P.GEETANJALI PRUSTY V. DY.COMMNR.OF INCOME

WP(C)/13227/2014

AI Insights

Smt. P. Geetanjali Prusty, the proprietor of M/s Narayan Kaju Industries, challenged a notice issued by the Deputy Commissioner of Income Tax, Berhampur, under Section 148 of the Income Tax Act, 1961, which sought to reopen her income assessment for the year 2009-10. Initially, her return was assessed, and discrepancies led to an estimated net profit being added to her taxable income. The notice for reopening was issued based on a perceived underestimation of her profit margin compared to the previous assessment year. However, the court found that the reopening was based on a mere change of opinion without any new material, leading to the quashing of the notice and all subsequent proceedings.

• Counselvise Citation: [2021] 140 COUNSELVISE.COM (IT) 697665 (HC-ORISSA)
• Appeal Type: Others
• Pronouncement Date: 26-10-2021
• Assessment Year: misc
• Other Referred Cases: M/s. Sri Jagannath Promoters & Builders, Giri Road Berhampur, Ganjam v. Deputy Commissioner of Income Tax, Berhampur Circle, Berhampur, Ganjam and others
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: T K SATAPATHY
• Assessee Lawyers: PRANAYA KUMAR HARICHANDAN
• Keywords: Assessment Reopening; Income Tax; Net profit estimation; Kaju Processing Unit
• Section: 147; 148; 143(3); 145(3)

Judgement Text

" W.P.(C) No.13227 of 2014 Page 1 of 4 IN THE HIGH COURT OF ORISSA AT CUTTACK W.P.(C) No.13227 of 2014 Smt. P. Geetanjali Prusty …. Petitioner Mr. Pranaya Kumar Harichandan, Advocate -versus- Deputy Commissioner of Income Tax, Berhampur Circle, Berhampur, Ganjam and others …. Opposite Parties Mr. T.K. Satapathy, Senior Standing Counsel CORAM: THE CHIEF JUSTICE JUSTICE B. P. ROUTRAY JUDGMENT 26.10.2021 Dr. S. Muralidhar, CJ. 1. The Petitioner, the Proprietor of a concern running a Kaju Processing Unit at Rambha, Ganjam under the name and style of M/s Narayan Kaju Industries has filed the present petition challenging a notice dated 16th September 2013 issued to her under Section 148 of the Income Tax Act, 1961 (Act) by the Deputy Commissioner of Income Tax, Berhampur Circle, Berhampur (Opposite Party No.1) seeking to re-open the assessment for the Assessment Year (AY) 2009-10. 2. Initially, the Petitioner filed her return for the AY in question on 30th September 2009 disclosing a total income of Rs.24,49,910/-. The W.P.(C) No.13227 of 2014 Page 2 of 4 return was picked up for scrutiny. The Petitioner appeared before the Assistant Commissioner of Income Tax, Berhampur Circle (hereafter the Assessing Officer- ‘AO’) and furnished the books of account. The AO passed an assessment order on 2nd December 2011 under Section 143 (3) of the Act rejecting the books of account of the Petitioner Assessee under Section 145 (3) of the Act and estimating the net profit @ 2.5% of the gross sale of kaju kernel @ Rs.11,60,76,992/-. Consequently, the estimated net profit of Rs.29,01,924/- was added to the gross sales for the aforementioned AY. Further, the AO also added Rs.1,08,836/- on account of un- disclosed sales. The total taxable income for the AY was determined as Rs.29,95,690/- and the consequent tax demanded was Rs.2,54,808/-. 3. It is in the above background that the impugned notice was issued to the Petitioner on 16th September 2013 under Section 148 of the Act stating as under: “Whereas I have reasons to believe that your income chargeable to tax for the assessment year 2009-10 has escaped assessment within the meaning of Section 147 of the Income Tax Act, 1961. 2. I, therefore, propose to for the said assessment year and I hereby require you to deliver to me within 30 days from the service of this notice, a return in the prescribed form of your income for the said assessment year.” W.P.(C) No.13227 of 2014 Page 3 of 4 4. When the Petitioner sought reasons for reopening of the assessment, it was provided to her by letter dated 3rd July, 2014 as under: “On verification of records, it is found that during the previous year relevant to the assessment year under consideration, the assessee has shown gross sales of cashew kernels at Rs.11,60,76,992/-. After deducting expenses under different heads, the assessee has arrived at the net profit of Rs.24,49,910/- which works out to 2.11% only. From the records, it is seen that she does not maintain regular books of account. Hence, the Assessing Office has rejected the books result shown by the assessee and estimated the profit @ 2.5 % on disclosed total sales by invoking the provisions of Section 145 (3) of the Income Tax Act, 1961. On perusal of the records for the assessment year 2008-09 i.e. immediately preceding year, the assessee has disclosed net profit of Rs.8,16,320/- on total sales of Rs.1,81,46,174/- which comes to 4.49%. Under such facts and circumstances of the case, if the books of account of the assessee were rejected and the profit was estimated, it would have been fair and reasonable to estimate the profit @ 4.49% at best or even more on total sales. For such estimation of income @ 2.5%, there is no logical basis. Since the assessee herself has shown net profit rate of 4.49% in the immediately preceding assessment year, the net profit rate shown by the assessee in the current assessment year as well as the profit estimated by the AO is very low. As there is no basis for estimating the profit of the assessee @ 2.5% and when the assessee herself has shown net profit of 4.49% on sales in the immediately preceding assessment year, the net profit on sales disclosed by the assessee in the assessment year W.P.(C) No.13227 of 2014 Page 4 of 4 2009-10 is required to be estimated minimum @ 4.49%.” 5. In a detailed judgment passed today, the Court in W.P.(C) 14603 of 2014 (M/s. Sri Jagannath Promoters & Builders, Giri Road Berhampur, Ganjam v. Deputy Commissioner of Income Tax, Berhampur Circle, Berhampur, Ganjam and others) quashed a similar notice issued under Section 148 of the Act on the ground that it was based on a mere change of opinion and not on any new material or information possessed by Opposite Party No.1 supporting its reason to believe that there was income that escaped assessment. For the reasons stated therein, in the present case too, the Court is of the view that the reopening of the assessment is sought to be based on a mere change of opinion and not on any new material. 6. For the same reasons, the impugned notice is hereby quashed and all proceedings taken by the Department pursuant thereto also stand hereby quashed. The present writ petition is accordingly allowed. But, in the circumstances, no order as to costs. 7. Urgent certified copy of this judgment be granted as per rules. (S. Muralidhar) Chief Justice (B.P. Routray) S.K. Guin Judge "