M/S MAHENDRA PRASAD SINGH andBRO V. THE CHIEF COMMISSIONER OF INCO

CWJC/15308/2010

AI Insights

The case involves M/S Mahendra Prasad Singh & Brothers, a partnership firm, challenging the reopening of their income tax assessment for the year 2005-06 by the Assistant Commissioner of Income Tax, Circle-5, Patna. The reopening was based on the belief that certain income had escaped assessment, as the firm had claimed credit for tax deducted at source in the names of individual partners rather than the firm itself. The firm argued that this income was already disclosed in their tax returns and that the reassessment was merely a change of opinion, not supported by new material, thus constituting an illegal review of the original assessment. The court agreed with the firm's position, highlighting the Deputy Commissioner's failure to address the firm's objections and the lack of new material to justify the reassessment.

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 726347 (HC-PATNA)
• Appeal Type: Others
• Pronouncement Date: 02-05-2011
• Assessment Year: misc
• Other Referred Cases: CIT v. Kelvinator of India Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: HARSHWARDHAN PRASAD; ARCHANA SINHA
• Assessee Lawyers: KRISHNA MOHAN MISHRA
• Keywords: Assessment Year 2005-06; Income Tax; Partnership firm; Reassessment; Tax deducted at source
• Section: 147; 148; 143(3); 143(1); 226

Judgement Text

" IN THE HIGH COURT OF JUDICATURE AT PATNA CIVIL WRIT JURISDICTION CASE No.15308 of 2010 ====================================================== M/S Mahendra Prasad Singh & Brothers, Office at Dalluchak, Khagaul, Patna, a partnership firm created under Indian Partnership Act, through its working partner Rakesh Kumar Sinha, S/o Mahendra Prasad Singh, R/O Dalluchak, P.S.- Khagaul, P.S., Town and District-Patna. .... .... Petitioner Versus 1. The Chief Commissioner of Income Tax, Central Revenue Building, Bir Chandra Patel Path, Patna. 2. The Commissioner of Income Tax-2, Central Revenue Building, Bir Chandra Patel Path, Patna 3. The Assistant Commissioner of Income Tax Circle-05, Lok Nayak Bhawan, Near Dak Bangala Crossing, Patna. .... .... Respondents ====================================================== Appearance : For the Petitioner : Mr. Krishna Mohan Mishra, Advocate For the Respondents : Mr. Harshwardhan Prasad, Advocate with Mrs. Archana Sinha, Advocate ====================================================== CORAM: HONOURABLE THE CHIEF JUSTICE and HONOURABLE MR. JUSTICE JYOTI SARAN ORAL ORDER (Per: HONOURABLE THE CHIEF JUSTICE) 8. 2.5.2011. With the consent of the learned advocates, the petition is heard and decided today. This petition under Article 226 of the Constitution is filed by an assessee, a partnership firm (hereinafter referred to as ‘the Firm’), against the action the Assistant Commissioner of Income Tax, Circle-5, Patna in reopening the assessment for the assessment year 2005-06 under Section 147 of the Income tax Act, 1961 (hereinafter refereed to as ‘the Act’). Impugned notice dated 19th May 2009 had been issued by the Assistant Commissioner on the pretext that he had Patna High Court CWJC No.15308 of 2010 (8) 02-05-2011 2 reasons to believe that certain income of the Firm had escaped assessment. On calling for the reasons by the Firm, the respondent no. 3 submitted reasons under communication dated 12th January 2010. According to the respondent no.3, the Firm had claimed credit of certain amounts of tax deducted at source in the name of persons other than the Firm. The respondent no.3, therefore, had reason to believe that certain income of the Firm had escaped assessment. In answer to the notice, the Firm raised objection that the Firm was a partnership firm; under the deed of partnership income of the partners was deemed to be the business of the Firm. Accordingly, the Firm had returned the income received by the individual partners and had claimed credit for the tax deducted at source in the name of the individual partners. The said reply was accompanied by deed of partnership. Nevertheless, by order dated 20th September 2010 the respondent no.3 rejected the objection. Therefore, the present petition. Learned advocate Mr. Krishna Mohan Mishra has appeared for the petitioner. He has submitted that the return filed by the Firm was processed by the assessing authority at the relevant time and the assessment was completed as envisaged by Section 143(1) of the Act. The income earned by the individual partners was also returned in the income tax return filed by the Firm. The Firm had also taken credit of the tax deducted at source in the name of the individual partners. In absence of any other material before the assessing Patna High Court CWJC No.15308 of 2010 (8) 02-05-2011 3 officer, the assessment could not have been reopened merely on a change of opinion or else it amounts to review of the order of assessment and will not be an order of reassessment. In support of the above submission he has relied upon the judgment of the Hon’ble Supreme Court in the matter of CIT v. Kelvinator of India Ltd. (SC) {[2010] 320 ITR 561 (SC)}. The petition is contested by learned counsel Mr. Harshwardhan Prasad. He has relied upon the counter affidavit made by the respondent no.3, the Deputy Commissioner of Income Tax. He has submitted that the Deputy Commissioner had materials on record to believe that certain income earned by the Firm had escaped assessment. Mr. Prasad has submitted that the Firm did not file copy of the partnership deed with the return of the income filed for the assessment year 2005- 06. The order of assessment for the assessment year 2005-06 was made under Section 143(1) of the Act. No scrutiny as envisaged by Section 143(3) of the Act was undertaken. The matter, therefore, cannot be said to be one of reopening assessment under Section 147 of the Act. We are completely at loss. The Firm has repeatedly asserted that the income received by the individual partners had been disclosed in the income tax return filed by the Firm. This particular assertion made in the objection raised by the Firm has neither been dealt with by the respondent no.3 in his order dated 20th Patna High Court CWJC No.15308 of 2010 (8) 02-05-2011 4 September 2010; nor in his counter affidavit. The partnership deed was also annexed to the objection raised by the Firm. The covenant of the said partnership deed has also not been examined by the Deputy Commissioner. On the contrary, he maintains that there being no assessment after proper scrutiny the matter is one of assessment and not of reassessment. In our opinion, the defence raised by the respondents is self contradictory. Having issued notice for reassessment under Section 148 of the Act, the Deputy Commissioner could not have denied that it is a case of reassessment on the belief that certain income of the Firm had escaped assessment. To us, it appears that the Deputy Commissioner did not care to examine the returns filed by the Firm for the assessment year 2005-06 or the partnership deed which was placed before the Deputy Commissioner. He mechanically rejected the objection raised by the Firm without dealing with the precise issue raised by the Firm. In absence of denial that the Firm did not disclose the income from the business of the individual partners in the income tax return of the Firm, the Deputy Commissioner could not have invoked the power of reassessment conferred by Section 147 of the Act. For the aforesaid reasons, the petition is allowed. The notice dated 19th May 2009 issued under Section 148 of the Act (Annexure-1 to the writ petition) is quashed and set aside. Consequently, the order dated 20th September 2010 rejecting objections raised by the Patna High Court CWJC No.15308 of 2010 (8) 02-05-2011 5 Firm also stands quashed and set aside. We believe that the action of the Deputy Commissioner in not considering the objections raised by the Firm and in not verifying the records is atrocious. It calls for award of cost to the petitioner. We, accordingly, allow this petition with cost. The cost is quantified at Rs.5,000/- (five thousand). The amount of cost will be paid to the petitioner within one month from today. It is further directed that the Income Tax Department will be entitled to recover the amount of cost from Shri Rajeshwar Prasad, Deputy Commissioner of Income tax, Circle-05, Patna. Pawan/- (R.M. Doshit, CJ) (Jyoti Saran, J) "