R/Of Yashodeep, 117, Navi-Peth v. The Dy. Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT BOMBAY,BENCH AT AURANGABAD. WRIT PETITION NO.630 OF 2013 Ajay s/o Shantilal Lalwani (HUF)through its Karta:-Ajay s/o Shantilal Lalwani,age 47 years, occup. business, r/of Yashodeep, 117, Navi-Peth, Jalgaon.Petitioner versus 1.The Dy. Commissioner of Income Tax, Circle-I, Jalgaon. 2.The Joint Commissioner of Income Tax, Range-I, Jalgaon. 3.The Commissioner of Income tax-II,Nasik. 4.The Chief Commissioner of Income Tax,Nasik. 5.The Union of India, through its Ministry of Finance, Department of Revenue, Central Board of Direct Taxes (CBDT),North Block, New Delhi.Respondents ------ Shri P. M. Shah, Senior Counsel, i/byShri S.P. Shah, Advocate for PetitionerShri Alok Sharma, Assistant SolicitorGeneral for Respondents. ----- CORAM : R. M. BORDE, AND SUNIL P. DESHMUKH, JJ. DATE OF RESERVING JUDGMENT : 30.04.2013 DATE OF PRONOUNCING JUDGMENT: 10.05.2013 Judgment (Per: Sunil P. Deshmukh, J.) 1.Rule, returnable forthwith. By consent of parties the writ petition is taken up for final disposal. 2.Petitioner seeks indulgence of High Court, to invoke powers and jurisdiction under Article 226 of the Constitution of India, questioning legality and validity of actions initiated by Respondents No. 1 and 2 for 'scrutiny assessment' [as referred to by the petitioner] of income for the financial year 2009-10, corresponding to assessment year 2010-11 under notices issued pursuant to Sections 143(2) and 142(1) of the Income Tax Act, 1961 (hereinafter, for brevity, referred to as "The IT Act"). 3.The petitioner is engaged in business of gold and diamond jewellery from last about 15 years as a trader at Jalgaon. The petitioner has a showroom at Jalgaon, where various items of jewellery are displayed for sale. Petitioner claims to have maintained full and complete books of account and record as are required to be maintained for such business, including, inter alia, purchase, sale, cash books, stock registers and other relevant record. The books of account are claimed to be duly audited every year and each item of stock of jewellery, according to the petitioner, tallies with stock register and other record maintained for said purpose. 4.On 24.9.2009, a survey, pursuant to Section 133-A of the IT Act, had been carried out by the Income Tax Department, of the trade premises of the petitioner in respect of the records and the physical stock available in the showroom/shop. During the survey, a statement of the petitioner had been recorded in which there had been a disclosure from the petitioner about additional income. It is the contention of the petitioner that an assurance had been given to him by survey party that, "no further action would be taken against the petitioner and in view of the instructions issued by the Central Board of Direct Tax ("CBDT" for short), petitioner's Return of Income would not be taken-up for scrutiny." and based on such assurance, petitioner had signed said statement. 5.According to the petitioner, although there is no discrepancy in the physical stock vis a visthe stock record and cash books, yet, only with a view to buy peace of mind and to avoid long drawn litigation, he accepted his income as per disclosure made during survey and accordingly, filed return of income for the assessment year 2010-11 on 15.10.2010 and also paid income tax on the same. 6.The petitioner was served with notice dated 21.9.2011 under Section 143(2) of the IT Act, issued by Respondent No. 1 (Deputy Commissioner of Income-tax, Circle I, Jalgaon), selecting 5.According to the petitioner, although there is no discrepancy in the physical stock vis a visthe stock record and cash books, yet, only with a view to buy peace of mind and to avoid long drawn litigation, he accepted his income as per disclosure made during survey and accordingly, filed return of income for the assessment year 2010-11 on 15.10.2010 and also paid income tax on the same. 6.The petitioner was served with notice dated 21.9.2011 under Section 143(2) of the IT Act, issued by Respondent No. 1 (Deputy Commissioner of Income-tax, Circle I, Jalgaon), selecting petitioner's case for 'scrutiny assessment'. The petitioner protested against said notice on 26.9.2011, contending that the case of the petitioner cannot be chosen for scrutiny assessment taking into account the guidelines issued by CBDT since there was no impounding of record or documents and there had been no retraction of disclosure made during the survey and the declaration of income, excluding disclosure, was more than the declared income of the preceding year and further that the survey party had promised the petitioner that the petitioner's income would not be subjected to scrutiny if the declaration is made by the petitioner. 7.Subsequently, the petitioner received a notice dated 21.5.2012 under Section 142 (1) of the IT Act, issued by Respondent No. 2 (Joint Commissioner of Income-tax Range I, Jalgaon) calling for certain details for assessment. In response to said notice, the petitioner had appeared before Respondent No. 2 on 6.6.2012, contending that though Respondent No. 1 had initiated assessment proceedings, he had not communicated anything about petitioner's objections to the same, which indicated that the objections were accepted and the proceedings were dropped. The objections of the petitioner appear to have been considered by Respondent No. 2 and rejected, referring to that there had been e-filing of income-tax return and that additional income was credited to profit and loss account instead of offering the same in computation of regular income. The income, excluding the declared income, shows sudden fall and there were no details regarding marriage function and petitioner was directed to give certain details listed in the communication of Respondent No. 2. 8.The petitioner had approached Ombudsman of Income Tax Department for grievance settlement under clauses 9(n) and 9(o) of the Income Tax Ombudsman guidelines, 2006, putting on record the facts regarding actions of the 1st and 2nd Respondents, requesting for issuing necessary directions. The petitioner thereafter sent reminder to Ombudsman for urgent disposal of the matter. 9.It also appears that Respondent No. 2 in July, 2012 had directed the petitioner to furnish certain details and warned of finalization of assessment on failure of compliance to supply the details. The petitioner had also been issued a show cause notice under Section 271 (1)(b) of the IT Act for penal action for failure to furnish required details. 10.The petitioner thereafter had approached Respondent No. 3 (The Commissioner of Income Tax-II, Nasik) and submits, despite aforesaid being brought to notice of Respondent No. 2, he went on fixing dates for hearing and assessment. The petitioner had also approached Respondent No. 4 (The Chief Commissioner of Income Tax, Nasik) urging him to intervene in the matter with a view to save him from harassment. It appears that comments were forwarded to Respondent No. 3 about the proceedings to go on. 11.Reference to relevant extract, from the CBDT circular (Exh. C to petition) titled "Criteria/Guidelines for selection of cases for Income tax Scrutiny for Assessment year 2010-11 or Financial Year 2009-2010" as is reproduced hereinbelow can usefully be made. 10.The petitioner thereafter had approached Respondent No. 3 (The Commissioner of Income Tax-II, Nasik) and submits, despite aforesaid being brought to notice of Respondent No. 2, he went on fixing dates for hearing and assessment. The petitioner had also approached Respondent No. 4 (The Chief Commissioner of Income Tax, Nasik) urging him to intervene in the matter with a view to save him from harassment. It appears that comments were forwarded to Respondent No. 3 about the proceedings to go on. 11.Reference to relevant extract, from the CBDT circular (Exh. C to petition) titled "Criteria/Guidelines for selection of cases for Income tax Scrutiny for Assessment year 2010-11 or Financial Year 2009-2010" as is reproduced hereinbelow can usefully be made. "1.Selection of cases for scrutiny during the financial year 2010-11 will be done primarily through CASS this year. Manual Selection for scrutiny this year will be limited only to a few cases listed below. 2. ................................................................................................................ 3. These guidelines are meant only for the use of officers of the Income Tax Department. These are not to be disclosed even if a request is made under Right to Information Act, in view of the decision of the Central Information Commission in the case of Shri Kamal Vs. Director (ITA-II) CBDT (order no.CIC/AT/2007/00617 dated 21.2.2008. a) .................................................................................................................b) ................................................................................................................. c) .................................................................................................................. d) Assessment in survey cases for the financial year in which survey was carried out. This criteria will not apply if all of the following conditions are fulfilled: i.There are no impounded books or documents. ii. There is no retraction of disclosure, if any, made during the survey. iii. Declared income, excluding any disclosure made during the survey, is not less than the declared income of the preceding year.survey, is not less than the declared income of the preceding year. e) .................................................................................................................. f) ................................................................................................................... g) Assessing Officer may select any return for scrutiny after recording the reason and obtaining approval of the CCIT/DGIT. The cases under this category should be selected if, there are compelling reasons and the case is not selected through CASS. These cases should be watched by CCIT/CIT in respect of the quality of assessment." 12.The petitioner contends that the criteria laid down by CBDT is to be implemented by the Income Tax authorities in the letter and the spirit which is intended to avoid picking and choosing of cases for scrutiny under manual selection, to curb possible misuse of power by unscrupulous authorities and thus CBDT has prescribed criteria for manual selection. The office of Income Tax Ombudsman has been formed to enable resolution of complaints against the Income Tax department on the ground of lack of transparency in identifying cases for consideration and non communication of reasons for selection and in relation to violation of administrative instructions and guidelines issued by CBDT. 13.It is contended by the petitioner, the source of powers for CBDT to issue instructions and directions is in Section 119 of the IT Act and as such, such instructions or guidelines have been statutory in nature. Powers have been given for just, proper and efficient work assessment in public interest for proper administration of fiscal law with a view to avoid undue hardship to the assessee. 13.It is contended by the petitioner, the source of powers for CBDT to issue instructions and directions is in Section 119 of the IT Act and as such, such instructions or guidelines have been statutory in nature. Powers have been given for just, proper and efficient work assessment in public interest for proper administration of fiscal law with a view to avoid undue hardship to the assessee. 14.The petitioner further contends, cases for scrutiny would be selected according to CBDT circular, primarily through Computer Aided Scrutiny Selection (CASS) and manual selection is limited to a few cases, viz. (i)after recording reasons (ii)obtaining approval of CCIT (iii)If, there are compelling reasons and, (iv)The case is not selected through CASS 15.The petitioner assails correctness of picking up of his case for scrutiny, for, according to the petitioner, there is doubt about obtaining approval of Joint Commissioner, Income Tax, as required under the instructions. According to the petitioner, the same is sans any material and no particulars have been furnished about the same and so is the case about the reasons stated by the assessing officer for seeking approval, nor copy of approval has been produced. 16.The petitioner submits that the instructions and directions of CBDT in respect of assessment have been over-taken in the actions of the Income Tax department, by issuing notices under sections 143 (2) and 142(1) of the IT Act and taking the case for scrutiny assessment. According to the petitioner said notices are, in excess of powers of 1st and 2nd Respondents and outside the scope of instructions issued by CBDT. 17.Aforesaid submissions have been formulated, for according to the petitioner, Respondent No. 3 has not granted approval himself and simply directed the Assessing Officer to obey the CBDT norms, implicit in which is seeking approval of competent authority. Since Respondent No.2 authority itself has given approval to manual selection for scrutiny and now Respondent No. 2 himself is the assessing officer, it is case of assessing officer and the approving officer being one and the same, and thus it is, fundamentally faulty as functions of the assessing officer and that of approving authority are qualitatively different. 18.The respondents No. 1 to 3 have filed their replies to the petition opposing the claims of petitioner. The respondents submit that entire procedure according to relevant CBDT guidelines has been followed before issuing notices to petitioner. There is no substance in the objections of petitioner in respect of the same. Respondents further contend that even otherwise they are authorized to issue notices under statutory provisions. 19.The respondents have taken exception to reference to CBDT guidelines and its contents by petitioner. However, the stand of the respondents that such instructions, guidelines etc. are not supposed to be disclosed even if the request is made under the Right to Information Act, in this case, is inefficacious. Besides, the position appears to have been governed by a few rulings on this issue. Although the respondents have reservations about disclosure of CBDT circulars, guidelines or directions which are confidential in nature and are not expected to be disclosed outside the Income Tax department, the same have been rendered redundant in this matter, since Respondent No. 2 himself has placed on record guidelines for scrutiny. 19.The respondents have taken exception to reference to CBDT guidelines and its contents by petitioner. However, the stand of the respondents that such instructions, guidelines etc. are not supposed to be disclosed even if the request is made under the Right to Information Act, in this case, is inefficacious. Besides, the position appears to have been governed by a few rulings on this issue. Although the respondents have reservations about disclosure of CBDT circulars, guidelines or directions which are confidential in nature and are not expected to be disclosed outside the Income Tax department, the same have been rendered redundant in this matter, since Respondent No. 2 himself has placed on record guidelines for scrutiny. 20. The Respondents refer to position that the declared income of the petitioner for the assessment year 2009-10 was Rs. 12,11,281/- and for the assessment year 2010-11, Rs. 13,97,022/-, excluding disclosure made during the statement given in survey. During survey, inventories of the stock and cash found were prepared by survey team. Said inventories had been duly signed by petitioner acknowledging that the survey party had taken correct stock as stated by petitioner on 24.9.2009. So also, trading account as subsisting on 24.9.2009, had been verified. The survey party found discrepancy of 5083.08 grams of gold and 0.816 of diamond in the respective items in the books of account as per the inventories prepared. The value of the difference in respect of stock was to the tune of Rs.81,51,540/-. Apart from difference in stock, the survey party also found difference in actual cash and balance as per the cashbook, which was of Rs.1,90,000/=. Respondents claim, said difference had been accepted by the petitioner. Said differences had been offered as additional income for the assessment year 2010-11. During the survey, petitioner had submitted list of gold depositors as on 24.9.2009 and total weight of gold deposit was shown at 10725.780, whereas during the course of survey, the head count stock valuation had been shown at 5229.99. According to respondents, this position clearly shows, there is a difference which the income tax department felt necessary to be verified. 21. In the present case, position appears to be that Respondent No. 1 as an assessing officer has sought approval from Respondent No. 2 being the approving authority pursuant to the CBDT instructions and it appears that it had been referred to that the case should be selected for scrutiny. The other ground on which the action of the Respondents is assailed is that there was no reason preceding the selection for scrutiny case of petitioner. The Respondents rely on a document shown to us, giving reasons for manual selection of petitioner's case for scrutiny by the assessing officer. 22.The position is that the relevant guidelines relied on show that the assessing officer under clause (g) thereof is empowered to select a particular case for 'scrutiny assessment'. Respondent No. 1 who then was assessing officer after recording reasons for selection of petitioner's case sought approval of Respondent No. 2 who was then the approving authority and had approved the selection. Subsequently, pursuant to provisions of IT Act, the case was assigned to Respondent No. 2 for assessment. Requisite procedure before issuing notices under Sections 143 (2) and 142 (1) of the IT Act appears to have been followed. 23.Present petition, therefore, does not appear to be a fit case for exercise of discretion in favour of the petitioner. Hence, we decline the request of the petitioner. 24.Consequently, rule is discharged. Petition stands dismissed. (SUNIL P. DESHMUKH, J.) (R. M. BORDE, J.) pnd