Easy Pay Pvt. Ltd v. Dy. Commissioner Of Income Tax Circle 2(1)(1

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/SPECIAL CIVIL APPLICATION NO. 14401 of 2021 With CIVIL APPLICATION (FOR ORDERS) NO. 1 of 2022 In R/SPECIAL CIVIL APPLICATION NO. 14401 of 2021 FOR APPROVAL AND SIGNATURE: HONOURABLE MR. JUSTICE A.J.DESAI andHONOURABLE MR. JUSTICE BHARGAV D. KARIA ========================================================== 1Whether Reporters of Local Papers may be allowedto see the judgment ?2To be referred to the Reporter or not ?3Whether their Lordships wish to see the fair copyof the judgment ? 4Whether this case involves a substantial questionof law as to the interpretation of the Constitutionof India or any order made thereunder ? ========================================================== EASY PAY PVT. LTD. Versus DY. COMMISSIONER OF INCOME TAX CIRCLE 2(1)(1) ==========================================================Appearance:MR KETAN H SHAH(2705) for the Petitioner(s) No. 1MR. AMAN K SHAH(9992) for the Petitioner(s) No. 1MR MANISH BHATT, SENIOR ADVOCATE FOR M R BHATT & CO.(5953) for the Respondent(s) No. 1 ========================================================== CORAM:HONOURABLE MR. JUSTICE A.J.DESAIand HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 14/06/2022 ORAL JUDGMENT (PER : HONOURABLE MR. JUSTICE A.J.DESAI) 1. Rule. Learned advocate Mr. Munjal Bhatt waivesservice of notice of rule on behalf ofrespondent. 2. With consent of learned advocates appearing forthe respective parties, the matter is taken upfor final hearing.the respective parties, the matter is taken upfor final hearing. 3. In this petition filed under Article 226 of theConstitution of India, the petitioner has prayedas under:Constitution of India, the petitioner has prayedas under: “11. The petitioner, therefore, pray that thisHon’ble Court be pleased to issue writ ofmandamus or a writ in the nature ofmandamus or a writ of certiorari or a writin a nature of certiorari or any otherappropriate writ, direction or order and bepleased to (a)Quashed and set aside the impugnednotices / order as appeared atAnnexure ‘F’, Annexure ‘G’ andAnnexure ‘I’. (b)Pending the admission hearing andfinal disposal of this petition, tostay the implementation and operationof the notices / orders as mentionedin para (a) herein above. And stay thefurthers proceedings for the AY 2017-18.(c)Any other and further relief deemedjust and proper be granted in theinterest of justice. C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 5. In response to the notice issued by this Court,the respondent authority has filed theaffidavit-in-reply dated 21.01.2022 and hasopposed this petition. 6. The brief facts of the case are as under: C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 DDIT (Inv.) Unit-1(2), Ahmedabad calling uponthe petitioner to submit details of cashdeposited during the financial year 2015-2016and financial year 2016-2017 in the requiredformat. 6.3) The petitioner submitted variouscharts showing cash deposit in the bank accountof the petitioner during the financial years2015-2016 and 2016-2017. 5. In response to the notice issued by this Court,the respondent authority has filed theaffidavit-in-reply dated 21.01.2022 and hasopposed this petition. 6. The brief facts of the case are as under: C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 DDIT (Inv.) Unit-1(2), Ahmedabad calling uponthe petitioner to submit details of cashdeposited during the financial year 2015-2016and financial year 2016-2017 in the requiredformat. 6.3) The petitioner submitted variouscharts showing cash deposit in the bank accountof the petitioner during the financial years2015-2016 and 2016-2017. 6.4) Thereafter the petitioner receivednotice dated 3[rd] September, 2019 under section142(1) of the Act, 1961 for providing variousinformation. As per paragraph no.20 of the saidnotice, detailed explanation was asked regardingcash deposited during the demonitisation periodand as per paragraph no.22, the AssessingOfficer called for detailed explanation inreference to cash deposited in the bank accountsalong with point no. 26 to explain the cash onhand as on 8[th] November, 2016 i.e. the date ofdemonitisation which was subsequently depositedin the bank by the petitioner. The petitionerwas also asked to provide the bank statement forthe period from 08.11.2016 to 31.12.2016. 6.5) The petitioner submitted reply dated12.11.2019 with regard to queries raised by theAssessing Officer. 6.6) The Assessing Officer passed the orderunder section 143(3) on 20.11.2019 afterconsidering the details provided by thepetitioner pursuant to the summons under section131(1A) as well as during the course ofassessment proceedings. 6.7) The Assessing Officer thereafter issuednotice dated 30.03.2021 under section 148 of theAct, 1961 for the assessment year 2017-2018. 6.8) The petitioner on receipt of the saidnotice requested for reasons recorded which weresupplied vide letter dated 20.05.2021. Thereasons recorded by the Assessing Officer are asunder : “2. While acknowledging the case anddiligence you have taken in preparing thereturn, there are certain issues asmentioned below, which need furtherclarification:- Issues as per reasons recorded forreopening As per the information received from thecredible source that the assessee companyhas deposited case of Rs.1,46,42,000/-during the demontization period (i.e. from09.11.2016 to 31.11.2016) in it bankaccount. It is further worth to mentionthat, on going through the informationavailable in Insight Portal, it is seenthat during the inquiry, the assesseecompany has stated that it has receivedpayment of various services. That case wasreceived at various outlets against thebills payments and the same was thereafter transferred to the respective serviceproviders. The assessee company earnscommission income against the serviceprovided. In these circumstances, deepinvestigation is required in this case. Theassessee found to be the owner of the moneyappearing in bank account(s). Further, thenature and source of such deposits made inthe bank accounts were not at allexplained. transferred to the respective serviceproviders. The assessee company earnscommission income against the serviceprovided. In these circumstances, deepinvestigation is required in this case. Theassessee found to be the owner of the moneyappearing in bank account(s). Further, thenature and source of such deposits made inthe bank accounts were not at allexplained. On perusal of information so received fromInvestigation Wing, Ahmedabad. It isnoticed that the assessee company Easy PayPrivate Limited (AADCE6257B) is found to bethe owner of the money appearing in thebankaccount(s)tothetuneofRs.1,46,12,000/- and hence, the financialtransaction as discussed above is clearlyattract the provision of Section 69A of theIncome Tax Act and therefore, required tobe added back to the total income of theassessee. Failure on the part of theassessee to disclose fully and truly allthe material facts necessary for theassessment , the income of the assessee hasescaped assessment to the tune ofRs.1,46,42,000/- for the AY 2017-18 withinthe meaning of Section 147 of the IncomeTax Act, 1961. I have, therefore, reason tobelieve that this is fit case for reopeningthe assessment u/s. 147 of the Act and forthe issue of notice u/s. 148 of the IncomeTax Act, 1961.” 6.9) On receipt of above reasons, thepetitioner filed objections on 26.05.2021 whichwere rejected by the respondent authority byorder dated 12.08.2021. Hence, this petition. 7. Learned advocate Mr. Ketan H. Shah for thepetitioner submitted that reopening theassessment by the Assessing Officer undersection 147 of the Act, 1961, is nothing but change of opinion because the issue with regardto the cash deposit during the demonitisationperiod was examined during the course of regularassessment completed under section 143(3) of theAct, 1961. 7.1) In support of his submission, learnedadvocate Mr. Shah relied upon the decision ofDivision Bench of this Court in case of GujaratPower Corporation Ltd. v. Assistant Commissionerof Income-Tax reported in (2013) 350 ITR 266(Guj) : “27. From the above discussion, it will emerge thatwhen in an assessment framed by the AssessingOfficer, if a certain claim of the assessee is notexamined, no queries raised, no answers elicited, itcan not be stated that merely because the AssessingOfficer did not reject such a claim in the finalorder of assessment, he should be deemed to haveexpressed an opinion with respect to such a claimand any reopening of an assessment of this natureeven within a period of four years from the end ofrelevant assessment year would amount to change ofopinion. We are further of the opinion that in anysuch case, as long as there is some tangiblematerial on the basis of which the Assessing Officercan form a belief that the income chargeable to taxhas escaped assessment, it would be permissible toreopen the assessment in exercise of powers undersection 147 of the Act, particularly after theamendments made with effect from 1.4.1989. Suchtangible material need not be alien to the record.” 8. On the other hand, learned Senior Advocate Mr.Manish Bhatt appearing for the Revenue submittedthat the Assessing Officer has issued theimpugned notice under section 148 of the Act,1961 as he has reason to believe that income has escaped assessment and there is no change ofopinion as canvassed on behalf of the petitionerso as to render the impugned notice bad in lawbecause the record itself reflects that thepetitioner was not in a position to explain thenature and source of deposit in the bankaccounts after the demonitisation period. 8. On the other hand, learned Senior Advocate Mr.Manish Bhatt appearing for the Revenue submittedthat the Assessing Officer has issued theimpugned notice under section 148 of the Act,1961 as he has reason to believe that income has escaped assessment and there is no change ofopinion as canvassed on behalf of the petitionerso as to render the impugned notice bad in lawbecause the record itself reflects that thepetitioner was not in a position to explain thenature and source of deposit in the bankaccounts after the demonitisation period. 8.1) Learned Senior Advocate Mr. Bhatt wouldsubmit that in order to issue notice undersection 148 of the Act, 1961 tangible materialcan be from the material available on recorditself. It was pointed out that in response tothe notice under section 142(1) of the Act,1961, the petitioner did not submit the requireddetails and therefore, the Assessing Officer hasreason to believe that income has escapedassessment for failure on part of the petitionerin disclosing truly and fully the correctmaterial facts. 9. We have heard learned advocates appearing forthe respective parties and perused the materialon record. It is not in dispute that theAssessing Officer before issuing notice undersection 142(1) of the Act,1961 called fordetails of cash deposited by the assessee duringthe demonitisation period. Investigation wasalso carried out by DDIT by issuing summonsunder section 131(1A) of the Act, 1961 in theyear 2018 and the petitioner furnished all the C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 required details in compliance of such summons.Thus while passing the order under section143(3) on 20.11.2019, the Assessing Officerconsidered the summons issued by the DDIT aswell as the reply of the assessee pursuant tothe notice under section 142(1) of the Act,1961. From the reply of the petitioner to thenotice under section1 142(1) of the Act, 1961 itappears that the petitioner had furnished allthe required details including the bankstatement for the period from 8.11.2016 to31.12.2016 and thereafter the Assessing Officerpassed the assessment order under section 143(3)of the Act,1961. 10.The petitioner in reply dated 29.01.2018pursuant to the summons issued under section131(1A) of the Act, 1961 has described thebusiness and operation of the petitioner companyand has also submitted source of cash depositand cash withdrawal during the financial years2015-2016 and 2016-2017. The petitioner also byreply dated 12.11.2019 in compliance of noticeunder section 142(1) of the Act provided thesame details pursuant to question nos. 20, 21,22 and 27 by furnishing the details of cashdeposit in the bank account from 9.11.2016 to31.12.2016 along with bank statement. Thepetitioner also explained that the petitionerhas tie-ups/service agreements with variousservice providers to collect bill payments on C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 behalf of them by various modes of paymentincluding cash, cheque, Debit/Credit cards etc.and the petitioner received commission incomeagainst collection facilities provided to suchservice providers like electricity, gas etc..The petitioner appoints Local BusinessAssociates to collect the bill payments onbehalf of the service providers and thereafterdeposits such cash collected by the petitionerson behalf of the service providers in the bankaccounts. Thus the petitioner explained thesource of cash collected and deposit thereof inthe bank account during the demonitisationperiod. C/SCA/14401/2021 JUDGMENT DATED: 14/06/2022 behalf of them by various modes of paymentincluding cash, cheque, Debit/Credit cards etc.and the petitioner received commission incomeagainst collection facilities provided to suchservice providers like electricity, gas etc..The petitioner appoints Local BusinessAssociates to collect the bill payments onbehalf of the service providers and thereafterdeposits such cash collected by the petitionerson behalf of the service providers in the bankaccounts. Thus the petitioner explained thesource of cash collected and deposit thereof inthe bank account during the demonitisationperiod. 11.Therefore, the reasons recorded by theAssessing Officer is required to be lookedconsidering the facts so as to enable theAssessing Officer to form a belief that incomechargeable to tax had escaped assessment on thebasis of materials which was available with him.During the course of regular assessment, theAssessing Officer had asked the assessee toexplain the source of cash deposit afterdemonitisation which was explained by theassessee in reply to the notice under section142(1) of the Act, 1961 which is accepted by theAssessing Officer while framing the assessmentunder section 143(3) of the Act, 1961.Therefore, ratio laid down by this Court in case of Swati Malove Divetia V. Income Tax Officer reported in [2018] 98 taxmann.com 447 (Gujarat)is applicable to the facts of the present caseas the Assessing Officer has recorded thereasons ignoring the reply of the assesseeduring the course of regular assessment andhence the reasons recorded by the AssessingOfficer to reopen the assessment under section147 of the Act lacks validity and the AssessingOfficer proceeded on erroneous premise. Officer cannot reopen the assessment on theground that the income has escaped assessmentdue to failure on part of the assessee todisclose truly and fully the material facts. (A.J.DESAI, J) (BHARGAV D. KARIA, J)