M/S. UNION BUILDERS AND DEVELOPERS V. THE INCOME TAX OFFICER

WP/40149/2016

AI Insights

The case involves M/s. Union Builders and Developers, represented by its partner Shri Philip Singh, challenging a notice issued by the Income-Tax Officer under Section 148 of the Income Tax Act, 1961, for the assessment year 2009-10. The petitioner argued that the notice was issued without jurisdiction as it was beyond the four-year period allowed for reassessment and failed to meet the conditions set out in the proviso to Section 147(1) of the Act. The petitioner also contended that the notice did not specify whether it was for assessment or reassessment, rendering it bad in law. The court considered the submissions and directed that the objections raised by the petitioner be addressed by the Assessing Officer in a reasoned manner.

• Counselvise Citation: [2018] 140 COUNSELVISE.COM (IT) 763210 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 23-11-2018
• Assessment Year: misc
• Other Referred Cases: COMMISSIONER OF INCOME TAX v. MOTOR INDUSTRIES CO. LTD., COMMISSIONER OF INCOME TAX v. FIBERS AND FABRICS, THE COMMISSIONER OF INCOME TAX AND ANOTHER v. HEWELETT PACKARD DIGITAL GLOBAL SOFT LTD., COMMISSIONER OF INCOME TAX v. ANKIT MAHESHWARI, STANDARD CHARTERED FINANCE LTD. v. COMMISSIONER OF INCOME TAX AND ANOTHER, COMMISSIONER OF INCOME TAX AND ANOTHER v. MANJUNATHA COTTON AND GINNING FACTORY AND OTHERS
• Laws Referred To: Income Tax Act, 1961, Indian Partnership Act, 1932
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: E I SANMATHI
• Assessee Lawyers: S ANNAMALAI
• Keywords: Assessment Year; Final Hearing; Income Tax; Jurisdiction; Notice Quash; Preliminary Hearing; Reassessment; Writ of Certiorari
• Section: 148; 143(3); 142(1); 143(2); 154; 139(1); 151(1); 151(2); 226; 155; 227

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 23rd DAY OF NOVEMBER 2018 BEFORE THE HON’BLE MR. JUSTICE ALOK ARADHE WRIT PETITION NO.40149 OF 2016 (T-IT) BETWEEN: M/S. UNION BUILDERS AND DEVELOPERS REPRESENTED BY ITS PARTNER SHRI PHILIP SINGH AGED ABOUT 56 YEARS NO.8, IIND FLOOR, G.R. BUILDING VARTHUR MAIN ROAD MARATHAHALLI BENGALURU – 560 037 … PETITIONER (BY SRI. S. ANNAMALAI, ADV. FOR SRI. M. LAVA, ADV.) AND: THE INCOME –TAX OFFICER WARD-4(2)(3) OFFICE OF THE INCOME TAX OFFICER ROOM NO.303, 3RD FLOOR BMTC BUILDING, 80 FEET ROAD KORAMANGALA BENGALURU – 560 095 … RESPONDENT (BY SRI. E.I. SANMATHI, ADV., FOR SRI. K.V. ARVIND ADV.) - - - This Writ Petition is filed under Articles 226 and 227 of the Constitution of India, praying to quash the notice issued under the provision of Section 148 of the Act issued by respondent as enclosed and marked as Annexure-A vide PAN:AACFU 2632 E dated: 31.12.2015 for the A.Y.2009-10 as one without jurisdiction and etc. This Petition coming on for Preliminary Hearing in ‘B’ group this day, the Court made the following:- 2 ORDER Shri.S.Annamalai, learned counsel for the assessee. Shri.E.I.Sanmathi, learned counsel for the revenue. 2. The petition is admitted for hearing. With consent of the parties, the same is heard finally. 3. In this writ petition, the petitioner, inter alia, seeks a writ of certiorari for quashing of notice issued to the petitioner under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 31.12.2015 for the assessment year 2009-10. In order to appreciate the petitioner’s challenge to the impugned notice, few facts need mention which are stated infra. 4. The petitioner is a partnership firm registered under the provisions of Indian Partnership Act, 1932 and is an assessee of the Income Tax Act. The 3 petitioner is carrying on the business of builders and developers. On 29.09.2009, the petitioner filed its return of income under Section 139(1) of the Act and declared the income of `6,43,160/- for the assessment year 2009-2010. Thereafter, on 26.10.2009 the petitioner filed a revised return of income. On 11.01.2011, the return of income was selected for scrutiny and a notice under Section 143(2) of the Act was issued to the petitioner. The Assessing Officer issued a notice under Section 142(1) of the Act dated 11.01.2011 by which several details were sought from the petitioner. The petitioner furnished all the details. The Assessing Officer, by an order dated 14.11.2011 passed an order of assessment under Section 143(3) of the Act by accepting the return of the income filed by the petitioner. 5. The Assessing Officer subsequently issued a notice under Section 154/155 of the Act on 14.02.2013. The petitioner filed a response to the aforesaid notice on 4 14.03.2013. An order of assessment was passed under Section 154 of the Act on 06.02.2014 by which a sum of `84,52,000/- was added to the income of the petitioner. Being aggrieved, the petitioner filed an appeal before the Commissioner of Income Tax (Appeals). The Appellate Authority, by an order dated 30.01.2015, allowed the appeal preferred by the petitioner and held that debatable issues do not come within the ambit of Section 154 of the Act. Admittedly, the order passed by the Appellate Authority was not challenged by the respondents and has attained finality. 6. The Assessing Officer issued a notice under Section 148 of the Act on 31.12.2015 notwithstanding the order passed by the Commissioner of Income Tax (Appeals). The petitioner, even before receiving the reasons for issuing notice, filed a preliminary objection on 18.01.2016. It is not in dispute that the Assessing Officer has supplied the reasons which have been recorded by him, to the petitioner on 20.01.2016. The 5 petitioner, on 27.06.2016, sent a communication before the Assessing Officer for filing return of income in response of notice issued under Section 148 of the Act. In the aforesaid factual background, the petitioner has approached this Court seeking the reliefs stated supra. 7. The learned counsel for the petitioner submitted that the impugned notice dated 31.12.2015 issued by the Assessing Officer under Section 148 of the Act is per se without jurisdiction as the same has been issued after a period of four years from the relevant assessment year i.e. 2009-10. It is further submitted that the conditions mentioned in the proviso to Section 147(1) of the Act have not at all been satisfied. While inviting the attention of this Court to the reasons which have been supplied by the Assessing Officer, it is submitted that the Assessing Officer has not recorded the satisfaction that the petitioner has not disclosed any particulars or has considered the income. Therefore, the notice issued under Section 148 is per se without 6 jurisdiction. It is also urged that the sanction has to be obtained after recording the reasons. It is also argued that the sanction has to be obtained under the provisions of Section 151(1) of the Act. Whereas sanction in the instant case has been obtained under Section 151(2) of the Act which is not applicable to the factual matrix of the case. It is urged that the impugned notice under Section 148 has been issued merely on the basis of suspicion. It is also pointed out that the notice has been issued in the standard form wherein it is not mentioned whether the notice is for assessment or re-assessment and therefore, the notice is bad in law. It is also argued that if the notice is invalid for any other reason, the entire proceeding would be void and are liable to be quashed. 8. In support of his submissions, learned counsel for the petitioner has referred to order dated 15.12.2014 passed in ITA No.220/2009 by a Division Bench of this Court in ‘COMMISSIONER OF INCOME 7 TAX v. MOTOR INDUSTRIES CO. LTD.’, order dated 22.09.2015 passed by a Division Bench of this Court in ‘COMMISSIONER OF INCOME TAX v. FIBERS AND FABRICS’, order dated 19.09.2011 by a Division Bench of this Court in the case of ‘THE COMMISSIONER OF INCOME TAX AND ANOTHER v. HEWELETT PACKARD DIGITAL GLOBAL SOFT LTD.’, in the case of ‘COMMISSIONER OF INCOME TAX v. ANKIT MAHESHWARI’, (2014) 366 ITR 146 (Guj), in the case of ‘STANDARD CHARTERED FINANCE LTD. v. COMMISSIONER OF INCOME TAX AND ANOTHER’, (2016) 381 ITR 453 (SC) and in the case of ‘COMMISSIONER OF INCOME TAX AND ANOTHER v. MANJUNATHA COTTON AND GINNING FACTORY AND OTHERS’ (2013) 359 ITR 565 (Karn.) in support of his contention that where there is a failure on the part of the Assessing Officer to disclose fully and truly all material facts, the notice issued under Section 148 of the Act has to be quashed. 8 9. On the other hand, learned counsel for the revenue has submitted that the reasons admittedly have been supplied to the assessee on 20.01.2016 and therefore, the proper course for him is to file an objection to the issuance of notice under Section 148 of the Act and the Assessing Officer is under an obligation to decide the objections preferred by the petitioner by a speaking order. 10. I have considered the submissions made by the learned counsel for the parties. The Hon’ble Supreme Court, in the case of ‘GKN DRIVESHAFTS (INDIA) LTD. v. INCOME-TAX OFFICER AND OTHERS’ (2003) 259 ITR 19 (SC) has held as follows: “We see no justifiable reason to interfere with the order under 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 a return and if he so desires, to seek reasons for issuing notices. The 9 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 abovesaid five assessment years.” 11. In view of the aforesaid enunciation of law, it is evident that once a notice under Section 148 of the Act is issued, the proper course of action for the noticee is to file a return and to seek reasons for issuing notice, if he so desires. 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 view of the aforesaid 10 enunciation of law by the Hon’ble Supreme Court and in the facts of the case, I deem it appropriate to dispose of the writ petition with a direction that in case the petitioner files an objection containing all the grounds challenging the notice dated 31.12.2015 issued by the Assessing Officer within a period of four weeks from the date of receipt of certified copy of the order passed today, the Assessing Officer shall afford an opportunity of hearing to the petitioner and shall decide each and every objection raised by the petitioner separately by assigning reasons. The Assessing Officer shall decide the objections preferred by the petitioner within a period of four weeks from the date of receipt of the objections. 12. Since a Bench of this Court, while entertaining this writ petition, by an ad interim order dated 16.11.2016 had clarified that no final order shall be passed by the Assessing Officer without leave of this Court, it is directed that the aforesaid order shall remain 11 in force for a further period of three weeks after decision by the Assessing Officer on the objections preferred by the petitioner so as to enable him to approach the appropriate forum in accordance with law, if occasion so arises. With the aforesaid directions, the writ petition is disposed of. Sd/- JUDGE RV "