Shri Manish vs. The Income Tax Officer1(1)

10 HIGH COURT OF MADHYA PRADESH : BENCH AT INDORE D.B.: Hon'ble Shri Pankaj Kumar Jaiswal Hon'ble Shri Alok Verma, JJ. W.P.

No.1838/2016 MANISH KOTHARI Versus INCOME TAX OFFICER-1 (1) AAYAKAR BHAWAN, BHARAT PURI, UJJAIN, M.P. *************** Shri P.M. Choudhary, Advocate for the petitioner. Ms. Veena Mandlik, Advocate for the respondent (Deptt.) * * * * * O R D E R (Passed on this 25th day of April, 2016) Per P.K. Jaiswal, J. The petitioner being aggrieved by order dated 18.1.2016, passed by the respondent whereby, the Income Tax Officer has rejected the objections for reassessment on the ground that he being office bearer has no personal liability nor reassessment proceedings can be initiated in his individual capacity for assessing the income of a Co-operative Society viz., M/s. Vardhman Sakh Sahakarita Maryadit, Ujjain, raised by the petitioner to the proceedings / reassessment initiated under Section 147 read with Section 142 (1) of the Income Tax Act, 1961 10 (hereinafter referred as 'the Act'). 2. Brief facts of the case are that on 29.9.2014 survey under Section 133A of the Act was conducted. During survey a prima facie evidence of Hawala on large scale was found. They searched the bank accounts of Axis Bank, Ujjain, ING Vaishya Bank Ujjain, ICICI Bank Ujjain and Bank of Baroda, Ujjain, for the financial year 2005-06 to 2014-15. During those period an amount of Rs.3092895229/- was deposited on different names and cheques were issued by the society on different names. It also came to the knowledge that all the accounts were opened by the petitioner, president of the society in different banks. Statement was recorded. In financial year 2007-08, an amount of Rs.8,58,12,353 in Axis Bank, Ashray Hotel (Branch), Ujjain and Rs.6780875/- in the bank of Baroda were found to be deposited in cash. They found Rs.9,25,93,228/- cash on the bank accounts, which was in the name of the society. No material was produced by the society to prove that the amount was deposited by member of the society or any business man in the name of the society. At that relevant point of time, petitioner was president of the society. Considering the fact that cash amount of more than 10 Rs.1,00,000/- was found on the banks account of the society, which was operated exclusively by the petitioner and, therefore, notice under Section 148 was issued for the assessment year 2008-09. After receipt of objection, statements of all the office bearers were taken. A prima facie material was found that account was ran by the petitioner in his personal capacity. The Department also came to the conclusion that all those accounts were single handedly controlled by the petitioner and, therefore, directed the petitioner to explain the source of various cash deposited of Rs.9,25,93,228/-. The petitioner being the president of of Co-operative society M/s.Vardhman Sakh Sahakarita Maryadit, Ujjain (in short 'VDCM') it is his responsibility to file a return of the society and to get the account of the society audited. The department recorded the reasons for reopening of the assessment and rejected the objection by impugned order dated 18.1.2016. Thereafter, they issued notice under Section 142 (2) of the Act. 3. The present matter relates to the Assessment year 2008-09 in respect of which the petitioner had filed his income-tax return on 19.1.2009, declaring a total income of Rs.1,04,870/-. 10 As per return the main source of income was brokage income as real state agent. He has also been a member and the president of M/s. Vardhman Sakh Sahakarita Maryadit, Ujjain, duly registered and incorporated under the provisions of M.P. Swayatta Sahakarita Adhiniyam, 1999. 4. On 29.9.2014, during survey proceedings under Section 133A of the Act, the departmental authorities have impounded the various record relating to bank account etc at the registered office of the society as well as at the residential premises of the petitioner, who was the president of the society. 5. Learned counsel for the petitioner has drawn our attention to various provisions of the Swayatta Sahakarita Adhiniyam, 1999 and Section 2 (7), 2 (31) of the Act, so also the decision of the Kerala High Court in the case of Dr. Baby Mathew V/s. Agricultural Income-Tax Officer & Ors. dated 22.2.1994 page 967, decision of Apex Court in the case of Chhugamal Rajpal V/s. S.P. Chaliha, 1971 (79) ITR 603 (SC), Garg Tading Co., Indore V/s. Sales Tax Officer & Ors., 1983 (16) VKN – 10, Lakshmibai V/s. Income – tax Officer, 1972 86 ITR 804 (MYS.), GKN Driveshafts (India) Ltd. V/s. 10 Income-tax Officer, 2002 (125) Taxman 963 (SC), Allana Cold Storage Ltd. V/s. Income-Tax Officer, 2006 287 ITR 1 (BOM). and Assistant Commissioner, Commercial Tax Department, Works Contract and Leasing, Kota V/s. Shukla & Brothers, 2010 (16) STJ 689 (SC) and submitted that the impugned action is contrary to law laid down by various High Court and Hon'ble the Supreme Court. 6. It is well settled that to reopen assessment under Section 147 of the Act, there must a reason and that reason must have a rational connection or relevant bearing on the firmest of the belief that there was income, which escaped assessment and there must be a direct nexus or live link between material coming to the notice of the ITO and the formation of his belief that there has been escapement of the income because of the failure of the assessee to disclose fully and truly all material facts. 7. Learned counsel for the petitioner has submitted that there should be “tangible material” to come to the conclusion that income has escaped assessment. In the present case, there was no tangible material before the assessing officer to enable him to entertain a prima facie belief that income 10 chargeable to tax has escaped assessment. 8. Placing the reliance on the decision, learned counsel for the petitioner has submitted that the present action to reopen the completed assessment merely on the basis of presumption and there was also no tangible material in possessing of the assessing officer to prove the live link of concealment of income and prayed for quashment of the same. 9. Per contra, learned counsel for the respondent – Deptt., has submitted that when a notice is issued, the proper course of action for the noticee is to file a return and if, he so, desire to seek reasons for issuing the notice. The assessing officer is bound to furnish a reason, within a reasonable time. In the present case vide Annexure P/9, the reasons have been furnished to the petitioner within a reasonable time. Objection of the petitioner was disposed of by passing a speaking order before proceeding for the assessment for financial year 2008-09 and thereafter, notice under Section 142 (1) of the Act was issued vide Annexure P/2, no case to interfere in the matter as prayed is made out and prayed for dismissal of the writ petition. 10. Order dated 18.1.2016 (Annexure P/1) reads 10 as under :- “With reference to the above re-opening proceedings in your case for the assessment year 2008-09 has been initiated. The reason as recorded prior to the issuance of the notice u/s 148 of the I.T Act has been provided to you. The reason for re-opening the case is reproduced as under :- s^^es- c)Zeku lk[k lgdkfjrk ek;Zfnr ds izdj.k esa /kkjk 133 , ds rgr losZ dh dk;Zokgh fnukad 29@09@2014] dks dh xbZA losZ dh dk;Zokgh ds nkSjku ik;k x;k fd fu/kkZfjr lkslk;Vh }kjk cM+s iSekus ij gokyk O;kikj fd;k x;kA fu/kkZfjr lkslk;Vh }kjk ,fDll cSad] mTtSu vkbZ-,u-th- oS'; cSad mTtSu] vkbZ-lh-vkbZ-lh- vkbZ- cSad] mTtSu ,oacSad vkWQ cM+ksnk] mTtSu esa cSad [kkrs esa j[ks x, bu cSad [kkrksa foRr o"kZ 2005&06 ls ysdj 2014&15 ¼losZ dk;Zokgh rd½ :- 3092895229@& uxn :i esa tek fd, x;s FksaA fofHkUu ukeksa ls lkslk;Vh }kjk psd tkjh fd, x,A bl laLFkk ds v/;{k Jh euh"k dksBkjh }kjk mijksDr lHkh [kkrs laLFkk ds uke ls vyXk&vyx cSadksa esa [ksys x;sA losZ dh dk;Zokgh ds nkSjku Jh euh"k dksBkjh] v/;{k ,oa Jh furhu lSuh] ,dkaM.V eSustj ds 'kiFk iwoZd cpku ntZ fd, x,s ftlds vuqlkj mUgksaus crk;k fd ;g jkf'k fofHkUu O;kikfj;ksa ls uxn :i esa ysdj muds }kjk crk, x, O;fDr ds uke ls psd tkjh fd, x,A lacaf/kr foRr o"kZ 2007&08 esa fu/kkZfjrh laLFkk }kjk ,fDll cSad] vkJ; gksVy] mTtSu ds [kkrk la[;k 329010100012287 esa :- 85812353@& ,oa cSad vkWQ cM+kSnk ds ,dkmaV ua- 5050200000269 esa :- 6780875@& uxn tek ik, x,A bl izdkj dqy jkf'k laLFkk ds [kkrksa esa :- 92593228@& uxn :i esa tek ik;h xbZ gSA tSlk fd c;ku esa dgk x;k gS] mijksDr jkf'k laLFkk ds lnL;ksa ,oa vU; O;fDr;ksa }kjk uxn :i esa tek djk;h xbZ Fkh] ijarq bl laca/k esa fu/kkZfjrh laLFkk }kjk dksbZ Hkh ,slk lk{; izLrqr ugha fd;k x;k ftlls ;g fl) gks fd ;k jkf'k laLFkk lnL; ,oa vU; O;kikfj;ksa }kjk tek djkbZ x;h gSA mijksDr of.kZr laLFkk esa Jh euh"k dksBkjh] v/;{k ds in ij dk;Zjr Fks ,oa mijksDr lHkh d`R; mudh ns[k&js[k esa laiUu fd, x,A D;ksafd bu lHkh d`R;ksa ds fy, Jh euh"k dksBkjh gh ftEesnkj gSa] ,oa muds }kjk ijks{k :i esa ykHk vftZr fd;k x;k gSA ;g jkf'k :- 100000@& ls vf/kd gS ,oa laLFkk esa fd, x, d`R;ksa ds fy, Hkh ogh ftEesnkj gSaA vr% eq>s fo'okl djus dk dkj.k gS fd mijksDr jkf'k fu/kkZfjrh Jh euh"k dksBkjh ds izdj.k esa fu/kkZj.k ls NwV xbZ gSA mijksDr izdj.k esa fu/kkZj.k o"kZ 2008&09 ds fy, /kkjk 148 ds varXkZr uksfVl tkjh fd;k tkrk gSA** 10 With reference to the above reason recorded for re-opening of the case, you have raised objection that, in the present case the reason as recorded for re- opening of the case was nothing but mere presumption in absence of detail of the person who has deposited cash and obtaining cheques from the society. The assessing officer collect information regarding the issuance of the cheques from the bank, Hence, there was no justification for issuance of the notice more so when it is clear that the assessee has neither deposit his cash nor obtained any cheques from the bank. Thus, reason as recorded for re-opening of the assessment was no correct one. The proceeding as started U/s 148 of the Act therefore requires to be dropped as not proper. In response to your objection it is to state that all the office bearers have recorded his statement that you run the VDCM Bank in your personal capacity. Since the society as single handedly controlled by you, therefore it your responsibility to explain the source of various cash deposits of Rs.9,25,93,228/-. Further information collected from the bank in respect of Cash deposit found that the cash deposit belongs to you. Further, your being the president of the society of VDCM, Ujjain it is your responsibility to file the return of income of the society and to get the accounts of 10 the society audited. It s to submit that there is no change of opinion to re-opening the case as recorded earlier. 11. The reasons recorded by the Department is relevant which reads as under :- es- o)Zeku lk[k ;gdkjfrk e;kZfnr ds izdj.k esa /kkjk 133, ds rgr losZ dk;Zokgh fnukad 29@09@2014 dks dh xbZA losZ dk;Zokgh ds nkSjku ik;k x;k fd fu/kkZfjr lkslk;Vh }kjk cM+s iSekus ij gokyk O;kikj fd;k x;k gSA fu/kkZfjfr lkslk;Vh }kjk ,fDll cSad] mTtSu] vkbZ-,u-th- oS'; cSad mttSu] vkbZ-lh-vkbZ-lh-vkbZ- cSad mTtSu ,oa cSad vkWQ cM+kSnk mTtSu esa cSad [kkrs j[ks x;s bu cSad [kkrksa es foRRk o"kZ 2005&06 ls ysdj 2014&15 ¼losZ dk;Zokgh rd½ :- 3092895229@& uxn :i esa tek fd, x;s FksaA fofHkUu ukeksa ls lkslk;Vh }kjk psd tkjh fd, x,A bl laLFkk ds v/;{k Jh euh"k dksBkjh }kjk mijksDr lHkh [kkrs laLFkk ds uke ls vyXk&vyx cSadksa esa [ksys x;sA losZ dh dk;Zokgh ds nkSjku Jh euh"k dksBkjh] v/;{k ,oa Jh furhu lSuh] ,dkam.V eSustj ds 'kiFk iwoZd c;ku ntZ fd, x,s ftlds vuqlkj mUgksaus crk;k fd ;g jkf'k fofHkUu O;kikfj;ksa ls uxn :i esa ysdj muds }kjk crk, x, O;fDr ds uke ls psd tkjh fd, x,A lacaf/kr foRr o"kZ 2007&08 esa fu/kkZfjrh laLFkk }kjk ,fDll cSad] vkJ; gksVy] mTtSu ds [kkrk la[;k 329010100012287 esa :- 85812353@& ,oa cSad vkWQ cM+kSnk ds ,dkmaV ua- 5050200000269 esa :- 6780875@& uxn tek ik, x,A bl izdkj dqy jkf'k laLFkk ds [kkrksa esa :- 92593228@& uxn :i esa tek ik;h xbZ gSA tSlk fd c;ku esa dgk x;k gS] mijksDr jkf'k laLFkk ds lnL;ksa ,oa vU; O;fDr;ksa }kjk uxn :i esa tek djk;h xbZ Fkh] ijarq bl laca/k esa fu/kkZfjrh laLFkk }kjk dksbZ Hkh ,slk lk{; izLrqr ugha fd;k x;k ftlls ;g fl) gks lds fd ;g jkf'k laLFkk lnL; ,oa vU; O;kikfj;ksa }kjk tek djkbZ xbZ gSA mijksDr of.kZr laLFkk esa Jh euh"k dksBkjh] v/;{k ds in ij dk;Zjr Fks ,oa mijksDr lHkh d`R; mudh ns[k&js[k esa laiUu fd, x,A D;ksafd bu lHkh d`R;ksa ds fy, Jh euh"k dksBkjh gh ftEesnkj gSa] ,oa muds }kjk ijks{k :i esa ykHk vftZr fd;k x;k gSA ;g jkf'k :- 100000@& ls vf/kd gS ,oa laLFkk esa fd, x, d`R;ksa ds fy, Hkh ogh ftEesnkj gSaA vr% eq>s fo'okl djus dk dkj.k gS fd mijksDr jkf'k fu/kkZfjrh Jh euh"k dksBkjh ds izdj.k esa fu/kkZj.k ls NwV xbZ gSA mijksDr izdj.k esa fu/kkZj.k o"kZ 2008&09 ds fy, /kkjk 148 ds varXkZr uksfVl tkjh fd;k tkrk gSA** 12. On due consideration of the aforesaid and for the reasons assigned by the department, we are of 10 the view that there was a tangible material to proceed against the petitioner, we see no justifiable reason to interfere with the order under challenge. The proper course of action for the noticee is to file a return and thereafter, the assessing authority proceed with the assessment in respect of the above said assessment order and decide the same in accordance with law. At this stage, it cannot be said that the action is wholly without jurisdiction. Looking to the huge transaction made by the petitioner through the account of Co- operative society and as per the affidavit of the members of the society, the petitioner has operated the aforesaid bank accounts and thus, we are of the view that the action is just and proper. No case to interfere at the preliminary stage with the order under challenge, as prayed is made out. 13. The petition fails and is hereby dismissed. (P.K. JAISWAL) (ALOK VERMA) JUDGE JUDGE ss/-