for the Petitioner(s) No. 1 MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 17/03/2021 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 has prayed for the following reliefs; “(A) Issue a writ of certiorari and/or a writ of mandamus and/or any other writ direction or order to quash and set aside the impugned notice dated 15.12.2017 under section 148 of the Income-Tax Act, 1961 annexed hereto at Annexure-D along with objection rejection order dated 17.08.2018 annexed hereto at Annexure-H for proceeding and completing Reassessment proceedings. (B) Pending admission, hearing and disposal of this petition, ad-interim relief be granted and the Respondent be ordered to restrain from enforcing compliance of the impugned notice dated 15.12.2017 under section 148 of the Income-Tax Act, 1961 annexed hereto at Annexure-D and/or taking any other steps in this regard including reassessment order or implementation of objection rejection order dated 17.08.2018 Annexure-H and further Page 1 of 4 C/SCA/14840/2018 ORDER notices issued for purpose of reassessment. (C ) Award the cost of this petition. (D) Grant such other and further reliefs as this Hon'ble Court deems fit.” 2. This is a case of reopening of the assessment for the A.Y.2012-13 beyond the period of four years and that of a scrutiny assessment undertaken under Section 143(3) of the Act. 3. The reasons assigned for reopening of the assessment are as under; “The assessee has filed its return of income for A.Y. 2012-13 on 28.09.2012 declaring income of Rs.1,50,57,760/-. The case was selected for scrutiny and order u/s. 143(3) passed on 27.03.2015 determining total income of Rs.2,38,27,380/-. 2. On perusal of the case record, it is seen that the assessee has made revenue expenditure of Rs.2,83,53,871/- and capital expenditure of Rs.29,25,662/- on research and development. In computation of income, assessee added back revenue expenditure of Rs.2,83,53,871/-. Thereafter, assessee claimed this revenue expenditure of Rs.2,83,53,871/- u/s.35(1)(i). The assessee claimed capital expenditure of Rs.29,25,662/- u/s. 35(1)(iv). Thereafter, assessee claimed deduction u/s.35(2AB) of Rs.2,73,88,086/- by calculating this amount as revenue expenditure of Rs.2,83,53,871/- less foreign consultancy expenditure of Rs.9,65,786/-. The total deduction claim u/s.35 by assessee was of Rs.5,86,67,619/- (Rs.2,83,53,871 + 29,25,662 + 2,73,88,086). The DSIR determined revenue expenditure of Rs.190.15 lakh and capital expenditure of Rs.28.90 Lakh as R & D expenditure eligible for deduction u/s.35 (2AB). 3. it is further noticed that Rs.54,83,086/- (Rs.2,73,88,086 claimed by assessee less Rs.2,19,05,000 admitted by DSIR) u/s. 35(2AB) was disallowed during Page 2 of 4 C/SCA/14840/2018 ORDER the assessment proceeding. Therefore, the total deduction allowed to assessee u/s. 35 of the Act was of Rs.5,31,84,533/- (Rs.2,83,53,871 + 29,25,662 + 2,19,05,000). 2.2 The total deduction allowable was of Rs.4,38,10,000/- being 2 times of expenditure of Rs.2,19,05,000 approved by DSIR. As total revenue expenditure was of Rs.2,83,53,871/- and total capital expenditure was of Rs.29,25,662 on R & D as per P/L, Balance sheet and submission of assessee and also stipulation that expenditure under any sub-section of section 35 cannot be claimed as deduction under another sub-section of section 35 or under any section of the Act. 2.3 In view of the above, the assessee was eligible for deduction of Rs.4,38,10,000/- only u/s. 35 (2AB) of the Act. However, the assessee had claimed deduction of Rs.5,31,84,533/- which was incurred. Hence, excess deduction was allowed to the assessee, which resulted in under assessment of income to the tune of Rs.93,74,533/- (5,31,84,533 + 4,38,10,000) 3. In view of the above, I have reason to believe that the income chargeable to tax has escaped assessment to the tune of Rs.93,74,533/- on account of excess relief granted to the Assessee. Therefore, I am satisfied that it is a fit case for reopening the case u/s.147 of the I.T. Act read with explanation 2C”. 4. To the aforesaid reasons, the assessee lodged his objections in details vide communication dated 3rd August, 2018. 5. The objections raised by the assessee, referred to above, came to be disposed of by the Assessing Officer vide order dated 17th August,2018. 6. We have heard Mr. Darshan Patel, the learned counsel appearing for the writ applicant (assessee) and Ms. Raval, the learned senior standing counsel appearing for the Revenue. Page 3 of 4 C/SCA/14840/2018 ORDER 7. It appears to be a case of change of opinion. The objections raised by the assessee are quite exhaustive going to the root of the issue. Ms. Raval, the learned senior standing counsel appearing for the Revenue vehemently opposed this writ application submitting that it is not a case of mere change of opinion. According to her, something tangible has come to the notice of the Assessing Officer of which cognizance at the relevant point of time was not taken and, therefore, the reopening though beyond the period of four years in a case of scrutiny assessment, 8. We are not convinced with the case put up by the Revenue for the purpose of opposing this writ application. There is one another good ground to allow this writ application. It is evident on plain reading of the order dated 17th August, 2018, disposing of the objections, that the same is not a speaking order. Not a single objection raised by the Assessee has been even prima facie dealt with. 9. In the overall view of the matter, we are convinced that the impugned notice for reopening is not sustainable in law. 10. In the result, this writ application succeeds and is hereby allowed. The impugned notice is hereby quashed and set aside. (J. B. PARDIWALA, J) (ILESH J. VORA,J) Vahid Page 4 of 4 "