Yogesh Kumar Saini v. Union Of India

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 10030/2014 Yogesh Kumar Saini S/o Late Shri Kanhaiya lalji Saini, aged app.60 years, R/o Plot No. 35, Manu Marg, Alwar (Rajasthan) ----Petitioner Versus 1. Union of India, through the Ministry of Finance, North Block,New Delhi-110 001, through the Commissioner of Income Tax,Alwar 2. The Commissioner of Income Tax Alwar, Moti Doongri Road,Alwar 3. The Income Tax Officer, Ward-2(3), Moti doongri, Alwar ----Respondents For Petitioner(s) : Mr.Anant Kasliwal, Sr. Adv. withMs.Charu PareekMr.Diwakar Khaldwa &Mr.Raghav KrishnatriFor Respondent(s): Mr. Anuroop Singhi withMr. Aditya Khandelwal &Mr. N.S. Bhatti HON'BLE MR. JUSTICE AVNEESH JHINGAN HON'BLE MR. JUSTICE UMA SHANKER VYASORDER -RESERVED ON:-PRONOUNCED ON: 08/11/2024 14/11/2024 -AVNEESH JHINGAN, (J): 1.This petition is filed seeking quashing of notice dated31.03.2014 issued under Section 148 of Income Tax Act, 1961 (forshort ‘the Act’) for Assessment Year (for brevity ‘AY’) 2009-10 andorder dated 20.06.2014 rejecting the objections. 2.The brief facts are that the petitioner filed the Income TaxReturn for the relevant year. The assessment under Section143(3) of the Act was finalized on 11.10.2011. Notice dated31.03.2014 was issued under Section 148 of the Act on theground that petitioner wrongly claimed deduction under Section54B and there is an escapement of tax on income of Rs.9,42,296/-. The objections filed by the petitioner weredismissed on 20.06.2014. Hence, the present petition. 3.Learned Senior Counsel for the petitioner submits that theassessment case of the petitioner was selected for scrutiny,questionnaire was issued and after considering the reply filed theassessment was framed. The deduction claimed under Section 54Bof the Act was examined by Assessing Officer (hereinafter referredto as ‘AO’) and the reassessment proceeding is on the basis ofchange of opinion. 4.Learned counsel for the respondent contended that the AOhad not considered the deduction under Section 54B of the Act.Reliance is placed upon the decision of High Court of Calcutta in Principal Commissioner of Income Tax versus ITC Ltd.reported in (2024) 467 ITR 467 (Cal). The argument is that forthe land sold by brothers of petitioner the deduction under Section54B of the Act was claimed by petitioner. 5.The assessment of the petitioner for the relevant year wasframed under Section 143(3) of the Act. On failure of thepetitioner to furnish the account for receipts and details, theaddition of Rs.35,000/- was made to the professional income. Thenotice under Section 148 of the Act was issued on ground that thepetitioner wrongly claimed deduction under Section 54B of the Actas the land was sold by the brothers of the petitioner and the AOhad reason to believe that income of Rs.9,42,296/- had escapedassessment. 6.The case of petitioner is that the assessing authority in theassessment order has taken note of income from Long Terms Capital Gain (hereinafter referred to as ‘LTCG’) and this entitlesthe petitioner to claim deduction under Section 54-B of the Act.Present is not a case of reopening of assessment on change ofopinion. There was no application of mind by AO on the issue ofdeduction claimed under Section 54-B of the Act. From disclosureof income LTCG in return, it cannot be inferred that the issue ofdeduction claimed under Section 54-B of the Act for the land soldby the brothers of the petitioner was considered or discussedduring assessment. 6.The case of petitioner is that the assessing authority in theassessment order has taken note of income from Long Terms Capital Gain (hereinafter referred to as ‘LTCG’) and this entitlesthe petitioner to claim deduction under Section 54-B of the Act.Present is not a case of reopening of assessment on change ofopinion. There was no application of mind by AO on the issue ofdeduction claimed under Section 54-B of the Act. From disclosureof income LTCG in return, it cannot be inferred that the issue ofdeduction claimed under Section 54-B of the Act for the land soldby the brothers of the petitioner was considered or discussedduring assessment. 7.From the perusal of the reply filed during assessmentproceedings and the assessment order, it is evident that there wasno specific question raised with regard to deduction claimed underSection 54B of the Act. The case would have been on differentpedestal if the AO during the assessment proceedings had raisedquery with regard to deduction under Section 54B of the Act. Inthat case the reply and material filed by the petitioner relating tothe deduction would have either been accepted or rejected orfurther probe ordered. 8.The Supreme Court in Assistant Commissioner of Income Tax versusRajesh Jhaveri Stock Broker Pvt. Ltd. reported in (2007)291 ITR 500 held:- 16. Section 147 authorises and permits theAssessing Officer to assess or reassess incomechargeable to tax if he has reason to believe thatincome for any assessment year has escapedassessment. The word 'reason' in the phrase 'reasonto believe' would mean cause or justification. If theAssessing Officer has cause or justification to knowor suppose that income had escaped assessment, itcan be said to have reason to believe that anincome had escaped assessment. The expressioncannot be read to mean that the Assessing OfficerAssessing Officer to assess or reassess incomechargeable to tax if he has reason to believe thatincome for any assessment year has escapedassessment. The word 'reason' in the phrase 'reasonto believe' would mean cause or justification. If theAssessing Officer has cause or justification to knowor suppose that income had escaped assessment, itcan be said to have reason to believe that anincome had escaped assessment. The expressioncannot be read to mean that the Assessing Officer should have finally ascertained the fact by legalevidence or conclusion. The function of theAssessing Officer is to administer the statute withsolicitude for the public exchequer with an inbuiltidea of fairness to taxpayers. Supreme Court inCentral Provinces Manganese Ore Co. Ltd. v. ITO[(1991)191ITR662(SC)] held:-for initiation of action under Section 147(a) (as theprovision stood at the relevant time) fulfillment ofthe two requisite conditions in that regard isessential. At that stage, the final outcome of theproceeding is not relevant. In other words, at theinitiation stage, what is required is 'reason tobelieve', but not the established fact of escapementof income. At the stage of issue of notice, the onlyquestion is whether there was relevant material onwhich a reasonable person could have formed arequisite belief. Whether the materials wouldconclusively prove the escapement is not theconcern at that stage. This is so because theformation of belief by the Assessing Officer is withintherealmofsubjectivesatisfaction.17. The scope and effect of Section 147 assubstituted with effect from April 1, 1989, as alsoSections 148 to 152 are substantially different fromthe provisions as they stood prior to suchsubstitution. Under the old provisions of Section147, separate Clauses (a) and (b) laid down thecircumstances under which income escapingassessment for the past assessment years could beassessed or reassessed. To confer jurisdiction underSection 147(a) two conditions were required to besatisfied firstly the Assessing Officer must havereason to believe that income profits or gainschargeable to income tax have escaped assessment,and secondly he must also have reason to believethat such escapement has occurred by reason ofeither (i) omission or failure on the part of theassessee to disclose fully or truly all material factsnecessary for his assessment of that year. Boththese conditions were conditions precedent to besatisfied before the Assessing Officer could havejurisdiction to issue notice under Section 148 readwith Section 147(a). But under the substitutedSection 147 existence of only the first conditionsuffices. In other words if the Assessing Officer forwhatever reason has reason to believe that incomehas escaped assessment it confers jurisdiction toreopen the assessment.It is however to be notedthat both the conditions must be fulfilled if the casefalls within the ambit of the proviso to Section 147.The case at hand is covered by the main provisionandnottheproviso. 18. So long as the ingredients of Section 147 are fulfilled, the Assessing Officer is free to initiateproceeding under Section 147 and failure to takesteps under Section 143(3) will not render theAssessing Officer powerless to initiate reassessmentproceedings even when intimation under Section143(1) had been issued. (emphasis supplied) 9.There is no quarrel with the proposition of law that thereassessment proceedings cannot be initiated merely on change ofopinion. The reasons for reopening clearly indicates that the AOhad reason to believe that income had escaped assessment. We atthis stage are not at all suggesting that the inference drawn iscorrect. What is required at this stage is that the AO has reason tobelieve that there was an escaped assessment. 10.There is no bar that under Section 147 of the Act that thereasons to believe cannot be based upon the material alreadyavailable on record. 11.The Supreme Court in Phool Chand Bajrang Lal & Anr.Versus Income Tax Officer & Anr. reported in(1993) 4 SCC 77 held as under: (emphasis supplied) 9.There is no quarrel with the proposition of law that thereassessment proceedings cannot be initiated merely on change ofopinion. The reasons for reopening clearly indicates that the AOhad reason to believe that income had escaped assessment. We atthis stage are not at all suggesting that the inference drawn iscorrect. What is required at this stage is that the AO has reason tobelieve that there was an escaped assessment. 10.There is no bar that under Section 147 of the Act that thereasons to believe cannot be based upon the material alreadyavailable on record. 11.The Supreme Court in Phool Chand Bajrang Lal & Anr.Versus Income Tax Officer & Anr. reported in(1993) 4 SCC 77 held as under: 27. From a combined review of the judgmentsof this Court, it follows that an Income-taxOfficer acquires jurisdiction to reopenassessment under Section 147(a) read withSection 148 of the Income Tax 1961 only if onthe basis of specific, reliable and relevantinformation coming to his possessionsubsequently, he has reasons which he mustrecord, to believe that by reason of omission orfailure on the part of the assessee to make atrue and full disclosure of all material factsnecessary for his assessment during theconcluded assessment proceedings, any part ofhis income, profit or gains chargeable to incometax has escaped assessment. He may startreassessment proceedings either because somefresh facts come to light which where notpreviously disclosed or some information withregard to the facts previously disclosed comes into his possession which tends to expose theuntruthfulness of those facts. In such situations,it is not a case of mere change of opinion or thedrawing of a different inference from the samefacts as were earlier available but acting onfresh information. Since, the belief is that of the-Incometax Officer, the sufficiency of reasonsfor forming the belief, is not for the Court tojudge but it is open to an assessee to establishthat there in fact existed no belief or that thebelief was not at all a bona fide one or was-based on vague, irrelevant and nonspecificinformation. To that limited extent, the Courtmay look into the conclusion arrived at by theIncome-tax Officer and examine whether therewas any material available on the record fromwhich the requisite belief could be formed bythe Income-tax Officer and further whether thatmaterial had any rational connection or a livelink for the formation of the requisite belief.It would be immaterial whether the Income-taxOfficer at the time of making the originalassessment could or, could not have found byfurther enquiry or investigation, whether thetransaction was genuine or not, if one the basisof subsequent information, the Income-taxOfficer arrives at a conclusion, after satisfyingthe twin conditions prescribed in Section 147(a)of the Act, that the assessee had not made afull and true disclosure of the material facts atthe time of original assessment and thereforeincome chargeable to tax had escapedassessment. The High Courts which have interpreted BurlopDealer's case (Supra) as laying down law to thecontrary fell in error and did not appreciate theimport of that judgment correctly. (emphasis supplied) 12. In view of the above discussion, it is not a case of change ofopinion, the petition is dismissed. (UMA SHANKER VYAS),J(AVNEESH JHINGAN),J Riya/Danish/162 Reportable:Yes