Maharashtra Oil Extraction Pvt. Ltd. v. Dy.CIT

Case snapshot

Sections / provisions: 147

Questions before the Court / Tribunal

• S. 147 : Reassessment-With in four years-Change of opinion- Payment to related parties-Incentives to senior employees- Difference in VAT return and Turnover as per profit and loss account-Reconciliation-Questions asked in the course of original assessment proceedings-No discussion in the assessment order- Reassessment notice was quashed. [S. 40A(2)(b), 148, Art. 226] The assessment of the petitioner was completed under section 143(3) of the Act. In the Couse of assessment proceedings the Assessing Officer has issued specific questions as regard the payments made to related parties in the form of incentives and also on the issue of difference in turnover VAT return and as per the profit and loss in the return of income . The petitioner gave the detailed reply after considering the said reply the Assessing Officer had not made any addition however there was no discussion in the assessment…
• Which factual, statutory and procedural conditions controlled the requested relief?
• How did the forum apply the governing provisions to the evidence and procedural history recorded in this case?

Material facts and procedural background

990-WP-1797-2022.odt IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 1797 OF 2022 Maharashtra Oil Extraction Private Limited … Petitioner Versus Dy . Commissioner of Income Tax Circle 4(3)(1), Mumbai and others … Respondents …...... Dr. K. Shivaram, Senior Advocate instructed by Mr. Shashi Bekal for the Petitioner. Mr. Suresh Kumar for the Respondent-Revenue. …...... CORAM : K.R. SHRIRAM AND N.R. BORKAR, JJ. DATED : APRIL 25, 2022 P .C. :- 1. Petitioner is impugning a notice dated 30 th March, 2021 issued under Section 148 of the Income Tax Act, 1961 (the said Act), an Order dated 24th February , 2022 rejecting Petitioner’s objections and also a subsequent notice dated 25th February , 2022 issued under Section 143(3). 2. Petitioner filed its return of income for A.Y. 2017-2018 on 27 th October, 2017 declaring income at Rs.19,08,72,160/-. The assessment proceedings under Section 143(3) was completed on 16 th December, 2019 assessing the income at Rs.19,08,72,160/-. Kanchan P Dhuri 1 / 6

990-WP-1797-2022.odt 3. On 30 th March, 2021, Petitioner received the impugned notice under Section 148 of the Act. The reason for re-opening was provided to Petitioner by a communication dated 1 st June, 2021. Two issues have been raised in the reasons for re-opening, firstly , Petitioner has given to its senior employees incentives of Rs.17,86,30,560/-, and those employees together are holding about 31.34% shares in the Company . No dividend has been declared for F .Y. 2016-2017. According to the Assessing Officer, these payments are nothing but a share of profit or dividend given in the form of incentives. Secondly , as per the VAT returns originally filed and profit and loss account, there is a difference of Rs.20,01,84,990/-. So, these two amounts have escaped assessment. Petitioner filed its objections to the re-opening which came to be rejected by an Order dated 24th February , 2022, which is also impugned. 4. Dr. Shivaram submitted that though the re-opening of assessment is proposed within the expiry of four years from the end of relevant assessment year, and the proviso to Section 147 of the Act may not strictly apply , nevertheless since an assessment has been completed and an assessment order under Section 143(3) of the Act has been passed, proposing to re-open on change of opinion is not permissible. Kanchan P Dhuri 2 / 6

990-WP-1797-2022.odt 5. Mr. Suresh Kumar without filing any reply submitted that as regards the incentives to the senior employees of the Company , it was a clear case the amounts that have been paid as incentives were actually a share of dividend. By doing this, Mr. Suresh Kumar submitted that Petitioner has claimed expenses and also has not paid dividend distribution tax. Mr. Suresh Kumar also submitted that these issues do not find mention in the assessment order and therefore, it cannot be stated that these two points were even considered by the Assessing Officer during the original assessment proceedings. 6. Dr. Shivaram submitted that both these issues raised in the reasons for re-opening were subject matter of consideration during the original assessment proceedings as much as specific queries have been raised and replies have been given which have been considered and as held by this Court in various matters including Aroni Commercials Ltd. v. Deputy Commissioner of Income Tax 2(1) 1, even if there is no specific discussion in the assessment order, query having been raised and answers given by the assessee, these issues were certainly subject matters of consideration in the assessment proceedings. 7. We have considered the Petition and documents annexed thereto with the assistance of Dr. Shivaram and Mr. Suresh Kumar. It is settled law as 1 [2014] 44 taxmann.com 304 (Bombay) Kanchan P Dhuri 3 / 6

990-WP-1797-2022.odt held by this Court in Aroni Commercials Ltd. (supra), that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. 8. In this case by a notice dated 7th August, 2019 issued under Section 142(1) of the Act, the Assessing Officer had called upon Petitioner to give details of payments made to the persons covered by section 40A(2)(b). Petitioner submitted replies dated 19 th August, 2019, 19 th October, 2019 and 14th November, 2019 giving details of the payments made. By a notice dated 21st September, 2019 issued under Section 142(1) of the Act, the Assessing Officer had called upon Petitioner to furnish copies of quarterly VAT returns for all the quarters of F .Y. 2016-2017 and also the revised VAT returns, if any . A second notice dated 18 th October, 2019 under Section 142(1) of the Act was again issued, where the Assessing Officer raised a specific query “further, as per the Profit and Loss Account total turn over is Rs.9,74,78,99,276/- and as per revised VAT returns total turn over is Rs.9,94,80,84,266/-. There is huge difference of Rs.20,01,84,990/-. Please explain the same in detail.” . Petitioner replied by its letters dated 16 th October, 2019 and 5 th November, Kanchan P Dhuri 4 / 6

990-WP-1797-2022.odt 2019 explaining the difference and also forwarding various documents including Form 704, i.e., Audit Report under the Maharashtra Value Added Tax Act, 2002. 9. Therefore, these two issues have been subject of consideration before the Assessing Officer during the original assessment proceedings. There can be no doubt in the present facts, the very issue of incentives to the senior executives and the difference in the VAT turnover was a subject matter of consideration by the Assessing Officer during the original assessment proceedings. It would therefore, follow that the re-opening of the assessment by the impugned notice is merely on the basis of change of opinion from that held earlier during the course of assessment proceedings. This change of opinion does not constitute justification and/or reasons to believe that income chargeable to tax has escaped assessment. 10. In the circumstances, we allow petition in terms of prayer clause (a) which reads as under : “(a) That this Hon’ble Court may be pleased to issue a Writ of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ, order or direction, calling for the records of the Petitioner’s case and after going into the legality and propriety thereof, to quash and set aside the said (i) The reopening Notice dated March 30, 2021 under section 148 of the Act for AY 2017-18 (Exhibit-A), (ii) The impugned order dated February 24, 2022 being (Exhibit-B) and (iii) Notice under Section 143(2) of the Act dated February 25, 2022 being (Exhibit-C).” Kanchan P Dhuri 5 / 6

Appellant / petitioner / assessee submissions

The judgment does not separately label this side’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Revenue / respondent submissions

The judgment does not separately label the respondent’s submissions in an independently extractable passage. No contention is inferred; read the full record.

Court / Tribunal analysis and reasoning

The concise order integrates its reasoning with the operative directions. The complete packaged record controls.

Operative decision and relief

990-WP-1797-2022.odt 11. Petition disposed with no order as to costs. ( N.R. BORKAR, J. ) ( K.R. SHRIRAM, J. ) Kanchan P Dhuri 6 / 6

Ratio and legal principle

The narrow proposition associated with Maharashtra Oil Extraction Pvt. Ltd. v. Dy.CIT concerns s. 147 : reassessment-with in four years-change of opinion- payment to related parties-incentives to senior employees- difference in vat return and turnover as per profit and loss account-reconciliation-questions asked in the course of original assessment proceedings-no discussion in the assessment order- reassessment notice was quashed. [s. 40a(2)(b), 148, art. 226] the assessment of the petitioner was completed under section 143(3) of the act. in the couse of assessment proceedings the assessing officer has issued specific questions as regard the payments made to related parties in the form of incentives and also on the issue of difference in turnover vat return and as per the profit and loss in the return of income . the petitioner gave the detailed reply after considering the said reply the assessing officer had not made any addition however there was no discussion in the assessment… The proposition cannot be separated from the judgment’s facts, the governing statutory version, the forum’s jurisdiction, and the exact relief recorded in WRIT PETITION NO. 1797 OF 2022.

For working-paper purposes, the decision should be cited only after matching the material facts and reading the passages under the judgment-grounded record above. The editorial outcome label “Quashed / set aside” is a navigation aid; it does not replace the operative order or explain every issue in a multi-issue case.

Why this judgment matters

This decision is relevant when a file raises the same central question identified in the source headnote: S. 147 : Reassessment-With in four years-Change of opinion- Payment to related parties-Incentives to senior employees- Difference in VAT return and Turnover as per profit and loss account-Reconciliation-Questions asked in the course of original assessment proceedings-No discussion in the assessment order- Reassessment notice was quashed. [S. 40A(2)(b), 148, Art. 226] The assessment of the petitioner was completed under section 143(3) of the Act. In the Couse of assessment proceedings the Assessing Officer has issued specific questions as regard the payments made to related parties in the form of incentives and also on the issue of difference in turnover VAT return and as per the profit and loss in the return of income . The petitioner gave the detailed reply after considering the said reply the Assessing Officer had not made any addition however there was no discussion in the assessment… Its practical value lies in the way the Bombay High Court connected the governing provisions—147—to the procedural posture and evidence before it.

The authority level is High Court. That affects persuasive or binding weight, but authority level alone is never enough. Territorial jurisdiction, statutory period, the identity of the challenged order, and later appellate treatment must all be checked before the case is used in advice, a submission, or litigation strategy.

Practitioner action points

• Begin with the complete judgment and mark the paragraphs supporting the exact proposition relied upon.
• Match the statutory version of 147 and the decision date 2022-04-25; do not assume the current text is identical.
• Compare the notice, assessment, appeal or other procedural sequence with the chronology recorded in this case.
• Verify the stated later-history status and any review, appeal, SLP, curative or rectification proceedings before citation.
• Record why the client’s evidence is materially similar, and also record any fact capable of distinguishing the result.

Does this case match your facts?

Detailed reliance and distinction analysis

Identity check. Confirm that the cited cause title is Maharashtra Oil Extraction Pvt. Ltd. v. Dy.CIT, the proceeding is WRIT PETITION NO. 1797 OF 2022, and the decision is dated 2022-04-25. These fields are taken from the judgment record and should appear exactly in the citation note.

Bench check. The judgment identifies the coram as K.R. SHRIRAM AND N.R. BORKAR, JJ.. A later order by another bench, a larger bench, or a higher forum may alter the weight or interpretation of the proposition.

Provision check. The source associates the dispute with 147. The practitioner should place the historical statutory text next to the current text and identify every amendment, proviso, explanation, rule or notification that could change the analysis.

Fact check. The source issue is not a free-standing abstract rule. It arises from the concrete record summarized above. A reliable application note should list the common facts, the different facts, and whether each difference affects jurisdiction, admissibility, limitation, burden, computation or relief.

Remedy check. The recorded result is Quashed / set aside. Where a matter is remanded, set aside, partly allowed, or disposed with directions, the exact operative language is more important than a binary winner/loser label.

History check. The current closure state is REVIEW_APPEAL_SLP_CHECK_PENDING. If that state is pending, the page does not assert that no later case exists. It means the check remains open and must be completed at the point of professional reliance.

Section / provision impact

• 147 — apply the exact version considered in the judgment.

Case network

• Adityaraj Builders v. State of Maharashtra — Bombay High Court · Quashed / set aside
• Sanket Vinayak Nagvekar v. ITO — Bombay High Court · Quashed / set aside
• Hero Products India Pvt. Ltd. v. NFAC — Bombay High Court · Quashed / set aside
• Pr. CIT v. Macleods Pharmaceuticals Ltd. — Bombay High Court · Quashed / set aside

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