Konark Life Spaces,}A Registered Partnership Firm,}1[St] Floor, Konark Plaza, Sapna}Talkies, Nr. Sapna Garden}Ulhasnagar, Maharashtra v. R.v. Patil

IN THE HIGH COURT OF JUDICATURE AT BOMBAYCIVIL APPELLATE JURISDICTION WRIT PETITION NO. 2840 OF 2022 Konark Life Spaces,}A registered Partnership Firm,}1[st] Floor, Konark Plaza, Sapna}Talkies, Nr. Sapna Garden}Ulhasnagar, Maharashtra-421003} ...Petitioner Versus 1. Assistant Commissioner of}Income -Tax, Central Circle – 4,}Thane, Ashar IT Park, 6[th] Floor,}Road No. 16Z, Wagle Industrial }Estate, Thane (W), Maharashtra }– 400 604 }2. Union of India, through the}Secretary Department of Revenue}Ministry of Finance, North Block, }New Delhi – 1100 01}…Respondents **** Dr. K. Shivram, Senior Advocate a/w Mr. Rahul Hakani, Advocatesfor the Petitioner. Mr. Suresh Kumar, Advocate for the Respondents. **** CORAM : DHIRAJ SINGH THAKUR AND KAMAL KHATA, JJ. RESERVED ON : 12[th] JANUARY, 2023. PRONOUNCED ON : 10[th] FEBRUARY, 2023. JUDGMENT PER DHIRAJ SINGH THAKUR, J.: .The Petitioner assessee challenges the notice under Section148 of the Income Tax Act, 1961 (“the Act”) dated 30[th] March,2021, whereby seeking to reopen the assessment year 2015-16. Thereasons for reopening as communicated to the Petitioner was anadvance payment of Rs.17,76,08,505/- made to M/s Nancy Buildersand Developers Pvt. Ltd., which according to the Assessing Offcer(A.O.), remain unexplained and, therefore, it was alleged that thePetitioner had failed to disclose fully and truly all material factsnecessary for the reassessment. 2.Reasons as communicated to the Petitioner, briefy stated are as under: “(2) Brief details of the information collected/received by the AO: On the basis of material available on record it is seen that theassessee has disclosed payment of advance of Rs. 17,76,08,505/- toM/s Nancy Builders and Developers Pvt Ltd. The assessee had paidthe said amount for acquiring development rights in a propertywhich has been acquired by them from one M/s Goel GangaDevelopers India Pvt Ltd. A MOU (Memorandum of Understanding)between Goel Ganga Developers Private Limited and Nancy Buildersand Developers Private Limited was entered into on 09/09/2011.Further it is noticed that the assessee entered into a MOU on05/04/2012 with M/s Nancy Builders and Developers to acquire thedevelopment rights acquired by them from M/s Goel GangaDevelopers Private Limited. Considering the above facts of the case, it is established thatMOU is only a colourable device to transfer the money to M/s NancyBuilders as there is no agreement between the assessee and theoriginal owner for transfer of the said development rights. Therefore, such transaction is to be treated as unexplainedinvestment u/s 69 and brought to taxation. (3) Analysis of information collected/received: On perusal of the records it is seen that the assessee has notentered into MOU to acquire the development rights directly withthe original party i.e. M/s Goel Ganga Developers Private Limited,but with M/s Nancy Builders and Developers. There is notagreement between the assessee and the original owner for transferof the development rights. (4) Inquiries made by AO as a sequel to informationcollected/received: On perusal of the records it is seen that the assessee has notentered into MOU to acquire the development rights directly withthe original party i.e. M/s Goel Ganga Developers Private Limited,but with M/s Nancy Builders and Developers. (5) Findings of the AO: (3) Analysis of information collected/received: On perusal of the records it is seen that the assessee has notentered into MOU to acquire the development rights directly withthe original party i.e. M/s Goel Ganga Developers Private Limited,but with M/s Nancy Builders and Developers. There is notagreement between the assessee and the original owner for transferof the development rights. (4) Inquiries made by AO as a sequel to informationcollected/received: On perusal of the records it is seen that the assessee has notentered into MOU to acquire the development rights directly withthe original party i.e. M/s Goel Ganga Developers Private Limited,but with M/s Nancy Builders and Developers. (5) Findings of the AO: On perusal of the records it is noticed that M/s Goel GangaDevelopers Private Limited, the original party was not a party of theMOU between M/s Nancy Builders and Developers Private Limitedand M/s Konark Lifespaces. The original owner M/s Goel GangaDevelopers Private Limited has not consented to the said transfer.Considering the above facts, it is established that the MOU is only acolourable device to transfer the money to M/s Nancy Builders.Further there is no agreement between the assessee and the originalowner for transfer of the said development rights. Hence thetransaction of Rs.17,76,08,505/- remains unexplained. (6) Basis for forming reason to believe and details of escapement ofincome: In view of the above facts and discussion made in aboveparas, I have reason to believe that the income chargeable to tax tothe extent of Rs.17,76,08,505/- has escaped assessment for A.Y2015-16 within the meaning and scope of section 147 of Income taxAct, 1961. (7) Findings of the AO on true and full disclosure of the materialfacts necessary for assessment under Proviso to section 147: The advance payment of Rs.17,76,08,505/- to M/s NancyBuilders and Developers Pvt. Ltd. remains unexplained. Thus, theassessee had not disclosed fully and truly all material factsnecessary for its assessments. (8) Applicability of provisions of section 147/151 to the facts of the case: In this case return of income was fled for the year underconsideration and regular assessment u/s 143(3) was made on29/12/2017. Since 4 years from the end of relevant A.Y has expiredin this case, the requirement to initiate proceedings u/s 147 of theAct are reason to believe that income for the year underconsideration has escaped assessment because of failure on the partof the assessee to disclose fully and truly all material factsnecessary for the assessment year under consideration. It ispertinent to mention here that reasons to believe that income hasescaped assessment for the year under consideration have beenrecorded above. I have carefully considered the assessment recordscontaining the submissions made by the assessee in response tovarious notices issued during the assessment proceedings and havenoted that full and true disclosures of material facts have not beenmade and thereby necessitating re-opening of assessment u/s 147 ofthe Act. It is evident from the above facts that the assessee has not truly andfully disclosed material facts necessary for its assessment for theyear under consideration thereby necessitating reopening u/s 147 ofthe Act. It is evident from the above facts that the assessee has not truly andfully disclosed material facts necessary for its assessment for theyear under consideration thereby necessitating reopening u/s 147 ofthe Act. It is true that assessee has fled a copy of annual report and auditedP/L account and balance sheet alongwith the return of incomewhere various information/material were disclosed. However therequisite full and true disclosures for the assessment were not madeas noted above. It was only after investigation carried out by thedepartment it was established that the above mentioned entitiesdoes not have credit worthiness and unsecured loan from them isnot genuine. It is pertinent to mention that even though assesseehas produced books of account, annual report, audited P/L account,balance sheet or other evidence as mentioned above, the requisitematerial facts as noted above in the reason for reopening wereembedded in such a manner that material evidence could not bediscovered by the AO and could have been discovered by duediligence, attracting provisions of section 147 of the Act. It is evident from the above discussion that in this case, the issuesunder consideration were never examined by the AO during thecourse of regular assessment/reassessment. This fact iscorroborated from the contents of notices issued by the AO u/s143(2)/142(1) during the 143(3) proceedings. It is important tohighlight here that material facts relevant for the assessment on theissue under consideration were not fled during the course ofassessment proceeding and the same may be embedded in annualreport, audited P&L a/c, balance sheet and books of account in sucha manner that it would require due diligence by the AO to extractthese information. For aforesaid reasons, it is not a case of change ofopinion by the AO. In this case, more than 4 years have elapsed from the end of AYunder consideration. Hence, necessary sanction to issue notice u/s148 has been obtained separately from the Principal Commissionerof Income Tax (Central), Pune as per the provisions of Section 151 ofthe Act.” 3.The main ground of challenge to the initiation of thereassessment proceedings is that there was no omission on the partof the Petitioner assessee to disclose fully and truly any materialfact and that all material facts had been disclosed before the A.O. inregard to the said amount, which was considered by the A.O. leadingto the passing of the order of assessment dated 29[th] December, 2017.It was stated that during the course of the said scrutinyassessment, the A.O. had vide his notice dated 16[th] May, 2017 issuedunder Section 142(1) of the Act, sought details with regard to theloans/advances made to a sister concern(s)(Form 3CD). In thisregard, it is stated that the said notice was replied videcommunication dated 05[th] June, 2017. A further clarifcation wassubmitted vide communication dated 16[th] August, 2017, wherein thePetitioner assessee submitted as under: “3.1 The details of Loans/Advances given are stated inSchedule I to Audited Balance Sheet (Refer Page 38 ofCompilation). A sum of Rs.17,76,08,505/- is receivable fromour sister concern Nancy Builders & Developers Pvt. Ltd. 3.2This amount is paid towards Purchase of DevelopmentRights in land at Pune from Goel Ganga Developers Pvt.Ltd. The advance paid by us is purely of commercial nature Not only this in continuation of the earlier submissions, thePetitioner further vide communication dated 22[nd] December, 2017submitted inter alia, as under: “3.1 The details of Loans/Advances given are stated inSchedule I to Audited Balance Sheet (Refer Page 38 ofCompilation). A sum of Rs.17,76,08,505/- is receivable fromour sister concern Nancy Builders & Developers Pvt. Ltd. 3.2This amount is paid towards Purchase of DevelopmentRights in land at Pune from Goel Ganga Developers Pvt.Ltd. The advance paid by us is purely of commercial nature Not only this in continuation of the earlier submissions, thePetitioner further vide communication dated 22[nd] December, 2017submitted inter alia, as under: “2.1 It can be seen from our Balance sheet that sum ofRs.17,76,08,505/- is appearing under the head ‘Loans &Advances’. (Sch.-J in Audited Balance Sheet) This amountis paid as advance to ‘Nancy Builders & Developers Pvt.Ltd. The said ‘Nancy Builders & Developers Pvt. Ltd.(hereinafter referred as the said company) had acquiredrights in property being Plot B out of S.No. 22, Hissa No. 2Kharadi, Pune area adm. 18427.87 sq.mtrs from GoelGanga Developers (India) Pvt. Ltd. (hereinafter referred asthe said property). 2.10 In our books, all these charges are transferred to theaccount of Nancy Builders & Developers Pvt. Ltd. sincethese payments will have to be adjusted against totalpurchase price at the time of fnal transactions. Copy oftheir Ledger Extract in our books for the period 01-04-2012 to 31-03-2015 is enclosed. It will be seen there fromthat after 29-12-2012, we have not paid any amount onaccount of this transactions.” 4.Finally, the order of assessment dated 29[th] December, 2017 came to be passed. The main ground of challenge in the presentpetition is that the initiation of reassessment proceedings is nothingbut a change of opinion and there was no omission on the part of the Petitioner to make disclosure of the material facts in the presentcase. In the response fled by the Respondents, this stand of the 16 WP.2840.2022 AS.doc revenue as was urged by Mr. Kumar, learned Counsel for theRespondents is that there was no proper disclosure of the materialfacts before the A.O. during scrutiny proceedings, on the groundthat M/s Goel Ganga Developers(India) Pvt. Ltd. was not a party tothe MOU between the Petitioner and M/s Nancy Builders &Developers Pvt. Ltd. and that M/s Goel Ganga Developers(India)Pvt. Ltd. had not consented to the said transfer and, therefore, anamount of Rs.17,76,08,505/- had remain unexplained and,therefore, the transaction had to be treated as unexplainedinvestment under Section 69 of the Act and was required to bebrought to tax. 5.Admittedly, in the present case the assessment is sought to bereopened beyond the period of four years from the end of therelevant assessment year 2015-16 and, therefore, the jurisdictionalrequirement that there was a failure on the part of the assessee tofully and truly disclose all material facts necessary for assessmenthad to be established by the assessing offcer. 6.The Supreme Court in Commissioner of Income-tax, Delhi Vs.Kelvinator of India Ltd. [1]held that there was a difference between ‘power to review’ and ‘power to reassess’ under section 147 andthat the AO had no power to review and that, if the concept of‘change of opinion’ was removed, then, in the garb of reopening ofthe assessment, a review would take place. It was held : 5.Admittedly, in the present case the assessment is sought to bereopened beyond the period of four years from the end of therelevant assessment year 2015-16 and, therefore, the jurisdictionalrequirement that there was a failure on the part of the assessee tofully and truly disclose all material facts necessary for assessmenthad to be established by the assessing offcer. 6.The Supreme Court in Commissioner of Income-tax, Delhi Vs.Kelvinator of India Ltd. [1]held that there was a difference between ‘power to review’ and ‘power to reassess’ under section 147 andthat the AO had no power to review and that, if the concept of‘change of opinion’ was removed, then, in the garb of reopening ofthe assessment, a review would take place. It was held : “4……..Therefore, post-1-4-1989, power to re-open is muchwider. However, one needs to give a schematicinterpretation to the words “reason to believe” failingwhich, we are afraid, section 147 would give arbitrarypowers to the Assessing Offcer to re-open assessments onthe basis of “mere change of opinion”, which cannot be perse reason to re-open. We must also keep in mind theconceptual difference between power to review and powerto re-assess. The Assessing Offcer has no power to review;he has the power to re-assess. But reassessment has to bebased on fulfllment of certain pre-condition and if theconcept of “change of opinion” is removed, as contended onbehalf of the Department, then, in the garb of re-openingthe assessment, review would take place. One must treatthe concept of “change of opinion” as an in-built test tocheck abuse of power by the Assessing Offcer. Hence, after1-4-1989, Assessing Offcer has power to re-open, providedthere is “tangible material” to come to the conclusion thatthere is escapement of income from assessment. Reasonsmust have a live link with the formation of the belief…...” In fact, the Supreme Court in Kelvinator of India Ltd. (Supra)upheld the Full Bench decision of Delhi High Court in Commissionerof Income-tax Vs. Kelvinator of India Ltd.[2].In the said judgment,the Full Bench of Delhi High Court held :upheld the Full Bench decision of Delhi High Court in Commissionerof Income-tax Vs. Kelvinator of India Ltd.[2].In the said judgment,the Full Bench of Delhi High Court held : “We also cannot accept submission of Mr. Jolly to theeffect that only because in the assessment order, detailedreasons have not been recorded on analysis of thematerials on the record by itself may justify the Assessing 2[2002] 256 ITR-1 Offcer to initiate a proceeding under section 147 of theAct. The said submission is fallacious. An order ofassessment can be passed either in terms of sub-section(1) of Section 143 or Sub-section (3) of Section 143. Whena regular order of assessment is passed in terms of thesaid sub-section (3) of section 143 a presumption can beraised that such an order has been passed on applicationof mind. It is well known that a presumption can also beraised to the effect that in terms of clause (e) of section114 of the Indian Evidence Act the judicial and offcial actshave been regularly performed. If it be held that an orderwhich has been passed purportedly without anythingfurther, the same would amount to giving premium to anauthority exercising quasi- judicial function to take beneftof its own wrong.” In Jindal Photo Films Ltd. Vs. Deputy Commissioner of Income Tax [3], the Court, in the light of the facts before it and in thebackground of section 147 of the Act, observed : In Jindal Photo Films Ltd. Vs. Deputy Commissioner of Income Tax [3], the Court, in the light of the facts before it and in thebackground of section 147 of the Act, observed : “……………….all that the Income-tax Offcer has said is thathe was not right in allowing deduction under Section 80Ibecause he had allowed the deductions wrongly and,therefore, he was of the opinion that the income hadescaped assessment. Though he has used the phrase"reason to believe" in his order, admittedly, between thedate of the orders of assessment sought to be reopened andthe date of forming of opinion by the Income-tax Offcernothing new has happened. There is no change of law. Nonew material has come on record. No information has beenreceived. It is merely a fresh application of mind by thesame Assessing Offcer to the same set of facts. Whilepassing the original orders of assessment the order datedFebruary 28, 1994, passed by the Commissioner ofIncome-tax (Appeals) was before the Assessing Offcer.That order stands till today. What the Assessing Offce hassaid about the order of the Commissioner of Income-tax(Appeals) while recording reasons under Section 147 hecould have said even in the original orders of assessment. 7.It is also equally well settled that if a notice under Section 148has been issued without the jurisdictional foundation under Section147 being available to the Assessing Offcer, the notice and thesubsequent proceedings will be without jurisdiction, liable to bestruck down in exercise of writ jurisdiction of this court. If "reasonto believe" be available, the writ court will not exercise its power ofjudicial review to go into the suffciency or adequacy of the materialavailable. However, the present one is not a case of testing thesuffciency of material available. It is a case of absence of materialand hence the absence of jurisdiction in the Assessing Offcer toinitiate the proceedings under Section 147/148 of the Act.” 8.Testing the facts of the present case on the on the touchstoneof the judgment referred to hereinabove, it can be seen that theissue of ‘Large Loans/Advances’, was not only raised during thescrutiny assessment, but the same was responded to specifcally bythe assessee, as seen from the clarifcations dated 5 June 2017 and16 August 2017, which fnally led to passing of the Order underSection 143(3) of the Act. 9.In the present case from the record, and specifcally from thereasons recorded, it is not justifable as to what information wasreceived by the assessing offcer and what was that issue ormaterial that had not been considered by the assessing offcerduring the scrutiny assessment proceedings. As between the dateof Order of assessment, which is sought to be reopened and the dateof forming of the opinion, in the present case, nothing new hadhappened. It is clear that there is neither a new informationreceived nor has referrence been made to any new material onrecord. It is an absence of an agreement between the Petitioner,Goel Ganga Developers Pvt Ltd and M/s Nancy Builders andDevelopers Ltd that the assessing offcer formed a basis forreopening the assessment. It is nobody’s case that there existedany such agreement, which ought to have been produced but wasnot produced. Rather the assessing offcer intends to imply that inthe absence of any such agreement, the beneft ought not to havebeen granted to the Petitioner in the scrutiny assessment. Therecannot be any failure to disclose fully and truly, if there was no suchdocument as such. This, in our opinion, is nothing but a change ofopinion, which does not satisfy the jurisdictional foundation underSection 147 of the Act. 16 WP.2840.2022 AS.doc 10.Be that as it may, we hold that the impugned notice dated30 March 2021 issued under Section 148 of the Ac and allconnected proceedings are unsustainable and, accordingly, setaside. Accordingly the Petition is allowed. No costs. (KAMAL KHATA, J.) (DHIRAJ SINGH THAKUR, J.) 16 WP.2840.2022 AS.doc 10.Be that as it may, we hold that the impugned notice dated30 March 2021 issued under Section 148 of the Ac and allconnected proceedings are unsustainable and, accordingly, setaside. Accordingly the Petition is allowed. No costs. (KAMAL KHATA, J.) (DHIRAJ SINGH THAKUR, J.) Digitally signed byRUSHIKESHRUSHIKESH VPATILV PATILDate: 2023.02.1018:56:33 +0530RUSHIKESHRUSHIKESH VPATILV PATILDate: 2023.02.1018:56:33 +0530