Cedric De Souza Faria v. Deputy Commissioner Of Income Tax, Having His Office At Ward

Santosh 1 wp929dt21-11-17 IN THE HIGH COURT OF BOMBAY AT GOA WRIT PETITION NO.929 OF 2017 Cedric De Souza Faria,r/o. House No.1, Alvaro TolsanzorAquem, Alto Margao, Goa. Versus1. Deputy Commissioner of Income Tax, having his Office at Ward No.4, 2nd Floor, Blessings Pioneer Commercial Complex,Margao, Goa. ….. Petitioner. 2. Commissioner of Income Tax, Having his Office at Aaykar Bhavan, Patto, Panaji, Goa. 3. Union of India, through the Ministry of Finance, New Delhi, 4. Deputy Commissioner of Income Tax(Central Circle), Pundalik Niwas, Rua De Ourem, Panaji, Goa. 5. Commissioner of Income Tax, Karnataka (Central), Having his Office at Central Revenue Building, Queens Road, Bangalore 560 001. …... Respondents. Mr. Nitin Sardessai, Senior Advocate with Ms. Gautami Kamat,Advocate for the Petitioner. Santosh 2 wp929dt21-11-17 Ms. Amira Razaq, Junior Central Government Standing Counsel forRespondents No.1, 2 & 3. Coram : N.M. Jamdar & Nutan D. Sardessai, JJ. Date : 21 November 2017. ORAL JUDGMENT :(Per N.M. Jamdar, J.) Rule, returnable forthwith. Learned Standing Counselwaives service for the Respondents. Taken up for final disposal. 2.This Petition is filed by the Assessee challenging theorder dated 16 August 2017 passed by the Income Tax Officer,Ward-4, Margao, Goa reopening the assessment under Section 147of the Income Tax Act, 1961,. 3.The Petitioner is an individual. The Petitioner had filedIncome Tax Returns for the Assessment Year 2010-11 on 30 March2011. The Petitioner declared his income as 1.70 Crore as on 30₹March 2017. He had shown Capital Receipt of ₹ 1.30 Crore.Respondent No.1-Deputy Commissioner of Income Tax issued aNotice under Section 148 of the Act, seeking to reopen theassessment for the Assessment Year 2010-11. On 7 April 2017, thePetitioner replied to the Notice and sought reasons for reopening the Santosh 3 wp929dt21-11-17 assessment. The reasons were supplied to the Petitioner byRespondent No.1 on 24 July 2017. The Petitioner submitted hisobjections on 7 August 2017 to the Respondent No.1. TheRespondent No.1 passed an order on 16 August 2017, disposing ofthe objections raised by the Petitioner. The Petitioner hasapproached this Court seeking to quash the Notice dated 30 March2017, issued by the Respondent under Section 148 of the Act. 4.By an order dated 7 November 2017, the Petition wasdirected to be disposed of finally at the admission stage and an adinterim relief was granted. 5.We have heard Mr. Nitin Sardessai, learned SeniorAdvocate for the Petitioner and Ms. Amira Razaq, learned StandingCounsel for the Respondents No.1 to 3. 6.Section 147 of the Income Tax Act deals with the conceptof Income Escaping Assessment. As per Section 147, if the AssessingOfficer has reason to believe that any income chargeable to tax hasescaped assessment which comes to his notice subsequently in thecourse of the proceeding, he can take necessary steps in respect ofthe income escaping assessment. Proviso to Section 147 lays downthat where an assessment under sub-section (3) of section 143 or this Santosh 4 wp929dt21-11-17 5.We have heard Mr. Nitin Sardessai, learned SeniorAdvocate for the Petitioner and Ms. Amira Razaq, learned StandingCounsel for the Respondents No.1 to 3. 6.Section 147 of the Income Tax Act deals with the conceptof Income Escaping Assessment. As per Section 147, if the AssessingOfficer has reason to believe that any income chargeable to tax hasescaped assessment which comes to his notice subsequently in thecourse of the proceeding, he can take necessary steps in respect ofthe income escaping assessment. Proviso to Section 147 lays downthat where an assessment under sub-section (3) of section 143 or this Santosh 4 wp929dt21-11-17 section has been made for the relevant assessment year, no actionshall be taken under this section after the expiry of four years fromthe end of the relevant assessment year, unless any income chargeableto tax has escaped assessment for such assessment year by reason ofthe failure on the part of the assessee to make a return under section139 or in response to a notice issued under sub-section (1) of section142 or section 148 or to disclose fully and truly all material factsnecessary for his assessment, for that assessment year. As per theproviso, if the assessment is sought to be reopened after the period offour years, then one of the ingredients to be fulfilled is that theAssessee should have failed to disclose fully and truly all material factsnecessary for the assessment of that particular year for which theassessment is sought to be reopened. 7.Since the assessment in question is of the year 2010-11and the notice has been issued by the Respondent No.1 on 30 March2017, it is beyond period of four years. Thus the proviso to Section147 comes into play. Though the time limit for notice for an amountof one lakh rupees and more for that year as specified in Section149(1(b) is indicated as six years, the rider provided in the proviso toSection 147, is applicable. Santosh various judicial pronouncements, certain basic parameters standfirmly established. Section 147 of the Act empowers the AssessingOfficer, if he has a reason to believe that any income chargeable to taxhas escaped assessment, to reassess the income. Section 147 howevercontains a proviso that no action under Section 147 will be takenafter a period of expiry of four years of the end of relevant assessmentyear, unless the assessee had failed to disclose fully and truly allmaterial facts necessary for his assessment for that assessment year.The conditions specified in Section 147 are jurisdictionalrequirements and unless they are fulfilled no proceeding under thesesections can be taken. It is open for the assessee to challenge theinitiation of the reassessment proceedings, if the assessee is able toshow that the jurisdictional requirements are not met. The AssessingOfficer must disclose reasons why reassessment proceedings are beingtaken out. Further, the Assessing Officer is not permitted to improveupon the reasons so furnished to the assessee. Thus, the validity of theinitiation of the assessment proceedings will be determined only bythe reasons furnished by the Assessing Officer to the assessee. If theassessment proceedings are to be initiated after a period of four yearson the ground that the assessee failed to make full and true disclosureof all necessary facts, then, the Assessing Officer must state so in thereasons and the action must be founded on such reason. Santosh 6 wp929dt21-11-17 9. In the present case, the reasons given by the Respondent- Officer are as under : “ The assessee Shri Cedric De Souza Faria had filed hisreturn of income for AY 2010-11 declaring total income ofRs.3,70,980. Santosh 6 wp929dt21-11-17 9. In the present case, the reasons given by the Respondent- Officer are as under : “ The assessee Shri Cedric De Souza Faria had filed hisreturn of income for AY 2010-11 declaring total income ofRs.3,70,980. During the assessment proceedings of M/s. Kala Minesand Minerals for AY 2010-11, it is seen by the AO that theabove firm has advanced Rs.1.30 Cr. to Shri Cedric De SouzaFaria for the purpose of purchase of land at Quepem videagreement dated 27/07/2009. Subsequently the above partycould not meet the condition implicit in the MOU withinthe time frame and the said amount is claimed to be forfeitedby the assessee firm and claimed as bad debts accordingly. TheAO, while passing order u/s 143(3) disallowed the bad debtsclaim of the assessee firm and Rs.1.30 Cr. was added to thereturned income. The assessee firm got relief from theCIT(A), vide order in ITA No.104/MRG/2013-14 dated22/11/2013 on the issue of bad debts. Therefore, the amountof Rs.1.30 Cr. received by Shri Cedric De Souza Faria, hasescaped assessment without taxation. Therefore, I have reason to believe that income chargeableto tax has escaped assessment within the meaning of section147 of the Income Tax Act, 1961 due to failure on the part ofthe assessee to disclose fully and truthfully all material factsnecessary for his assessment for the relevant Assessment Year,”AY 2010-11. 10.When the reply was filed by the Petitioner, the Petitionerhad categorically stated that there was no failure on the part of thePetitioner to disclose fully and truly all material facts. It was statedthat in respect of proceedings of M/s. Kala Mines certain orders cameto be passed by CIT (A) on the issue of bad debts and that does not Santosh 7 wp929dt21-11-17 mean that there was failure on the part of the Petitioner to disclosefully and truly all material facts which were necessary at the time ofassessment. 11.Ms Razaq, the learned Standing Counsel for theRespondent Department sought to contend that it is only when theproceedings in respect of M/s. Kala Mines was decided in appealand the issue of bad debts was resolved, the Respondent came toknow about the income that has escaped assessment and thePetitioner ought to have placed these orders on record. We are notinclined to agree with these submissions. What the proviso to Section147 postulates is material which was necessary for assessment, whichthe Assessee failed to fully and truly disclose. There is no clearstatement in the reasons as to which material the Petitioner failed todisclose. On the Department's own showing in view of subsequentevents that is the appeal of M/s. Kala Mines being allowed, that thereopening of the assessment was necessary. Even in the order, there isno reference to the argument of the Petitioner that he had not failedto disclose fully and truly all material facts. It is not enough that inthe reasons supplied there is one line to the effect that 'due to failureon the part of the assessee to disclose fully and truthfully all materialfacts necessary for his assessment for the relevant Assessment Year, AY2010-11'. This is just copying and incorporating the language of the Santosh 8 wp929dt21-11-17 section to assume jurisdiction. Such mere lip service is not enough.When the Respondent No.1 dealt with this explanation, reference tothis jurisdictional requirement is found only in paragraph 5, whilenarrating the facts. In the discussions, there is no reference at all tothis aspect. Santosh 8 wp929dt21-11-17 section to assume jurisdiction. Such mere lip service is not enough.When the Respondent No.1 dealt with this explanation, reference tothis jurisdictional requirement is found only in paragraph 5, whilenarrating the facts. In the discussions, there is no reference at all tothis aspect. 12.Even though the Petitioner can always pursue the remedyunder the Income Tax Act against the assessment, as per law laiddown by the Apex Court and this Court, the Petitioner is entitled toapproach this Court under Article 226 of the Constitution of India, ifthe action of the Income Tax authorities in reopening the assessmentis beyond their jurisdiction. The Courts have equated the conditionunder Sections 147 and 148 of the Act to a jurisdictionalrequirement. The jurisdictional requirement in the present case,namely, the failure of the assessee to fully and truly disclose allmaterial facts, is not established. Furthermore, there are noparticulars in the reasons supplied to the Petitioner which alone couldbe the foundation of the order passed under Section 148 of the Act. Santosh 9 wp929dt21-11-17 13.In view of this position, the Petitioner is entitled tosucceed. Accordingly, the Rule is made absolute in terms of prayerclause (a). No order as to costs. Nutan D. Sardessai, J. N.M. Jamdar, J.