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2021 (3) TMI 798
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.... pursuance of section 148 notice at Annexure-B and the order rejecting the objections at Annexure-I. (C) Pending the hearing and final disposal of this application, this Hon'ble Court be pleased to stay further proceedings in pursuance of section 148 notice at Annexure-B." 2. The subject matter of challenge in the present litigation is to the notice of reopening of the assessment issued under Section 148 of the Income Tax Act, 1961 (for short 'the Act') for the A.Y. 2015-2016. 3. It is not in dispute that the return of income was filed for the year under consideration, but no scrutiny assessment under Section 143 (3)of the Act, was made. The return, in such circumstances, was processed under Section 143 (1) of the Act. The reasons assigned by the Assessing Officer to the writ applicant by way of communication dated 20.06.2018 are as under:- Reasons for reopening :- "1. The assessee by name Shri Purshottambhai B. Pitroda Prop. Of M/s. J.P.Fabricators had filed his return of income for A.Y. 2015-16 on 30.09.2016 and declared total income of Rs. 2,76,15,370/-. The assessee is engaged in business of mining contractors in Prop. Concern of M/s. JP F....
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....t of equivalent amount of RTGS in the bank account. For e.g., if there is cash receipt against EC, it indicates that equivalent amount of RTGS has been paid to the other party through banking channel. It is found that some of the names of 'Against EC' parties/entities along with the concerned person in whose name the 'Against EC' are noted in the seized documents (unaccounted cash book, cash voucher) are also found in the seized material from 901 sapphire Complex, C. G. Road Ahmedabad and these are correlated with evidences seized from Terrace of Crystal Arcade C.G. Road Ahmedabad. The names mentioned on these pages are also mentioned on the other seized evidences lke cash voucher, summary sheet of Against EC transactions (page number 2 to 9 of Annexure A- 129, seized from the Terrace of Crystal Arcade) and cash book related to 'Against EC' transactions. It has been found that 'Against EC' entries are the cash receipt and cash payment to various parties who are in the need of RTGS/cash. The Venus Group through its concerns like Sunderdeep Builders (SDB), Sanjeet Motor Finance Private Limited (SMFPL) and Greenstone Agro-Products & infrastructure Priva....
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....e income chargeable to tax has escaped assessment. This case is within four years from the end of the assessment year under consideration. Hence, necessary sanction to issue the notice u/s. 148 has been obtained separately from Addl. Commissioner of Income Tax as per the provisions of Section 151 of the IT Act, 1961." 4. The assessee lodged his objections to the aforesaid reasons, which are as under:- "1.The learned AO stated in the reasons about the payment of cash to Sanjeet Motor Finance P. Ltd and the assessee has received through RTGS back. This is not correct. 2. The assessee has actually received loan during F.Y. 2011-12 & 2012-13 i.e. A.Y. 2012-2013 & 2013-2014. During A.Y. 2015-2016 the said loan is repaid in installments through RTGS. The assessee has not received any loan from Sanjeet Motor Finance P. Ltd. in cash. It appears that the AO has mainly relief upon the information received without verifying the books of accounts. 3. Since the assessee has paid no payment in cash to Sanjeet Motor Finance P. Ltd. the question of undisclosed income during A.Y. 2015-2016 does not arise, Therefore, the reopening of the assessment is bad in la....
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....ee herein to the Venus Group is required to be taxed as the same has escaped assessment for the assessment year 2015-2016, which has been made the basis for reopening, is factually incorrect because M/s. J.P.Fabricators, in fact, had made the payment by cheque to the Venus Group, while the department records a factually incorrect reason that, M/s. J.P.Fabricators had made cash payment of Rs. 1,40,00,000/- to the Venus Group. Mr. Shah vehemently submitted that, while disposing of the objections, the Assessing Officer very conveniently ignored to give any finding much less prima facie finding as to why there is no substance in what has been pointed out by the writ applicant in his objections. Mr. Shah further submits that, on receipt of the reasons, the noticee is entitled to file objections to the issuance of notice and the Assessing Officer is obliged to dispose of the same by passing a speaking order. According to Mr. Shah, the order in the case on hand disposing of the objections cannot be termed as a speaking order. Mr. Shah would submit that, though the Assessing Officer had an opportunity at the stage of considering the objections to verify the contention of the assessee, g....
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....cer had not formed any opinion, principle of change of opinion would not apply. This has been made sufficiently clear in the case of Assistant Commissioner of Income-Tax v. Rajesh Jhaveri Stock Brokers Private Limited, reported in [2007] 291 ITR 500 [SC] in which it was held and observed as under :- "One thing further to be noticed is that intimation under section 143(1) (a) is given without prejudice to the provisions of section 143(2). Though technically the intimation issued was deemed to be a demand notice issued under section 156, that did not per se preclude the right of the Assessing Officer to proceed under section 143(2). That right is preserved and is not taken away. Between the period from April 1, 1989 to March 31, 1998, the second proviso to section 143(1)(a), required that where adjustments were made under the first proviso to section 143(1) (a), an intimation had to be sent to the assessee notwithstanding that no tax or refund was due from him after making such adjustments. With effect from April 1, 1998, the second proviso to section 143(1)(a) was substituted by the Finance Act, 1997, which was operative till June 1, 1999. The requirement was that an intima....
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....on 143(l)(a) as it stood prior to April 1, 1989, the Assessing Officer had to pass an assessment order if he decided to accept the return, but under the amended provision,the requirement of passing of an assessment order has been dispensed with and instead an intimation is required to be sent. Various circulars sent by the Central Board of Direct Taxes spell out the intent of the Legislature, i.e., to minimize the departmental work to scrutinize each and every return and to concentrate on selective scrutiny of returns. These aspects were highlighted by one of us (D. K. Jain J) in Apogee International Limited v. Union of India [(1996) 220 ITR 248]. It may be noted above that under the first proviso to the newly substituted section 143(1), with effect from June 1, 1999, except as provided in the provision itself, the acknowledgment of the return shall be deemed to be an intimation under section 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgment is not done by any Assessing Officer, but mostly by ministerial staff. Can it be said that any assessment is done by them? The reply is an emphatic no. The intim....
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....n the assessment, provided he had some tangible material on the basis of which he could form a reason to believe that income chargeable to tax had escaped assessment. However, as held by the Apex Court in the case of Assistant Commissioner of Income Tax v. Rajesh Jhaveri Stock Brokers P. Ltd., ((supra)) and several other decisions, such reason to believe need not necessarily be a firm final decision of the Assessing Officer." 10. The requirement, thus for reopening of assessment, is "reasonable belief". This expression is not synonymous with Assessing Officer having finally ascertained the fact by any legal evidence or conclusion. In this context, the Supreme Court in the case of Rajesh Jhaveri Stock Brokers Private Limited [Supra] had observed as under :- "Section 147 authorizes and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to....
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....sessing authority. The appeals are dismissed. There will be no order as to costs." 12. Lastly, it is well settled that the validity of the notice of reopening would be judged on the basis of reasons recorded by the Assessing Officer for issuance of such notice. It would not be permissible for the Assessing Officer to improve upon such reasons or to rely upon some extraneous material to support his action. Reference in this respect can be made to the decision of this Court in the case of Aayojan Developers v. Income-tax Officer, reported in [2011] 335 ITR 234 [Guj]." 10. Mrs. Bhatt invited the attention of this Court to few relevant averments made in the Affidavit-in-Reply filed for and on behalf of the revenue, wherein, the following has been stated:- "1. I am respondent in the present petition and having made myself conversant on the basis of the available records, able to depose to the statements and averments made herein. 2. At the outset, I most respectfully submit that the petition is filed at a pre-mature stage inasmuch as only a notice u/s.148 read with section 147 of the Income Tax Act ('the Act' for short) has been issued. In the event....
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.... of Crystal Arcade C.G. Road Ahmedabad with the noting as 'Against EC'. The 'Against EC' transactions in the unaccounted day cash book had their relation with the receipt and payment of equivalent amount of RTGS in the bank account. For e.g., if there was cash receipt against EC, it indicates that equivalent amount of RTGS was paid to the other party through banking channel. It was found that some of the names of 'Against EC' parties/entities along with the concerned person in whose name the 'Against EC' were noted in the seized documents (unaccounted cash book, cash voucher) also found in the seized material from 901 Sapphire Complex, C. G. Road Ahmedabad and these were correlated with evidences seized from Terrace of Crystal Arcade C.G. Road Ahmedabad. The names mentioned on these pages were also mentioned on the other seized evidences like cash voucher, summary sheet of Against EC transactions (page number 2 to 9 of Annexure A- 129, seized from the Terrace of Crystal Arcade) and cash book related to 'Against EC' transactions. It was found that 'Against EC' entries were the cash receipt and cash payment to various parties who were i....
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....isfaction of A.O. that income chargeable to Tax has escaped assessment which is evident from the reasons recorded. In this case reopening is done within four years from the end of the relevant assessment year under consideration. Hence necessary sanction to issue the notice u/s 148 was obtained separately from Addl. Jt. Commissioner of Income Tax as per the provisions of section 151 of IT Act,1961." 11. In such circumstances referred to above, Mrs. Bhatt prays that there being no merit in this writ application, the same may be rejected. 12. In response to the aforesaid Affidavit-in-Reply filed on behalf of the revenue, the assessee has filed rejoinder stating as under: "4. In para 2 of the Affidavit-in-Reply, the Respondent states that the petition has been filed at a premature stage as only a notice u/s.148 has been issued and further states that in any event if the petitioner is aggrieved by the reassessment, the petitioner has an alternative efficacious remedy by way of appeal to C.J.T.(Appeals), and thereafter to the Income Tax Appellate Tribunal as per the provision of Income Tax Act, 1961. In this regard, I state that the contentions of the Respondent ....
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....mpugned issue. In this regard, I state that though no scrutiny assessment u/s. 143(3) has been made in the year under consideration but to initiate proceedings u/s.147 there must be valid reason to believe to initiate proceedings u/s.147, which is clearly absent in the present case as repayment by cheque of loan taken and accepted in earlier years can never become reason to believe for escapement of income in the year of repayment. I further state that in absence of valid reason to believe, provision of clause (b) of Explanation-2 to Section 147 is not applicable on the facts of the present case. I am under the bona fide belief that Additional/Joint CIT has granted mechanically sanction to the notice u/s. 148 of the IT Act, 1961 and mandate of provisions of Section 151 of the IT Act has not been followed in proper spirit and perspective." 13. Having heard the learned counsel appearing for the respective parties and having gone through the materials on record, the only question that falls for our consideration is, whether the impugned notice of reopening issued under Section 148 of the Act should be quashed and set aside ? 14. Keeping the aforesaid legal principles in mind, we....
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.... issuing notices. The Assessing Officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the Assessing Officer is bound to dispose of the same by passing a speaking order{ In the instant case, as the reasons have been disclosed in these proceedings, the Assessing Officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the abovesaid five assessment years." 18. Thus, on receipt of the reasons, the noticee is entitled to file his objections and the Assessing Officer, in turn, is obliged to dispose of the objections by passing a speaking order. Though the Assessing Officer had an opportunity at the stage of dealing with the objections to verify the contention of the writ applicant, which went to the root of the matter, he very conveniently ignored the issue by taking a stance that the factual proposition would be examined at the time of reassessment proceedings after giving sufficient opportunity to the assessee. Such stance of the Assessing Officer leads this Court to prima facie believe that the Assessing Offi....