|Bombay High Court (Goa Bench)
|M. S. Sonak J, Nutan D. Sardesai J
|failure to disclose material facts, Reassessment
|Shivan Desai, Susan Linhares
|February 18, 2020 (Date of pronouncement)
|May 7, 2020 (Date of publication)
|Click here to download the file in pdf format
|S. 147/ 148: A mere bald assertion by the AO that the assessee has not disclosed fully and truly all the material facts is not sufficient. The AO has to give details as to which fact or the material was not disclosed by the assessee, leading to its income escaping assessment. Otherwise, the reopening is not valid (Imp judgements referred)
IN THE HIGH COURT OF BOMBAY AT GOA
WRIT PETITION NO. 17 OF 2020
M/s. Anand Developers,
a partnership firm constituted
under the provisions of the
Partnership Act, 1932, having office
at 801, Anand Square B, Near
Sanjeevani Hospital, Baina,
Vasco Da Gama 403 802, Goa,
India P.A. No.AAMFA 9496L,
through its Authorized Representative
Mr. Ashish V. Prabhu Verlekar, son of
Mr. V.B. Prabhu Verlekar, major of age,
Indian National, having office at
201, Govinda Building, M.G. Road,
Panaji, Goa. ..… Petitioner
1. Asst. Commissioner of Income Tax
Circle 2(1), having office at
Patto, Panaji – Goa.
2. Commissioner of Income-Tax
Patto, Panaji, Goa. …… Respondents.
Mr. Shivan Desai, Advocate for the Petitioner.
Ms. Susan Linhares, Standing Cousnel for the Respondents.
Coram : M.S. Sonak &
Kum. Nutan D. Sardessai, JJ.
Date : 18th February, 2020.
ORAL JUDGMENT : (Per M.S. Sonak, J.)
Heard Mr. Shivan Desai for the Petitioner and Ms. S.
Linhares, learned Standing Counsel for the Respondents.
2. Rule. Rule is made returnable forthwith with the consent
of and at the request of the learned Counsel for the parties.
3. Challenge in this Petition is to the Notice dated 29th March,
2019, issued under Section 148 of the Income Tax Act, 1961 (IT
Act) and the order dated 17th December, 2019, disposing of the
Petitioner’s objections to the reopening of the assessment in
pursuance of the notice dated 29th March, 2019.
4. Mr. Shivan Desai, learned Counsel for the Petitioner
submits that in the present case, true and complete disclosures were
made by the Petitioner vide letter dated 20th February, 2015 in the
course of the assessment proceedings itself. Upon consideration of
such disclosures, the Assessing Officer (AO) made assessment order
dated 16th March, 2015 under Section 143(3) of the IT Act. Mr.
Desai submits that in such circumstances, merely on the basis of a
change of opinion, the AO lacked jurisdiction to issue notice under
Section 148 of the IT Act, seeking to reopen the assessment. In any
case, Mr. Desai submits that since, there was absolutely no failure to
make true and full disclosures, there was no jurisdiction to issue
notice under Section 148 of the IT Act, after expiry of period of 4
years from the date of assessment. On both these grounds, he
submits that the Rule is liable to be made absolute in the present
Petition. He relies on the cases of Mrs. Parveen P. Bharucha vs. The
Deputy Commissioner of Income Tax Circle 2 and anr.1; Zuari
Foods and Farms Pvt. Ltd. vs. Asst. Commissioner of Income-Tax
and another2; and Bombay Stock Exchange Ltd. vs. Deputy Director
of Income-Tax (Exemption) and others (No.2)3 in support of the
5. Ms. Linhares, learned Standing Counsel for the
Respondents submits that since the Petitioner had admitted vide
letter dated 20th February, 2015 that it had violated the provisions of
Section 80IB of the IT Act and further, failed to make true and full
disclosures, there was absolutely no jurisdictional error in issuing the
impugned notice or making the impugned order. She submits that
the scope of interference with notices under Section 147/148 of the
IT Act is quite limited. She submits that at this stage, it will not be
1 (2012) 348 ITR 325
2 WP No.1001 of 2007 decided on 11/4/2018
3  365 ITR 181 (Bom)
appropriate to go into the merits of the matter, for which, the
Petitioner will have ample opportunity during the reassessment
proceedings. She, therefore, submits that the present Petition is liable
to be dismissed. She relies on Calcutta Discount Co. Ltd. vs.
Income-tax Officer4; S. Narayanappa vs. Commissioner of Incometax5;
Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock
Brokers (P) Ltd.6 and Raymond Woollen Mills Ltd. vs. Income Tax
Officer & Ors. in support of her defence.
6. The rival contentions now fall for our determination.
7. In the present case, we are concerned with the Assessment
Year 2012-13, for which, the Petitioner had submitted returns within
the prescribed period, declaring total income of Rs.62,233/-. The
case was selected for scrutiny through CASS and notice was issued to
the Petitioner under Section 143(2) of the IT Act, which was served
upon the Petitioner on 28-08-2013. Based upon the details
furnished by the Petitioner to the AO, the assessment order dated 16th
March 2015 was made by the AO in terms of Section 143(2) of the
8. Paragraphs 3 and 4 of the assessment order dated 16th
4  41 ITR 191 (SC)
5  63 ITR 219(SC)
6 (2007) 291 ITR 0500
March, 2015 are relevant to the issues raised in the present Petition
and, therefore, the same are prescribed below for convenience of
“3. In response to the notices issued, Shri Rajan Ramani,
Chartered Accountant and the Authorized Representative of
the assessee appeared from time to time and submitted the
details. The details produced have been verified and the
case was heard. The assessee is carrying on the Real
Estate/Builders & Developers.
4. After perusing the details submitted by assessee, the
assessment is concluded by accepting the return of income
of the assessee.”
9. In fact, it is the case of the Petitioner that the Petitioner,
vide letter dated 20th February, 2015, in the course of assessment
proceedings before the AO had itself submitted that a few flats may
have been allotted to persons in violation of Clause 10(f) of Section
80IB of the IT Act. However, in the same letter, it was contended
that this ought not to be regarded as any breach of the provisions of
Section 80IB or in any case, this ought not to be regarded as any
breach of the provisions of Section 80IB in its entirety and at the
highest, benefit may be denied in respect of the transfers made in
breach of Clause 10(f) of Section 80IB of the IT Act.
10. The Petitioner has pleaded that for the present, the
Petitioner does not have a copy of the letter dated 20th February,
2015 and, therefore, letters were addressed to the Respondents to
furnish a copy of the same. However, the copy of the same has till
date not been furnished by the Respondents.
11. The factum of address of the letter dated 20th February,
2015 is indisputable, because the Respondents have themselves not
only referred to the letter dated 20th February, 2015, but also quoted
from the letter dated 20th February, 2015 in the Show Cause Notice
dated 17th December, 2019 issued to the Petitioner along with the
impugned Order dated 17th December, 2019, by which the
objections of the Petitioner to the reopening of the assessment came
to be rejected. Even the impugned order dated 17th December, 2019,
rejecting the Petitioner’s objections, makes a specific reference to the
Petitioner’s own letter dated 20th February, 2015 submitted during
the assessment proceedings under Section 143(3) of the IT Act.
12. Both, the Show Cause Notice dated 17th December, 2019
and the impugned Order dated 17th December, 2019, specifically
state that the Petitioner, in the course of the assessment proceedings
before the AO, had furnished a list of flat owners to whom flats were
sold in the project ‘Bay Village’. The notice and the impugned order
proceed to state that upon perusal of this list, coupled with the letter
dated 20th February, 2015, it transpires that there was noncompliance
on the part of the Petitioner with the provisions of
Section 80IB, at least in so far as some of the sales were concerned.
13. Since, it is virtually an admitted fact that the Petitioner had
submitted a list of the flat owners and further, itself vide letter dated
20th February, 2015 pointed out that there may be breach in so far as
sale of some of the flats are concerned, it can really not be said by the
Respondents that there was no truthful or complete disclosures on
the part of the Petitioners in the course of the assessment
proceedings itself. Merely making of bald statement that the assessee
had not disclosed fully and truly all the material facts, is really never
sufficient in such matters.
14. In the case of Bombay Stock Exchange Ltd. (supra),
Division Bench of this Court has held that though it is true that the
reasons for initiating reassessment proceedings do, in fact, state that
there was violation on the part of the Petitioner to disclose fully and
truly all material facts necessary for its assessment, however, making
of such bald assertion was not enough. Relying upon Hindustan
Lever Ltd. vs. R.B. Wadkar, Assistant CIT,  268 ITR 232
(Bom), the Division Bench held that there is requirement of giving
details as to which fact or the material was not disclosed by the
Petitioner, leading to its income escaping assessment. In the said
matter as well, there was only a bald assertion in the reasons that
there was failure on the part of the Petitioner to disclose fully and
truly all material facts, without giving any details thereof. The notice
proposing to reopen the assessment was quashed in such
15. In the present case as well, apart from bald assertion that
the Petitioner had not disclosed fully and truly all material facts, no
details have been disclosed as to the material which was allegedly not
disclosed either truly, or fully. Rather, the record indicates that the
entire list of flat owners was disclosed. Further, vide letter dated 20th
February, 2015, disclosures were made in relation to the sale
transactions and it was even suggested that some of the sale
transactions may not be compliant with the provisions of Clause
10(f) of Section 80IB of the IT Act. Clearly, therefore, the
Respondents have failed to make out any case that there was no true
and full disclosures by the Petitioner.
16. Section 147 of the IT Act empowers the AO who has
reason to believe that any income chargeable to tax has escaped
assessment for any assessment year, to reassess such income, no
doubt, subject to the provisions of sections 148 to 153 of the IT Act.
The proviso to Section 147, however, makes clear that where an
assessment under sub- section (3) of section 143 has been made for
the relevant assessment year, no action shall be taken under Section
147 of the IT Act, 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, inter alia, “to disclose fully and truly all
material facts necessary for its assessment for that assessment year.”
17. This means that normally, the limitation period for
reassessment under Section 147 of the IT Act is 4 years. However, in
a case where the assessment has been made under Section 143(3) of
the IT Act where, inter alia, the assessee fails to disclose fully and
truly all material facts necessary for assessment for that assessment
year, reassessment can be made even beyond the period of 4 years in
terms of Section 148 of the IT Act. Therefore, in order to sustain a
notice seeking to reopen assessment beyond normal period of 4 years,
it is necessary for the Respondents to establish, at least, prima facie
that there was failure to disclose fully and truly all material facts
necessary for the assessment for that assessment year.
18. In the facts of the present case, the Respondents have failed
to establish this precondition even prima facie. Rather, the material
on record establishes that there were full and true disclosures of all
material facts necessary for the assessment of the Petitioner for the
Assessment Year 2012-13. Despite this, the impugned notice seeking
to reopen the assessment for the Assessment Year 2012-13 has been
issued beyond the normal period of 4 years. According to us, on this
short ground the impugned notice dated 29th March, 2019 and the
impugned order dated 17th December, 2019 are required to be
quashed and set aside.
19. The view which we have taken finds support in the
decisions of the Division Bench of this Court in the case of Mrs.
Parveen P. Bharucha (supra) and Zuari Foods and Farms Pvt. Ltd.
20. The decisions relied upon by Ms. Linhares are quite
distinguishable and will not apply to the fact situation in the present
21. S. Narayanappa (supra) provides that where it was clear
from the material on record that there was nondisclosure on the part
of the assessee which led to underassessment of income, the Revenue
was entitled to issue notice, seeking reopening of the assessment. In
the present case, the material on record is clear, on that there was no
failure to disclose true and full material facts on the part of the
Petitioner-assessee. Therefore, the decision in S. Narayanappa (supra)
can be of no assistance to the Respondents-Revenue.
22. In Raymond Woollen Mills Ltd. (supra), the Hon’ble Apex
Court has held sufficiency or correctness of the material on the basis
of which the AO may have had ‘reasons to believe’ is not to be
examined at the stage of determining the validity of the notices,
seeking to reopen the assessment. In the present case, we have not at
all adverted to the sufficiency or correctness of the material. In fact,
that issue is not being addressed, since one of the essential parameters
precedent to reopening of assessment, has not at all been complied
with by the Revenue.
23. In Rajesh Jhaveri Stock Brokers (P) Ltd. (supra), there is
discussion as to the circumstances in which it can be held that the
notice seeking reassessment is based on a mere change of opinion by
the AO. Again, we have not gone into this issue in the present matter
and, therefore, the decision is really not attracted in the present case.
24. The decision in Calcutta Discount Co. Ltd. (supra) in fact,
assists the case of the Petitioner rather than the Respondents. In this
decision, the Hon’ble Supreme Court has held that it is the duty of
the assessee to disclose fully and truly all primary relevant facts and
once all primary facts are before the assessing authority, he requires
no further assistance by way of disclosure and it is for him to decide
what inference of facts can be reasonably drawn and what legal
inferences have ultimately to be drawn. However, if there are some
reasonable grounds for thinking that there had been underassessment
as regards any primary facts which could have a material
bearing on question of under-assessment, that would be sufficient to
give jurisdiction to the ITO to issue notice for reassessment.
25. In the present case, as noted earlier, there is absolutely no
reference to any alleged material facts which the Petitioner failed to
disclose in the course of the assessment proceedings. Rather, the
impugned notice refers to the list, as well as the letter issued by the
Petitioner itself, which is sought to be made basis for reopening of the
assessment. In this case, it is apparent that all the primary facts were
disclosed by the Petitioner. In fact, the Petitioner had disclosed truly
and fully all the material facts and it was open to the AO to take the
same into account in the course of the assessment proceedings or, in
any case, it was open to the AO to issue notice for reassessment
within normal period of 4 years from the date of assessment.
26. For all the aforesaid reasons, we allow the present Petition
and quash and set aside the impugned notice dated 29th March,
2019 and the impugned order dated 17th December, 2019. Rule is
accordingly made absolute in terms of prayer clauses (a), (b) and (c)
of the Petition. There shall be no order as to costs.
Nutan D. Sardessai, J. M.S. Sonak, J.