Wp/24940/2019 Of Chawla Estate Developers Pvt. Ltd v. The Income Tax Department & One Another Indore, Dated 16.12.2019

Writ Petition No.24940/2019 HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.24940/2019Chawla Estate Developers Pvt. Ltd. v/s The Income TaxDepartment & One AnotherIndore, dated 16.12.2019 Shri Vijay Assudani, learned counsel for thepetitioner. Ms. Veena Mandlik, learned counsel for therespondents. The petitioner before this Court has filed thispresent petition being aggrieved by the order dated13.08.2019 passed by the respondent No.2 / Income TaxOfficer – 2(3), Indore. 02.The petitioner is a Private Limited Companyincorporated under the provisions of the Companies Act,1956. The petitioner / Company, on 25.10.2015,electronically, submitted a return for the assessment year2015 – 16 (Financial Year 2014 – 15) disclosing a return ofRs.12,21,160/-. On 12.09.2016, a notice under Section 143(2) of the Income Tax Act, 1961 (hereinafter referred as theAct of 1961) informing the petitioner / Company that thecase of the petitioner / Company has been selected forscrutiny.03.The facts of the case further reveal that thepetitioner / Company, in response to the aforesaid notice,submitted all desired information to respondent No.2 on29.11.2017. The respondent No.2, thereafter, initiatedproceeding under Section 147 of the Act of 1961, andthereafter, a notice was received by the petitioner /Company under Section 148 of the Act of 1961 on 04.02.2019 and the petitioner / Company submitted adetailed reply to the notice issued under Section 148 of theAct of 1961 on 30.07.2019. 04.The petitioner / Company has raised the followingobjections :- (i)No approval from the joint Commissioner hasbeen obtained in the present case. (ii)That there is an order of assessment acceptingreturned income, and therefore, without any freshinformation in possession of the Assessing Officermerely on the basis of change of opinion reopeningcannot have been done. (iii)The proceeding under Section 148 cannot beinitiated to review earlier opinion. (iv)Reopening of assessment is on the basis ofinformation available with the Assessing Officer andnot on the basis of whims and caprices. (v)The words 'reasons to believe' used underSection 147 cannot be equated with reasons to suspect.(vi)That there is no material for formation ofbelieve as contemplated under Section 147. (vii)That once the primary facts are disclosedoversight, carelessness or inefficiency on part ofassessing officer to carry out proper investigation doesnot empower the Assessing Officer to reopen afinancial assistance. 05.The objection raised by the petitioner / Companywas dismissed on 13.08.2019, and thereafter, on 30.10.2019a notice under Section 142 (1) of the Act of 1961 has beenissued to the petitioner. 06.The petitioner has raised several grounds before thisCourt and its contention is that the impugned order dated13.08.2019 passed by the respondent No.2 / Income TaxOfficer-2(3) is bad in law as no approval has been obtainedfrom the Joint Commissioner / Competent Authority in thematter. 07.It has been stated that there is an order of assessment accepting the returned income, and therefore,without any fresh information in possession of theAssessing Officer merely on the basis of change of opinion,reopening could not have been done as has been done in thepresent case and proceeding under Section 148 cannot beinitiated to review the earlier opinion. 08.It has further been stated that the word 'reasons tobelieve' used under Section 147 of the Act of 1961 cannotbe equated with the words 'reasons to suspect'. It has beenstated that there is no material for formation of believe ascontemplated under Section 147 of the Act of 1961 and aprayer has been made to quash the impugned order dated13.08.2019 as well as for quashment of notice dated04.02.2019. 07.It has been stated that there is an order of assessment accepting the returned income, and therefore,without any fresh information in possession of theAssessing Officer merely on the basis of change of opinion,reopening could not have been done as has been done in thepresent case and proceeding under Section 148 cannot beinitiated to review the earlier opinion. 08.It has further been stated that the word 'reasons tobelieve' used under Section 147 of the Act of 1961 cannotbe equated with the words 'reasons to suspect'. It has beenstated that there is no material for formation of believe ascontemplated under Section 147 of the Act of 1961 and aprayer has been made to quash the impugned order dated13.08.2019 as well as for quashment of notice dated04.02.2019. 09.A reply has been filed in the matter and it has beenstated by the respondents that they have initiated actionagainst the petitioner keeping in view Section 147 of theAct of 1961 and the Department is entitled to reopen thecase of the petitioner. 10.It has been stated by the respondents that in case,the Assessing Officer is having a reason to believe thattaxable income has not been taxed or there is an escapementof income chargeable to tax, he is entitled to proceed aheadin the matter. The respondents have stated that they havefollowed the statutory provisions as contained under the Actof 1961 while proceeding ahead in the matter and theassessee is certainly free to file objections and to apply forany documents related in the matter. 11.Reliance has been placed upon a judgment delivered by this Court in the case of Malay Shrivastava v/s TheDeputy Commissioner (W.P. No.4046/2015) decided on21.04.2016. The respondents have stated that they havegranted opportunity of hearing to the petitioner in the matterduring the proceeding of reassessment under Sections147/148 of the Act of 1961 and the petitioner shall be freeto file reply as well as to defend itself. 12.It has also been stated that the reason has alreadybeen given to the assessee as per the note-sheet dated27.09.2019, and therefore, question of interference by thisCourt does not arise. 13.Heard learned counsel for the parties at length andperused the record. 14.The facts of the case reveal that the petitioner, in thepresent case, did file a return for the assessment year 2015 –16 (Financial Year 2014 – 15) disclosing a return ofRs.12,21,160/-. A notice under Section 143 (2) of the Act of1961 was issued to the petitioner on 12.09.2016. Thepetitioner did submit all the desired information and anassessment order was passed under Section 143 (3) of theAct of 1961 on 29.11.2017 accepting the returned income.15.Thereafter, the proceedings under Section 147 of theAct of 1961 were initiated against the petitioner and on04.02.2019, the petitioner received a notice under Section148 of the Act of 1961. The petitioner did submit a reply on30.07.2019 in response to the notice dated 04.02.2019 andvide order dated 13.08.2019, the objections of the petitionerwere rejected by a non-speaking and cryptic order. Theorder passed by the Income Tax Officer (Assessing Officer) reads as under:- “Kindly refer your letter received in the officeon 30.07.2019.Your objection cannot be accepted due to thefollowing reasons:- The assessee's jurisdiction lies with this officeand the case has been reopened on the basis ofinformation in possession of Assessing Officer aftertaking proper approval from competent Authority. Hence, in view of the above discussion, theobjection filed stands disposed off and the reassessmentproceedings will continue as per law” 16.The aforesaid order / reply makes it clear that thecase of the petitioner has been reopened on the basis ofinformation in possession of the Assessing Officer. 17.Sections 147 and 148 of the Act of 1961 reads asunder:- reads as under:- “Kindly refer your letter received in the officeon 30.07.2019.Your objection cannot be accepted due to thefollowing reasons:- The assessee's jurisdiction lies with this officeand the case has been reopened on the basis ofinformation in possession of Assessing Officer aftertaking proper approval from competent Authority. Hence, in view of the above discussion, theobjection filed stands disposed off and the reassessmentproceedings will continue as per law” 16.The aforesaid order / reply makes it clear that thecase of the petitioner has been reopened on the basis ofinformation in possession of the Assessing Officer. 17.Sections 147 and 148 of the Act of 1961 reads asunder:- “147.Income escaping assessment 2 If the AssessingOfficer has reason to believe] that any incomechargeable to tax has escaped assessment for anyassessment year, he may, subject to the provisions ofsections 148 to 153, assess or reassess such income andalso any other income chargeable to tax which hasescaped assessment and which comes to his noticesubsequently in the course of the proceedings under thissection, or recompute the loss or the depreciationallowance or any other allowance, as the case may be,for the assessment year concerned (hereafter in thissection and in sections 148 to 153 referred to as therelevant assessment year): Provided that where anassessment under sub- section (3) of section 143 or thissection has been made for the relevant assessment year,no action shall be taken under this section after theexpiry of four years from the end of relevantassessment year, unless any income chargeable to taxhas escaped assessment for such assessment year byreason of the failure on the part of the assessee to makea return under section 139 or in response to a noticeissued under sub- section (1) of section 142 or section148 or to disclose fully and truly all material factsnecessary for his assessment for that assessment year.Explanation 1-Production before the Assessing Officerof account books or other evidence from which materialevidence could, with due diligence, have been discovered by the Assessing Officer will not necessarilyamount to disclosure within the meaning of theforegoing proviso. Explanation 2.- For the purposes ofthis section, the following shall also be deemed to becases where income chargeable to tax has escapedassessment, namely:- (a)where no return of income has beenfurnished by the assessee although his totalincome or the total income of any other person inrespect of which he is assessable under this Actduring the previous year exceeded the maximumamount which is not chargeable to income- tax; (b)where a return of income has beenfurnished by the assessee but no assessment hasbeen made and it is noticed by the AssessingOfficer that the assessee has understated theincome or has claimed excessive loss, deduction,allowance or relief in the return; (c)where an assessment has been made, but-(I)income chargeable to tax has been under-assessed; or(I)income chargeable to tax has been under-assessed; or (ii)such income has been assessed at too lowa rate; ora rate; or (iii)such income has been made the subject ofexcessive relief under this Act; or (iv)excessive loss or depreciation allowanceor any other allowance under this Act has beencomputed.]or any other allowance under this Act has beencomputed.] 148.Issue of notice where income has escapedassessment 2 (b)where a return of income has beenfurnished by the assessee but no assessment hasbeen made and it is noticed by the AssessingOfficer that the assessee has understated theincome or has claimed excessive loss, deduction,allowance or relief in the return; (c)where an assessment has been made, but-(I)income chargeable to tax has been under-assessed; or(I)income chargeable to tax has been under-assessed; or (ii)such income has been assessed at too lowa rate; ora rate; or (iii)such income has been made the subject ofexcessive relief under this Act; or (iv)excessive loss or depreciation allowanceor any other allowance under this Act has beencomputed.]or any other allowance under this Act has beencomputed.] 148.Issue of notice where income has escapedassessment 2 (1)Before making the assessment,reassessment or recomputation under section 147,the Assessing Officer shall serve on the assesseea notice requiring him to furnish within suchperiod, not being less than thirty days, as may bespecified in the notice, a return of his income orthe income of any other person in respect ofwhich he is assessable under this Act during theprevious year corresponding to the relevantassessment year, in the prescribed form andverified in the prescribed manner and settingforth such other particulars as may be prescribed;and the provisions of this Act shall, so far as maybe, apply accordingly as if such return were areturn required to be furnished under section 139.] (2)The Assessing Officer shall, beforeissuing any notice under this section, record hisreasons for doing so.” 18.In the present case, the reasons for reopening theassessment have not been disclosed to the assessee andmerely on basis of change of opinion, the reassessment hasbeen ordered. The words 'reasons to believe' under Section147 of the Act of 1961 cannot be equated with 'reasons tosuspect' and reassessment has been ordered withoutdisclosing any fresh information in possession of theAssessing Officer. 19.It is true that Section 147 of the Act of 1961 confersa jurisdiction upon the Assessment Officer to initiate theproceedings for reopening of the assessment for bringingincome tax, which has escaped assessment. The provisionsof Section 147 of the Act of 1961 can be invoked by theAssessing Officer if he has reasons to believe that anyincome chargeable to tax has escaped assessment and theAssessing Officer does have the power to reassess anassessee subject to the provisions of Section 148 to 153 ofthe Act of 1961. However, the provisions of Section 147 oof the Act of 1961 confers the power upon the AssessingOfficer to reopen an assessment and the said power has tobe exercised only if there are reasons to believe that anyincome chargeable to tax has escaped assessment, meaningthereby, existence of the reasons and formation of thebelieve on the basis of such reasons, is an essentialcondition for invoking provisions of Section 147 of the Actof 1961. 20.The reasons to believe is not the same thing as thereasons to suspect as has been held in the case of DasFriends Builder Private Limited v/s DCIT reported in (2006) 80 ITR 77 Allahabad. A similar view has been takenby the Delhi High Court in the case of Ashok Kumar Singhv/s CIT reported in 132 ITR 707 Delhi High Court and inthe case of CIT v/s Kelvinator India Limited reported in256 ITR 1 SC. 21.In the present case, there was no suppression on thepart of the assessee and merely because there is a change inopinion, reopening could not have been done in the mannerand method it has been done in the present case. There wasno additional material for formation of the believe ascontemplated under Section 147 of the ID Act. 22.Resultantly, the impugned order dated 13.08.2019passed by the respondent No.2 is hereby set aside. TheIncome Tax Officer shall be free to proceed ahead afreshagainst the petitioner in accordance with law. With the aforesaid, the present Writ Petition stands allowed. Certified copy, as per rules. 21.In the present case, there was no suppression on thepart of the assessee and merely because there is a change inopinion, reopening could not have been done in the mannerand method it has been done in the present case. There wasno additional material for formation of the believe ascontemplated under Section 147 of the ID Act. 22.Resultantly, the impugned order dated 13.08.2019passed by the respondent No.2 is hereby set aside. TheIncome Tax Officer shall be free to proceed ahead afreshagainst the petitioner in accordance with law. With the aforesaid, the present Writ Petition stands allowed. Certified copy, as per rules. (S.C. SHARMA) J U D G E (SHAILENDRA SHUKLA) J U D G E Ravi Digitally signed by Ravi Prakash Date: 2020.01.08 17:24:46 +05'30'