DCIT, CENTRAL CIRCLE -1(1),, AHMEDABAD vs. SHRI DEEPAK BUDHARMAL VASWANI,, AHMEDABAD

When these appeals were called out for hearing, learned counsel for the assessee, submitted that one of the grievances that the assessee has raised, in his appeal, is against learned CIT(A)’s upholding the validity of reassessment proceedings, and that in the event of this grievance being upheld, all other issues raised in the cross appeals will be rendered

The assessee did object to these reasons of reopening the assessment. The assessee disputed the very factual foundation on which the reasons for reopening the assessment were set out. He requested for a copy of the letter dated 28th June 2013, referred to in the reasons so recorded, based on which the assessment has been reopened. He submitted that, to the best of his knowledge, there was no tangible material based on which the reassessment proceedings are initiated. He also submitted that he has nothing to do with plot no. 33A referred to in the reasons and the same belongs to Parth Bopal Cooperative Housing Society Ltd and not him. Referring to Hon’ble Supreme Court’s judgment in the case of ITO Vs Lakhmani Mewal Das (103 ITR 437), the assessee highlighted the need for live link between material and belief so as to justify the reopening and the fact that an application was also filed seeking relevant information under the Right to Information Act, 2005. The assessee thus vehemently objected to the reasons recorded for reopening the assessment. Vide order dated 10th June 2014, these objections were disposed of. It was observed that the inquiries have revealed that Rohit Thakore had actually paid Rs 3.11 crore to the assessee between 8.8.16 to 22.1.2007, and this amount was not shown by the assessee. There was thus a reason to believe that the income of Rs 3.11 crores has escaped the assessment. The objections were thus overruled, and the Assessing Officer proceeded with the reassessment proceedings. In appeal, the assessee once again raised objections to the reassessment proceedings but without any success. While upholding the validity of reassessment proceedings, the CIT(A) observed as follows: “4.2 Submission of the appellant and the assessment order has been carefully considered. Facts of the case in brief as mentioned in assessment order are that the assessment has been reopened by issuing notice dated 7.8.2013 u/s 148 of the Act and the same was duly served upon the appellant. In response to the said notice, the appellant vide letter dated 29.8.2013 stated that the original return filed on 22.01.2008 showing income of Rs.19,12,110/- may be considered as return filed in response to notice u/s. 148 of the Act. Thereafter notice u/s 143(2) dated 20.9.2013 was issued and duly served upon the appellant. However, the appellant filed writ petition before the Hon'ble High Court of Gujarat, Ahmedabad challenging the validity of notice issued u/s. 148 of the Act on two counts i.e. i) Approval accorded u/s. 151(2) of the Act and ii) initiation of proceedings and reasons recorded u/s 148 of the Act. The Hon'ble High Court of Gujarat vide order dated 27.1.2014 held that department would withdraw the impugned notices u/s. 148, however, with a liberty to take fresh action in accordance with the law. Therefore, the notice dated 7.8.2013 issued u/s 148 of the Act was withdrawn vide letter dated 5.2,2014 by the Assessing Officer and a fresh notice u/s 148 was issued on 5.2.2014 after recording the reasons before issue of notice. Approval u/s 151 was also obtained from the prescribed authority before issuing the notice. The appellant again stated vide letter dated 10.3.2014 that the original return filed on 22.1.2008 may be considered as return filed in response to the said notice. The appellant filed letter dated 3.4.2014 before the Assessing Officer to provide copy of the original reasons recorded and also raised objections for reopening of proceedings vide letter dated 30.5.2014. The photocopies of the reasons recorded were provided to the appellant alongwith letter dated 5.5.2014 by the Assessing Officer. The objections raised by the appellant were also disposed off by passing speaking order dated 10.6.2014. Therefore, the AO asked the appellant to explain the contents of the document seized from the premises of Shri

The assessee is not satisfied and is in further appeal before us.

We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

As a plain reading of the reasons recorded for reopening the assessment would show, it has been observed that “the amount of Rs 3.11 crore paid to Shri Deepak Vasavni, as mentioned in the seized page no. 23, was added to the total income of Shri Rohit Thakore as unexplained investment (emphasis, by underlining, provided by the Assessing Officer recording the reasons of reopening the assessment) in the assessment order passed by the DCIT, CC-2(1), Ahmedabad” and, as stated in the immediately following sentence, “on perusal of the income of Shri Deepakkumar Buddharmal Vaswani, he has now total income of Rs 19,22,110 only for the assessment year 2007-08”. On these facts the Assessing Officer has concluded that “the assessee has not shown the receipt of Rs 3.11 crore in return of income for the AY 2007-08”, and opined that “in view of the above, I have, therefore, reasons to believe that the assessee’s income has escaped assessment within the meanings of Section 147 of the Income Tax Act, 1961” and “Therefore, this is a fit case for reopening the assessment”. All these observations are made in the same order, one after the other without anything else, and clearly lead to the conclusion that it is a fit case for reopening the assessment because Rs 3.11 crores paid to Shri Deepal Vaswani, which have been added as unexplained investments in the hands of Rohit Thakore, have not been shown as receipts by the assessee. The addition in the hands of Rohit Thakore as unexplained investment, and taxability in the hands of the assessee as unaccounted receipts are, as set out in these reasons, clearly in the nature of cause and effect relationship.

Learned counsel, however, points out that the observations made in the reasons recorded for reopening the assessment are factually incorrect inasmuch as no additions have been made in the hands of Rohit Thakore as unexplained investment to the tune of Rs 3.11 crore, or of any amount for that purposes, and the very foundation of the reasons recorded does not hold good in law. Our attention is invited to a copy of the said assessment order which does not show any addition as unexplained investment. It is submitted that the reasons recorded for reopening are factually incorrect and, therefore, unsustainable in law. Learned counsel then invites our attention to the judgment of Hon’ble Bombay High Court, in the case of Hindustan Lever Ltd Vs R B Wadkar [(2004) 268 ITR 332 (Bom)] in support of the proposition that nothing can be read into the reasons and that reasons must be read as the reasons are recorded. Nothing can be added to, or deleted from, the reasons recorded by the Assessing Officer, and the validity of reopening the assessment is to be adjudicated upon in

It is well settled in law that reasons, as recorded for reopening the reassessment, are to be examined on a standalone basis. Nothing can be added to the reasons so recorded, nor anything can be deleted from the reasons so recorded. Hon'ble Bombay High Court, in the case of Hindustan Lever Ltd (supra), has, inter alia, observed that "……….It is needless to mention that the reasons are required to be read as they were recorded by the AO. No substitution or deletion is permissible. No additions can be made to those reasons. No inference can be allowed to be drawn on the basis of reasons not recorded. It is for the AO to disclose and open his mind through the reasons recorded by him. He has to speak through the reasons." Their Lordships added that "The reasons recorded should be self- explanatory and should not keep the assessee guessing for reasons. Reasons provide link between conclusion and the evidence….". Therefore, the reasons are to be examined only on the basis of the reasons as recorded. As for the impact of Section 292B on the defects in the reasons recorded, if we are to proceed on the basis that reassessment proceedings shall not be invalid or by reason of any mistake, defect or omission in such reassessment proceeding if such reassessment proceeding is in substance and effect in conformity with or according to the intent and purpose of this Act, the reasons recorded for reopening the assessment will be reduced to a meaningless ritual. That will make the things unworkable and it is only elementary that the law is to be interpreted so as to make it workable rather than make it redundant, as is reflected in the latin maxim, well approved by the Hon’ble Courts above time and again, ut res magis valeat quam pereat i.e., in such a manner as to make it workable rather than redundant. While on this issue, it may also be noted that the provisions of Section 292B have been on the statute right since 1st October 1975, which were introduced as part of first amendments in tax laws after internal emergency came into force in 1975, and yet many decades later in 2004, while delivering the landmark judgment in the case of Hindustan Lever (supra), Hon’ble Bombay High Court held that the “no additions can be made to those

As we have quashed the reassessment proceedings for the short reason set out above, all other issues raised in the appeal of the assessee, as also the appeal of the Assessing Officer, are academic at this stage. No adjudication is, thus, needed in respect of the same.

In the result, the appeal of the assessee is allowed in the terms indicated above, and the appeal of the Assessing Officer is dismissed as infructuous. Pronounced in the open court today on the 17th day of June, 2019