C/TAXAP/749/2019 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 749 of 2019 PRINCIPAL COMMMISSIONER OF INCOME TAX-2 Versus M/S GUJARAT STATE FINANCIAL CORPORATION Appearance: MRS MAUNA M BHATT(174) for Appellant(s) No. 1 for Opponent(s) No. 1 CORAM:HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MS. JUSTICE SANGEETA K. VISHEN Date : 10/12/2019 ORAL ORDER (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1. By this appeal under section 260A of Income Tax Act, 1961 (hereinafter referred to as Act ) appellant revenue has challenged order dated 4.6.2019 passed by Income Tax Appellate Tribunal, Ahmedabad, Bench (hereinafter referred to as Tribunal ) in ITA No.2637/Ahd/2014 for assessment year 2006-07 by proposing following two questions stated to be substantial questions of law:- [A] Whether Appellate Tribunal has erred in law and on facts in holding that reopening of assessment u/s 147 was not justified and requires to be quashed? [B] Whether Appellate Tribunal has erred in law and on facts in holding that question of treating amount of Rs.159.46 Cr credited directly to Capital reserve account without crediting to P & L account as cessation of liability u/s 41(1) of Act, which was not dealt with in original assessment proceedings does not constitute information Page 1 of 6 Downloaded on : Thu Apr 23 16:29:57 IST 2020 C/TAXAP/749/2019 ORDER within meaning of Section 147(b) of Act? 2. assessment year is 2006-07 and relevant accounting period is previous year 2005-06. 3. assessee filed its return of income on 27.12.2006, declaring total loss of Rs.137,02,37,406/-. original assessment proceedings under section 143(3) of Act had been completed on 16.12.2008 determining total loss at Rs.12,00,85,426/-. Thereafter, assessment came to be reopened under section 147 of Act and assessment came to be framed under section 143(3) read with section 147 of Act on 4.3.2013 making addition of Rs.159,46,05,271/- on account of amount directly credited to capital reserve account. 4. assessee carried matter in appeal before Commissioner (Appeals), who dismissed appeal relying upon her own decision on similar issue in assessee's own case for assessment year 2009-10. 5. assessee carried matter in appeal before Tribunal which set aside assessment order. 6. Ms. Mauna Bhatt, learned senior standing counsel for appellant invited attention of court to impugned order passed by Tribunal, to submit that Tribunal has held that assessment in case where scrutiny assessment has been made cannot be reopened after period of four years unless it is established that on account of failure of assessee to disclose all material facts fully and truly, income had escaped assessment. It was pointed out that Tribunal Page 2 of 6 Downloaded on : Thu Apr 23 16:29:57 IST 2020 C/TAXAP/749/2019 ORDER has inter alia held that Assessing Officer was not able to lay his hands on any new information and has only re- appreciated information already possessed by him and considered in scrutiny assessment and that there is no allegation against assessee of withholding any information. Reference was made to Explanation 1 to section 147 of Act, which provides that production before Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by Assessing Officer will not necessarily amount to disclosure within meaning of foregoing proviso. It was submitted that therefore, merely because Assessing Officer has placed reliance upon record of case and his belief that income chargeable to tax has escaped assessment is not based on any new information, Tribunal was not justified in holding that reopening of assessment is not justified. It was, accordingly, urged that matter requires consideration on questions as proposed or as may be formulated by this court. 7. perusal of assessment order dated 1.7.2014 passed by Commissioner (Appeal) reveals that in paragraph 6.1.5 thereof, Commissioner (Appeals) has recorded that pursuant to query as to whether assessee had reported capital reserve gain on restructuring of principal debts of Rs.159,46,05,271/- and to submit complete details thereof with its impact on total income, authorised representative of assessee, during course of regular scrutiny assessment for assessment year 2006-07, had submitted reply to question No. (C)(1)(4) vide letter dated 13.12.2008, under point No.4 wherein, it is stated thus:- Page 3 of 6 Downloaded on : Thu Apr 23 16:29:57 IST 2020 C/TAXAP/749/2019 ORDER Corporation was passing through severe liquidity crunch and accumulated losses are of Rs.872.48 crores as on 31/03/2005. It could not repay to its lenders and hence it has restructured its liabilities. Corporation has made amicable settlement with SIDBI and other banks. Accordingly, Corporation was required to pay Rs.400.00 crores to SIDBI in four instalments against principal outstanding of Rs. 537.46 crores and Rs.21.57 crores to other banks against principal outstanding of Rs.43.14 crores. Corporation thus got remission of Rs.159.05 crores in principal outstanding of loan liabilities. transaction between Corporation and SIDBI and other banks are of nature of loan transaction. These transactions are therefore on Capital Account. waiver or remission of liabilities towards loan is therefore of Capital Receipt and hence Corporation has therefore credited these amounts to Capital Reserve. details of principal loan amounts waived by SIDBI and other banks are given in Annexure-B. 8. Thus, it is evident that issue proposed vide question [B] had been scrutinized at time of original scrutiny assessment under section 143(3) of Act. Subsequently, Assessing Officer has reopened assessment to examine very same issue, which has already been scrutinized at time of scrutiny assessment. 9. Tribunal, in impugned order, has recorded that perusal of reasons would reveal that Assessing Officer Page 4 of 6 Downloaded on : Thu Apr 23 16:29:57 IST 2020 C/TAXAP/749/2019 ORDER nowhere recorded that on account of failure of assessee to disclose fully and truly all material facts, income chargeable to tax has escaped assessment. In this regard, perusal of reasons recorded as reflected in paragraph 6 of impugned order shows that Assessing Officer has recorded facts on basis of which he has formed belief that income chargeable to tax has escaped assessment and thereafter, has recorded that he has reason to believe that income of assessee is under-assessed by amount of Rs.159,46,05,271/-. However, in entire reasons recorded there is not even whisper that there is any failure on part of assessee to disclose fully and truly all material facts. It being admitted position that assessment is sought to be reopened beyond period of four years from end of relevant assessment year in case where scrutiny assessment has been made under section 143(3) of Act, it was incumbent upon Assessing Officer to record, in reasons itself, as to whether there was any failure on part of assessee to disclose fully and truly all material facts. In absence of any such finding in reasons recorded for reopening assessment, assumption of jurisdiction on part of Assessing Officer, beyond period of four years from end of relevant assessment year, lacked validity. Under circumstances, no infirmity can be found in impugned order so as to give rise to any question of law, much less, substantial question of law. 10. Insofar as finding recorded by Tribunal that Assessing Officer could not lay his hands on any new information and has re-appreciated information already possessed by him and considered it in scrutiny Page 5 of 6 Downloaded on : Thu Apr 23 16:29:57 IST 2020 C/TAXAP/749/2019 ORDER assessment, as rightly pointed out by learned senior standing counsel for appellant, in light of provisions of Explanation 1 to section 147 of Act, there is no bar against Assessing Officer on reopening assessment on basis of information contained in material which was already placed before Assessing Officer. However, information has to be such as is contemplated in Explanation 1 to section 147 of Act. In present case, there is no observation of Assessing Officer that material on record was embedded in such manner that it was not possible for Assessing Officer to notice same at time of scrutiny assessment. Moreover, as recorded earlier, very same issue had already been scrutinized during course of scrutiny assessment. Under circumstances, no infirmity can be found in impugned order warranting interference. 11. appeal therefore, fails and is accordingly summarily dismissed. HARSHA DEVANI, J) (SANGEETA K. VISHEN,J) BINOY B PILLAI Page 6 of 6 Downloaded on : Thu Apr 23 16:29:57 IST 2020 Principal Commissioner of Income-tax-2 v. Gujarat State Financial Corporation