TaxTMI 
TaxTMI 
2019 (7) TMI 548
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....ed in the interest of justice; (d) to provide for the cost of this petition." 3. The case of the writ applicant may be summarized as under : "2.1 The petitioner is a Company incorporated under the Companies Act, 1956 of which majority shareholders are citizens of India. The petitioner is, therefore, entitled to the constitutional rights guaranteed under Article 14 and 19(1)(g) of the Constitution of India. 2.2 The petitioner is engaged in the activity of trading-cum-marketing of pharmaceutical products. The petitioner, during the year under consideration (i.e. Assessment Year 2013-14), had incurred sales promotion expenses of Rs. 30,43,808/-, made purchases of Rs. 1,66,76,556/- and sales of Rs. 2,97,60,315/-. Such three items duly appear in the Audit Annual Accounts of the petitioner, relevant being Schedule-20 (sales promotion expenses), Schedule-15 (purchases) and Schedule-13 (sales). The petitioner filed return of income for the year under consideration on 28.09.2013 declaring total income at Rs.NIL and the same was initially processed under section 143(1) of the Act. 2.3 The case of the petitioner was selected for scrutiny assessment under section 143(3) of the Ac....
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....ion 148 of the Act seeking to reopen the case of the petitioner for the year under consideration. 2.9 The petitioner filed return of income in response to the impugned notice on 05.05.18. The petitioner, vide letter dated 14.05.18, informed the Respondent about filing of such return of income and further requested the Respondent to supply copy of reasons for reopening. 2.10 The Respondent, vide letter dated 30.05.18, was pleased to supply copy of reasons for reopening. Perusal of reasons for reopening reveals that the case has been reopened broadly on twin counts viz. (1) "Sales promotion expenses" to the tune of Rs. 20,00,271/- incurred on various tours have not been expended wholly and exclusively for the business of the petitioner and (2) Further verification and investigation of "Purchases" and "Sales" is required. Briefly, the case of the Respondent is as follows : "SALES PROMOTION EXPENSES": The petitioner has debited Rs. 45,57,388/- towards indirect expenses out of which, a sum of Rs. 30,43,808/- is towards "Sales promotion expenses" which accounts for almost 67% of total indirect expenses. Further, upon perusal of the details furnished at the original assessment....
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....arked as ANNEXURE "H". 2.12 However, the Respondent, vide letter dated 25.09.18 (received on 04.12.18), disposed off the objections raised by the petitioner against reopening and, inter alia, held that the action of reopening is valid in the eye of law. Copy of order dated 17.10.18 disposing off objections against reopening is annexed and marked as ANNEXURE "I". 2.13 The petitioner states that the impugned notice under section 148 of the Act is bad, illegal barred by limitation and without jurisdiction and therefore deserves to be quashed." 4. Mr. Tushar Hemani, the learned advocate appearing for the writ applicant invited the attention of this court to the reasons recorded for reopening the assessment. He submitted that the assessment is sought to be reopened on two fold grounds: first, the sales promotion expenses to the tune of Rs. 20,00,271/- incurred on various tours have been expended wholly and exclusively for the business purpose, and secondly, further verification and investigation of the purchases and sales is required. It was pointed out that insofar as the first aspect is concerned, in the reasons recorded itself, the Assessing Officer has recorded that during t....
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....iced that the assessee had debited an amount of Rs. 45,57,388/- towards indirect expenses. Verification of expenditure claimed, revealed that the assessee had claimed expenses of Rs. 30,43,808/- towards sale promotion. Out of the total sale promotion expenses of Rs. 30,43,808/-, Rs. 20,00,271/- was in relation to various tours within India and outside India. During original scrutiny proceedings assessment, the details in relation to the sale promotion expenses were not verified and no opinion was formed. The assessee failed in establishing the nexus between the expenditure claimed and its business connection. Though the expenditure claimed was not in relation to business, the assessee claimed as sale promotion. This had resulted into under assessment of income for which notice u/s 148 was issued after recording reasons. 5. It is submitted that discrepancies were also noticed in relation to the purchases and sales shown by the assessee for the year under consideration. The discrepancies found are stated in the reasons recorded and respondent crave leave to refer to and rely upon the same. Thus the assessee made incorrect disclosure which resulted into under assessment of income. ....
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....te efficacious alternative remedy available to the petitioner, and petitioner approached the High Court without availing the same, unless petitioner makes out an exceptional case warranting such interference or there exist sufficient grounds to invoke the extraordinary jurisdiction under article 226. It is pertinent to mention that in the instant case petitioner has not brought on record any such exception to invoke the extraordinary jurisdiction under article 226. 10. With reference to para 4 to 7, it is submitted that in the present case income chargeable to tax as escaped assessment, for which, no opinion is formed. Further sufficiency of reasons may not be required to be gone into at this stage. In this case, notice under Section 148 was issued as income chargeable to tax has escaped assessment, for which, no opinion is formed in the original assessment order." 5.1 Mrs. Mauna Bhatt, the learned senior standing counsel appearing for the respondent places strong reliance on a decision of this Court in the case of Gujarat Power Corporation Ltd. vs. Assistant Commissioner of Incometax reported in (2012) 26 taxmann.com 51 (Guj.). Mrs. Bhatt places reliance on the following obse....
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....dly be disputed that once the Assessing Officer notices a certain claim made by the assessee in the return filed, has some doubt about eligibility of such a claim and therefore, raises queries, extracts response from the assessee, thereafter in what manner such claim should be treated in the final order of assessment, is an issue on which the assessee would have no control whatsoever. Whether the Assessing Officer allows such a claim, rejects such a claim or partially allows and partially rejects the claim, are all options available with the Assessing Officer, over which the assessee beyond trying to persuade the Assessing Officer, would have no control whatsoever. Therefore, while framing the assessment, allowing the claim fully or partially, in what manner the assessment order should be framed, is totally beyond the control of the assessee. If the Assessing Officer, therefore, after scrutinizing the claim minutely during the assessment proceedings, does not reject such a claim, but chooses not to give any reasons for such a course of action that he adopts, it can hardly be stated that he did not form an opinion on such a claim. It is not unknown that assessments of larger corpora....
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.... is not just one of change of opinion. According to Mrs. Bhatt, the notice under Section 148 of the Income Tax Act, 1961 (for short "the Act, 1961") came to be issued on the basis of certain material which is otherwise tangible and enables the Assessing Officer to form a belief that the income chargeable to tax had escaped assessment. She submitted that even if such material formed part of the original assessment record, the same per se would not bar the Assessing Officer from reopening the assessment on the basis of such material. The expression "tangible material" does not mean material absolutely foreign to the original record. In such circumstances referred to above, Mrs. Bhatt prays that there being no merit in this writ application, the same be rejected. 6. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the respondent was justified in issuing notice under Section 148 of the Act, 1961. 6.1 In Kelvinator of India Ltd. (supra), the Supreme Court had observed as under : "On going through the changes, quoted above, made to Section 147 of the Act, we fin....
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....ve' in Section 147.--A number of representations were received against the omission of the words `reason to believe' from Section 147 and their substitution by the `opinion' of the Assessing Officer. It was pointed out that the meaning of the expression, `reason to believe' had been explained in a number of court rulings in the past and was well settled and its omission from section 147 would give arbitrary powers to the Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, the Amending Act, 1989, has again amended section 147 to reintroduce the expression `has reason to believe' in place of the words `for reasons to be recorded by him in writing, is of the opinion'. Other provisions of the new section 147, however, remain the same." 6.2 Bearing the aforesaid dictum in mind, we need to examine whether the notice under Section 148 of the Act deserves to be quashed and set aside. The Assessment Order dated 26.10.2015 reads thus : ASSESSMENT ORDER "In this case, the assessee company filed E-Return of Income for A.Y. 2013-14 on 28.09.2013 declaring total income at NIL. The return was processed u/s. 143(1) of the Act. Notice u/s. 143(2) of t....