JASHAN TEXTILE MILLS PVT. LTD. vs. THE DEPUTY COMMISSIONER OF INCOME TAX 4(2), MUMBAI

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IN IN IN THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY THE HIGH COURT OF JUDICATURE AT BOMBAY

ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION

WRIT WRIT WRIT PETITION NO.3152 OF 2005 PETITION NO.3152 OF 2005 PETITION NO.3152 OF 2005

Jashan Textile Mills Private Limited

114, Turf Estate,

3/65, Off. Dr.E.Moses Road,

Mahalakshmi,

Mumbai 400 011 .. Petitioner

V/s

The Deputy commissioner of

Income-tax 4(2), Mumbai,

Aaykar Bhavan, M.K.Road,

Mumbai - 400 020

The Commissioner of Income-tax

IV, Aaykar Bhavan, M.K.Road,

Mumbai - 400 020

Union of India through the

Secretary, Ministry of Law

Justice & Company Affairs,

North Block,

New Delhi - 110 101

.. Respondents

WITH WITH WITH

WRIT WRIT WRIT PETITION NO.3153 OF 2005 PETITION NO.3153 OF 2005 PETITION NO.3153 OF 2005

Jashan Textile Mills Private Limited

114, Turf Estate,

3/65, Off. Dr.E.Moses Road,

Mahalakshmi,

Mumbai 400 011

.. Petitioner

V/s

The Deputy commissioner of

Income-tax 4(2), Mumbai,

Aaykar Bhavan, M.K.Road,

Mumbai - 400 020

The Commissioner of Income-tax

IV, Aaykar Bhavan, M.K.Road,

Mumbai - 400 020 CNR No : HCBM020254012005 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:16

:2:

Union of India through the

Secretary, Ministry of Law

Justice & Company Affairs,

North Block,

New Delhi - 110 101

.. Respondents

Shri.S.N.Inamdar with Shri.Atul Jasani for the

Petitioners.

Shri.E.P.Chopra for the Respondents.

CORAM CORAM CORAM : DR.S.RADHAKRISHNAN : DR.S.RADHAKRISHNAN : DR.S.RADHAKRISHNAN &

J.P.DEVADHAR, J.P.DEVADHAR, J.P.DEVADHAR, JJ. JJ. JJ.

DATE DATE DATE : 28TH FEBRUARY, 2006. : 28TH FEBRUARY, 2006. : 28TH FEBRUARY, 2006.

JUDGMENT JUDGMENT JUDGMENT (PER :- J.P. DEVADHAR, J.) (PER :- J.P. DEVADHAR, J.) (PER :- J.P. DEVADHAR, J.)

Heard learned Counsel for both sides. Rule.

Rule

made

returnable forthwith.

consent

parties, both these petitions are taken up for final

hearing.

In these two Writ Petitions, the Petitioners

have

challenged the notices issued under section

148

the Income Tax Act, 1961 as also the order

passed

the

Assessing

Officer rejecting

the

objections

raised

the

Petitioners

for

re-opening

the

assessments for the Assessment Year 1998-99 and the

Assessment Year 1999-2000.

Since the facts in both the Writ Petitions are

more

or less similar, for the sake of convenience

this

Judgment,

set

out the facts

the

Writ Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:16

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Petition

No.3152

2005.

The

decision

Writ

Petition No.3152 of 2005 will apply to the Writ

Petition No.3153 of 2005 as well.

For the Assessment Year 1999-2000, the return

filed

the Petitioner was assessed

under

section

143(3)

of the Income Tax Act and an assessment

order

was passed accordingly by the Assessing Officer on

23rd January, 2001.

By the impugned notice issued under section

148

the

Income Tax Act, 1961 dated

16th

March,

2005,

the

Assessing

Officer sought to

re-open

the

assessment

for the Assessment Year 1999-2000 for

the

reasons

set

out

therein.

The

Assessee

filed

its

objection

for

re-opening

the

assessment.

The

Assessing

Officer

by his order dated

7th

December,

2005

has rejected the objection for re-opening of the

assessment.

Accordingly, challenging the notice

for

re-opening

the

assessment under section 148

the

Income

Tax

Act

as well as the order passed

the

Assessing

Officer

rejecting the objection raised

the notice under section 148 of the Income Tax Act,

the Petitioner has filed present petition.

Shri.Inamdar, the learned Counsel appearing on

behalf

the

Petitioner submitted

that

from

the Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:16

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reasons

recorded for re-opening the assessment it

seen

that

there

is no failure on the

part

the

Assessee

disclose

fully and truly

all

material

facts.

On the contrary, the reasons recorded by

the

Assessing

Officer clearly shows that the reopening of

the

assessment is based on examination of the records

available

with

the

department

and

there

allegation

of failure on the part of the Assessee

disclose

fully

and

truly

all

material

facts.

Therefore,

the

re-opening of the

assessment four years without there being any failure on the part

of the Assessee cannot be sustained.

Shri.Inamdar further submitted that in the

present

case the dispute pertains to the market value

adopted

the Petitioner in respect of

Hexapeptide

manufactured

by them prior to its manufacture in

one

its

units,

the

Petitioner

used

import

Hexapeptide

from other countries.

While transferring

the

indigenously

manufactured Hexapeptide

from

one

unit

another

unit

since

the

Assessment

Year

1994-1995,

the

Petitioner has been taking

the

last

landed

cost of the imported goods as the fair

market

value

the

Hexapeptide

manufactured

them.

According

the Petitioner, at the

relevant

time,

Hexapeptide

was not manufactured by any one in

India

and

therefore they had taken the fair market value on Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:16

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the

basis

of the landed cost of the imported

goods.

For

the

Assessment

Year

1994-1995,

the

Assessing

Officer

objected

the

said

valuation

and

explanation

given

the

Petitioner,

the

said

valuation

was

accepted.

Thereafter

every

subsequent assessment year, the said valuation offered

the

Petitioner based on the last landed cost

has

been

accepted

the

Revenue.

Accordingly,

Shri.Inamdar submitted that all along the Assessee has

disclosed the basis on which the market price has been

arrived

and

since 1994-95 the Assessing

Authorities

have

accepted

the basis adopted by the Assessee

and

therefore, it is not open to Assessing Officer to

re-open the assessment for the years in question.

Shri.Inamdar further submitted that even in

the

Assessment

Year 1999-2000 which is

the

subject

matter of the present petition, the Assessing Officer, the assessment, had raised the query regarding

the

market

valued

adopted by the Assessee

and

the

Assessee

by its letter dated 27th December, 2000

had

furnished

the basis for determining the market

price

the

goods

manufactured

in their

unit

and

the

Assessing

Officer,

consideration

the

facts

deemed it fit to reduce the market price by Rs.130-150

per

gram.

Thus in the Assessment Year 1999-2000, the

issue

market

value was again

raised

and

after Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:16

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considering the submission, the price was reduced.

these

circumstances

not

open

Assessing

Officer

once again to agitate the issue by initiating

proceedings

for reopening the assessment and that too

when there is no failure on the part of the Assessee

to disclose the basis of fixing the transfer price.

Relying upon the judgment of this Court in the

case

Hindustan

Lever Ltd.

Vs.

R.B.

Wadkar, Hindustan

Lever Ltd.

Vs.

R.B.

Wadkar, Hindustan

Lever Ltd.

Vs.

R.B.

Wadkar,

Assistant Assistant Assistant

Commissioner

Income-Tax

and

Others

Commissioner

Income-Tax

and

Others

Commissioner

Income-Tax

and

Others

(No.1)-I.T.R. (No.1)-I.T.R. (No.1)-I.T.R.

reported

Vol.268-P.332

reported

Vol.268-P.332

reported

Vol.268-P.332.

Shri.Inamdar

submitted

that

not

open

Assessing

Officer to supplement the reasons by filing

affidavit.

He further submitted in

the

present

case

the

Assessing Officer, by his order

dated

7th

December, 2005 as well as the affidavit-in-reply filed

the

petition,

has sought to

supplement

reasons

which

not

permissible

law.

Shri.Inamdar

submitted that in the present case the revenue has not

made

out

case for re-opening the

assessment four

years.

As regard the Directors’

Report

dated

31st March, 1993, Shri.Inamdar submitted that the said

report

was

in fact submitted by the Assessee the relevant assessment proceedings and therefore, the

statement

contained in the said Report cannot be

the

basis to hold that there is any failure on the part of

the

Assessee to disclose fully and truly all material Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:16

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facts.

He submitted that the findings recorded in the

order

rejecting the objections to the effect that

sale

the final product the Assessee is

incurring

loss

is also factually incorrect.

From the documents

annexed to the petition, Shri.Inamdar pointed out that

the

Assessee had made substantial profits on sale

the

final products and therefore, reasoning given

the

Assessing Officer while rejecting the

objections

are

totally

erroneous.

With

reference

the

assessment

order

for the Assessment Year

2002-2003,

Shri.Inamdar submitted that the Commissioner (Appeals)

has

set

aside

the

findings recorded

the

said

Assessment

Order

and

that fact was brought

the

notice

of the Assessing Officer in the present

case.

However,

the

same

has

not

been

taken

into

consideration

while

rejecting

the

objections.

Accordingly,

Shri.Inamdar submitted that none of

the

requisite

conditions

have

been

fulfilled

for

re-opening

the

assessment under section 148

the

Income

Tax

Act,

1961 and

therefore,

the

impugned

notices issued are liable to be quashed and set aside.

10.

Shri.Chopra, learned

Counsel

for the

Respondents,

the other hand supported the

orders

passed

the Authorities below.

He submitted

that

from the reasons recorded for reopening the assessment

elaborated in the order rejecting the objection it Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:16

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can

seen

that the transfer price

shown

the

Petitioner

respect of the goods

manufactured

them

was not just and proper.

He submitted that

the

reasons

recorded for re-opening the assessment can be

supplemented

order

while

dealing

with

the

objections

raised by the Assessee.

He submitted that

the

basis

of the Directors’

report

dated

31st

March,

1993

well as the submission made

the

Assessee, the

assessment

proceedings

for

Assessment

Year

2002-2003, it was evident

that

the

transfer

price fixed by the Assessee for the relevant

years

was

incorrect

and

therefore,

the

Assessing

Officer

was

justified in invoking the provisions

Section

148

for

re-opening

the

assessment.

Shri.Chopra

further submitted that the very fact that

the

transfer

price has remained constant

since

the

Assessment

Year 1994-95 for several assessment

years

itself

shows

that

the transfer price fixed

the

Assessee

was

erroneous.

Accordingly,

Shri.Chopra

submitted

that the Assessing Officer was justified in

re-opening

the

assessment.

He submitted

that

the

Assessee

is entitled to raise all contentions in

the

re-assessment

proceedings

and

therefore,

interference

called

for

this

stage.

Accordingly, he submitted that the above petitions be

dismissed with costs. Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:16

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11.

We have carefully considered the rival

submissions as well as the authorities cited before

us.

12.

It is well established by a catena of

decisions

this

Court

that in

cases

where

the

assessments

are completed under section 143(3) of the

Income

Tax

Act,

re-opening of the

said

assessment

under

section

148 of the Income Tax Act the

period

four

years

from

the

end

relevant

Assessment

Year

can

sustained

only

established

that there was failure on the part of the

Assessee

disclose

fully and truly

all

material

facts.

(See

IPCA Laboratories Ltd.

Vs.

Gajanand

IPCA Laboratories Ltd.

Vs.

Gajanand

IPCA Laboratories Ltd.

Vs.

Gajanand

Meena, Meena, Meena,

Deputy Commissioner of Income Tax and

Others-

Deputy Commissioner of Income Tax and

Others-

Deputy Commissioner of Income Tax and

Others-

Vol.251 Vol.251 Vol.251

ITR 416 (Bombay)

ITR 416 (Bombay)

ITR 416 (Bombay) and ICICI Bank Ltd.

Vs. ICICI Bank Ltd.

Vs. ICICI Bank Ltd.

Vs.

K.J. K.J. K.J.

Rao and Another - Vol.

268 - ITR 203 (Bombay)

Rao and Another - Vol.

268 - ITR 203 (Bombay)

Rao and Another - Vol.

268 - ITR 203 (Bombay)).

In the present case, from the reasons recorded for the

re-opening

the

assessment

seen

that

the

reopening

is solely based on the materials already on

record

and

is not the case of the

revenue

that

there

was any failure on the part of the Assessee

disclose

fully and truly material facts.

If there is

failure

on the part of the Assessee

disclose

fully

and

truly

all

material

facts,

then

the

re-opening of the assessment is liable to be quashed

and set aside on that ground alone. Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:16

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13.

While rejecting the objections raised by the

Petitioner, the Assessing Officer has recorded that on

sale

of the final product, the Assessee had

incurred

loss.

From the annexures to the Petition, it is seen

that,

fact,

sale of the

final

product

the

Assessee has made substantial profits.

Thus, even the

conclusion

drawn by the Assessing Officer against the

Petitioner appear to be based on total misconstruction

facts.

Reliance placed on the Directors’

report

does

not support the case of the Revenue because

the

said

report

for the year ending on 31st March,

1993

was

submitted

by the Assessee during the

assessment

proceedings

the relevant assessment year and

the

assessment

order for that year has been passed

after

considering

the

said

report.

Therefore,

when

the

Director’s

report

was already there on

record,

the

contents

of that report cannot constitute failure

the

part of the Assessee to disclose fully and

truly

all material facts.

Similarly, the contention that in

the

assessment

proceedings for the Assessment

Year,

2002-2003, the Assessee had admitted that the transfer

price

adopted

in the past was not correct

does

not

support the case of the Revenue because, firstly it is

pointed

out

that

the

findings

recorded

the

Assessing

Officer in that year has been set aside

the

Commissioner of Income Tax (Appeals).

Secondly, Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:16

:11:

assuming

that

the

Assessee had

agreed the

assessment

proceedings for Assessment Year

2002-2003

that

the

determination

of the market value

the

goods for the earlier years was erroneous, that cannot

ground

to reopen the assessment

because

that

admission is not on account of any failure on the part

the

Assessee

disclose fully

and

truly

all

material facts.

The Revenue cannot invoke Explanation

to section 147 of the Income Tax Act in the present

case

because the assessment sought to be reopened four

years

from

the

end

the

relevant

assessment year and there is no failure on the part of

the

Assessee to disclose fully and truly all material

facts.

In other words, where the assessment is sought

be reopened beyond four years from the end of

the

relevant

assessment

year,

then,

unless

established

that there was failure on the part of the

Assessee

disclose

fully and truly

all

material

facts the question of invoking Explanation:2 to

Section 147 does not arise at all.

14.

For all the aforesaid reasons we are of the

opinion

that in the present case, the notices

issued

for

the

re-opening of the assessments do not

fulfil

the

preconditions

required

fulfilled

for

reopening

the assessment.

Accordingly, we quash

and

set

aside

the impugned notices issued under

section Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:16

:12:

148

the

Income

Tax Act,

1961.

Rule

made

absolute

terms of prayer clause (a) in

both

the

petitions. However, there will be no order as to

costs.

(DR.S.RADHAKRISHNAN,J.) (DR.S.RADHAKRISHNAN,J.) (DR.S.RADHAKRISHNAN,J.)

(J.P.DEVADHAR,J.) (J.P.DEVADHAR,J.) (J.P.DEVADHAR,J.) Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:16:16 Powered by TCPDF (www.tcpdf.org)