The Commissioner of Income-tax, Goa v. Narcissus Investments Pvt. Ltd
[Citation -2019-LL-0731-42]

Citation 2019-LL-0731-42
Appellant Name The Commissioner of Income-tax, Goa
Respondent Name Narcissus Investments Pvt. Ltd.
Court HIGH COURT OF BOMBAY AT GOA
Relevant Act Income-tax
Date of Order 31/07/2019
Assessment Year 1995-96
Judgment View Judgment
Keyword Tags transaction of sale of shares • convertible foreign exchange • income escaping assessment • re-opening of assessment • application of mind • claim of deduction • change of opinion • audit objection • remedial action • foreign company • escaped income • material facts
Bot Summary: Ms. Razaq submits that the reopening of assessment has no nexus with the audit objections, because in the present case, the Assessing Officer has independently applied his mind and only thereafter issued the notice of reassessment. The Assessing Officer, only after due consideration of the Assessee's response dated 31.12.1996, completed the assessment under Section 143(3) on 2nd June, 1997, accepting return of the 9 txa44-08.dt.31-07-19 income. From the perusal of the reply, which is at Annexure 'B', it is very apparent that the Assessing Officer, at the stage of finalisation of assessment, had very 10 txa44-08.dt.31-07-19 clearly addressed the issue as to whether the transaction of sale of shares of an Indian company to a foreign company, in the facts and circumstances of the present case, constituted an export and consequently the proceeds were deductible under Section 80HHC of the IT Act. Despite a strong reply to the audit objection, the Assessing Officer, upon receipt of letter dated 16th February, 2000 from the Commissioner of Income Tax requiring him to take 'remedial action forthwith', vide notice dated 17th February, 2000 i.e. on the very next day, issued a notice under Section 148 of the IT Act, seeking to reopen the assessment. The material on record does indicate that there was no independent application of mind on the part of the Assessing Officer and the notice proposing reassessment was issued reeling under the dictation from the Commissioner of Income-tax who was, admittedly, his 11 txa44-08.dt.31-07-19 superior officer. In the present case, as noted earlier, it cannot be said that the audit objection had pointed out some factual information which had been overlooked or not taken into consideration by the 12 txa44-08.dt.31-07-19 Assessing Officer, not only at the stage when the Assessing Officer accepted the Assessee's return in the first instance, but also when the Assessing Officer accepted the Assessee's return after the case was taken up for scrutiny. Since, on the basis of the material on record we are satisfied that there was no case made out for reopening of the assessment, we do not deem it necessary to go into the larger issue as to whether the Assessing Officer is precluded from issuing a notice for reassessment where such Assessing Officer has already replied to the audit objection justifying his earlier position.


IN HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO.44 OF 2008 Commissioner of Income Tax, having office at Aayakar Bhavan, Patto Plaza, Panaji, Goa. . Appellant. Versus M/s. Narcissus Investments Pvt. Ltd., Gabmar Apartments, Vasco Da Gama, Goa. . Respondent. Ms. Amira Abdul Razaq, with Ms. Tanya Ferreira, Advocate for Appellant. Mr. Mihir Naniwadekar, with Ms. Vinita Palyekar, Advocate for Respondent. Coram : M.S. Sonak & Nutan D. Sardessai, JJ. Reserved on : 23/07/2019. Pronounced on : 31st July, 2019. JUDGMENT : (Per M.S. Sonak, J.) Heard Ms. Amira Razaq with Ms. Tanya Ferreira for Appellant and Mr. Mihir Naniwadekar with Ms. Vinita Palyekar for Respondent. 2. By order dated 2nd June, 2008 this Tax Appeal was admitted on following substantial questions of law : 2 txa44-08.dt.31-07-19 A) Whether on facts and in circumstances of case ITAT was justified in law in upholding order of CIT(A) in cancelling income escaping assessment passed by Assessing Officer through provisions of Sec. 147 was rightly invoked to bring escaped income to tax ? B) Whether on facts and in circumstances of case, ITAT was justified in holding that AO reopened assessment on basis of change of opinion, without appreciating fact that reopening of assessment was within four years from end of relevant assessment year and therefore falls within expression "income escaping assessment", under clause (c) of Explanation 2, to section 147 of IT Act ? C) Whether on facts and in circumstances of case, ITAT was justified in law in not answering substantial question whether assessee investment company was justified in making claim of deduction u/s. 80HHC on sale proceeds received in convertible foreign exchange on sale of 1,70,032 shares of M/s. Chowgule Steamships Ltd. to M/s. International Finance Corporation, Washington, USA, though business of assessee company is only buying and selling of shares and not involved in any trading or manufacturing of goods or merchandise as per provisions of Sec. 80HHC? 3. challenge in this Tax Appeal is to Judgment and Order dated 3rd August, 2007 made by Income Tax Appellate Tribunal (ITAT) in proceedings ITA No.228/PNJ/2002 (impugned Judgment and Order). By impugned Judgment and Order, ITAT has confirmed order dated 5/8/2002 made by 3 txa44-08.dt.31-07-19 Commissioner (Appeals) quashing re-opening of assessment by Assessing Officer in respect of return of income filed by Respondent-Assessee for Assessment Year 1995-96. 4. In this case, Respondent-Assessee filed return of income for Assessment Year 1995-96 on 29/3/1996. By order dated 2 nd June, 1997, Assessing Officer completed assessment under Section 143(3) of Income Tax Act, 1961 (IT Act). However, on 17/2/2000, notice was issued to Respondent-Assessee under Section 148 of IT Act, seeking to reopen assessment. Respondent-Assessee filed its return on 31/3/2000 in response to notice dated 17.2.2000, inter alia, protesting reopening of assessment. 5. By order dated 21st November, 2001, Assessing Officer completed assessment under Section 143(2) of IT Act, disallowing Assessee's claim for deduction under Section 80 HHC in respect of export of shares and determined total income of Respondent-Assessee at 1,22,60,230. 6. Respondent-Assessee appealed to Commissioner (Appeals), who, vide order dated 5th August, 2002, quashed reopening of assessment. Appellant, thereupon, appealed to ITAT, which has, vide impugned Judgment and Order, 4 txa44-08.dt.31-07-19 dismissed Appeal and confirmed Commissioner (Appeals) order dated 5th August, 2002. Hence, present present Appeal under Section 260A of IT Act. 7. Ms. Razaq, learned Counsel for Appellant submits that there was absolutely no infirmity on part of Revenue in seeking to reopen assessment. She submits that this was not at all case of 'change of opinion' as has been held by Commissioner (Appeals) and confirmed by ITAT. She submits that issue as to whether sale of shares of Indian company to foreign company amounts to 'export' or not under relevant provisions of Customs Act, 1962 was not at all adverted to by Assessing Officer at stage when assessment was finalised in first instance sometime in year 1997. 8. Ms. Razaq submits that reopening of assessment has no nexus with audit objections, because in present case, Assessing Officer has independently applied his mind and only thereafter issued notice of reassessment. She submits that merely because Assessing Office had replied to audit objection and maintained his earlier stance, there can be no statutory bar to such Assessing Officer issuing notice for reassessment. 9. Ms. Razaq submits that even, otherwise, audit objection can also be construed as 'information', on basis of which notice 5 txa44-08.dt.31-07-19 for reassessment can always be issued. She submits that if Assessing Officer derives information from external source concerning facts or even as to law relating to and/or having bearing on assessment, Assessing Officer is perfectly competent to reopen assessment. She submits that this is view taken by Hon'ble Supreme Court in case of Larsen and Toubro Limited vs. State of Jharkhand and others 1. 10. Ms. Razaq submits that this Court in case of IPCA Laboratories Ltd. vs. Gajanand Meena, Deputy Commissioner of Income-tax 2 had sustained notice for reopening of assessment where Assessee had claimed excessive deduction under Section 80HHC. She submits that view taken by Commissioner (Appeals) and ITAT is contrary to law laid down by Hon'ble Supreme Court in Larsen and Toubro Limited (supra) and by this Court in IPCA Laboratories Ltd. (supra). For all these reasons, she submits that substantial questions of law at (A) and (B) are liable to be answered in favour of Revenue and against Respondent-Assessee. 11. Ms. Razaq submits that in present case, ITAT has not even adverted to issue as to whether Assessee, who is admittedly investment company, was justified in claiming 1 2017 (13) SCC 780 2 [2001] 251 ITR 420 (Bombay) 6 txa44-08.dt.31-07-19 deduction under Section 80HHC on sale proceeds received in convertible foreign exchange on sale of 1,70,032 shares of M/s. Chowgule Steamship Limited to M/s. International Finance Corporation, Washington, USA even though business of Assessee company was only of buying and selling of shares and Assessee company was not at all involved in trading or manufacturing goods or merchandise as contemplated by Section 80HHC of IT Act. She submits that should this Court answer substantial questions of law at (A) and (B) in favour of Revenue, then, matter may be remanded to ITAT in order to consider this issue, since this issue was never even considered by ITAT, though same was specifically raised. 12. Mr. Mihir Naniwadekar, learned Counsel for Respondent-Assessee defended impugned Judgment and Order on basis of reasoning reflected therein. He submits that in present case both, Commissioner (Appeals), as well as ITAT have recorded finding of fact that Assessing Officer in reopening assessment has acted under dictation of Commissioner of Income Tax. He submits that there is no reason to disturb this concurrent finding of fact. He relies upon case of Sheo Narain Jaiswal vs. Income-tax Officer 3 and CIT vs. T.R. Rajakumari 4 3 [1989] 176 ITR 352 (Patna) 4 [1974 96 ITR 78 7 txa44-08.dt.31-07-19 13. Mr. Naniwadekar submits that in present case, Assessing Officer had, in fact, rejected objections raised in audit report. Thereafter, by changing his opinion, Assessing Officer has issued reassessment notice. He relies upon Commissioner of Income Tax -17, Mumbai vs. Rajan N. Aswani 5 to submit that such course of action is clearly impermissible in law. 14. Mr. Naniwadekar submits that in reasons indicated by Assessing Officer for reassessment there is really no reference to issue of transaction not being 'export' for purposes of Customs Act. He submits that Revenue is not entitled to add or supplement such reasons, but has to stand or fall on reasons set out in notice seeking to reopen assessment. He submits that this is clear case of change of opinion based merely upon audit objection. Accordingly, he submits that impugned Judgment and order warrants no interference whatsoever. 15. rival contentions now fall for our determination. 16. In present case, as noted earlier, return filed by Assessee claiming deduction under Section 80HHC of IT Act was initially accepted by Assessing Officer in terms of Section 143(1) (a) of IT Act. return was, thereafter, selected for scrutiny by 5 Income Tax Appeal No.606/2015 decided on 24/2/2018 8 txa44-08.dt.31-07-19 issuing notice under Section 143(2) and Section 142(1) of IT Act. In fact, notice dated 21.06.1996 was issued to Assessee under Section 142(1) of IT Act, by which Assessing Officer required Assessee to justify its claim of sale of shares to parties outside India as qualifying to be regarded as ' export' and consequently deductible under Section 80HHC of IT Act. Assessing Officer required Assessee to furnish details along with receipt of convertible foreign exchange, details of custom clearance, Reserve Bank of India clearance, if any, in relation of transactions in question. By further letter dated 27 th June, 1996, Assessing Officer also required Assessee to furnish particulars, including name and other details of foreign company to whom shares were sold and value of shares so sold. 17. record indicates that Assessee, by letter dated 31.12.1996, responded to notice/letter and justified its claim for deduction under Section 80HHC. Assessee also furnished details as called for by Assessing Officer, including correspondence with Reserve Bank of India giving approval for transfer of shares. 18. Assessing Officer, only after due consideration of Assessee's response dated 31.12.1996, completed assessment under Section 143(3) on 2nd June, 1997, accepting return of 9 txa44-08.dt.31-07-19 income. Therefore, this is really not case where we can accept contention of Ms. Razaq that Assessing Officer had not even adverted to aspect of transaction not amounting to ' export'. Once this issue was squarely considered, it was not open to Revenue to indulge into further hair-splitting by urging that some facet of this issue remained to be considered. 19. record indicates that even issue of impact of Customs Act upon transaction in question was raised and considered by Assessing Authority. In this case, Assessing Authority was quite alive to this issue. There is not even any allegation that Assessee had failed to disclose all material facts in relation to transaction in question. In such circumstances, permitting Revenue to reopen assessment would amount to permitting Revenue to review its earlier order, which jurisdiction is clearly not vested in Revenue while exercising powers under under Sections 147 and 148 of IT Act. 20. In this case, after audit raised its objection, Assessing Officer submitted reply to same in which Assessing Officer resisted audit objection and defended completion of assessment. From perusal of reply, which is at Annexure 'B' (pages 67 to 79 of paper book), it is very apparent that Assessing Officer, at stage of finalisation of assessment, had very 10 txa44-08.dt.31-07-19 clearly addressed issue as to whether transaction of sale of shares of Indian company to foreign company, in facts and circumstances of present case, constituted export and consequently proceeds were deductible under Section 80HHC of IT Act. 21. From reply, it is evident that transaction was screened not only in context of Companies Act, 1956, but also from context of Foreign Exchange Regulation Act, 1973 since, there was no definition of 'export' under IT Act. Despite strong reply to audit objection, Assessing Officer, upon receipt of letter dated 16th February, 2000 from Commissioner of Income Tax requiring him to take 'remedial action forthwith', vide notice dated 17th February, 2000 i.e. on very next day, issued notice under Section 148 of IT Act, seeking to reopen assessment. 22. Both, Commissioner (Appeals), as well as ITAT, have recorded concurrent findings of fact that aforesaid action on part of Assessing Officer amounts to 'acting under dictation'. material on record does indicate that there was no independent application of mind on part of Assessing Officer and notice proposing reassessment was issued reeling under dictation from Commissioner of Income-tax who was, admittedly, his 11 txa44-08.dt.31-07-19 superior officer. In such circumstances, there is no good ground to interfere with impugned Judgment and Order. 23. In case of Larsen and Toubro Limited (supra), Hon'ble Supreme Court has held that expression 'information' in context of provisions which permit reopening of assessment, means instruction or knowledge derived from external source concerning facts or parties or as to law relating to and/or having bearing on assessment. This expression is required to be given widest amplitude and should not be construed narrowly. It comprehends not only variety of factors, including information from external sources of any kind, but also discovery of new facts or information available in record of assessment not previously noticed or investigated. In this case, Apex Court has also noted that there are catena of judgments holding that assessment proceedings can be reopened if audit objection points out factual information already available in records and that it was overlooked or not taken into consideration. Similarly, if audit points out some information or facts available outside record or any arithmetical mistake, assessment can be reopened. 24. In present case, as noted earlier, it cannot be said that audit objection had pointed out some factual information which had been overlooked or not taken into consideration by 12 txa44-08.dt.31-07-19 Assessing Officer, not only at stage when Assessing Officer accepted Assessee's return in first instance, but also when Assessing Officer accepted Assessee's return after case was taken up for scrutiny. As noted earlier, detailed set of questions were posed to Assessee and information called for, in order to determine as to whether transaction, in question, amounted to 'export' or not. It is only after detailed consideration of such material, that Assessing Officer accepted return of Assessee and allowed deduction as claimed. 25. Even in reply to audit objection, Assessing Officer maintained that deduction was rightly granted after taking into consideration all material on record and after adverting to facts and law, relevant to issue. Thereafter, on basis of reasons, which are mostly vague, Assessing Officer upon being directed by Commissioner of Income Tax to take remedial action, issued notice for reassessment. In such facts, it cannot be said that observations in Larsen and Toubro Limited (supra), upon which considerable emphasis was placed by Ms Razaq, would assist case of Revenue. In fact, in paragraph 21 of report relied upon by Ms. Razaq, Apex Court has noted that mere change of opinion or having second thought about it by competent authority on same set of facts and materials on record does not constitute information for purposes of reopening of assessment. 13 txa44-08.dt.31-07-19 This, according to us, is clear case of Assessing Officer merely changing his opinion or having second thought on basis of materials on record and that too reluctantly and reeling under dictation from superior officer. Accordingly, we are satisfied that there is no case made out to interfere with impugned Judgment and Order. 26. decision of this Court in case of IPCA Laboratories Ltd. (supra) also turns on its own facts, where Assessing Officer had overlooked meaning of word 'profit' as appearing in Section 80HHC(3)(c) of IT Act. It is in that context that Division Bench of this Court held that reopening of assessment was not based upon mere change of opinion. facts in present case, as noticed earlier, are quite different. 27. Since, on basis of material on record we are satisfied that there was no case made out for reopening of assessment, we do not deem it necessary to go into larger issue as to whether Assessing Officer is precluded from issuing notice for reassessment where such Assessing Officer has already replied to audit objection justifying his earlier position. No doubt, in Rajan N. Aswani (supra) there are some observations to this effect as urged by Mr. Naniwadekar. However, Ms. Razaq did make attempts to distinguish said decision. According to us, it is really not 14 txa44-08.dt.31-07-19 necessary to go into this larger issue, since, based upon discussion as aforesaid, we are satisfied that there was no case made out for reopening of assessment. 28. On basis of aforesaid discussion, we answer substantial questions of law at (A) and (B) against Revenue and in favour of Respondent-Assessee. Since these two substantial questions of law are being answered against Revenue, there is no case made out to remit matter to ITAT for deciding issue raised in substantial question of law at (C). In fact, there is no necessity of deciding substantial question of law at (C), because, even if such question were to be decided in favour of Revenue, same would make no difference to final conclusion in matter. 29. Accordingly, this Appeal is dismissed. There shall be no order as to costs. Nutan D. Sardessai, J. M.S. Sonak, J. Commissioner of Income-tax, Goa v. Narcissus Investments Pvt. Ltd
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