Gujarat High Court Case Information System Print TAXAP/393/2010 6/ 6 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 393 of 2010 With TAX APPEAL No. 394 of 2010 [ENTITY] - Appellant(s) Versus [ENTITY] - Opponent(s) Appearance : MR [ENTITY], SR COUNSEL for Appellant(s) : 1, MRS [ENTITY] for Opponent(s) : 1, CORAM : HONOURABLE MR.JUSTICE [ENTITY] and HONOURABLE MS JUSTICE [ENTITY] Date : 14/11/2011 ORAL ORDER
(Per : HONOURABLE MR.JUSTICE [ENTITY]) Revenue is in appeal against judgement of the Tribunal dated 24.7.2009. Following questions are presented for our consideration :
"(A) Whether the Appellate Tribunal is right in law in quashing the assessment without going into the merits even though the assessment was validly reopened, as there was a failure on the part of the assessee in disclosing fully and truly all the material facts necessary for assessment, more so as the Tax Audit Report has not mentioned the unpaid liability excise duty?
(B) Whether the Appellate Tribunal is right in law in quashing the assessment order holding that the assessment was not validly reopened u/[SECTION], based on the decision of Appellate Tribunal in the case of Gujarat Mineral Development Corporation Ltd for A.Y. 1996-97, without giving a clear finding on the facts of the case as to whether the decision relied upon is clearly applicable in the instant case?
(C) Whether the Appellate Tribunal is correct in law in cancelling the assessment order, holding that the reopening of assessee u/[SECTION] is not valid, even though it was reopened within 4 years from the end of the assessment year, and the proviso to [SECTION] is not applicable to the facts of the case?
Briefly stated facts are as follows :
2.1 Assessee's return for the assessment year 1997-1998 was taken for scrutiny.
Assessing Officer framed the assessment on 18.2.2000 assessing total income of Rs.3.26 crore. Subsequently the Assessing Officer issued notice of reopening of assessment on 25.2.2002 under [SECTION] of the [ACT]. The assessee replied to the said notice on 18.3.2002 and stated that the original return be considered as return filed in response to notice under [SECTION] of the Act. We may record that reason for reopening the assessment as recorded by the Assessing Officer was that on account of non inclusion of excise duty in closing stock, there has been lowering of income chargeable to tax.
Before the Assessing Officer, the assessee had opposed the reopening on the ground that reason stated is not valid. The Assessing Officer while framing the assessment formed an opinion that addition on the ground of non inclusion of excise duty in closing stock could not be made. He however, was of the opinion that on some other head namely, deduction under [SECTION] of the Act, there has been an under assessment of the income. He accordingly disallowed certain deduction under [SECTION] of the Act which was previously not done in the original assessment. We may record that this was however, not the ground on which the assessment was sought to be reopened.
The assessee filed appeal against the order of the Assessing Officer. He challenged the additions on two grounds. On behalf of the assessee, it was contended that the reopening was invalid. It was suggested that reopening was beyond period of four years from the end of the relevant assessment year. There was no allegation that assessee had failed to disclose truly and fully all material facts. Assessee also pressed in service decision in case of [PRECEDENT] to contend that in absence of communication of the reasons, reopening was vitiated. On behalf of the assessee, the addition made by the Assessing Officer were also contested on merits.
CIT(Appeals) rejected the assessee's contention with respect to invalidity of reopening of assessment. It was noted that decision of the Apex Court in case of GKN Driveshaft India Ltd.(supra) laying down procedures for communication of reasons recorded and considering objections if raised by the assessee was not available when the Assessing Officer issued notice. CIT(Appeals) further held that notice of reopening was issued within period of four years from the relevant assessment year. On these grounds challenge to the validity of reopening of the assessment proceedings was turned down. Insofar as additions were made, CIT(Appeals) however, ruled in favour of the assessee and held that on merits such additions were not justified.
Two appeals were filed before the Tribunal against the decision of CIT(Appeals). Revenue challenged the appellate order insofar as it deleted the additions made by the Assessing Officer. The assessee challenged the order of CIT(Appeals) insofar as the question of validity of reopening of the assessment was held against the assessee. Both the appeals were simultaneously heard and disposed of by the common judgement which is impugned in these appeals. Tribunal held that question of valuation of closing stock and effect of excise liability is covered in favour of the assessee by virtue of decision of the Apex Court in case of [PRECEDENT]. The Tribunal therefore, held that reopening was invalid. In view of such conclusion, Tribunal did not go into merits of the addition made by the Assessing Officer but deleted by CIT(Appeals).
Counsel for the assessee drew out attention to decision of Bombay High Court in case of [PRECEDENT] wherein in somewhat similar background, Bombay High Court was also pleased to hold that notice of reassessment under [SECTION] of the Act was liable to be quashed.
Having heard learned counsel for the parties and having perused the orders on record, it clearly emerges that that sole ground on which the assessment previously framed after scrutiny was sought to be reopened was that assessee had not included excise duty in closing stock and which in the opinion of the Assessing Officer has resulted into lowering of income chargeable to tax. Admittedly no other ground was recorded in reasons for reopening. It is not in dispute that insofar as this question is concerned, the same is concluded in favour of the assessee. Initially the Apex Court had in decision in case of Berger Paints India Ltd.(supra) had so opined. Subsequently also our High Court had in later judgement in case of [PRECEDENT] taken a similar view. In view of these decisions insofar as reason on which the Assessing Officer had found it necessary to reopen the assessment was not valid. It may be that both the decisions were available subsequent to the decision of Assessing Officer for reopening of the assessment. However, assessee did not subjected himself to the jurisdiction of the Assessing Officer for fresh assessment. Assessee had to the contrary raise the issue of invalidity of the reopening proceedings at all stages. Even after the Assessing Officer framed the assessment afresh, in appeal, assessee had pointedly taken the ground and pressed in service before CIT(Appeals) through counsel. Even when CIT(Appeals) turned down the assessee's challenge to the reopening, it allowed the assessee's appeal on quantum additions on merits. Assessee preferred an independent appeal before the Tribunal and raised the question of validity of assessment proceedings separately. Thus insofar as assessee is concerned it had kept issue of validity of reassessment proceedings alive all through out. Therefore, when the Tribunal was judging the validity of such reassessment proceedings, Tribunal was bound to apply the laws as is declared by jurisdictional Court as well as by the Appellate Court by which time law was well settled and provided no additions to the income on account of non inclusion of excise duty in closing stock.
That being the position in our view, Tribunal was justified in holding and declaring that the reason on which assessment was sought to be reopened was not valid and that therefore, the entire proceedings are vitiated.
In that view of the matter, we do not find any illegality in the order of the Tribunal. Tax Appeal is dismissed.
([ENTITY],J.) (Ms. [ENTITY],J.) (raghu)