M/ s. Creamline Dairy Products Limited vs. The Principal Commissioner of Income Tax-I

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WP/13322/2022HC TelanganaHBHC01017661202206 March 2026Author: P.SAM KOSHY,SUDDALA CHALAPATHI RAO25 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the reassessment proceedings were fundamentally flawed and legally unsustainable. The Court found that the issuance of the notice under Section 148 and the approval under Section 151 constituted a prohibited change of opinion. The original assessment had been completed after detailed scrutiny, where the Assessing Officer had applied his mind to the facts and documents presented, including the valuation certificate. The subsequent claim that a specific rule was not mentioned or discussed did not constitute new material justifying reopening. The Court emphasized that Section 147 is not a power to review but to reassess based on tangible material suggesting escapement of income not previously considered. Furthermore, the Court noted procedural irregularities, including an undue delay in communicating the reasons for reopening and providing insufficient time for the petitioner to respond, violating principles of natural justice. The failure to provide the approval under Section 151 was also criticized. Consequently, the impugned reassessment proceedings were set aside.

What were the facts?

The petitioner, M/s. Creamline Dairy Products Limited, filed a writ petition challenging the notice issued under Section 148 of the Income Tax Act, 1961, dated March 30, 2021, and the approval under Section 151 dated March 30, 2021, for reopening the assessment for Assessment Year 2016-17. The original assessment was completed on December 17, 2018. The reasons for reopening were communicated on March 11, 2022, along with a show-cause notice, giving the petitioner less than four working days to respond to issues pertaining to transactions from five years prior. The petitioner received the notice on March 11, 2022. The respondents are various income tax authorities, including the Principal Commissioner of Income Tax-I and the National Faceless Assessment Centre.

What were the issues?

1. Whether the impugned notice under Section 148 dated March 30, 2021, and the approval under Section 151 dated March 30, 2021, seeking to reopen the assessment for AY 2016-17 are without jurisdiction, arbitrary, illegal, unconstitutional, and in contravention of the Income Tax Act, 1961, particularly on the grounds of being a prohibited change of opinion and violation of principles of natural justice. Assessee's Contention: The reassessment proceedings constitute a prohibited change of opinion as the original assessment was completed after detailed scrutiny, where the Assessing Officer had the opportunity to examine the same transactions. The petitioner had disclosed all material facts, and the Assessing Officer applied his mind. Reliance was placed on Supreme Court decisions in Assistant Commissioner of Income Tax-12(3)(2) and Others vs. Marico Limited, Marico Ltd. vs. Assistant Commissioner of Income Tax-12(3)(2) and Others, and Commissioner of Income Tax, Delhi vs. Kelvinator of India Ltd. Revenue's Contention: The revenue argued that the Assessing Officer did not form an opinion on the method of valuation during the original assessment, and the subsequent assertion that Rule 111A was not applied constitutes discovery of new material warranting reopening. The revenue also contended that the approval under Section 151 was granted by the appropriate authority.

Which sections of the Income-tax Act were involved?

Section 148,Section 151

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
[ 348e ] IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) FRIDAY, THE SIXTH DAY OF MARCH TWO THOUSAND AND TWENTY SIX PRESENT THE HONOURABLE SRI JUSTICE P. SAM KOSHY AND THE HONOURABLE SRI JUSTICE SUDDALA CHALAPATHI RAO WRIT PETITION NO: 13322 OF 2022 Between: AND 1 [r4/s. Creamline Dairy Products Limited, Having its registered office at, 6-3- 123818.121 . Raj Bhavan Road, Asif Avenue, Hyderabad - 500 082, Rep. by its Mr, A Venkata Swadeep, lvlanager - Finance and Accounts ...PETITIONER The Principal Commissioner of lncome Tax-|, Room No. 711, 7th Floor, A Block, lT Tower, AC Guards, Masab Tank, Hyderabad, Telangana - 500 004. Joint Commissioner of lncome Tax, Range-1 , Hyderabad lT Tower, AC Guards, lvlasab Tank, Hyderabad, Telangana - 500 004 Deputy Commissioner of lncome Tax, Circle 1(2), Hyderabad lT Tower, AC Guards, Masab Tank, Hyderabad, Telangana - 500 004 Assistant Commissioner of lncome Tax, Circle 'l(2), Hyderabad lT Tower, AC Guards, Masab Tank, Hyderabad, Telangana - 500 004. lncome Tax Officer, Circle 1(2), Hyderabad lT Tower, AC Guards, Masab Tank, Hyderabad, Telangana - 500 004. The National-e-Assessment Centre, (National Faceless Assessment Centre) Room No. 4O1 ,2nd Floor, E-Ramp, Jawaharlal Nehru Stadium, Delhi - 1 10 003 Additional Commissioner of Income Tax, National-e-Assessment Centre, (National Faceless Assessment Centre) Room No. 401 ,2nd Floor, E-Ramp, Jawaharlal Nehru Stadium, Delhi - 110 003. Joint Commissioner of lncome Tax, National-e-Assessment Centre, National Faceless Assessment Centre) Room No. 401,2nd Floor, E-Ramp, Jawaharlal Nehru Stadium, Delhi - 110 003. Deputy Commissioner of Income Tax, National-e-Assessment Centre, (National Faceless Assessment Centre)Room No. 40'1 , 2nd Floor, E-Ramp, lawhailaNekuStadium, Delhi -1 10 003. 2 ., 4 5 6 7 8 I 'l 0.Assistant Commissioner of lncome Tax, National-e-Assessment Centre, (National Faceless Assessment Centre) Room No. 401, 2nd Floor, E-Ramp, Jawaharlal Nehru Stadium, Delhi - 1 10 003 'l l.lncome{ax Officer, National e-Assessment Centre (National Faceless Assessment Centre) Room No 401 ,2nd Floor, E-Ramp. Jawaharlal Nehru Stadium, Delhi - 110 003 12. Union of lndia, Through the Secretary Ministry of Finance, Government of lndia. North Block, New Delhi 1 10 001. ...RESPONDENTS Petition under Article 226 o'f lhe Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to issue a writ, order or a direction, particularly one in the nature of a Writ of Mandamus declaring the action of the Respondents, particularly Respondent No.2-3,6-10, in issuing the lmpugned Notice under Section '148 dated 30/03/202 1 bearing Notice No ITBA/AST/S/14812020-2111031935111 (1) on the basis of the lmpugned Approval under Section 15'l dated 30.03.2021 (received on 1110312022) bearing Document No. ITBA/AST/S/1 1Bl2O20- 2111031927703(1) seeking to reopen the assessment of the Petitioner Company for the Assessment Year 2016-17 as being without jurisdiction, arbitrary, illegal, un constitutrona I and in contravention of the lncome Tax Act, 196'1 , and conseq uently. (a) Set aside the Notice dated 30/03/202'1 bearing Notice No. ITBA/AST/S/14812020-2111A31935111(1) issued by Respondent No 3 b) Set aside the Approval dated 3010312021 (received on 1 110312022) bearing Document No. ITBA/AST I S I 1 1 B 12020-21 I 1 031 927 7 03( 1 ) issued by Respondent No, 2. and (c) Set aside the Show Cause Notice dated 11.03.2022 bearing Document no. ITBA/ASTiF/'142(1)12021-2211040620689(1) issued by Respondent No. 6 to 10. lA NO: 1 OF 2022 Petition under Section 151 CPC praying that in the circumstances stated in the affrdavit filed rn support of the petition, the High Court may be pleased to stay all further proceedings arising out of the lmpugned Notice under Section 148 dated 30/03/2021 bearing Notice No. ITBA/ AST/S/1 4Bl 2020-2111O31935111(1) issued by Respondent No. 3 on the basis of the lmpugned Approval under Section 15'1 dated 3010312021 (received on 11.03.2022) bearing Document No. ITBA/ AST/S/1 1812020-2111031927703(1) issued by Respondent No. 2, including but not limited to Show Cause Notice dated 1110312022 bearing Document no. ITBA/ AST/F/1 42(1)12021-22l10406 20689(1) issued by Respondent Nos.6 to 10. Counsel for the Petitioner: SRI AVINASH DESAI, SR. COUNSEL REP. FOR SRI KOPAL SHARRAF Counsel for the Respondent No.1 to 11: M/s. BOKARO SAPNA REDDY (sR. sc tNcoME TAX) Counsel for the Respondent No.12: SRI N. BHUJANGA RAO, Deputy Solicitor General of lndia

The Court made the following: ORDER

TN THE HIGH COURT FORTHE STATE OFTELANGANA AT HYDERABAD THE HON'BLE SRI J USTTCE P.SAM KOSHY ANT) THE HON'BLE SRI JUSTICE SUDDALA CHALAPATHI RAO WRIT PFI,TITION No.13322 of 2O22 DATE:O6$.2026 Between: M/s. Creamline Dairv Products [.imited Petitioner AND The Principal Commissioncr ol' lncomc Tax-[, Room No. Tll,lth Floor, 'A'Block, lT Towcr, ACI Cuards, Masab Tank, flyderabad, Telangana 500 00'1 and others. ..Respondents ORDER: Qlr ttu ttut ht. st.t ttt\tlit'I'slat Ko\tt)) Heard Mr- Avinash Desai. learned Senior Counsel appearing on behatf ol Mr. Kopal Shama[', leartlcd counsel lor the petitioner; and Mr. Bokaro Sapna ltcclcly' learned Senior Standing Counsel for [ncome Tax Depaftment appearing on belialf of the respondents'

t ['agc-2of2l

2.

The instant \\,rit petition under A(icle 226 of the Constitution of Indiahasbeerrfiledbl,thepetitior'rcrseekingthefollowingrclietTs,viz., ''.........to rtstrtt tt trril onlcr o' tt Llirttlitttt puttiLuLurll'ol1c in lllc nalur(: o.l a Il'Vit ol. \\t.tru'lcrttttrs latlttring lhe uL:liott of lhe Respontlents. pttrltculurll Re'tprtn'funl \o' ) ') 6- t0 in isstring the lntpttgned Notit'c tn(lar Scttion 118 ctutcl 3()03 )02 I hcuring r\roliic,Vo. t-t-tJ.l -lSTS't18 )D()-lt !03t9i5tlt(l) on rhe basi's o'l' tlrc lntptrgncd .'lpprrrul trrttbt St'tiirttt tit tlulctl J0'01 202 I (rcceit'ad ()tt t I ()i 2l)) ) ) bLttrrirrg f)otttrnenl '\tr' ITRAtASl S. llil )0)(t,21 t()3i9:"-0j(l) \(ki {, tt) tcolltll the u.f.\e.\.tntcnl of lh(' Pelitiotttt ( ottltutr.i lor tlrt' lr'rcssrnenl I?:ar 20t6-1' us ltain! \ ithtntt itrriulit'rttttt urhilrarl illcgul' Ltncotlstiltttion(:lttnLlincrtntrutanltttnttflltL'htcttmeTttxAt't'1961' and consr'quettt lt. (a) '\el irslcle lhc .\'oticc Llutad ll)'03 )lt) I hctring Abtice A/o' 118.4,,157 ,.\ !18 2010-:t 1(ti t9l5ll lt !t t'ttrt'tl h-t' R''tpttndant \to' l. lh) Sct tt:;iclt lht .',1rytrrttul dutrl -iit' 1t.0-J 201)) baurtnr [)octrrttt'rtt '\rr ) t t0i l9)::t)ii t) is;ucJ ht Reslruitltttt \rt 0i )01 I (ractiva<l on 1.\7'./5./ I lil'2U0- rrB.1 ): utttl (d ,\e t u;;rtlc rht' .\ho't (iar'rc '\ollti' d'tttLl I l'0-l')0)) hcuring l)t.,cttrtttttt rttt. lIB1.151 t". I])/t) l0)t-:l t0106)()689(I) isstrcd ht, Ile spttndent Yo. 6 u t0 ttnd ;tu'is ttnt othcr otler or orde rs us this llon'hlt ( tntrl mnl rleertt.fit in the <irturnslctttt:c's o-f lhc tttst; "

f, v. Page 3 of2l

3.

The facts of the case in nutshell are that the original assessment for the Assessment Year 20 16- I 7 u,as completed by the Assessing Officer vlde order dated 17. 12.20t8 after detailed scrutinv and consideration of all relevant documcnts and submissions made by the petitioner. However, the respondent authorities, specifically respondent Nos.2 and 3, issued an approval dated 30.03.202i under Section 151 ol the Act and subscqucntly issued a notice under Section 148 of thc Act on the same date seeking to reopen the assessment. The reasons for reopening vvere not cornrnunicated to the petitioner until 1l .03.2022. when a show-cause notice was also issued giving the petitioner Iess than four working days to respond to the matters pertaining to transactions from five years prior.

4.

Leamed Senior Coutrsel appearing for the petitioner contended that the impugned notice dated 10.03.202 I (received on I 1.03.2022) and the impugned notice dated I 1.0i.2022 arc lttndamentally flawed and bad in law as they constitute a prohibitcd change of opinion. The original assessment was completed on i 7. 12.20 I 8 after a detaLb& scrutiny proceedings wherein the Assessing Officer examined all relevant facts,

s Page 4 ol2l docurrents and subrnissions tnade by thc pctitioner. During those proceedings, the Assessing Officer had full opportunity to examine the vcry same transactions ancl issues that arc t.roi.v sottght to be reopencd. Moreover, thc petitioner had disclosed all the rraterirl facts truly and fully, and the Assessing Officer applied his nrind to those facts and arrived at conclusions alier due consideration. 'l'he scftlcd position in lau,, as laid down by the I Ion'ble Supreme Court in nur.nerous decisions including Assistant Commissioner of Income Tax-12(3)(2) and Others vs. Marico Limitedt^ Marico Ltd. vs. Assistant Cnmmissioner of Income Tax-12(3X2) and Others2, and Commissioner of Income Tax, assessment merely because he has flortne'd a diffbrent opinion on the same set of flacts. 'fhe polver to reopen undel Scction l,l7 o[' the Act is not a powet of review ancl cannot be exercised to peunit thc Assessing ' t2o2ot 16 Supreme Coun Cases 354 ' 2019 SCC OnLine Bom 4772 ' (zolo) z Supreme Court Cases 723

7v f Pase 5 of2l Officer to have a second look at the same material which was available during the original assessment.

5.

Leamed Senior Counsel lumher contended that the respondent authorities have failed to demonstrate the existence of any fresh tangibte material that came into thcir possessior.r subsequent to the completion of the original assessment proceedings which would justify the reopening of assessment under Section 1,17 ol the Act. The statutory provision mandates that reassessmenl can on ly be initiated when the Assessing Officer has reasons to believe that incomc chargeable to ta.x has escaped assessment based on tangible material not available during the original assessment. In the present case. all infbnnation, documents and materials relating to the transaction in question were duly examined during the original assessment proceedings. Moreover, the attempt to reopen the assessment is merely based on a re-appreciation ol the same facts and materials that were already on record, which does not constitute valid grounds for reassessment. That the respondent authorities are providing ex-post facto justifications to cover up the irregularities and iltegality committed in the process of issuing the impugned notices. Without any l i i I I

a I'age 6 ol2 [ new tangible rnaterial having surlaced post the original assessment, the rcassessment proceedings lack the loundational .iurisdictional requirernent ar-rd is therelore liable to be quashed

6.

Leamed Senior Counsel further contended that the respondent authorities provided the reasons for reopening the assessmcnt only on 11.03.2.022, alter an inordinate and unexplained dela-v of nrore than I I nronths from the date of issuance of the notice. Morc cgregiousll'. aftcr this prolonged delay the petitioner was given less than four u'orking days to respond to the shorv cause notice and provide inforrnation and docunrents relating to transactions dating back tivc years. This arbitrary and unreasonable time f}ame made it practically inrpossible lor the petitioner to preparc and submit a comprehensiYe response, efl'ectively denying thenr a nreaninglul opportunity of being heard. Fr.rrthcrrnore, the rcspondents had lailed to provide the approval granted b1, the Additional Commissioncr of Income Tax for rcopening the case undcr Scction 148 of the Act. despite specific requests fl'om the petitioner. The concemed authorify stating that such approval is merelv intemal correspondence that need not be cornmunicated to the petitioner is r.r,holly untenable and Page 7 of2l demonstrates a complete disregard for transparency and fairness in quasi-judicial proceedings. These procedural irregularities and violations of natural justice render the in-rpugned notices legally irrfirm arrd liable to be set aside.

7.

Per contra, the learned Senior Standing Counsel for lncomc Tax Department contended that the petitioner has deliberately misled the Jurisdictionat Assessing ofticer by f'aiting to apply the prescribed methods for valuation of shares under Rule I IUA of the Act' Despite being a prolessionally managed colnpany rvith auditcd books of account' the petitioner did not adopt either the "Discounted Free Cash Flow Method" or the "Net Asset Value Method" as tnandated by law' Instead' the petitioner submitled a valuation certillcate by inappropriately comparing share values with those ol a tistcd cotrpany' which is not an approved method under the Act Furthennorc' the petitiorler lailed to correctly calculate the disallowance under Section l4A by not applying the provisions of Rule 8D, leading to underrepofting of invcstments and incorrect computation of taxable income' -fhat these material omissions and non-application of tnaudatory rule provisions constitute tangible

\ Page [i ol'2 I groLrnds lbr reoperring the lssessment. as income chargeable to tax had escapecl asscssnlcnt rlue to tltc petitioner's lailurc to corlph riith thc statutorv [e(]uiremeqts. The Assessing Oftlcer durine thc original scrutinl proceedines did not fbrm any opinion on the inappropriatc metlrod adopted bv the petitioner and therelirre. the question of a urere diffcrencc of opinion clocs not arise in this case. 8. [-earnecl Senior Slanding Counscl lor Inconre Tax Dcparlment subrrrits that all proccdural requirements under Section t.lg ol the Act werc dul1, courl;lied r,i,ith beibre issui.g thc notice lor rcopening lhc asscssnrent 1ir r Asscssrlcnt Year 20 l6-17. A show cause notice undcr. Sccti.n 1.18.\(b) *,as issued on I 1.0i.2022, pLoviding rhe periLio,er a. o1-rp.rtunit'to respon(i. and considering the nratefial on rccord and no,- |esp()nsc tionr the pctitioncr, an order under Section l4gA(d) of the Act u'as Passecl orr i0.0l.l()ll. [-hc notice uudcl Section r4g ol thc Act \\,as issueri ., :10.03.20:2 atier obtaining prior approval lrom the spccilied authorit' undcr Secti.n l5l of the Act, u,ith proper DtN (Docunrent Identificatiou Numher) cencration that rellccts tlre date and tirne ol- approl'al. It was also clarified that the approval granted by the Joint

Page 9 ol2 I Commissioner of lncorne Tax (respondent No.2) is part of the official record and was obtained in accordance with the law as it stood on 30.03 .2021 . The reasons for reopening were provided to the petitioner vitle letLer dated 11.03.2022 in response to the petitioncr's request dated 10.12.2021. Therefore, the reopening is not based on a change of opinion but on the discovery of new material facts regarding the petitioner's non- compliance with Rute l tUA and Section 14A read with Rule 8D, which were not properly examined during the original assessmenf proceedings' g. Further, the learned Senior Standing Counsel lor [ncome Tax Department refutes the petitioner's contentions that the rcassessment proceedings are time-barred or violate the amended provisions under Section l48A of the Act. The impugned notice under Section 148 of the Act was issued on 30.03.2021 , which was well within the limitation period and in accordance with the provisions of law as existed at that time. -fhe subsequent amendments introduced by the Finance Act, 202 I' which inserted Section l48A do not apply retrospectively to proceedings that were already initiated before the amendments came into lorce. That the reassessment proceedings were conducted with proper jurisdiction

( Pagc l0 of 2l and rvithin the tirne limits specified under the Act. The notice under Section 1421 l) datc'd I 1.03.2022 was issucd legitimatelv calling inforrnation from the petitioner and for supplying the reasons for reopening as requested by the petitioner'. 'Ihus, the learned Senior Standins. CounseI firr Income Tax Department prays the Hon'ble Court to dismiss the writ petition and vacate the stay granted on the reopening proccedings allon,ing the Department to conduct lurther scrutiny proceedings in accordtrnce w,ith law.

10.

Ilar.ing heard the contcntions put forlh on either side and on perusal of tecords. thc question that arises for consider.ation in this case is "w'hether thc impugned norice dated 30.03.2021 under Section I48 of the Act and the subsequent ltroceedings constitute an impermissible changc of opinion w,hen the orisinal assessment lbr the Assessmetlt yeal. 2016-ll rvas corlpleted alter a detailed scrutir-ry on 17. 12.2018, and rvhethcr thc reassessntent proceedings are legally sustainable in the absence of anv fresh tangible nraterial coming into existence subsequent to the original assessmcnl?"

u' Page ll ol21 It. The fact on record is that the original assessment lor thc Assessnrcnt Year l0l6- I 7 was completed on I 7. I 2.20 I 8 alter elaboratc scrutiny proceedings wherein the Assessing Officer had exanrined the very transactions now sought to be reopened, including the valuation of shares and disallowance under Section 14,A.. The petitioner had placed all the material facts. documents and valuation certificates belore thc Assessing Offrcer during the original assessmenl proceedings and thc Assessing Officer alter due application of r-nind accepted the sanre atld completed the assessment. The respondent authorities subsecluent realization that a different method of valuation under Rule I IUA ought to have been applied, or that Rule 8D should have been invokcd lor Section l4A disaltowance, represents nothing but a mere change ol opinion on the satne set of facts that were lulty available during thc original assessment.

12.

The Hon'ble Supreme Court in the case of Indian & Eastern Delhir held at paragraph No. [4 as under: o (lgzg) a Supreme Court Cases 248

s l'agc l2 ol'21 '14- \rtv. it tlL tLt\( hclrtrc trs. lhe lncetut Tut Oflic<'r hud. v'han ItL' trtrrrlt' lln' ,tri!itrul {/\\f!.!rr('/?1. .()n.\ilL'red lhc ltroririons rtl .\L'ctirtit', t) Lultl lt) ltl.t dill(ru,lt1 t i!t' tuktrt ht him afiantrrtls on llrc opytlittttiotr rl thtr<, ltnl i.ritttt.s vttnrkl utttuttl ltt u chunge of L.tltirtiort rtn nt(t(trLtl ultcutl.t utn.virlcral bv hint. fhc Revenuc cottttr s that il i\ t)lt(,n tu lim lo lo so. turl on lhat husis lo reopcn lltt ustts.trncrtt uttLlt'r .\tttiott ll-(b) Reliunt'e is plucal on Kulyunji .llurji & ('o. r.( ll ltl9-6t LS('(' 9,9i 1976 S(( (7'ux) lll : (19-6) l(tl llR :,\-l y ht'rr: t llcnch of tttt lcurned..ludges ol this ('tturt ohttrt trl tlttrt tt ((tr(, v lrcrc ittcotttc had a.scaptd os\cs.tnrcnl tluL' trt tlt ()t('t\illtl. irtrulrerkrtt'c rtr mi.stakc of llr Inunte Ttx O//icrr ntu.st lrtll t ithin .\i(ction 3lll )(b) ol lhc lndion lnunte Tu.i .11t. l9l). ll ur\)L'(r\ tt) tt.i. t,it11 t(peLl. lhul the lrropo:-ilion i.\ .\tulaLt tot) v i,l,'h ,tnd tro|cls fut'llk'r tlrun tlrc stulule fan'unl.t irrttfirr ux it tt,rt ltt'ruitl kt lqt, elottt tlu/ if, tn reapprui.sing lht, mutt't ttrl cort.srrltrttl hy ltin drtring lhc rtrigirutl u\\e.\rnrcnl. tlla Ittttrre lut ()l/it,'r liscote r.s thut ha hd.\ .'ommilkd atl arn)t ilt (()t\((lu( i(( r,l *ltitlt itr('()uL' hu.\ t.;Lupel usie.ysmcnl il i\ open t() Ittnt to rt'oltttt tlt(,(t\\e:\ t(nl- ltt our opiniott. un ertor di.scovcrt,tl ort u rt,t,trtsidc,trttttrt of tlt sutn( ntutcriul (ond no nore) doe.l n(i giv<, ltinr tlnt prltcr llrut : ,ut lltt t,rtlr tukan h.t' this ('out l irt \l,tltutLtj Ktlnur Krrntttl .\ingh r. ( ll [1lR 1959 S( 25- . (19-;q) ji 17 R I lt).,t) \u/)t) L\( R 101 . ( ITt'. Iluntun & l'o lAlR 196fj S(' 19 : (196,\t L\( R 10 (1968) 6i ll'll llj and llunkiltur (.lub Lttl.\'.( ll l(lt)--', /.\(( i86.l9r1 S('('(Tux) 76. (1971) 82 l7'R ,9) ll . trrul tc tht trut hcliL'va thot -thc lat lrus since luken u differartt ttttrrsc .lr.r oli\rttdtion\ in Ktll,orryi .\lutji & ('o. t' ('lT lU9'6) I S( (' 98.r 19-6 .\('( (7ur) I II .. (1976) l0) l'tR 2,\7J suggastin+ lhc' tonlr ur.\' t , ru)t. \re :ut tt'ilh respt'cl, lu.y' dott,n tha correct lay..

t#!..!,ry ,€ Page 13 of2l

13.

The Hon'ble SuPreme Court in the case of Kelvinator of India Limitetl (suPra) has held as undcr:

"6. 11'e ntusl als'o keep in mind lhe conceptttaL difkrence bchveen pou'ar to reviett and prtv'et to reassess' The ussessing olficer has no power to reviev', he ha's lhe potter ttt reassess But reassassmenl has to bt' hascd on fttLflment ttf ccrtain precondition and if the concept of 'change ttf opinion" is removed' as utnlended on behalf of the Dc!)(tt'lntenl' thcn' in the garh of reopening the assestmtnl' rtvicrt v,ould take Place

7.

()ne ntttst lrcal the toncept o;f "change of opinion" as an in-built lest ttt clteck abuse oJ'pou'cr by rhe assessing oJficer' Hence' aJier I - J- 1989. the assassing ttfficer has power to reopen' provided there i's "tangible malerial" Lo come ttt the concluston lhal lhere is esc(lpafitcnl tl income .frttm assessment' Reosons musl have a lita link ttith llta forntatittn of the belief Otu" view gels supporl from thc cltanges macle lo Sct'lktrt t17 of the Act' as quoted hereinahot'e' I.lntler tlrc Direct lta Laws (''lmendment) Acl' 1987' Porliament not onl-t' delated lhe ttortls 'reason lo believe" but olso inserted lhe ttord ttpittittn" in Scclitttt 147 of the Act However' on rcceipt of rcPrasant(|ti()ns J'ont lhe companies against omission of lhe t'ords 'r(usot1 l(t ltelrcta'" Parliamenl reintroduced the said expression unLl deleted the trttrd opirtir'tn" on lhe grourul thut it tlould t'ast u r h it rur-l' pox' e rs i n t he as se s s in g oJ'fi ce r' "

*.., Page l4 of 2l

14.

The Hon'ble Suprcme Clourt in the case ol Marico Ltd. (supra) has held as uuder: '

10.

It r.t urtdislttrtt,tl position halbrc u.t. Ihut u querv \ras rai.sed on tlrc vt, t-t i.:suc o/ rtrrytenint tlrrnng regulur ussc.f.\menl proceedings. 7'he pctrtics huvc ratpontlcd to il and the o-\s(,.r.\menl order clated .lunuun. 30. 20 18. muke.s rto rcJbrcncc to the uboye issue al all. Hotraver. on(r d qu(r.t: lru: baen raised b.y thc As.se.:sing Of/icer tluring thr'.r\.!r'.\.\/r/(//t 1tntc'cttIing.s tnd Ifu u.stc.s.scc h,:ts responded to lhul qu(r.t. il vottlcl rrce.ssurilv follur. ts heltl hy oLU' cout l lhal tlrc,,1s.sc.s..sing Olfic'cr lrus uL'te[)ted Ihc petitionet's/as.tessee's strbmi.s.siort.s. .\() oi to nol clt'ul Yith that issua in the assessment rtrtfur. ln flc't. rnrr .:oLtrl ut Gli,\'.\]ri1cr' l[atul.s Ltd. y. Ms. Rumultriy,r RugJutun. ..1:st. ( IT (2015) 37 I II'R 225(Bom) had ot:ca:ion to daol l .i/lt tfu :int ilur:itfuntic'a! subni.t.sion.s on behalf oJ' tha Rtt'cntra, \'i::.. thol on o\\t.\\nttnt ordcr pu.s.sed under seclion 11](i) d the .1tt tktcs nt rtflctt un.t t-ttnsideralion of the issue, it ttlu:it ./bllo\ thul no opiniort \ u.: fiItnctl hv tfu .l.ssassing Oftice r in thc rcgular u.\:r.\.\nt?tll pro('atling.s. This.subnis.sion t,as neguli'ed hy thi.r cotrrl bt oh;e n irt,g u.;.lollotr.s (puru 2il ol 3 t- I ITR). ''.,1c1'ordit4l trt tlr Rcytrttrc. it co tl onl.t he vhen the o.\.\ass t(n! orulcr contoin.\ u tli.stus.siott vith rcgLtrd lo u lturliculur t'ktint tttn il hc .ruid lhut the ,,l.s.tL,s.sing Of;l'icar hud forntetl on oltinutn tr ith rcgord b thc tlaim nade by thc ussess.a. This court in ldea Cellular Ltd. v. Deputy CIT 12008) 301 17R107(llont) hus axpra"'sl.r nat{utived on _, the iclenricul c.tntcntion on hchaL,f o.l the Revenue. The tourt heltl tllut once dll tha muteriol y,us pluced be.fore

l € I lhe Assessing OlJicer und he clrcse not to refer to the dedut:tktn. claim uhich vas heing allowed in the u.\scssment order. it could not be contended lhal lhe ,4sscssing (ffiter hn not applied his mind vhile pussing the ossessnrcnt onler. Moreoyer in this case, il is evident .fron thc latter duted .4ttgust 6, 2007, addressetl by the Assessing Olficcr to the petitioncr contuining the reasons ret:orded./itr issuinS4 the intptrgned notice also record the /act that cluring tfu regular assessment proceedings, lhe petilioner has hecn u.sked to.firnish details in supporl of lha claim./br e-rerupliort undcr seclion 8}-IAilB oJ the Act. 'lhe letter./ rther records that the details sought Jbr were .furnishad und it is nov observcd that there has been a disproport ionate distribution of expenses between various units bekrnging lo lha pctitioner for claiming deduction under .settion 80-1.4/IB of the Act. This is a further indicatiotr rt/ the Juct lhot tha Assessing Olficer had during tha regular assessment proceedings for thc us.tessment -t eur )002-03 sought informotion in respect of the allot'utiort of expenses und lha explanation offered hy thc petitio er vasJintnd to be satisfactory. This is evident fiunr quarl tluled December 27, 2001. and thc pelilioner's rcspotlst to lhe r;une ctn Jarurury 25, 2005, explaining the munncr of dis'tribution of comnr.tn expenses.for delal,ing the proca.ts qf claiming deduction Ltnder section 80- lAt'S0-IB of the Act. All this y,ould indicate that Assessing Ollicer hud fornted an opinion v,hile passing lhe order dulad March 9, 2005, 'l'his court in Aroni Commercials Ltd. v. As:st. Cl'l (2011) 367 ITR 105(Bom) had occasion

i Paqc l6 of2l to trtn.sili,r .somevhal .sintilor .;ubmi.s.sirtn matlc bt, the llcyantrc trrrl rttctrtitt,l tltt, tunt' hy futlling that rhen u tlucrt ltu.s ItLctt tttt.tctl tr ilh tcgartl /o u l)(t.ti(ul r is.\ttc duritrg llrc tcgulur as.st.s.\nant proccclings. it nu.st Jiilow rhut tht ,1;:a:.sing O\/ictr hacl atrtplicd his nind and tuken tt t,iLtr in lhe nluttcr us i.t rt'flectcd irt lhe ussassmanl orclcr. [Jesilas. [lrc nunnt:r in t,hich an Ass.assint Offitcr touhl dralt fiurna hi.; onlar is not \t itlin thc tttntrol o./ un ..1sJcJ rs(,. \lorcovcr, il crJt), contL:nlion ruisad h.t, /ha ossessea rrltitlt ettn if atceptetl i.s to bc rafleclel in the u.\.\c:\ntett rtrler. llrrt u: obyen'cd br the Gujarat High ('ourt irt ('17' t'. \irntu ('hcnicoly t,td. [2()081 3051I'R 60:(f&H). tlrc ordtr t,ould restrll into utl cpiL lontc. Ba.sidcs. tt tnuld hc iurltossihle.fitr the A.;.sc.ssing OfJ:itcr 1() cofitLrlcl( ull tha u.s.;t,ssntcnts thich ltu,,.c' ttntlerqone .\'uulinr ut it.s l.utntl. ltt the ubov r.rerr.. 11 i.l tleur lhut ottLc u qu?rt hus ltccn roised durinc the ussessnt(nl 1tr<tctcrling: tt d tlt lt?litiotrcr hu: rc.s:ltrtniled to thc quen t() tlt 5uti.s/uttion ol tha l.ssr:.s.ting Oflicar as i.s evidelt lrottt thc ltu:l lhut !lrc u.ssL,:.rnertt or.der. tlatcd llurt:lt 9. )l)05. ottcpts !fu pctttioncr',s cluim for daitrtion trnrlcr sactittrr ,\0 Ll 8() tB ol tfu, ,lcl. lt mu:! lollor thut thcre is due ttpplit.ution of trind bt, tha .l.i.resill,J Ollicer to tlte is.;ue t aistcl " The ubora ohsanutions upply sn ull .fiturs to this pelition, so,fur a.s llrc Reycnut,'.s rubmi.s.siort tl'no thange o[opinion is concernetl I2. Thus tt fir iltot the reo:on.t itl support o.f tl.ta inpu,qnecl notice i5 rt. vsTf i.s.srte in respcct oJ-vhich tltt,..l.ysa.s.;irtt Oflic.t,r. ltas rai.std

['agc l7 of 2l the query dutad Septcnber 25, 2017, during the asses-tmenl procecdings trntl tha petilionar hud resporulatl to the sunte by its latlen datcd Dt'centher 10. )0t7 und Decenhar 21 2017' justiJfing it.r stond. 7hc non-rejcc'tirtn tt/ tlrc esplanalion in the assessmenl ordcr v'truld anounl Io llrc Assessing (ffitcr accepling thc viev'ol the usses.tcc. lhu.\ luking a vig11'.l firntittg un opinion ThereJbrr', in lhese cirLlfin.tlunct'.s, lhc reason.; in suPporl oJ'the impugned noticc procacrl on u merc c'hungc of opinion and therafore v'ould he contplelell' t ilhoul iuri.sdiction in lhe present .facts- Accordingly, the inpugnccl nolic'a tluled ,llurch )7. )019, is quushed and sel aside. "

15.

In the case of Assistant Commissioner of lncome Tax-12(3)(2) and Others vs. Marico Limited (supra) it was held as under: ''

3.

Subsequentlt'. ht' notite datcd 27-3-2019 issued under Section t18 of the lntrtme Titx Att. lhe mutter wrts.rought to be re-opened- While accepring thc challange lo tha i:rsuonce o.f nolice. the High Court lMurio Lrd. v. ('l'[. 1019 SC'(' Online l]om 1772 -' (2019) I1t CTR 1165 | in puru ti d irs .iudgnent observed as under'. (Marico l.ttl- cuse !Nluriut Ltd. v. Cl'1, 2019 SCC OnLine Bom 1772 . (2() l9) 3l I ('l'R 8651 . S('(' Onl.inc Bom) "

13.

Thus. trc lind thut lhe rausons in supporl of thc impugned notic'c is tha t'cr-t,i;suc in rc\)ect ofvhich lhe ussessing offcer has ruisati thc quer.t duted )5-9-2017 during lhe usse:ismenl pruccedings and the pelitioner hud resYtnded lo lhe some blt its lctters duted l0-tl'2017 and 2l-12-2017 jusrifiing its stand. 'l'hc non-rcicclittrt of tlrc explanation in the ussessntenl order vould amount lo lhe ussessing ofJicer accepling lhe viev'

I'ase I8 of'lI ()/ /ht, .r.\\('\\.'c'. tlttrt tukin,q u trcr fitrnting utr ttJtittitttt 'I lnrtf trt, itt llt'v' tttttttttrluttLt.r. llrc t?tt.\ott.\ ttt sttltytrt of tlrc ittt!ttt,!tLt! nt,litt l)t()L('((l trtt tt tttL'i t' t'lrungt rtf rtltinirtn lttl tlt,''e.litt roull hc ()t pl(ttll t ithotl juri.sditliott itt tlrc ltrt'scnt fttt l:.. .lcutrLlmglv. lht inpt,grtt'cl rulica tluttd 27--l- Itt l9 rt .lr,rtlu,,l ,tthl rt u:i,!r'. 16. t-astl1,. in the case of Shri Saibaba Sansthan Trust (Shirdi) vs. Union of Intlias in paras.raph No.4tl, it \\'as held as urlder: 18. |)on tltL ulortxtid di.st'us.tiott. it is tlttilc t'lcur l() u.\ lllul onLe tunqiblt, nult'riul during tha crttrr.\t' rt/ ttrte:.trnenl lvttctedirrg.s tltts uwtiluhlc v,ith !hc Arst'.;.vinc Olficer untl tlrc sanc r''us tttttsideretl in ltu.ssing lhL, uts'('\.\tltanl otrlcr under .sattittn ll l(3) rtl llt Inatnte-lux ..ltr. tha ..ltsLtssirry O/fiL'tr. in tht' uh.vnta of arn /ie.th nuleriul. ctnitl trut ltu, e' ltrttr'L',;'lcl lo n'opL'tt lh( Palllutn(l\ u.\.\('\\tttanl ot1 similar nulL'riul.\ Slch e.rcrt'ru'c' ttottlrl turtlutttttuttt l,t u tt'tiet oJ lha u\'.\a.\-\t anl rtrtlt'r'ott ( t1t(r( chtulgt: of oltittitttt l'lti' i.s t'<'rluinl.t'ru pL'rmi.stihlt, lf ru(lt ittlcrl\a,tolt()n ()l lh( itrrt'r'isiont 4\- Ltttlt'(t\sad (,n hahull tl tht n'spttt enl.s i.s ttcceltlal. tt)t us\e.\.\t !t1l ttrtfur voultl hr'cttnL,wrlrt-'nrblt' lrt ht urhilturilt r('olt't1(Ll. ntrtlt ott tht' grountl ll tl llrc -1.\.\t,.\:ittg ()//itt'r c,t llrc tL'r.t ututtrrul iltlett(k lo tokc u dil/a|t,nt Iir,tr rtltinutD ott llt ut.sc.s.tnr?nt rntlt,r pu:tatl hr ltin.'lhi.s wtukl lcul to d t\'!ilte of tcttul ttttc'artuinn.. ln (nu opinion. thi.s i.s ntithcr tht ohit,tt tutr tlt? it at ion <t/ tlrc prot'isi)ns o/ .stction 111. 'l lrc pntt,i.titttt i: u .:1tt'ciul pctt ar. .\() us t(, chtc'k. liscent and recull t'ontluded (/!.!(,.r.!//1sli/.t, hcnct. .ruch l)or1(r cA tnt lt arart'i.scd 5 2oz+ scc online Bom 3875 j I II

Page l9 ol 2 I when il is nol u cosc, rlrcre thc osscssee had nol vithhcld ony infbrmotiort und.br the .lsscsslng Ollicer ditl not lruvc any .fre sh tungibla muteriul ,1 sccttntl bilc ut thc chcrry' 15 nol vhul is conlamplutctl under sc(ltott l'l-. on the busis o.f ntuteriuls ulrcud;' at'uilahle v'ilh lhe .'lsscssittg ()ffic'cr. u\ thc prorision toulcl hecome applicahle in thc prc:;cnt.fhcl.s. ,11n. secli<ttt 117 cerluinly does not ptrsttlulc a ttrriert .itu'istlittion so lhot the assessmcnl can he re't'ievcrl, on lhe Asse.\sing Officar intencling ttt.fornt a di/fercnt and,or a nev oltinion.

17.

All the above judgments have consistcntly held that reassessment proceedings cannot be initiated merely because the Assessing Officer, on a subsequent rcview of the same material, forms a different opinion about the applicabitity of cefiain provisions or nlethods of computation' The power under Section t47 of the Act is not a power to review but a power to reassess rvhich can only bc cxercised when there is tangible material suggesting escapement of income that was not available or considered during the original assessment proceedings. Furthermore' the contention oI the Department that the Assessing Officer did not lorm any opinion on the method ol valuation during the original assessment is factuatty incorrect and legally untenable. when a valuation ceftificate is submitted during scrutiny proceedings and the Assessing Officer accepts

l'age 10 of2l the usscssnrcnt \\'ithout raising anv ob]ection or nraking any addition on that uround. it inrplies that thc Asscssing Of flcer has applicd his nrind to the r aluatiorr nrethodologr and lound it acccptablt: 'l-tre subsequent xssertion that ltule l lllA q,as not applied IS nrerely retrospectlvc a rationalization and docs not constitute discovery of nc\\, ntatel.ial wan lrnting reopcning. 'l he l)epatlmcnt cannot now colltend that because specific rulc provisions wcre not crplicitll, rncntionerl or discussed, no opinion uas formeci. I he acccptance of the rc-turn and corlpletion of assessmcr.lt ilsel 1' rc flects thc lormatiorr ol opinion I8. More,.rver'. tlrc. procedural irregularities committed by thc respondent authoritics liuther vitiate thc reassessrneni procecclings. 'I'he reas()r1s lirr reopcnine \verc comntunicatcd to tlrc. pctitioner. crnly on I I .01.1021 alicr an inclldinatc and unexplair.ted de lay of near[,r' I I nrontlls fionr thc datc ol issuancc ol'thc intpugtrcd notice on j0.01.202 l. and urercaflcr the pctitioncr qas qivcn less than lbur working days to rcspond to the rnalters concelning tr-ansactions liont flve year.s prior thc'rcb' r'iolating thc tunda,enta[ principles ol natural justice cnsll.ined in ;\rticlc l-1 o1- the Constituti.n .r- India. 'fhc Department,s {airure to ry , To, Page2l ol2l provide the approval granted under Section l5l of the Act claiming it to bc intcrnal comcspondence, demonstrates a cavalier approach to transparency in quasi-judicial p.ocecdings and deprives the petitioner of the opportunity to verify the legal sanctity of the approval process.

19.

For these curnulative rcasons, we are of lhe considered opinion that the reassessment proceedings are fundamentally flawed and tegally unsustainable. Thus, the impugned reassessment proceedings issued by the respondent authorities deserve to be set aside / quashed. It is ordered accordingly. 20. [n the result, the w.rit petitiorl stands allowed. 2l . As a sequel, miscellaneous petitions pending if any, shall stand closed. However, there shall be no order as to costs. l- H.S.GOWRI SHANKAR SISTANT REGISTRAR //// SECTION OFFICER

1.

The P Commisslone r of lncome Tax-l m No. 711' 7th Floor, A Block, er, AC Guards' Masab Tank, H bad, Tela - 500 004 rincipal lT Tow

2.

Joint Commissioner of lncom e Tax, Range-1 , erabad lT ,AC

3.

DePutY Guards, M Commissioner asab Tank' Hvd oflncome T erabad, Telangana ax, Circle 1 - 500 004 (2), H rabad lT Tower, AC yde 004 erabad lT Tower' AC

4.

Assistant Co Guards, Masab Tank, mmissioner o Hvd f lncome Tax, erabad, Telanga Circle 1 ( na - 500 2), Hvd Guards, Masa b Tank, HYderabad, Telangana - 500 004 5. lncome Tax Officer, Circle 1(2), Hyderabad lT Tower, AC Guards, Masab Tank, bad, Telangana - 500 004 -Assessment Centre, NationaI Faceless Assessment Centre) ngana Tower Room

6.

The N Hydera ational-e ( J

003.

No. 401 , 2nd Floor, E-Ramp, awaharlal Nehru Stadium, Delhi - 1 10

! 7 Addrtronal Commissioner of lncome Tax, National-e-Assessment Centre, (National Faceless Assessment Centre) Room No. 401 .2nd Floor, E-Ramp, Jawaharlal Nehru Stadium, Delhi - 110 003. B Joint Cornmissioner of Income Tax, National-e-Assessment Centre, National Faceless Assessment Centre) Room No. 401 ,Znd Floor, E-Ramp, Jawaharlal Nehru Stadrum. Delhi - 1'10 003

9.

Deputy Commissioner of Income Tax, Nalional-e-Assessment Centre, (National Faceless Assessment Centre)Room No. 40'1 , 2nd Floor, E-Ramp, lawhailaNekuStadium, Delhi -1 10 003. 10. Assistant Commissioner of lncome Tax, Nattonal-e-Assessment Centre, (National Faceless Assessment Centre) Room No. 4O1 ,2nd Floor, E-Ramp, Jawaharlal Nehru Stadium, Delhi - '1 10 003 1 1. lncome{ax Officer, National e-Assessment Centre (National Faceless Assessment Centre) Room No. 40 1, 2nd Floor, E-Ramp, Jawaharlal Nehru Stadium. Delhi - 1 10 003. 12. The Secretary N/inistry of Finance, Union of lndia, Government of lndia, North Block, New Delhi 110 001 . 'l 3. One CC to SRI KOPAL SHARRAF, Advocate IOPUC]

14.

One CC to [t4/s. BOKARO SAPNA REDDY (SR. SC INCOIVE TAX) [OPUC] 15 One CC to SRI N BHUJANGA RAO, Deputy Solicitor General of lndia [OPUC] 16.Two CD Copies BN DD Yr r: i..: .' ';::t " i.;al :- irll1*J;._.i;, -,E-; ",di"

HIGH COURT DATED:06103t2026 ORDER WP.No.13322 of 2022 ALLOWING THE WRIT PETITION WITHOUT COSTS Cd?1nI \ toi(i$c sr4I A PA I 0 o U I fl P -:, 026 t 2 rfl{ t yB &tr Cl o

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