The Principal Commissioner Of Income Tax, Dhanbad v. Maheshwari Devi …

IN THE HIGH COURT OF JHARKHAND AT RANCHI Tax Appeal No. 36 of 2020 The Principal Commissioner of Income Tax, Dhanbad having its office at Aayakar Bhawan, Luby Circular Road, Dhanbad. ..…Appellant Versus Maheshwari Devi …..Respondent -------- CORAM: Hon’ble Mr. Justice Aparesh Kumar Singh Hon’ble Mr. Justice Deepak Roshan -------- For the Appellant : Mr. Ratnesh Nandan Sahay, Adv For the Respondent : Mr. Mahendra Kumar Choudhary, Adv. -------- 19/21.11.2022Heard learned counsel for the parties. 2.This appeal is directed against the order dated 06.03.2020 passed by the Learned Income Tax Appellate Tribunal ("ITAT"), Ranchi Bench 'SMC' Ranchi in the Appeal, being I.T.A No.259/Ran/2019, for the A.Y. 2010-11; whereby the learned ITAT has allowed the appeal preferred by the Respondent and held that the notice under Section 148 of the Income Tax Act, 1961 issued in the present case was bad in law as the same was allegedly issued only for the purpose of verification. 3.The facts giving rise to the instant appeal relates to the assessment year 2010-11. The Respondent is an Assessee under the Income Tax Act having its PAN No. BXFPD 8254 C. The Respondent Assessee did not file her return of income for the Assessment Year 2010-11. Subsequently, a Tax evasion petition was received in the case of Mr. Dhrub Narayan Parihast, who was son of the Respondent Assessee, on the alleged sale of huge land property during the relevant period. Thereafter, certain enquiries were conducted by the office of the Deputy Director of Income Tax (Investigation), Dhanbad. During the course of investigation and enquiry, a statement on oath of Mr. Dhrub Narayan Parihast was also recorded under Section 131 of the Income Tax Act, 1961. A detailed enquiry report was received in the office of the Assessing Officer regarding finding of the enquiry and investigation carried out in this case. Thereafter, the Assessing Officer re-opened the assessment of the Respondent Assessee and issued notice under Section 148 of the Income Tax Act, 1961 for the assessment of income concerning the A.Y. 2010-11. However, the Respondent chose not to file any return. Thereafter, the Assessing Officer had received information that the CBI, ACB, Dhanbad has lodged a FIR regarding the land scam on 19.06.2012 vide case no. Mohanpur Circle, Deoghar being RC16 (A)/2012-D and case no. RC 15(A)/2012-D. In the said FIR Mr. Dhrub Narayan Parihast, the son of the Respondent Assessee, Mr. Deo Narayan Parihast, the husband of the Respondent Assessee and the Respondent Assessee herself were accused of criminal conspiracy, abetment and fraud. Upon analyzing the facts the AO passed the Assessment Order, dated 20.11.2017, under Section 144 read with Section 147 of the Income.Tax Act, 1961 in the case of the Respondent for the Assessment Year 2010-11. In the said Assessment Order, Rs.7,90,000/- was added as income of the Respondent since the same was an unexplained cash credit of the Respondent. The Respondent preferred an appeal against the said assessment order, dated 20.11.2017, before the Commissioner of Income Tax (Appeals), Dhanbad (hereinafter referred to as the "CIT (Appeals)". The said appeal was registered as Appeal No. CIT(A), Dhanbad/10102/2017-18 for A.Y. 2010-11. The CIT (Appeals), vide its order dated 09.08.2019, dismissed the appeal of the respondent for A. Y. 2011-11. Being aggrieved, the Respondent preferred an appeal before the ITAT. The said appeal preferred by the Respondent was registered as I.T.A No.259/Ran/2019 for the A.Y. 2010-11. The Learned tribunal vide its order dated 06.03.2020 in ITA No.259/Ran/2019 for the A.Y.2010-11 allowed the said appeal of the Respondent herein and quashed the assessment order dated 20.11.2017 passed in the case of the Respondent for Assessment Year 2010-11. The revenue being aggrieved by the order passed by the learned ITAT preferred the instant appeal. 4. The aforesaid case was admitted by this Court vide order dated 10th May, 2022 on following questions of law; Being aggrieved, the Respondent preferred an appeal before the ITAT. The said appeal preferred by the Respondent was registered as I.T.A No.259/Ran/2019 for the A.Y. 2010-11. The Learned tribunal vide its order dated 06.03.2020 in ITA No.259/Ran/2019 for the A.Y.2010-11 allowed the said appeal of the Respondent herein and quashed the assessment order dated 20.11.2017 passed in the case of the Respondent for Assessment Year 2010-11. The revenue being aggrieved by the order passed by the learned ITAT preferred the instant appeal. 4. The aforesaid case was admitted by this Court vide order dated 10th May, 2022 on following questions of law; 1. Whether in the facts and circumstances of the case the reasons to believe recorded by the Assessing Officer is sufficient to proceed in the case under Section 148 read with Section 147 ofthe Income Tax Act for re-assessment of the case of the assesse for the assessment year 2010-11; reasons to believe recorded by the Assessing Officer is sufficient to proceed in the case under Section 148 read with Section 147 ofthe Income Tax Act for re-assessment of the case of the assesse for the assessment year 2010-11; 2. Whether in the facts and circumstances of the case, the impugned order passed by the learned I.T.A.T. is perverse in the eye of law. impugned order passed by the learned I.T.A.T. is perverse in the eye of law. 5.Mr. Ratnesh Nandan Sahay, learned senior standing counsel for the appellant/Revenue submits that the learned ITAT was not justified in law in quashing the Assessment Order by squarely applying the judgment of the Hon'ble High Court of Gujarat passed in the case of Income Tax - 5 versus Manzil Dinesh Kumar Shah (2018) 406 ITR 326 (Guj) when the High Court in that case has dismissed the departmental appeal against the ITAT's order quashing the assessment order on the ground that the reason recorded in that case was only to deeply verify the information, but in the present case notice under Section 148 was issued not only to verify the information but also to assess the escaped income of the Respondent Assessee. He further submits that when the Assessing Officer has recorded along with sufficient reasons, that he had reason to believe that the income of the Respondent from sale of land has escaped from assessment, it cannot be held that the notice issued thereafter under Section 148 of the Income Tax Act, 1961 was bad in law and therefore the entire assessment proceeding was liable to be quashed. In support of his contention learned counsel for the Revenue relied upon the judgment passed in the case of Deputy Commissioner of Income Tax (Central) Circle 1 (2) Versus M.R.Shah Logistics Pvt. Ltd. reported in 2022 SCC Online SC 365. 6.Mr. Mahendra Choudhary, learned counsel for the Assessee submits that the initiation of proceeding for assessment/re-assessment under section 147/148 of the Income Tax Act, 1961 (hereinafter referred to as the Act) is not sustainable in the eye of law in view of the reasons recorded by the Assessing Officer as it is not reason to believe rather at best it will be deemed by the reason to suspect. There is no specific or remote detail of alleged sale or investment with regard to alleged land. The reason is vague without mentioning the name of the village etc.; even the name of the person to whom the alleged land has been sold is not mentioned. He further referred to Section 133 (6) of the Act, wherein there is a specific provision empowering the Assessing Officer to call for information. Re-assessment proceeding is to be adjudged on the basis of reason to believe, however, by going through the Annexure-1 it transpires that at best it can be said to be reason to suspect. Mr. Choudhary concluded his argument by submitting that there is no error in the impugned order passed by the leaned tribunal, as such the instant application be dismissed. He further referred to Section 133 (6) of the Act, wherein there is a specific provision empowering the Assessing Officer to call for information. Re-assessment proceeding is to be adjudged on the basis of reason to believe, however, by going through the Annexure-1 it transpires that at best it can be said to be reason to suspect. Mr. Choudhary concluded his argument by submitting that there is no error in the impugned order passed by the leaned tribunal, as such the instant application be dismissed. 7.Having heard learned counsel for the parties and after going through the documents annexed with the respective affidavits and the averments made therein, it appears that the Assessing Officer had re-opened the assessment of the Respondent Assessee and issued notice under Section 148 of the Income Tax Act, 1961 for the assessment of income concerning A.Y 2010-11. However, the Respondent chose not to file any return. In the meantime, the Assessing Officer had received information that the CBI, ACB, Dhanbad had lodged F.I.R regarding the land scam. In the said FIR, the son and the husband of the Respondent Assessee including herself were accused of criminal conspiracy, abetment and fraud. Finally, after analyzing the facts and records, the AO passed the Re-Assessment Order, dated 20.11.2017, under Section 144 read with Section 147 of the Income Tax Act, 1961. The Assessee preferred appeal before CIT(A). However being unsuccessful, the Assessee again preferred appeal before learned ITAT who allowed the appeal preferred by the Assessee; hence Revenue is before us. 8. To decide the issue in hand it is necessary to deal with Section 147 and 148 of the Act which is quoted herein below:- “[147. Income escaping assessment.—If the [Assessing Officer] [has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub-section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of the relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub-section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment, for that assessment year: [Provided further that nothing contained in the first proviso shall apply in a case where any income in relation to any asset (including financial interest in any entity) located outside India, chargeable to tax, has escaped assessment for any assessment year:] [Provided also] that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.] Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could, with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:— [Provided also] that the Assessing Officer may assess or reassess such income, other than the income involving matters which are the subject matters of any appeal, reference or revision, which is chargeable to tax and has escaped assessment.] Explanation 1.—Production before the Assessing Officer of account books or other evidence from which material evidence could, with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.—For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:— (a) where no return of income has been furnished by the assesseealthough his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assesseebut no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; [(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under section 92E;] (c) where an assessment has been made, but— (i) income chargeable to tax has been underassessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act ; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed;] [(ca) where a return of income has not been furnished by the assessee or a return of income has been furnished by him and on the basis of information or document received from the prescribed income-tax authority, under sub-section (2) of section 133-C, it is noticed by the Assessing Officer that the income of the assesseeexceeds the maximum amount not chargeable to tax, or as the case may be, the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return;] [(d) where a person is found to have any asset (including financial interest in any entity) located outside India.] [Explanation 3.—For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.] [Explanation 4.—For the removal of doubts, it is hereby clarified that the provisions of this section, as amended by the Finance Act, 2012 (23 of 2012), shall also be applicable for any assessment year beginning on or before the 1st day of April, 2012.] 148. Issue of notice where income has escaped assessment.—[(1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished undersection 139:] [Provided that in a case— (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and [Provided that in a case— (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005 in response to a notice served under this section, and (b) subsequently a notice has been served under sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to sub-section (2) of section 143, as it stood immediately before the amendment of said sub-section by the Finance Act, 2002 (20 of 2002) but before the expiry of the time limit for making the assessment, re-assessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice: Provided further that in a case— (a) where a return has been furnished during the period commencing on the 1st day of October, 1991 and ending on the 30th day of September, 2005, in response to a notice served under this section, and (b) subsequently a notice has been served under clause (ii) of sub-section (2) of section 143 after the expiry of twelve months specified in the proviso to clause (ii) of sub-section (2) of section 143, but before the expiry of the time limit for making the assessment, reassessment or recomputation as specified in sub-section (2) of section 153, every such notice referred to in this clause shall be deemed to be a valid notice.] [Explanation.—For the removal of doubts, it is hereby declared that nothing contained in the first proviso or the second proviso shall apply to any return which has been furnished on or after the 1st day of October, 2005 in response to a notice served under this section.] [(2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.]” 9.By going through the aforesaid definition it is abundantly clear that before opening any re-assessment proceedings the assessing Officer has to record reason to believe that any income chargeable to tax has escaped assessment for the relevant assessment year. Now coming back to the case we have to analyze as to whether the Assessing Officer was having any reason to believe that the Assessee had escaped assessment. For brevity, reason recorded by the AO is extracted herein below: "03.03.2016. Information is received from the DDIT (Inv), Dhanbad vide F.No. DDIT (Inv)/ DHN/T392X/2015-16/1318 dated 28[th] March, 2016 that Smt. Maheshwari Devi W/o Shri Deo Narayan Parihast, Dhanukdtola, Deoghar has sold 35 acres land amounting to Rs. One crore but income Tax return has not filed for the A.Y 2009-10. DDIT (Inv)/ DHN/T392X/2015-16/1318 dated 28[th] March, 2016 that Smt. Maheshwari Devi W/o Shri Deo Narayan Parihast, Dhanukdtola, Deoghar has sold 35 acres land amounting to Rs. One crore but income Tax return has not filed for the A.Y 2009-10. He has invested huge amount in land during the year. Some of these land properties have also been sold during the year and earning lakhs of rupees from these sale transaction which need to be verified. In view of the above facts, I have reason to believe that the income from sale of land have escaped from assessment. Therefore, it is necessary to issue notice u/s 148 of the Income Tax Act, 1961 to assess the income of the assessee for the A.Y 2009-10. Since more than four years have been passed from the end of the relevant assessment year and tax effect on income escaping assessment is more than one lah. Hence, the approval of Pr. Commissioner of Income Tax is necessary. Therefore, the proposal is being sent to the Pr. Commissioner of Income tax, Dhanbad for kind perusal and approval." 10.By going through the aforesaid reason mentioned at Annexure-1, In view of the above facts, I have reason to believe that the income from sale of land have escaped from assessment. Therefore, it is necessary to issue notice u/s 148 of the Income Tax Act, 1961 to assess the income of the assessee for the A.Y 2009-10. Since more than four years have been passed from the end of the relevant assessment year and tax effect on income escaping assessment is more than one lah. Hence, the approval of Pr. Commissioner of Income Tax is necessary. Therefore, the proposal is being sent to the Pr. Commissioner of Income tax, Dhanbad for kind perusal and approval." 10.By going through the aforesaid reason mentioned at Annexure-1, it appears that the assessing officer himself made it clear that the issue of the corresponding sale transaction required to be verified. Now the law is no more res integra, inasmuch as, the Assessing Officer cannot take recourse of reassessment proceeding just for the purpose of verification. There is a difference between reason to believe and reason to suspect. In the case of Income Tax Officer Versus Lakhmani Mewal Das, reported in [1976] 103 ITR 437 (SC) it has been succinctly defined that the reason for the formation of the believe must be held in good faith and should not be a mere pretence the powers of Income Tax Officer to reopen assessment, though wide, or not plenary the words of statute are “reason to believe” and not “reason to suspect”. It is therefore essential that before such action is taken the requirement of law should be satisfied. Further, this Court in the case of Naveen Kumar Jaiswal Versus Income Tax Department- W.P.(T) No. 675 of 2022 (Ranchi) reported in 2022 SCC Online Jhar 189, has held at paragraph 11 and 12 has held as under; “11. It is well settled principles with regard to reassessment. A reassessment proceeding is to be adjudged on the basis of “reason to believe” disclosed to the Assessee and the said reasons cannot be supplemented by the revenue as the reasons have to speak for themselves. 12. The law is now no more res-integra that the reasons are required to be read as they were recorded by the assessing officer. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn based on reasons not recorded. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded by the AO cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, on the strength of affidavit or oral submissions advanced. Admittedly, in the instant case the AO has referred that the Assessee had purchased immovable property valued of Rs. 1,80,60,000/- on 9.3.2017; whereas the fact is divergent. As such, the notice issued for initiation of reassessment proceeding does not have any legs to stand in the eye of law.” In the instant case, by going through the recorded reasons of the Assessing Officer it clearly transpires that the Assessing Officer has himself held that “these sale transaction which needs to be verified”. This observation of the Assessing Officer itself makes the reason to believe as reason to suspect. There cannot be a fishing and itinerant enquiry under section 147/148 of the Act. In the case of Principal Commissioner of Income-tax-5 versus Manzil Dinesh Kumar Shah reported in [2018]95 Taxmann.co 46 (Gujarat)- the Hon’ble Court has held at Paragraph no. 7 as under: In the instant case, by going through the recorded reasons of the Assessing Officer it clearly transpires that the Assessing Officer has himself held that “these sale transaction which needs to be verified”. This observation of the Assessing Officer itself makes the reason to believe as reason to suspect. There cannot be a fishing and itinerant enquiry under section 147/148 of the Act. In the case of Principal Commissioner of Income-tax-5 versus Manzil Dinesh Kumar Shah reported in [2018]95 Taxmann.co 46 (Gujarat)- the Hon’ble Court has held at Paragraph no. 7 as under: “7. It is equally well settled that the notice or reopening can be supported on the basis of reasons recorded by the Assessing Officer. He cannot supplement such reasons. The third principle of law which is equally well settled and which would apply in the present case is that reopening of the assessment would not be permitted for a fishing or a roving inquiry. This can as well be seen as part of the first requirement of the Assessing Officer having reason to believe that income chargeable to tax has escaped assessment. In other words, notice of reopening which is issued barely for making fishing inquiry, would not satisfy this requirement.” Recently, in the case of Principle Commissioner ofIncome-tax, Versus Sheetal Dushyant Chaturvedi [2022] 134 Taxmann.com 328 (SC) appeal filed by the department was dismissed against the order of High Court who held that where reasons supplied by Assessing Officer for reopening Assessee assessment only referred to a need to verify documents and reasons supplied by assessing officer did not show that income has escaped assessment. 11.At the cost of repetition, there cannot be any re-assessment for a reason to suspect and re-assessment is only to be done if the Assessing Officer has reasons to believe that the Assessee has escaped assessment. Without going into the other argument of the petitioner and merits of the case; the instant appeal requires to be dismissed on the sole ground that the Assessing Officer was not having any reason to believe for initiating re-assessment which is clear from the recorded reason to believe (Annexure-1) itself. The learned tribunal has not committed any error in applying the judgment passed in the case of Dinesh Kurmar Sah (supra).Consequently, the question of law framed in this case is answered against the department. 12.Accordingly, the instant appeal is dismissed. (Aparesh Kumar Singh, J.) (Deepak Roshan, J.)