FARADAY ELECTRICALS PVT LTD V. ASST COMMISSIONER OF INCOME TAX AND ANR

SAW/1993/2017

AI Insights

The case involves Faraday Electricals Pvt Ltd., which appealed against the dismissal of their writ petition by a learned Single Judge. The appellant challenged the reopening of their income tax assessment by the Assistant Commissioner and Deputy Commissioner of Income Tax, Circle-2, Jaipur. The appellant relied on a Delhi High Court decision and a Central Board of Direct Taxes circular, arguing that the reopening was not justified. The respondents contended that the guidelines cited were issued after the reopening of the assessment in question. The court's decision focused on ensuring that the appellant could fully present their objections to the AO, who was instructed to consider these objections based on the current law.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 768640 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 24-07-2018
• Assessment Year: misc
• Other Referred Cases: Sabh Infrastructure Ltd vs. Assistant Commissioner of Income Tax, WP(C) No. 1357/2016
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: ANUROOP SINGHI
• Assessee Lawyers: SANJAY JHANWAR; PRAKHUL KHURANA
• Keywords: Income Tax; Reopening of assessment; Writ petition; Delhi High Court decision; Central Board of Direct Taxes circular
• Section: 147; 148

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Special Appeal Writ No. 1993/2017 Faraday Electricals Pvt Ltd. having registered office at 36-Gopal Bari, Ajmer Road through Abhinav Saboo S/o Mr. S. K. Saboo aged about 46 years R/o 36-Gopal Bari, Ajmer Road ----Appellant Versus 1. Asst Commissioner Of Income Tax, Circle-2, Jaipur. 2. Dy. Commissioner of Income Tax, Circle-2, Jaipur. ----Respondents For Appellant(s) : Mr. Sanjay Jhanwar with Mr. Prakhul Khurana For Respondent(s) : Mr. Anuroop Singhi HON'BLE MR. JUSTICE KALPESH SATYENDRA JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS Order 24/07/2018 1. By way of this appeal, the appellant has challenged the judgment and order of the learned Single Judge whereby the learned Single Judge has dismissed the writ petition filed by the petitioner-appellant herein. 2. Counsel for the appellant has relied upon the decision of Delhi High Court in Sabh Infrastructure Ltd vs. Assistant Commissioner of Income Tax, WP(C) No. 1357/2016 decided on 25.09.2017 wherein it has been held as under:- “In the facts of this case, the primary facts have not been shown to be false. The five companies do exist. They did subscribe to the share capital of the Petitioner. They did pay the money to the Petitioner. All the five companies are assessed to tax. These are the primary facts. The reasons to believe rely upon a letter received from the (2 of 3) [SAW-1993/2017] Investigation Wing and Mr. Chaudhary submits that this letter was in fact an investigation report. The report does not form part of the reasons and neither was it annexed to the reasons. Interestingly, even the counter affidavit is silent as to the material which has not been disclosed by the Petitioner. The counter affidavit merely states that the information was specific and the information would be provided to the Petitioner during the assessment proceedings. Thus, if the Revenue had any basis to show that the primary facts were incorrect, the same ought to have been set out in the reasons to believe. That has not been done in the present case. 19. Before parting with the case, the Court would like to observe that on a routine basis, a large number of writ petitions are filed challenging the reopening of assessments by the Revenue under Sections 147 and 148 of theAct and despite numerous judgments on this issue, the same errors are repeated by the concerned Revenue authorities. In this background, the Court would like the Revenue to adhere to the following guidelines in matters of reopening of assessments: (i) while communicating the reasons for reopening the assessment, the copy of the standard form used by the AO for obtaining the approval of the Superior Officer should itself be provided to the Assessee. This would contain the comment or endorsement of the Superior Officer with his name, designation and date. In other words, merely stating the reasons in a letter addressed by the AO to the Assessee is to be avoided; (ii) the reasons to believe ought to spell out all the reasons and grounds available with the AO for re-opening the assessment - especially in those cases where the first proviso to Section 147 is attracted. The reasons to believe ought to also paraphrase any investigation report which may form the basis of the reasons and any enquiry conducted by the AO on the same and if so, the conclusions thereof; (iii) where the reasons make a reference to another document, whether as a letter or report, such document and/ or relevant portions of such report should be enclosed along with the reasons; (iv) the exercise of considering the Assessee’s objections to the reopening of assessment is not a mechanical ritual. It is (3 of 3) [SAW-1993/2017] a quasi- judicial function. The order disposing of the objections should deal with each objection and give proper reasons for the conclusion. No attempt should be made to add to the reasons for reopening of the assessment beyond what has already been disclosed.” 3. He has also relied upon a circular which has been issued by the Central Board of Direct Taxes dated 10.01.2018 and contended that taking into consideration the observations made by the Delhi High Court and guidelines issued as per the circular, the order of the Tribunal is liable to be quashed and set aside. 5. At this stage, counsel for the respondent contended that guidelines are subsequent to the reopening of the issue which is subject matter of petition filed on 14th December, 2017. 6. In our considered opinion, in the fitness of the things, it will be open for the appellant to raise all objections previous and additional within a period of one week i.e. on or before 1st August, 2018 before the AO and the same will be considered and decided taking into consideration, the law prevailing as on today. We hope that reasonable time will be granted to the appellant by AO to challenge the order, if the same is decided against the appellant. 6. The appeal is allowed to the aforesaid extent. (VIJAY KUMAR VYAS),J (K. S. JHAVERI),J B.M.G/Gourav/56 "