A Statement Has Been Filed By The Respondentcontroverting The Stand And Inter Alia Stating That Sufficient Reasonshad Been Stated In The Impugned Documents For v. Lakhmani Mewal Das[(1976) 103 Itr 437], Commissioner Of Income Tax V.kelvinator Of India Ltd [(2010) 320 Itr 561], Messe Dusseldorfindia P. Ltd V. Deput

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE A.M.SHAFFIQUE WEDNESDAY, THE 21ST DAY OF DECEMBER 2016/30TH AGRAHAYANA, 1938 WP(C).No. 35020 of 2016 (B) ---------------------------- PETITIONER(S):------------- ANCY JOHN, W/O. JOHN JOSEPH, KALLUNKAL HOUSE, KENICHIRA P.O., PANAMARAM, WAYANAD. BY ADVS.SRI.V.V.ASOKAN (SR.) SRI.K.I.MAYANKUTTY MATHER SRI.R.JAIKRISHNA RESPONDENT(S):-------------- 1. INCOME TAX OFFICER WARD NO.2, KALPETTA, WAYANAD - 673 122. 2. ADDITIONAL COMMISSIONER (INCOME TAX) RANGE 2, KOZHIKODE - 673 001. R1,R2 BY ADVS.SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT SRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21-12-2016, ALONG WITH WPC. 35054/2016, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: EL WP(C).No. 35020 of 2016 (B) ---------------------------- APPENDIX PETITIONER(S)' EXHIBITS ----------------------- P1 TRUE COPY OF THE ORDER ISSUED UNDER SECTION 281(B) OF THE INCOME TAX ACT BY THE 1ST RESPONDENT DATED 23.2.2015.THE INCOME TAX ACT BY THE 1ST RESPONDENT DATED 23.2.2015. P2 TRUE COPY OF THE ASSESSMENT ORDER ISSUED BY THE 1ST RESPONDENT DATED 31.3.2015.RESPONDENT DATED 31.3.2015. P2(A) TRUE COPY OF THE PROCEEDINGS IN CONNECTION WITH THE SURVEY CONDUCTED UNDER SECTION 133A DATED 10.12.2014.CONDUCTED UNDER SECTION 133A DATED 10.12.2014. P2(B) TRUE COPY OF THE LIST OF DOCUMENT SEIZED DATED 10.12.2014. P2(C) TRUE COPY OF THE STATEMENT RECORDED FROM K.M.BABU DATED 10.12.2014.10.12.2014. P2(D) TRUE COPY OF THE STATEMENT RECORDED FROM CICY JAISON DATED 10.12.2014.10.12.2014. P2(E) TRUE COPY OF THE STATEMENT RECORDED FROM ANCY JOHN DATED 10.12.2014.10.12.2014. P3TRUE COPY OF THE NOTICE ISSUED UNDER SECTION 147 OF THE INCOME TAX ACT BY THE 1ST RESPONDENT (AY-2011-2012) DATED 31.7.2015.TAX ACT BY THE 1ST RESPONDENT (AY-2011-2012) DATED 31.7.2015. P3(A) TRUE COPY OF THE NOTICE ISSUED UNDER SECTION 147 OF THE INCOME TAX ACT BY THE 1ST RESPONDENT (AY-2012-2013) DATED 31.7.2015.TAX ACT BY THE 1ST RESPONDENT (AY-2012-2013) DATED 31.7.2015. P3(B) TRUE COPY OF THE NOTICE ISSUED UNDER SECTION 147 OF THE INCOME TAX ACT BY THE 1ST RESPONDENT (AY-2013-2014) DATED 31.7.2015.TAX ACT BY THE 1ST RESPONDENT (AY-2013-2014) DATED 31.7.2015. P4TRUE COPY OF THE REQUEST GIVEN BY THE PETITIONER DATED 12.8.2015.12.8.2015. P4(A) TRUE COPY OF THE REQUEST GIVEN BY THE PETITIONER DATED 12.8.2015.12.8.2015. P4(B) TRUE COPY OF THE REQUEST GIVEN BY THE PETITIONER DATED 12.8.2015.12.8.2015. P5TRUE COPY OF THE SATISFACTION NOTE ISSUED BY THE 1ST RESPONDENTDATED 21.9.2016.DATED 21.9.2016. P5(A) TRUE COPY OF THE SATISFACTION NOTE ISSUED BY THE 1ST RESPONDENTDATED 21.9.2016.DATED 21.9.2016. P5(B) TRUE COPY OF THE SATISFACTION NOTE ISSUED BY THE 1ST RESPONDENTDATED 21.9.2016.DATED 21.9.2016. P6TRUE COPY OF THE LETTER ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT DATED 05.10.2016.RESPONDENT DATED 05.10.2016.P6(A) TRUE COPY OF THE LETTER ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT DATED 05.10.2016.RESPONDENT DATED 05.10.2016. EL WP(C).No. 35020 of 2016 (B) ---------------------------- P6(B) TRUE COPY OF THE LETTER ISSUED BY THE PETITIONER TO THE 1ST RESPONDENT DATED 05.10.2016.RESPONDENT DATED 05.10.2016. P7TRUE COPY OF THE LETTER GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016.17.10.2016. P7(A) TRUE COPY OF THE LETTER GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016.17.10.2016. P7(B) TRUE COPY OF THE LETTER GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016.17.10.2016. P8TRUE COPY OF THE COMMUNICATION GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016.DATED 17.10.2016. P8(A) TRUE COPY OF THE COMMUNICATION GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016.DATED 17.10.2016. P8(B) TRUE COPY OF THE COMMUNICATION GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016.DATED 17.10.2016. RESPONDENT(S)' EXHIBITS----------------------- NIL TRUE COPY P.S. TO JUDGE EL A.M. SHAFFIQUE, J. ===============W.P. (C) Nos. 35020 & 35054 of 2016======================= P7TRUE COPY OF THE LETTER GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016.17.10.2016. P7(A) TRUE COPY OF THE LETTER GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016.17.10.2016. P7(B) TRUE COPY OF THE LETTER GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016.17.10.2016. P8TRUE COPY OF THE COMMUNICATION GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016.DATED 17.10.2016. P8(A) TRUE COPY OF THE COMMUNICATION GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016.DATED 17.10.2016. P8(B) TRUE COPY OF THE COMMUNICATION GIVEN BY THE 1ST RESPONDENT DATED 17.10.2016.DATED 17.10.2016. RESPONDENT(S)' EXHIBITS----------------------- NIL TRUE COPY P.S. TO JUDGE EL A.M. SHAFFIQUE, J. ===============W.P. (C) Nos. 35020 & 35054 of 2016======================= Dated this, the 21[st] day of December, 2016 J U D G M E N T These writ petitions have been filed challenging the actiontaken by the Income Tax Department for reopening the assessmentin terms of Sections 147 and 148 of the Income Tax Act, 1961.Petitioners are husband and wife. The main contention urged by thepetitioners is that the reason to believe as reflected in Ext.P5 seriesin WP(C) No. 35020/2016 and Ext.P7 series in WP(C) No. 35054/2016is not a valid reason to reopen the assessments. 2.A statement has been filed by the respondentcontroverting the stand and inter alia stating that sufficient reasonshad been stated in the impugned documents for the assessingofficer to believe that there is escaped turnover. 3.Learned counsel for the petitioners places reliance on the judgments in Income Tax Officer v. Lakhmani Mewal Das[(1976) 103 ITR 437], Commissioner of Income Tax v.Kelvinator of India Ltd [(2010) 320 ITR 561], Messe DusseldorfIndia P. Ltd v. Deputy Commissioner of Income-Tax, Transfer W.P(C) Nos.35020 & 35054 /16 -:2:- Pricing Officer and another [(2010) 320 ITR 565], MilanSupari Stores v. Assistant Income-Tax Commissioner[(1922) 194 ITR 72], Agya Ram v. Commissioner of IncomeTax, Delhi (ITA No.290/2004 and connected cases), UnitechHoldings Limited v. Deputy Commissioner of Income Tax(WP(C) No. 12325/2015 & CM No.32738/2015) as well as GKNDriveshafts (India) Ltdv. Income-Tax Officer and Others[(2003) 259 ITR 19]. 4.The main contention urged is that the impugneddocuments do not contain reason to believe. Perusal of Ext.P5series and Ext.P7 series in either cases would show that theIncome Tax Officer proceeded on the basis that a survey underSection 133A was carried out in the business premises of theassessee on 10/12/2014 and during the survey, evidence hadbeen collected showing suppression of actual receipts. Hence,there is reason to believe that income escaped assessment to tax.The reasons for initiating proceedings under Section 148 hasbeen mentioned in the Annexure as well. Annexure to Ext.P5reads as under: -:3:- “Reasons for initiating proceedings u/s 148-Annexure to the proforma for obtaining theapproval of the Joint/Addl.Commissioner of IncomeTax. A survey u/s 133A was carried out in the businesspremises of the assessees 1)Shri John Joseph and 2)Smt.Ancy John, W/o Shri John Jospeh on 10/12/2014.Both the assessees are involved in Real Estatebusiness & Property development, Resort &Hospitality business etc. Even though both the assesses are furnishing theirreturn of income as separate independentindividuals, the business activities and relatedaccounts of both the assesses are entirely handledby Shri.John Joseph and his confidantes and keystaff members Mr.K.M.Babu, Mrs.Civy Jaison etc.Smt.Ancy John confirmed the same in her swornstatement. The combined real accounts of theassessee were obtained during the course ofsurvey. A survey u/s 133A was carried out in the businesspremises of the assessees 1)Shri John Joseph and 2)Smt.Ancy John, W/o Shri John Jospeh on 10/12/2014.Both the assessees are involved in Real Estatebusiness & Property development, Resort &Hospitality business etc. Even though both the assesses are furnishing theirreturn of income as separate independentindividuals, the business activities and relatedaccounts of both the assesses are entirely handledby Shri.John Joseph and his confidantes and keystaff members Mr.K.M.Babu, Mrs.Civy Jaison etc.Smt.Ancy John confirmed the same in her swornstatement. The combined real accounts of theassessee were obtained during the course ofsurvey. During the course of survey, evidences regarding 1)Suppression in total receipts 2) Unaccounted cashpayment in the purchase of landed propertiesincluding agreements 3) Unaccounted cash receiptsin the sale of landed properties includingagreements 4) Purchase and sale of land in benaminames of Shri. K.M.Babu and Smt.Cicy Jaison whichwere never reflected in actual accounts. The actual particulars of the real estatebusiness of the assessee for financial years 2011-12, 2012-13 and 2013-4 of Shri John Joseph and his wife Smt.Ancy John were submitted to thedepartment by the assessee group themselves videe mails dated 12.1.2015, 20.1.2015 and 5.1.2015respectively. The abstract of the same is attachedalong with as Annexure-II. The turnover differencefor AY2012-13 and AY 2013-14 is summarized asunder: While examining the return of the Shri.John Joseph,it was further noticed that the assessee has made aCapital introduction of Rs.56,79,793 duringFinancial Year 2010-11 which is way higher than theincomes returned by the assessee during previousyears. Similarly property purchases details wereobtained in the name of Smt.Ancy John and Shri.John Joseph during financial year 2010-11.During the survey, it was observed that assesseemaintains all his receipts and payments whichinclude income and expenditure related to his realestate activities, income from villas, constructionagreements, farming and agricultural activities in aconsolidated manner with Smt.Cicy Jaison. Thedaybooks maintained by her however do not reflectagricultural income as claimed by the assessees.Further Smt.Ancy in her statement confirmed thatshe is involved in farming and agricultural activities -:5:- and she doesn't have any bills or evidencespertaining to the agricultural activities. It appears tome that the assessee group is showing higheragriculture income to make source for theinvestment activities. The assessee, who was initially co-operating withthe post survey enquiries and verifications,however, later started non cooperation on anafterthought and was reluctant to divulge furtherdetails. It may be noted that regular scrutiny forAY2012-13 is already completed in the case of JohnJoseph under the above grounds. The return particulars of Shri.John Joseph (AY2011-12, AY2013-14) and Smt.Ancy John (AY2011-12,AY2012-13, AY2013-14) are as under:Sri.John Joseph W.P(C) Nos.35020 & 35054 /16 -:6:- Sri Ancy John Considering the above facts, I have reasons tobelieve that income has escaped assessment in thecases of 1) Shri.John Joseph (AY2011 & AY2013-14)and 2) Smt.Ancy John (AY2011-12, AY2012-13 &AY2013-14)” 5. Similar enclosures had been annexed along with the other documents which indicates reason to believe. Learnedstanding counsel appearing for the respondents submits that theorders informing reason to believe had been supplied as early ason 27/9/2015 and so far, no steps had been taken by thepetitioner either to file the return or such other steps inaccordance with law and therefore the writ petitions itself are not W.P(C) Nos.35020 & 35054 /16 -:6:- Sri Ancy John Considering the above facts, I have reasons tobelieve that income has escaped assessment in thecases of 1) Shri.John Joseph (AY2011 & AY2013-14)and 2) Smt.Ancy John (AY2011-12, AY2012-13 &AY2013-14)” 5. Similar enclosures had been annexed along with the other documents which indicates reason to believe. Learnedstanding counsel appearing for the respondents submits that theorders informing reason to believe had been supplied as early ason 27/9/2015 and so far, no steps had been taken by thepetitioner either to file the return or such other steps inaccordance with law and therefore the writ petitions itself are not maintainable for delay and laches. That apart, it is submitted thatthe reason stated in the enclosure clearly indicates that there issuppression of turnover which itself is enough for the purpose ofunderstanding the reason for reopening the assessment. 6.There is no dispute about the legal position involved inthe matter. Before an assessment is reopened in terms ofSections 147 and 148 of the Income Tax Act, necessarily, it isopen for the assessee to request for the reason to believe. In thiscase, when request was made by the assessee, the reason tobelieve had been given. Though in Ext.P5, at para 12, thefollowing alone has been stated; “12. It may be noted that the findings of survey,which is the basic reason for reopening your casewas already discussed in detail with your husbandand his staff members who is handling your entirebusiness activities as submitted by you during thepost survey proceedings and consolidated daybook details for FY2011-12, FY2012-13 andFY2013-14 based on the findings of the survey waseven submitted to the department. Furtherproceedings under Section 143(3) for AY2012-13which was pending in your husband Shri JohnJoseph's case was finished on the basis of the saiddetails. Thus it clear that the necessary copies regarding the findings of the survey are alreadyavailable with your group.” the enclosure which has been annexed along with the documents clearly narrates why the assessment had to be reopened.Learned counsel for the petitioners however has a case that theenclosure that had been given was for internal purpose and was not intended to be a notice given to the petitioners indicating thereason to believe. In so far as the enclosure is enclosed along withExt.P5 series and Ext.P7 series, necessarily, the petitioners areput to notice regarding the reason to believe by which theassessment had been reopened. Under such circumstances, I amof the view that necessary particulars had already been given tothe petitioner showing the reasons to believe and there is noreason why this Court should sit in judgment over the same andtake a different view in the matter. 7.In the light of the above said facts, I do not think itnecessary for this Court to interfere with the impugned orders. Writ petitions are dismissed. Rp21/12/2016 Sd/- A.M. SHAFFIQUE, JUDGE