Ghanshyambhai Adarbhai Patel V. Union of India

SCA/16749/2019

AI Insights

The case involves Ghanshyambhai Adarbhai Patel, who challenged a notice issued by the Union of India under Section 148 of the Income Tax Act, 1961, seeking to reopen his assessment for the Assessment Year 2013-14. The original assessment had accepted a gift of Rs. 15,00,000 received by the assessee from his brother-in-law, which was declared and documented. However, a subsequent revenue audit raised objections, leading to the reopening of the assessment on grounds of underassessment and escapement of income. The High Court examined whether the reopening was justified, considering the principles of change of opinion and the disclosure of material facts by the assessee.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 820071 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 25-03-2021
• Assessment Year: misc
• Other Referred Cases: CIT Vs. Usha International Ltd., Adani Exports Vs. DCIT, Indian & Eastern Newspaper Society Vs. CIT
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: RASESH PARIKH; HEMANG PARIKH
• Keywords: Escapement of income; Income Tax; Reopening of assessment; Gift declaration
• Section: 148; 143(3); 143(1); 226

Judgement Text

"C/SCA/16749/2019 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 16749 of 2019 ===================================================== GHANSHYAMBHAI ADARBHAI PATEL Versus UNION OF INDIA ===================================================== Appearance: MR RASESH H PARIKH(3862) for the Petitioner(s) No. 1 MR.HEMANG H PARIKH(2628) for the Petitioner(s) No. 1 DS AFF.NOT FILED (N)(11) for the Respondent(s) No. 1 MRS MAUNA M BHATT(174) for the Respondent(s) No. 2 ===================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 25/03/2021 ORAL ORDER (PER : HONOURABLE MR. JUSTICE ILESH J. VORA) 1. By filing this writ application, under Article 226 of the Constitution of India, the writ applicant seeks to challenge the impugned notice dated 26.02.2019 issued under Section 148 of the Income Tax Act, 1961 seeking to reopen the applicant’s assessment for the A.Y. 2013-14. 2. The brief facts can be summarized as under: The assessee filed his return of income for A.Y. 2013-14 on 29.01.2014 declaring total income at Rs.24,52,260/-, whereby, the assessee had claimed the exempt income Rs.15,00,000/- received as a gift from his brother-in-law. The return was processed under Page 1 of 12 C/SCA/16749/2019 ORDER Section 143(1) of the Act on 10.07.2014 and thereafter, the case was selected for scrutiny assessment. During the scrutiny proceedings, the details called for were placed on record. The assessing officer had asked the details regarding receipt of gift of Rs.15,00,000/-. The assessee vide letter dated 11.01.2016 furnished various details including his explanation with regard to gift received from his brother in law amounting to Rs.15,00,000/- and in support thereof, the copy of declaration of gift made by Mr. B.U.Patel (brother-in-law of the assessee) was also submitted. The assessment order under Section 143(3) of the Act was passed on 29.02.2016 without any further addition and determined the income at Rs.24,52,260/- as shown in the return of income. The assessing officer did not disallow the amount of Rs.15,00,000/- duly received as a gift by the assessee. Thereafter, the Assessing office reopened the assessment for the A.Y. 2013-14 by issuing impugned notice dated 26.02.2019 under Section 148 of the Act. Pursuant to the impugned notice, the assessee filed his return of income and requested to provide the copy of the reasons recorded for reopening of the assessment. 3. The assessing officer vide communication dated 22.07.2019 furnished the reasons recorded to the assessee. The assessee filed his objections vide letter dated 13.08.2019 which came to be disposed of by the revenue vide order dated 23.08.2019. The reasons recorded for reopening of the reassessment provided by the revenue reads thus: Page 2 of 12 C/SCA/16749/2019 ORDER “1. Brief details of the Assessee: The assessee has filed his return of income tax in respect of AY 2013-14 on 2001/2014 declaring his total income at Rs. 24,52,260/-, The return was processed u/s 143(1) of the act on 10.07.2014, The case was selected through CASS (Limited) for verification of large investment in property as compared to total Income. The assessment u/s. 143(3) was finalized on 19/02/2016 assessing same income as return of Income. 2 Brief details of information collected/received by the AO: Revenue audit was carried out in this case and the Audit party vide letter No ITRA/ITB/007/2017-18 dated 5..1.2018 raised an objection that perusal of the Capital account submitted by assessee during the scrutiny, it observed that assessee had credited an amount of Rs.15,00,000/- as gift received from Bhailal U. Patel (Brother in law) on 12/04/2012. To prove the same a declaration of gift on a 100 Rs. Stamp paper and a copy of Bank statement of Shri Bhailal U Patel was kept on record, It was observed from the Bank statement Kept with assessment record in respect of assessee’s Brother in law that assessee had first deposited an amount of Rs. 15,00,000 on 12/04/2012 and same was withdrawn vide cheque No.41270 dt.12/04/2012 i.e same amount on the same day. Thus it is dear that assessee has received back his own amount via cheque which has resulted into under assessment of Rs.15,00,000/- which has resulted in escapement of income. 3. Analysis of information collected/received: From the analysis of the information, it is seen from the capital account that assessee had credited an amount of Rs.15,00,000 as gift received from Bhailal U. Patel (Brother in law) on 12/04/2012 and as supporting evidence declaration of gift on a 100 Rs. Stamp paper and a copy of Bank statement of Shri Bhailal U Patel was kept on record. It was observed from the Bank statement kept with assessment record in respect of assessee’s Brother in law that assessee had first deposed an amount of Rs. 15,00,000 on dt. 12/04/2012 and same was received back as a gift from brother in law vide cheque no 41270 dt.12/04/2012 I.e. same amount on the same day. Thus it is clear that assessee has received back his own amount via cheque which has resulted into under assessment of Rs.15,00,000/- which has resulted in escapement of income. 4. Enquiries made by the AO as sequel to Information collected/received: - The Capital Account of the assessee, The copy of bank account, declaration of gift on Rs.100 stamp paper and copy of bank statement of Shri Bhailal U Patel who is brother in law of the assessee from whom gift received are available In assessment records. The information received is processed and examined from the assessment records and material available on record with the department. Page 3 of 12 C/SCA/16749/2019 ORDER 5. Findings of the AO:- On verification of case record, during the assessment proceedings assessee has furnished capital account wherein it is seen that assessee had credited an amount of Rs.15,00,000/- as gift received from Bhailal U. Patel (Brother in law) on 12/04/2012. The same was supported with a declaration of gift on a 100 Rs. Stamp paper and a copy of Bank statement of Shri Bhailal U Patel was kept on record. It was observed from the Corporation Bank statement kept with assessment record in respect of assessee’s Brother in law that assessee had first deposited an amount of Rs.15,00,000/- on dt,12/04/2012 and same was withdrawn vide cheque no.41270 dt.12/04/2012 i.e. same amount on the same day which has resulted into under assessment of Rs.15,00,000/- which has resulted in escapement of income during the assessment. 6. Basis of forming reason to believe and details of escapement of income:- During the assessment proceedings assessee has furnished capital account wherein it is seen that assessee had credited an amount of Rs.15,00,000/- as gift received from Bhailal U. Patel (Brother in law) on 12/04/2012. The same was supported with a declaration of gift on a 100 Rs. Stamp paper and a copy of Bank statement of Shri Bhailal U Patel was kept on record. It was observed from the Bank statement kept with assessment record in respect of assessee’s Brother in law that assessee had first deposited an amount of Rs. 15,00,000 on dt.12/04/2012 and same was received back as a gift from brother in law vide cheque no.41270 dt.12/04/2012 i.e. same amount on the same day. Thus it is clear that assessee has received back his own amount via cheque. Therefore, I have reason to believe that difference amount to the extent of Rs,15,00,000/- which has resulted into under assessment of income and escapement of Income. 7. Escapement of income chargeable to a tax in relation to any asset located outside India: - NA 8. Applicability of the provisions of section 147/151 to the facts of the case: In this case return of income was filed for the year under consideration and regular assessment u/s 143(3) was made on 19.02.2016. Since, 4 years from the end of the relevant year has expired in this case, the only requirement to initiate proceeding u/s 147 is reason to believe which has been recorded above (referred paragraphs No5 & 6). It is pertinent to mention here that in this case an assessment was made as stipulated u/s 2(40) of the act. However, as discussed in reason to believe in this case. • Income chargeable to tax has been under assessed by an amount of Rs.15,00,000/- Page 4 of 12 C/SCA/16749/2019 ORDER In view of the above facts, the provisions of clause(c) of explanation 2 to section 147 are applicable to facts of this case and the assessment year under consideration is deemed to be a case where income chargeable to tax has escaped assessment. This case is more than four years have lapsed from the end of the assessment year under consideration. Hence necessary sanction to issue notice u/s 148 has been obtained separately from Principal Commissioner of Income Tax as per the provision of section 151 of the act.” 4. Being aggrieved by and dissatisfied with the impugned notice dated 26.02.2019 as well as the order of disposing the objections, the assessee has come up before this Court with the present writ application. 5. We have heard Mr. R.H.Parikh, the learned counsel appearing for the writ applicant and Mrs. Mauna Bhatt, the learned Standing Counsel assisted by Mr. Karan Sangani, the learned counsel appearing for the revenue. 6. Assailing the impugned notice, the learned counsel appearing for the writ applicant Mr. Parikh submitted that, the impugned notice as well as the order of disposing the objections are bad in law and without jurisdiction. It was contended that, the impugned notice has been issued on 26.02.2019, in relation to the assessment year 2013-14, which is clearly beyond the period of four years from the end of the relevant assessment year and as such, the assessee had disclosed all material facts with regard to receipt of Rs.15,00,000/- at the stage of previous assessment proceedings. Therefore, in absence of any failure on the part of the assessed to disclose fully and truly all material facts assumption of jurisdiction by the Page 5 of 12 C/SCA/16749/2019 ORDER assessing officer under Section 147 of the Act is invalid. It was also contended that, at the time of framing the assessment under Section 143 of the Act, all necessary particulars like capital accounts, copy of bank accounts, declaration of gift and copy of the bank statement of Bhailal Patel had been furnished to the assessing officer and after considering the explanation and documentary evidence, the assessing officer passed the assessment order without making further addition to the income of the assessee. Under the circumstances, the reassessment is sought to be reopened would nothing, but a change of opinion on the part of the assessing officer which cannot be permitted in law and on this count, the reopening of the assessment is invalid. 7. In view of the aforesaid contentions, learned counsel for the writ applicant urged that there being merits in the writ application, the same may be allowed. 8. On the other hand, Mrs. Mauna Bhatt, the learned Senior Standing Counsel appearing for the revenue submitted that, the reopening by the assessing officer is just, legal and proper and does not warrant any inference by this Court. Referring to the reasons recorded as well as the facts mentioned in the affidavit in reply, it was submitted that, the revenue audit of the assessee was carried out and after verification of the capital account of the assessee, the audit party observed that, the assessee had credited an amount of Rs.15,00,000/- as a gift received from Mr. Bhailal Patel on 12.04.2012 and after careful examination of the bank statement of Page 6 of 12 C/SCA/16749/2019 ORDER Mr. Patel, it was found that, the assessee had deposited Rs.15,00,000 /- in the account of his brother-in-law on 12.04.2012 and the said amount was withdrawn by him on the same day. Under the circumstances, on the basis of objections raised by the audit party and after verification of the record and having independent satisfaction on the issue, the assessing officer has formed an opinion that, the assessee received back his own amount, which is chargeable to tax has escaped assessment. In view of the aforesaid contentions, learned counsel appearing for the revenue urged that, the application having no any merits, may not be entertained. 9. Having heard the learned counsel for the respective parties and having gone through the materials on record, the question falls for our consideration is whether the revenue is justified in reopening the assessment for the year under consideration ? 10.Before adverting to the rival contentions raised by the respective parties, we may refer to the legal position with regard to reopening of the assessment. If the assessing officer has reason to believe that, any income chargeable to tax has escaped assessment for any assessment year, he may subject to the provisions of section 148 to 153 of the Act, assesss or reassess such income, provided that, where an assessment under sub-section 3 of Section 143 of the Act has been made for the relevant assessment year, no action shall be taken under section 147 of the Act after the expiry of four years Page 7 of 12 C/SCA/16749/2019 ORDER from the end of the relevant assessment year unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment for that assessment year. 11.In the facts of the present case, undisputedly, the assessment is sought to be reopened after the expiry of four years from the end of the relevant assessment year. Undisputedly, the return filed by the assessed for the year 2013-14 was initially processed under Section 143(1) of the Act and his case was selected for scrutiny assessment under Section 143 (3) of the Act. Record indicates that, at the time of framing the assessment, notice under Section 142(1) of the Act r.w. Section 129 of the Act dated 30.12.2015 was served upon the assessee and the assessee was specifically called upon to furnish the details in respect of receipt of Rs.15,00,000/- in relation to gift received from his brother in law. In response to the notice, the assessee vide communication dated 11.11.2016 had furnished the various details as called for and also submitted the copy of the gift-deed, to show that, he had received gift of Rs.15,00,000/- from his brother-in-law. It appears that, the assessing officer passed an assessment order dated 19.02.2016, wherein, he thought not fit to disallow the exempt amount of Rs.15,00,000/-, received by the assessee as a gift from his brother-in-law and determined the total income at Rs.24,52,260/-. Under the circumstances, it appears that, the assessing officer did not make any addition towards total Page 8 of 12 C/SCA/16749/2019 ORDER income for the purpose of tax. 12.The contention is that, at the previous assessment proceedings, the assessee had disclosed all the material facts truly and fully and the issue though raised by the assessing officer had not been decided against the assessee. Under this circumstances, it was submitted that, the reopening of the assessment is nothing, but a change of opinion on the part of the assessing officer. The case of the revenue is that, the facts of audit objections as referred by the assessing officer in the reasons for reassessment would constitute the tangible materials which were not available before the assessee at the stage of previous assessment proceedings. Therefore, the principle of change of opinion would not be applicable in the present case. 13.We have carefully examined the reasons recorded for reassessment. A plan reading of the reasons recorded reveal that, at the time of filing the return of income and during the course of original assessment proceedings, the assessee had submitted capital account, copy of bank account, copy of the declaration of gift, copy of bank account of Shri B.U.Patel. In this factual background, we are of the view that, the assessee had disclosed all material facts truly and fully for the assessment of income for the year under consideration. In other words, there was no failure to disclose primary facts necessary for the assessment on the part of the assessee. Page 9 of 12 C/SCA/16749/2019 ORDER 14.We take the notice of the fact that, during the previous assessment proceedings, the specific query was raised by the assessing officer with regard to receipt of gift of Rs.15,00,000/- and the stand of the assessee before the assessing officer was very much clear that, the amount had been received as a gift from his brother in law and in support thereof, he had submitted copy of the declaration of gift- deed. Under the circumstances, it appears that, the assessing officer failed to draw the necessary interference that the transaction of gift of Rs.15,00,000/- is sham and to avoid the tax liability, the assessee himself deposited the said amount and withdraw it on the same date. During the assessment proceedings, the assessing officer ought to have looked into the matter when all the primary facts duly disclosed by the assessee. Therefore, failure on the part of the assessing officer to make necessary inference with regard to alleged amount, then it would be presumed that, the transaction being scrutinized and the assessing officer did not intend to add the amount for the tax. In this context, we may refer and rely to the observations made by the Full Bench of the Delhi High Court in the case of CIT Vs. Usha International Ltd.[(2012) 348 ITR 485 Delhi Full Bench], wherein, it has been observed that, “reassessment proceedings will be invalid in case an issue or query raised and answered by the assessee in original assessment proceedings, but thereafter, AO does not make any addition in the assessment order. In such situation, it should be accepted that, the issue was examined, but AO did not find any ground or reason to make addition or reject the stand by the assessee. He forms an Page 10 of 12 C/SCA/16749/2019 ORDER opinion. The reassessment will be invalid because the AO had formed an opinion in the original assessment, though he had not recorded his reasons. 15.Applying the principle of law as propounded by the Full Bench of the Delhi High Court in the case of Usha International Ltd. (supra) and considering the facts of the present case, we are of the view that, when specific query with regard to transaction of Rs.15,00,000/- was raised by the AO and the same was answered by the assessee, the AO thought fit not to make any addition, which clearly proves that, he consciously formed the opinion and framed the assessment. We have examined the objections raised by the audit party and subsequent enquiries made by the AO before reopening of the assessment. Except the audit objections, no any new material came in the hands of the assessing officer while initiating the proceedings of reopening of the assessment for the year under consideration. Therefore, the audit objections do not constitute a tangible material to reopen the assessment. Reliance may be placed on the decision of this Court in the case of Adani Exports Vs. DCIT [(1999) 240 ITR 224], wherein, this Court has held that, reassessment was not valid as the AO held no belief on his own at any point of time that, income of assessee had escaped assessment on account of erroneous computation of benefit under Section 80HHC and was constrained to issue notice only on the basis of audit objections. The same view was taken in the case of Indian & Eastern Newspaper Society Vs. CIT [(1979) 119 ITR 996 Page 11 of 12 C/SCA/16749/2019 ORDER (SC)], that the audit objections cannot be basis for reopening of the assessment. 16.In view of the above position of law and factual background of the case, we are of the view that, no new material surfaced during the reassessment proceedings on which the AO could have formed a requisite belief with regard to escapement of assessment and the assessee had disclosed all the materials fully and truly during the previous assessment proceedings. Under the circumstances, the impugned Notice under Section 148 of the Act dated 26.02.2019 assuming jurisdiction under Section 147 of the Act after the expiry of four years from the end of the relevant assessment year is clearly without jurisdiction of law and cannot be sustained in law. 17.For the foregoing reasons, the writ application succeeds and is hereby allowed. The impugned notice dated 26.02.2019 is hereby quashed and set aside. All subsequent proceedings pursuant thereto also stand terminated. (J. B. PARDIWALA, J) (ILESH J. VORA,J) P.S. JOSHI Page 12 of 12 "