Ganesh Ram Choudhary V. Union of India and Principal Chief Commissioner of Income Tax (NaFAC) and Additional/Joint/Deputy/Assistant Commissioner/ Income Tax Officer, National Faceless Assessment Centre and Principal Commissioner of Income Tax-I and Income Tax Officer, Ward-1, Pali - Marwar

CW/1685/2022

AI Insights

Ganesh Ram Choudhary filed a writ petition challenging the notice dated 30.03.2021 under Section 148 of the Income-tax Act, 1961, which sought to reopen his assessment for the year 2013-14, and the subsequent dismissal of his objections by the ITO, Ward-1, Pali-Marwar. The petitioner argued that the ITO did not apply his own independent mind and merely followed the report and observations of DDIT (Inv.)-I, Jodhpur. The court examined the detailed objections submitted by the petitioner and the reasons provided by the ITO for dismissing these objections. The court concluded that the ITO had indeed applied his mind and that the reasons for reopening the assessment were based on tangible material indicating that income had escaped assessment.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 802260 (HC-RAJASTHAN)
• Appeal Type: Others
• Pronouncement Date: 10-02-2022
• Assessment Year: misc
• Other Referred Cases: Principal Commissioner of Income Tax-6 Vs. Meenakshi Overseas Pvt. Ltd., South Yarra Holdings Vs. Income Tax Officer, 16(1)(1)(4), Mumbai, Bakulbhai Ramanlal Patel Vs. ITO, Commissioner of Income Tax-III Vs. Suren International Pvt. Ltd., Jaswant Sugar Mills Ltd., Meerut Vs. Lakshmichand and Ors.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: SHARAD KOTHARI; MAYANK TAPARIA
• Keywords: Application of mind; Income escaped assessment; Notice under section 148; Reassessment; Objections dismissed
• Section: 148; 68; 131(1A)

Judgement Text

"HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR D.B. Civil Writ Petition No. 1685/2022 Ganesh Ram Choudhary S/o Achala Ram, aged about 60 Years, resident of 8-A, Janta Colony, Near Post Office, Pali-Marwar 306401, Rajasthan. ----Petitioner Versus 1. Union of India, through Principal Secretary, Ministry of Finance, Government of India, New Delhi - 110001. 2. Principal Chief Commissioner of Income Tax (NaFAC), North Block, New Delhi - 110001. 3. Additional/Joint/Deputy/Assistant Commissioner/ Income Tax Officer, National Faceless Assessment Centre, North Block, New Delhi 110001. 4. Principal Commissioner of Income Tax-I, Aaykar Bhawan, Paota C Road, Jodhpur. 5. Income Tax Officer, Ward-1, Pali - Marwar. ----Respondents For Petitioner(s) : Mr. Sharad Kothari Mr. Mayank Taparia For Respondent(s) : -- HON'BLE MR. JUSTICE SANDEEP MEHTA HON'BLE MS. JUSTICE REKHA BORANA Order 10/02/2022 Reportable (Per Hon’ble Ms. Rekha Borana, J) The present petition has been filed aggrieved of the notice dated 30.03.2021 issued under Section 148 of the Income-tax Act, 1961 (for short, ‘Act of 1961’) seeking to reopen assessment and the order of dismissal of the objections against the same. The petitioner has pleaded in the writ petition as under: (2 of 9) [CW-1685/2022] The petitioner was in receipt of summons dated 20.01.2017 issued under Section 131(1A) of the Act of 1961 requiring him to furnish information and documents concerning nature of his business, source of income and books of accounts including bank statements. The said summons was followed by further summons dated 14.02.2017, 26.05.2017, 09.11.2017 and 27.11.2017. A reply to the said summons was ultimately filed by the petitioner on 20.02.2018 whereby, the documents and the information as called for were submitted. But after a period of 3 years of the reply being furnished by the petitioner, he was served with the notice dated 30.03.2021 under Section 148 of the Act of 1961 seeking to reopen assessment on the grounds that the income chargeable to tax for the assessment year 2013-14 has escaped assessment. Vide the said notice, the income-tax return in the prescribed format for the assessment year 2013-14 was called for from the petitioner. Before submitting the detailed reply to the said notice, the petitioner, vide communication dated 19.05.2021, requested to supply the reasons for the decision to reopen the assessment. In response thereof, vide communication dated 28.06.2021, the reasons as requested for by the petitioner were supplied to him. After receipt of the same, the petitioner submitted objections in detail against the same on 19.08.2021 but the said objections of the petitioner were dismissed by the Income Tax Officer Ward-1, Pali – Marwar (respondent No.5) vide his order dated 01.09.2021. Further vide notice dated 08.12.2021, the petitioner was called upon to supply the details of certain documents/grounds pertaining to the assessment year 2013-14. (3 of 9) [CW-1685/2022] Aggrieved against the notice dated 30.03.2021 (under Section 148 of the Act of 1961) and order dated 01.09.2021, whereby, the objections of the petitioner were dismissed, the present writ petition has been preferred. The petitioner has in his petition raised the ground that the respondent No.5 did not apply his own independent mind but proceeded only on the basis of the report and observations of DDIT (Inv.)-I, Jodhpur. He submitted that the order dated 01.09.2021 is nothing more than the conclusions, one by one, as observed by DDIT (Inv.)-I, Jodhpur. It is the submission of the counsel that the proceedings for reassessment cannot be opened without arriving at individual satisfaction of the Officer. Whereas in the present matter, it is just a “borrowed satisfaction”. It is the submission that the reasons as narrated in the order dated 01.09.2021 failed to demonstrate any link between the tangible material and the affirmation of the reason to believe that income has escaped assessment. Counsel argued that the order passed by the respondent No.5 was merely an order reiterating the observations of DDIT (Inv.)-I, Jodhpur with cloak of justification under the garb of “his reasons to believe”. Counsel for the petitioner further argued that even the order according sanction by respondent No.4 is merely a rubber stamp order with no application of mind. He argued that the report of respondent No.4 simply mentions “I am satisfied”, which itself is sufficient to prove that there was no application of mind by respondent No.4 also while according sanction. Counsel further tried to portray that sufficient and reasonable explanation of the withdrawals of cash was furnished (4 of 9) [CW-1685/2022] by him and it was specifically submitted on his behalf that the withdrawals were meant to pay the agriculturalists from whom purchases were affected by the petitioner and that the credits were against the sales of agricultural produce. Counsel relied upon Rule 6DD of the Income-tax Rules, 1962, wherein, relaxation in cash deposits/payments has been provided in cases where the payment is made for the purchase of agricultural or forest produce. Counsel argued that the present is a case where all the cash transactions of the petitioner were sufficiently explained and the documents pertaining to the same had also been supplied to the Department, therefore, it was not a case where the income had escaped assessment and therefore, the notice under Section 148 of the Act of 1961 as well as the order dated 01.09.2021 rejecting the objections of the petitioner are both bad in law and deserve to be quashed. Counsel for the petitioner relied upon the following judgments in support of his submissions : 1. ITA 692/2016; Principal Commissioner of Income Tax-6 Vs. Meenakshi Overseas Pvt. Ltd. reported in [2017] 395 ITR 677 (Delhi). 2. Writ Petition No.3398 of 2018; South Yarra Holdings Vs. Income Tax Officer, 16(1)(1)(4), Mumbai reported in [2019] 263 TAXMAN 594 (Bom). 3. Special Civil Appln. No. 12853 of 2010 A.Y. 2003-04; Bakulbhai Ramanlal Patel Vs. ITO passed by the High Court of Gujrat on 04.03.2011. (5 of 9) [CW-1685/2022] 4. ITA No.289/2012; Commissioner of Income Tax-III Vs. Suren International Pvt. Ltd. reported in [2013] 357 ITR 24 (Delhi). 5. Civil Appeal Nos.37 and 38 of 1961; Jaswant Sugar Mills Ltd., Meerut Vs. Lakshmichand and Ors. reported in AIR 1963 SC 677. Heard learned counsel for the petitioner and perused the material available on record. So far as the first contention of the counsel for the petitioner that the respondent No.5 had not applied its mind while rejecting the objections of the petitioner is concerned, a bare perusal of the order dated 01.09.2021 clearly shows that the same is a well reasoned order passed after considering each and every objection as raised by the petitioner and after considering the complete law as settled by the Hon’ble Apex Court in various judgments. Respondent No.5 while dealing with each objection raised by the petitioner in detail reached to the specific finding, which reads as under : “Further, it is stated that the assessee has shown the sale/gross receipt of business of Rs.1,08,71,597/- and purchase of Rs.1,11,08,611/- in his ITR for A.Y. 2013-14 but bank accounts of the assessee which were credited through cash deposit, RTGS/NEFT from various parties and transfers totaling to Rs.1,07,53,271/- has no nexus with business receipt. It is evident from the information received from the DDIT (Inv.)-1, Jodhpur that despite providing many opportunities to assessee from the DDIT (Inv.)-1, Jodhpur, no explanation was furnished by the assessee in respect of above referred amounts credited in his various bank accounts during the year under consideration. The assessee has only made partial submission and found that bank book was provided which did not have any parties details and/or narration. Cash book was called upon however the same was not submitted by the assessee. No evidence/bills/vouchers were produced by the assessee to establish the genuineness of transactions carried out through above mentioned bank accounts. Since no explanations was made by assessee in respect of these deposits before the DDIT (Inv.)-1, Jodhpur, therefore, (6 of 9) [CW-1685/2022] above referred amounts credited in the bank account of the assessee Sh. Ganesh Ram Choudhary remained unexplained which was liable to be added u/s 68 of the IT Act, 1961 to the income of the assessee for A.Y. 2013-14.” It cannot be lost sight of that the basis of all the proceedings for opening of reassessment is the report of the assessing officer and the reasons for belief that income has escaped assessment. The reasons for belief as placed on record and as supplied to the petitioner also, are very clear and unambiguous. The reasons are based on the information collected/received by the assessing officer. The information as received clearly specifies that an amount of more than Rs.1,07,53,271/- had been deposited in various bank accounts of the assessee during the Financial Year 2012-13 which remained unexplained. The complete details of the cash amount received in the said bank accounts are also available on record. On the basis of the information so received, necessary inquiry was made for verification and ultimately it was concluded by the assessing officer as under : “Further, the assessee has also availed OD facility vide a/c No. 2832 maintained with PUCB, Pali. Accordingly, the assessee has received total cash through RTGS/NEFT amounting to Rs.1,07,53,271/- in his bank accounts during F.Y. 2012-13 and the amount so received not proved to have a nexus with the business receipts of the assessee. Assessee has received substantial cash through RTGS/NEFT and subsequently the amount was withdrawn by assessee itself on same location of Pali during the period 26/02/2012 to 26/03/2013. Thus, it is seen that, the assessee used his bank account as business account but the assessee could not prove the fund received through RTGS/NEFT and withdrawn of the same. From the above facts, it is observed that, the total cash deposit in bank received through NEFT/RTGS amounting to Rs.1,07,53,271/- is unexplained in absence of nexus with sales and purchase declared in ROI.” (7 of 9) [CW-1685/2022] It is the said findings of the assessing officer which were under consideration before the authority considering the objections. It has been taken note by the authority that despite several opportunities being granted during inquiry, no explanation was offered by the assessee in respect of the above referred amount of cash deposits. It has also been noted that the bank book which was provided by the assessee did not have any parties’ details or narration and the cash book which was called upon was never submitted by the assessee. Therefore, in view of the above findings of the assessing officer, the Principal Commissioner of Income Tax-I (respondent No.4) found it to be a fit case for sanction of the notices to be issued under Section 148 of the Act of 1961, which in the opinion of this Court is perfectly just and valid. Consequently, the notice as issued under Section 148 of the Act of 1961 is also perfectly valid in the eyes of law and cannot be said to be issued in abuse of the process of law. As observed in the preceding paras, the order dated 01.09.2021 whereby the objections of the assessee petitioner had been rejected, being also based on logical reasoning and valid considerations, deserves to be upheld. So far as the judgments relied upon by the counsel are concerned, none of the judgments suggest that no notice under Section 148 of the Act of 1961 can be issued even if there is tangible material available with the assessing officer and the fact that the income has escaped assessment is evident from a reading of the reasons. The conclusions of the ratio as laid down in the above judgments can be summarized as under: (8 of 9) [CW-1685/2022] 1. The reasons must be self evident, they must speak for themselves. The tangible material which forms the basis for the belief that income has escaped assessment must be evident from a reading of the reasons. The entire material need not be set out. However, something therein which is critical to the formation of the belief must be referred to. 2. Re-opening of an assessment has to be done by an Assessing Officer on his own satisfaction. It is not open to an Assessing Officer to issue a reopening notice at the dictate and/or satisfaction of some other authority. Therefore, on receipt of any information which suggests escapement of income, the Assessing Officer must examine the information in context of the facts of the case and only on satisfaction leading to a reasonable belief that income chargeable to tax has escaped assessment, that re- opening notice is to be issued. 3. The court held that it is not belief per se that is a pre-condition for invoking Section 147 of the Act but a belief founded on reasons. The expression used in Section 147 is “If the AO has reason to believe” and not “If the AO believes”. There must be some basis upon which the belief can be built. It does not matter whether the belief is ultimately proved right or wrong, but, there must be some material upon which such a belief can be founded. Keeping in consideration, the ratio as laid down by the Hon’ble Apex Court and in view the observations as made above, it is clear on record that present is a matter where there is sufficient material available on record to suggest that the income has escaped assessment. The reasons as suggested do speak for (9 of 9) [CW-1685/2022] themselves and are particularly the reasons to believe that the income has escaped assessment. In view of the above observations, the present writ petition being devoid of merits is dismissed. (REKHA BORANA),J (SANDEEP MEHTA),J 1-AnilKC/- "