MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT LTD vs. DEPUTY COMMISSIONER OF INCOME TAX

C/SCA/6196/2014 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION NO. 6196 of 2014

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI

and HONOURABLE MR.JUSTICE K.J.THAKER

================================================================ 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ================================================================ MUNDRA INTERNATIONAL CONTAINER TERMINAL PVT LTD....Petitioner(s) Versus DEPUTY COMMISSIONER OF INCOME TAX....Respondent(s) ================================================================ Appearance: MR B S SOPARKAR, ADVOCATE for the Petitioner(s) No. 1 MRS MAUNA M BHATT, ADVOCATE for the Respondent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Page 1 of 6

C/SCA/6196/2014 JUDGMENT

Date : 11/11/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. This   petition   has   been   filed   against   the   action   of   the respondent­authority of issuing Notice dated 23.01.2014 u/s.148 of the Income­tax Act, 1961 to the petitioner whereby, the petitioner has been asked to file his return of income for the A.Y. 2007­08 on the  ground that  the  income  assessable   to  tax  for  the  A.Y.  has escaped assessment within the meaning of Section 147 of the said Act. 2. Briefly stated, the facts are that the petitioner herein, which is a private limited company incorporated under the Companies Act, 1956, had filed  its  original  e­returns of income   on  30.10.2007 declaring   loss   of   Rs.82,86,75,690/­   and   revised   return   on 17.09.2008 declaring loss of Rs.81,87,45,944/­. The return was duly processed u/s.143(1) of the Act. The case was taken up for scrutiny and Notice u/s.143(3) was issued and served upon the petitioner. The petitioner furnished all necessary details along with the   reply.   After   perusing   the   materials   available   before   it,   the respondent framed an assessment order u/s.143(3) on 07.02.2011 whereby, the claim of the petitioner was allowed. However, the petitioner was served with the impugned Notice dated 23.01.2014 whereby, the petitioner was called upon to submit its reply on the issue of reopening of the assessment for the A.Y. 2007­08. Being aggrieved by the same, the present petition has been preferred. Page 2 of 6

C/SCA/6196/2014 JUDGMENT 3. Mr. BS Soparkar learned counsel appearing on behalf of the petitioner   submitted   that   the   impugned   Notice   issued   by   the respondent is bad in law inasmuch as it has been issued merely on the basis of change of opinion. It is submitted that the assessment order dated 07.02.2011 makes it apparent that the respondent had consciously   allowed   the   claim   of   the   petitioner   with   regard   to depreciation on “infrastructural usage facility” after considering all the materials on record. Therefore, now, it is not open for the respondent   to   re­open   the   assessment   merely   on   the   basis   of change of opinion. It is submitted that the present proceedings are initiated for the purpose of re­appreciating the material available on record, which is impermissible in the eye of law. 3.1 Learned   counsel   Mr.   Soparkar   further   submitted   that Notice u/s.147 of the Act can be issued “if and only if” an A.O has reason to believe that any income chargeable to tax has escaped assessment. Such “belief” must be based on reasonable ground and not on a mere change of opinion. Therefore also, the impugned Notice issued by the respondent deserves to be quashed and set aside. 3.2 Learned   counsel   Mr.   Soparkar   submitted   that   merely because there exists a reason to believe that income had escaped assessment, the same is not sufficient to re­open an assessment beyond the period of four years. The escapement of income must also be occasioned by a failure  on the part of the assessee to disclose fully and truly all material facts. In this case, there is no failure on the part of the assessee to disclose truly and fully any Page 3 of 6

C/SCA/6196/2014 JUDGMENT material fact. Therefore, it is now not open to the respondent to re­ open the assessment. 3.3 In   support   of   his   submissions,   learned   counsel   Mr. Soparkar has placed reliance upon the following decisions; (a) Commissioner of Income­Tax v. Kelvinator of India Ltd., [2010] 320 ITR 561 (SC). (b) Gujarat   Power   Corporation   Ltd.   v.   Assistant Commissioner of Income­tax, [2013] 350 ITR 266 (Guj). (c) Cliantha Research Ltd. v. Dy. Commissioner of Income­ tax,   Ahmedabad   Circle­I,   [2013]   35   taxmann.com   61 (Gujarat). (d) National   Dairy   Development   Board   v.   Dy. Commissioner of Income­tax, [2013] 33 taxmann.com 429. (e) An   unreported   decision   of   this   Court   rendered   in Sepcial   Civil   Application   No.1588/2013   decided   on 29.07.2013. 4. Mrs. Mauna Bhatt learned Standing Counsel appearing for the Revenue drew our attention to the objection dated 25.03.2014 filed by the petitioner. It was submitted that at no point of time, the assessee disclosed the fact that it was allowed to use only the infrastructural   facility   and   that   it   was   not   the   owner   of   the Page 4 of 6

C/SCA/6196/2014 JUDGMENT infrastructure.   Ownership   was   one   of   the   conditions   for admissibility   of   depreciation   allowance.   The   right   to   use   the infrastructural facility would not be the same as “intangible asset” as enumerated in Section 32 of the Act and hence, not eligible for any depreciation. The assessee was only user of the infrastructural facility but, not the owner. The depreciation allowance would be available only to the owner of the assets enumerated in Section 32 of the Act. 4.1 It was submitted by Mrs. Bhatt that during the course of original proceedings, there was no clear disclosure by the assessee that it was not the owner of the facility. In view of this non­ disclosure by the assessee, the  provision of Section 147 of the Act has rightly been invoked. Hence, it was prayed that the present petition may be dismissed. 5. We have heard learned counsel for both the sides. It appears from the record that the petitioner has not concealed any fact while the assessment proceedings for the Assessment Year in question were under way. In fact, the petitioner itself had informed the respondent that it is not the owner of the infrastructural facility in question. The said fact is apparent from the following averments made   by   the   petitioner   it   its   communication   dated   07.11.2009 (copy of which is appended vide Annexure­C) addressed to the respondent; “3. ….   Further,   the   infrastructure   facility   like   dredged channel,   use   of   rail,   road   connectivity,   use   of   water, Page 5 of 6

C/SCA/6196/2014 JUDGMENT electricity and telecommunication and use of marine and port facility of which the ownership belong to Mundra Port and to utilize the said assets the company has paid the amount.” 6. Therefore,   the   factum   of   ownership   of   the   infrastructural facility,   which   is   the   basis   for   the   arrival   of   opinion   by   the respondent, was very much present and visible at the time when the assessment proceedings were under way. There is no willful non­disclosure of relevant facts on the part of the petitioner, as alleged by the respondent. Therefore, the impugned action of the respondent   proposing   to   re­open   the   assessment   within   the meaning of Section 147 of the Act for the A.Y. 2007­08 is erroneous and bad in law. 7. In view of the above discussion, the petition is allowed and the impugned Notice dated 23.01.2014 issued u/s.143 of the Act is quashed and set aside. Rule is made absolute. (K.S.JHAVERI, J.) (K.J.THAKER, J) Pravin/* Page 6 of 6