C/SCA/17581/2014 JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 17581 of 2014 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA ================================================================ 1 Whether Reporters of Local Papers may be allowed to see judgment ? 2 To be referred to Reporter or not ? 3 Whether their Lordships wish to see fair copy of judgment ? 4 Whether this case involves substantial question of law as to interpretation of Constitution of India or any order made thereunder ? ================================================================ SHREE RAM BUILDERS....Petitioner(s) Versus ASSISTANT COMMISSIONER OF INCOME TAX (OSD)....Respondent(s) ================================================================ Appearance: UMAIDSINGH BHATI, ADVOCATE for Petitioner(s) No. 1 MR NITIN K MEHTA, ADVOCATE for Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE S.H.VORA Date : 01/04/2015 Page 1 of 7 HC-NIC Page 1 of 7 Created On Sat Feb 13 11:32:10 IST 2016 C/SCA/17581/2014 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1. Rule. Shri Nitin Mehta, learned advocate waives service of notice of Rule on behalf of respondent. 2. In facts and circumstances of case and with consent of learned advocates appearing on behalf of respective parties, present petition is taken up for final hearing today. 3. By way of this petition under Article 226 of Constitution of India, petitioner assessee has prayed for appropriate writ, order or direction to quash and set aside impugned reassessment proceedings initiated under Section 147/148 of Income Tax Act (hereinafter referred to as Act ). 4. That assessee filed return of income for A.Y.2009- 2010 which came to be finalized by order dated 09.12.2010. It appears that assessee filed return of income declaring income of Rs.43,87,671/- and by order of assessment, income was assessed under Section 143(3) of Act at Rs.49,62,230/-. That thereafter, within period of four years from date of assessment year, assessee was served with notice under Section 148 of Act on 04.03.2014. That assessee asked for reasons recorded for reopening of assessment vide communication dated 05.04.2014. That thereafter, assessee was served with reasons recorded for reopening of assessment and for Page 2 of 7 HC-NIC Page 2 of 7 Created On Sat Feb 13 11:32:10 IST 2016 C/SCA/17581/2014 JUDGMENT notice under Section 148 of Act. That assessee raised objections against reopening of assessment for A.Y. 2009-2010 mainly contending, inter alia, that reopening of proceedings is nothing but change of opinion by Assessing Officer which is not permissible. It was also contended that reopening of assessment proceedings is at instance of audit party and on basis of audit objections. That thereafter, vide communication dated 18.09.2014, Assessing Officer has disposed of objections against reasons recorded for reopening of assessment proceedings. Hence, petitioner assessee has preferred present petition under Article 226 of Constitution of India challenging initiation of reopening of assessment for A.Y. 2009-2010. 5. Shri Umaidsingh Bhati, learned advocate appearing for assessee has vehemently submitted that reopening of assessment is nothing but change of opinion by Assessing Officer on particular issue on which, assessment proceedings are reopened. It is submitted that assessment proceedings were concluded by Assessing Officer after detailed questionnaire and thereafter, Assessing Officer disallowed expenditure of Rs.1,19,00,000/- being labour charges paid to sub-contractors. It is submitted that assessee did furnish all particulars with respect to VAT expenses which came to be considered by Assessing Officer and thereafter, disallowed expenditure of Rs.41,23,784/- under Section 43B of Act. It is submitted that therefore, reopening of assessment for reasons recorded is nothing but change of opinion by Assessing Officer and, therefore, reopening of assessment is not Page 3 of 7 HC-NIC Page 3 of 7 Created On Sat Feb 13 11:32:10 IST 2016 C/SCA/17581/2014 JUDGMENT permissible. 5.1. It is further submitted by Shri Bhati, learned advocate appearing for assessee that in any case, reassessment proceedings are on basis of audit objections raised by audit party only. It is submitted that though, in objections against reopening of assessment, it was specifically mentioned that as reassessment proceedings are on basis of audit objections raised by audit party and, therefore, same is not permissible, Assessing Officer while dealing with objections against reasons recorded for reopening of assessment, has deliberately not dealt with same. It is submitted that even in present petition also, though it is specifically mentioned that reassessment proceedings are initiated on basis of audit objections raised by audit party, even in affidavit-in-reply, same has not been dealt with by Department. Relying upon decision of this Court in case of Commissioner of Income-Tax, Ahmedabad IV V/s. Shilp Gravures Ltd. reported in (2013)40 Taxmann 309(Gujarat), in case of Vodafone West Ltd. V/s. Assistant Commissioner of Income-tax reported in (2013)37 Taxmann 158 (Gujarat) and decision of Division Bench of this Court in case of Mayur Wovens Pvt. Ltd. V/s. Income Tax Officer & 1 in Special Civil Application No.3707 of 2014 with 3708 of 2014, it is requested to allow present petition and quash and set aside impugned reassessment proceedings. 6. At outset, it is required to be noted that after hearing at length learned advocate appearing for petitioner on issue whether reassessment proceedings for Page 4 of 7 HC-NIC Page 4 of 7 Created On Sat Feb 13 11:32:10 IST 2016 C/SCA/17581/2014 JUDGMENT reasons recorded can be said to be change of opinion by Assessing Officer or not?, after considering material on record, we were not satisfied that reassessment proceedings for reasons recorded can be said to be change of opinion. 6.1. However, petition is to succeed on second ground i.e. contention of learned advocate for petitioner that reassessment proceedings are on basis of audit objections raised by audit party. At outset, it is required to be noted that though objections raised by assesese against reassessment proceedings and against reasons recorded, Assessing Officer had not dealt with aforesaid aspect at all though, in affidavit-in-reply filed by Assessing Officer it is denied that reopening is being done because of audit objections and, therefore, reopening is bad in law as it is not based on opinion of respondent. However, to satisfy ourselves whether reassessment proceedings have been initiated solely at instance of audit party and solely on audit objections, we called for original file from office of Assessing Officer. Shri Mehta, learned counsel appearing for Revenue has produced relevant files from office of Assessing Officer. On perusal of files and notings and even reply filed by Assessing Officer, it appears that as such, Assessing Officer justified original assessment order and categorically stated that there is no substance in audit objections. Therefore, as such, from relevant documents, it appears that reassessment proceedings have been initiated thereafter at instance of audit party and solely on audit objections. It is also found that as such, Assessing Officer tried to sustain his original assessment order and even Page 5 of 7 HC-NIC Page 5 of 7 Created On Sat Feb 13 11:32:10 IST 2016 C/SCA/17581/2014 JUDGMENT submitted to audit party to drop objections. Under such factual aspects, present petition is required to be considered. 6.2. Not only that, even subsequently also, i.e. even after initiation of reassessment proceedings, by communication dated 23.01.2015, Assessing Officer- Deputy Commissioner of Income Tax Circle-3(3), Ahmedabad has tried to support/justify original assessment order and has categorically stated that audit objections are not acceptable as objections are raised on presumption and surmises. If that be so, then it is worst. On one hand, Assessing Officer is trying to justify/support original assessment order and on another hand, he is reopening assessment and/or initiating reassessment proceedings. Therefore, as such, subjective satisfaction of Assessing Officer while reopening assessment is vitiated. 7. issue involved in present petition is squarely covered by decisions of Division Bench of this Court in case of Shilp Gravures Ltd. (Supra), in case of Vodafone West Ltd. (Supra) and in case of Mayur Wovens Pvt. Ltd. (supra) by which view is taken that if reassessment proceedings are initiated merely and solely at instance of audit party and when Assessing Officer tried to justify Assessment Orders and requested audit party to drop objections and there was no independent application of mind by Assessing Officer with respect to subjective satisfaction for initiation of reassessment proceedings, impugned reassessment proceedings cannot be sustained and Page 6 of 7 HC-NIC Page 6 of 7 Created On Sat Feb 13 11:32:10 IST 2016 C/SCA/17581/2014 JUDGMENT same deserves to be quashed and set aside. 8. In view of above and for reasons stated hereinabove, impugned reassessment proceedings are required to be quashed and set aside and accordingly, present petition is allowed. impugned reassessment proceedings for A.Y. 2009-2010 are hereby quashed and set aside on aforesaid ground alone. Rule is made absolute to aforesaid extent. However, in facts and circumstances of case, there shall be no order as to costs. (M.R.SHAH, J.) (S.H.VORA, J.) Hitesh Page 7 of 7 HC-NIC Page 7 of 7 Created On Sat Feb 13 11:32:10 IST 2016 Shree Ram Builders v. Assistant Commissioner of Income-tax (OSD)