Sca/19253/2019 Of Rainbow Texchem Private Limited v. Income Tax Officer Ward

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 19253 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MS. JUSTICE BELA M. TRIVEDI Sd/- andHONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHISd/-==========================================================1Whether Reporters of Local Papers may be allowedto see the judgment ?NO2To be referred to the Reporter or not ?YESS3Whether their Lordships wish to see the fair copyof the judgment ?NO4Whether this case involves a substantial questionof law as to the interpretation of the ConstitutionNOof India or any order made thereunder ? 1Whether Reporters of Local Papers may be allowedto see the judgment ?NO2To be referred to the Reporter or not ?YESS3Whether their Lordships wish to see the fair copyof the judgment ?NO4Whether this case involves a substantial questionof law as to the interpretation of the ConstitutionNOof India or any order made thereunder ?==========================================================RAINBOW TEXCHEM PRIVATE LIMITED VersusINCOME TAX OFFICER WARD NO 2(1)(1) ==========================================================Appearance: MR DARSHAN R PATEL(8486), ADVOCATE for the Petitioner(s) No. 1MR NIKUNT RAVAL, SR. STANDING COUNSEL FOR MRS KALPANAK RAVAL(1046), ADVOCATE for the Respondent(s) No. 1========================================================== CORAM: HONOURABLE MS. JUSTICE BELA M. TRIVEDI andHONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI Date : 17/06/2021 CAV JUDGMENT (PER : HONOURABLE MS. JUSTICE BELA M. TRIVEDI) 1. The petition filed by the petitioner under Article 226 of the Constitution of India is directed against the Notice dated 26.3.2019(Annexure-B) issued by the respondent under Section 148 ofIncome Tax Act (hereinafter referred to the “said Act”) and thepreliminary order dated 21.9.2019 (Annexure-E) passed by therespondent disposing off the objections raised by the petitioneragainst the said Notice. 2. The short facts giving rise to the present petition are that thepetitioner is a Private Limited Company incorporated under theCompanies Act and is being regularly assessed to income tax by theIncome Tax Department. For the A.Y. 2012-13, a return of incomewas filed on 29.9.2012 by the petitioner. No scrutiny assessmentwas filed under Section 143(3) of the said Act. The petitionerreceived the impugned Notice dated 26.3.2019 issued by therespondent under Section 148 read with Section 147 of the saidAct, stating inter alia that the respondent had reason to believe thatthe income of the petitioner chargeable to Tax for the A. Y. 2012-13 had escaped assessment. The petitioner, therefore, was calledupon to deliver a return in the prescribed form for the said A.Y.The respondent also issued a letter dated 7.5.2019 providing thereasons recorded for reopening of the assessment for the A.Y.2012-13 under Section 147 of the said Act. The petitioner filed hisobjections to the said reasons on 28.7.2019, which have been rejected vide the impugned order dated 21.9.2019. 3. The respondent has filed affidavit-in-reply resisting the petition bycontending inter alia that the respondent had reason to believe thatthe petitioner had suppressed income to the tune of Rs.67,64,436/-for the A.Y. concerned, for the grounds stated in the letter dated7.5.2019, and therefore, the assessment was sought to be reopenedunder Section 147/148 of the Act.contending inter alia that the respondent had reason to believe thatthe petitioner had suppressed income to the tune of Rs.67,64,436/-for the A.Y. concerned, for the grounds stated in the letter dated7.5.2019, and therefore, the assessment was sought to be reopenedunder Section 147/148 of the Act. rejected vide the impugned order dated 21.9.2019. 3. The respondent has filed affidavit-in-reply resisting the petition bycontending inter alia that the respondent had reason to believe thatthe petitioner had suppressed income to the tune of Rs.67,64,436/-for the A.Y. concerned, for the grounds stated in the letter dated7.5.2019, and therefore, the assessment was sought to be reopenedunder Section 147/148 of the Act.contending inter alia that the respondent had reason to believe thatthe petitioner had suppressed income to the tune of Rs.67,64,436/-for the A.Y. concerned, for the grounds stated in the letter dated7.5.2019, and therefore, the assessment was sought to be reopenedunder Section 147/148 of the Act. 4. The learned Sr. Advocate Mr.D.R. Patel for the petitioner raisedvarious contentions, challenging the action of the respondent inseeking to reopen the assessment for the concerned year bysubmitting that the respondent did not have the jurisdiction underSection 147/148 to reopen the proceedings based on incorrect facts.According to him, the petitioner had never carried out anytransactions with Kamal Zaveri, proprietor of M/s. RishitCorporation or his proprietary concern, nor had taken anyunsecured loans from him, which was evident from the audit report.He further submitted that the respondent cannot be permitted tocarry out fishing or roving inquiry merely for the purpose ofverification. There was total non-application of mind on the part ofthe respondent in reopening the assessment, and therefore, it couldnot be said that there was a reason to believe on the part of therespondent in initiating the proceedings under Section 147 of the said Act. Mr.Patel has sought to rely upon the unreportedjudgement of this Court in case of Parth Knitex Pvt. Ltd.,Pravinkumar Ramkaran Agarval Vs. Deputy Commissioner ofIncome Tax Circle 2(1)(1) (Special Civil Application No.21107of 2017 decided on 27.2.2018) and in case of GKN Driveshafts(India) Limited Vs. Income-Tax Officer and Others, reported in 259 ITR 19 in support of his submissions. 5. Per Contra the learned Senior Standing Counsel Mr.Nikunt Ravalfor the respondent submitted that a survey action was undertaken bythe Investigation Wing, Surat under Section 133A of the said Act incase of one Kamal Jayantilal Zaveri, Proprietor of M/s.RishiCorporation on 24.3.2015 and during the reassessment proceedingsin case of the said Kamal Jayantilal Zaveri, the impounded materialrevealed the entries of tax bills and accommodation loan entriesconnecting the present petitioner to the tune of Rs.67,64,463/- forthe A.Y. 2012-13, and therefore, on the basis of the said materialthe respondent had sought to reopen the assessment by recordingthe reasons. Placing reliance on the decision of Supreme Court incase of A Raman & Company, reported in 67 ITR 11 (SC), hesubmitted that the word ‘information’ means instruction orknowledge derived from external source or as to law relating to amatter bearing on the assessment. He also relied upon the decision of the Supreme Court in case of Kalyanji Mavji, reported in 102 ITR 287 (SC) to submit that information can come from externalsources or even from material already on record and the wordinformation would include the true and correct state of law.Reliance was also placed on the decision of this Court in case of of the Supreme Court in case of Kalyanji Mavji, reported in 102 ITR 287 (SC) to submit that information can come from externalsources or even from material already on record and the wordinformation would include the true and correct state of law.Reliance was also placed on the decision of this Court in case of Jayant Security and Finance Limited Vs. ACIT, reported in(2018) 91 taxmann.com 181 (Gujarat), and in case of AaspasMultimedia Limited Vs. DCIT, reported in (2017) 83taxmann.com 82 (Gujarat) to submit that the A.O. havingrecorded the prima facie findings on the basis of search conductedof Shri Kamal J. Zaveri, it could not be said that there was notangible material available with the A.O. Mr.Raval has also reliedupon the judgement of the Supreme Court in case of RaymondWoolen Mills Limited Vs. ITO &Ors., reported in (1999) 236ITR 34 (SC) in support of his submission that the sufficiency orcorrectness of the material could not be considered at this junctureand what is required to be considered is whether prima facie therewas some material before the Assessing Officer for reopening of thecase of the assessment. 6. At the outset, it may be stated that one of the purposes of Section147 of the said Act is to ensure that a party does not get away bywillfully making false or untrue statement at the time of original147 of the said Act is to ensure that a party does not get away bywillfully making false or untrue statement at the time of original assessment, and when that falsity comes to notice, to turn aroundand say “you accepted my lie, now your hands are tied and youcannot do anything”, as observed by the Supreme Court in case ofM/S. Phool Chand Bajrang Lal And Another vs Income-TaxOfficer And Another, reported in 203 ITR 456 (SC) . It is alsowell settled proposition of law that the Income Tax Officer acquiresjurisdiction to reopen an assessment under Section 147 read withSection 148 of the said Act, only if on the basis of specific, reliableand relevant information coming to his possession subsequently, hehas reason, which he must record, to believe that the incomechargeable to tax has escaped assessment for the concernedassessment year. The sufficiency of reasons for forming the beliefis not for the Court to judge, but it is open to the assessee toestablish that there, in fact, existed no belief or that the belief wasnot bona fide or that the belief was based on vague or irrelevantinformation. Therefore, let us examine as to whether the initiationof action under Section 147 read with Section 148 of the said Actagainst the petitioner is legal and justified. 7. In the instant case stated earlier, the impugned notice dated26.3.2019 was issued by the respondent under Section 148 of thesaid Act, calling upon the petitioner to deliver a return in theprescribed form for the A.Y. 2012-13 as the respondent had a26.3.2019 was issued by the respondent under Section 148 of thesaid Act, calling upon the petitioner to deliver a return in theprescribed form for the A.Y. 2012-13 as the respondent had a reason to believe that the income of the petitioner chargeable to taxfor the said assessment year had “escaped assessment” within themeaning of Section 147 of the said Act. The respondent had alsosupplied the reasons in support of the said Notice, conveyed to thepetitioner vide the letter dated 7.5.2019. The petitioner, on28.7.2019, had filed the objections to the said reasons recorded forreopening the assessment, which have been rejected by therespondent. reason to believe that the income of the petitioner chargeable to taxfor the said assessment year had “escaped assessment” within themeaning of Section 147 of the said Act. The respondent had alsosupplied the reasons in support of the said Notice, conveyed to thepetitioner vide the letter dated 7.5.2019. The petitioner, on28.7.2019, had filed the objections to the said reasons recorded forreopening the assessment, which have been rejected by therespondent. 8. Now, it appears that the impugned action under Section 147/148 ofthe said Act has been initiated against the petitioner by therespondent on the basis of the material and the impoundeddocuments recovered during the course of survey action undertakenby the Investigation Wing, Surat under Section 133A of the saidAct in case of one Shri Kamal J. Zaveri, Proprietor of M/s. RishitCorporation on 24.3.2015. Therefore, there was a tangible materialavailable with the respondent and the said material had a primafacie link with the petitioner and with the formation of the belief bythe respondent that income of about Rs.67,64,463/- had escapedassessment. 9. In case of CIT Vs. M/s.Kelvinator of India Limited, reported in320 ITR 561 (SC), it has been held inter alia that the AssessingOfficer has power to reopen, provided there is “tangible material” to320 ITR 561 (SC), it has been held inter alia that the AssessingOfficer has power to reopen, provided there is “tangible material” to come to the conclusion that there is an escapement of income fromassessment and that reasons must have a live link with the formationof the belief. 10.Our Court has also in similar case, in the case of Aaspas Multimedia Pvt. Ltd. (supra) held that if on the basis ofinformation supplied by/from the office of Principal Director ofIncome Tax (Investigation), the A.O., has found that the petitionerassessee was the beneficiary of accommodation entries provided bythe other assessee, it could not be said that there was no tangiblematerial available with the A.O., to prima facie form anopinion/belief that income of the petitioner chargeable to tax hasescaped an assessment.information supplied by/from the office of Principal Director ofIncome Tax (Investigation), the A.O., has found that the petitionerassessee was the beneficiary of accommodation entries provided bythe other assessee, it could not be said that there was no tangiblematerial available with the A.O., to prima facie form anopinion/belief that income of the petitioner chargeable to tax hasescaped an assessment. 11.As rightly submitted by the learned Sr. Standing CounselMr.Raval, what is required to reopen a case is “reason to believe”,the sufficiency or correctness of material cannot be considered atthis juncture, as held by the Supreme Court in case of RaymondWoolen Mills Limited Vs. ITO (supra). Mr.Raval, what is required to reopen a case is “reason to believe”,the sufficiency or correctness of material cannot be considered atthis juncture, as held by the Supreme Court in case of RaymondWoolen Mills Limited Vs. ITO (supra). 12.The Supreme Court in case of ACIT Vs. Rajesh JhaveriStock Brokers Pvt. Ltd., reported in (2007) 291 ITR 500 (SC),has also observed that the word “reason” in the phrase “reason tobelieve” would mean cause or justification. If the Assessing OfficerStock Brokers Pvt. Ltd., reported in (2007) 291 ITR 500 (SC),has also observed that the word “reason” in the phrase “reason tobelieve” would mean cause or justification. If the Assessing Officer has a cause or justification to know or suppose that income hadescaped assessment, it can be said to have reason to believe that anincome had escaped assessment. 13.The decision relied upon by the learned Advocate Mr.D. R. 12.The Supreme Court in case of ACIT Vs. Rajesh JhaveriStock Brokers Pvt. Ltd., reported in (2007) 291 ITR 500 (SC),has also observed that the word “reason” in the phrase “reason tobelieve” would mean cause or justification. If the Assessing OfficerStock Brokers Pvt. Ltd., reported in (2007) 291 ITR 500 (SC),has also observed that the word “reason” in the phrase “reason tobelieve” would mean cause or justification. If the Assessing Officer has a cause or justification to know or suppose that income hadescaped assessment, it can be said to have reason to believe that anincome had escaped assessment. 13.The decision relied upon by the learned Advocate Mr.D. R. Patel for the petitioner in case of GKN Driveshafts (India)Limited Vs. Income-Tax Officer and Others (supra) has noapplication to the facts of the present case. In the said case, it wasobserved that the A. O. is bound to furnish reasons within areasonable time, and on receipt of the reasons, the noticee isentitled to file objections to issuance of notice and the A. O., isbound to dispose of the same by passing a speaking order. In theinstant case, the A. O. has disposed of the objections of thepetitioner by passing a speaking order considering all legal andfactual aspects, which are just and proper, and do not call for anyinterference by this Court, exercising the jurisdiction under Article226 of the Constitution of India. 14.In that view of the matter, the petition being of devoid of merit isdismissed. Sd/- (BELA M. TRIVEDI, J) Sd/- (A. C. JOSHI,J)