M/S. SUNJEWELS INDIA PVT. LTD. vs. INCOME TAX OFFICER WARD 8(3) (2) MUMBAI AND ORS.

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WP/526/2005HC Bombay13 June 2022Bench: HON'BLE SHRI JUSTICE NITIN JAMDAR, HON'BLE SHRI JUSTICE N. R. BORKAR4 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the Petitioner was entitled to succeed based on the reasons supplied by the Revenue itself. The Court identified two fundamental errors. Firstly, the notice under Section 148 for AY 1998-99 did not contain any assertion that the Petitioner had failed to disclose fully and truly all material facts, which is a mandatory prerequisite for assuming jurisdiction under Section 147 of the Act. Secondly, the Respondent appeared to be proceeding on the ground that the Petitioner had applied the wrong method of depreciation, which constituted a clear 'change of opinion'. The Court found no failure on the part of the Petitioner to disclose facts. Therefore, in light of the settled law governing the exercise of powers under Sections 147 and 148, the Petitioner was entitled to succeed. The Rule was made absolute in terms of prayer clauses (a) and (b), quashing the notice and the order rejecting objections.

What were the facts?

The Petitioner, M/s. Sunjewels India Pvt. Ltd., engaged in manufacturing and export of gold jewellery, filed its return of income for Assessment Year 1998-99 on November 30, 1998, declaring Nil income after claiming depreciation on a straight-line method and exemption under Section 10A. An assessment order under Section 143(3) was passed on January 31, 2001. On March 29, 2004, the Income Tax Officer issued a notice under Section 148 proposing to reassess the income for AY 1998-99. The Petitioner requested the return filed earlier be treated as a return in response to the Section 148 notice. After receiving the reasons for reopening, the Petitioner raised objections, which were rejected by an order dated February 14, 2005. The Petitioner then filed a writ petition challenging the Section 148 notice and the order rejecting objections. Rule was issued and interim relief was granted.

What were the issues?

1. Whether the notice issued by the Respondent No.1 under Section 148 of the Income Tax Act, 1961, for reopening the assessment for AY 1998-99 is valid, considering the absence of an assertion of failure on the part of the Petitioner to disclose fully and truly all material facts. 2. Whether the reopening of assessment is based on a 'change of opinion' by the Assessing Officer regarding the method of depreciation applied by the Petitioner. Assessee's Contentions: The Petitioner argued that the notice under Section 148 was invalid because the Respondent failed to assert that the Petitioner had not disclosed material facts fully and truly, which is a mandatory requirement for assuming jurisdiction under Section 147. Furthermore, the Petitioner contended that the reopening was based on a 'change of opinion' regarding the depreciation method, as the original assessment order had accepted the straight-line method. The Petitioner relied on settled law governing the exercise of powers under Sections 147 and 148 of the Act. Revenue's Contentions: The Respondent relied on the order dated February 14, 2005, disposing of the objections, and contended that no case was made out by the Petitioner.

Which sections of the Income-tax Act were involved?

Section 148,Section 147,Section 10A,Section 139(1),Section 143(3)

AI-generated summary — verify with the full judgment below

211-wp-526-05.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 526 OF 2005

M/s.Sunjewels India Pvt. Ltd.

… Petitioner. V/s. Income Tax Officer, Ward 8(3)(2), Mumbai and ors.

… Respondents

None for the Petitioner. Mr. Akhileshwar Sharma a/w. Mr. Vikas T. Kanchandani for the Respondent.

CORAM : NITIN JAMDAR &

N.R. BORKAR, JJ. DATE : 13 JUNE 2022. ORAL JUDGMENT (PER NITIN JAMDAR, J.) . None for the Petitioner. 2. By this Petition, the Petitioner has challenged the notice dated 29 March 2004 issued by Respondent No.1 under Section 148 of the Income Tax Act, 1961 (‘the Act’) and the order dated 14 February 2005 disposing of the objections raised by the Petitioner. 3. The Petitioner is a Private Limited Company. The Petitioner company is engaged in the business of manufacturing and export of gold jewellery. The Petitioner filed return of income under Section 139(1) of the Act on 30 November 1998 declaring total income at Dinesh Sherla 1/4 CNR No : HCBM020035722005 Uploaded on - 16/06/2022 Downloaded on - 31/10/2026 01:25:51

211-wp-526-05.doc Rs. Nil after claiming depreciation on straight line method. It was stated so in the notes to account in the balance – sheet filed along with return of income in respect of exemption under Section 10A of the Act for the assessment year 1998-99. The assessment order under Section 143(3) of the Act, after scrutiny, was issued on 31 January 2001. 4. On 29 March 2004, Respondent No.1 issued notice to the Petitioner under Section 148 of the Act proposing to reassess the income of the Petitioner for the assessment year 1998-99. The Petitioner by letter dated 27 April 2004 requested the Respondent No.1 to treat the return of income filed on 30 November 1998 as being filed in response to notice under Section 148 of the Act. The Petitioner received notices to attend, which the Petitioner complied with. On 24 December 2004, the Petitioner requested the reasons to be supplied. The reasons were supplied by the Respondent No.1 by letter dated 4 January 2005. On 22 January 2005, the Petitioner raised the objections to the notice which was rejected by order dated 14 February 2005. Hence, the present petition was filed. 5. Rule was issued in this petition on 7 March 2005 and the interim relief was granted in terms of prayer clause (d), i.e., staying the impugned order, notice and further proceedings. Dinesh Sherla 2/4 Uploaded on - 16/06/2022 Downloaded on - 31/10/2026 01:25:51

211-wp-526-05.doc 6. The learned Counsel for the Respondent has sought to rely on the order dated 14 February 2005 disposing of the objections and contended that no case is made out by the Petitioner. 7. On the face of reasons supplied to the Petitioner itself the Petitioner is entitled to succeed. The reasons given to the Petitioner are as under: “While completing the assessment company was allowed depreciation on straight line method instead of W.D.V. method as per I.T. Act, 1961. The income was claimed and allowed exempt u/s.10A of the I.T. Act, 1961. The allowance, if less depreciation amounted increase in exemption u/s.10A of the I.T. Act. The less depreciation works out to Rs.2,42,400/- for A.Y. 1998- 99. I have further reason to believe that income chargeable to tax has escaped assessment by virtue of provisions of section 147 of the I.T. Act, 1961”

8.

The two fundamental errors can be noticed. Firstly, by notice dated 29 March 2004 the assessment in respect of year 1998-99 was sought to be reopened, however, there is not even an assertion that there is failure on the part of the Petitioner to disclose fully and truly all material facts, which is a mandatory requirement to assume jurisdiction by the Respondent. Secondly, the Respondent No.1 seems to proceed on the ground that the Petitioner has applied wrong method in respect of depreciation. This is a clear change of opinion. There is absolutely no failure on the part of the Petitioner Dinesh Sherla 3/4 Uploaded on - 16/06/2022 Downloaded on - 31/10/2026 01:25:51

211-wp-526-05.doc to disclose the facts. Therefore, in the light of settled law governing exercise of powers under Sections 147 and 148 of the Act, the Petitioner is entitled to succeed. 9. Rule is made absolute in terms of prayer clause (a) and (b). 10. No order as to costs.

(N.R. BORKAR, J.) (NITIN JAMDAR, J.) Dinesh Sherla 4/4 Uploaded on - 16/06/2022 Downloaded on - 31/10/2026 01:25:51 Powered by TCPDF (www.tcpdf.org)

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