Wp/3444/2018 Of Himmatbhai M. Viradiya v. The Income Tax Officer-25(2)(4) Nd 2 Ors

Priya Soparkar 1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO.3444 OF 2018 Himmatbhai M. Viradiya… Petitioner V/s. The Income Tax Officer -25(2)(4) and ors.… Respondents --- Mr.Niraj Sheth with Mr.Tanzil Padvekar i/by M/s Dave &Padvekar Associates for the Petitioner.Mr.Sham Walve for the Respondents. --- CORAM : AKIL KURESHI AND M.S.SANKLECHA, JJ. DATE : DECEMBER 13, 2018. P.C.:- 1.Petitioner has challenged a notice of re-opening of assessment dated 29[th] March, 2018 issued by the RespondentNo.1-Income Tax Officer. 2.Brief facts are as under: Petitioner is an individual. For the assessment year 2011- 12, the petitioner filed return of income on 29[th] July, 2011 declaring total income of Rs.6,04,017/-. The return was acceptedunder Section 143(1) of the Income Tax Act, 1961 (“the Act”for short) without scrutiny. To re-open such assessment, theAssessing Officer issued the impugned notice. There is somecontroversy about what precisely the reasons the Assessing Officerhad recorded, in order to issue such notice. However, the gist ofthe reasons was that the assessee had received brokerage in cashRs.21,65,980/- and invested a sum of Rs.61,34,800/- in cash forpurchase of a residential property in a scheme situated atKandivali (W) to be developed by one M/s Sony & Associates.According to the reasons Police Authorities had recorded thestatements of various persons including the petitioner, in whichsuch cash payment was admitted. According to the AssessingOfficer, therefore, the cash amount of Rs.61,34,800/- wasundisclosed income of the assessee, which had escapedassessment. 3.The petitioner demanded reasons from the Assessing Officer.At one stage the Assessing Officer made a followingcommunication on 22[nd] May, 2018:-At one stage the Assessing Officer made a followingcommunication on 22[nd] May, 2018:- “Reasons recorded for reopening are as under: Information received regarding group ofpersons from diamond market who have allegedlymade cash payment for purchase of residentialproperty to be constructed at Dahanukarwadi,Kandivali (W), Mumbai, under SRA scheme bydeveloper M/s Soni & associates. As perinformation, during the F.Y. 2010-11, assesseebeing Estate Agent have received brokerage in cashof Rs.21,65,080/-& also amount of Rs.61,34,800/-in cash is invested by him to purchase residentialproperty under the said SRA scheme of Kandivaliby developer M/s Soni & associates. The fact is admitted in the statementrecorded in Malad police station for the FIR fileddated 29/04/2015, against developer M/s Soni &Associates for not completing the said SRA project& also not returning the back the cash paid by themembers. On verification of the AIR informationthe assessee has declared business income ofRs.6,03,739/- only in return for the A.Y. 2011-12,whereas he has paid cash of Rs.61,34,800/- to M/sSoni & Associates. The said cash investment isfrom unexplained source & undisclosed & notoffered to tax, for the A.Y. 2011-12. On this basis, Ihave reason to believe that escapement of incomeexceeding Rs.1 lac has resulted inunderassessment within the meaning of sec.147of I.T.Act, 1961, for the A.Y. 2011-12. Hence, thecase is reopened.” 4. In response to the application filed by the petitioner under Right to Information Act, the Assessing Officer supplied thereasons in prescribed format. The contents of which read as “Reasons for reopening of the assessment in thecase of HIMMAT M. VIRADIYA for A.Y. 2011-12u/s 147 of the Income Tax Act, 1961 The assessee has filed return of incomefor A.Y. 2011-12 on 29/07/2011 declaring totalincome of Rs.6,04,017/-. The return wasprocessed under section 143(1) of the Income taxAct, 1961. 4. In response to the application filed by the petitioner under Right to Information Act, the Assessing Officer supplied thereasons in prescribed format. The contents of which read as “Reasons for reopening of the assessment in thecase of HIMMAT M. VIRADIYA for A.Y. 2011-12u/s 147 of the Income Tax Act, 1961 The assessee has filed return of incomefor A.Y. 2011-12 on 29/07/2011 declaring totalincome of Rs.6,04,017/-. The return wasprocessed under section 143(1) of the Income taxAct, 1961. 2.Information was received regarding group ofpersons from diamond market who have allegedlymade cash payments for purchase of residentialproperty to be constructed at Dahanukar wadi,Kandivali(W), Mumbai, under SRA scheme bydeveloper M/s Soni & Associates. The assessee isone of the persons in this case of black moneytransaction/tax evasion. As per the information, itis seen that during the F.Y. 2010-11, the assesseebeing estate agent has received brokerage in cashof Rs.21,65,980/-& also amount of Rs.61,34,800/-in cash is invested by him to purchase residentialproperty under the said SRA Scheme at KandivaliWest by developer M/s Soni & Associates. 3.All the members filed FIR with Malad PoliceStation vide FIR No.22/2015 dtd. 29.4.2015against the developer for not completing the saidproject & also not returning back the money, tothem. During the statements recorded in policestation, all the members including the assesseeadmitted the payment of cash made for thepurchase of residential flat, during F.Y. 2010-11to the developer M/s soni & Associates. 4.On verification of the AIR information, it isseen the assessee has declared business income of Rs.6,03,739/- only for A.Y. 2011-12 whereasas per the information, he has paid a sum ofRs.61,34,800/- in cash to M/s Soni & Associatesin F.Y. 2010-11. 5.Thus the cash investment of Rs.61,34,800/-has been through undisclosed sources and isunexplained. The source of income has not beendisclosed and offered to tax for A.Y. 2011-12. 6.It is evident from the above facts that in thiscase, the assessee has failed to disclose fully andtruly all material facts relevant to the assessmentyear under consideration. Therefore, on the basisof the above findings, I have reason to believethat income of more than Rs.61,34,800/- hasescaped assessment for A.Y. 2011-12 within themeaning of Explanation 2(b) to section 147 ofthe Act. 7.It is pertinent to mention that the assesseehas filed return of income for year underconsideration but no assessment as stipulatedu/s 2 (40) of the Act was made and the return ofonly processed u/s 143 (1) of the Act. In view ofthe above, the provisions of clause (b) ofExplanation 1 to Section 147 of the I.T.Act, 1961are applicable to the facts of this case and theassessment year in consideration is deemed to bea case where income chargeable to tax hasescaped assessment. 8.In this case, more than four years havelapsed from the end of the assessment year underconsideration. Hence, necessary sanction to issuenotice u/s 148 of the Act has been obtainedseparately from the Pr. Commissioner of IncomeTax as per the provisions of Sec 151 of the Act.” Priya Soparkar 627 wp 3444-18-o 5.Petitioner raised detailed objections to the notice of re-opening under a communication dated 4[th] September, 2018. suchobjections however were rejected by the Assessing Officer by anorder dated 29[th] September, 2018. Dissatisfied with the manner ofdisposal of the objections by the Assessing Officer, the petitioneryet again approached the Assessing Officer under acommunication dated 17[th] October, 2018 and requested him topass a speaking order. Such request was rejected by the AssessingOfficer under communication dated 15[th] November, 2018,thereupon the present petition has been filed. Priya Soparkar 627 wp 3444-18-o 5.Petitioner raised detailed objections to the notice of re-opening under a communication dated 4[th] September, 2018. suchobjections however were rejected by the Assessing Officer by anorder dated 29[th] September, 2018. Dissatisfied with the manner ofdisposal of the objections by the Assessing Officer, the petitioneryet again approached the Assessing Officer under acommunication dated 17[th] October, 2018 and requested him topass a speaking order. Such request was rejected by the AssessingOfficer under communication dated 15[th] November, 2018,thereupon the present petition has been filed. 6.Counsel for the petitioner submitted that the AssessingOfficer had supplied two sets of reasons. It is not clear whichreasons were existing on record when the sanction from thePrincipal Commissioner was obtained and impugned noticeissued. He submitted that the Assessing Officer has not recordedany satisfaction in either of two sets of the reasons that incomechargeable to tax had escaped assessment. He further submittedthat there was no tangible material available with the AssessingOfficer in order to issue the impugned notice of re-assessment. Counsel further submitted that the reference to the informationreceived by the Assessing Officer in the reasons recorded was notsupplied to the petitioner nor backed by any documents onrecord. 7.On the other hand Mr. Walve for the department opposedthe petition contending that the Assessing Officer had recordedonly one set of reasons. There is material to believe that incomeof the petitioner has escaped assessment. Return filed by thepetitioner was accepted under Section 143(1) of the Act. 8.It is undoubtedly true that the Department hascommunicated the reasons to the petitioner twice. We havetaken note of both the communications and reproduced therelevant portions in this judgment. In the context of thiscontroversy as to which set of reasons were on record and whetherat the relevant time the reasons existed on record at all or not,we have summoned the original files from the Department.Learned counsel for the Department had made available the fileof the Assessing Officer, of the Joint Commissioner of Income Tax Priya Soparkar 827 wp 3444-18-o through whom the process of obtaining sanction was routed andthat of the Principal Commissioner of the Income tax who hadgranted the sanction. We have perused all these files. We find thatreasons conveyed to the petitioner in response to his queryunder Right to Information Act, the contents of which we havereproduced in this judgment existed on the file right from thebeginning. The reasons find place in the file of the AssessingOfficer. The request for granting sanction made to the PrincipalCommissioner was routed through the Joint Commissioner. Thefile of the Joint Commissioner shows that the request wasreceived on 28[th] March, 2018. The Joint Commissioner put hisremarks in the proforma that it was a fit case to re-open. Thishappened on 28[th] March, 2018. Perusal of the file of the PrincipalCommissioner would show that the Principal Commissioner alsoexamined the reasons and the note put by the Joint Commissionerand in his own hand granted sanction in following terms:- “Yes, I am satisfied with the reason given by theAssessing officer for re-opening the case undersection 147.” 9.Right after the said sanction letter of the Principal Commissioner Income Tax, one would find the reasons recordedby the Assessing Officer. 10.Under the circumstances, we are satisfied that the reasonsdid exist on file, were duly recorded by the Assessing Officerbefore obtaining sanction from the Principal Commissioner, thatthe Joint Commissioner perused such reasons and forwarded thesame to the Principal Commissioner with his own remarks andlastly that the Principal Commissioner also put his endorsementthat it was a fit case for re-opening of assessment. “Yes, I am satisfied with the reason given by theAssessing officer for re-opening the case undersection 147.” 9.Right after the said sanction letter of the Principal Commissioner Income Tax, one would find the reasons recordedby the Assessing Officer. 10.Under the circumstances, we are satisfied that the reasonsdid exist on file, were duly recorded by the Assessing Officerbefore obtaining sanction from the Principal Commissioner, thatthe Joint Commissioner perused such reasons and forwarded thesame to the Principal Commissioner with his own remarks andlastly that the Principal Commissioner also put his endorsementthat it was a fit case for re-opening of assessment. 11.The mix up by the Departmental Authorities in conveyingreasons twice would not be fetal in the present case. Firstly, asnoted above, we have verified that it was later set of reasonsconveyed to the petitioner which exist on file. Secondly, theearlier communication dated 22[nd] May, 2018 also concerns thegist of same reasons. So far as the material aspects are concerned,we notice no change. In essence under communication dated22[nd] May, 2018 the Assessing Officer had merely conveyed thegist of his reasons to the petitioner. 12.As noted, the present case is one where return filed by thepetitioner is accepted without scrutiny. The Assessing Officertherefore, would have much wider latitude to re-open theassessment. The reasons recorded by him show that according tothe Assessing Officer, the petitioner had invested the cash amountof Rs.61,34,800/- for purchase of an immovable property to bedeveloped by one M/s Soni & Associates. The Petitioner hadgiven a statement to the Police Authority, in which he had madesuch declaration. The return filed by the petitioner declared atotal income Rs.6,04,017/-. It can thus be seen that the AssessingOfficer had tangible material at his command to form areasonable belief that income chargeable tax had escapedassessment. In the result, the petition is dismissed. (M.S.SANKLECHA,J.) (AKIL KURESHI,J.)….