ASTRAZENECA INDIAN PRIVATE LIMITED vs. THE ASSISTANT COMMISSIONER OF INCOME TAX

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WP/54208/2018HC KarnatakaKAHC01024255201830 June 2022Bench: M.I.ARUN13 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the reopening of assessment after four years but within six years, under the proviso to Section 147 of the Income Tax Act, 1961, requires a finding that the assessee failed to disclose fully and truly all material facts necessary for that assessment year. The court found that in the present case, no such allegation was made against the assessee. The reason for reopening was solely based on the revenue's view that the deduction claimed under Section 35(1)(iv) was wrongly granted, not on any failure of disclosure by the assessee. Relying on the Bombay High Court's decision in Hindustan Lever Ltd. vs. R.B.Wadkar, the court emphasized that reasons for reopening must be clear, unambiguous, and supported by evidence, and cannot be supplemented by affidavits or oral submissions. Consequently, the court found the reopening of assessment for assessment years 2011-12 and 2012-13 to be invalid and set aside the notices and subsequent orders. The court did not examine other contentions raised by the petitioner as the writ petitions were allowed on this preliminary ground.

What were the facts?

The assessee, AstraZeneca Indian Private Limited, filed writ petitions challenging notices issued under Section 148 of the Income Tax Act, 1961, for assessment years 2011-12 and 2012-13. These notices were issued after a lapse of four years but within six years from the end of the relevant assessment years. The assessee had claimed deductions under Section 35(1)(iv) of the Act, which were initially allowed. However, the revenue sought to reopen the assessments in 2018, contending that the deductions were not permissible, leading to escaped income. The assessee objected to the reopening, arguing that no allegations of failure to make a true and full disclosure were made, and that the income had not escaped assessment. The Assessing Officer rejected these objections, and the assessee then filed writ petitions before the High Court of Karnataka.

What were the issues?

1. Whether the notices issued under Section 148 of the Income Tax Act, 1961, for assessment years 2011-12 and 2012-13 are valid, considering they were issued after four years but within six years from the end of the relevant assessment years, and in the absence of any allegation of failure by the assessee to disclose fully and truly all material facts necessary for assessment? Assessee's contention: The assessee argued that for reassessment proceedings initiated after four years but within six years, it is mandatory that income has escaped assessment due to the assessee's failure to make a true and full disclosure of material facts. Since no such failure was alleged, the reopening is invalid. Revenue's contention: The revenue initiated reassessment proceedings based on the belief that the deduction claimed under Section 35(1)(iv) was wrongly allowed, leading to escaped income. The revenue did not dispute the fact that no allegation of non-disclosure was made.

Which sections of the Income-tax Act were involved?

Section 148,Section 147,Section 149,Section 143(3),Section 142(1),Section 35(1)(iv)

AI-generated summary — verify with the full judgment below

Heard together (2 matters)

WP NO.54208/2018
WP NO.54209/2018

Read from the judgment's own cause title. This page is filed under one of them.

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU

DATED THIS THE 30TH DAY OF JUNE, 2022

BEFORE

THE HON'BLE MR. JUSTICE M.I.ARUN

WRIT PETITION NO.54208 OF 2018 (T-IT) C/W WRIT PETITION NO.54209 OF 2018 (T-IT)

IN WP NO.54208/2018

BETWEEN:

ASTRAZENECA INDIAN PRIVATE LIMITED (A PRIVATE COMPANY LIMITED BY SHARES HAVING ITS OFFICE AT 12TH MILE ON BELLARY ROAD, VENKATALA, KATTIGENAHALLI YELAHANKA BANGALORE - 560 063

(COMPANY HAS CHANGED ITS REGISTERED OFFICE TO BLOCK A NEVILLE TOWER, 11TH FLOOR, RAMANUJAN IT SEZ TARAMANI, CHENNAI CHENNAI, TAMIL NADU INDIA - 600 113) … PETITIONER (BY SRI.NAGESHWAR RAO, ADVOCATE FOR SRI. MALLAHA RAO K, ADVOCATE)

AND:

1.

THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1) BMTC BUILDING, 80 FT ROAD, 6TH BLOCK, NEAR KHB GAMES VILLGE NRUPATHUNGA ROAD, KORAMANAGALA BENGALURU - 560 095.

2 2. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1) 2ND FLOOR, ROOM NO. 215, BMTC COMPLEX, KORAMANGALA BENGALURU - 560 001.

3.

COMMISSIONER OF INCOME TAX C.R.BUILDING, NO.1, QUEENS ROAD, BANGALORE - 560 001.

... RESPONDENTS

(BY SRI.K.V.ARAVIND, ADVOCATE)

WRIT PETITION NO.54208/2018 IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE NOTICE DTD 28.03.2018 VIDE ANNX-A LETTER ISSUED BY R-1 TO THE PETITIONER UNDER SECTION 148 OF THE INCOME TAX ACT, 1961 (THE ACT) AS BEING ILLEGAL AND INVALID AND ETC.,

IN WP NO.54209/2018

BETWEEN:

ASTRAZENECA INDIAN PRIVATE LIMITED (A PRIVATE COMPANY LIMITED BY SHARES HAVING ITS OFFICES AT 12TH MILE ON BELLARY ROAD, VENKATALA, KATTIGENAHALLI YELAHANKA BANGALORE - 560 063

(COMAPANY HAS CHANGED ITS REGISTERED OFFICE TO: BLOCK A, NEVILLE TOWER, 11TH FLOOR, RAMANUJAN IT SEZ, TARAMANI, CHENNAI, CHENNAI, TAMIL NADU, INDIA - 600 113)

… PETITIONER

(BY SRI.NAGESHWAR RAO, ADVOCATE FOR SRI.MALLAHA RAO.K., ADVOCATE)

AND:

3 1. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1) BMTC BUILDING, 80 FT ROAD, 6TH BLOCK NEAR KHB GAMES VILLAGE NRUPATHUNGA ROAD, KORAMANGALA BENGALURU - 560 095.

2.

DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1(1)(1) 2ND FLOOR, ROOM NO. 215 BMTC COMPLEX, KORAMANGALA BENGALURU - 560001.

3.

COMMISSIONER OF INCOME TAX 7TH FLOOR, BMTC BUILDING, 80 FT ROAD, KORAMANGALA 6TH BLOCK, BANGALORE - 560 095.

... RESPONDENTS

(BY SRI.K.V.ARAVIND, ADVOCATE)

WRIT PETITION NO.54209/2018 IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE NOTICE DATED 19.6.2018 (IMPUGNED NOTICE) ISSUED BY R-1 TO THE PETITIONER UNDER SEC. 148 OF THE INCOME-TAX ACT, 1961 (THE ACT) AS BEING ILLEGAL AND INVALID, VIDE ANNEX-A AND ETC.

THESE WRIT PETITIONS COMING ON FOR PRELIMINARY HEARING ‘B’ GROUP, THIS DAY THE COURT MADE THE FOLLOWING:

ORDER

The assessment of the petitioner for the assessment years 2011-12 and 2012-13 were sought to be re-opened after lapse of 4 years but before 6 years

4 from the last date of the relevant assessment years. In this regard, notices under Section 148(1) of the Income Tax Act, 1961 were issued for which the petitioner filed its objections and the orders have been passed rejecting the same. Thereafter, further proceedings have been initiated to re-assess the income that is alleged to have escaped assessment for the assessment years 2011-12 and 2012-13.

2.

In writ petition No.54208/2018, the petitioner has sought to challenge the notice issued under Section 148 (1) of the Income Tax Act, 1961 bearing No.ITBA/COM/F/17/2017-18/1009493181(1) dated 28.03.2018 vide Annexure-A to the writ petition, the order rejecting its objections bearing No.ITBA/COM/F/17/2018-19/1012944734(1) dated 10.10.2018 vide Annexure-B to the writ petition and the notice issued under Section 142(1) of the Income Tax Act dated 21.11.2018 bearing

No.DCIT/C- 1(1)(1)/2018-19/148/AstraZeneca/11-12 vide Annexure-N to the writ petition in respect of the assessment year 2011-12. Similarly, in writ petition

5 No.54209/2018, the notice issued under Section 148 (1) of the Income Tax Act, 1961 bearing No.ITBA/AST/S/148/2018-19/1010211165(2) dated 19.06.2018 vide Annexure-A to the writ petition, the order rejecting its objections bearing No.ITBA/COM/F/17/2018-19/1013673599(1) dated 17.11.2018 vide Annexure-B to the writ petition and the notice issued under Section 142(1) of the Income Tax Act bearing No.DCIT/C-111/2018- 19/148/AstraZeneca/12-13 dated 17.11.2018 vide Annexure-N to the writ petition for the assessment year 2012-13 are challenged.

3.

The case of the petitioner is that it has been filing its returns regularly and has always made true and full disclosure of all necessary particulars. In the process, it had claimed certain exemption under Section 35(1)(iv) of the Income Tax Act and the said deductions were allowed by the revenue for the assessment years 2011-12 and 2012-13. However, in the year 2018, after lapse of 4 years but before 6 years from the assessment years 2012-13 and 2013-14 the claim of deductions by

6 the petitioner under Section 35(1)(iv) of the Income Tax Act has been held not permissible and concluding that the income has escaped assessment proceedings to re- open the assessment were initiated by the authorities. However, no allegation has been made against the assessee that he has not made true and full disclosure. On the said ground and other grounds contending that the income has not escaped assessment, the instant writ petitions are filed.

4.

Admittedly, the proceedings to re-open assessment has been made as per the proviso to Section 147 of the Income Tax Act as it existed then and it has been made after lapse of 4 years but before 6 years from the last date of the relevant assessment year. The said fact is not disputed. The first proviso to Section 147 of the Income Tax Act as it stood then reads as under: "Provided that where an assessment under sub- section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the

7 part of the assessee to make a return under section 139 or in response to a notice issued under sub-section(1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year".

Section 149 (1)(b) as it stood then reads as under: "149. Time limit for notice.-(1)No notice under section 148 shall be issued** for the relevant assessment year, - (a) if four years have elapsed from the end of the relevant assessment year, unless the case falls under clause(b) or clause(c); (b) if four years, but not more than six years, have elapsed from the end of the relevant assessment year unless the income chargeable to tax which has escaped assessment amounts to or is likely to amount to one lakh rupees or more for the year";

5.

The High Court of Bombay in Hindustan Lever Ltd. vs. R.B.Wadkar reported in [2004] 137 Taxman 479 (BOM.)

while interpreting the aforementioned provision at paragraph 20 has held as under: “The reasons recorded by the Assessing Officer nowhere state that there was failure on the part of the assessee to disclose fully and truly all material facts necessary for the assessment of that assessment year. It is needless to mention that the reasons are required to be read as they were recorded by the Assessing Officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not

8 recorded. It is for the Assessing Officer to disclose and open his mind through reasons recorded by him. He has to speak through his reasons. It is for the Assessing Officer to reach to the conclusion as to whether there was failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the concerned assessment year. It is for the Assessing Officer to form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced.

6.

I find no reason to differ from the opinion expressed in the judgment of the High Court of Bombay while interpreting Sections 147 and 149 of the Income Tax Act. Thus, when assessment is reopened after 4 years but within 6 years under the provisions of Section 143(3) of the Income Tax Act, it has to be for the reason that the assessee has not disclosed fully and truly all the material facts necessary for that assessment year. In the instant case, no such allegation is made.

The reason assigned for reopening assessment year 2011-12 is that ‘the facts in respect of deduction U/s 35(1)(iv) of IT Act, 1961 by the assessee company in AY 2011-12 are similar to facts in AY 2013- 14 & 2014-15. Thus, the claim of assessee u/s 35(1)(iv) of IT Act, 1961 in AY 2011-12 of Rs.12,98,55,150/- is not allowable to the assessee company’ and for the assessment year 2012-13 is ‘the facts in respect of claim of deduction u/s 35(1)(iv) of IT Act, 1961 by the assessee company in AY 2011-12 are similar to facts in AY 2013-14 & 2014-15. Thus, the claim of assessee u/s 35(1)(iv) of IT Act, 1961 in AY 2011-12 of

10 Rs.12,98,55,150/- is not allowable to the assessee company. Thus, there is a escaped taxable income to the tune of Rs.12,98,55,150/- and consequently short levy of tax to the tune of Rs.6,03,88,487 (Rs.4,31,34,634 IT plus Rs.1,72,53,853 int u/s 234B for 40 months)’.

7.

Thus, the assessment is not reopened on the allegation that there is no true and full disclosure by the assessee. In fact, it is not the case of the respondent-authority at all. Their case is that the claim of deduction under Section 35(1)(iv) of the Income Tax Act as claimed by the petitioner was wrongly granted. The revenue is not in a position to dispute the aforementioned facts. In the instant case, for the aforementioned reasons, the reopening of assessment for the assessment years 2011-12 and 2012-13 and authorities assuming jurisdiction for the same has to be held invalid. Under the given facts and circumstances of the case, the writ petition deserves to be allowed on this preliminary ground itself. There is no necessity to

11 examine the other contentions raised by petitioner. Hence, the following: ORDER 1) The notice dated 28.03.2018 bearing No.ITBA/COM/F/17/2017- 18/1009493181(1) issued under Section 148(1) of the Income Tax Act, 1961 for the assessment year 2011-12 vide Annexure-A in writ petition No.54208/2018 is hereby set aside.

2) Consequently, the order dated 10.10.2018 bearing No.ITBA/COM/F/17/2018- 19/1012944734(1) vide Annexure-B issued by respondent No.1 under Section 148 of the Income Tax Act, 1961 in writ petition No.54208/2018 is hereby set aside.

3) The notice dated 21.11.2018 bearing No.DCIT/C-1(1)(1)/2018- 19/148/AstraZeneca/11-12 issued by respondent No.2 under Section 142(1) of

12 the Income Tax Act, 1961 vide Annexure-N in writ petition No.54208/2018 is hereby set aside.

4) The notice dated 19.06.2018 bearing No.ITBA/AST/S/148/2018- 19/1010211165(2) issued under Section 148 of Income Tax Act 1961 for the assessment year 2012-13 vide Annexure-A in writ petition No. 54209/2018 is hereby set aside.

5) Consequently, order dated 17.11.2018 bearing No.ITBA/COM/F/17/2018- 19/1013673599(1) vide Annexure-B issued by respondent No.1 for the objections filed by the petitioner against initiation of reassessment proceedings under Section 147 of the Act in Writ petition No.54209/2018 is hereby set aside.

6) The notice dated 17.11.2018 bearing No.DCIT/C-111/2018-

13 19/148/AstraZeneca/12-13 issued by respondent No.2 under Section 142(1) of the Act vide Annexure-N in Writ petition No.54209/2018 is hereby set aside.

The writ petitions stand disposed of accordingly.

Sd/- JUDGE

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