IN HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 1917 OF 2019 Marico Ltd. Petitioner V/s. Assistant Commissioner of Income Tax-12(3)(2) and Ors. ... Respondents Mr. Percy Pardiwala, Senior Advocate a/w. Nitesh Joshi i/b. Mandar Manohar Vaidya for Petitioner. Mr. Sham Walve a/w. Pritish Chatterjee for Respondents. CORAM : M.S. SANKLECHA & NITIN JAMDAR, JJ. DATE : 21 AUGUST 2019. P.C. :- At request of learned Counsel for parties, this Petition is taken up for final disposal at stage of admission. 2. This Petition under Article 226 of Constitution of India challenges notice dated 27 March 2019 issued by Respondent No.1 Assistant Commissioner of Income Tax. 2 22. WP 1917.19.doc impugned notice dated 27 March 2019 has been issued under Section 148 of Income Tax Act, 1961 (the Act) seeking to reopen assessment for Assessment Year 2014-15. 3. Briefly, facts leading to this Petition arise as under :- (i) For Assessment Year 2014-15 Petitioner filed its revised return of income, declaring total income of Rs.418.04 crores under normal provisions of Act and Rs.670.82 crores as Book Profits under Section 115JB of Act. In its return Petitioner has also claimed deduction of Rs.47.04 crores on account of amortization of brand value, while computing Book Profits at Rs.670.82 crores under Section 115JB of Act. (ii) Assessing Officer took up Petitioner s return relating to Assessment Year 2014-15 for scrutiny assessment. On examination of return of income, Assessing Officer issued notice dated 25 September 2017 under Section 142(1) of Act to Petitioner. above notice at Serial No.5 thereof inter alia called for explanation as under :- 5. You have reduced from Book Profits under Section 115JB amount of Rs.47,04,58,042/- (as per revised return), being Book depreciation on intangibles (Fiancee & Haircode) . In preceding AY 2013-14 also, ::: Uploaded on - 27/08/2019 ::: Downloaded on - 29/08/2019 09:55:03 ::: 3 22. WP 1917.19.doc exactly same amount of Rs. 47,04,58,042/- was so reduced from book profits, which amount was added back to book profits for detailed reasons given in said assessment order. Pleas show cause as to why said amount should not be added to your Book Profits under Section 115JB on similar line as made in AY 2013-14. (iii) Petitioner responded to above notice dated 25 September 2017 by its letters dated 10 October 2017 and 21 December 2017. In its response, Petitioner justified claiming depreciation of Rs. 47.04 crores on intangible i.e. brand value while determining Book Profits under Section 115JB of Act. It was pointed out that depreciation not debited to profit and loss account, will still have to be taken its account to determine book profits, if same is disclosed in notes to Balance Sheet and Profit and Loss Account. Reliance in support of above was made on decision of Delhi High Court in CET v/s. Sain Processing & Weaving Mills (P) Ltd. (221 CTR 493) . It was further pointed out that adjustment of brand against securities premium and capital redemption reserve is not in accordance with AS (Accounting Standard) 26 and cannot be permitted. (iv) Respondent No.1 passed assessment order dated 30 January 2018 under Section 143(3) r/w Section 144C of Act. above assessment order accepted Petitioner s claim for ::: Uploaded on - 27/08/2019 ::: Downloaded on - 29/08/2019 09:55:03 ::: 4 22. WP 1917.19.doc allowing depreciation for amortization of brand value to determine Book Profits under Section 115JB of Act at Rs.684.04 crores. (v) Thereafter, on 27 March 2019 impugned notice was issued seeking to re-open Assessment Year 2014-15. impugned re-opening notice has been issued within period of four years from end of Assessment Year 2014-15. reasons in support of impugned notice as issued to Petitioner reads as under :- 1) In this case, assessee has filed its return of income on 24.11.2014 declaring total income of Rs.422,17,76,910/- for A.Y. 2014-15. case was selected for scrutiny under CASS and scrutiny assessment was completed u/s.143(3) r.w.s. 144C(3) on 30.01.2018 determining total assessed income at Rs.4,98,28,21,820/- and Book Profit u/s 115JB at Rs.684,08,76,976/-. 2) On going through records of assessee company for A.Y. 2012-13, and assessment order passed by then AO for that year, it is seen that assessee has written off amount of Rs.47,04,58,042/- as amortization for A.Y. 2014-15. Under provisions of section 115JB of Income tax Act, 1961, book profit is to be computed after making additions and deletions to net profit specified therein. No deduction is allowable beyond specified deletions or negative adjustments provided in said section. assessee company had claimed deduction of Rs.47,04,58,042/- from book profit on ground that after revaluation of assets of certain ::: Uploaded on - 27/08/2019 ::: Downloaded on - 29/08/2019 09:55:03 ::: 5 22. WP 1917.19.doc brands having net book value of Rs.473 Cr. were written off and charged to Capital redemption reserve and securities premium during A.Y. 2007-08. amount written off pertains to brand Manjal and Nihar acquired in A.Y. 2006-07 and Fiancee and Haircode acquired in A.Y. 2007-08. There is no provision in section 115JB for granting deduction for amortization not charged in profit and loss account on notional basis. department has consistently denied deduction to book profit claimed by assessee from A.Y. 2010-11 onwards. However, during assessment proceedings for A.Y. 2014-15, notional amortization amount of Rs.47,04,58,042/- was remains to be added back by assessing officer. This has resulted into under assessment of Rs.47,04,58,048/- and income chargeable to tax of equal amount has escaped assessment within meaning of clause (c) explanation 2 of section 147 of income Tax Act, 1961. 3) In view of above, I have reason to believe that income amounting to Rs. 47,04,58,042/- chargeable to tax has escaped assessment by reason of failure on part of assessee to disclose fully and truly all material facts within meaning of section 147 of Income- tax Act, 1961 for A.Y. 2014-15. Hence, it is fit case for issue of notice u/s.148 of I.T.Act, 1961 . (vi) Petitioner by its letter dated 14 May 2010 objected to re-opening notice on ground that it is without jurisdiction inasmuch as it is based on change of opinion. This very issue/reason for reopening assessment was subject matter of consideration during regular assessment proceedings, leading to assessment ::: Uploaded on - 27/08/2019 ::: Downloaded on - 29/08/2019 09:55:03 ::: 6 22. WP 1917.19.doc order dated 30 January 2018. (vii) Assessing Officer by order dated 9 June 2019 rejected objections by holding that basis of reopening notice is not on account of change of opinion. This for reason that Assessing Officer had not formed any opinion with regard to same in order dated 30 January 2018 passed under Section 143(3) of Act, as there is no discussion on it, in impugned order dated 30 January 2018. 4. Mr. Pardiwala, learned Senior Advocate appearing in support of Petition submits as under :- (a) Although impugned notice for reopening has been issued within period of four years from end of Assessment Year i.e. 2014-15, yet jurisdiction to reopen assessment cannot be exercised on account of change of opinion. It is submitted that jurisdiction to re-open assessment is not jurisdiction to review order as held by Apex Court in CIT v. Kelvinator of India Ltd. (2010) 320 ITR 561; (b) In this case specific query with regard to issue which forms basis of reopening notice was raised during regular assessment proceeding under Section 143(3) of said Act. Petitioner s explanation to above specific queries was ::: Uploaded on - 27/08/2019 ::: Downloaded on - 29/08/2019 09:55:03 ::: 7 22. WP 1917.19.doc accepted, as no disallowance on above amounts was done to arrive at book profits in assessment order dated 30 January 2018. Thus, on facts reopening notice is on account of change of opinion; and (c) No discussion in Assessment Order dated 30 January 2018, would not mean that Assessing Officer had not formed any opinion. This more particularly so, as query on this aspect was raised by Assessing Officer and responded to by Petitioner to satisfaction of Assessing Officer during assessment proceedings. 5. Per contra, Mr. Walve, learned Counsel for Respondents in support of impugned notice submits : (a) That impugned notice has been issued within period of four years from end of relevant Assessment Year, therefore mere disclosure of all material facts truly and fully will not oust jurisdiction of Assessing Officer to issue reopening notice; and (b) There is no change of opinion, for reason that Assessing Officer while passing Assessment order dated 30 January 2018 under Section 143(3) of Act had not formed any opinion on issue. opinion, if any, should find mention in order by way of adjudication. Thus reopening notice is not on ::: Uploaded on - 27/08/2019 ::: Downloaded on - 29/08/2019 09:55:03 ::: 8 22. WP 1917.19.doc account of opinion to one formed in assessment order dated 30 January 2018 under Section 143(3) of Act. Thus Petition be dismissed. 6. We have considered rival submissions. It is settled position in law that power to reopen assessment within period of four years from end of relevant assessment year, even when assessment has been made under Section 143(3) of Act, is not curtailed by proviso to Section 147 of Act. Therefore, even where assessee has disclosed all material facts truly and fully for assessment and assessment is completed under Section 143(3) of Act, reopening is permissible within period of four years from end of relevant assessment year. only condition precedent for exercising jurisdiction to reopen assessment, is Assessing Officer should have reasonable belief that income chargeable to tax has escaped assessment. This reason to believe that income chargeable to tax has escaped assessment should not be on basis of change of opinion, as otherwise power of reassessment would become power of review, which it is not. 7. Apex Court in Kelvinator of India Ltd. (supra), has while setting out parameters for exercise of powers of reopening assessment had inter-alia observed as under :- However, one needs to give schematic ::: Uploaded on - 27/08/2019 ::: Downloaded on - 29/08/2019 09:55:03 ::: 9 22. WP 1917.19.doc interpretation to words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to Assessing Officer to reopen assessments on basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind conceptual difference between power to review and power to reassess. But reassessment has to be based on fulfillment of certain pre-conditions and if concept of change of opinion is removed, as contended on behalf of Department, then, in garb of reopening assessment, review would take place. One must treat concept of change of opinion as in-built test to check abuse of power by Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to reopen, provided there is tangible material to come to conclusion that there is escapement of income from assessment. Reasons must have live link with formation of belief. 8. In present facts, we note that Assessing Officer during course of regular assessment proceedings leading to assessment order dated 30 January 2018, on basis of profits and loss account and balance sheet and practice for earlier years i.e. Assessment Year 2013-14 had issued notice on 25 September 2017 to Petitioner to show cause why amount of Rs.47.04 crores being claimed as book depreciation on intangibles should not be disallowed to determine book profits under Section 115JB of Act. above query of Assessing Officer was responded to by Petitioner in great detail by its letters dated 10 October 2017 and 21 December 2017. It justified its claim for deductions by placing ::: Uploaded on - 27/08/2019 ::: Downloaded on - 29/08/2019 09:55:03 ::: 10 22. WP 1917.19.doc reliance upon decisions of Courts. In support of its contention that they are entitled to deduction of current years depreciation from net profit to arrive at book profits under Section 115JB of Act. It was also explained that under sub- section 6 of Section 211 of Companies Act, reference to balance sheet or profit and loss account would also include any notes thereto or documents annexed thereto. Thus notes to account should be taken into account to determine net profits for working out book profits in terms of Section 115JB of Act. Assessing Officer thereafter proceeded to pass assessment order dated 30 January 2018 under Section 143(3) of Act and did not make proposed dis-allowance. 9. It is made clear that for purpose of this petition, we are not called upon to and therefore not examining correctness or otherwise of disallowance of depreciation to arrive at book profits. Our examination is limited only to jurisdiction of Assessing Officer to reopen assessment. 10. It is undisputed position before us, that query was raised on very issue of reopening during regular Assessment proceedings. parties have responded to it and Assessment Order dated 30 January 2018 makes no reference to above issue at all. However, once query has been raised by Assessing Officer during assessment proceedings and assessee has ::: Uploaded on - 27/08/2019 ::: Downloaded on - 29/08/2019 09:55:03 ::: 11 22. WP 1917.19.doc responded to that query, it would necessarily follow, as held by our Court that Assessing Officer has accepted Petitioner s/Assessee s submissions, so as to not deal with that issue in assessment order. In fact, our Court in GKN Sinter Metals Ltd. V/s. Ms. Ramapriya Raghavan, Assistant Commissioner of Income Tax, Circle 2(1) (371) ITR 225 had occasion to dealt with similar/identical submissions on behalf of Revenue viz. that assessment order passed under Section 143(3) of Act does not reflect any consideration of issue, it must follow that no opinion was formed by Assessing Officer in regular assessment proceedings. This submission was negatived by this Court by observing as follows :- 14. According to Revenue, it could only be when assessment order contains discussion with regard to particular claim can it be said that Assessing Officer had formed opinion with regard to claim made by assessee. This Court in Idea Cellular Ltd. v/s. Deputy Commissioner of Income Tax 301 ITR 407 has expressly negatived on identical contention on behalf of Revenue. Court held that once all material was placed before Assessing Officer and he chose not to refer to to deduction/ claim which was being allowed in assessment order, it could not be contended that Assessing Officer had not applied his mind while passing assessment order. Moreover in this case, it is evident from letter dated 6 th August, 2007 addressed by Assessing Officer to Petitioner containing reasons recorded for issuing ::: Uploaded on - 27/08/2019 ::: Downloaded on - 29/08/2019 09:55:03 ::: 12 22. WP 1917.19.doc impugned notice also record fact that during regular assessment proceedings, Petitioner has been asked to furnish details in support of claim for exemption under Section 80IA/IB of Act. letter further records that details sought for were furnished and it is now observed that there has been disproportionate distribution of expenses between various units belonging to Petitioner for claiming deduction under Section 80IA/IB of Act. This is further indication of fact that Assessing Officer had during regular assessment proceedings for Assessment Year 200203 sought information in respect of allocation of expenses and explanation offered by Petitioner was found to be satisfactory. This is evident from query dated 27 th December, 2004 and Petitioner's response to same on 25 th January, 2005 explaining manner of distribution of common expenses for delaying process of claiming deduction under Section 80IA/IB of Act. All this would indicate that Assessing Officer had formed opinion while passing order dated 9 th March, 2005. This Court in Aroni Commercials Ltd. v/s. Assistant Commissioner of Income Tax 367 ITR 405 had occasion to consider somewhat similar submission made by Revenue and negatived same by holding that when query has been raised with regard to particular issue during regular assessment proceedings, it must follow that Assessing Officer had applied his mind and taken view in matter as is reflected in Assessment Order. Besides, manner in which Assessing Officer would draft/frame his order is not within control of assessee. Moreover, if every contention raised by assessee which even if accepted is to be reflected in assessment order, then as observed by Gujarat High Court in CIT v/s. Nirma Chemicals ::: Uploaded on - 27/08/2019 ::: Downloaded on - 29/08/2019 09:55:03 ::: 13 22. WP 1917.19.doc Ltd. 305 ITR 607, order would result into epic tome. Besides, it would be impossible for Assessing Officer to complete all assessments which have to under gone scrutiny at its hand. In above view, it is clear that once query has been raised during assessment proceedings and Petitioner has responded to query to satisfaction of Assessing Officer as is evident from fact that Assessment Order dated 9th March, 2005 accepts Petitioner's claim for deduction under Section 80IA/IB of Act. It must follow that there is due application of mind by Assessing Officer to issue raised. above observations apply on all fours to this Petition, so far as Revenue s submission of no change of opinion is concerned. 11. further submission of Mr. Walve that in absence of Assessing Officer adjudicating upon issue it cannot be said that Assessing Officer had formed opinion during regular assessment proceedings leading to order dated 30 January 2018. adjudication would only be on such issue where assessee s submissions are not acceptable to Revenue, then occasion to decide lis would arise i.e. adjudication. However, where Revenue accepts view propounded by assessee in response to Revenue s query, Assessing Officer has certainly to form opinion whether or not stand taken by assessee is acceptable. Therefore, it must follow that where queries have been raised during assessment proceedings and assessee has responded to ::: Uploaded on - 27/08/2019 ::: Downloaded on - 29/08/2019 09:55:03 ::: 14 22. WP 1917.19.doc same, then non-discussion of same or non-rejection of response of assessee, would necessarily mean that Assessing Officer has formed opinion accepting view of Assessee. Thus opinion is formed during regular Assessment proceedings, bars Assessing Officer to reopen same only on account of different view. 12. Thus we find that reasons in support of impugned notice is very issue in respect of which Assessing Officer has raised query dated 25 September 2017 during assessment proceedings and Petitioner had responded to same by its letters dated 10 December 2017 and 21 December 2017 justifying its stand. non-rejection of explanation in Assessment Order would amount to Assessing Officer accepting view of assessee, thus taking view/forming opinion. Therefore, in these circumstances, reasons in support of impugned notice proceed on mere change of opinion and therefore would be completely without jurisdiction in present facts. Accordingly, impugned notice dated 27 March 2019 is quashed and set aside. 13. Petition allowed. NITIN JAMDAR, J. M.S. SANKLECHA, J Marico Ltd. v. Assistant Commissioner of Income-tax-12(3)(2) and Or