NATWAR AGARWAL & SONS (HUF) V. THE INCOME TAX OFFICER

WP/2648/2019

AI Insights

The case involves Natwar Agarwal & Sons (HUF), represented by Mr. Natwar Agarwal, challenging the reassessment orders issued by the Income Tax Officer for the assessment years 2011-12 and 2013-14. The petitions were filed under Articles 226 & 227 of the Constitution of India, seeking to quash the reassessment orders and the consequential demand notices. The main contention was the alleged failure of the Income Tax Officer to provide reasons for the reassessment in a timely manner, which the petitioner argued violated the procedural requirements established by the Supreme Court in GKN Driveshafts (India) Ltd. v. Income Tax Officer. The court examined the sequence of events, including the issuance of notices under Section 148 of the Income Tax Act, the filing of returns by the petitioner, and the subsequent communications regarding the reassessment.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 758568 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 20-01-2021
• Assessment Year: misc
• Other Referred Cases: GKN DRIVESHAFTS (INDIA) LTD. v. INCOME TAX OFFICER & OTHERS - (2003) 1 SCC 72
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: E I SANMATHI
• Assessee Lawyers: HARISH
• Keywords: Demand; Income Tax; Notice; Reassessment; Writ petition
• Section: 147; 148; 143(3); 226; 227

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 20TH DAY OF JANUARY, 2021 BEFORE THE HON'BLE MR.JUSTICE S. SUNIL DUTT YADAV WRIT PETITION No.2648/2019 C/W WRIT PETITION No.2649/2019 (T-IT) W.P. No.2648/2019 Between: Natwar Agarwal & Sons (HUF), A Hindu Undivided Family, Represented by its Karta, Mr. Natwar Agarwal, S/o Mr. K.G. Agarwal, Aged about 39 years, R/at No.2/4, Thyappa Garden, 8th Cross, Lakshmi Road, Bangalore - 560 027. … Petitioner (By Sri Harish V.S., Advocate) And: The Income Tax Officer, Ward 7(2)(2), 3rd Floor, Room No.320, BMTC Building, Koramangala 80 feet Road, Bangalore - 560 095. … Respondent (By Sri E.I. Sanmathi, Advocate) This Writ Petition is filed under Articles 226 & 227 of the Constitution of India, praying to quash the impugned order of 2 reassessment passed by the respondent under Section 143(3) read with Section 147 of the Act relevant to the Assessment Year 2011-12, dated 24.12.2018 i.e., Annexure-E and the consequential demand notice issued by the respondent, relevant to the Assessment Year 2011-12, dated 24.12.2018 i.e., Annexure-F and etc. W.P. No.2649/2019 Between: Natwar Agarwal & Sons (HUF), A Hindu Undivided Family, Represented by its Karta, Mr. Natwar Agarwal, S/o Mr. K.G. Agarwal, Aged about 39 years, R/at No.2/4, Thyappa Garden, 8th Cross, Lakshmi Road, Bangalore - 560 027. … Petitioner (By Sri Harish V.S., Advocate) And: The Income Tax Officer, Ward 7(2)(2), 3rd Floor, Room No.320, BMTC Building, Koramangala 80 feet Road, Bangalore - 560 095. … Respondent (By Sri E.I. Sanmathi, Advocate) This Writ Petition is filed under Articles 226 & 227 of the Constitution of India, praying to quash the impugned order of reassessment passed by the respondent under Section 143(3) read with Section 147 of the Act, relevant to the Assessment Year 2013-14, dated 24.12.2018 i.e., Annexure-E and the consequential demand notice issued by the respondent, relevant 3 to the Assessment Year 2013-14, dated 24.12.2018 i.e., Annexure-F and etc. These Writ Petitions coming on for preliminary hearing in 'B' Group this day, the Court, made the following: ORDER Petitioner has filed W.P.No.2648/2019 and W.P.No.2649/2019 seeking for issuance of writ of certiorari to quash the impugned order of reassessment passed by the respondent Under Section 143(3) r/w Section 147 of the Income Tax Act, 1961 (for short 'the Act') relevant to the assessment years 2011-12 and 2013-14 dated 24.12.2018 respectively and has sought for setting aside the consequential demand notices. 2. Since the impugned orders in both the writ petitions are based on an identical factual matrix, the same are taken up together and disposed off by this common order. 3. Petitioner submits that the return for the assessment year 2011-12 was filed on 26.07.2011 and return for the assessment year 2013-14 was filed on 4 30.07.2013. The facts as made out are that the returns were sought to be reopened by the respondent and accordingly, notices under Section 148 of the Act were issued on 27.03.2018 for the assessment year 2011-12 and dated 30.03.2018 for the assessment year 2013-14. Petitioner submits that he had filed return under Section 148 of the Act and requested the respondent to furnish reasons in accordance with the direction and observations made by the Apex Court in the case of GKN DRIVESHAFTS (INDIA) LTD. v. INCOME TAX OFFICER & OTHERS - (2003) 1 SCC 72. Petitioner submits that he had sought for reasons to enable him to represent his case effectively. 4. Petitioner submits that the respondent has not furnished reasons for reopening the assessment and despite several requests, the same was not honoured. Petitioner submits that the respondent has proceeded to pass reassessment order and the fact that reasons for reassessment not having been informed to him and no opportunity being provided for him to file objections, there 5 is a clear violation of the procedure prescribed relating to reassessment proceedings as observed by the Apex Court in the case of GKN DRIVESHAFTS (Supra). 5. The observation of the Apex Court in paragraph No.5 of the said judgment is as follows: \"We see no justifiable reason to interfere with the order under challenge. However, we clarify that when a notice under Section 148 of the Income Tax 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 notices. The assessing officer is bound to furnish reasons within a reasonable time. On receipt of reasons, the noticee is entitled to file objections to issuance of notice and the assessing officer is bound to dispose of the same by passing a speaking order. In the instant case, as the reasons have been disclosed in these proceedings, the assessing officer has to dispose of the objections, if filed, by passing a speaking order, before proceeding with the assessment in respect of the above said five assessment years.\" 6 6. Learned counsel for the revenue has filed his statement of objections and at paragraph No.6 of the objections has reproduced sequence of events, which reads as hereunder: In W.P. No.2648/2019: Date Particulars 27/3/2018 Assessing authority issues notice under section 148 of the Act to file return of income within 30 days. Copy produced as Annexure- R.1 21/8/2018 Assessing authority issues letter to assessee to prepare true and correct return of income. Copy produced as Annexure- R.2 29/8/2018 Assessee files letter dated 29/8/2018 before Tappal section of assessing authority stating that return of income is already filed and encloses the same. Copy produced as Annexure- R.3 4/9/2018 Assessing authority writes letter to assessee stating that return of income in response to notice issued under section 148 is not filed. Copy of letter produced as Annexure-R.4 16/9/2018 In response to said letter assessee filed return of income. Copy of said return of income is produced as annexure-R.5 10/12/2018 Assessee files Income Tax Return and other documents Copy of letter produced as 7 Annexure-R.6 11/12/2018 Even though there is no request till date for seeking reasons for re-opening by assessee, Assessing authority communicates the same vide letter dated 11/12/2018 Copy of letter produced as Annexure-R.7 22/11/2018 Assessing authority writes letter to assessee proposing to pass ex-parte order as assessee fails to contest the case inspite of reminders Copy of letter produced as Annexure-R.8 5/12/2018 Assessing authority issues notice under section 143(2) of the Act and seeks presence of assessee on 10/12/2018 at 12.30pm along with documents, accounts and any other evidence in support of return of income filed by assessee Copy of letter produced as Annexure-R.9 10/12/2018 Assessing authority issues notice under section 142(1) of the Act to furnish certain documents on 20/12/2018 at 11.45am Copy of notice is produced as Annexure-R.10 10/12/2018 Assessing authority on same day also issues seeking details of transactions Copy of letter produced as Annexure-R.11 21/12/2018 Representative of assessee files letter in Tappal section of assessing authority along with vakalath and seeks reasons for re-opening. Copy of said letter along with vakalath is filed as Annexure- R.12 Copies of postal acknowledgments for having communicated reasons are Copies of postal Acknowledgmen t's Annexure- 8 produced. R.13 27/12/2018 Assessing authority on same day communicated re- assessment order vide e- mail. Copy of communication of re- assessment order vide e- mail is produced as Annexure-R.14 20/3/2020 On application preferred by assessee on 18/6/2020 to rectify re-assessment order, assessing authority passes order under section 154 of the Act. Copy of order passed under section 154 of the Act is produced as Annexure-R.15 In W.P. No.2649/2019: Date Particulars 30/3/2018 Assessing authority issues notice under section 148 of the Act to file return of income within 30 days. Copy produced as Annexure-R.1 21/8/2018 Assessing authority issues letter to assessee to prepare true and correct return of income. Copy produced as Annexure-R.2 29/8/2018 Assessee files letter dated 29/8/2018 before Tappal section of assessing authority stating that return of income is already filed and encloses the same. Copy produced as Annexure-R.3 4/9/2018 Assessing authority writes letter to assessee stating that return of income in response to notice issued Copy of letter produced as Annexure-R.4 9 under section 148 is not filed. 16/9/2018 In response to said letter assessee filed return of income. Copy of said return of income is produced as annexure-R.5 10/12/2018 Assessee files Income Tax Return and other documents Copy of letter produced as Annexure-R.6 11/12/2018 Even though there is no request till date for seeking reasons for re-opening by assessee, Assessing authority communicates the same vide letter dated 11/12/2018 Copy of letter produced as Annexure-R.7 22/11/2018 Assessing authority writes letter to assessee proposing to pass ex-parte order as assessee fails to contest the case inspite of reminders Copy of letter produced as Annexure-R.8 5/12/2018 Assessing authority issues notice under section 143(2) of the Act and seeks presence of assessee on 10/12/2018 at 12.30pm along with documents, accounts and any other evidence in support of return of income filed by the assessee Copy of letter produced as Annexure-R.9 10/12/2018 Assessing authority issues notice under section 142(1) of the Act to furnish certain documents on 20/12/2018 at 11.45am Copy of notice is produced as Annexure-R.10 10/12/2018 Assessing authority on same day also issues seeking details of transactions Copy of letter produced as Annexure-R.11 10 21/12/2018 Representative of assessee files letter in Tappal section of assessing authority along with vakalath and seeks reasons for re-opening. Copy of said letter along with vakalath is filed as Annexure- R.12 21/12/2018 Assessing authority writes letter to assessee proposing to complete assessment under Section 144 of the Act as assessee fails to appear. Copy of said letter is produced as Annexure- R.13 Copies of postal acknowledgments for having communicated reasons are produced. Copies of postal Acknowledgment' s Annexure-R.14 24/12/2018 Assessing authority on same day communicated re- assessment order vide e- mail. Copy of communication of re-assessment order vide e-mail is produced as Annexure-R.15 18/06/2020 On application preferred by assessee on 18.06.2020 to rectify reassessment order, assessing authority passes order under Section 154 of the Act. Copy of order passed under section 154 of the Act is produced as Annexure-R.16 27/12/2018 Assessee referring to earlier dated 20/12/2018, seeks copy of reasons Copy of letter dated 27/12/2018 Annexure-R.17 7. The petitioner contends that though the assessing authority has stated that they have communicated reasons for reopening as per the letter at Annexure-R7, it is submitted that the said communication 11 was not received by the petitioner and he relies on the memo filed by the respondent on 29.01.2019 whereby the letter sent by the revenue with respect to furnishing of reasons for reopening of the assessment for the years 2011-12 and 2013-14 is stated to have been communicated as per the postal receipts enclosed at Page No.6. Learned counsel for the petitioner points out that as per the postal tracking report, copy of which has been produced in Court, the said consignments are stated to contain reasons for reopening which were never sent in December, 2018 as contended by the revenue but was in fact was booked on 05.01.2019 and received also on 05.01.2019. It is further submitted that entry as regards postal receipts for having dispatched notices are found at page 6 with respect to the assessee as regards consignment No.EK372121085IN and No.EK372121094IN. It is pointed out that as per the postal tracking consignment report, notices were dispatched on 05.01.2019, which was subsequent to the assessment order being passed. 12 8. Learned counsel for the respondent on the other hand contends by placing reliance at Page 3 of the memo dated 29.01.2019 that as per the entry in the postal records found at Page No.5, the consignment No.EK372120615IN has been sent on 11.12.2018 and that the acknowledgment found at page No.3 of the records indicates reasons for reopening of the assessment for the year 2013-14 have been received on 24.12.2018 and as regards reasons for reopening of the assessment for the year 2011-12 was received by the assessee on 24.11.2018. It is further submitted that acknowledgement containing the reasons for reopening with respect to the year 2011-12 and 2013-14 has been received by the assessee as per the acknowledgment found at page No.4 of the said memo. 9. It is noticed that insofar as the sequence of events is concerned as reproduced by the learned counsel for the revenue, the notice was issued on 30.03.2018 as regards the assessment year 2013-2014 and on 27.03.2018 as regards the assessment year 2011-2012 under Section 13 148 of the Act. The return was filed in response to such notice only on 16.09.2018. However, communication would indicate that letter was addressed to the petitioner proposing to pass ex-parte order on 22.11.2018 and 05.12.2018. There are various other communications in the meanwhile and it is only on 21.12.2018, the assessee has sent a letter seeking for reasons for reopening. It is not in dispute that the proceedings have to be completed by the authority by 31.12.2018 in terms of Section 153 of Act. 10. Now insofar as the procedure prescribed under paragraph No.5 of the judgment of the Apex Court in the case of GKN DRIVESHAFTS (Supra), question of seeking reasons from the assessing authority would arise after filing of the return upon which the petitioner could file his objections and necessary order to be passed before proceeding further by the assessing authority. It is clear that the request of the petitioner was made belatedly and it has been made admittedly on 21.12.2018 when the last 14 date for passing of the order for rectification was 31.12.2018. Such request is made belatedly. 11. Insofar as the say of the department by placing reliance to the acknowledgments produced along with the memo dated 29.01.2019, it is clear that in page No.3 of the said memo, there is an acknowledgement dated 24.12.2018 and the description of the document that has been sent would indicate that the document sent is 'reasons for reopening of assessment for the year 2013-14'. The other acknowledgment found on the same page relates to reasons for reopening of the assessment for the year 2011-12 which is also stated to have been received on 24.11.2018. There is another acknowledgment produced at page No.4 of the said memo again containing the reasons for reopening. There is no reason to disbelieve such acknowledgments. No doubt the petitioner points out to other consignments that were sent as contended by the revenue on 21.12.2018 but the consignment note indicates that the said consignment was dispatched only on 05.01.2019. Even ignoring the 15 same, the acknowledgments produced at page No.3 of the memo provide for arriving at a conclusion that the reasons for re-opening were indeed communicated on 24.12.2018 as regards assessment year 2013-2014 and on 24.11.2018 as regards the assessment year 2011-2012 and no grounds are made out for interference with such assertion made by the revenue. 12. Learned counsel for the petitioner submits that acknowledgment relied on by the revenue contain different documents from the one that was described in the acknowledgment. As regards such contention, there is no reason to disbelieve the say of the public authority on the basis of material produced and accordingly, such contention cannot be accepted. The Court cannot traverse and record a finding beyond such prima facie material submitted by the revenue relating to communication of reasons. Even otherwise, the request of the petitioner is made belatedly at the fag-end on 21.12.2018 when the proceedings were to be concluded by 31.12.2018. 16 13. Accordingly, no ground is made out for interference and both the petitions are dismissed as being devoid of merits. Needless to state that the right of the assessee to challenge the reassessment order could be pursued independently in accordance with law. In light of the request made by the petitioner for extension of time to file an appeal in view of the pendency of the present proceedings, four weeks time is granted from the date of release of this order to file an appeal against the order of reassessment before the First Appellate Authority, as per law. Sd/- JUDGE VP "