Wp/2727/2013 Of Nishith Madanlal Desai v. Commissioner Of Income Tax -11 Mumbai

PURTIPRASADPARAB Digitally signed byPURTI PRASAD PARABDate: 2022.02.1016:06:58 +0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 2727 OF 2013 Nishith Madanlal Desai V/s. ….Petitioner Commissioner of Income Tax-11(3) Mumbai …Respondent ---- Mr. Firoze B. Andhyarujina, Senior Advocate i/b Mr. Sameer G. Dalal for Petitioner.Mr. Suresh Kumar for Respondent. ---- CORAM : K.R. SHRIRAM & N. J. JAMADAR, JJ. DATED : 4[th] FEBRUARY, 2022 P.C. : 1.Petitioner is impugning a notice dated 8[th] March, 2013 issuedunder Section 148 of the Income Tax Act, 1961 (the Act) for A.Y. 2006-07and the order dated 19[th] September, 2013 rejecting objections of petitioner. 2.Petitioner, an individual had filed his return of income for A.Y.2006-07 declaring total income of Rs.6,32,09,099/-. The return wasprocessed under Section 143(1) of the Act accepting the returned income.The case was selected for scrutiny and assessment under Section 143(3) ofthe Act was completed on 10[th] December, 2018 assessing the total income atRs.6,32,39,099/-. 3.Subsequently, in March, 2013 petitioner received the impugnednotice of re-opening dated 8[th] March, 2013. 4. 4.We have considered the reasons for re-opening of re-assessmentwith the assistance of Mr. Andhyarujina and Mr. Suresh Kumar. 5.The notice for re-opening has been issued after expiry of fouryears from the end of the relevant assessment year and the scrutiny andassessment under Section 143(3) of the Act having been done, the provisoto Section 147 of the Act shall be applicable. As per proviso there is a bar tore-open any assessment after expiry of four years from the end ofassessment year unless revenue is able to show that there was failure on thepart of the assessee to truly and fully disclose all material facts required forassessment for the relevant assessment year. Now, let us examine whether the reasons recorded forre-opening disclose any such information not disclosed by petitioner. In ourview, there is nothing to indicate that there was non disclosure on the partof petitioner. 6.Mr. Suresh Kumar submitted that petitioner had utilised termloan which he has taken from HDFC Ltd., for investment in debentures andnot for housing property and instead of claiming deduction under Section24(3) of the Act claimed deduction under Section 57 of the Act. Therefore,the interest expense of Rs.58,03,897/- cannot be allowed as a deduction tothe assessee either under Section 24(b) or under section 57 of the Act.Mr.Suresh Kumar submitted that by claiming deduction under Section 57 ofthe Act and not under Section 24(b) of the Act would also amount to non- disclosure. Mr. Suresh Kumar submitted that disclosure of material factswith respect to the setting off of the interest expenses under Section 57 ofthe Act might be full but it cannot be considered as true and it is failure onthe part of the assessee. Mere production of books of accounts or otherdocuments are not enough in view of explanation 1 to Section 147 of theAct. These submissions of Mr. Suresh Kumar cut no ice with us. disclosure. Mr. Suresh Kumar submitted that disclosure of material factswith respect to the setting off of the interest expenses under Section 57 ofthe Act might be full but it cannot be considered as true and it is failure onthe part of the assessee. Mere production of books of accounts or otherdocuments are not enough in view of explanation 1 to Section 147 of theAct. These submissions of Mr. Suresh Kumar cut no ice with us. 7.The Apex Court in Calcutta Discount Co. Ltd. V/s. Income TaxOfficer 1, has held that there can be no doubt that the duty of disclosing allthe primary facts relevant to the decision of the question before theassessing authority lies on the assessee, however, does not extend beyondthe full and truthful disclosure of all primary facts. Once all the primaryfacts are before the assessing authority, he requires no further assistance byway of disclosure. It is for him to decide what inferences of facts can bereasonably drawn and what legal inferences have ultimately to be drawn. Itis not for somebody else-far less the assessee to tell the assessing authoritywhat inferences, whether of facts or law, should be drawn. Indeed, when itis remembered that people often differ as regards what inferences should bedrawn from given facts, it will be meaningless to demand that the assesseemust disclose what inferences - whether of facts or law - he would drawfrom the primary facts. If from primary facts more inferences than onecould be drawn, it would not be possible to say that the assessee shouldhave drawn any particular inference and communicated it to the assessing 1 (1961) 41 ITR 191 (SC) authority. How could an assessee be charged with failure to communicatean inference, which he might or might not have drawn? It may be pointedout that the Explanation to the sub- section has nothing to do with"inferences" and deals only with the question whether primary material factsnot disclosed could still be said to be constructively disclosed on the groundthat with due diligence the Income-tax Officer could have discovered themfrom the facts actually disclosed. The Explanation has not the effect ofenlarging the section, by casting a duty on the assessee to disclose"inferences" to draw the proper inferences being the duty imposed on theIncome Tax Officer. Therefore, it can be concluded that while the duty of theassessee is to disclose fully and truly all primary relevant facts, it does notextend beyond this. 8.All the points raised in the reasons recorded have beenconsidered during the assessment proceeding. In as much as, query wasraised regarding the loan taken and utilisation thereof during theassessment proceeding. It is evident from letter dated 5[th] December, 2008addressed by petitioner’s Chartered Accountants to respondent by whichpetitioner had forwarded details of Secured Loans alongwith utilisationthereof and balance as per books of accounts as on 31[st] March, 2006 anddetails of interest paid as shown under the head Financial Expenses. Ofcourse, with the said letter various other details were also provided.Therefore, there has been query raised and query has been answered. It is settled law as held in Aroni Commercials Ltd. vs. Deputy Commissioner ofIncome-tax 2(1)2 that once a query is raised during the assessmentproceedings and the assessee has replied to it, it follows that the queryraised was a subject of consideration of the Assessing Officer whilecompleting the assessment. It is not even necessary that an assessmentorder should contain reference and/or discussion to disclose its satisfactionin respect of the query raised.Income-tax 2(1)2 that once a query is raised during the assessmentproceedings and the assessee has replied to it, it follows that the queryraised was a subject of consideration of the Assessing Officer whilecompleting the assessment. It is not even necessary that an assessmentorder should contain reference and/or discussion to disclose its satisfactionin respect of the query raised. 9.Moreover, on proper reading of the reasons for re-opening, it isevident that the Assessing Officer has believed that the income accessible totax has escaped assessment on verification of the records. The reasons statethat “On verification of the case ………………..”. “The case records for AY2006-07 contain a certificate ……………...”, etc. Therefore, the entire basisis from available records and once a conclusive view has been taken by theAssessing Officer another officer cannot rely on the same documents orinformation to take a view different from the view already taken. In otherwords change of opinion is not permissible. 10.Further, the Assessing Officer has relied on the assessmentproceedings for A.Y. 2009-10 in which the entire interest paid to HDFC Ltd.,on the housing loan was disallowed and that disallowance of of interest paidon housing loan from HDFC Ltd., has been upheld by the learned CIT (A)-2.Mr.Andhyarujina submitted that petitioner had impugned the order of CIT 2 [2014] 44 taxmann.com 304 (Bombay) (A) before the Income Tax Appellate Tribunal (ITAT) and the ITAT, by anorder dated 28[th] April, 2017 held that petitioner was entitled to thededuction on interest paid on housing loan from HDFC Ltd. It is true thatrespondent has challenged the said order of ITAT by way of Appeal in thiscourt. 11.Therefore, the Assessment Order of ITAT has attained finalityfor A.Y. 2009-10. If the ITAT has held that petitioner was entitled to thehousing loan deduction and interest paid for housing loan from HDFC Ltd.,thereby reversing the findings of the Assessing Officer as well as CIT (A) forA.Y. 2009-10, the entire basis in the reasons for re-opening for A.Y. 2006-07also has collapsed. 12.In the circumstances, we allow the petition in terms of prayer clause (i) and (ii) which reads as under : (i) call for record and proceedings and issue writ settingaside and quashing the Impugned Notices dated 08.03.2013being Ex - ‘H’ issued under section 148 of the Act by theSecond Respondent; (ii) call for record and proceedings and issue writ settingaside and quashing the order passed by the SecondRespondent disposing off the objections raised by thePetitioner against the reopening of assessment under section147 of the Income Tax Act, 1961 dated 19.09.2013, beingEx.’J’ hereto; 13.Petition disposed. (N. J. JAMADAR, J.) (K.R. SHRIRAM, J.)