JAYESH CHANDULAL PRAJAPATI V. DEPUTY COMMISSIONER OF INCOME TAX

SCA/15208/2018

AI Insights

The case involves Jayesh Chandulal Prajapati, the petitioner, who challenged a notice under section 148 of the Income Tax Act, 1961, issued by the Deputy Commissioner of Income Tax for reopening his assessment. The notice was based on information from a subsequent search at J.P. Iscon Group, alleging undisclosed investment in a flat. The petitioner argued that the issue had already been assessed and was under appeal, thus the reopening was not permissible. The court examined precedents and the specific provisions of the Income Tax Act, particularly focusing on the principle of merger and the restrictions on reassessment when matters are under appeal.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 750642 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 06-08-2019
• Assessment Year: misc
• Other Referred Cases: Radhawami Salt Works Versus Asst. Commissioner of Income Tax, Jhankit Chandulal Prajapati Versus Dy. Commissioner of Income Tax, Central Circle, National Dairy Development Board Versus Deputy Commissioner of Income Tax, Anand Circle
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: DARSHAN PATEL
• Keywords: Assessment; Income Tax; Jurisdiction; Notice; Objection; Reassessment
• Section: 147; 148; 143(3); 69; 151; 153(A)

Judgement Text

"C/SCA/15208/2018 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 15208 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA Sd/- and HONOURABLE MR.JUSTICE A.C. RAO Sd/- ========================================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? NO 2 To be referred to the Reporter or not ? NO 3 Whether their Lordships wish to see the fair copy of the judgment ? NO 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? NO ========================================================== JAYESH CHANDULAL PRAJAPATI Versus DEPUTY COMMISSIONER OF INCOME TAX ========================================================== Appearance: DARSHAN R PATEL(8486) for the Petitioner(s) No. 1 MRS MAUNA M BHATT(174) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 06/08/2019 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) Page 1 of 10 C/SCA/15208/2018 JUDGMENT 1.00. RULE, returnable forthwith. Ms.Mauna Bhatt, learned standing counsel waives service of notice of rule for and on behalf of the respondent. 2.00. By this writ application under Article 226 of the Constitution of India, the writ applicant – an assessee under the Income Tax Act has prayed for the following reliefs :- “(A). Issue a writ of certiorari and/or a writ of mandamus and/or any other writ, direction or order to quash and set aside the notice dated 30.3.2018 under section 148 of the Income-tax Act, 1961 annexed hereto at Annexure-C along with objection rejection order dated 20.8.2018 annexed hereto at Annexure-F for proceeding and completing Reassessment proceedings.” 2.00. The case of the writ applicant in his own words as pleaded in the writ application is as under :- “(2). The petitioner is an individual being regularly assessed to tax by the Income Tax Officer at Ahmedabad. Search under section 132 was conducted in the case of Kalol Prajapati Group on 6.11.2012. Warrant u/s. 132 was issued in the case of the petitioner and notice was issued u/s. 153(A) on 5.4.2013. Ultimately, a thorough scrutiny assessment u/s. 143(3) read with section 153(A) was framed on 18.3.2015. One of the major additions was in respect of Rs.56,45,000/- under Page 2 of 10 C/SCA/15208/2018 JUDGMENT section 69 towards investment in flat No.G-301 at “Iscon Platinum” in respect of which booking letter dated 20/06/2011 was also issued by J.P. Iscon Ltd. The petitioner challenged order of assessment before the CIT (Appeals), who examined the issue at length and deleted the addition vide order dated 10.8.2017. The revenue preferred further appeal to the Tribunal which is pending adjudication. (3). Suddenly notice u/s. 148 dated 30.3.2018 is issued to the petitioner. The respondent provided reasons for reopening vide letter dated 25.4.2018 and on examination of the same, it is seen that the respondent is of the view that Rs.7.10 lakh has escaped assessment towards undisclosed investment in the flat. The respondent is of this view based on the information received from the office of the DCIT on 23.3.2018 in repsect of search conducted by the Income Tax Department on 25.2.2016 at the premise of J.P. Iscon group. The fact remains that the issue was thoroughly processed for the same amount and the same subject matter during the course of original scrutiny proceedings at assessment level. (4). the petitioner filed exhaustive objections vide letter dated 23.6.2018 filed on 28.6.2018 indicating that the respondent has no jurisdiction u/s. 147/148 to commence reassessment proceedings. However, vide order dated 20.8.2018, the respondent rejected objections of the petitioner. Page 3 of 10 C/SCA/15208/2018 JUDGMENT (5). In the light of the aforesaid facts and circumstances and legal background, being seriously aggrieved by reopening proceedings of the objections rejection order dated 20.8.2018, the petitioner respectfully has approached this Hon'ble Court and the facts and submissions as reflected from the records and annexures are appended to this petition.” 3.00. The main ground of challenge to the impugned notice of reassessment under section 148 of the Income-tax Act, 1961 (for short “the Act”) is as under :- “The petitioner respectfully submits that the addition of Rs.7.10 lakh sought to be made by the respondent is without jurisdiction and the entire reopening proceedings are not tenable in light of the principles of “merger” as explained in the provisions of section 147 itself by the third proviso to section 147 of the Act since the income sought to be reassessed is already assessed and was subject matter of appeal before the CIT (Appeals), which is already adjudicated upon by the learned Commissioner. Even otherwise and without prejudice to the aforesaid ground, the petitioner respectfully submits that in absence of reasoned sanction under section 151 of the Income Tax Act, 1961 to invoke jurisdiction under section 147/148, the entire Page 4 of 10 C/SCA/15208/2018 JUDGMENT proceedings are bad in law as even assuming, mechanical sanction is obtained by the respondent, the settled position of law is that a reasoned sanction of the concerned authority is mandatory requirement of statute and not a mere procedural aspect in the realm of reopening of assessment.” 4.00. Having heard the learned counsel appearing for the parties and having gone through the materials on record, the only question that falls for our consideration is whether the impugned notice issued by the respondent under section 148 of the Act is sustainable in law. 5.00. It is not in dispute that the income which is sought to be reassessed by virtue of the issue of the impugned notice under section 148 of the Act was already assessed and was the subject matter of appeal before the CIT(Appeals). The matter is now pending before the ITAT. In such circumstances, the assessment which is sought to be reopened could be said to have merged with the order of Commissioner (Appeals). 6.00. In the aforesaid context, we may refer to a decision of this Court in the case of Radhawami Salt Works Versus Asst. Commissioner of Income Tax and another, rendered in Special Civil Application No.16644 of 2012 decided on 14/06/2017 wherein this Court observed as under :- “14. Yet another reason on which we cannot permit reopening on the grounds stated in the reasons is that the assessee carried the issue in appeal before the Appellate Commissioner and canvassed that to Page 5 of 10 C/SCA/15208/2018 JUDGMENT tax the income as capital gain was wrong. The Commissioner having dismissed the appeal, the issue is pending before the Tribunal in assessee’s appeal. Section 147 of the Act as is well known, empowers the Assessing Officer to reopen the assessment, subject to certain conditions. 3rd proviso to section 147 however provides that the Assessing Officer may assess or reassess such income other than the income involving the matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. When the subject matter viz. The receipt of transfer of rights in land and the income relatable to such matter was the subject matter of appeal and thereafter second appeal, the principle of merger would apply. There cannot be two separate considerations to the same subject matter relatable to the income. One by the appellate authority or forum and another by the Assessing Officer in fresh assessment. Had material particulars concerning the income been withheld by the assessee, issue perhaps would stand on a different footing. Since such facts are not presented before us, we would not comment any further in this respect.” 7.00. Mr.Patel, the learned counsel invited our attention to the judgement in the case of Jhankit Chandulal Prajapati Versus Dy. Commissioner of Income Tax, Central Circle, rendered in Special Civil Application No.15206 of 2018 Page 6 of 10 C/SCA/15208/2018 JUDGMENT decided on 11/02/2019. The petitioner in the said case is none other than the brother of the writ applicant herein. Mr.Patel invited attention of this Court to the following observations made by the Co-ordinate Bench :- “15. In the facts of the present case, insofar as unexplained cash payment of Rs.3,00,000/- made to M/s J.P. Iscon Pvt. Ltd. as revealed during the course of search in the case of M/s J.P. Iscon Pvt. Ltd. is concerned, the very same Rs.3,00,000/- was subject matter of the earlier proceedings under section 143(3) read with section 153A of the Act, wherein on the basis of the material seized during the course of search on the premises of the petitioner, it was found that the petitioner had paid Rs.3,00,000/- in cash for the assessment year under consideration to M/s J.P. Iscon Pvt. Ltd. Upon conclusion of those proceedings, an assessment was framed under section 143(3) read with section 153A of the Act, whereby the amount of Rs.3,00,000 had been added under section 69 of the Act. Therefore, the very same Rs.3,00,000/- in respect of which the Assessing Officer seeks to reopen the assessment for the year under consideration, has already been taxed under the order dated 18.3.2015 made under section 143(3) read with section 153A of the Act. Therefore, Rs.3,00,000/- has been held to be income chargeable to tax in the proceedings under section 143(3) read with section 153A of the Act and has been added to the income of the petitioner under Page 7 of 10 C/SCA/15208/2018 JUDGMENT section 69 of the Act, the very same income thereafter cannot be said to be income which has escaped assessment, inasmuch as such income has already been assessed. Therefore, on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment, inasmuch as such income has already been assessed under section 143(3) read with section 153A of the Act. The assumption of jurisdiction under section 147 of the Act on the part of the Assessing Officer therefore, lacks validity and hence, cannot be sustained. 16. Another relevant aspect of the matter is that as noted hereinabove, earlier an assessment order under section 143(3) read with section 153A(1)(b) of the Act had been made making an addition of Rs.3,00,000/- under section 69 of the Act. Against the said order, the petitioner went in appeal before the Commissioner (Appeals), who by an order dated 11.8.2017, held in favour of the petitioner insofar as the addition of Rs.3,00,000/- made under section 69 of the Act is concerned. Thus, the order of the Assessing Officer insofar as the issue in respect of which the assessment is sought to be reopened, has merged with the order passed by the Commissioner (Appeals). The third proviso to section 147 of the Act postulates that the Assessing Officer may assess or re-assess such income, other than the income involving matters which are the subject matters of any appeal, reference or Page 8 of 10 C/SCA/15208/2018 JUDGMENT revision, which is chargeable to tax or escaped assessment. Thus, the third proviso to section 147 of the Act permits the Assessing Officer to assess or re-assess only such income which was not subject matter of appeal, reference or revision. In the present case, the Assessing Officer seeks to reopen the assessment in respect of income involving a matter which was subject matter of appeal before the Commissioner (Appeals). The reopening of assessment by the impugned notice under section 148 of the Act is, therefore, also hit by the third proviso to section 147 of the Act and is not permissible in law. 17. For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned notice dated 30.3.2018 issued under section 148 of the Income Tax Act, 1961 seeking to reopen the assessment of the petitioner for assessment year 2011-12, is hereby quashed and set aside. Rule is made absolute accordingly, with no order as to costs.” 8.00. We may also refer to and rely upon one another decision of this Court in the case of National Dairy Development Board Versus Deputy Commissioner of Income Tax, Anand Circle, rendered in Special Civil Application No.14449 of 2010 decided on 24/03/2011, wherein this Court observed in para 14 as under :- Page 9 of 10 C/SCA/15208/2018 JUDGMENT “14. Moreover, insofar as the second ground for reopening of assessment is concerned, it may be noted that the second proviso to section 147 of the Act expressly provides that the Assessing Officer may assess or reassess such income, other than the income involving matters which are subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment. Thus by virtue of the second proviso to section 147 of the Act, income involving matters which are subject matters of any appeal, reference or revision has expressly been taken out of the purview of the said section. In the circumstances, insofar as the income stated to have escaped assessment under the second ground is concerned, the same having been subject matter of appeal would not fall within the ambit of section 147 of the Act and as such the Assessing Officer lacks jurisdiction to reopen the assessment on the said ground.” 9.00. For the foregoing reasons, this petition succeeds and is hereby allowed. The impugned notice dated 30/3/2018 issued by the respondent under section 148 of the Act is hereby quashed and set aside. Rule is made absolute with no order as to costs. Sd/- (J. B. PARDIWALA, J) Sd/- (A. C. RAO, J) RAFIK... Page 10 of 10 "