Bennett Property Holdings Company Ltd v. The Deputy Commissioner Of Income Tax-1(1)(1)And Two Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2984 OF 2019 Bennett Property Holdings Company Ltd.. ...Petitioner. Vs. The Deputy Commissioner of Income Tax-1(1)(1)and two Ors. ...Respondents. --- Mr. Porus Kaka, Senior Advocate a/w. Mr. Nitesh Joshi, Mr.Prakash Shah, Mr. Manish Kant and Mr. Jas Sanghavi i/by PDSLegal for Petitioner. Mr. Suresh Kumar, Advocate for Respondents. --- CORAM : K.R. SHRIRAM & R.N. LADDHA, JJ. DATED : JANUARY 04, 2022 P.C. : (Through Video Conferencing) 1.Petitioner is impugning a notice dated 30[th] March, 2019issued under section 148 of the Income Tax Act, 1961 and anorder dated 15[th] October, 2019, rejecting Petitioner's objectionsto the reopening of the assessment. 2.Mr. Porus Kaka submitted that the impugned notice iswithout jurisdiction and without authority of law for want ofsatisfaction of condition precedent under section 148 of the Actand there was no failure on the part of Petitioner to disclosefully and truly any material fact and, therefore, there can be noDigitally signedSHALIKRAMPRALHADRAOby SHALIKRAMPRALHADRAOBOREYBOREYDate: 2022.01.1012:06:09 +0530 reason to believe there was escapement of income fromassessment as well. Mr. Kaka also submitted that if oneconsiders the reasons, it is quite clear that it is nothing butchange of he opinion, which is not permissible in law. 3. Admittedly, Petitioner had filed the return of income forAssessment Year 2012-13, declaring a total income ofRs.33,93,73,990/- on 29[th] September, 2012. The return wasrevised on 25[th] March, 2014. The Assessment was completedon 12[th] March, 2015, by assessing the total income at Rs.36,50,47,700/-. 4. Petitioner received the impugned notice dated 30[th]March, 2019, informing Petitioner that the JurisdictionalAssessing OfÏcer (JAO) had reasons to believe that Petitioner’sincome chargeable to the tax for Assessment Year 2012-13 hasescaped assessment within the meaning of section 147 of theAct. Therefore, the notice to reopen has been issued afterexpiry of four years from the end of the relevant assessmentyear and as assessment under sub-section (3) of Section 143 ofthe Act has been made for the relevant assessment year, theonus is on Respondents to show by reason of the failure on the part of Petitioner to disclose fully and truly all materialfacts necessary for that assessment year, the incomechargeable to tax has escaped assessment for suchassessment year. 5.We have considered reasons for reopening given on 21[st]August, 2019 to Petitioner and it is quite obvious that it isnothing but change of opinion. Prior to passing of theassessment order, on 31[st] March, 2012 the Assessing OfÏcerhad called upon Petitioner to furnish various details and copyof the notice issued under section 142(1) of the Act which isannexed to the Petition. Petitioner provided all the details asrequired and in the assessment order, the Assessing OfÏcerhas accepted the fact that pursuant to the orders passed bythe Honourable High Court in the scheme of arrangementbetween the Bennett, Coleman & Co. Ltd., (BCCL) and Petitionerunder sections 391 & 394 of the Companies Act, 1956, the RealEstate Division of the BCCL was demerged and vested withthe assessee company with effect from 1[st] April, 2011.According to the JAO because the properties which were de-merged from BCCL and vested in the Petitioner Company, havenot been mutated to the ownership of Petitioner, the transactions cannot be regarded as demerger but transfer ofvarious assets and liabilities undertaken, which attract capitalgain. According to the JAO rental income was treated byPetitioner as income from house property and Petitionerclaimed deduction on account of municipal taxes paid of Rs.95.59 lakhs and deduction under section 24 at Rs. 964.53lakhs. Since the properties were not transferred from theBCCL to Petitioner, the income was assesseble under the head“business income” or “other sources” and as such Petitionerwas not entitled to the deduction under section 24 of the Act. 6.In the revised computation of total income filed on 24[th]March, 2014, Petitioner has disclosed municipal taxes paid atRs.95,59,448/- and repair & collection charges at Rs.9,64,53,360/- and claimed deduction of these amounts fromthe income of the house properties. The Assessing OfÏcer hadthese details before him and also has accepted that there was ascheme of arrangement between BCCL and Petitioner and theReal Estate Division of the BCCL was demerged and vestedwith Petitioner with effect from 1[st] April, 2011. Therefore,Petitioner had explained all the details and after considering allthat, the assessment order dated 12[th] March, 2015 was passed, accepting the return of income filed by Petitioner withsame set of reasons. The Assessing OfÏcer had in hispossession all the primary facts and it was for him to makenecessary enquiries and draw proper inference as to whetherthe amount was to be allowed as deduction under section 24 ofthe Act. As noted earlier, the Assessing OfÏcer had all materialfacts before him when he made original assessment. When theprimary facts necessary for assessment are fully and trulydisclosed, the Assessing OfÏcer is not entitled on change ofopinion to commence proceedings for re-assessment. Even ifthe Assessing OfÏcer, who passed the assessment order, mayhave raised too many legal inferences from the facts disclosed,on that count the Assessing OfÏcer, who has decided to re-open the assessment, is not competent to reopen assessmentproceedings. Where on consideration of the material on record,one view is conclusively taken by the Assessing OfÏcer, itwould not be open to re-open the assessment based on thevery same material with a view to take another view. 7.Mr. Suresh Kumar submitted that in the reasons for re-opening, the Assessing OfÏcer has stated that there was failureto disclose fully and truly material facts and has also relied upon the Explanation- 1 to section 147 of the Act. The duty,however, does not extend beyond the full and truthfuldisclosure of all primary facts. Once all the primary facts arebefore the assessing authority, he requires no furtherassistance by way of disclosure. It is for him to decide whatinferences of facts can be reasonably drawn and what legalinferences have ultimately to be drawn. It is not for somebodyelse-far less the assessee to tell the assessing authority whatinferences, whether of facts or law, should be drawn. Indeed,when it is remembered that people often differ as regardswhat inferences should be drawn from given facts, it will bemeaningless to demand that the assessee must disclose whatinferences – whether of facts or law – he would draw from theprimary facts. If from primary facts more inferences than onecould be drawn, it would not be possible to say that theassessee should have drawn any particular inference andcommunicated it to the assessing authority. How could anassessee be charged with failure to communicate an inference,which he might or might not have drawn?. It may be pointedout that the Explanation to the sub-section has nothing to dowith “inferences” and deals only with the question whetherprimary material facts not disclosed could still be said to be constructively disclosed on the ground that with due diligencethe Income-tax OfÏcer could have discovered them from thefacts actually disclosed. The Explanation has not the effect ofenlarging the section, by casting a duty on the assessee todisclose “inferences” to draw the proper inferences being theduty imposed on the Income Tax OfÏcer. Therefore, it can beconcluded that while the duty of the assessee is to disclosefully and truly all primary relevant facts, it does not extendbeyond this. 8.In our view, using the words “failure to disclose fully andtruly all material facts”, is clearly made only as an attempt totake the case out of the restrictions imposed by the proviso (1)to section 147 of the Act. 9.Consequently, the Notice dated 30[th] March, 2019 issuedunder section 148 of the Act and the order dated 15[th] October,2019 impugned in the Petition, are hereby quashed and setaside. 10.Petition disposed with no order as to costs. (R.N. LADDHA,J.) (K.R. SHRIRAM, J.)