Mundra International Container Terminal Pvt. Ltd. vs Deputy Commissioner of Income Tax

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K.S. Jhaveri, J.—This petition has been filed against the action of the respondent-authority of issuing Notice dated 23.01.2014 u/s. 148 of the Income-tax Act, 1961 to the petitioner whereby, the petitioner has been asked to file his return of income for the A.Y. 2007-08 on the ground that the income assessable to tax for the A.Y. has escaped assessment within the meaning of Section 147 of the said Act.

Briefly stated, the facts are that the petitioner herein, which is a private limited company incorporated under the Companies Act, 1956, had filed its original e-returns of income on 30.10.2007 declaring loss of Rs. 82,86,75,690/- and revised return on 17.09.2008 declaring loss of Rs. 81,87,45,944/-. The return was duly processed u/s. 143(1) of the Act. The case was taken up for scrutiny and Notice u/s. 143(3) was issued and served upon the petitioner. The petitioner furnished all necessary details along with the reply. After perusing the materials available before it, the respondent framed an assessment order u/s. 143(3) on 07.02.2011 whereby, the claim of the petitioner was allowed. However, the petitioner was served with the impugned Notice dated 23.01.2014 whereby, the petitioner was called upon to submit its reply on the issue of reopening of the assessment for the A.Y. 2007-08. Being aggrieved by the same, the present petition has been preferred.

Mr. BS Soparkar learned counsel appearing on behalf of the petitioner submitted that the impugned Notice issued by the respondent is bad in law inasmuch as it has been issued merely on the basis of change of opinion. It is submitted that the assessment order dated 07.02.2011 makes it apparent that the respondent had consciously allowed the claim of the petitioner with regard to depreciation on "infrastructural usage facility" after considering all the materials on record. Therefore, now, it is not open for the respondent to re-open the assessment merely on the basis of change of opinion. It is submitted that the present proceedings are initiated for the purpose of re-appreciating the material available on record, which is impermissible in the eye of law.

3.1 Learned counsel Mr. Soparkar further submitted that Notice u/s. 147 of the Act can be issued "if and only if" an A.O. has reason to believe that any income chargeable to tax has escaped assessment. Such "belief" must be based on reasonable ground and not on a mere change of opinion. Therefore also, the impugned Notice issued by the respondent deserves to be quashed and set aside.

3.2 Learned counsel Mr. Soparkar submitted that merely because there exists a reason to believe that income had escaped assessment, the same is not sufficient to re-open an assessment beyond the period of four years. The escapement of income must also be occasioned by a failure on the part of the assessee to disclose fully and truly all material facts. In this case, there is no failure on the part of the assessee to disclose truly and fully any material fact. Therefore, it is now not open to the respondent to reopen the assessment.

3.3 In support of his submissions, learned counsel Mr. Soparkar has placed reliance upon the following decisions;

"(a) Commissioner of Income Tax, Delhi Vs. Kelvinator of India Limited, .

(b) Gujarat Power Corporation Ltd. Vs. Assistant Commissioner of Income Tax, .

(c) Cliantha Research Ltd. Vs. Dy. CIT .

(d) National Dairy Development Board Vs. Deputy Commissioner of Income Tax, .

(e) An unreported decision of this Court rendered in Special Civil Application No. 1588/2013 decided on 29.07.2013."

Mrs. Mauna Bhatt learned Standing Counsel appearing for the Revenue drew our attention to the objection dated 25.03.2014 filed by the petitioner. It was submitted that at no point of time, the assessee disclosed the fact that it was allowed to use only the infrastructural facility and that it was not the owner of the infrastructure. Ownership was one of the conditions for admissibility of depreciation allowance. The right to use the infrastructural facility would not be the same as "intangible asset" as enumerated in Section 32 of the Act and hence, not eligible for any depreciation. The assessee was only user of the infrastructural facility but, not the owner. The depreciation allowance would be available only to the owner of the assets enumerated in Section 32 of the Act.

4.1 It was submitted by Mrs. Bhatt that during the course of original proceedings, there was no clear disclosure by the assessee that it was not the owner of the facility. In view of this nondisclosure by the assessee, the provision of Section 147 of the Act has rightly been invoked. Hence, it was prayed that the present petition may be dismissed.

We have heard learned counsel for both the sides. It appears from the record that the petitioner has not concealed any fact while the assessment proceedings for the Assessment Year in question were under way. In fact, the petitioner itself had informed the respondent that it is not the owner of the infrastructural facility in question. The said fact is apparent from the following averments made by the petitioner it its communication dated 07.11.2009 (copy of which is appended vide Annexure-C) addressed to the respondent;

"3. .... Further, the infrastructure facility like dredged channel, use of rail, road connectivity, use of water, electricity and telecommunication and use of marine and port facility of which the ownership belong to Mundra Port and to utilize the said assets the company has paid the amount."

Therefore, the factum of ownership of the infrastructural facility, which is the basis for the arrival of opinion by the respondent, was very much present and visible at the time when the assessment proceedings were under way. There is no willful non-disclosure of relevant facts on the part of the petitioner, as alleged by the respondent. Therefore, the impugned action of the respondent proposing to re-open the assessment within the meaning of Section 147 of the Act for the A.Y. 2007-08 is erroneous and bad in law.

In view of the above discussion, the petition is allowed and the impugned Notice dated 23.01.2014 issued u/s. 143 of the Act is quashed and set aside. Rule is made absolute.