Chawla Estate Developers Pvt. Ltd. Through Its Director Shri Gaurav Chawla S/O Shri Jai Kumar Chawla vs. Income Tax Department

Writ Petition No.24940/2019 1 HIGH COURT OF MADHYA PRADESH: BENCH AT INDORE Writ Petition No.24940/2019 Chawla Estate Developers Pvt. Ltd. v/s The Income Tax Department & One Another Indore, dated 16.12.2019 Shri Vijay Assudani, learned counsel for the petitioner. Ms. Veena Mandlik, learned counsel for the respondents. The petitioner before this Court has filed this present petition being aggrieved by the order dated 13.08.2019 passed by the respondent No.2 / Income Tax Officer – 2(3), Indore. 02. The petitioner is a Private Limited Company incorporated under the provisions of the Companies Act, 1956. The petitioner / Company, on 25.10.2015, electronically, submitted a return for the assessment year 2015 – 16 (Financial Year 2014 – 15) disclosing a return of Rs.12,21,160/-. On 12.09.2016, a notice under Section 143 (2) of the Income Tax Act, 1961 (hereinafter referred as the Act of 1961) informing the petitioner / Company that the case of the petitioner / Company has been selected for scrutiny. 03. The facts of the case further reveal that the petitioner / Company, in response to the aforesaid notice, submitted all desired information to respondent No.2 on 29.11.2017. The respondent No.2, thereafter, initiated proceeding under Section 147 of the Act of 1961, and thereafter, a notice was received by the petitioner / Company under Section 148 of the Act of 1961 on Writ Petition No.24940/2019 2 04.02.2019 and the petitioner / Company submitted a detailed reply to the notice issued under Section 148 of the Act of 1961 on 30.07.2019. 04. The petitioner / Company has raised the following objections :- (i) No approval from the joint Commissioner has been obtained in the present case. (ii) That there is an order of assessment accepting returned income, and therefore, without any fresh information in possession of the Assessing Officer merely on the basis of change of opinion reopening cannot have been done. (iii) The proceeding under Section 148 cannot be initiated to review earlier opinion. (iv) Reopening of assessment is on the basis of information available with the Assessing Officer and not on the basis of whims and caprices. (v) The words 'reasons to believe' used under Section 147 cannot be equated with reasons to suspect. (vi) That there is no material for formation of believe as contemplated under Section 147. (vii) That once the primary facts are disclosed oversight, carelessness or inefficiency on part of assessing officer to carry out proper investigation does not empower the Assessing Officer to reopen a financial assistance. 05. The objection raised by the petitioner / Company was dismissed on 13.08.2019, and thereafter, on 30.10.2019 a notice under Section 142 (1) of the Act of 1961 has been issued to the petitioner. 06. The petitioner has raised several grounds before this Court and its contention is that the impugned order dated 13.08.2019 passed by the respondent No.2 / Income Tax Officer-2(3) is bad in law as no approval has been obtained from the Joint Commissioner / Competent Authority in the matter. 07. It has been stated that there is an order of Writ Petition No.24940/2019 3 assessment accepting the returned income, and therefore, without any fresh information in possession of the Assessing Officer merely on the basis of change of opinion, reopening could not have been done as has been done in the present case and proceeding under Section 148 cannot be initiated to review the earlier opinion. 08. It has further been stated that the word 'reasons to believe' used under Section 147 of the Act of 1961 cannot be equated with the words 'reasons to suspect'. It has been stated that there is no material for formation of believe as contemplated under Section 147 of the Act of 1961 and a prayer has been made to quash the impugned order dated 13.08.2019 as well as for quashment of notice dated 04.02.2019. 09. A reply has been filed in the matter and it has been stated by the respondents that they have initiated action against the petitioner keeping in view Section 147 of the Act of 1961 and the Department is entitled to reopen the case of the petitioner. 10. It has been stated by the respondents that in case, the Assessing Officer is having a reason to believe that taxable income has not been taxed or there is an escapement of income chargeable to tax, he is entitled to proceed ahead in the matter. The respondents have stated that they have followed the statutory provisions as contained under the Act of 1961 while proceeding ahead in the matter and the assessee is certainly free to file objections and to apply for any documents related in the matter. 11. Reliance has been placed upon a judgment delivered Writ Petition No.24940/2019 4 by this Court in the case of Malay Shrivastava v/s The Deputy Commissioner (W.P. No.4046/2015) decided on 21.04.2016. The respondents have stated that they have granted opportunity of hearing to the petitioner in the matter during the proceeding of reassessment under Sections 147/148 of the Act of 1961 and the petitioner shall be free to file reply as well as to defend itself. 12. It has also been stated that the reason has already been given to the assessee as per the note-sheet dated 27.09.2019, and therefore, question of interference by this Court does not arise. 13. Heard learned counsel for the parties at length and perused the record. 14. The facts of the case reveal that the petitioner, in the present case, did file a return for the assessment year 2015 – 16 (Financial Year 2014 – 15) disclosing a return of Rs.12,21,160/-. A notice under Section 143 (2) of the Act of 1961 was issued to the petitioner on 12.09.2016. The petitioner did submit all the desired information and an assessment order was passed under Section 143 (3) of the Act of 1961 on 29.11.2017 accepting the returned income. 15. Thereafter, the proceedings under Section 147 of the Act of 1961 were initiated against the petitioner and on 04.02.2019, the petitioner received a notice under Section 148 of the Act of 1961. The petitioner did submit a reply on 30.07.2019 in response to the notice dated 04.02.2019 and vide order dated 13.08.2019, the objections of the petitioner were rejected by a non-speaking and cryptic order. The order passed by the Income Tax Officer (Assessing Officer) Writ Petition No.24940/2019 5 reads as under:- “Kindly refer your letter received in the office on 30.07.2019. Your objection cannot be accepted due to the following reasons:- The assessee's jurisdiction lies with this office and the case has been reopened on the basis of information in possession of Assessing Officer after taking proper approval from competent Authority. Hence, in view of the above discussion, the objection filed stands disposed off and the reassessment proceedings will continue as per law” 16. The aforesaid order / reply makes it clear that the case of the petitioner has been reopened on the basis of information in possession of the Assessing Officer. 17. Sections 147 and 148 of the Act of 1961 reads as under:- “147. Income escaping assessment 2 If the Assessing Officer has reason to believe] that any income chargeable to tax has escaped assessment for any assessment year, he may, subject to the provisions of sections 148 to 153, assess or reassess such income and also any other income chargeable to tax which has escaped assessment and which comes to his notice subsequently in the course of the proceedings under this section, or recompute the loss or the depreciation allowance or any other allowance, as the case may be, for the assessment year concerned (hereafter in this section and in sections 148 to 153 referred to as the relevant assessment year): Provided that where an assessment under sub- section (3) of section 143 or this section has been made for the relevant assessment year, no action shall be taken under this section after the expiry of four years from the end of relevant assessment year, unless any income chargeable to tax has escaped assessment for such assessment year by reason of the failure on the part of the assessee to make a return under section 139 or in response to a notice issued under sub- section (1) of section 142 or section 148 or to disclose fully and truly all material facts necessary for his assessment for that assessment year. Explanation 1-Production before the Assessing Officer of account books or other evidence from which material evidence could, with due diligence, have been Writ Petition No.24940/2019 6 discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.- For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income- tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; (c) where an assessment has been made, but- (I) income chargeable to tax has been under- assessed; or (ii) such income has been assessed at too low a rate; or (iii) such income has been made the subject of excessive relief under this Act; or (iv) excessive loss or depreciation allowance or any other allowance under this Act has been computed.] 148. Issue of notice where income has escaped assessment 2 (1) Before making the assessment, reassessment or recomputation under section 147, the Assessing Officer shall serve on the assessee a notice requiring him to furnish within such period, not being less than thirty days, as may be specified in the notice, a return of his income or the income of any other person in respect of which he is assessable under this Act during the previous year corresponding to the relevant assessment year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed; and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139.] (2) The Assessing Officer shall, before issuing any notice under this section, record his reasons for doing so.” Writ Petition No.24940/2019 7 18. In the present case, the reasons for reopening the assessment have not been disclosed to the assessee and merely on basis of change of opinion, the reassessment has been ordered. The words 'reasons to believe' under Section 147 of the Act of 1961 cannot be equated with 'reasons to suspect' and reassessment has been ordered without disclosing any fresh information in possession of the Assessing Officer. 19. It is true that Section 147 of the Act of 1961 confers a jurisdiction upon the Assessment Officer to initiate the proceedings for reopening of the assessment for bringing income tax, which has escaped assessment. The provisions of Section 147 of the Act of 1961 can be invoked by the Assessing Officer if he has reasons to believe that any income chargeable to tax has escaped assessment and the Assessing Officer does have the power to reassess an assessee subject to the provisions of Section 148 to 153 of the Act of 1961. However, the provisions of Section 147 o of the Act of 1961 confers the power upon the Assessing Officer to reopen an assessment and the said power has to be exercised only if there are reasons to believe that any income chargeable to tax has escaped assessment, meaning thereby, existence of the reasons and formation of the believe on the basis of such reasons, is an essential condition for invoking provisions of Section 147 of the Act of 1961. 20. The reasons to believe is not the same thing as the reasons to suspect as has been held in the case of Das Friends Builder Private Limited v/s DCIT reported in Writ Petition No.24940/2019 8 (2006) 80 ITR 77 Allahabad. A similar view has been taken by the Delhi High Court in the case of Ashok Kumar Singh v/s CIT reported in 132 ITR 707 Delhi High Court and in the case of CIT v/s Kelvinator India Limited reported in 256 ITR 1 SC. 21. In the present case, there was no suppression on the part of the assessee and merely because there is a change in opinion, reopening could not have been done in the manner and method it has been done in the present case. There was no additional material for formation of the believe as contemplated under Section 147 of the ID Act. 22. Resultantly, the impugned order dated 13.08.2019 passed by the respondent No.2 is hereby set aside. The Income Tax Officer shall be free to proceed ahead afresh against the petitioner in accordance with law. With the aforesaid, the present Writ Petition stands allowed. Certified copy, as per rules. (S.C. SHARMA) J U D G E (SHAILENDRA SHUKLA) J U D G E

Ravi Digitally signed by Ravi Prakash Date: 2020.01.08 17:24:46 +05'30'