MYSOON EXPORTS PRIVATE LIMITED V. INCOME TAX OFFICER

SCA/21120/2019

AI Insights

The case involves Mysoon Exports Private Limited challenging a notice issued under Section 148 of the Income Tax Act, 1961, for the Assessment Year 2012-13. The notice was issued for reopening the assessment based on information from the DDIT (Inv.), Unit 2(1), Mumbai, which suggested that the assessee had entered into transactions with entities lacking creditworthiness. The AO initially framed the assessment under Section 143(3) after the assessee provided all necessary details. However, upon receiving new information, the AO issued a notice for reassessment, which the assessee contested on grounds of jurisdiction and merits. The High Court found that the AO had not adequately addressed the objections raised by the assessee and had not provided a reasoned order, leading to the setting aside of the AO's order and remitting the matter back for a fresh decision.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 749763 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 11-05-2021
• Assessment Year: misc
• Other Referred Cases: GKN Driveshafts (India) Ltd, (2003) 259 ITR 19, SABH Infrastructure Ltd Vs. ACIT, (2018) 99 Taxmann.com 409 (Delhi)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: KALPANA RAVAL
• Assessee Lawyers: OMKAR DAVE
• Keywords: Income escape; Jurisdiction; Mechanical disposal; Reassessment; Speaking order
• Section: 147; 148; 143(3); 151

Judgement Text

"C/SCA/21120/2019 ORDER DATED: 11/05/2021 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 21120 of 2019 ========================================================== MYSOON EXPORTS PRIVATE LIMITED Versus INCOME TAX OFFICER ========================================================== Appearance: MR OMKAR C DAVE(2003) for the Petitioner(s) No. 1 MRS KALPANAK RAVAL(1046) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 11/05/2021 ORAL ORDER (PER : HONOURABLE MR. JUSTICE ILESH J. VORA) 1. By filing this petition under Article 226 of the Constitution of India, the writ applicant being a private limited company has challenged the Notice dated 30.03.2019 issued under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’ for short), in respect of Assessment Year 2012-13 by the Assessing Officer, on the ground that same is illegal, without jurisdiction, as prescribed under the Act. 2. Briefly stated the facts of the case are that the writ applicant being a private limited company filed its return of income on 29.09.2012, declaring the total income at Rs.5,41,938/-. On 31.03.2014, the assessment was framed under Section 143(3) of the Act. During the assessment proceedings various details were called for by the AO including the details pertaining to the bank entries and various transactions made during the year under consideration. The writ applicant vide letters dated Nil (at pages 50 to & 53) had furnished various details like bank particulars, bank statements, purchase and Page 1 of 7 C/SCA/21120/2019 ORDER DATED: 11/05/2021 sales ledgers, etc. The AO after considering the details furnished by the writ applicant, framed the assessment under Section 143(3) of the Act. 3. Thereafter, the AO issued impugned notice dated 31.03.2019 under Section 148 of the Act for reopening of the assessment for the year 2012-13. In response to the notice, the writ applicant filed his return of income and asked to provide reasons recorded for the reassessment. The revenue vide its communication dated 08.05.2019 furnished the reasons recorded, which reads as under:- Reasons for reopening :- “The assessee company filed its return of income for A.Y. 2012-13 on 29.09.2012 declaring total income at Rs.5,41,938/-. IN this case assessment order under section 143(3) was passed on 31.03.2014. 2. In this case, information has been received from DDIT (Inv.), Unit2(1), Mumbai vide letter dated 18.03.2018. As per the information received enquiry was conducted by the DDIT (inv.), Unit 2(1), Mumbai, in the case of the assessee and from the enquiry, it was noted that the account of the bearing account no.550011040448 was credited by Rs.4915333279/- during the year under consideration. It was further seen that most of the transaction of the assessee was with Dishita Gems pvt. Ltd, Nanesh Export Pvt Ltd and Ajit Gems. Further during the investigation by the wing it was seen that these concern have no asset and meagre income. 2.1 Information received in this case is verified. Further return of income filed by the aassessee for the year under consideration and assessment record of the assessee is anaylzed. Since from the report of investigation wing it is apparent that the assessee company had entered into transactions with various parties which had no creditworthiness to make huge transactions and also their return of income filed is on the line of amount credited in their bank account. Further assessment record of the assessee is also analyzed and it is seen that during the year the assessee has claimed to have made purchase of Rs.217791108/-, 55902509/- and Rs.107606458, from M/s. Disha Gems, M/s. Ajit Gems Pvt. Ltd and M/s. Nanesh Exports Pvt. Ltd. Since from the investigation of wing it was found that they were not having creditworthiness to make such transactions. So the claim of purchase from these entities is not genuine. Therefore, I have reason to believe that income of the assessee for the year under consideration to the tune of Rs.311300075/- has escaped assessment, within the meaning of Page 2 of 7 C/SCA/21120/2019 ORDER DATED: 11/05/2021 Section 147 of the Income Tax Act. 4. In this case, the return of income was filed for the year consideration and regular assessment under Section 143(3) was made on 31.03.2014. Since four years from the end of the relevant year has expired in this case, the requirement to initiated proceedings under Section 147 of the Income Tax Act is reason to believe that income for the year under consideration has escaped assessment because of failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment for the year under consideration. It is pertinent to mention here that reason to believe that income has escaped assessment for the year under consideration have been recorded above in para 1 to 3. I have caregully considered the assessment records containing the submission made by the assessee in response to the various notices issued during the assessment and noted that the assessee had not disclosed the fact regarding its non- genuine transactions with Disha Gems Pvt. Ltd, Nanesh Exports Pvt. Ltd and Ajit Gems. Therefore, the assessee has not disclosed fully and truly all material facts necessary for his assessment. 5. In this case more than four years hagve lapsed fro the end of assessment year under consideration. Hence, necessary sanction to issue notice under Section 148 of the Income Tax Act has been obtained separately from Pr. Commissioner of Income Tax as per the provisions of Section 151 of the Income Tax Act.” 6. The writ applicant raised various objections vide communication dated 16.07.2019, both on the ground of jurisdiction as well as on merits and requested the respondent to drop the reassessment proceedings. Same came to be rejected by the respondent vide order dated 30.08.2019, holding that the assessment is valid and within jurisdiction. 7. Being aggrieved by the impugned notice as well as the order disposing of the objections, the writ applicant came up with present writ application. 8. We have heard the learned Senior Advocate Mr. Sunit Shah, assisted by Mr. Omkar Dave, the learned advocate appearing for the writ applicant and Mrs. Kalpana Raval, the learned Standing Counsel assisted by Mr. Nikunt Raval, the learned advocate appearing for the Page 3 of 7 C/SCA/21120/2019 ORDER DATED: 11/05/2021 revenue. 9. Mr. Sunit Shah, the learned Senior Advocate has raised various contentions as mentioned in the petition. Referring to the reasons recorded and order disposing the objections raised by the writ applicant, it was contended that the AO had mechanically disposed of the preliminary objections. Relying on the decision of GKN Driveshafts (India) Ltd, (2003) 259 ITR 19, it was submitted that the AO should have dealt with each objection and should have assigned cogent reasons for its conclusion, by passing a speaking order. In this context, it was submitted that in the case on hand, although various objections were raised against the impugned notice, yet the AO failed to take note of the objections and mechanically disposed of the same without assigning the reasons on the issues. Therefore, it was submitted that the impugned notice as well as the order disposing the objections are required to be set aside. 10. Mr. Sunit Shah, the learned Senior counsel relying upon the case of SABH Infrastructure Ltd Vs. ACIT, (2018) 99 Taxmann.com 409 (Delhi), further contended that there is a clear violation of the directions issued by the Delhi High Court. It was submitted that at the time of providing the reasons recorded for the reassessment, the respondent failed to provide the necessary approval accorded by the Competent Authority and other documents which may form the basis of reasons and enquiry conducted by the AO. 11. It was submitted by the learned counsel Mr. Sunit Shah for the writ applicant that in the previous assessment proceedings, the writ applicant had furnished all the details and based on the details provided, the AO had framed the assessment order under Section 143(3) of the Act, and Page 4 of 7 C/SCA/21120/2019 ORDER DATED: 11/05/2021 now on the same material, the AO sought to reopen the assessment which is nothing but a change of opinion and therefore, mere change of opinion, the reopening of concluded assessment is not permissible in law. 12. It was submitted by the learned counsel for the writ applicant that the impugned notice has been issued on 31.03.2019 in relation to AY 2012- 13, which clearly beyond the period of 4 years from the end of the relevant assessment year and as such in absence of any failure on the part of the applicant to disclose fully and truly all material facts, the assumption of jurisdiction by the AO under Section 147 of the Act is invalid. 13. On the other hand, learned Senior Standing Counsel Mrs. Kalpana Raval appearing for the revenue, reiterating the stand adopted by the revenue in affidavit in reply as well as in the order of disposing of the objections, submitted that the action taken by the AO is just, legal and proper and does not warrant any interference. It was further submitted that the AO has assigned cogent and sound reasons while disposing the preliminary objections filed by the writ applicant. It was further submitted that the impugned notice has been rightly issued by invoking Section 147 of the Act as writ applicant failed to disclose the truly and fully material facts with regard to credit entries as referred by the AO in the reasons recorded for the reassessment. It was submitted that the principle of change of opinion would not be applicable in the present case as the information received after framing of the assessment order which clearly shows that the assessee failed to disclose the material, which is incorrect and was not available at the time of previous assessment proceedings. 14. Having heard the learned counsel appearing for the respective parties and having gone through the materials on record, we are of the view that the AO while disposing off the preliminary objections filed by the writ applicant against the reasons recorded for reassessment, has not Page 5 of 7 C/SCA/21120/2019 ORDER DATED: 11/05/2021 properly dealt with the objections. We take notice of the fact that, while disposing the objections, the AO has concluded that the objection of the assessee has been duly considered and the same is not found acceptable on merits. 15. We are of the view that the AO failed to take note of various objections filed against the reasons recorded. Para-4 of the order as referred to above does not reflect the proper application of mind to the objections raised by the applicant and it could not be said that the objections having been disposed of by passing reason order. In the case of GKN Driveshaft (supra), the Supreme Court has laid down the procedure as to the manner of dealing with the objections raised against the notice under Section 148 of the Act. The Supreme Court has held that when a notice under Section 148 of the Act is issued, the proper course of action for the noticee is to file return and if he so desires, to seek reasons for issuing notice. It was further held that the AO is bound to furnish reasons within a reasonable time and upon receipt of reasons, the noticee is entitled to file an objection to issuance of notice and AO is bound to dispose of the same by speaking order. In the case of SABH Infrastructure Ltd (supra), the Delhi High Court, has held that the exercise of considering the assessee’s objections to the reopening of the assessment is not a mechanical ritual. It is a quasi judicial function. The order disposing of the objection should deal with each objection and give proper reason for conclusion. The order should reflect proper application of mind. 16. Applying the dictum as laid down by the Supreme Court in the case of GVK Driveshaft (supra), we are of the view that disposing of the objections raised by the assessee against the reasons recorded before issuance of notice under Section 148 of the Act, though not part of the statutory requirement, as prescribed under the Act, however, same is guided by the directions issued by the Apex Court. The specific objections raised by the writ applicant, produced on record at page-30 to Page 6 of 7 C/SCA/21120/2019 ORDER DATED: 11/05/2021 41 to this writ application, have not been properly dealt with by the AO. The lapse is in clear violation of the decision of the Apex Court. We are of the view that the AO has passed the order mechanically and without application of his mind. In other words not in a meaningful manner. 17. In view of the above, this writ application succeeds in part. The order disposing of the objections filed by the assessee dated 30.08.2019 at Annexure – A, page-18 to 22 to this petition is hereby set aside and the matter is remitted to the AO. The AO shall take into consideration the objections raised by the assessee and pass a fresh speaking order in accordance with law. 18. Let this exercise be undertaken within a period of six weeks from the date of the receipt of this order. We may clarify that we have otherwise not expressed any opinion on the merits of the case and we should otherwise also not do so as we are remitting the matter to the AO. 19. In the event, if the order that the AO may pass a fresh, is adverse in any manner to the assessee, then, it shall be open for him to challenge the same before the appropriate forum in accordance with law. However, in the event, if the order is adverse, then at-least a period of four weeks shall be granted to the assessee to take recourse of the remedy available to him in law. (J. B. PARDIWALA, J) (ILESH J. VORA,J) P.S.Joshi Page 7 of 7 "