IN THE HIGH COURT OF JUDICATURE AT BOMBAY
\nORDINARY ORIGINAL CIVIL JURISDICTION
\nWRIT PETITION NO. 3344 OF 2018<\/p>\n
Ankita A. Choksey .. Petitioner.<\/p>\n
v\/s.<\/p>\n
Income Tax Officer19 (1)(1) & Others .. Respondents.<\/p>\n
Mr. Jitendra Jain with Mr. Sameer Dalal, for the Petitioner.<\/p>\n
Mr. Sham Walve, for the Respondents.<\/p>\n
CORAM: AKIL KURESHI & M.S.SANKLECHA, JJ.<\/p>\n
DATE : 10th JANUARY, 2019.<\/p>\n
P.C:<\/p>\n
With the consent of the parties, this Petition which challenges
\na reopening notice under the Income Tax Act, 1961 (the Act), is being
\ntaken up for final disposal at the stage of admission.<\/p>\n
2 This Petition under Article 226 of the Constitution of India,
\nchallenges a notice dated 27th March, 2018 issued by the Assessing
\nOfficer under Section 148 of the Income Tax Act, 1961 (the Act). The
\nimpugned notice seeks to reopen the Assessment for Assessment Year
\n201112.<\/p>\n
3 Briefly, the facts leading to this Petition are as under:<\/p>\n
(i) The Petitioner held 10% shares in one M\/s. Samuel Dracup and
\nSons India Private Limited (the Limited Company) .<\/p>\n
(ii) On 18th October, 2010, the Limited Company decided to voluntarily
\nwind up and liquidate its business. This by the Limited Company passing resolution at the General Body Meeting of its share holders. It was resolved that the assets (including immovable property) remaining after paying of the liabilities, would be distributed between its share holders in proportion to their share
\nholding.<\/p>\n
(iii) Pursuant to the above, on 27th December, 2010, the Limited
\nCompany executed a sale deed, transferring the immovable
\nproperty i.e. a flat in “Geetanjali” situated in Mumbai (said flat) in
\nfavour of the Petitioner and her mother \u2013 Mrs. Priti Choksey to the
\nextent their shares holding i.e. 10% and 90% in the Limited
\nCompany respectively.<\/p>\n
(iv) On 30th June, 2011, this Court ordered the dissolution of the
\nLimited Company. This, while indicating the share holding of the
\nLimited Company at 90% in the hands of Ms. Priti Choksey and
\n10% in the hands of the Petitioner. The above order of dissolution
\nwas passed after the RespondentRevenue gave its no objection to
\nit.<\/p>\n
(v) On 30th June, 2011, the Petitioner filed its return of income for the
\nAssessment Year 201112, returning an income of Rs.6.34 lakhs. In
\nits return of income the Petitioner had disclosed under Section 46 of
\nthe Act, the receipt of 10% interest in the said flat received from the
\ncompany on account of its liquidation i.e. 10% of Rs.3.79 Crores
\n(being value of flat). This to arrive at her capital gains. The
\nreturn of income was processed under Section 143(1) of the Act by
\nway of intimation.<\/p>\n
(vi) Thereafter on 27th March, 2018, the impugned notice under
\nSection 148 of the Act was issued, seeking to reopen the
\nAssessment for Assessment Year 201112. The reasons recorded in
\nsupport of the impugned notice dated 27th March, 2018 is as
\nunder:<\/p>\n
\u201c1. In the above case, the assessee has filed the return of
\nincome for A.Y. 201112 on 30.07.2011 declaring total income
\nof Rs.6,34,580\/. The return was processed u\/s. 143(1) of the
\nAct on 17.12.2012. The assessee is having income from Salary
\nand income from other Sources.<\/p>\n
2. Information has been received from the ITO 1(3)(2),
\nMumbai vide letter dated 27.12.2013 that during the course of
\nassessment proceedings of the company M\/s. Samuel Dracup &
\nSons (I) Pvt. Ltd., (PAN: AAHCS6649D) for A.Y. 201112, it
\nwas noticed that the assessee company was liquidated by the
\norder of Hon’ble Bombay High Court. Consequently, the assets in
\nthe hands on company were transferred to the shareholders in
\nthe ratio of their holdings. One of the shareholders in the ratio
\nof their holdings. One of the shareholders Ms. Ankita Amit
\nChoksey, PAN: AFXPC9692J is assessed to tax with this charge
\nand the consideration arising out of liquidation of the assets is
\ncharged in the hands of the assessee Ms. Ankita Amit Choksey.<\/p>\n
3. On analysis of the information received and on the
\nverification of the ITS details from ITD system, it is revealed that
\nthe assessee Ms. Ankita Amit Choksey has received consideration
\nto the tune of Rs.3,79,63,000\/ from the sale of immovable
\nproperty of the company M\/s. Samuel Dracup and Sons Pvt Ltd.
\nThe same was not offered for tax and not reflected in the books
\nof account. The nature\/ source of the same transactions
\nremained unverified.<\/p>\n
4. In view of the above facts and circumstances of the case
\nand after application of my mind, I have reason to believe that
\nthe income of the assessee Ms. Ankita Amit Choksey, chargeable
\n to tax for the A.Y. 201112 amounting to Rs.3,79,63,000\/ has
\nescaped assessment due to failure of the assessee to disclose fully
\nand truly all material facts necessary for the assessment in this
\ncase in terms of provisions of Section 147 of the I.T. Act.<\/p>\n
5 In this case, a return of income was filed for the year
\nunder consideration but no scrutiny assessment u\/s. 143(3) of
\nthe Act was made. Accordingly, in this case, the only
\nrequirement to initiate proceedings u\/s. 147 is reason to believe
\nwhich has been recorded above.<\/p>\n
6. It is pertinent to mention here that in this case the
\nassessee has filed return of income for the year under
\nconsideration but no assessment as stipulated u\/s. 2(40) of the
\nAct was made and the return of income was only processed u\/s.
\n143(1) of the Act. In view of the above, provisions of clause (b)
\nof explanation 2 of Section 147 are applicable to facts of this
\ncase and the assessment year under consideration is deemed to
\nbe a case where income chargeable to tax has escaped
\nassessment.\u201d<\/p>\n
(vii) On 5th October, 2018, the Petitioner filed its objection to the
\nimpugned reopening notice and the reasons in support thereof. In
\nparticular, the Petitioner pointed out that the reasons in support of
\nthe impugned notice erroneously proceed on the basis that the
\nPetitioner received a consideration of Rs.3.79 Crores for the sale
\nof the said flat and that this fact was not disclosed. In fact, it was
\npointed out in the objection that the said flat had not been sold
\nby the Petitioner as she continues to be in possession of the same.<\/p>\n
Besides, it was pointed out that Petitioner had disclosed the
\namount of 10% of Rs.3.79 Crores i.e. Rs.38.07 lakhs as being the
\nfull value of consideration received on extinguishment of its share
\nholding in the Limited Company in its return of income. Thus, it
\nwas the Petitioner’s contention that if correct and relevant facts were to be considered, there can be no reason to believe that
\nincome chargeable to tax has escaped assessment. Therefore, the
\nPetitioner prayed that the impugned notice dated 27th March, 2018
\nbe withdrawn.<\/p>\n
(viii) By an order dated 18th October, 2018, the Assessing Officer rejected
\nthe Petitioner’s objection. However, the assertions on facts made by
\nthe Petitioner were not disputed in the order dated 18th October,
\n2018. This even when it is contrary to the facts recorded in the
\nreasons in support of the impugned notice. The only basis for
\nsustaining the impugned notice dated 27th March, 2018 in the order
\nwas that the Return of Income for the subject Assessment Year had
\nnot been subjected to any scrutiny assessment, as it was only
\nprocessed by an intimation under Section 143(1) of the Act.<\/p>\n
4 Mr. Jain, the learned Counsel for the Petitioner on the above
\nfacts points out absence of any reason to believe that income chargeable
\nto tax has escaped Assessment. Thus, he submits that the impugned notice
\nis completely without jurisdiction and should be quashed.<\/p>\n
5 Mr. Walve, learned Counsel appearing for the Revenue and
\nsupporting the impugned notice dated 27th March, 2018, adopts the
\nreasoning of the order dated 18th October, 2018 i.e. there was no scrutiny
\nassessment. Thus, no occasion to examine the claim made by the
\nPetitioner. Therefore, it is submitted that at this stage, the Court should
\nnot interdict the reassessment proceedings. This, if the claim of the
\nPetitioner is correct, the same would be accepted in the reassessment
\norder and there would be no cause for grievance.<\/p>\n
6 It is a settled position in law that the Assessing Officer
\nacquires jurisdiction to issue a reopening notice only when he has reason
\nto believe that income chargeable to tax has escaped Assessment. This
\nbasic condition precedent is applicable whether the return of income was
\nprocessed under Section 143(1) of the Act by intimation or assessed by
\nscrutiny under Section 143(3) of the Act. [See Asst. Commissioner of
\nIncome Tax v\/s. Rajesh Jhaveri Stock Brokers (P) Ltd., (SC) 291 ITR 500
\nand PCIT v\/s. M\/s. Shodimen Investments (Bombay) 2018 (93)
\nTaxman.Com 153]. <\/p>\n
Further, the reasons to believe that income chargeable
\nto tax has escaped Assessment must be on correct facts. If the facts, as
\nrecorded in the reasons are not correct and the assessee points out the
\nsame in its objections, then the order on objection must deal with it and
\nprima facie, establish that the facts stated by it in its reasons as recorded are correct. In the absence of the order of objections dealing with the assertion of the Assessee that the correct facts are not as recorded in the reason, it would be safe to draw an adverse inference against the
\nRevenue.<\/p>\n
7 Thus, we are of the view that even in cases where the return
\nof income has been accepted by processing under Section 143(1) of the
\nAct, reopening of an assessment can only be done when the Assessing
\nOfficer has reason to believe that income chargeable to tax has escaped
\nassessment. The mere fact that the return has been processed under
\nSection 143(1) of the Act, does not give the Assessing Officer a carte blanc
\nto issue a reopening notice. <\/p>\n
The condition precedent of reason to believe
\nthat income chargeable to tax has escaped assessment on correct facts,
\nmust be satisfied by the Assessing Officer so as to have jurisdiction to issue
\nthe reopening notice. In the present case, the Assessing Officer has
\n proceeded on fundamentally wrong facts to come to the reasonable belief
\nconclusion that income chargeable to tax has escaped assessment. <\/p>\n
Further, even when the same is pointed out by the Petitioner, the Assessing Officer in its order disposing off the objection does not deal with factual position
\nasserted by the Petitioner. Thus, it would safe to conclude that the
\nRevenue does not dispute the facts stated by the Petitioner. On the facts
\nas found, there could be no reason for the Assessing Officer to believe that
\nincome chargeable to tax has escaped assessment.<\/p>\n
8 Therefore, in the above view, as the impugned notice is
\nwithout jurisdiction, it is quashed and set aside.<\/p>\n
9 Petition allowed in the above terms.<\/p>\n
(M.S.SANKLECHA,J.) (AKIL KURESHI,J.)<\/p>\n","protected":false},"excerpt":{"rendered":"
Even in cases where the return of income has been accepted by processing under Section 143(1) of the Act, reopening of an assessment can only be done when the Assessing Officer has reason to believe that income chargeable to tax has escaped assessment. The mere fact that the return has been processed under Section 143(1) of the Act, does not give the Assessing Officer a carte blanc to issue a reopening notice<\/p>\n