Nirmal Bang Securities Pvt. Ltd. Mumbai v. Asst. Commissioner Of Income Tax Circle

SANTOSHSUBHASHKULKARNIDigitally signed bySANTOSH SUBHASHKULKARNIDate: 2022.02.1013:44:53 +0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 671 OF 2022 Nirmal Bang Securities Pvt. Ltd. Mumbai...Petitioner Versus Asst. Commissioner of Income Tax Circle 4(2)(1), Mumbai & anr....Respondents Dr. K. Shivaram, Senior Advocate, i/b Mr. Rahul Hakani, forthe Petitioner. the Petitioner. Mr. Sham V. Walve, i/b Mr. Suresh Kumar, for theRespondents.Respondents. CORAM: K. R. SHRIRAM & N. J. JAMADAR, JJ8[th] FEBRUARY, 2022(Video Conferencing) DATED: -Order: 1.No reply has been filed and by consent of the parties taken up for admission/disposal, at this stage itself. 2.Prayer clause (a) of the petition reads as under: “(a) that this Hon’ble Court may be pleased to issue a Writof Certiorari or a Writ in the nature of Certiorari or any otherappropriate Writ, order or direction, calling for the records ofthe Petitioner’s case and after going into the legality andpropriety thereof, to quash and set aside the said (i) Noticeu/s 148 dated 31[st] March, 2021 (Exh.”A”), (ii) the impugnedorder dated 13/1/2022 being (Exh.”B”) and (iii) Notice u/s142(1) dtd.20/1/2022 being (Exh.”C”).” 3.Petitioner is a stockbroking firm and returned an income of Rs.1,03,30,630/- for Assessment Year 2013-2014. During the course of assessment proceedings, Assessing Officer issued notice dated 13[th] July 2015 under Section 142(1) of the IncomeTax Act, 1961 ("the Act") asking for various details. Theassessment of petitioner for Assessment Year 2013-2014 wascompleted under Section 143(3) of the Act assessing total incomeat Rs.9,10,95,756/-. Thereafter, assessment was reopenedunder Section 147 vide notice dated 30[th] March 2018 underSection 148 as information about large value cash transactionwas received. Upon considering the submissions made as wellas the documents submitted by petitioner no addition was madeand income was assessed as per order dated 19[th] April, 2018passed in appeal under Section 250 against the originalassessment order. 4.The assessment of petitioner is now again proposed to bereopened by issuing notice dated 31[st] March 2021 under Section148 of the Act. The reasons supplied to petitioner for reopeningare as under:- “In this case, search information is received with regard toaccommodation entry, STR etc in which assessee is beneficiary, thedetails of which are as under: In view of the above facts and after due application of mindafter analyzing all the relevant information in the case of assessee intotality, I have reason to believe that income of Rs.7,08,54,623/- hasescaped assessment for A.Y.2013-14 and the same is thereforerequired to be reopened for scrutiny assessment.” 5.As could be seen from the reasons quoted above, it is bereftof any material. It does not indicate what address was searched,from whom such information was received, what date the searchhappened, what date the information was received, what was theinformation etc. Admittedly a copy of the information receivedalso has not been provided to petitioner to enable petitioner toeffectively deal with the reasons. 6.Notwithstanding receiving these reasons, without anydetails available, petitioner filed its objection by acommunication dated 12[th] August, 2021. Petitioner objected tothe reopening on the following grounds: (i)There was no failure on the part of petitioner todisclose fully and truly all material facts necessaryfor assessment and recorded reasons do not recordsuch failure. disclose fully and truly all material facts necessaryfor assessment and recorded reasons do not recordsuch failure. (ii)Reopening is done without own satisfaction ofrespondent no.1.respondent no.1. 6.Notwithstanding receiving these reasons, without anydetails available, petitioner filed its objection by acommunication dated 12[th] August, 2021. Petitioner objected tothe reopening on the following grounds: (i)There was no failure on the part of petitioner todisclose fully and truly all material facts necessaryfor assessment and recorded reasons do not recordsuch failure. disclose fully and truly all material facts necessaryfor assessment and recorded reasons do not recordsuch failure. (ii)Reopening is done without own satisfaction ofrespondent no.1.respondent no.1. (iii) There is no live nexus between the material andformation of belief about escapement of income. formation of belief about escapement of income. (iv) The reasons are vague and factually incorrect. Basedon the decisions of the Courts, the proposed noticeissued for reopening of assessment is withoutjurisdiction, hence, the reopening is bad in law.on the decisions of the Courts, the proposed noticeissued for reopening of assessment is withoutjurisdiction, hence, the reopening is bad in law. (v)The reopening notice was issued on the ground offactually incorrect basis which is bad in law. factually incorrect basis which is bad in law. 7.These objections were rejected by an order dated 13[th] January 2022 without dealing with any of the objections ofpetitioner on factual aspects of the issues involved. It is thisorder dated 13[th] January 2022, which is also impugned in thispetition. 8.Admittedly the notice for reopening has been issued fouryears after the expiry of the relevant assessment year. Therefore,reopening is barred unless respondent is able to show thatpetitioner had failed to disclose fully and truly all material factsfor assessment. 9.Mr. Walve relied upon a judgment of this Court inCrompton Greaves Ltd. V/s. Assistant Commissioner of IncomeTax,Circle 6 (2) 4[1] to submit that even if the reason for reopening 1(2015) 55 taxmann.com59 (Bombay) 4/6 does not specifically state that there was any failure on the partof petitioner to disclose fully and truly all material factsnecessary for its assessment for the relevant assessment year, itwill not be fatal to the assumption of jurisdiction under Sections147 and 148 of the Act. We would certainly agree with Mr. Walvebut as held in Crompton Greaves Ltd. (Supra), this is subject tothe rider that there must be cogent and clear indication in thereasons supplied, that in fact there was failure on the part ofassessee to disclose fully and truly all the material factsnecessary for its assessment. If the factum of failure to disclosecan be culled from the reasons in support of the notice seekingto reopen assessment, that will certainly not be fatal to theassumption of jurisdiction under Sections 147 and 148 of theAct. The Court held “However, if from the reasons, no case offailure to disclose is made out, then certainly the assumption ofjurisdiction under Sections 147 and 148 of the Act would beultra vires, being in excess of the jurisdictional restraintsimposed by the first proviso to Section 147 of the Act”. 10.Having seen the reasons, no case of failure to disclose ismade out. The factum of failure to disclose cannot be culledfrom the reasons in support of the notice seeking to reopen theassessment. Therefore, certainly it will be fatal to theassumption of jurisdiction under Sections 147 and 148 of the5/6 Act. 11.On this ground alone, the prayer clause (a) as quotedabove is hereby granted. 10.Having seen the reasons, no case of failure to disclose ismade out. The factum of failure to disclose cannot be culledfrom the reasons in support of the notice seeking to reopen theassessment. Therefore, certainly it will be fatal to theassumption of jurisdiction under Sections 147 and 148 of the5/6 Act. 11.On this ground alone, the prayer clause (a) as quotedabove is hereby granted. 12.We also have to observe that the reason recorded forreopening as noted earlier, is bereft of any material orinformation. We wonder what prompted the jurisdictionalAssessing Officer to write such a bald and toothless reason.Certainly the reasons, as recorded, cannot even indicateanywhere or by no stretch of imagination can it be concludedthat any income has escaped assessment. We are also surprisedthat by reading these reasons, approval under Section 151 hasbeen granted, which also indicates clear non-application of mindby the authority which granted the approval. 13.We only hope that respondents’ officers will record betterreasons for reopening and the authority granting approval willalso apply their mind sincerely before granting an approval. 14.Petition disposed with no order as to costs. [N. J. JAMADAR, J.] [K. R. SHRIRAM, J.]