HEMANT MANAHARLAL SHAH (HUF) vs. INCOME TAX OFFICER, WARD - 8

Petitioner   has   challenged   a   notice   dated 28.03.2017 issued by the respondent­Assessing Officer seeking to reopen the petitioner's assessment for the assessment year 2010­11. 2. Facts are as under.

Petitioner is an HUF.   For the said assessment year 2010­11, the petitioner had filed the return of income declaring total income of Rs.30,833/­.   The petitioner had agricultural income of Rs.21.56 lakhs (rounded   off)   during   the   said   year   which   was otherwise exempt from tax.  This return was not taken in scrutiny.  After the period for issuing notice for scrutiny assessment was over, the Assessing Officer issued a notice on 21.02.2017 under section 133(6) of the Income Tax Act, 1961 ('the Act' for short) and raised certain queries, inter alia, pointing out that the assessee had deposited a sum of Rs.30.75 lakhs during   the   period   relevant   to   the   said   assessment year and that therefore, the assessee to furnish the details   and   evidences   as   a  proof   of   the   financial transactions,   clearly   providing   the   date,   mode   and source of such investment with supporting documents.

The   assessee   replied   to   such   query   under   a communication dated 06.03.2017 pointing out that the assessee had earned agricultural income in cash which was deposited in the bank account.  The assessee had also   withdrawn   such   amount   from   time   to   time   and redeposited the same which comes to Rs.30.75 lakhs during the relevant period.  Along with this letter, the   assessee   also   produced   a   copy   of   an   agreement dated 04.06.2009 for sale of his Mango produce to a dealer for a total sale consideration of Rs.25 lakhs. This agreement recorded that an oral agreement was entered on 25.05.2009. The assessee would receive total of Rs.25 lakhs, Rs.10 lakhs already paid over on   27.05.2009   and   remaining   15   lakhs   paid   on 04.06.2009. The purchaser of the Mango would harvest the entire crop latest by 22.06.2009. The petitioner also produced his bank statement.

The   Assessing   Officer   thereupon   issued   the impugned   notice   on   28.03.2017. He   had   recorded following reasons for issuing the notice. “....In this case, the information available on record, it is seen that the assessee has deposited Cash amount of Rs.30,75,000/­ in his   Saving   Bank   A/c   held   with   Dena   Bank during the year under consideration. From verification of the return it was seen that the assessee has filed his return of   income   on   30.03.2011   declaring   total income   at   Rs.30,833/­   and   Agricultural income for rate purpose of Rs.21,56,458/­. As the amount deposited in Bank Accounts was very large with respect to the return shown in   ITR,   hence   a   clarification/verification letter was issued to the assessee to furnish his reply in respect of large cash deposit with   supporting   evidences. However, assessee

The petitioner raised objections to the notice of reopening under a letter dated 18.05.2017. Such objections   were   rejected   by   an   order   dated 02.08.2017. Hence, this petition.

Having heard learned counsel for the parties and having   perused   the   documents   on   record,   we   gather that in case of the present petitioner, two notices for reopening were issued by two separate Assessing Officers.   The present notice dated 28.03.2017 was issued by the Income Tax Officer, Ward No.8, Vapi. Another   notice   dated   27.03.2017   was   issued   by Assessing   Officer,   Ward   No.3,   Vapi,   also   for reopening   assessment   for   the   same   assessment   year. Despite   best   efforts,   the   department   has   not   been able to explain two parallel notices issued by two separate   officers   seeking   to   reopen   the   assessment for the same assessment year.   No matter what the reason for the confusion, it is simply impermissible that two notices for reopening can be issued validly that   too   by   two   separate   Assessing   Officers. Jurisdiction   of   assessment   over   an   assessee   is   a well­documented   procedure.     Two   Assessing   Officers cannot   simply   claim   jurisdiction   over   the   same assessee.

Now that the department has abandoned the notice issued by Assessing Officer, Ward No.3, Vapi, we do not   propose   to   quash   the   present   notice   on   this ground.   On the merits of the notice issued by the Assessing Officer, we may recall, in the reasons, he had   stated   that   the   assessee   had   declared   a   total income of barely Rs.30,833/­ and agricultural income for the same period was shown at Rs.21,56,458/­.  The amount deposited in the bank account was very large as   compared   to   the   return   shown   by   the   assessee. Therefore, a letter was issued seeking clarification and asking the assessee to furnish certain details. According to the Assessing Officer, as stated in the said   reasons   “the   assessee   had   not   furnished   the details/explanation in this regard till date.”.

We are conscious that in the present case, the return   filed   by   the   assessee   was   accepted   without scrutiny.  The Assessing Officer therefore not having formed   any   opinion   on   the   proposed   addition,   the principle   of   change   of   opinion   would   not   apply. Nevertheless,   even   in   such   a   case,   the   Assessing Officer must have valid reason to believe that income chargeable   to   tax   has   escaped   assessment.     The observations   made   by   this   Court   in   case   of Inductotherm (India) P. Ltd. v. M. Gopalan, Deputy Commissioner   of   Income­Tax  reported   in  [2013]   356 ITR 481 (Guj), may be noted. “16. It   would,   thus,   emerge   that   even   in case of reopening of an assessment which was previously accepted under section 143(1) of the   Act   without   scrutiny,   the   Assessing Officer   would   have   power   to   reopen   the assessment,   provided   he   had   some   tangible material on the basis of which he could form a   reason   to  believe  that   income  chargeable to   tax   had   escaped   assessment.   However,  as held   by   the   Apex   Court   in   the   case   of Assistant   Commissioner   of   Income   Tax   v. Rajesh   Jhaveri   Stock   Brokers   P.   Ltd., (supra)   and   several   other   decisions,   such reason to believe need not necessarily be a firm   final   decision   of   the   Assessing Officer.

If   we   accept   such   proposition,   the petitioner's apprehension that the Assessing Officer   would   arbitrarily   exercise   powers under section 147 of the Act to circumvent the scrutiny proceedings which could not be framed   in   view   of   notice   under   section 143(2)   having   become   time   barred,   would  be taken   care   of.   To   reiterate,   even   for reopening   of   an   assessment   which   was accepted previously under section 143(1) of the   Act   without   scrutiny,   the   Assessing Officer  should   have  reason   to   believe   that income   chargeable   to   tax   has   escaped assessment.”

The   Assessing   Officer   formed   a   belief   that income chargeable to tax has escaped assessment, on the ground that noticing a big mismatch between the returned   income   and   cash   transactions   in   the assessee's bank accounts, queries were raised, which remained un­replied.   This is contrary to the facts on record. As noted, in reply to the notice dated 21.02.2017   issued   by   the   Assessing   Officer,   the assessee had given a detailed reply on 06.03.2017. He had pointed out that he had received Rs.25 lakhs in cash for sale of his Mango crop.   Such amount was deposited   in   the   bank   account.     Part   of   it   was withdrawn   and   redeposited.     That   is   how   the   total cash deposit in his account reached Rs.30.75 lakhs during the relevant period. Along with his reply, the assessee had also furnished a copy of the agreement between the assessee and the purchaser of the Mango crop. The bank statement was also produced.  If the Assessing   Officer   was   not   still   satisfied,   it   was always open for him to call for further details or even for valid reason to discard the assessee's reply and   reopen   the   assessment   recording   the   reasons. However, under no circumstances, he could have simply ignored the reply and proceeded to form a belief that income chargeable to tax has escaped assessment on the premise that his queries had remained un­replied. In plain terms, his reasons proceeded on wrong facts. His satisfaction was thus, tainted by wrong facts. His   attempt   to   cover   the   issue   through   the   order disposing   of   objections   must   fail.     His   assertion that   such   large   amount   of   agricultural   income required verification, would amount to improving the reasons and also seeking to carry out fishing inquiry through the process of reopening of the assessment.

In the result, impugned notice dated  28.03.2017 is quashed.  Petition is disposed of.