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TMI Blog2023 (1) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... f the scrutiny during the assessment and Assessing Officer having consciously taken a particular decision, the change of opinion cannot form the basis for reopening the assessment that too based on same set of facts. In fact, it would be apt and appropriate to note at this juncture that during the course of the assessment proceedings, assessee has submitted three communications with reference to the first three issues based on which the assessment is sought to be reopened by highlighting the facts as more specifically stated therein which has gone into the decision making process at the time of passing assessment orders or in other words, the Assessing Officer took note of these facts and has formed an opinion, which opinion is now sought to be substituted and made as a ground for reopening of the assessment which is impermissible as change of opinion cannot be the basis for reopening the assessment. We are of the considered view that prayer sought for in the petition deserves to be granted by answering the point formulated hereinabove in favour of the assessee and against the Revenue. - R/SPECIAL CIVIL APPLICATION NO. 16916 of 2018 - - - Dated:- 2-1-2023 - HONOURABLE THE CH ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Court by way of present petition. 4. On the basis of unilateral submission of learned Senior Advocate Mr. Saurabh N. Soparkar, who appeared for the petitioner, the co-ordinate Bench of this Court vide order dated 30.10.2018 was pleased to issue notice and by way of ad-interim order, impugned notice came to be stayed. It is in this background, petition has come up for consideration before us and pursuant to the request having been made, we took up the matter for final disposal since the pleadings are complete. 5. Mr. S.N.Soparkar, learned Senior Advocate appearing for the petitioner has raised multiple contentions and by referring to various documents attached to the petition compilation, has submitted that the authority while considering the objections has failed to deal with the specific objections which have been raised by petitioner and in a stereo type manner, mechanically, without applying mind, disposed of same and as such, it is under challenge contending it is suffering from vice of non-application of mind and there appears to be no subjective satisfaction by the authority who is under an obligation to consider the same. It has been contended that impugned actio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch is reflecting from paragraph 3 of the reasons on page 37 and though there is a clear explanation given about such query related to VAT, Sales Tax including Service Tax, by referring to paragraph 2.2 from the explanation/objections against reasons recorded, the entire issue raised by the authority has been clearly explained and related to this query, project wise details of Service Tax/VAT has been provided and proof of same is also produced, still by just mentioning this in paragraph that no explanation is offered, the detailed explanation has been overlooked. It has been submitted that to explain this, documents running from page 176 to 261 have also been produced and submitted that assessee is paying VAT under the composition scheme and as per the said scheme, it has to pay VAT/Service Tax on certain percentage of turnover, but then, it was specifically submitted that petitioner assessee has correctly followed the system of accounting and rightly claimed the Service Tax/ VAT being paid out of pocket and/or not eligible for input credit. The relevant objections of respective claim was also brought to the notice of the authority while tendering such objections against reasons on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t insofar as another issue contained in paragraph 6 of the reasons for re-opening, surprisingly, the authority has examined the merit and has gone to the extent of recording a finding that M/s. Solvent Real Estate Private Limited (SREPL) had no genuine business transactions and it was only engaged in providing bogus billing and as such, Mr. Soparkar, learned Senior Advocate has submitted that authority while dealing with such issue has overstepped its jurisdiction and as such, impugned order deserves to be quashed. It has been submitted that a new issue is raised by the authority based upon a letter dated 16.03.2018, and to this objection has been raised by the petitioner as can be seen from paragraph 4 onwards reflecting from page 50. This new issue has been tried to be explained and objected to by raising contention that assessee company was awarded a contract of Rs.5,98,73,300/- by Progressive Constructions Limited for dismantling of concrete and disposal of the same and clearing debris from the Mumbai International Airport Limited Project Site. The assessee company has assigned work to sub-contractor to SREPL which is also reflecting from page 265 to 268 and the SREPL has car ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n for arriving at a prima facie opinion, such material which has already been made available and as such, the order under challenge per se reflects non-application of mind, suffers from vice of perversity and that having been done, same requires to be quashed in the interest of justice. 5.6. Yet another substantial contention which has been raised by Mr. Soparkar, learned Senior Advocate is that apart from aforesaid circumstance, in any case, issuance of notice and order under challenge is without jurisdiction and same is beyond the period of four years and as such, it is impermissible in view of the provisions contained under the Act. It has been submitted that relevant period if to be considered end of relevant A.Y. is 31.03.2012 whereas, initiation is after lapse of four years and four years period was getting lapsed on 31.03.2016 and as such, apparently the action is impermissible. For canvassing this submission, learned Senior Advocate has drawn our attention to provisions contained under Section 147 and 148 of the Act and has submitted that condition precedent is that unless and until income has escaped from assessment, no re-opening of assessment is permissible and theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that the reflection of exercising of jurisdiction by the authority is hit by principle propounded in this very decision. 5.10. For substantiating the contention about non supply of material though relied upon has affected petitioner s right, a reference is made to yet another decision in the case of Kanak Fabrics v. Income Tax Officer reported in 359 ITR 447 and it has been submitted that authority has exercised the discretion without observance of condition precedent contained in relevant provisions. A further reference is made to a decision in the case of Ganga Saran Sons (P) Ltd., v. Income-Tax Officer, reported in [1981] 6 Taxman 14 (SC) (paragraphs 5, 6, 8 and 10) and has submitted that raising a mere inference without any cogent material is not sufficient enough to sustain the impugned order. References have also been made to the decisions (i) In the case of P.G. W. Sawoo (P) Ltd., v. Assistant Commissioner of Income Tax reported in 385 ITR 60 (SC), (paragraph 8) (ii) In the case of Devesh Metcast Ltd., v. Joint Commissioner of Income Tax reported in [2011] 12 Taxmann.com 458 (paragraph 6, 7, 17 and 18) and by referring to aforesaid decisions, Mr. Sop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be held as ill-founded. The issue involved is a mixed questions of law and fact, therefore, the opinion which has been expressed on the basis of the available material may not be substituted in exercise of extraordinary jurisdiction. 6.2. To substantiate his contention, Mr. Bhatt, learned Senior Advocate has made a reference to several decisions and has drawn the attention about principles propounded therein. Following are the decisions referred to for the purpose of substantiating the submission with regard to sufficiency or inadequacy of reasons may not be the sole ground for quashing the opinion which has been formulated by the authority. For this purpose Mr. Bhatt, learned Senior Advocate has produced a compilation of decisions relied upon and few of the decisions are (i) In the case of Calcutta Discount Co. Ltd., v. Income Tax Officer, Companies District I, Calcutta Anr., reported in [1946] 41 ITR 191 (SC); (ii) In the case of Dishman Pharmaceuticals Chemicals Limited v. Deputy Commissioner of Income-Tax (OSD) (No.1) reported in [2012] 346 ITR 228 (Guj.), (iii) in the case of Phool Chand Bajrang Lal Anr., v. Income-Tax Officer Anr., reported ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to be justifiable, and at this stage of the proceedings, the opinion which has been formulated for reopening the assessment may not be set-at-naught. A reference is made to a decision delivered by Hon ble Apex Court in the case of CIT v. Chhabil Dass Agrawal reported in 357 ITR 357 (SC) (Paragraph 15- 20). 6.5. Yet another contention has been vehemently canvassed by Mr. Bhatt learned Senior Advocate is that there is equally efficacious alternative remedy available to raise all these contentions before the appropriate authority and as such, writ jurisdiction may not be allowed to be invoked by the petitioner. In fact, the explanation/objection which has been given by the petitioner requires proper adjudication and same may not be possible to be scrutinized in exercise of extraordinary jurisdiction and in view of catena of decisions, this Court may not intervene. Few more decisions are also referred to by way of a separate compilation and has fairly submitted that gist of these judgments are that satisfaction which has been arrived at this stage of the proceedings may not be substituted unless there is apparent illegality which is completely missing in the case on hand. Mr. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er will not necessarily mean or amount to disclosure within the meaning of foregoing provision as indicated therein and merely because petitioner has produced material in bunch before the Assessing Officer, will not amount to disclosure by virtue of this explanation itself and as such, reasons assigned for re-opening is justified. To substantiate his contention, Mr. Bhatt, learned Senior Advocate has relied upon several decisions by way of producing a separate bunch which citations are as under: 1. In the case of Inductotherm (India) (P) Ltd. v. Gopalan DCIT reported in [2013] 356 ITS 481 (Gujarat). 2. In the case of Gujarat Power Corpn. Ltd.. v. ACIT reported in [2013] 350 ITR 266 (Gujarat). 3. In the case of Krishna Developers Company v. DCIT reported in [2018] 400 ITR 260 (Gujarat). 4. In the case of Olwin Tiles (India) (P) Ltd., v. DCIT reported in [2016] 382 ITR 291 (Gujarat). 5. In the case of Aaspas Multimedia Ltd., v. DCIT reported in [2018] 405 ITR 512 (Gujarat). 6. In the case of Dishman Pharmaceuticals Chemicals Ltd., v. DCIT reported in [2012] 346 ITR 228 (Gujarat). 7. In the case of MSK Real Estates (P) Ltd., v. DCIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly affects the right of petitioner to raise appropriate objections. Hence, he contends impugend order is violative of principles of natural justice and to substantiate his submission, Mr. Soparkar, learned Senior Advocate has relied upon the decision delivered on 22.04.2014 in Special Civil Application No. 1896 of 2014. 7.1. He has also submitted rather reiterated that unless and until conditions precedent for reopening as stipulated under the provisions are satisfied, such re-opening is impermissible and as such the action of respondent is without authority of law and it is always open for the petitioner to invoke extraordinary jurisdiction of this Court, petition is maintainable in view of the settled position of law. It has been further submitted that relevant audit objections is one of the prime reason for reopening and respondent authority has conveniently remained silent on this aspect in its affidavit-in-reply and as such also, the action is not just and proper. 7.2. In any case, conjoint submission is leading to an ultimate request to grant the relief as prayed for in the petition. Mr. Soparkar has also relied upon the following bunch of decisions which are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 is liable to be quashed or sustained? REASONS, DISCUSSION AND FINDING OF ABOVE POINT 9. Assessee is a company which had filed its returns of income for the assessment year 2011-12 on 27.09.2011 declaring total income of Rs.11,99,50,930/- under normal provision and Rs.17,13,95,125/- under Section 115JB of the Act. Assessee filed revised return of income on 27.09.2012 declaring total income of Rs.12,02,45,130/under normal provision and Rs.17,13,95,125/- under Section 115JB. Same came to be assessed under Section 143(3) and income was determined at Rs.13,64,40,540/under normal provision vide order dated 29.03.2014. Subsequently, the impugned notice dated 29.03.2018 came to be issued and as such petitioner sought for reasons for reopening which came to be furnished vide communication dated 04.07.2018, upon which petitioner submitted its objection which reads as under : 1. M/s Nila Infrastructure Ltd. is assessed with the undersigned. The assessee company had filed return of income for AY 2011-12 on 27.09.2011 declaring total income of Rs.11,99,50,930/- under normal provision and Rs.17,13,95,125 u/s 115JB of the Act. Assessee filed revised return on 27.09.2012 declarin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 115JAA(IA) of the Act. 5. In view of the above, income to the tune of Rs.3,60,83,909/- (209,60,183+151,23,726) has escaped assessment within the meaning of section 147 of the I.T. Act, 1961. 6. Further, vide letter dated 16.03.2018, ITO, Ward 10(2), Kolkata has forwarded intimation in case of M/s Nila Infrastructure Ltd. As per the said letter it has been informed that during the course of assessment u/s 143(3) r.w.s 263 in case of M/s Solvent Real Estate Private Limited (hereinafter referred as SREPL) for AY 2011-12. addition of Rs.101,01,50,000/- was made u/s. 10(a)(ia) as SREPL had not deducted TDS on subcontract payments. The order u/s 143(3) r.w.s 263 was passed on 24.03.2014. Later matter travelled to CIT (A)-4, Kolkata. Ld. CIT (A)-4, Kolkata made independent factual findings which established that SREPL had no genuine business and it was engaged only in providing bogus bills to various concerns for commission. The order dated 15.03.2018 of CIT (A)- 4, Kolkata has been perused by the undersigned. The relevant findings of CIT(A)-4, Kolkata are as under : a. None of the 4 purchase parties of SREPL were traceable at the given addresses. b. None of the Contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment concluded under Section 143(3) is that the assessee has debited Rs.4,48,56,594/- as interest and financial charges and assessee has paid interest of Rs.60,27,397/- to Adani Enterprise, Rs.1,05,22,915/- to India Bulls and Rs.92,75,843/- to Gruh Finance but has not deducted and paid the TDS on the above amount and hence, there is escapement of income of Rs.2,09,60,183/-. The records on hand would indicate that assessee had duly deducted and paid the TDS on the above payment and copy of the account of the said parties had been tendered at the time of assessment and along with the objections for reopening at Annexure-1. In fact, in the order disposing of the objections raised for reopening, it has been observed by AO as under : It is verified that the company has not deducted the TDS on these interest charges, the Assessing Officer has not disallowed the expenditure and there is nothing on record to show that the TDS was deducted. 12. The aforesaid finding itself would indicate that there was material available with the Assessing Officer and the assessee had not suppressed or withheld any information at the time of assessment proceedings and on this score itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for services received. For example if it has received services bill of Rs.110/which is inclusive of Rs.10 as service tax then the company is showing Rs.100 under expenses and Rs.10 as service tax paid instead of showing Rs.110 as expenses. On the similar line the assessee is paying VAT under composition scheme and as per the said scheme it has to pay VAT/service tax at certain percentage of the turnover. It means that the assessee has not collected anything from the customer but it has to pay VAT from its pocket. Further, also it is not eligible for any input credit and hence any tax charged on the material purchase is treated as expenses. The relevant pages of the respective scheme is attached herewith for your perusal vide Annexure-4. The sample copy invoices are attached herewith as Annexure-5. The copy of account of service tax and VAT is also enclosed herewith vide Annexure-6. In view of the above the assessee has correctly followed the system of accounting and rightly claim the service tax and VAT being paid out of pocket and or not eligible for input credit. 14. Thus, there was no suppression or withholding of information by the assessee at the time of framing of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d enjoy. MAT credit which can be carried forward and set off has the potential of reducing the tax liability during subsequent years and therefore it possesses the characteristics of being considered as a 'property'. Guidance note on accounting, of MAT credit issued by ICAI also recognises that MAT credit has expected future economic benefits in the form of its adjustment against the discharge of the normal tax liability in future years and therefore is an 'asset'. The said Guidance note also permits the accounting and recognition of MAT credit as an 'asset' in the financial statements. Thus, MAT credit of the amalgamating company, which would be considered as a property, becomes the property of the amalgamated company by virtue of the amalgamation. AS-14 - Accounting for amalgamation in the books of amalgamated company issued by ICAI and notified by Central Government in the form of Companies (Accounting Standard) Rules 2006 envisages two types of amalgamation viz ., amalgamation in the nature of merger (pooling of interest method) and amalgamation in the nature of purchase (purchase method).] If the amalgamation is that of type one i.e., amalgama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isations fully tax neutral. In the speech the following was stated it is proposed that all fiscal concessions will survive for the unexpired period in the case of amalgamation and de-mergers. It may be noted that MAT credit in respect of tax paid u/s. 115JA was already on the statute books when the provisions of Finance Act 1999 were introduced: The intention of the legislature appears to be that the benefits/reliefs available to the amalgamating company should vest in the amalgamated company so that the latter company can claim such benefits/reliefs for the unexpired period, on a premise that the amalgamation had not been effected. 3.4. There is no prohibition or restriction in S. 115JAA with regard to carry forward and set off of MAT credit belonging to the amalgamating company by the amalgamated company. The memorandum explaining the provisions of Finance Bill, 2005 [273 ITR (St.) 60] and Circular no. 3 of 2006, dated 27-2-2006 [(2006) 281 ITR (St.) 222] explaining the provisions of Finance Act 2005 also do not state that carry forward and set off of MAT credit is allowable only to the company which has paid tax u's. 115JB. In an amalgamation, one company is subsumed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ioned scheme inter alia provided that the unabsorbed losses and depreciation of VPCL shall be deemed to be losses and depreciation of the assessee as provided u/s.72 of the Act. The assessee in computing the MAT liability u/s.115JB reduced unabsorbed losses of VPCL (which was less than the unabsorbed depreciation of VPCL) from book profits: The CIT passed order u/s.263 holding that unabsorbed losses reduced were not as per books of account of the assessee but were as per books of accounts of VPCL and therefore the same cannot be reduced from the book profits of the assessee. On appeal, the Tribunal apart from relying on S. 72 also relied on S. 72A of the Act. It was observed that the sanctioned scheme also provided that the unabsorbed losses and depreciation of VPCL shall be deemed to be losses and depreciation of the assessee as provided u/s.72 of the Act. It was therefore held that the assessee has rightly reduced the unabsorbed losses of VPCL from its book profits in computing MAT liability u/s. 115JB. 3.7. In ITO v. Mahyco Vegetable Seeds Ltd ., (2009) 314 ITR (AT) 37 ITAT (Mum.) it was held that the resulting company is entitled to carry forward unabsorbed scientific re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) in A.Y. 1965-66. The assets and liabilities on the date of amalgamation of the amalgamating company would become assets and liabilities of the amalgamated company. If M/s. Charminar Breweries has paid tax u/s.115JA of the Act in earlier assessment years and that benefit is permissible u/s.115JA of the Act then that cannot be denied to the assessee simply for the reason that M/s. Charminar Breweries is not in existence. The Ld. CIT(A) has erred in placing his implicit reliance upon the judgment of Hon'ble Supreme court. In principle we allow this ground of appeal of the assessee, set aside the issue to the file of A.O for verification of the taxes paid by M/s. Charminar Breweries and how that benefit would devolve upon the assessee. The AO shall verify the details and then grant the benefit to the assessee. 3.9. The rationale for allowing credit in respect of taxes paid under MAT, as per the memorandum explaining the provisions of Finance Bill, 1997 [224 ITR (St.) 26] and as per Para 45.4 of CBDT Circular No. 763, dated 182-1998 [230 ITR (St.) 54] is that a company should always pay a minimum tax even while offsetting the MAT credit against regular tax. The objective of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... object of the legislation, then an equitable construction should be preferred over the strict literal construction. Where the plain literal interpretation of a statutory provision produces a manifestly unjust result which could never have been intended by the legislature, the court might modify the language used by the legislature so as to achieve the intention of the legislature and produce a rational result. 3.12. Further, the reliance is also placed on the decision of ACIT vs. M/s Caplin Laboratories Ltd. in ITA No. 667/Mds/2013 dated 31.01.2014, the relevant extract from the said decision is reproduced herein under: Upon a careful consideration of the issue we find that, after amalgamation the assessee company is entitled to all the assets, claims etc. of the erstwhile company, which is also supported by Hon'ble High Court order in this regard. Further, when the assessee company is now being assessed in place of erstwhile company and TDS credit pertaining to the erstwhile company is being given credit to the assessee company, there is no reason why a different treatment should be given to the MAT credit available pertaining to the erstwhile company. We do not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the character of borrowed satisfaction and/or without there being independent finding recorded by AO for reopening of the assessment. In fact, Assessing Officer seems to have reopened the assessment to fish out evidence which is impermissible and the pre-requisite for reopening being satisfaction of income to tax having escaped , the authority should have reason to believe that income of the assessee has escaped assessment; and, secondly, he must have reason to believe that such escapement is by reason of omission or failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment. If these twin conditions are not being fulfilled, notice issued by the authority would be one without jurisdiction. The belief which the authority entertains must not be arbitrary or irrational. It must be reasonable or having nexus to the escapement of income to tax. The adequacy of the reasons and its relevancy would form the foundation for reopening of the assessment. In the absence thereof, on borrowed opinion, reassessment proceedings cannot be commenced. 17. The Hon ble Apex Court in the case of Ganga Saran and Sons Private Limited vs. Income Ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spondent authority has proposed to reopen the assessment. 19. The first three grounds on which the Assessing Officer has proposed to reopen the assessment as could be discerned from the assessment order, was part of the scrutiny during the assessment and Assessing Officer having consciously taken a particular decision, the change of opinion cannot form the basis for reopening the assessment that too based on same set of facts. In fact, it would be apt and appropriate to note at this juncture that during the course of the assessment proceedings, assessee has submitted three communications dated 16.12.2013, 09.01.2014 and 03.02.2014 (Annexure-F) with reference to the first three issues based on which the assessment is sought to be reopened by highlighting the facts as more specifically stated therein which has gone into the decision making process at the time of passing assessment orders or in other words, the Assessing Officer took note of these facts and has formed an opinion, which opinion is now sought to be substituted and made as a ground for reopening of the assessment which is impermissible as change of opinion cannot be the basis for reopening the assessment. 20. For t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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