Patel Engineering Limited v. Deputy Commissioner Of Income Tax, Central Circle 3(4) And Ors

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 3543 OF 2019 Patel Engineering Limited...PetitionerVersus Deputy Commissioner of Income Tax, Central Circle 3(4) and ors. ...Respondents Mr. Madhur Agarwal, a/w Mr. Upendra Lokegaonkar, i/bMind & Confreres, for the Petitioner. Mr. Suresh Kumar, for the Respondents. CORAM:K. R. SHRIRAM &N. J. JAMADAR, JJDATED:25[th] JANUARY, 2022(Video Conferencing) -Oral Order: 1.Petition is impugning notice dated 31[st] March, 2019, issuedunder Section 148 of the Income Tax Act, 1961 ("the Act") andorder dated 16[th] October, 2019, disposing off petitioner'sobjections. No reply has been filed though time was granted on18[th] December, 2019. 2.As could be seen from the impugned notice dated 31[st]March, 2019, reopening is proposed after expiry of four yearsfrom the relevant assessment year. Since assessment underSection 143(3) has been completed, the proviso to Section 147 ofthe Act shall apply. The onus is on respondents to disclose what was the material fact that petitioner failed to disclose truly andfully. 3.We have considered the reasons recorded for reopening andin our view, it does not disclose anywhere that there was failureon the part of petitioner to disclose fully and truly all materialfacts. Simply using the words, ".... by reason of failure on thepart of assessee to disclose fully and truly all material factsnecessary for his assessment," would be of no use torespondents since it is rather obvious that it is made only as anattempt to take the case out of the restrictions imposed byproviso to Section 147 of the Act. 4.Mr. Suresh Kumar 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 reopeningdoes 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.Suresh Kumar but as held in Crompton Greaves Ltd.(Supra),this is subject to the rider that there must be cogent and clearindication in the reasons supplied, that in fact there was failure 1(2015) 55 taxmann.com59 (Bombay) on the part of assessee to disclose fully and truly all the materialfacts necessary for its assessment. If the factum of failure todisclose can be culled down from the reasons in support of thenotice seeking to reopen assessment, that will certainly not befatal to the assumption of jurisdiction under Sections 147 and148 of the Act. The Court held “However, if from the reasons, nocase of failure to disclose is made out,then certainly theassumption of jurisdiction under Sections 147 and 148of the Actwould be ultra vires, being in excess of thejurisdictionalrestraints imposed by the first proviso to Section147 of the Act”. 5.We are actually having difficulty to make out any sense inthe reasons recorded. The entire basis, as we have understood,is certain companies were accepting contracts and were sub-contracting those contracts to other entities and respondentscame to know about this based on a survey under Section 133-Aof the Act of one Singla Engineers and Contractors PrivateLimited (“SECPL”) on 31[st] October, 2014. First of all, this surveyhas been conducted before the assessment order dated 31[st]March, 2015 for Assessment Year 2012-2013 was passed in thecase of petitioner and, therefore, the Assessing Officer shouldhave been aware of any such information but still chose not toraise it during the assessment process. Moreover, according to3/8 5.We are actually having difficulty to make out any sense inthe reasons recorded. The entire basis, as we have understood,is certain companies were accepting contracts and were sub-contracting those contracts to other entities and respondentscame to know about this based on a survey under Section 133-Aof the Act of one Singla Engineers and Contractors PrivateLimited (“SECPL”) on 31[st] October, 2014. First of all, this surveyhas been conducted before the assessment order dated 31[st]March, 2015 for Assessment Year 2012-2013 was passed in thecase of petitioner and, therefore, the Assessing Officer shouldhave been aware of any such information but still chose not toraise it during the assessment process. Moreover, according to3/8 the Jurisdictional Assessing Officer (“JAO”), who has recordedthe reasons, a contract was received by petitioner from oneSECPL during the relevant assessment year forRs.24,22,57,252/-. That can not be a reason to re-open becauseJAO does not even state, whether petitioner executed thecontract and received any income. 6.Moreover, petitioner has stated in the petition and it hasnot been denied by respondent, that petitioner did receive acontract from SECPL but the contract was for Rs.14,92,47,452/-and not for Rs.24,22,57,252/- as mentioned in the reasons forreopening. Petitioner had sub-contracted the contract to oneBramhaputra Infrastructure Limited for a consideration ofRs.14,62,95,999/- and the contracting charges were credited bypetitioner to the profit and loss account and offered as income.Petitioner first filed its return of income for Assessment Year2012-2013 on 30[th] November, 2012 and thereafter filed revisedreturn of income on 28[th] February, 2014 along with annualaccounts of petitioner. During the assessment proceedings,Assessing Officer had issued notice dated 17[th] December, 2014under Section 142(1) read with Section 129 of the Act askingdetails of the sub-contract given by petitioner with details of theparties. Petitioner by its letter dated 5[th] January, 2015submitted the details required by the Assessing Officer which4/8 included the receipt of Rs.14,92,47,452/- from SECPL, whichwas credited as income in the relevant year. Petitioner,thereafter, on 25[th] March, 2015 filed submissions giving the AIRReconciliation that included reconciliation of income receivedfrom SECPL. Thereafter the assessment order dated 31[st] March,2015 under Section 143(3) for Assessment Year 2012-2013 waspassed. The assessment order dated 31[st] March, 2015, copywhereof is annexed to the petition, also records that theauthorised representative of petitioner attended from time totime and furnished details called for. 7.Therefore, by no stretch of imagination, it can be held thatthere was non-disclosure on the part of petitioner. These factshave been brought to the notice of respondents by petitioner videletter dated 10[th] October, 2019. Notwithstanding the same, theorder on the objections dated 16[th] October, 2017 and impugnedin the petition has been passed. 8.In our view, having heard the Counsels and considered thepetition along with documents annexed thereto, the JAO has notverified the facts with the data available with him and simply onthe basis of information received from DDIT, has issued thenotice to petitioner. Therefore the condition precedent for takingaction under Section 147 of the Act that mandates, it is exclusively the satisfaction of the assessing authority based onsome direct, correct and relevant material has not been met.This Court in CTIT vs. Shodiman Investment P. Ltd.[2] has heldthat reopening notice has to be issued by the Assessing Officeron his own satisfaction and not on borrowed satisfaction. 8.In our view, having heard the Counsels and considered thepetition along with documents annexed thereto, the JAO has notverified the facts with the data available with him and simply onthe basis of information received from DDIT, has issued thenotice to petitioner. Therefore the condition precedent for takingaction under Section 147 of the Act that mandates, it is exclusively the satisfaction of the assessing authority based onsome direct, correct and relevant material has not been met.This Court in CTIT vs. Shodiman Investment P. Ltd.[2] has heldthat reopening notice has to be issued by the Assessing Officeron his own satisfaction and not on borrowed satisfaction. 9.The Delhi High Court in Sabh Infrastructure Limited vs.Assistant Commissioner of Income-Tax[3]had laid down certainguidelines in matters of reopening of assessment and one of theguideline, which the revenue was directed to adhere to was,where the reasons make a reference to another document,whether as a letter or report, such document and/or relevantportions of such report should be enclosed along with thereasons. We find that to the reasons recorded, revenue has notannexed the DDIT information received by them. To that extent,the revenue, therefore, is in breach of the orders of the DelhiHigh Court in Sabh Infrastructure Limited (supra). 10.We also notice in the order disposing petitioner’sobjections, Assessing Officer has relied upon various judgmentsof which copies have not been provided or were brought to thenotice of assessee before the order on objection was passed sothat assessee could have suitably dealt with those 2(2018) 39 taxmann.com 153 (Bom). 3(2017) 398 ITR 198 (Delhi). judgments/orders. Therefore, we would add that there is alsobreach of principles of natural justice on the part of theAssessing Officer, who as a quasi judicial authority had anobligation to adhere strictly to the principles of natural justice. 11.We also notice that in the order disposing the objections,the JAO has gone beyond the reasons recorded for reopeninginasmuch as according to him no bank statements or workcontract receipts were inquired or submitted during the originalassessment proceedings based on which the actual amount andthe nature and genuineness of the work done by assessee forSECPL could have been verified. It is settled law that reasonscannot be improved upon and/or supplemented as held in FirstSource Solutions Limited vs. The Assistant Commissioner ofIncome Tax – 12(2)(1) and another.[4] In any event, the AssessingOfficer is not correct inasmuch as petitioner, as recorded earlier,has provided the details regarding contract with SECPL. 12.In the circumstances, the petition is allowed in terms ofprayer Clause (a), which reads as under. “(a) that this Hon'ble Court be pleased to issue aWrit of Certiorari or any other writ order or directionunder Article 226 of the Constitution of India calling forthe records of the case leading to the issue of theimpugned notice and passing of the impugned order andafter going through the same and examining the questionof legality thereof quash, cancel and set aside theimpugned notice (Exhibit-F) dated 31[st] March, 2019 and impugned order (Exhibit-J) dated 16[th] October, 2019.” 13.Petition disposed. [N. J. JAMADAR, J.] [K. R. SHRIRAM, J.]