M/S R. KANTILAL AND CO. V. INCOME TAX OFFICER

SCA/13517/2018

AI Insights

The case revolves around the reopening of an income tax assessment for the year 2011-12 by the Income Tax Officer, based on the seizure of cash by the Dhule Police, which was allegedly not reflected in the books of the petitioner, M/S R. Kantilal and Co. The petitioner contested the reopening, arguing that the cash was indeed disclosed in their books during the original assessment, and that the reopening was merely a change of opinion by the Assessing Officer. The court examined the reasons for reopening provided by the Assessing Officer and found them to be contrary to the actual records, leading to the conclusion that the reopening was unjustified.

• Counselvise Citation: [2019] 140 COUNSELVISE.COM (IT) 750711 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 08-04-2019
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MAUNA BHATT
• Assessee Lawyers: R K PATEL; DARSHAN PATEL
• Keywords: Change of opinion; Jurisdiction; Reopening of assessment; Unaccounted cash
• Section: 148; 143(3); 226; 227

Judgement Text

"C/SCA/13517/2018 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 13517 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 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 ========================================================== M/S R. KANTILAL AND CO. Versus INCOME TAX OFFICER ========================================================== Appearance: MR RK PATEL with DARSHAN R PATEL(8486) for the Petitioner(s) No. 1 MRS MAUNA M BHATT(174) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANI and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 08/04/2019 ORAL JUDGMENT (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) Page 1 of 9 C/SCA/13517/2018 JUDGMENT 1. Rule. Mrs. Mauna Bhatt, learned senior standing counsel waives service of notice of rule on behalf of the respondent. 2. Having regard to the controversy involved in the present case, which lies in a very narrow compass and with the consent of the learned counsel for the respective parties, the matter was taken up for final hearing today. 3. By this petition under articles 226 and 227 of the Constitution of India, the petitioner has challenged the notice dated 28.3.2018 issued by the respondent under section 148 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), whereby the respondent seeks to reopen the assessment of the petitioner for assessment year 2011-12. 4. The facts stated briefly are that for assessment year 2011-12, the petitioner filed return of income on 27.8.2011 showing total income at Rs.6,45,322/-. The matter was taken up in scrutiny and the assessment came to be framed under section 143(3) of the Act on 30.1.2013 assessing the total income at Rs.62,42,503/-. The appellate proceedings in respect of the same terminated before the Tribunal in ITA No.1335 of 2014 vide order dated 16.2.2017. Thereafter by the impugned notice dated 28.3.2018 issued under section 148 of the Act, the respondent seeks to reopen the assessment of the petitioner for assessment year 2011-12. In response to the impugned notice, the petitioner submitted its return of income and also requested for a copy of the reasons recorded for reopening the assessment. By a letter dated 22.5.2018 such reasons came to be furnished. Thereafter upon perusal of the Page 2 of 9 C/SCA/13517/2018 JUDGMENT reasons recorded by the Assessing Officer for reopening the assessment, the petitioner filed objections to the assumption of jurisdiction by the Assessing Officer under section 147 read with section 148 of the Act. By an order dated 24.7.2018, such objections came to be rejected. Being aggrieved, the petitioner has filed the present petition. 5. Mr. R.K. Patel, learned advocate for the petitioner invited the attention of the court to the reasons recorded for reopening the assessment, to submit that the Assessing Officer seeks to reopen the assessment on the ground that the Dhule Police had seized cash of Rs.1.33 crore from six persons on 24.6.2010, out of which cash of Rs.46,00,000/- was seized in the case of the petitioner. That on the basis of the information received from the DDIT (Inv.) Unit-1(1) Ahmedabad, the Assessing Officer had found that the cash seized was not reflected in the books of account and that the assessee had failed to disclose the unaccounted cash and, therefore, the Assessing Officer has formed the belief that income chargeable to tax to the extent of Rs.46,00,000/- had escaped assessment. 5.1 It was submitted that the reasons recorded for reopening the assessment are de hors the record, inasmuch as, the petitioner has fully and truly disclosed the amount of Rs.46,00,000/- in its books of account. It was further submitted that during the course of scrutiny assessment, the Assessing Officer had gone into this issue and had thereafter not made any addition in that regard and hence, the Assessing Officer seeks to reopen the assessment on a mere change of opinion. Page 3 of 9 C/SCA/13517/2018 JUDGMENT 5.2 It was submitted that in the present case, the Assessing Officer seeks to reopen the assessment for assessment year 2011-12 by the impugned notice dated 28.3.2018 which is clearly beyond a period of four years from the end of the relevant assessment year and hence, in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment, the assumption of jurisdiction on the part of the Assessing Officer is invalid. 5.3 The attention of the court was invited to the notice issued by the Assessing Officer during the course of assessment proceedings, wherein the Assessing Officer had called upon the assessee to explain the cash of Rs.46,00,000/- seized by the Dhule Police Station as well as to the reply filed by the petitioner in response thereto. It was submitted that the assumption of jurisdiction on the part of the Assessing Officer without the requisite requirement for reopening the assessment under section 147 of the Act being satisfied, is invalid and without any authority of law and hence, the petition deserves to be allowed by setting aside the impugned notice. 5.4 It was further pointed out that the Assessing Officer in the opening part of the reasons has recorded that the return of income was filed on 27.8.2011 at Rs.6,45,320/- which was processed under section 143(1) on the returned income and that the order under section 143(3) of the Act was passed on 31.3.2013, whereas in paragraph 4 of the reasons recorded, he has observed that the assessee failed to file return of income for the year under consideration although the total income of the assessee exceeds the maximum amount which is not chargeable to tax. It was submitted that the Assessing Officer Page 4 of 9 C/SCA/13517/2018 JUDGMENT has recorded contradictory facts while recording the reasons which makes it evident that the reasons have been recorded without due application of mind. 6. Opposing the petition, Mrs. Mauna Bhatt, learned senior standing counsel for the respondent submitted that the Assessing Officer has duly recorded satisfaction for the purpose of reopening the assessment which is based upon tangible material namely the report dated 12.7.2010 of the DDIT (Inv.) Unit-1(1) Ahmedabad and has further observed that the petitioner has not disclosed the amount in the books of account. It was submitted that, therefore, it is evident that the Assessing Officer has placed reliance upon the material other than the material on record and has also formed the belief that the petitioner had not disclosed any unaccounted cash in the books of account, under the circumstances, the reopening of assessment beyond a period of four years from the end of the relevant assessment year is wholly justified and that there is no warrant for interference by this court. 7. This court has considered the submissions advanced by the learned counsel for the respective parties and has perused the record as placed before the court. 8. From the reasons recorded, it is evident that the Assessing Officer seeks to reopen the assessment on the ground that he has received information that the Dhule Police had seized cash of Rs.1.33 crore from six persons on 24.6.2010 out of which cash of Rs.46,00,000/- was seized from the petitioner. According to the Assessing Officer, the cash seized from the petitioner is not reflected in the books of account Page 5 of 9 C/SCA/13517/2018 JUDGMENT and, therefore, the assessee has failed to disclose such unaccounted cash. In this regard, a perusal of the record of the case reveals that the petitioner in the schedule forming part of the account for the year ended on 31.3.2011 (page 31) has under the heading “Loans & Advances/Deposits” shown the amount of Rs.46,00,000/- deposited with the Dhule Police Station. A perusal of the annexures annexed along with the additional affidavit filed by the petitioner reveals that the Assessing Officer had issued a notice dated 25.9.2012 under section 142(1) of the Act, wherein the Assessing Officer has stated that on perusal of the balance sheet (asset side), it is noticed that the firm has shown loans and advances/deposit with the police, details whereof are set out therein, which includes the amount of Rs.46,00,000/- deposited with the Dhule Police Station and has called upon the petitioner to give details about the said amount which was lying with the police station. In response thereto, the petitioner had given its reply dated 3.10.2012, wherein at paragraph 17 thereof, the petitioner has given details about the cash seizure by the police department and has further stated that the amounts in respect of the Dhulia (sic. Dhule) matter and Jalna matters were already reflected in the books of accounts of firm the same were required to be shown on the asset side of the balance sheet as on 31.3.2011. Thereafter, the Assessing Officer issued another notice dated 14.12.2012, the relevant part whereof reads thus:“2. In reply to Question No-17 of the questionnaire submitted partly. Please file photocopies of the police punchnama in respect of cash seized at Rs.46 lacs, Rs.18 lacs and Rs.12.55 lacs by the Police of Dhule, Jalna and Surat respectively.” In response thereto, the petitioner has filed a reply dated 22.12.2012 wherein the details called for by Page 6 of 9 C/SCA/13517/2018 JUDGMENT the Assessing Officer have been furnished. 9. A perusal of the assessment order reveals that the Assessing Officer has not referred to the amount of Rs.46,00,000/- seized by the Dhule Police Station; however, from the notice issued by the Assessing Officer under section 142(1) of the Act and further notices, it is evident that he has called upon the petitioner to explain the cash amount of Rs.46,00,000/- deposited with the Dhule Police Station which finds place in the balance sheet submitted by the petitioner along with the return of income. 10. Besides from the notices issued by the Assessing Officer, during the course of scrutiny assessment, as well as on a perusal of the schedule forming part of the accounts for the year ended 31.3.2011, it is clear that the petitioner had shown the amount of Rs.46,00,000/- seized by the Dhule Police in the books of account. Under the circumstances, the observation made by the Assessing Officer that the assessee has failed to disclose the unaccounted cash is clearly contrary to the record of the case. 11. In this case, earlier an assessment had been framed under section 143(3) of the Act for assessment year 2011-12. The impugned notice under section 148 of the Act has been issued on 28.3.2018, which is clearly beyond a period of four years from the end of the relevant assessment year, and therefore, the first proviso to section 147 of the Act would be attracted, consequently, the assessment can be reopened only if there is any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment Page 7 of 9 C/SCA/13517/2018 JUDGMENT for the year under consideration. It would therefore, be necessary to refer to the reasons recorded to ascertain as to whether the Assessing Officer has recorded any such satisfaction therein. A perusal of the reasons recorded reveals that the Assessing Officer has recorded that “2. From the information gathered, spot inquiries and statement recorded on oath, it is clear that the cash seized from the assessee are not reflected in the books of account of the assessee and the assessee has failed to disclose the unaccounted cash.” However, from the facts recorded hereinabove, it is manifest that what is recorded in the reasons for reopening the assessment is contrary to the record of the case, inasmuch as the record clearly shows that amount of Rs.46,00,000/- has been duly disclosed by the petitioner in the books of account. Therefore, there is no failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment. It follows as a natural corollary that in the absence of any failure on the part of the petitioner to disclose fully and truly all material facts necessary for its assessment for the assessment year under consideration, the assumption of jurisdiction on the part of the Assessing Officer beyond a period of four years from the end of the relevant assessment year is invalid and without authority of law. 12. Besides, as recorded hereinabove, during the course of scrutiny assessment, the Assessing Officer had applied his mind to this very aspect and had called for details from the petitioner in respect of the amount of Rs.46,00,000/- deposited with the Dhule Police Station and after considering the explanation tendered by the petitioner did not make any addition in that regard. Evidently, therefore, the Assessing Page 8 of 9 C/SCA/13517/2018 JUDGMENT Officer seeks to reopen the assessment on a mere change of opinion and hence, even on this count the assumption of jurisdiction on the part of the Assessing Officer is bad in law. 13. For the foregoing reasons, the petition succeeds and is, accordingly, allowed. The impugned notice dated 28.3.2018 issued by the respondent under section 148 of the Income Tax Act, 1961 as well as all proceedings pursuant thereto are hereby quashed and set aside. Rule is made absolute accordingly with no order as to costs. (HARSHA DEVANI, J) (BHARGAV D. KARIA, J) Z.G. SHAIKH Page 9 of 9 "