Farmacia Molio v. Income-Tax Officer, Ward

Suchitra IN THE HIGH COURT OF BOMBAY AT GOA WRIT PETITION NO.15/2022 FARMACIA MOLIO, a Partnership Firm duly registered under the Indian Partnership Act, 1932, having its office at Jose Inacio Loyala Road, Near Municipality Margao Salcete, Goa 403601, represented by its Partner, Mr. Mukund Molio, Indian National, aged about 55 years, S/o. Mr. Somnath Molio, r/o. H No. 4694/2, TriveniGreen Hill Estate, Near St Annes School, Agali, Margao Goa 403602, duly authorized vide Resolution dated 21.01.2022. ...PETITIONER Versus 1. INCOME-TAX OFFICER, WARD 4, MARGAO, having office at Blessing Pioneer Complex, Old Market, Opposite District Court, Margao - Goa 403601. 2. PRINCIPAL COMMISSIONER OF INCOME TAX, having its office at Aayakar Bhavan, EDC Complex, Patto Panaji Goa 403001. …RESPONDENTS .Mr. Gaurang Panandikar, Advocatefor the Petitioner.Ms. Susan Linhares, Standing Counsel for the Respondents CORAM:M. S. SONAK &R. N. LADDHA, JJ. DATED: 31[st] January 2022 ORAL ORDER: (Per M. S. Sonak, J.) 1.Heard Mr. Gaurang Panandikar for the petitionerand Ms. Susan Linhares learned Standing Counsel for therespondents. 1. 2.The petitioner challenges notice dated 30.03.2021and Order dated 16.08.2021 seeking to reopen assessment anddisposing of objections to the notice seeking to reopen theassessment for the Assessment year 2017-18. 2. 3.Mr. Panandikar, learned counsel for the petitionersubmits that there is no material whatsoever on record to sustainthe alleged subjective satisfaction that any income of thepetitioner/assessee has escaped assessment for the Assessment Year2017-18. He points out that during the relevant assessment year,the assessee did not even have a bank account with the GoaUrban Cooperative Bank and this aspect has been clarified by thebank in its communication dated 27.08.2021 which was placedbefore the respondents, though after the impugned notice/order was made. He submits that even otherwise a categorical objectionwas taken based on this factual circumstance and this objectionhas not been considered in the impugned order dated16.08.2021. Mr. Panandikar submits that the respondents haveconfused between the petitioner-partnership firm and aproprietary concern of one of the partners. Mr. Panandikarsubmits that for Income Tax Act, 1961 (said Act) the firm and itspartner are distinct legal entities. He relies on MohanlalChampalal Jain v/s. ITO – 2019 (102) Taxman.com 293(Bombay) to submit that non-consideration of a vital objectionraised by the assessee vitiates the order disposing of objections.He points out that this decision was confirmed by the Hon'bleSupreme Court in the matter reported in 2019 (111)taxmann.com 67 (SC). For all these reasons he submits that theimpugned notice and order are liable to be set aside. 4. Ms. Linhares learned Standing Counsel for therespondents submits that the alleged letter addressed by the bankto the petitioner on 27.08.2021 was not even before therespondents to warrant its consideration by the respondents. Shesubmits that in any case, based on such a unilateral letter, there isno question of interfering with the impugned notice and order.She submits that the statement of the bank as also several othercircumstances that arise from the deposit of a huge amount of `4,38,91,900/- will have to be examined and assessed. She,therefore, submits that no case is made out to interfere with theimpugned notice and impugned order at this stage. She submitsthat if the petitioner's grievance subsists after the assessmentproceedings are complete, the petitioner will have remedies tochallenge the assessment order. `4,38,91,900/- will have to be examined and assessed. She,therefore, submits that no case is made out to interfere with theimpugned notice and impugned order at this stage. She submitsthat if the petitioner's grievance subsists after the assessmentproceedings are complete, the petitioner will have remedies tochallenge the assessment order. 5. Ms. Linhares submits that in this case, therespondents discovered that a cash deposit in a huge amount of`4.39 crores was made in the Goa Urban Cooperative Bank. Shepoints out that the PAN number used to make such a hugedeposit was that of the petitioner firm. She points out that forthe relevant assessment year, however, no income tax returns werefiled by the petitioner firm. She submits that the facts inMohanlal Champalal Jain (supra) are totally different and basedthereon, the present petition is not liable to succeed. For all thesereasons Ms. Linhares submits that this petition may be dismissed. 6. The rival contentions now fall for our determination. 7.In this case, admittedly, no returns were filed by thepetitioner firm for the Assessment Year 2017-18. Therefore,when the respondents discovered that a cash deposit of almost`4.39 crores was made as against the petitioner's PAN number in the Goa Urban Cooperative Bank, the respondents, issued theimpugned notice within the prescribed period of limitationseeking to reopen the assessment for the Assessment Year 2017- 18. 8.The petitioner, consistent with the practice followed,was granted an opportunity to file objections. Such objectionswere indeed filed by the petitioner and the same was disposed ofvide order dated 16.08.2021. 9.The reasoning reflected in the impugned order dated16.08.2021 is to be found in paragraphs 4, 5, and 6 thereofwhich read as follows:- “4. As far as, the issue involved based on which the case isre-opened and communicated to the assessee by providingreason recorded on 16.04.2021 pertains to the only reasoni.e. Cash deposits in an account other than a currentaccount. 5. The assessee has not filed its return of income (ROI) u/s139 of I.T. Act for the year under consideration. Thecontention of the assessee is that no cash has beendeposited in current account as well as other than currentaccount as its all Bank Accounts were opened after31.03.2017, is not acceptable as the transaction amount ofRs. 4,38,91,900/- in the statement in Part E-Details of SFTTransaction in Form 26AS of the assessee for F.Y. 2016-17srelevant to A.Y. 2017-18 reflecting under the assessee’PAN: is itself self-explanatory. The assessee is supposed to disclose truly and fully material facts in hisreturn. In the instant case, the assessee has not filed itsreturn of income u/s 139 of I.T. Act for the year underconsideration. The failure on the part of the assessee hasbeen ascertained as a result of verification carried out inafresh which constitutes the reason to believe that theincome chargeable to tax has escaped assessment. Thus, nopossibility of being change of opinion is involved and theverification on the basis of which the assessment has beenre-opened is not only information received from AIMS(Actionable Information Monitoring System) inDepartmental ITBA but also SFT Transaction uploaded inits Form 26AS mentioned as above. 6. The case has been re-opened within the permissible timelimit i.e. before the expiry of 06 years from the end of therelevant assessment year as the failure in disclosing correctincome chargeable to tax is attributable to the assessee. Inthe instant case, the assessee has not filed its return ofincome (ROI) us/139 of I.T. Act for the year underconsideration. In this regard, reliance is placed on thedecision held by the Hon’ble Apex Court in the case ofACIT Vs. Rajesh Jhaveri Stock Brokers (P.) Ltd.(2007)161.” 10. The letter dated 27.08.2021 addressed by the Goa 6. The case has been re-opened within the permissible timelimit i.e. before the expiry of 06 years from the end of therelevant assessment year as the failure in disclosing correctincome chargeable to tax is attributable to the assessee. Inthe instant case, the assessee has not filed its return ofincome (ROI) us/139 of I.T. Act for the year underconsideration. In this regard, reliance is placed on thedecision held by the Hon’ble Apex Court in the case ofACIT Vs. Rajesh Jhaveri Stock Brokers (P.) Ltd.(2007)161.” 10. The letter dated 27.08.2021 addressed by the Goa Urban Cooperative Bank to the petitioner was not before therespondents and therefore, Mr. Panandikar is not justified incontending that such letter was not taken into account by therespondents. The contention about the bank account in thename of the firm not being in existence on the date of the alleged cash deposit has been duly considered by the respondents. Therespondents have reasoned that the cash deposit of `4.39 croreswas made against the petitioner firm's PAN number. The orderalso reasons that for the relevant assessment year, the petitionerdespite having prima facie made such a large cash deposit of`4.39 crores in the non-current account, chose not to file anyincome tax returns. Therefore, there was reason to believe thatincome had escaped assessment. This is therefore not a casewhere the objection raised by the petitioner was not consideredby the respondents while making the impugned order dated16.08.2021. The objection has been considered, no doubt fordetermining whether any prima facie case was made out to reopenthe assessment and not for the final assessment. 11.In Mohanlal Champalal Jain (supra) the assessee hadobjected to the notice seeking to re-open the assessment bypointing out that during the relevant assessment year the assesseehad suffered losses. This was the reason given for not filingreturns during the relevant assessment year. This Court foundthat this explanation was not even adverted to, much less,sconsidered whilst disposing of objections. Besides, in Mohanlal’case, there was no question of large cash deposits in non-currentaccounts against the assessee's PAN number. Therefore, the 11. ruling in Mohanlal Champalal Jain (supra) is distinguishable andcannot assist the petitioner's case where facts, are not comparable. 12.In Asa v/s. CIT – 26 ITR 270 and in CIT v/s.Agarwalla Brothers – 189 ITR 786 it is held that to decidewhether the Assessment officer (AO) has reason to believe thatincome escaped assessment it is only those materials that werebefore the AO at the time of initiating the proceedings that haveto be taken into account and not some further materials whichsubsequently came to light in the course of proceedings under thesaid Act. Similarly, it is well settled that the adequacy orsufficiency as distinct from the existence or relevance of thematerial for the AO's belief cannot normally be investigated bythe Court. (See Phool Chand v/s. CIT 203 ITR 456 (SC) andCentral Provinces Manganese Ore v/s. ITO – 191 ITR 662(SC)). 13.At the stage of examining the legality or otherwise ofthe notice seeking to re-open an assessment, the Court will onlylook at whether the notice and material on which the notice wasbased, shows prima facie that the reasonable belief could havebeen formed that income has escaped assessment for the relevantassessment year. The Hon'ble Supreme Court, in New DelhiTelevision Ltd. V/s. DCIT [2020] 116 taxmann.com 151 (SC) reiterated the position that at the stage of issuance of noticethe assessment officer is required to only form a prima facie view. 13.At the stage of examining the legality or otherwise ofthe notice seeking to re-open an assessment, the Court will onlylook at whether the notice and material on which the notice wasbased, shows prima facie that the reasonable belief could havebeen formed that income has escaped assessment for the relevantassessment year. The Hon'ble Supreme Court, in New DelhiTelevision Ltd. V/s. DCIT [2020] 116 taxmann.com 151 (SC) reiterated the position that at the stage of issuance of noticethe assessment officer is required to only form a prima facie view. 14.Applying the aforesaid principles to the facts of thepresent case we do not think that any case has been made out tointerfere with the impugned notice or the impugned order. Inthis case, based on the material on record, we cannot say that therespondents had no reason to believe that income had indeedescaped assessment for the relevant assessment year. Thecircumstance about the discovery of cash deposits to the extent of`4.39 crores against the assessee's PAN number and thecircumstance that for this assessment year, the assessee chose notto file any return at all, were, sufficient as well as relevant to theformation of reason to believe. Therefore, no case is made out tointerfere with the impugned notice and the impugned order. 15.Though we are dismissing the present petition, wemake it clear that none of the observations in this order shouldeither influence or affect the assessment proceedings taken out inpursuance of the impugned notice. There, it is expected that therespondents examine the matter in some detail, including, thedefense of the petitioner herein in the context of the lettersubsequently issued by the Goa Urban Cooperative Bank. Theassessment will have to be completed by adverting to all this material no doubt after verifying the same in accord with the law.To this extent, therefore, even the petitioner will not be seriouslyprejudiced. 16.For all the aforesaid reasons this petition is dismissed.There shall be no order for costs. R. N. LADDHA, J. M. S. SONAK, J.