JUDGMENT
A.S. Supehia, J.- Since a short issue is involved in the present writ-petition, with the consent of the learned counsel appearing for the respective parties, the matter is taken up for final disposal.
2. The petitioner, who is engaged in the business of processing and trading of yarn, has challenged the Notice dated 27.03.2019 issued under Section 148 of the Income Tax Act, 1961 (for short ‘the Act’) for Assessment Year (for short ‘A.Y.’) 2012-13 and the order dated 16.10.2019, disposing of the objections raised by the petitioner against the show cause notice.
3. The issue raised in the present writ-petition is in narrow compass. The petitioner filed the return of income on 28.09.2012 for A.Y. 2012-13 declaring total income of Rs,50,93,730/-. The case of the petitioner was selected for scrutiny assessment under Section 143 (3) of the Act, and accordingly, Notice under Section 143 (2) of the Act dated 07.08.2013 was issued by the Assessing Officer calling for certain specific details, such as audit report under Section 44AB of the Act and copies of certified final account for A.Y. 2012-13.
3.1. Accordingly the petitioner-Company vide letter dated 16.05.2014 furnished all the details, as asked by the Assessing Officer which included audit reports and audited financial statements along with notes.
3.2. Subsequently also, on 26.08.2014 a Notice under Section 142 (1) of the Act was issued to the petitioner-Company, which was also duly complied with by the petitioner. After deliberation of the documentary evidence as called for, the Assessing Officer processed the return of income and passed an assessment order on 20.03.2015 under Section 143 (3) of the Act assessing total income of Rs.1,20,19,371/- by making an addition of Rs.69,25,639/-.
3.3. Being aggrieved with the assessment order, the petitioner Company preferred a statutory Appeal under Section 246-A of the Act before the Commissioner of Income Tax, which was disposed of by the appellate order dated 20.10.2015 under Section 250 of the said Act, by partly allowing the same.
3.4. The matter with regard to the A.Y. 2012-13 thus got over, however, subsequently, after a period of four years from the end of A.Y. 2012-13, the petitioner-Company received a Notice under Section 148 of the Act dated 27.03.2019 alleging that income chargeable to tax has escaped assessment. The petitioner-Company responded to the said notice by filing appropriate reply on 08.04.2019.
3.5. The petitioner-Company raised its objection against the reasons recorded in the letter dated 21.09.2019, however, the respondent rejected the objection vide order dated 16.10.2019 and being aggrieved with the reopening of the assessment, the petitioner has challenged such action by way of the present writ-petition.
4. Learned advocate Mr. Manish Shah, at the outset, has submitted that the reopening of the assessment runs contrary to the proviso to Section-147 of the Act, since the reopening is premised after a period of four years which is only permissible in case, the assessee has failed to disclose fully and truly all material facts necessary for assessment.
4.1. It is submitted that, in the present case, the petitioner had disclosed all the material facts, specifically with regard to change in method of charging of depreciation. He has referred to the statement of profit and loss, which mentions about the depreciation and amortization expense to the tune of Rs.2,27,60,881/- and also the notes on financial statements for the year ended 31.03.2012.
4.2. It is submitted that in paragraph no.24.1 of Notes on the audited financial statement, the petitioner company has intimated that since there was change of policy of charging depreciation on fixed assets from SLM (Straight Line Method) to WDV (Written Down-Value Method), the same was disclosed and been debited to profit and loss accounts under depreciation and amortization expenses. He has also referred to the accounting policies which has been mentioned (at page-40), providing the basis of accounting relating to depreciation on WDV at the rate specified in Schedule-14 of the Companies Act, 1956 and accordingly, it was intimated that the company has changed the accounting policy for depreciation method from SLM to WDV, and as a result, an arrear of depreciation in Rs.1,70,46,944/- charged in profit and loss account. It is submitted that, having disclosed these vital aspects, the burden lies on the Assessing Officer to apply his mind and draw inference and accordingly, after examination of such details and the accounting policy, the assessment order under Section 143(3) of the Act was passed.
4.3. It is thus submitted that in these circumstances, it cannot be said that income has escaped assessment, for the reason that the petitioner did not fully disclose any tangible material or any information has been suppressed by it. Thus, it is contended that the reopening is hit by the limitation period of four years, as per the proviso to Section-147(1) of the Act. Hence, the Notice under Section 148 is required to be quashed.
4.4. In support of his submission, learned advocate Mr. Shah has placed reliance on the judgment of the Coordinate Bench in the case of Mihir Textiles Ltd v. Jt. CIT (2010) 43 DTR 11 (Guj)/Special Civil Application No.5825 of 2000, dated 09.02.2010.
5. Opposing the foregoing submissions and the present writ petition, learned Senior Standing Counsel Mr. Karan Sanghani has submitted that, at this stage, the Court may not restrict or bar the reopening of the assessment. It is submitted that the Assessing Officer, after examination of the necessary material which was supplied by the petitioner has formed the opinion that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for reassessment.
5.1. It is submitted that upon verification, it was found that in the scrutiny proceedings under Section-143(3) of the Act, the Assessing Officer has recorded that the petitioner company has made submissions/explanations as called for from time to time, and those submissions/explanations have been duly verified and placed on record, however, it was noticed that there was no full disclosure of the requisite facts relating to the change of methodology in claiming the depreciation.
5.2. It is submitted that that the Explanation-1 to Section-147 of the Act clearly prescribes that, merely the production before the Assessing Officer about the account books or other evidence, will not necessarily amount to disclosure by the assessee of all material facts necessary for assessment, if the Assessing Officer has not adopted due diligence in processing or appreciating the same. Thus, it is submitted that reopening of the assessment is permissible, since, it is found that the Assessing Officer has solely relied on the material available on record in the original scrutiny proceedings without appreciating that the petitioner has not disclosed the relevant information and without appreciating that the Assessing Officer has not raised any query on the issue of claiming the depreciation by changing in the methodology from SLM to WDV method.
6. We have heard the learned advocates at length. The facts which are established from record and pleadings are that the petitioner company declared its total income of Rs.50,93,730/- for A.Y. 201213 in the return of income dated 28.09.2012. The same was selected for scrutiny assessment under the provision of Section-143(3) of the Act. The petitioner was called upon by the concerned Assessing Officer to supply the audited reports and audited financial statements along with notes. After considering such material, the Assessment Order dated 20.03.2015 under Section-143(3) of the Act, assessing the total income of Rs.1,20,19,371/- passed by making an addition of Rs.69,25,639/-, which was further subject matter of challenge before the Appellate Authority, and accordingly, the Appeal filed by the petitioner company was partly allowed.
7. After passage of four years from the end of A.Y. 2012-13, the assessment is sought to be reopened, and accordingly, the Notice under Section-148 of the Act was issued on 27.03.2019. The petitioner responded to the Notice and filed a detailed statement and objections, which were disposed off, by order dated 16.10.2019.
8. It is not in dispute that in case the reopening of the proceedings under Section-147 of the Act is resorted to after a period of four years, the same has to be on the basis that the assessee has failed to fully disclose or truly disclose any material facts necessary for assessment, which has resulted into the escapement of income chargeable to tax.
9. We find that the petitioner in the original scrutiny proceedings has disclosed all the material facts including the notes on financial statement for the year ended on 31.03.2012 relating to depreciation and amortization of expense. The petitioner has also clarified about the effect of change in method in claiming the depreciation. The necessary accounting policy was also declared by the petitioner in the scrutiny assessment, and after full disclosure, the assessment order under Section-143(3) was passed.
10. The respondents have miserably failed to satisfy this Court to the extent that the petitioner has failed to disclose any tangible material or the Assessing Officer has found any information or material which suggests that the same was not disclosed by the petitioner in his original scrutiny proceedings. Hence, in these circumstances, the reopening is impermissible in view of the Proviso to Section-147(1) of the Act. Hence, the Notice under Section 148 of the Act is uncalled for, accordingly, the impugned Notice dated 27.03.2019 and the order dated 16.10.2019 disposing the objections are hereby quashed. Hence, the writ petition succeeds and accordingly is allowed.
