Bhavesh Biharilal Maheshwari v. The Icnome Tax Officer

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 20987 of 2018With R/SPECIAL CIVIL APPLICATION NO. 20997 of 2018 ========================================================== BHAVESH BIHARILAL MAHESHWARI VersusTHE ICNOME TAX OFFICER ========================================================== Appearance:MR DARSHAN B GANDHI(9771) with MR JIMMY PATEL for the Petitioner(s) No. 1MRS MAUNA M BHATT(174) for the Respondent(s) No. 1 ========================================================== CORAM: HONOURABLE MS.JUSTICE HARSHA DEVANIand HONOURABLE MS. JUSTICE SANGEETA K. VISHEN Date : 18/11/2019ORAL ORDER (PER : HONOURABLE MS.JUSTICE HARSHA DEVANI) 1.Rule. Mrs. Mauna Bhatt, learned senior standing counsel, waives service of notice of rule on behalf of the respondent. 2.Having regard to the controversy involved in the present cases, which lies in a very narrow compass and with the consent of the learned counsel for the respective parties, the matters were taken up for final hearing today. 3.By these petitions under article 226 of the Constitution of India, the petitioner has challenged the notices dated 29.03.2018 issued by the respondent under section 148 of the Income C/SCA/20987/2018 ORDER Tax Act, 1961 (hereinafter referred to as “the Act”) seeking to reopen the assessment of the petitioner for the assessment years 2011-12 and 2012-13 respectively. 4.The facts stated briefly are that the petitioner, an individual, is a partner in the firm named M/s. Gajanand Agro Industries. The petitioner filed his return of income for the assessment year 2011-12 on 31.07.2012 declaring total income at Rs.3,56,960/-. The return was accepted under section 143(1) of the Act and there was no scrutiny assessment. Similarly for assessment year 2012-13, the petitioner filed return of income on 28.03.2014, declaring total income of Rs.3,94,417/- Subsequently, the petitioner received summons dated 18.01.2018 under section 131(1A) of the Act, calling upon him to produce the details asked for both the assessment years. In response thereto, the petitioner submitted necessary details by a letter dated 29.01.2018. Thereafter, the petitioner received the impugned notices dated 29.03.2018 issued under section 148 of the Act, seeking to reopen the assessment of the petitioner for the assessment years 2011-12 and 2012-13. C/SCA/20987/2018 ORDER return of income on 18.05.2018 for assessment year 2011-2012 and by a letter dated 22.05.2018, requested the respondent to furnish a copy of the reasons recorded. For assessment year 2012-13, the petitioner filed return of income on 13.07.2018 and further requested the respondent to furnish the reasons recorded for reopening the assessment. The reasons came to be furnished by letters dated 05.10.2018. Thereafter, the petitioner received notices under sections 143(2) and 142(1) of the Act, in response to which, the petitioner furnished his reply and supplied the details called for. Thereafter, the petitioner received a final show cause notices dated 25.12.2018 proposing to make a huge addition of Rs.3,35,31,376/-andRs.4,29,81,400/-for assessmentyears2011-12and2012-13 respectively, calling upon the petitioner to comply with the same by 28.12.2018. The petitioner objected to the reopening of assessment vide separate letters dated 26.12.2018 and directly approached this court without waiting for the objection disposal order. 6.During the pendency of the present petitions, the respondent passed the objection disposal orders on 13.02.2019, copies whereof have been placed on record. 6.During the pendency of the present petitions, the respondent passed the objection disposal orders on 13.02.2019, copies whereof have been placed on record. C/SCA/20987/2018 ORDER 7.By an order dated 28.12.2018, this court had issued notice and by way of ad-interim relief, had permitted the respondent to proceed further pursuant to the impugned notices; but, had restrained the respondent from passing the final orders without the permission of this court. 8.Mr. Darshan Gandhi, learned advocate for the petitioner, invited the attention of the court to the reasons recorded for reopening the assessment, to submit that the sole reason for reopening the assessment is that the petitioner had made cash withdrawals from his bank, which are not commensurate with the reported profile and activity of the firm, namely, the oil mill. It was submitted that according to the Assessing Officer, the cash withdrawal of Rs.5.14 crores during financial year 2010-11 has escaped assessment within the meaning of section 147 of the Act. It was submitted that withdrawal of cash from the petitioner’s own bank account can by no stretch of imagination amount to income having escaped assessment. 8.1 It was submitted that it is the case of the Assessing Officer that cash withdrawals have been made from the bank accounts of the partnership firm. It was contended that withdrawal of cash from the bank accounts of the partnership firm, C/SCA/20987/2018 ORDER can by no means be said to be income having escaped assessment in the hands of the partner. It was urged that the source of the amount can be doubted; however, there is no question of the withdrawal being doubted. It was, accordingly, urged that the assumption of jurisdiction on the part of the Assessing Officer under section 147 of the Act lacks validity, and hence, the impugned notice under section 148 of the Act as well as the proceedings pursuant thereto deserves to be quashed and set aside. 9.Opposing the petitions, Mrs. Mauna Bhatt, learned senior standing counsel for the respondent, invited the attention of the court to the events that have taken place. It was pointed out that for assessment year 2011-2012, the notice under section 148 of the Act has been issued on 29.03.2018, and in response thereto, the petitioner filed his return of income on 18.05.2018. The reasons recorded came to be furnished to the petitioner on 05.10.2018. Thereafter, notices under sections 143(2) and 142(1) of the Act came to be issued. It was submitted that the final show cause notice was issued on 25.12.2018 and it is only thereafter that the petitioner had filed his objections to the reopening of the assessment. It was submitted that therefore, the petitioner had acquiesced with the jurisdiction of the Assessing Officer and that the present petitions are in the nature of an afterthought and at this stage, the court may not entertain the petitions. with the jurisdiction of the Assessing Officer and that the present petitions are in the nature of an afterthought and at this stage, the court may not entertain the petitions. 9.1 In support of such submission, the learned senior standing counsel placed reliance upon the decision of the Bombay High Court in the case of Amaya Infrastructure P. Ltd. v. Income-Tax Officer and others, [2016] 383 ITR 498 (Bom), wherein the court has observed that the power of the High Court under article 226 of the Constitution of India is plenary. Therefore, the court would exercise the same whenever it is of the view that interest of justice would require its exercise. The court further held that having of jurisdiction does not make it obligatory upon the court to exercise extraordinary writ jurisdiction without reference to the facts before it. The court held that where the petitioners had participated in the proceedings under the Act before the Assessing Officer and thereafter, had filed the writ petition on the ground that the authority had no jurisdiction, the court would not normally entertain the petition, more particularly, when an effective alternative remedy is available under the Act to set aside the order passed by the authority, which the petitioners claim was without jurisdiction. The court held that the provisions of sections 147 and 148 of the Act empower the Assessing Officer to issue notice for reopening the assessment, subject to satisfaction of the parameters set out therein. It is open to the assessee to challenge the order of the Assessing Officer under the Act on the ground that the conditions precedent for its exercise are not satisfied. This could be done either by challenging it under article 226 of the Constitution of India or by challenging it before the authorities under the Act. Therefore, where a party submits itself to the jurisdiction of the Assessing Officer and challenges the issue of his jurisdiction during the course of proceedings of reassessment, the court would not normally exercise jurisdiction, more particularly, when the petitioners are not remediless and can challenge the order of the Assessing Officer before the appellate authority under the Act and secure the same ultimate relief. 9.2 The learned senior standing counsel further submitted that the facts of the present case are similar to the facts of the case before the Bombay High Court, wherein notices under sections 142(1) and 143(2) of the Act had been issued and the petitioners therein had participated in the assessment proceedings. It was submitted that in C/SCA/20987/2018 ORDER the light of principles enunciated in the above decision, it is not open for the petitioner to now object to the proceedings, and hence, the petitions deserve to be dismissed leaving it open for the petitioner to avail of the alternative statutory remedy available to him in case any adverse orders are passed in the proceedings under section 147 of the Act. 10. This court has considered the submissions advanced by the learned advocates for the respective parties. Before adverting to the merits of the rival contentions, the reasons recorded for reopening the assessment for assessment year 2011-12 may be referred to: “In this case, on the basis of information received from O/o. The ADIT (Inv), Mehsana report, it is noticed that the assessee Mr. Bhavesh B. Maheshwari is the partner of 40% share in M/s. Gajanand Agro Industries engaged in the business of oil mill. As reported in STR, the credit and debit turnover of M/s. Gajanand Agro Industries during F.Y. 2010-11 was Rs.12.84 crores and Rs.12.83 crores respectively. The firm withdrew cash of Rs.5.14 crores during the F.Y. 2010-11. 10. This court has considered the submissions advanced by the learned advocates for the respective parties. Before adverting to the merits of the rival contentions, the reasons recorded for reopening the assessment for assessment year 2011-12 may be referred to: “In this case, on the basis of information received from O/o. The ADIT (Inv), Mehsana report, it is noticed that the assessee Mr. Bhavesh B. Maheshwari is the partner of 40% share in M/s. Gajanand Agro Industries engaged in the business of oil mill. As reported in STR, the credit and debit turnover of M/s. Gajanand Agro Industries during F.Y. 2010-11 was Rs.12.84 crores and Rs.12.83 crores respectively. The firm withdrew cash of Rs.5.14 crores during the F.Y. 2010-11. Relevant extracts of the report of the FIU-IND STR No.10000062974 are as under: “The firm withdrew cash Rs.5.14 crores during the F.Y. and Rs. Rs.5.25 crores during current financial year. Almost 50% of the total debits are by way of cash withdrawals. The cash withdrawal are varied and range from Rs.1.20 lacs to Rs.25 Lacs. The withdrawing of huge cash is not commensurate with the reported profile and activity of the firm i.e. Oil Mill. Therefore, it is need to go through such heavy cash transaction. Hence, cash withdrawal of Rs.5.14 crores escaped assessment within the meaning of section 147 of the I.T.Act. As per above discussion, I have reason to believe that income chargeable to tax on amount of Rs.5.14 crores has escaped assessment for A.Y. 2011-12 and intend to assess the income from such transaction and also any other income chargeable to tax which has escaped assessment and which comes to the notice subsequently in the course of the proceedings under this section. However, the assessee has filed the return of income which requires verification. In view of the facts discussed above, I have reason to believe that the income chargeable to tax on the above points has escaped assessment within the meaning of section 147(a) of the I.T. Act, 1961 for A.Y. 2011-12. 11. For assessment year 2012-13, the reasons recorded are more or less identically worded except that the amount of cash stated to have been withdrawn in F.Y.2011-12 is Rs.5.25 crores. 12. On a plain reading of the reasons recorded, it is evident that it is the case of the Assessing Officer that the petitioner is a partner in M/s. Gajanand Agro Industries which is engaged in the business of oil mill, and has 40% share in the firm. The firm has withdrawn cash of Rs.5.14 crores during financial year 2010-11 and Rs.5.25 crores during financial year 2011-12. It is the case of the Assessing Officer that the withdrawal of huge cash is not commensurate with the reported profile and activity of the firm. With a view to examine the huge cash transactions, the Assessing Officer has formed the belief that income of Rs.5.14 crores and Rs.5.25 crores has escaped assessment in the case of the petitioner for the assessment year 2011-12 and 2012-13 respectively. 13. On a plain reading of the reasons recorded, it is evident that cash withdrawals have been made from the bank account of the firm and not the bank account of the petitioner. By an order of even date made in Special Civil Applications No.20988 of 2018 and 20991 of 2018, wherein the Assessing Officer had sought to reopen the assessment of the firm viz. Gajanand Agro Industries, for the assessment years 2011-12 and 2012-13, as the firm had withdrawn cash of Rs.5.14 crores and Rs.5.25 crores respectively, for the said assessment years, this court has held that the reopening of assessment is bad on the ground that on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment. 13. On a plain reading of the reasons recorded, it is evident that cash withdrawals have been made from the bank account of the firm and not the bank account of the petitioner. By an order of even date made in Special Civil Applications No.20988 of 2018 and 20991 of 2018, wherein the Assessing Officer had sought to reopen the assessment of the firm viz. Gajanand Agro Industries, for the assessment years 2011-12 and 2012-13, as the firm had withdrawn cash of Rs.5.14 crores and Rs.5.25 crores respectively, for the said assessment years, this court has held that the reopening of assessment is bad on the ground that on the reasons recorded, the Assessing Officer could not have formed the belief that income chargeable to tax has escaped assessment. 14. Since the allegation is that cash withdrawals have been made from the bank account of the firm, there is no reason for the Assessing Officer to form the belief that income chargeable to tax has escaped assessment in the case of the partner, more so, when even in the case of the firm, this court has held that the reopening of assessment is invalid. Under the circumstances, the impugned notices under section 148 of the Act cannot be sustained. 15. For the foregoing reasons, the petitions succeed and are, accordingly, allowed. The impugned notices dated 29.03.2018 issued by the respondent under section 148 of the Act, reopening the assessment of the petitioner for the assessment years 2011-12 and 2012-13, and all proceedings pursuant thereto, are hereby quashed and set aside. Rule is made absolute accordingly, with no order as to costs. (HARSHA DEVANI, J) (SANGEETA K. VISHEN,J)