M/S SHWETA CONSTRUCTION PVT LT vs. C I T JAIPUR

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ITA/186/2002HC RajasthanRJHC02034820200206 December 20165 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the view taken by the Tribunal was just and proper and no interference was called for. The Court found that the details provided in Annexure-III were self-explanatory and indicated misleading information furnished by the assessee. Specifically, the court noted that in column No. 3, against serial numbers 5, 6, and 7, the assessee had written the nature of payment instead of the relation, and in column No. 7 (nature of payment, i.e., interest), the amount was mentioned. The court found these details to be 'fishy' and giving rise to suspicion, which falsified the issuance of notice under Section 147/148. Therefore, the issue was answered in favour of the department and against the assessee. The High Court dismissed the appeal.

What were the facts?

The assessee, Shweta Construction P. Ltd., filed its return for Assessment Year 1993-94 on December 31, 1993. During the assessment proceedings for AY 1994-95, it was discovered that the assessee had claimed payments of hire charges and interest to Sh. Nand Kishore, brother of a Director, for vehicle hire. Inquiries revealed that Sh. Nand Kishore did not own any vehicles and had not rendered services to the assessee. Despite an affidavit from Sh. Nand Kishore, he was not produced for examination. Similar bogus claims for hire charges were noted in other cases. Consequently, reassessment proceedings under Section 147/148 were initiated on December 4, 1997, for AY 1993-94, citing escapement of income due to bogus hire charges claimed to Sh. Nand Kishore. The amount in dispute for hire charges to Sh. Nand Kishore for AY 1993-94 was Rs. 73,500.

What were the issues?

1. Whether the grounds mentioned by the Assessing Officer for reopening the assessment under Section 147 read with Section 148 of the Income Tax Act, 1961, could be construed as 'reasons to believe' as envisaged in Section 147 of the Act? Assessee's Contention: The assessee argued that the order of reassessment passed under Section 147 & 148 is void and without jurisdiction as no valid reasons existed to initiate reassessment proceedings. The assessee referred to Annexure-III and the reasons recorded on November 7, 1997, to support this contention, stating the case under Section 147 & 148 was not made out. Revenue's Contention: The revenue supported the Tribunal's order, contending that a definite case was made out for reassessment. The revenue relied on the decision of the Supreme Court in Assistant Commissioner of Income Tax vs. Rajesh Jhaveri Stock Brokers (P.) Ltd. (2007) 291 ITR 500 (SC).

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 143(1)(a)

AI-generated summary — verify with the full judgment below

1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR. DB INCOME TAX APPEAL NO.186/2002 Shweta Construction P. Ltd.,201, City Centre, Jaipur. Versus Commissioner of Income Tax, Jaipur, Income Tax Office Center Revenue Building Jaipur. DATE OF ORDER ::: 06.12.2016. HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE DINESH MEHTA Mr. Prakul Khurana, for the appellant. Mr. Anuroop Singhi, for the respondent .

1.

By way of this appeal, the assessee has challenged the judgment and order of the Tribunal whereby the Tribunal has dismissed the appeal preferred by the department and partly allowed the appeal of the assessee.

2.

This Court while admitting the appeal on 07.02.2003 framed the following substantial questions of law:

“1. Whether the facts and circumstances of the case, the grounds mentioned by assessing officer for reopening the present case u/s. 147 read with Section 148 of the Act, could be construed as the 'reasons to believe' as envisaged in section 147 of the Act?”

3.

The brief facts of the case are that the return in the case of assessee company was filed on 31.12.1993 declaring income of Rs.2,70,719/-. Along with the return, audit report dated

2 30.09.1993 as per requirement of Section 44AB has also been furnished. The return was processed u/s.143(1)(a) on 28.03.1994. Subsequently in the course of assessment proceedings for the assessment year 94-95 it was found that assessee had shown payment to Sh. Nand Kishore, brother of Sh. D.K. Choudhary, Director, on account of hire charges of vehicle claimedly taken by the assessee from the said said person. On inquiries it was gathered that in fact Sh. Nand Kishore did not own any truck/tractor and had never worked or rendered services to assessee company. The above position emerged on inquiry by the Inspector of the circle from Sh. Nand Kishire. He also denied of having any deposit with the company or any money was paid by or due to him from the assessee. Although an affidavit of Sh. Nand Kishore was subsequently filed by the assessee but he was not produced before the A.O for examination despite specific requisition in this regard. It was also noted that in many other cases, the claimed payments of hire charges were bogus as the persons shown as recipients of such payments had no vehicles to give on hire for assessee's business. In view of the above, the claim of the assessee with regard to payment of hire charges to Sh. Nand Kishore and others was not accepted and for the above bogus claim and other defects in accounts profit was determined by applying net profit rate rejecting book version. Claim of interest payment to Sh. Nand Kishore was also disallowed. In the period relevant to A.Y. 93-94 also the assessee claimed payment of hire charges

3 at Rs. 73,500 to Sh. Nand Kishore from May, 1992 to September, 1992 his account was further credited by Rs. 47,000 on account of hire charges payable from September, 92 to March, 93. For the reasons given above the claim of payment of hire charges to the above person was not genuine in this year also and therefore there was a case of escapement/under assessment of income and accordingly reassessment proceedings u/s 147 were initiated by issuing notice u/s 148 on 4.12.97. 4. Counsel for the appellant contended that the order passed by the Tribunal is contrary to record and the order of reassessment passed under Section 147 & 148, is void and without jurisdiction as no reasons were existing for making out the case against the assessee, justifying initiation of reassessment proceedings.

5.

Counsel for the appellant during the hearing has produced on record, the additional paper book wherein he has produced the copy of the order of assessment 1993-94 and copy of Annexure-III. On going through Annexure-III, the details are shown as under: S.N O. NAME DIRECTOR/ RELATIVES SALARY RENT MEDICAL REIMBUR- SEMENT INTERE ST AND OTHER S 1 Shri Dinesh Kumar Choudhary M.D. 48000 12000 - 16892.2 2 Shri Sanjeev Kumar Jhanjharia Relative - - - 2810.8 3 Smt. Nikita Relative - - - 1685.9

4 S.N O. NAME DIRECTOR/ RELATIVES SALARY RENT MEDICAL REIMBUR- SEMENT INTERE ST AND OTHER S 4 Smt. Sheela Choudhary Relative 8869.2 5 Sweta Stone's (Purchase of Stone) - - - 305000 6 Choudhary Trading Co. (Purchase of Stone) - - - 207010 7 Sh. Nand Kishore (Tractor Freight) - - - 73500

6.

By reading the above document which was the basis for reopening of the assessment, he contended that case under Section 147 & 148 was not made out. He has also referred to the reasons recorded on 7.11.1997 which read as under:- “7/11/97 As per findings given in the Assessment order for AY 94-95 the payment of interest in the name of Sh. Naval Kishore is not allowable. Similarly investments in the purchase of vehicle is benami names in to be considered. The perusal of return of income shows payment of interest of Rs. 73,500/- in the name of Shri. Naval Kishore which requires to be disallowed. Income to this effect apparently stands concealed and escaped assessment. Therefore to bring to tax this income and to examine other related matters, Issue notice u/s 148.”

7.

From the Annexure-III, details which are given were self- explanatory. The assessee has furnished/ recorded misleading information inasmuch as in column No.3, Serial No. 5, 6 and 7 as against the relation, he had written nature of payment and against the column No.7 relating to nature of payment i.e. interest; he has mentioned the amount. The details therein are fishy and gives rise to suspicion falsifying issuance of notice under Section 147/148. 10. In that view of the matter, we are of the opinion that the view taken by the Tribunal is just and proper. No interference is called for. The issue is required to be answered in favour of the department and against the assessee.

The appeal is dismissed. (DINESH MEHTA), J. (K.S. JHAVERI), J. BM Gandhi 04

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