Wp/14490/2018 Of Akshar Builders And Developers v. Asstt. Commissioner Of Income Tax, Circle 28(1) And Anr

IN THE HIGH COURT OF JUDICATURE AT BOMBAYCIVIL APPELLATE JURISDICTION WRIT PETITION NO. 14490 OF 2018 Akshar Builders and Developers .. Petitioner v/s. Asstt. Commissioner of Income Tax­28(1)Mumbai & Anr. .. Respondents Ms. Ritika Agarwal I/b ACE Legal for the petitioner Mr. N.C. Mohanty for the respondents CORAM : AKIL KURESHI & M.S. SANKLECHA, J.J. P.C. DATED : 17[th] JANUARY, 2019 1.The petitioner has challenged a notice of reopening of assessmentdated 29[th] March, 2018 under which the respondent no.1­ Assessing Officer has reopened the petitioner's assessment for A.Y. 2011­12. Inorder to issue the notice, the Assessing Officer had recorded followingreasons :­ “1.In this case return of income for A.Y. 2011­12 has beenfiled on 25.3.2013 declaring total income at Rs. NIL/­. Theassessee is a builder and developer.2.A detailed investigation report has been forwarded byDirectorate of Investigation, Unit­1(2), Ahmedabad regardingsurvey action conducted on M/s. Mudra Finvest (Guj) Ltd. On8.12.2016. The entity is involved in the jewellery business.3.Four hard disk which contain digital data were impoundedfrom the premises, 6 ground floor, revdi bazaar, Ahmedabad during survey. On examination of these disks it is seen thatM/s. MUDRA REAL ESTATE PRIVATE LTD is a group entity whohas constructed and developed project “4­D SQUARE” inAhemdabad – Gandhi Nagar road. 3.1The tally data from the disk, contained ledgers of variousparties cash book, trial balance, P/I account and balance sheet ofM/s. Mudra Real Estate Private Ltd. For F.Y. 2010­11. Onperusal of the same it is seen that huge amount was paid in cashto various entities. The name of AKSHAR BUILDER ANDDEVELOPER PAN : appears as one of these entitiesand is JV PARTNER in the development and construction of '4­DSQUARE'. A cash amount of Rs.3,54,82,000/­ was paid to M/s.Akshar Builder and Developers on different dates. The ledgeraccount retrieved from the disks of the period 1.4.2010 to31.3.2011 showing cash entries paid to M/s. Akshar Buildersand Developers along with other information is forwarded to theundersigned. 4.Specific information has been passed in the case of M/s.Akshar Builders and Developers regarding cash payments madeby M/s. Mudra Real Estate Pvt. Ltd. Ahmedabad to M/s. AksharBuilders and Developers. The assessee firm M/s. Akshar Buildersand Developers has filed Nil return of income for the A.Y. 2011­12. The information received from DGIT (Inv) Unit 1(2),Ahmedabad is credible information. The cash amount receivedamounting to Rs.3,54,82,000/­ is not accounted for and notoffered for taxation. 5.It is worth mentioning that the statement of Shri.Sanjaykumar Hundia Director of M/s. MUDRA REAL ESTATEPRIVATE LTD was recorded u/s 131 of the IT Act on 25.1.2018.He has admitted to knowing M/s. Akshar Builders andDevelopers who is co­developer of the project '4­D Square'. Thecash book of M/s. Mudra Real Estate Pvt. Ltd. Ahmedabad whichis enclosed also reflects the amount paid to M/s. Akshar Builderand Developer. 6.The analysis of the return of income filed does not reflectthese transactions in the accounts or income. The return ofincome for AY 2011­12 does not reflect any of the abovetransaction. The statement by the director of M/s. Mudra RealEstate Pvt. Ltd. the cash book,ledger account reveal that theassessee is having cash income of Rs.3,54,82,000/­ for FY 2010­11 for FY 2010­11 relevant to A.Y. 2011­12 which is not accounted for or disclosed for taxation. 7.In view of the above, I have reason to believe that incomechargeable to tax which has escaped assessment to the tune ofRs.3,54,82,000/­ (Rs. Three Crore fifty four lakhs eighty twothousand only) chargeable to tax within the meaning ofExplanation 2(b) of Section 147 of the I.T. Act, 1961. As such itis a fit case for issuance of notice u/s 148 of the Income Tax Act,1961. accounted for or disclosed for taxation. 7.In view of the above, I have reason to believe that incomechargeable to tax which has escaped assessment to the tune ofRs.3,54,82,000/­ (Rs. Three Crore fifty four lakhs eighty twothousand only) chargeable to tax within the meaning ofExplanation 2(b) of Section 147 of the I.T. Act, 1961. As such itis a fit case for issuance of notice u/s 148 of the Income Tax Act,1961. 8. In this case, since more than four years have lapsed fromthe end of assessment year under consideration, hence necessarysanction to initiate proceedings u/s 147 and to issue notice u/s148 of the I.T. Act may be accorded as per provisions of Section151 of the Income Tax Act.” 2.Upon being supplied the reasons, the petitioner filed objections tothe notice of reopening under communication dated 28[th] November,2018. Such objections were however rejected by the Assessing Officerby order dated 14[th] December, 2018. 3.The petitioner is a partnership firm, Akshar Builders andDevelopers ("AB&D" for short). For Assessment Year 2011­12, thepetitioner had filed its return of income which was accepted underSection 143(1) of the Income Tax Act, 1961 ("the Act" for short)without scrutiny. To reopen such assessment the impugned notice hasbeen issued. The main ground of challenge raised by the Counsel forthe petitioner is that there was no tangible material available with theAssessing Officer to form a belief that the income chargeable to tax has escaped assessment. She pointed out that the Assessing Officer relieson the documents seized during the survey operation against one M/s.Mudra Real Estate Pvt. Ltd. ("Mudra" for short) which recorded certaincash payments to one M/s. Akshar Developers ("AD" for short).Counsel submitted that the petitioner AB&D, a partnership firm, hasdistinct identity and different partners from AB, another partnershipfirm having different set of partners. She pointed out that both thepartnership firms have different PAN numbers. The Assessing Officer,therefore, acted on a material prima facie showing payments by Mudrato AD and reopened the assessment in case of the present petitioner.Counsel further submitted that the reassessment in case of Mudra hasnow been done by the Assessing Officer, passing order on 31[st]December, 2018 in which also there is no addition in relation to thesaid alleged payments by Mudra to AD. In other words, theDepartment in the assessment in case of Mudra has not relied on thepayments in question. 4.On the other hand, learned Counsel for the Department opposedthe petition contending that previously assessment was not framed afterscrutiny. The Assessing Officer therefore would have much wider scopeto reopen the assessment. In this regard, he relied upon the decision of the Supreme Court in the case of ACIT Vs. Rajesh Jhaveri StockBrokers (P) Ltd., (2007) 291 ITR 500. Counsel submitted that at thisstage the sufficiency of material enabling the Assessing Officer toreopen the assessment would not be subject matter of scrutiny by theCourt. He further submitted that the Assessing Officer had sufficientmaterial at his command to form a belief that income of the presentpetitioner chargeable to tax has escaped assessment. 4.On the other hand, learned Counsel for the Department opposedthe petition contending that previously assessment was not framed afterscrutiny. The Assessing Officer therefore would have much wider scopeto reopen the assessment. In this regard, he relied upon the decision of the Supreme Court in the case of ACIT Vs. Rajesh Jhaveri StockBrokers (P) Ltd., (2007) 291 ITR 500. Counsel submitted that at thisstage the sufficiency of material enabling the Assessing Officer toreopen the assessment would not be subject matter of scrutiny by theCourt. He further submitted that the Assessing Officer had sufficientmaterial at his command to form a belief that income of the presentpetitioner chargeable to tax has escaped assessment. 5.Since the factum of reassessment order in case of Mudra is notpart of the present proceedings, we may keep the same out ofconsideration. From the record it emerges that the Assessing Officerhas issued notice of reopening of assessment after recording his reasonsfor doing so. These reasons suggest information available to theAssessing Officer supplied by the Investigation wing of the Departmentthat the assessee had received cash amounts of Rs.3.54 crores whichwas not accounted for and not offered to tax. He has referred tostatement of one Shri. Sanjay Kumar Hundia, Director of Mudrarecorded on 25[th] January, 2018 suggesting cash payment by Mudra toAB&D. However, the document supplied by the Assessing Officer whichis a copy of the ledger account of AD in the books of Mudra, at bestsuggests that such cash payment was made to AD and not to the AB&D, whereas notice of reopening of assessment is issued against AB&D i.e.the present petitioner. To cover this mismatch, it is now sought to besuggested by the Assessing Officer that Investigation Wing informedhim that the two entities are one and the same and AB&D is popularlyreferred to as AD. However, this being the question of two entitiesbeing separate, having different partners and having distinct PANnumbers. These aspects are not disputed by the Revenue either whiledisposing of the objections raised by the petitioner to the notice ofreopening or in the affidavit filed in response to the present petition.We, therefore, proceeded on such basis. 6.It is thus emerges from the record that the Assessing Officer hasmerely acted upon the information submitted to him by theinvestigation wing that there is material to suggest that Mudra had paidcash amount to AB&D whereas, the material collected during the surveyagainst Mudra prima faice suggests such cash payment to AD. Thiswould demonstrate total lack of application of mind on the part of theAssessing Officer. If he had perused the material supplied to him bythe investigation wing, he would have immediately noticed thatmaterial referred would suggest cash payment to AD and not AB&D i.e.the present petitioner. 7.Even in a case where the return filed by the assessee is acceptedwithout scrutiny, as per the settled law, the Assessing Officer can issue anotice of reopening of assessment provided he has reason to believethat income chargeable to tax has escaped assessment. The AssessingOfficer cannot proceed mechanically and also on erroneous informationthat may have been supplied to him. In fact, we note that in thepresent case the Assessing Officer had issued a notice to a wrongperson. The impugned notice is, therefore, set aside. 8.Petition is disposed of accordingly. (M.S. SANKLECHA, J.) (AKIL KURESHI, J.)