MANGALORE REFINERY AND PETROCHEMICALS LTD. vs. THE ASSISTANT COMMISSIONER OF INCOME TAX 3(2), AND ORS.

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WP/3211/2004HC Bombay14 November 2005Bench: HON'BLE SHRI JUSTICE H.L. GOKHALE, HON'BLE SHRI JUSTICE J.P. DEVADHAR6 pages
AI SummaryAllowed

What did the High Court hold?

The High Court allowed the petition and quashed the notice dated March 29, 2004, issued under Section 148 and the consequent reassessment order dated February 28, 2005. The Court reasoned that the decision to reopen the matter was taken beyond the period provided by law, and crucially, there was no failure on the part of the assessee to disclose relevant material facts. The Court found that the Assessing Officer lacked jurisdiction to reopen the assessment proceedings under such circumstances. The reliance by the revenue on Associated Stone Industries (Kotah) Ltd. was distinguished as it pertained to a different statutory provision and factual matrix concerning the time limit for reassessment. The Court emphasized that when the reopening itself is beyond the stipulated period and without any assessee default, the assessee should not be subjected to further jeopardy. The ratio decidendi is that a reopening under Section 147 beyond four years, without any failure on the part of the assessee to disclose material facts, is without jurisdiction.

What were the facts?

The petitioner, Mangalore Refinery & Petrochemicals Limited, a public limited company, challenged an order dated March 29, 2004, issued by the Assistant Commissioner of Income Tax, Mumbai. This order initiated reassessment proceedings under Section 148 of the Income Tax Act, 1961, for the assessment year 1998-99. The revenue believed that interest of Rs. 8,28,73,625/- was not added back while calculating book profit under Section 115JA, leading to escaped assessment. The petitioner had disclosed all relevant information during the original assessment. The reassessment notice was issued more than four years after the end of the relevant assessment year, requiring the sanction of the CIT. The petitioner also filed an appeal to a High Power Inter-ministerial Committee. Despite this, the respondents proceeded with reassessment, leading to an order dated February 28, 2005, which was later stayed by the High Court.

What were the issues?

1. Whether the Assessing Officer had the jurisdiction to reopen the assessment under Section 147 of the Income Tax Act, 1961, for the assessment year 1998-99, when the notice was issued more than four years after the end of the relevant assessment year and there was no failure on the part of the assessee to disclose material facts? Assessee's Contentions: - The authorities were not expected to reopen the matter and pass an order when the dispute was pending before the High Power Inter-ministerial Committee, relying on Oil & Natural Gas Commission vs. Collector of Central Excise. - Under the proviso to Section 147, reassessment beyond four years is permissible only if there is a failure by the assessee to make a correct return. The petitioner had disclosed all necessary papers and the original determination was correct, citing Hindustan Lever Ltd. vs. R.B. Wadkar, Assistant Commissioner of Income-Tax & ors. Revenue's Contentions: - The revenue relied on Associated Stone Industries (Kotah) Ltd. vs. Commissioner of Income-Tax, which dealt with Section 34 of the Income Tax Act, 1922, and suggested that reassessment is permissible even without assessee's omission or failure, provided it's within a specified period (though the judgment noted the facts of that case involved a period of four weeks, not four years).

Which sections of the Income-tax Act were involved?

Section 148,Section 115JA,Section 147,Section 151

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3211 OF 2004 Mangalore Refinery & Petrochemicals Limited. .. .. Petitioner v/s. The Assistant Commissioner of Income-tax 3(2) & ors. .. .. Respondents Mr.S.E. Dastur, Senior Advocate with Mr.Murlidhar i/by M /s.Mulla & Mulla for petitioner. Mr.A.K.Kotangale with Mr.A.S.Rao for respondents. ----- CORAM : H.L. GOKHALE & CORAM : H.L. GOKHALE & CORAM : H.L. GOKHALE & J.P. DEVADHAR, JJ. J.P. DEVADHAR, JJ. J.P. DEVADHAR, JJ. DATED : 14th November 2005 DATED : 14th November 2005 DATED : 14th November 2005 ORAL ORDER : (Per H.L. Gokhale, J.) ORAL ORDER : (Per H.L. Gokhale, J.) ORAL ORDER : (Per H.L. Gokhale, J.) 1. Heard Mr.Dastur in support of this petition. Mr.Kotangale appears for the respondents. 2. Rule, returnable forthwith. Reply is already filed. Mr.Kontangale waives service. 3. The petitioner herein is a Public Limited Company engaged in the business of running a petroleum refinery at Mangalore. The petitioner has been constrained to challenge the order dated 29th March 2004 passed by the Assistant Commissioner of Income Tax Range 3(2), Mumbai, CNR No : HCBM020221132004 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:38:49

-2- issuing a notice of reopening the assessment of income of the petitioner under Section 148 of the Income Tax Act, 1961 for the assessment done for the year 1998-99. According to the Commissioner, interest of Rs.8,28,73,625/- remained to be added back while arriving at the book profit under Section 115JA of the Income Tax Act. However, it is not a case of the petitioner not disclosing the relevant information at the earlier occasion when the assessment was done. The relevant part of reasons enclosed therewith reads as follows:- " On perusal of records, it is noticed that the Income Tax interest of Rs.8,28,73,625/- debited to Profit & Loss A/c remains to be added back while arriving at Book Profit u/s.115JA. I have therefore reason to believe that the income has escaped assessment to the extent 30% of Rs.8,28,73,625/- being Rs.2,48,62,082/-. Since the period of 4 years has lapsed from the end of the relevant assessment year, the sanction of CIT is required by virtue of Proviso to Sec.151(1) before the issuance of notice u/s.148 of the I.T. Act. The proposal in proforma is placed along side for kind Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:38:49

-3- sanction. " 4. After this order was passed, the petitioner filed the present petition. However, since this is a dispute between a Government Company on one hand and the Income Tax Department on the other, it also filed an appeal to the High Power Inter-ministerial Committee which the petitioner is expected to file in all such matters. Yet the respondents proceeded to pass an order after reassessment though aware of pendency of the dispute before the High Power Committee. The petitioner, therefore, pressed for an ad-interim order. Inasmuch as the High Power Committee was seized of the matter and the decision was taking its own time, this Court passed an ad-interim order on 10th March 2005 in terms of prayer clause (d) of this petition, granting an ad-interim relief restraining the respondents from acting upon the said re-assessment order dated 28th February 2005, which had been passed in the meanwhile after reopening the matter. 5. Mr.Dastur, learned Counsel appearing for the petitioner, submits that in view of the fact that the matter was pending before the High Power Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:38:49

-4- Committee, the Authorities concerned were not expected to reopen the matter and pass the order in the manner in which they have passed it. In this behalf, he relied upon paragraph 6 of the order of the Apex Court in the case of Oil & Oil & Oil & Natural Gas Commission vs. Collector of Central Natural Gas Commission vs. Collector of Central Natural Gas Commission vs. Collector of Central Excise reported in (1994) 116 CTR (SC) 643 Excise reported in (1994) 116 CTR (SC) 643 Excise reported in (1994) 116 CTR (SC) 643. 6. That apart, Mr.Dastur submitted that under the proviso to Section 147 of the Income Tax Act, income escaping assessment can be looked into afresh only upto four years. An action can be taken after the expiry of four years, provided there is a failure on the part of the assessee to make a correct return. He has his own submissions on merits with respect to the interest component under Section 115JA of the Income Tax Act. But that apart, his principal submission is that all necessary papers were disclosed before the Authorities and they had arrived at a correct determination. In this behalf, he relied upon a Division Bench judgment of this Court in the case of Hindustan Lever Ltd. vs. R.B.Wadkar, Hindustan Lever Ltd. vs. R.B.Wadkar, Hindustan Lever Ltd. vs. R.B.Wadkar, Assistant Commissioner of Income-Tax & ors. Assistant Commissioner of Income-Tax & ors. Assistant Commissioner of Income-Tax & ors. reported in 268 ITR page 332 reported in 268 ITR page 332 reported in 268 ITR page 332, to which one of us (Devadhar, J.) was a Member. That judgment has explained the scope of Section 147 of the Income Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:38:49

-5- Tax Act and in that judgment the Court has held that if there was no failure on the part of the assessee to disclose all material facts, the Assessing Officer would have no jurisdiction to reopen the assessment proceedings. 7. Mr.Kotangale, learned Counsel appearing for the respondents, on the other hand, drew our attention to a judgment of the Apex Court in the case of Associated Stone Industries (Kotah) Ltd. Associated Stone Industries (Kotah) Ltd. Associated Stone Industries (Kotah) Ltd. vs. Commissioner of Income-Tax reported in 224 vs. Commissioner of Income-Tax reported in 224 vs. Commissioner of Income-Tax reported in 224 ITR page 560 ITR page 560 ITR page 560. That was on Section 34 of the Income Tax Act, 1922, as it then stood. Under sub-section (1)(b) of Section 34 of the Income Tax, 1922, it was specifically provided that notwithstanding that there has been no omission or failure on the part of the assessee, the department has jurisdiction to reopen the matter. As far as the facts of that case are concerned, it is clearly seen that there was no dispute that the reassessment proceedings were taken within a period of four weeks. The submission of Mr.Kotangale based on this judgment that a reassessment is permissible cannot, therefore, be accepted. 8. Mr.Kotangale submitted that an Appeal is Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:38:49

-6- available to the petitioner to the Authority concerned. In our view, when the decision to reopen the matter itself is taken beyond the period provided and when there is no failure on the part of the assessee to disclose the relevant material, the assessee cannot be put into another jeopardy by reopening the matter. 9. In the circumstances, in our view, the petition deserves to be allowed and we quash and set aside the Notice dated 29th March 2004 issued under Section 148 of the Income Tax Act and also the consequent reassessment order made on 28th of February 2005. 10. Rule is made absolute accordingly in terms of prayer clause (a). No order as to costs. (H.L. GOKHALE, J.) (H.L. GOKHALE, J.) (H.L. GOKHALE, J.) (J.P. DEVADHAR, J.) (J.P. DEVADHAR, J.) (J.P. DEVADHAR, J.) Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:38:49 Powered by TCPDF (www.tcpdf.org)

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