The Deputy Commissioner Of Incometax Circle 3 (3) (1) And Ors v. Amit B. Borkar, Jj. Dated : 22[Nd] December, 2021

PURTIPRASADPARAB IN THE HIGH COURT OF JUDICATURE AT BOMBAYDigitally signed byPURTI PRASADPARABORDINARY ORIGINAL CIVIL JURISDICTIONDate: 2021.12.2318:28:56 +0530 WRIT PETITION NO. 3172 OF 2019 Sea Glimpse Investments Pvt. Ltd. V/s. The Deputy Commissioner of IncomeTax Circle 3 (3) (1) and Ors. ….Petitioner …Respondents ---- Ms. Dinkle Hariya i/b Ms. Namrata Kasale for Petitioner.Mr. Sham V. Walve for Respondents-Revenue. ---- CORAM : K.R. SHRIRAM & AMIT B. BORKAR, JJ. DATED : 22[nd] DECEMBER, 2021 P.C. : 1.Petitioner is impugning the notice dated 31[st] March, 2019issued by first respondent under Section 148 of the Income Tax Act, 1961(the Act) for A.Y. 2014-15 and also the order dated 14[th] October, 2019rejecting the objections raised by petitioner to the proposed re-opening. 2. Various grounds have been raised in the petition. The primary ground being (a) there has been non application of mind while granting thesanction under Section 151 of the Act; and (b) the facts as recorded in thereasons are not correct. 3.Ms. Hariya submitted that it is the settled position in law thatthe Assessing Officer acquires jurisdiction to issue re-opening notice only when he has reason to believe that income chargeable to tax has escapedassessment and the reasons to believe that income chargeable to tax hasescaped assessment must be on correct facts. If the facts as recorded in thereasons are not correct re-opening notice could not be issued. 4.The reasons to re-open is annexed to the petition. In paragraphno. 5 it says necessary approval of the Additional Commissioner of IncomeTax ……. has been obtained …….. vide letter No. ……. dated _______,2019. This is one lacuna that Ms. Hariya pointed out. Secondly, Ms. Hariya submitted that the assessee had filed its e-return of income on 25[th] November, 2014 as could be seen in the assessmentorder dated 27[th] October, 2016 but in the reasons for re-opening it is statedthat assessee e-filed its return on 27[th] October, 2016 and scrutiny assessmentwas completed under Section 143(3) of the Act on 27[th] October, 2016. Thisground itself would show non application of mind not only by the AssessingOfficer but also the authority which sanctioned the proposal of re-openingthe assessment. Any one reading the first paragraph in the reasons for re-opening would wonder how the filing of return of income and scrutinyassessment under Section 143(3) of the Act can be completed on the samedate. It is therefore, clear that the sanction has been granted withoutapplication of mind. One more fact which appears from the reasons for re-openingthat exposes total non application of mind by the sanctioning authority and also the person recording the reasons is it says that the assessee holds0.01% i.e., 10 shares in itself. How can a company hold its own shares?This erroneous statement of fact in the reasons itself should have made theauthority granting sanction to refusegranting the sanction. Moreover, inthe petition, position before amalgamation and post amalgamation has beenmentioned which is at variance with what is given in the reasons for re-opening. It is also alleged in the petition that change in shareholdingpattern as recorded in the reasons for re-opening is erroneous. That has notbeen denied in the affidavit in reply. The reason to believe that incomechargeable to tax has escaped assessment must be on correct fact. If thefacts as recorded in the reasons are not correct, it is for the Assessing Officerto establish that the facts stated by him in the reason as recorded arecorrect. The Division Bench of this court in Ankita A. Choksey vs. Income-Tax Officer And Others11in paragraph no. 6 and 7 has held as under : Tax Officer And Others11 Tax Officer And Others11 6.It is a settled position in law that the Assessing Officeracquires jurisdiction to issue a reopening notice only when he hasreason to believe that income chargeable to tax has escapedAssessment. This basic condition precedent is applicable whetherthe return of income was processed under Section 143(1) of theAct by intimation or assessed by scrutiny under Section 143(3) ofthe Act. [See Asst. Commissioner of Income Tax v/s. RajeshJhaveri Stock Brokers (P) Ltd., [2007] 291 ITR 500 (SC) andPrincipal CIT v/s. Shodimen Investments P. Ltd. [2018] (93)taxmann.com 153 (Bom). Further, the reasons to believe thatincome chargeable to tax has escaped Assessment must be oncorrect facts. If the facts, as recorded in the reasons are notcorrect and the assessee points out the same in its objections, thenthe order on objection must deal with it and prima facie, establishthat the facts stated by it in its reasons as recorded are correct. In the absence of the order of objections dealing with the assertion ofthe assessee that the correct facts are not as recorded in thereason, it would be safe to draw an adverse inference against theRevenue. 7.Thus, we are of the view that even in cases where the returnof income has been accepted by processing under Section 143(1)of the Act, reopening of an assessment can only be done when theAssessing Officer has reason to believe that income chargeable totax has escaped assessment. The mere fact that the return hasbeen processed under Section 143(1) of the Act, does not give theAssessing Officer a carte blanche to issue a reopening notice. Thecondition precedent of reason to believe that income chargeableto tax has escaped assessment on correct facts, must be satisfiedby the Assessing Officer so as to have jurisdiction to issue thereopening notice. In the present case, the Assessing Officer hasproceeded on fundamentally wrong facts to come to thereasonable belief/conclusion that income chargeable to tax hasescaped assessment. Further, even when the same is pointed outby the Petitioner, the Assessing Officer in his order disposing of theobjection does not deal with factual position asserted by thePetitioner. Thus, it would be safe to conclude that the Revenuedoes not dispute the facts stated by the Petitioner. On the facts asfound, there could be no reason for the Assessing Officer tobelieve that income chargeable to tax has escaped assessment. 5.It is settled law as held by the Division Bench of this court in German Remedies Ltd. vs. Deputy Commissioner of Income Tax2that while granting approval it was obligatory on the part of the PrincipalCommissioner of Income Tax to verify whether there was any failure on thepart of the assessee to disclose full and true relevant facts in the return ofincome filed for the assessment of income of that assessment order. 6.In view of the above, the impugned notice and consequentialorder justifying reasons recorded are unsustainable. The same are liable tobe quashed and set aside. Hence, petition is allowed. Rule made absolute 2 [2006] 287 ITR 494 (BOM) in terms of prayer clause - (a) and (b) which reads as under : (a) that this Hon’ble Court may be pleased to issue underArticle 226 of the Constitution of India an appropriate direction,order or a writ, including a writ in the nature of ‘Certiorari’,calling for the records of the case and after satisfying itself as tothe legality thereof quash and set aside the notice dated31.03.2019 issued by the First Respondent under section 148 ofthe Income Tax Act, 1961, being Ex. - ‘G’ hereto ; 6.In view of the above, the impugned notice and consequentialorder justifying reasons recorded are unsustainable. The same are liable tobe quashed and set aside. Hence, petition is allowed. Rule made absolute 2 [2006] 287 ITR 494 (BOM) in terms of prayer clause - (a) and (b) which reads as under : (a) that this Hon’ble Court may be pleased to issue underArticle 226 of the Constitution of India an appropriate direction,order or a writ, including a writ in the nature of ‘Certiorari’,calling for the records of the case and after satisfying itself as tothe legality thereof quash and set aside the notice dated31.03.2019 issued by the First Respondent under section 148 ofthe Income Tax Act, 1961, being Ex. - ‘G’ hereto ; (b) that this Hon’ble Court may be pleased to issue underArticle 226 of the Constitution of India an appropriate direction,order or a writ, including a writ in the nature of ‘Certiorari’,calling for the records of the case and after satisfying itself as tothe legality thereof quash and set aside the order dated14.10.2019, Ex. - ‘L’ herein, passed by the First Respondent,purportedly disposing of the objections raised by the Petitioneragainst the initiation of the reassessment proceeding by the FirstRespondent. 7.Petition disposed. (AMIT B. BORKAR, J.) (K.R. SHRIRAM, J.)