JAY KRISHNA GROUP THROUGH BHARWAD NAVGHAN CHHAGANBHAI V. INCOME TAX OFFICER, WARD 1

SCA/5883/2022

AI Insights

The case involves Jay Krishna Group, a partnership firm, challenging the notices issued by the Income Tax Officer under section 148 of the Income Tax Act, 1961, for reopening the assessments for the years 2016-2017 and 2017-2018. The petitioner argued that there was no new material to justify the reopening of the assessments, claiming it was merely a change of opinion by the Assessing Officer. The respondent countered that new information from an 'insight portal' revealed that certain income had escaped assessment, justifying the reopening. The court sided with the respondent, affirming the reopening of the assessments based on the new material.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 770368 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 17-08-2022
• Assessment Year: misc
• Other Referred Cases: Easy Pay Private Limited Vs DCIT, Swati Malove Divetia Vs ITO, Parixit Industries P. Ltd Vs ACIT, Sandip B.Padsala Vs ITO, H.K.Buildcon Ltd. Vs ITO, Ganesh Housing Corporation Limited Vs DCIT, Awlesh Kumar Singh Vs UOI, Mumtaz Haji Mohmad Memon Vs ITO, Vijay Harishchandra Patel Vs ITO, Narendrakumar M.Patel Vs ITO, Sunrise Education Trust Vs ITO, Sagar Enterprise Vs ACIT, Prin.CIT Vs Fibres and Fabrics Int.P.Ltd., Assistant Commissioner of Income Tax Vs Rajesh Jhaveri Stock Brokers P. Ltd., D.N.Jeevaraj Vs Chief Secretary, Government of Karnataka, Rashmi Metaliks Ltd. & Anr Vs Kolkata Metrop. Dev. Auth. & Ors
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: M R BHATT CO
• Assessee Lawyers: DARSHAN PATEL
• Keywords: Change of opinion; Income Tax; Notice under section 148; Reason to believe; Reopening of assessment
• Section: 148; 142(1); 143(2); 151

Judgement Text

"C/SCA/15739/2021 ORDER DATED: 17/08/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 15739 of 2021 With R/SPECIAL CIVIL APPLICATION NO. 5883 of 2022 ========================================================== JAY KRISHNA GROUP THROUGH BHARVAD NAVGHAN CHHAGANBHAI Versus INCOME TAX OFFICER WARD -1 ========================================================== Appearance: DARSHAN R PATEL(8486) for the Petitioner(s) No. 1 M R BHATT & CO.(5953) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE THE CHIEF JUSTICE MR. JUSTICE ARAVIND KUMAR and HONOURABLE MR. JUSTICE ASHUTOSH J. SHASTRI Date : 17/08/2022 ORAL ORDER (PER : HONOURABLE THE CHIEF JUSTICE MR. JUSTICE ARAVIND KUMAR) 1. Heard Mr.Darshan R.Patel, learned counsel appearing for the petitioner and Mr.Karan Sanghani, learned counsel appearing for the respondent. Perused the record. 2. Short point that arises for our consideration in these two petitions is : Whether respondent was correct and justified in issuing the notices under section 148 of the Income Tax Act 1961 (“the Act” for short) for reopening assessment for the assessment years Page 1 of 13 C/SCA/15739/2021 ORDER DATED: 17/08/2022 2016-2017 and 2017-2018 ? 3. Since the contentions raised, grounds urged, defence pleaded in these two petitions are common and impugned notices issued under section 148 of the Act also being the same and identical, these two petitions are taken up together for consideration and disposed of by this common order. 4. Petitioner, in the respective petitions, is a partnership firm had filed its return of income for the respective assessment years 2016-2017 and 2017-2018 declaring total income. Notices under section 143(2) and 142(1) were issued to the petitioner, pursuant to which, reply was filed and even notice under section 142(1) of the Act calling upon the petitioner to produce the details and documents had also been replied by the petitioner and subsequently, order under section 143(2) of the Act came to be passed by assessing the income of the petitioner. 5. A notice under section 148 of the Act came to be issued to the petitioner for respective assessment years which was accompanied by the reasons for such reopening and the petitioner on receipt of said notice filed its objections which came to be rejected and by orders dated 9.3.2022 and 17.8.2021 (Annexures-L and I) respectively which are impugned in the respective Special Civil Applications. 6. It is the contention of Mr.Darshan Patel, learned Page 2 of 13 C/SCA/15739/2021 ORDER DATED: 17/08/2022 counsel appearing for the petitioner that there was no additional material which was available before the Assessing Officer and notices issued prior to the assessment was duly replied with supporting documents. Having considered this aspect, Assessing Officer had passed the assessment orders for respective assessment years and as such, there is no justification for reopening of the assessment based on alleged escapement of income which is not there. He would further elaborate his submissions contending that mere change of opinion cannot be a ground for reopening of the assessment and until and unless there is fresh material which has come to his knowledge, the Assessing Officer which has purportedly escaped income while assessment being carried would only be a ground on which reopening of the proceedings could be commenced, as otherwise such commencement of proceedings would be flawed. By drawing the attention of the Court to various materials which were available before the Assessing Officer at the time of scrutiny, he would contend that in the present case, mere change of opinion is the basis on which the respondent intends to reopen assessment and it is the very same Assessing Officer, who had scrutinized the return of income or scrutinized documents on the basis of details furnished by the petitioner at the time of assessment, has issued the notices for reopening of assessment without there being any fresh material. As such, he contends that same is liable to be quashed. In support of his submissions, he has relied upon the following judgments. (i) Special Civil Application No.14401 of 2021 Page 3 of 13 C/SCA/15739/2021 ORDER DATED: 17/08/2022 Easy Pay Private Limited Vs DCIT (ii) (2018) 98 taxmanna.com 447 (Guj) Swati Malove Divetia Vs ITO dated 10.9.2018 (iii) 352 ITR 349 (Guj) Parixit Industries P. Ltd Vs ACIT dated 12.3.2012 (iv) Special Civil Application No.17223 of 2016 Sandip B.Padsala Vs ITO (v) 339 ITR 535 (Guj) (2012) 21 taxmann.com 83 (Guj) H.K.Buildcon Ltd. Vs ITO dated 12.4.2010. (vi) 350 ITR 131 (Guj) (2013) 31 taxmann.com 359 (Guj) Ganesh Housing Corporation Limited Vs DCIT dated 12.3.2012 (vii) (2022) 139 taxmann.com 502 (Alh) Awlesh Kumar Singh Vs UOI dated 5.5.2022 (viii) Special Civil Application No.21030 of 2017 Mumtaz Haji Mohmad Memon Vs ITO (ix) Special Civil Application No.16171 of 2017 Vijay Harishchandra Patel Vs ITO dated 6.12.2017 (x) Special Civil Application No.16790 of 2017 Narendrakumar M.Patel Vs ITO dated 7.2.2018 Page 4 of 13 C/SCA/15739/2021 ORDER DATED: 17/08/2022 (xi) (2018) 92 taxmann.com 74 (Guj) Sunrise Education Trust Vs ITO dated 19.2.2018 (xii) (2002) 124 Taxman 641 (Guj) Sagar Enterprise Vs ACIT dated 26.12.2001. (xiii) (2022) 139 taxmann.com 562 (SC) Prin.CIT Vs Fibres and Fabrics Int.P.Ltd. Dated 25.4.2022. 7. Per contra, Mr.Karan Sanghani, learned counsel appearing for the respondent - revenue would support the impugned orders by contending and drawing our attention to the reply affidavit, more particularly, with reference to paragraphs 5 and 6, to buttress his argument that on account of insight portal disclosing modus operandi adopted by the petitioner gave rise for reopening the assessment as certain amounts had escaped assessment on account of this material not being available at the time of scrutiny and same being the basis on which reassessment is now being proposed to be done, it cannot be gainsaid by assessee that there is no fresh material available before the authorities. He would also contend that it is not change of opinion by the Assessing Officer which has necessitated reopening of assessment but Assessing Officer having unearthed information through insight portal, it had resulted in escapement of income to tax which has perforced the Assessing Officer to issue the impugned notices which cannot be tested in the proceedings under Article 227 of the Constitution of India, inasmuch as correctness or otherwise Page 5 of 13 C/SCA/15739/2021 ORDER DATED: 17/08/2022 of the said material cannot be gone into by this Court and he has prayed for dismissal of the petitions. He has relied upon the decision in the case of Aaspas Multimedia Ltd Vs Deputy Commissioner of Income Tax, reported in (2018) 405 ITR 512 (Guj) in support of his submissions. DISCUSSION AND FINDINGS : 8. The facts in brief having already been stated, we do not propose to burden this judgment by repeating the same. At the outset, it requires to be noticed that the scope of reopening by issuance of notice under section 148 of the Act has been laid to rest by the Honourable Apex Court in the case of Assistant Commissioner of Income Tax Vs Rajesh Jhaveri Stock Brokers P. Ltd., reported in (2007) 291 ITR 500 (SC) wherein it has been held by Apex Court that expression “reason to believe” should not be read to mean that Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The expression “reason to believe” would mean cause or justification for reopening. If the Assessing Officer has cause or justification to know or suppose to know that income had escaped assessment, it can be said to have reason to believe that income had escaped assessment. It has been further observed by Apex Court thus : “16. Section 147 authorises 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 Page 6 of 13 C/SCA/15739/2021 ORDER DATED: 17/08/2022 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 believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. As observed by the Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662, for initiation of action under section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is “reason to believe”, but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the realm of subjective satisfaction (see ITO v. selected Page 7 of 13 C/SCA/15739/2021 ORDER DATED: 17/08/2022 Dalurband Coal Co.P. Ltd. [1996] 217 ITR 597 (SC) ; Raymond Woolen Mills Ltd. v. ITO [1999] 236 ITR 34 (SC).” 9. Thus, the expression “reason to believe” would mean and include that there should be subjective satisfaction by objective assessment available with the Assessing Officer for issuance of notice. In the instant case, the said notices, which are issued to the petitioner, have been furnished to the petitioner and conclusion drawn by the Assessing Officer for reopening of assessment is that the Assessing Officer received “insight portal” information to the effect that the petitioner firm is in business of lucky draw networking scheme and that no other tangible assets were handled by the firm other than financial transactions. Though Mr.Darshan Patel has made valiant attempt to contend before this Court that information sought for while issuing notices under sections 143(2) and 142(1) of the Act, details have been produced. The fact remains that the Assessing Officer did not possess this insight portal information which has been relied upon for issuance of the notices under section 148 of the Act. As such, the contention raised by learned counsel appearing for the petitioner requires to be considered for the purpose of outright rejection and it stands rejected. 10. Yet another contention which has been raised by learned counsel appearing for the petitioner is that while giving approval under section 151 of the Act, there has been no due application of mind by the said authority. Howsoever Page 8 of 13 C/SCA/15739/2021 ORDER DATED: 17/08/2022 attractive the said argument could be would not stand to rhyme or reason inasmuch as the said order of approval which was accompanied by the reasons for reopening of assessment would disclose very same basis, namely “insight portal”. The information which was secured by the Assessing Officer subsequent to the assessment proceedings or scrutiny proceedings has been referred to and this has been considered, examined and on objective assessment of the material on record available before the said authority, permission has been accorded under section 151 of the Act which cannot be said, held or construed as without due application of mind. As such, the said contention also stands rejected. Though several judgments on the said issue i.e. change of opinion and explaining the term or expression “reason to believe” have been relied upon, we are of the considered view that all these judgments are based on the facts and as such, without dwelving upon each of these judgments, we hold that there cannot be any second opinion with regard to proposition of law that mere change of opinion cannot form the basis for reopening of assessment. 11. Mr.Darshan Patel, learned counsel appearing for the petitioner has vehemently contended that very same Assessing Officer, who scrutinized, assessed and framed assessment orders, is the one who has issued the notices under section 148 of the Act is the basis on changed opinion and reopening of assessment is not permissible, cannot be accepted for the simple reason that notices for reopening as well as reasons assigned for reopening would clearly indicate that it is the material which has come to the Page 9 of 13 C/SCA/15739/2021 ORDER DATED: 17/08/2022 knowledge of the Assessing Officer i.e. insight portal details to his knowledge conforce issuance of notices under section 148 of the Act. As to whether assertion made by the revenue in the impugned notices is to be sustained or otherwise would be subject matter of scrutiny by the Assessing Officer. At the time of issuance of notices for reopening, the Assessing Officer would not be required to finally ascertained the fact that by arriving at the conclusion on the basis of any evidence as held by the Honourable Apex Court in Rajesh Jhaveri Stock Brokers P. Ltd (supra) referred to hereinabove. 12. This Court in exercise of powers vested under Article 227 of the Constitution of India would not take over the decision making powers of the statutory authority. The Honourable Apex Court in the case of D.N.Jeevaraj Vs Chief Secretary, Government of Karnataka, reported in (2016) 2 SCC 653, has held that the High Court cannot mandate beyond the course of action to be taken by the statutory authority by giving complete go-by to the procedural requirement and the Court itself taking over functions of the authority. It has been further held thus : “43. To this we may add that if a court is of the opinion that a statutory authority cannot take an independent or impartial decision due to some external or internal pressure, it must give its reasons for coming to that conclusion. The reasons given by the court for disabling the statutory authority from taking a decision can Page 10 of 13 C/SCA/15739/2021 ORDER DATED: 17/08/2022 always be tested and if the reasons are found to be inadequate, the decision of the court to by- pass the statutory authority can always be set aside. If the reasons are cogent, then in an exceptional case, the court may take a decision without leaving it to the statutory authority to do so. However, we must caution that if the court were to take over the decision taking power of the statutory authority it must only be in exceptional circumstances and not as a routine. Insofar as the present case is concerned, the High Court has not given any reason why it virtually took over the decision taking function of the authorities and for this reason alone the mandamus issued by the High Court deserves to be set aside, apart from the merits of the case which we have already adverted to.” 13. In that view of the matter, contentions of learned counsel appearing for the petitioner cannot be accepted and it stands rejected and the point formulated hereinabove is accordingly answered in the negative i.e. in favour of the respondent and against the petitioner assessee. 14. We are also of the considered view that it would be apt and necessary to observe at this juncture yet another fact which has unfolded in the instant case. As noticed hereinabove, the short issue which was required to be examined, considered, adjudicated and answered by this Court was with regard to the validity of the notices issued Page 11 of 13 C/SCA/15739/2021 ORDER DATED: 17/08/2022 under section 148 of the Act and consequential orders passed thereon. Learned counsel appearing for the petitioner, who has elaborately and vehemently argued assailing the impugned notices and orders, has relied upon a catena of judgments (13 judgments). It is trite law that while relying upon case – laws in support of their submissions, learned advocates need not file or rely upon repetitive judgments on the same issue by furnishing same to the Court so as to inflate the records. Any judgment which has been relied upon has to be independent, separate and distinct from one which has already relied upon for its application to the facts of the case concerned. By furnishing or submitting multiple judgments on the same issue, as has happened in the instant case i.e. furnishing several citations on same issue with reference to discussion made by the Honourable Apex Court and this court on expression “reason to believe” and “change of opinion” as applied to different facts would not change the facts of the present case. Despite our request to learned counsel appearing for the petitioner as to whether he proposes to rely upon all the judgments on the same issue, he has insisted for all the thirteen judgments referred to in the list of authorities being considered by this Court of which we have referred to few hereinabove as being applicable to the facts of the said cases. In fact, on the same issue, several judgments have been furnished. The Honourable Apex Court in the case of Rashmi Metaliks Ltd. & Anr Vs Kolkata Metrop. Dev. Auth. & Ors, (2013) 10 SCC 95 has held that such practice requires to be deprecated and accordingly, we deprecate the same. We do hope and trust that these Page 12 of 13 C/SCA/15739/2021 ORDER DATED: 17/08/2022 observations would be taken in right spirit and we observe that judgment which would cover the issue even if it is one in number it would suffice. By observing thus, we proceed to pass the following ORDER (i) The Special Civil Applications are dismissed with no order as to costs. (ii) The order dated 9.3.2022 at Annexure- L in Special Civil Application No.5883 of 2022 and the order dated 17.8.2021 at Annexure-I in Special Civil Application No.15739 of 2021 are affirmed. (iii) Rule discharged. (ARAVIND KUMAR,CJ) (ASHUTOSH J. SHASTRI, J) H.M. PATHAN Page 13 of 13 "