Siddharth Sumer Kothari v. Oral Order

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/SPECIAL CIVIL APPLICATION NO. 19580 of 2021 ========================================================== SIDDHARTH SUMER KOTHARI Versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(1)(1) ==========================================================Appearance:MR. HARDIK V VORA(7123) for the Petitioner(s) No. 1 for the Respondent(s) No. 1 MR. M.R.BHATT, SR. ADV. WITH MR. KARAN SANGHANI, ADV. FOR M R BHATT & CO.(5953) for the Respondent(s) No. 1========================================================== CORAM:HONOURABLE MR. JUSTICE N.V.ANJARIAandHONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 05/07/2022 ORAL ORDER (PER : HONOURABLE MR. JUSTICE N.V.ANJARIA) In the facts of the case and having regard to the request and consentof learned advocates for the parties, the petition was taken up for finalhearing. 1.1Rule, returnable forthwith. Learned advocate Mr. Karan Sanghaifor M. R. Bhatt & Co. waives service of notice of Rule on behalf of therespondent. 1.2Heard learned advocate Mr. Hardik Vora for the petitioner andlearned senior advocate Mr. M. R. Bhatt for M. R. Bhatt & Co. for therespondent. 2.The challenge in this Special Civil Application is directed againstnotice dated 30.3.2021 issued under section 148 of the Income Tax Act,1961 in respect of the Assessment Year 2014-2015. 2.1In the said notice, Assessing Officer of the Income Tax Departmentstated that he had reason to believe that the income chargeable to tax forthe assessment year 2014-2015 had escaped the assessment within themeaning of section section 147 of the Income Tax Act, 1961. Theincome for the said assessment year was therefore proposed to be re-assessed. The petitioner assessee was required to submit a written replywithin stipulated time. 3.The reasons seeking to reopen the assessment were supplied to theassessee on 14.5.2021. It was stated therein that while the assessee haddeclared the total income of Rs. 19,63,840/- in respect of assessment year2014-2015 by filling return of income on 27.12.2014, the case wasselected for scrutiny assessment under section 143(3) of the Income TaxAct, 1961 (hereinafter referred as ‘the Act’) and the same was finalisedon 28.11.2016 without addition of income. It was thereafter stated thatscrutiny of the records in respect of “computation of income” revealedthat the main source of income of the assessee was interest, remunerationand profit from the partnership firm. The total income received by theassessee from the partnership firm was Rs. 1,27,62,961/-,which wasinclusive of interest on deposits. 3.1Out of the total income, an amount of Rs. 1,10,01,111/- was profitfrom the firm which was claimed as exempt under section 10(2A) of theAct. Against the total income, the assessee claimed interest expenses ofRs. 8,03,943/-. The total income comprised of the income frompartnership firm. The total amount towards income from the partnershipfirm, interest on deposits and the interest expenses claimed were requiredto be disallowed and were required to be added to the total income of theassessee, it was further stated. 3.2 The assessee submitted its objections to the reasons recorded on2.7.2021 inter alia submitting that Assessing Officer had specificallyinquired and dealt with the issue for the purpose of reopening ofassessment. Paragraph No.3 of notice under section 142(1) dated30.06.2016 was extracted to submit that the said issue was raised by theAssessing Officer and the assesee had given reply dated 9.9.2016. It wasalso submitted that no new material was available with the AssessingOfficer to justify the re-opening of the assessment. 4.From the record, it could be seen that when the notice undersection 142(1) of the Act was given to the petitioner, one of the detailsrequired to be furnished as per paragraph No. 18 for the said notice wasas under, 3.2 The assessee submitted its objections to the reasons recorded on2.7.2021 inter alia submitting that Assessing Officer had specificallyinquired and dealt with the issue for the purpose of reopening ofassessment. Paragraph No.3 of notice under section 142(1) dated30.06.2016 was extracted to submit that the said issue was raised by theAssessing Officer and the assesee had given reply dated 9.9.2016. It wasalso submitted that no new material was available with the AssessingOfficer to justify the re-opening of the assessment. 4.From the record, it could be seen that when the notice undersection 142(1) of the Act was given to the petitioner, one of the detailsrequired to be furnished as per paragraph No. 18 for the said notice wasas under, “Have you earned any exempt income during tye year ? If yes, kindlyfurnish the details there of. In such case, where you have earned exemptincome kindly state about the applicability of Section 14A of the I.T.Act.” 4.1The assessee answered on 7.9.2016 submitting inter alia that sincethe capital was more than required, section 14A was not applicable. Inthe assessment order dated 28.11.2016 also, the Assessing Officer statedinter alia thus,”Besides this, assessee is a partner in M/s. SRK Enterpriseand Aadi Ozone Developers and received share of profit, salary andinterest income. The details submitted by the assessee has been kept onrecord after verification. The case was discussed with the A.R. of theassessee and he was heard carefully”. Therefore, the question about thetreatment of share of profit in capacity of partner was dealt with. 5.From the above facts emanating from the record, it could be wellsaid that the Assessing Officer had considered the very issue in respect of which subsequently he issued notice under section 148 seeking to re-open the assessment. The assessment order passed by assessing authorityalso reflected consideration of the same. Therefore, there was no basisfor re-opening of the reassessment. It is trite principle that change ofopinion could not be a ground to resort to reopening of process. TheAssessing Officer in the present case could be said to have any new factsdiscovered to justify the re-opening. If it was a mere change of opinionon the part of the Assessing Officer in issuing the order such course wasnot permissible in law. The entire assumption of jurisdiction to reopen theassessment was without any factual and legal basis. 5.1Furthermore, the present case offers a situation where powersunder section 148 of the Act were invoked after four years. Notice wasissued on 30.3.2021 seeking to re-open the Assessment for the financialyear 2014-2015. 5.2Now, Section 147 reads as under, “147. Income escaping assessment - If the Assessing Officer has reasonto believe that any income chargeable to tax has escaped assessment forany assessment year, he may, subject to the provisions of sections 148 to153, assess or reassess such income and also any other incomechargeable to tax which has escaped assessment and which comes to hisnotice subsequently in the course of the proceedings under this section,or recompute the loss or the depreciation allowance or any otherallowance, as the case may be, for the assessment year concerned(hereafter in this section and in sections 148 to 153 referred to as therelevant assessment year): Provided that where an assessment under sub- section (3) of section 143or this section has been made for the relevant assessment year, no actionshall be taken under this section after the expiry of four years from theend of relevant assessment year, unless any income chargeable to taxhas escaped assessment for such assessment year by reason of the failureon the part of the assessee to make a return under section 139 or inresponse to a notice issued under sub- section (1) of section 142 orsection 148 or to disclose fully and truly all material facts necessary forhis assessment for that assessment year. Provided that where an assessment under sub- section (3) of section 143or this section has been made for the relevant assessment year, no actionshall be taken under this section after the expiry of four years from theend of relevant assessment year, unless any income chargeable to taxhas escaped assessment for such assessment year by reason of the failureon the part of the assessee to make a return under section 139 or inresponse to a notice issued under sub- section (1) of section 142 orsection 148 or to disclose fully and truly all material facts necessary forhis assessment for that assessment year. Provided further ………….Provided also …………..Explanation 1 ……………Explanation 2 ……………Explanation 3 ……………Explanation 4 …………… 6.In the facts obtained in this case, there is nothing to suggest that theassessee had not disclosed fully and truely all material facts necessary forthe assessment, rather it was otherwise. On that count itself, the noticewas rendered bad. 7.For all the aforesaid reasons, the impugned notice dated 30.3.2021issued by the concerned officer of the department is required to bequashed. Accordingly, it is quashed. The petition is allowed. Rule ismade absolute. (N.V.ANJARIA, J) C.M. JOSHI (BHARGAV D. KARIA, J)