SIDDHARTH SUMER KOTHARI V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(1)

SCA/19580/2021

AI Insights

The case involves Siddharth Sumer Kothari, the petitioner, challenging a notice issued under section 148 of the Income Tax Act, 1961, by the Assistant Commissioner of Income Tax for the assessment year 2014-2015. The notice sought to reopen the assessment on the grounds that income had escaped assessment. The petitioner argued that the issue had been previously addressed during the original assessment and that there was no new material to justify the reopening. The court examined the records and found that the issue had indeed been considered earlier, leading to the conclusion that the reopening was based on a mere change of opinion, which is not permissible under the law.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 747489 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 05-07-2022
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M R BHATT; KARAN SANGHANI
• Assessee Lawyers: HARDIK VORA
• Keywords: Change of opinion; Escaped assessment; Exempt income; Income Tax; Reassessment
• Section: 147; 148; 143(3); 14A; 10(2A)

Judgement Text

"C/SCA/19580/2021 ORDER DATED: 05/07/2022 IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 19580 of 2021 ========================================================== SIDDHARTH SUMER KOTHARI Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(1) ========================================================== Appearance: MR. HARDIK V VORA(7123) for the Petitioner(s) No. 1 for the Respondent(s) No. 1 MR. M.R.BHATT, SR. ADV. WITH MR. KARAN SANGHANI, ADV. FOR M R BHATT & CO.(5953) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 05/07/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) In the facts of the case and having regard to the request and consent of learned advocates for the parties, the petition was taken up for final hearing. 1.1 Rule, returnable forthwith. Learned advocate Mr. Karan Sanghai for M. R. Bhatt & Co. waives service of notice of Rule on behalf of the respondent. 1.2 Heard learned advocate Mr. Hardik Vora for the petitioner and learned senior advocate Mr. M. R. Bhatt for M. R. Bhatt & Co. for the respondent. 2. The challenge in this Special Civil Application is directed against notice dated 30.3.2021 issued under section 148 of the Income Tax Act, 1961 in respect of the Assessment Year 2014-2015. Page 1 of 5 C/SCA/19580/2021 ORDER DATED: 05/07/2022 2.1 In the said notice, Assessing Officer of the Income Tax Department stated that he had reason to believe that the income chargeable to tax for the assessment year 2014-2015 had escaped the assessment within the meaning of section section 147 of the Income Tax Act, 1961. The income for the said assessment year was therefore proposed to be re- assessed. The petitioner assessee was required to submit a written reply within stipulated time. 3. The reasons seeking to reopen the assessment were supplied to the assessee on 14.5.2021. It was stated therein that while the assessee had declared the total income of Rs. 19,63,840/- in respect of assessment year 2014-2015 by filling return of income on 27.12.2014, the case was selected for scrutiny assessment under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) and the same was finalised on 28.11.2016 without addition of income. It was thereafter stated that scrutiny of the records in respect of “computation of income” revealed that the main source of income of the assessee was interest, remuneration and profit from the partnership firm. The total income received by the assessee from the partnership firm was Rs. 1,27,62,961/-,which was inclusive of interest on deposits. 3.1 Out of the total income, an amount of Rs. 1,10,01,111/- was profit from the firm which was claimed as exempt under section 10(2A) of the Act. Against the total income, the assessee claimed interest expenses of Rs. 8,03,943/-. The total income comprised of the income from partnership firm. The total amount towards income from the partnership firm, interest on deposits and the interest expenses claimed were required to be disallowed and were required to be added to the total income of the assessee, it was further stated. Page 2 of 5 C/SCA/19580/2021 ORDER DATED: 05/07/2022 3.2 The assessee submitted its objections to the reasons recorded on 2.7.2021 inter alia submitting that Assessing Officer had specifically inquired and dealt with the issue for the purpose of reopening of assessment. Paragraph No.3 of notice under section 142(1) dated 30.06.2016 was extracted to submit that the said issue was raised by the Assessing Officer and the assesee had given reply dated 9.9.2016. It was also submitted that no new material was available with the Assessing Officer to justify the re-opening of the assessment. 4. From the record, it could be seen that when the notice under section 142(1) of the Act was given to the petitioner, one of the details required to be furnished as per paragraph No. 18 for the said notice was as under, “Have you earned any exempt income during tye year ? If yes, kindly furnish the details there of. In such case, where you have earned exempt income kindly state about the applicability of Section 14A of the I.T. Act.” 4.1 The assessee answered on 7.9.2016 submitting inter alia that since the capital was more than required, section 14A was not applicable. In the assessment order dated 28.11.2016 also, the Assessing Officer stated inter alia thus,”Besides this, assessee is a partner in M/s. SRK Enterprise and Aadi Ozone Developers and received share of profit, salary and interest income. The details submitted by the assessee has been kept on record after verification. The case was discussed with the A.R. of the assessee and he was heard carefully”. Therefore, the question about the treatment of share of profit in capacity of partner was dealt with. 5. From the above facts emanating from the record, it could be well said that the Assessing Officer had considered the very issue in respect Page 3 of 5 C/SCA/19580/2021 ORDER DATED: 05/07/2022 of which subsequently he issued notice under section 148 seeking to re- open the assessment. The assessment order passed by assessing authority also reflected consideration of the same. Therefore, there was no basis for re-opening of the reassessment. It is trite principle that change of opinion could not be a ground to resort to reopening of process. The Assessing Officer in the present case could be said to have any new facts discovered to justify the re-opening. If it was a mere change of opinion on the part of the Assessing Officer in issuing the order such course was not permissible in law. The entire assumption of jurisdiction to reopen the assessment was without any factual and legal basis. 5.1 Furthermore, the present case offers a situation where powers under section 148 of the Act were invoked after four years. Notice was issued on 30.3.2021 seeking to re-open the Assessment for the financial year 2014-2015. 5.2 Now, Section 147 reads as under, “147. Income escaping assessment - If the Assessing Officer has reason to believe that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub- section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Page 4 of 5 C/SCA/19580/2021 ORDER DATED: 05/07/2022 Provided further …………. Provided also ………….. Explanation 1 …………… Explanation 2 …………… Explanation 3 …………… Explanation 4 …………… 6. In the facts obtained in this case, there is nothing to suggest that the assessee had not disclosed fully and truely all material facts necessary for the assessment, rather it was otherwise. On that count itself, the notice was rendered bad. 7. For all the aforesaid reasons, the impugned notice dated 30.3.2021 issued by the concerned officer of the department is required to be quashed. Accordingly, it is quashed. The petition is allowed. Rule is made absolute. (N.V.ANJARIA, J) (BHARGAV D. KARIA, J) C.M. JOSHI Page 5 of 5 "