Santosh v. Patto, Panaji, Goa. …

1 Santosh IN THE HIGH COURT OF BOMBAY AT GOA WRIT PETITION NO. 17 OF 2020 M/s. Anand Developers, a partnership firm constituted under the provisions of the Partnership Act, 1932, having officeat 801, Anand Square B, NearSanjeevani Hospital, Baina, Vasco Da Gama 403 802, Goa, India P.A. No.AAMFA 9496L, through its Authorized RepresentativeMr. Ashish V. Prabhu Verlekar, son of Mr. V.B. Prabhu Verlekar, major of age,Indian National, having office at 201, Govinda Building, M.G. Road, Panaji, Goa. ..… Petitioner Versus1. Asst. Commissioner of Income TaxCircle 2(1), having office at Patto, Panaji – Goa. 2. Commissioner of Income-Tax Patto, Panaji, Goa. …... Respondents.Mr. Shivan Desai, Advocate for the Petitioner. Patto, Panaji, Goa. …... Respondents.Mr. Shivan Desai, Advocate for the Petitioner. Ms. Susan Linhares, Standing Cousnel for the Respondents. 2 wp17-20dt.18-02-20 Coram : M.S. Sonak & Kum. Nutan D. Sardessai, JJ. th February, 2020. Date : 18 ORAL JUDGMENT : (Per M.S. Sonak, J.) Heard Mr. Shivan Desai for the Petitioner and Ms. S.Linhares, learned Standing Counsel for the Respondents. 2.Rule. Rule is made returnable forthwith with the consentof and at the request of the learned Counsel for the parties. 3.Challenge in this Petition is to the Notice dated 29[th] March,2019, issued under Section 148 of the Income Tax Act, 1961 (ITAct) and the order dated 17th December, 2019, disposing of thePetitioner's objections to the reopening of the assessment inpursuance of the notice dated 29th March, 2019. 4.Mr. Shivan Desai, learned Counsel for the Petitionersubmits that in the present case, true and complete disclosures weremade by the Petitioner vide letter dated 20[th] February, 2015 in thecourse of the assessment proceedings itself. Upon consideration ofsuch disclosures, the Assessing Officer (AO) made assessment orderdated 16th March, 2015 under Section 143(3) of the IT Act. Mr.Desai submits that in such circumstances, merely on the basis of a 3 change of opinion, the AO lacked jurisdiction to issue notice underSection 148 of the IT Act, seeking to reopen the assessment. In anycase, Mr. Desai submits that since, there was absolutely no failure tomake true and full disclosures, there was no jurisdiction to issuenotice under Section 148 of the IT Act, after expiry of period of 4years from the date of assessment. On both these grounds, hesubmits that the Rule is liable to be made absolute in the presentPetition. He relies on the cases of Mrs. Parveen P. Bharucha vs. TheDeputy Commissioner of Income Tax Circle 2 and anr.1; ZuariFoods and Farms Pvt. Ltd. vs. Asst. Commissioner of Income-Taxand another2; and Bombay Stock Exchange Ltd. vs. Deputy Directorof Income-Tax (Exemption) and others (No.2)3in support of thePetition. 5.Ms. Linhares, learned Standing Counsel for theRespondents submits that since the Petitioner had admitted videletter dated 20th February, 2015 that it had violated the provisions ofSection 80IB of the IT Act and further, failed to make true and fulldisclosures, there was absolutely no jurisdictional error in issuing theimpugned notice or making the impugned order. She submits thatthe scope of interference with notices under Section 147/148 of theIT Act is quite limited. She submits that at this stage, it will not be 1(2012) 348 ITR 325 2WP No.1001 of 2007 decided on 11/4/2018 3[2014] 365 ITR 181 (Bom) 4 wp17-20dt.18-02-20 appropriate to go into the merits of the matter, for which, thePetitioner will have ample opportunity during the reassessmentproceedings. She, therefore, submits that the present Petition is liableto be dismissed. She relies on Calcutta Discount Co. Ltd. vs.Income-tax Officer4; S. Narayanappa vs. Commissioner of Income-5tax; Assistant Commissioner of Income Tax vs. Rajesh Jhaveri StockBrokers (P) Ltd.6 and Raymond Woollen Mills Ltd. vs. Income TaxOfficer & Ors. in support of her defence. 6.The rival contentions now fall for our determination. 1(2012) 348 ITR 325 2WP No.1001 of 2007 decided on 11/4/2018 3[2014] 365 ITR 181 (Bom) 4 wp17-20dt.18-02-20 appropriate to go into the merits of the matter, for which, thePetitioner will have ample opportunity during the reassessmentproceedings. She, therefore, submits that the present Petition is liableto be dismissed. She relies on Calcutta Discount Co. Ltd. vs.Income-tax Officer4; S. Narayanappa vs. Commissioner of Income-5tax; Assistant Commissioner of Income Tax vs. Rajesh Jhaveri StockBrokers (P) Ltd.6 and Raymond Woollen Mills Ltd. vs. Income TaxOfficer & Ors. in support of her defence. 6.The rival contentions now fall for our determination. 7.In the present case, we are concerned with the AssessmentYear 2012-13, for which, the Petitioner had submitted returns withinthe prescribed period, declaring total income of Rs.62,233/-. Thecase was selected for scrutiny through CASS and notice was issued tothe Petitioner under Section 143(2) of the IT Act, which was servedupon the Petitioner on 28-08-2013. Based upon the detailsfurnished by the Petitioner to the AO, the assessment order dated 16thMarch 2015 was made by the AO in terms of Section 143(2) of theIT Act. 8.Paragraphs 3 and 4 of the assessment order dated 16[th] 4[1961] 41 ITR 191 (SC) 5[1967] 63 ITR 219(SC) 6(2007) 291 ITR 0500 5 March, 2015 are relevant to the issues raised in the present Petitionand, therefore, the same are prescribed below for convenience of reference : “3. In response to the notices issued, Shri Rajan Ramani,Chartered Accountant and the Authorized Representative ofthe assessee appeared from time to time and submitted thedetails. The details produced have been verified and thecase was heard. The assessee is carrying on the RealEstate/Builders & Developers. 4. After perusing the details submitted by assessee, theassessment is concluded by accepting the return of incomeof the assessee.” 9.In fact, it is the case of the Petitioner that the Petitioner,vide letter dated 20th February, 2015, in the course of assessmentproceedings before the AO had itself submitted that a few flats mayhave been allotted to persons in violation of Clause 10(f) of Section80IB of the IT Act. However, in the same letter, it was contendedthat this ought not to be regarded as any breach of the provisions ofSection 80IB or in any case, this ought not to be regarded as anybreach of the provisions of Section 80IB in its entirety and at thehighest, benefit may be denied in respect of the transfers made inbreach of Clause 10(f) of Section 80IB of the IT Act. 10.The Petitioner has pleaded that for the present, thePetitioner does not have a copy of the letter dated 20[th] February, 6 wp17-20dt.18-02-20 2015 and, therefore, letters were addressed to the Respondents tofurnish a copy of the same. However, the copy of the same has tilldate not been furnished by the Respondents. 11.The factum of address of the letter dated 20th February,2015 is indisputable, because the Respondents have themselves notonly referred to the letter dated 20th February, 2015, but also quotedfrom the letter dated 20th February, 2015 in the Show Cause Noticedated 17th December, 2019 issued to the Petitioner along with theimpugned Order dated 17th December, 2019, by which theobjections of the Petitioner to the reopening of the assessment cameto be rejected. Even the impugned order dated 17[th] December, 2019,rejecting the Petitioner's objections, makes a specific reference to thePetitioner's own letter dated 20th February, 2015 submitted duringthe assessment proceedings under Section 143(3) of the IT Act. 11.The factum of address of the letter dated 20th February,2015 is indisputable, because the Respondents have themselves notonly referred to the letter dated 20th February, 2015, but also quotedfrom the letter dated 20th February, 2015 in the Show Cause Noticedated 17th December, 2019 issued to the Petitioner along with theimpugned Order dated 17th December, 2019, by which theobjections of the Petitioner to the reopening of the assessment cameto be rejected. Even the impugned order dated 17[th] December, 2019,rejecting the Petitioner's objections, makes a specific reference to thePetitioner's own letter dated 20th February, 2015 submitted duringthe assessment proceedings under Section 143(3) of the IT Act. 12.Both, the Show Cause Notice dated 17th December, 2019and the impugned Order dated 17th December, 2019, specificallystate that the Petitioner, in the course of the assessment proceedingsbefore the AO, had furnished a list of flat owners to whom flats weresold in the project 'Bay Village'. The notice and the impugned orderproceed to state that upon perusal of this list, coupled with the letterdated 20th February, 2015, it transpires that there was non-compliance on the part of the Petitioner with the provisions of 7 wp17-20dt.18-02-20 Section 80IB, at least in so far as some of the sales were concerned. 13.Since, it is virtually an admitted fact that the Petitioner hadsubmitted a list of the flat owners and further, itself vide letter dated20th February, 2015 pointed out that there may be breach in so far assale of some of the flats are concerned, it can really not be said by theRespondents that there was no truthful or complete disclosures onthe part of the Petitioners in the course of the assessmentproceedings itself. Merely making of bald statement that the assesseehad not disclosed fully and truly all the material facts, is really neversufficient in such matters. 14.In the case of Bombay Stock Exchange Ltd. (supra),Division Bench of this Court has held that though it is true that thereasons for initiating reassessment proceedings do, in fact, state thatthere was violation on the part of the Petitioner to disclose fully andtruly all material facts necessary for its assessment, however, makingof such bald assertion was not enough. Relying upon HindustanLever Ltd. vs. R.B. Wadkar, Assistant CIT, [2004] 268 ITR 232(Bom), the Division Bench held that there is requirement of givingdetails as to which fact or the material was not disclosed by thePetitioner, leading to its income escaping assessment. In the saidmatter as well, there was only a bald assertion in the reasons thatthere was failure on the part of the Petitioner to disclose fully and 8 wp17-20dt.18-02-20 truly all material facts, without giving any details thereof. The noticeproposing to reopen the assessment was quashed in suchcircumstances. 15.In the present case as well, apart from bald assertion thatthe Petitioner had not disclosed fully and truly all material facts, nodetails have been disclosed as to the material which was allegedly notdisclosed either truly, or fully. Rather, the record indicates that theentire list of flat owners was disclosed. Further, vide letter dated 20[th]February, 2015, disclosures were made in relation to the saletransactions and it was even suggested that some of the saletransactions may not be compliant with the provisions of Clause10(f) of Section 80IB of the IT Act. Clearly, therefore, theRespondents have failed to make out any case that there was no trueand full disclosures by the Petitioner. 15.In the present case as well, apart from bald assertion thatthe Petitioner had not disclosed fully and truly all material facts, nodetails have been disclosed as to the material which was allegedly notdisclosed either truly, or fully. Rather, the record indicates that theentire list of flat owners was disclosed. Further, vide letter dated 20[th]February, 2015, disclosures were made in relation to the saletransactions and it was even suggested that some of the saletransactions may not be compliant with the provisions of Clause10(f) of Section 80IB of the IT Act. Clearly, therefore, theRespondents have failed to make out any case that there was no trueand full disclosures by the Petitioner. 16.Section 147 of the IT Act empowers the AO who hasreason to believe that any income chargeable to tax has escapedassessment for any assessment year, to reassess such income, nodoubt, subject to the provisions of sections 148 to 153 of the IT Act.The proviso to Section 147, however, makes clear that where anassessment under sub- section (3) of section 143 has been made forthe relevant assessment year, no action shall be taken under Section147 of the IT Act, after the expiry of four years from the end of 9 relevant assessment year, unless any income chargeable to tax hasescaped assessment for such assessment year by reason of the failureon the part of the assessee, inter alia, “to disclose fully and truly allmaterial facts necessary for its assessment for that assessment year.” 17.This means that normally, the limitation period forreassessment under Section 147 of the IT Act is 4 years. However, ina case where the assessment has been made under Section 143(3) ofthe IT Act where, inter alia, the assessee fails to disclose fully andtruly all material facts necessary for assessment for that assessmentyear, reassessment can be made even beyond the period of 4 years interms of Section 148 of the IT Act. Therefore, in order to sustain anotice seeking to reopen assessment beyond normal period of 4 years,it is necessary for the Respondents to establish, at least, prima faciethat there was failure to disclose fully and truly all material factsnecessary for the assessment for that assessment year. 18.In the facts of the present case, the Respondents have failedto establish this precondition even prima facie. Rather, the materialon record establishes that there were full and true disclosures of allmaterial facts necessary for the assessment of the Petitioner for theAssessment Year 2012-13. Despite this, the impugned notice seekingto reopen the assessment for the Assessment Year 2012-13 has beenissued beyond the normal period of 4 years. According to us, on this 10 wp17-20dt.18-02-20 short ground the impugned notice dated 29th March, 2019 and theimpugned order dated 17th December, 2019 are required to bequashed and set aside. 19.The view which we have taken finds support in thedecisions of the Division Bench of this Court in the case of Mrs.Parveen P. Bharucha (supra) and Zuari Foods and Farms Pvt. Ltd.(supra). 20.The decisions relied upon by Ms. Linhares are quitedistinguishable and will not apply to the fact situation in the presentmatter. 21.S. Narayanappa (supra) provides that where it was clearfrom the material on record that there was nondisclosure on the partof the assessee which led to underassessment of income, the Revenuewas entitled to issue notice, seeking reopening of the assessment. Inthe present case, the material on record is clear, on that there was nofailure to disclose true and full material facts on the part of thePetitioner-assessee. Therefore, the decision in S. Narayanappa (supra)can be of no assistance to the Respondents-Revenue. 22.In Raymond Woollen Mills Ltd. (supra), the Hon'ble ApexCourt has held sufficiency or correctness of the material on the basis 11 wp17-20dt.18-02-20 21.S. Narayanappa (supra) provides that where it was clearfrom the material on record that there was nondisclosure on the partof the assessee which led to underassessment of income, the Revenuewas entitled to issue notice, seeking reopening of the assessment. Inthe present case, the material on record is clear, on that there was nofailure to disclose true and full material facts on the part of thePetitioner-assessee. Therefore, the decision in S. Narayanappa (supra)can be of no assistance to the Respondents-Revenue. 22.In Raymond Woollen Mills Ltd. (supra), the Hon'ble ApexCourt has held sufficiency or correctness of the material on the basis 11 wp17-20dt.18-02-20 of which the AO may have had 'reasons to believe' is not to beexamined at the stage of determining the validity of the notices,seeking to reopen the assessment. In the present case, we have not atall adverted to the sufficiency or correctness of the material. In fact,that issue is not being addressed, since one of the essential parametersprecedent to reopening of assessment, has not at all been compliedwith by the Revenue. 23.In Rajesh Jhaveri Stock Brokers (P) Ltd. (supra), there isdiscussion as to the circumstances in which it can be held that thenotice seeking reassessment is based on a mere change of opinion bythe AO. Again, we have not gone into this issue in the present matterand, therefore, the decision is really not attracted in the present case. 24.The decision in Calcutta Discount Co. Ltd. (supra) in fact,assists the case of the Petitioner rather than the Respondents. In thisdecision, the Hon'ble Supreme Court has held that it is the duty ofthe assessee to disclose fully and truly all primary relevant facts andonce all primary facts are before the assessing authority, he requiresno further assistance by way of disclosure and it is for him to decidewhat inference of facts can be reasonably drawn and what legalinferences have ultimately to be drawn. However, if there are somereasonable grounds for thinking that there had been under-assessment as regards any primary facts which could have a material 12 bearing on question of under-assessment, that would be sufficient togive jurisdiction to the ITO to issue notice for reassessment. 25.In the present case, as noted earlier, there is absolutely noreference to any alleged material facts which the Petitioner failed todisclose in the course of the assessment proceedings. Rather, theimpugned notice refers to the list, as well as the letter issued by thePetitioner itself, which is sought to be made basis for reopening of theassessment. In this case, it is apparent that all the primary facts weredisclosed by the Petitioner. In fact, the Petitioner had disclosed trulyand fully all the material facts and it was open to the AO to take thesame into account in the course of the assessment proceedings or, inany case, it was open to the AO to issue notice for reassessmentwithin normal period of 4 years from the date of assessment. 26.For all the aforesaid reasons, we allow the present Petitionand quash and set aside the impugned notice dated 29th March,2019 and the impugned order dated 17th December, 2019. Rule isaccordingly made absolute in terms of prayer clauses (a), (b) and (c)of the Petition. There shall be no order as to costs. Nutan D. Sardessai, J. M.S. Sonak, J.