|COURT:||Bombay High Court|
|CORAM:||Akil Kureshi J, M. S. Sanklecha J|
|CATCH WORDS:||Reopening of assessment|
|DATE:||January 17, 2019 (Date of pronouncement)|
|DATE:||January 28, 2019 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 147: Even in a case where return is accepted without scrutiny, the AO cannot proceed mechanically and on erroneous information supplied to him by investigation wing. If AO acts merely upon information submitted by investigation wing and on total lack of application of mind, the reopening is invalid|
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
CIVIL APPELLATE JURISDICTION
WRIT PETITION NO. 14490 OF 2018
Akshar Builders and Developers .. Petitioner
Asstt. Commissioner of Income Tax28(1) Mumbai & Anr. .. Respondents
Ms. Ritika Agarwal I/b ACE Legal for the petitioner
Mr. N.C. Mohanty for the respondents
CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J.
DATED : 17th JANUARY, 2019
1. The petitioner has challenged a notice of reopening of assessment
dated 29th March, 2018 under which the respondent no.1 Assessing
Officer has reopened the petitioner’s assessment for A.Y. 201112. In
order to issue the notice, the Assessing Officer had recorded following
“1. In this case return of income for A.Y. 201112 has been
filed on 25.3.2013 declaring total income at Rs. NIL/. The
assessee is a builder and developer.
2. A detailed investigation report has been forwarded by
Directorate of Investigation, Unit1(2), Ahmedabad regarding
survey action conducted on M/s. Mudra Finvest (Guj) Ltd. On
8.12.2016. The entity is involved in the jewellery business.
3. Four hard disk which contain digital data were impounded
from the premises, 6 ground floor, revdi bazaar, Ahmedabad
during survey. On examination of these disks it is seen that
M/s. MUDRA REAL ESTATE PRIVATE LTD is a group entity who
has constructed and developed project “4D SQUARE” in
Ahemdabad – Gandhi Nagar road.
3.1 The tally data from the disk, contained ledgers of various
parties cash book, trial balance, P/I account and balance sheet of
M/s. Mudra Real Estate Private Ltd. For F.Y. 201011. On
perusal of the same it is seen that huge amount was paid in cash
to various entities. The name of AKSHAR BUILDER AND
DEVELOPER PAN : AANFA3072H appears as one of these entities
and is JV PARTNER in the development and construction of ‘4D
SQUARE’. A cash amount of Rs.3,54,82,000/ was paid to M/s.
Akshar Builder and Developers on different dates. The ledger
account retrieved from the disks of the period 1.4.2010 to
31.3.2011 showing cash entries paid to M/s. Akshar Builders
and Developers along with other information is forwarded to the
4. Specific information has been passed in the case of M/s.
Akshar Builders and Developers regarding cash payments made
by M/s. Mudra Real Estate Pvt. Ltd. Ahmedabad to M/s. Akshar
Builders and Developers. The assessee firm M/s. Akshar Builders
and Developers has filed Nil return of income for the A.Y. 2011
12. The information received from DGIT (Inv) Unit 1(2),
Ahmedabad is credible information. The cash amount received
amounting to Rs.3,54,82,000/ is not accounted for and not
offered for taxation.
5. It is worth mentioning that the statement of Shri.
Sanjaykumar Hundia Director of M/s. MUDRA REAL ESTATE
PRIVATE LTD was recorded u/s 131 of the IT Act on 25.1.2018.
He has admitted to knowing M/s. Akshar Builders and
Developers who is codeveloper of the project ‘4D Square’. The
cash book of M/s. Mudra Real Estate Pvt. Ltd. Ahmedabad which
is enclosed also reflects the amount paid to M/s. Akshar Builder
6. The analysis of the return of income filed does not reflect
these transactions in the accounts or income. The return of
income for AY 201112 does not reflect any of the above
transaction. The statement by the director of M/s. Mudra Real
Estate Pvt. Ltd. the cash book,ledger account reveal that the
assessee is having cash income of Rs.3,54,82,000/ for FY 2010
11 for FY 201011 relevant to A.Y. 201112 which is not
accounted for or disclosed for taxation.
7. In view of the above, I have reason to believe that income
chargeable to tax which has escaped assessment to the tune of
Rs.3,54,82,000/ (Rs. Three Crore fifty four lakhs eighty two
thousand only) chargeable to tax within the meaning of
Explanation 2(b) of Section 147 of the I.T. Act, 1961. As such it
is a fit case for issuance of notice u/s 148 of the Income Tax Act,
8. In this case, since more than four years have lapsed from
the end of assessment year under consideration, hence necessary
sanction to initiate proceedings u/s 147 and to issue notice u/s
148 of the I.T. Act may be accorded as per provisions of Section
151 of the Income Tax Act.”
2. Upon being supplied the reasons, the petitioner filed objections to
the notice of reopening under communication dated 28th November,
2018. Such objections were however rejected by the Assessing Officer
by order dated 14th December, 2018.
3. The petitioner is a partnership firm, Akshar Builders and
Developers (“AB&D” for short). For Assessment Year 201112, the
petitioner had filed its return of income which was accepted under
Section 143(1) of the Income Tax Act, 1961 (“the Act” for short)
without scrutiny. To reopen such assessment the impugned notice has
been issued. The main ground of challenge raised by the Counsel for
the petitioner is that there was no tangible material available with the
Assessing Officer to form a belief that the income chargeable to tax has
escaped assessment. She pointed out that the Assessing Officer relies
on the documents seized during the survey operation against one M/s.
Mudra Real Estate Pvt. Ltd. (“Mudra” for short) which recorded certain
cash payments to one M/s. Akshar Developers (“AD” for short).
Counsel submitted that the petitioner AB&D, a partnership firm, has
distinct identity and different partners from AB, another partnership
firm having different set of partners. She pointed out that both the
partnership firms have different PAN numbers. The Assessing Officer,
therefore, acted on a material prima facie showing payments by Mudra
to AD and reopened the assessment in case of the present petitioner.
Counsel further submitted that the reassessment in case of Mudra has
now been done by the Assessing Officer, passing order on 31st
December, 2018 in which also there is no addition in relation to the
said alleged payments by Mudra to AD. In other words, the
Department in the assessment in case of Mudra has not relied on the
payments in question.
4. On the other hand, learned Counsel for the Department opposed
the petition contending that previously assessment was not framed after
scrutiny. The Assessing Officer therefore would have much wider scope
to reopen the assessment. In this regard, he relied upon the decision of
the Supreme Court in the case of ACIT Vs. Rajesh Jhaveri Stock
Brokers (P) Ltd., (2007) 291 ITR 500. Counsel submitted that at this
stage the sufficiency of material enabling the Assessing Officer to
reopen the assessment would not be subject matter of scrutiny by the
Court. He further submitted that the Assessing Officer had sufficient
material at his command to form a belief that income of the present
petitioner chargeable to tax has escaped assessment.
5. Since the factum of reassessment order in case of Mudra is not
part of the present proceedings, we may keep the same out of
consideration. From the record it emerges that the Assessing Officer
has issued notice of reopening of assessment after recording his reasons
for doing so. These reasons suggest information available to the
Assessing Officer supplied by the Investigation wing of the Department
that the assessee had received cash amounts of Rs.3.54 crores which
was not accounted for and not offered to tax. He has referred to
statement of one Shri. Sanjay Kumar Hundia, Director of Mudra
recorded on 25th January, 2018 suggesting cash payment by Mudra to
AB&D. However, the document supplied by the Assessing Officer which
is a copy of the ledger account of AD in the books of Mudra, at best
suggests that such cash payment was made to AD and not to the AB&D,
whereas notice of reopening of assessment is issued against AB&D i.e.
the present petitioner.
To cover this mismatch, it is now sought to be
suggested by the Assessing Officer that Investigation Wing informed
him that the two entities are one and the same and AB&D is popularly
referred to as AD. However, this being the question of two entities
being separate, having different partners and having distinct PAN
numbers. These aspects are not disputed by the Revenue either while
disposing of the objections raised by the petitioner to the notice of
reopening or in the affidavit filed in response to the present petition.
We, therefore, proceeded on such basis.
6. It is thus emerges from the record that the Assessing Officer has
merely acted upon the information submitted to him by the
investigation wing that there is material to suggest that Mudra had paid
cash amount to AB&D whereas, the material collected during the survey
against Mudra prima faice suggests such cash payment to AD.
would demonstrate total lack of application of mind on the part of the
Assessing Officer. If he had perused the material supplied to him by
the investigation wing, he would have immediately noticed that
material referred would suggest cash payment to AD and not AB&D i.e.
the present petitioner.
7. Even in a case where the return filed by the assessee is accepted
without scrutiny, as per the settled law, the Assessing Officer can issue a
notice of reopening of assessment provided he has reason to believe
that income chargeable to tax has escaped assessment. The Assessing
Officer cannot proceed mechanically and also on erroneous information
that may have been supplied to him. In fact, we note that in the
present case the Assessing Officer had issued a notice to a wrong
person. The impugned notice is, therefore, set aside.
8. Petition is disposed of accordingly.
(M.S. SANKLECHA, J.) (AKIL KURESHI, J.)