TaxTMI 
TaxTMI 
2025 (3) TMI 100
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....egal, without jurisdiction, non-est as urged by the petitioner. 3. The substantive prayers in the petition read thus:- "(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) Notice dated 27th March, 2021 u/s 148 for A.Y. 2014-15 (Exh. A) and (ii) Assessment Order u/s 147 r.w. 143 (3) dated 29th March, 2022 being (Exh. "B") and after examining the legality and validity thereof to quash and set aside the same; (b) This Hon'ble Court be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate Writ, order or direction, directing the Respondents, its servants, subordinates, agents and successors in office; (i) To forthwith withdraw and/or cancel and/or quash the (i) Notice dated 27th March, 2021 u/s 148 for A.Y. 2014-15 (Exh. A) and (ii) Assessment Order u/s 147 r.w. 143 (3) dated 29th March, 2022 being (Exh. "B"); (ii) To forthwith forbear from taking....
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.... out the details of loan confirmation of all parties from whom the interest free loan were received by the petitioner. Detailed document/account in support of such material was also enclosed by the petitioner to the said letter dated 19 December 2016. This was followed by another letter of the petitioner where the petitioner clarified that out of loans of Rs. 105.77 crores (Supra), unsecured interest free loans were to the extent of Rs. 89.60 crores and secured interest-bearing loans of Rs. 16,17,68,368 (Rs. 16.17 crores approx.) It was also pointed out that there were no fresh withdrawals by the partners during the year instead capital was introduced by the partner of the firm during the said A.Y. 2014-15. The petitioner clarified that drawings by one of the partners Mr. Mukesh Doshi is out of interest-free funds available with the petitioner and not the interest-bearing funds. 7. Further to the above the respondent no. 1 issued a demand notice dated 29 June 2016 under section 156 of the IT Act to the petitioner for the A.Y. 2014-15 by which the petitioner's income was assessed as NIL. The respondent no. 1 proceeded to then issue an impugned notice dated 27 March 2021 under sec....
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....val Contentions:- The case of the Petitioner : 12. Mr. Hakani learned counsel for the petitioner would assail the impugned notice dated 27 March 2021 issued under Section 148 of the IT Act read with the impugned assessment order dated 29 March 2022 premised on the following substantial grounds; (a) Notice issued by the respondent no. 1 under Section 148 of the IT Act is bad in law as it is beyond the mandatory period of four years as provided under first proviso to Section 147 of the IT Act for the reason that there was no failure on the part of the petitioner to truly and fully disclose the material facts; (b) Reopening of the petitioner for the A.Y. 2014-15 in the facts of the present case tantamounts to change of opinion of the assessing officer, which is legally impermissible to reopen the assessment; (c) Reopening of assessment for the A.Y. 2014-15 in the present case is based on an internal audit which is contrary to law. Moreover, the objections to reopening by the petitioner are neither disposed off by a separate order nor done so in the same impugned assessment order dated 29 March 2022. 13. Mr. Hakani would next submit that the reopenin....
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....r to the respondents, Respondent No. 2 did not pass a separate order disposing of the petitioner's objection dated 18 February 2022 filed along with relevant annexures. Such objections were never dealt with in the impugned assessment order dated 29 March 2022, much less not even adjudicated and/or disposed of. 15. Mr. Hakani would also refer to the decision of this Court in the case of KSS Petron Private Limited V/s The Assistant Commissioner of Income Tax Circle 10(2) 2016 SCC Online Bom 13550. This was in support of his submission to the effect that non disposal of the objections of the petitioner by the assessing officer is a jurisdictional issue, which goes to the root of the matter as held by the Supreme Court in GKN Driveshaft (Supra). A failure on the part of the respondent to act in such manner vitiates the impugned order rendering it illegal. 16. Mr. Hakani would point out that the notice dated 10 May 2016 issued under Section 142 (1) of the IT Act seeking various details from the petitioners was responded to by the petitioner vide letter dated 24 May 2016. Thereafter, notice dated 13 December 2016 was issued under Section 142 (1) by Respondent No. 1 wherein it was s....
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....ed as final show cause notice calling upon the petitioner to show cause as to why the interest of Rs. 9.07 Crore (approx) at 12% on Rs. 75.64 Crores (approx) ought not to be charged and be added to the total income of the petitioner. The petitioner filed an elaborate response to the said show cause notice by letter dated 19 December 2016 setting out all details as required by the respondent including the loan confirmations from various parties, schedule of capital account and balance sheet to show that no interest is charged to profit and loss account and that the debit balance of partner is on account of the interest free amount received. 18. Mr. Hakani would submit that the reasons recorded in the subsequent notice dated 2 February 2022 would further demonstrate that the exercise of reopening was undertaken on the basis of an internal audit. According to him, the notice dated 27 March 2021 issued under Section 148 of the IT Act pursuant to the reopening to the petitioner's assessment under Section 147 which itself is illegal, also making the said notice being issued without authority of law. 19. Mr. Hakani in support of the above would place reliance on the decision of the ....
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....of the land. 22. In the above context, Mr. Sharma would rely on a decision in the case Commissioner of Income Tax and Others v. Chhabil Dass Agarwal (2013) 357 ITR 357 and Assistant Collector, Central Excise v. Dunlop India Pvt Ltd 1985 (19) ELT 22, to submit that the IT Act provides for a remedy in form of appeal under section 246A and revision under section 264 of the IT Act. In view thereof, no writ shall lie. In the alternative, on merits he would submit that merely stating that the debit balance is out of the petitioner's interest free funds without providing any supporting evidence in this regard, to does not tantamount to full and true disclosure under the provisions of section 148 of the IT Act. Mr. Sharma would further contend that the Supreme Court and various High Courts have justified the reopening of the assessment in such facts and circumstances. Consequently, the window of reopening of assessment will remain open for assessing officer on those points where the assessing officer neither accepts nor rejects such claim. 23. Mr. Sharma would then place reliance on the decision of the Gujarat High Court in the case of Gujarat Power Corporation Ltd v. Assistant Commi....
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....ately rely upon to examine the aspect of income escaping tax assessment. Once the assessing officer is satisfied based upon the information received by audit that income chargeable tax has escaped assessment, the action of the assessing officer is to reinitiate reassessment is free from doubt. Mr. Sharma would submit that the issue raised by the audit was not disclosed by the petitioner in its return of income and also not disclosed during the course of original assessment proceedings. In vie thereof, such reopening was just legal and proper in the given facts. Rejoinder of the Petitioner:- 28. Mr. Hakani would reiterate his submissions recorded above inter alia asserting that the assessment proceedings were commenced without disposing the objections of the petitioner or without giving further time to petitioner to file its objections. Further, the rejoinder clarifies that the petitioner specifically asked for a copy of the recorded reasons on 12 January 2022 and the same were supplied to the petitioner on 2 February 2022, after which the petitioner filed its objections on 18 February 2022. Hence, the allegation of the respondent that petitioner did not file objections to reo....
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....sset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:] [Provided [also] that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.] Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the ass....
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....essment year in question, i.e., A.Y. 2014-15 the petitioner had initially filed its return declaring loss of Rs. 5,53,822/- on 27 November 2014. In the original assessment proceeding the assessing officer vide notices dated 10 May 2016 and 13 December 2016 issued under Section 142 (1), verified all details of the petitioner firms capital account, interest on secured and unsecured loans. The assessing officer issued notice u/s 142 (1) dated 13/12/2016 wherein it was specifically stated that Assessee has taken loans of Rs.105.77 crores and given loans of Rs.75.64 crores and asked as to why interest of Rs. 9,07,70,902/- on Rs.75.64 crores @12% should not be charged to tax. In response to said notice, the petitioner filed its letter dated 19 December, 2016 wherein it was mentioned that Rs. 75,64,24,189/- was debit balance of partner Mr Mukesh Doshi 31. The petitioner then filed replies dated 24 May 2016 and 19 December 2016. The assessing officer thereafter passed the original assessment order dated 29 June 2016 upon duly verifying the issue of taxing the interest on the debit balance of the partner. Thereafter, the petitioner received a copy of such recorded reasons from the jurisd....
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....ent order dated 29 March 2022. There appears to be no fresh tangible material before the respondents to form its own/independent opinion in regard to reopening of the petitioner assessment for the A.Y. 2014-15, under Section 147 of the IT Act. This would be clearly indicative of change of opinion on part of the respondents in the facts of this case which is not permissible under the statutory scheme of Act read with the judgments in this regard, as further discussed below. 34. We may observe that the mandatory procedure postulated under Section 144B of the IT Act is also not followed by the respondents. This is in as much as the petitioner's objection dated 18 February 2022 to the reasons recorded for reopening of the assessment by the respondent dated 9 December 2021 were neither considered, dealt with, much less disposed of by the respondents. Further the reply of the petitioner to the draft assessment order dated 24 March 2022 was filed by the petitioner on 28 March 2022, mainly pointing out that the reassessment proceedings were contrary to the provisions of section 147 of the IT Act read with the decision of the Supreme Court in GKN Driveshaft (Supra). The respondent failed....
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....o restore the issue to the Assessing Officer to pass a further/fresh order. If this is permitted, it would give a licence to the Assessing Officer to pass orders on reopening notice, without jurisdiction (without compliance of the law in accordance with the procedure), yet the only consequence, would be that in appeal, it would be restored to the Assessing Officer for fresh adjudication after following the due procedure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters." Considering the facts in the given case, the above decision is applicable and in light of such settled legal principles we see no reason to take a different view as Mr. Sharma would want us to. The impugned order cannot be given any effect to as it is eclipsed by the observations and ratio of such judgments. 37. Further, at this juncture it is apposite to refer to a decision of the Supreme Court in Kelvinator of India Ltd (Supra), where the court was pleased to hold thus:- "6. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to re....
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....to be drawn based on reasons not 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 asse....
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.... 147 was strictly applicable inter alia to the effect that when the petitioner/assessee had not defaulted in fully and truly disclosing all material facts necessary for his assessment for the assessment year in question, the Assessing Officer would not have jurisdiction to reopen the concluded assessment. Secondly, the reasons as furnished to the petitioner, in no manner whatsoever make out a case on the failure on the part of the petitioner to fully and truly disclose all the materials. This apart, the reasons demonstrate that the entire basis for such reopening is on the materials which was already available with the Assessing Officer, in finalizing the petitioner's assessment under Section 143 (3) of the IT Act. If this be so, the Assessing Officer was acting on a complete change of opinion on the same material and / or intending to have a review of the assessment order passed by him. This was certainly not permissible applying the settled principles of law as discussed by us hereinabove. Thus, on both the counts namely on failure of the Assessing Officer in adhering to the mandate as contained in the first proviso to Section 147, and on exceeding his jurisdiction as conferred b....