M/S. SOHAM DATA PROCESSING AND FINANCE PVT. LTD. vs. COMMISSIONER OF INCOME TAX-7

WP511.12

IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 511 OF 2012 M/s. Soham Data Processing & Finance ] Pvt. Ltd., Mahalaxmi Industrial Estate, ] Ground Floor, L.J. Cross Road No.1, ] Mahim West, Mumbai – 400 016 ] ... Petitioner Vs 1. Commissioners of Income-Tax – 27, ] Aayakar Bhavan, M.K Road, ] Mumbai – 400 020. ] 2. Asst. Commissioner of Income Tax, ] Circle – 7(2), Room No.624, 6th Floor, ] Aayakar Bhavan, M.K. Road, ] Mumbai – 400 020. ] ... Respondents Mr. S.C. Tiwari with Ms. Natasha Mangat i/b Mr.S.C. Tiwari, R. Ashokan and Natasha Mangat for the Petitioner. Mr. Suresh Kumar for the Respondents. CORAM : S.J. VAZIFDAR, & M.S. SANKLECHA, JJ. FRIDAY, 31ST AUGUST, 2012 SRP                                                                                                                                                           1/9 CNR No : HCBM020022582012 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:52:56

WP511.12 ORAL JUDGMENT.: [Per S.J. Vazifdar, J.] 1. Rule. By consent, Rule is made returnable forthwith and heard finally. 2. The petitioner seeks a writ of certiorari to quash a notice under section 148 of the Income Tax Act, 1961 dated 13th December, 2011, by Respondent No.2, the Assistant Commissioner of Income Tax. 3. We have held that this is not a fit case for interference with the reassessment proceedings in a Writ Petition. Considering the facts of this case, which on significant aspects are disputed or in any event not clear, we have thought it appropriate that the petitioner challenges the same before the Appellate Authorities in the appeal, if any, from the final order of the Assessing Officer. 4. The petitioner had filed its return of income on 18th November, 2006, declaring a total income of Rs.4,59,834/- in respect of assessment year 2006-07. The case was selected for scrutiny and an assessment order under section 143(3) was passed on 19th December, 2008. The order records that the petitioner was engaged in the SRP                                                                                                                                                           2/9 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:52:56

WP511.12 business of premises service provider and had declared an income of maintenance charges, interest on investment and a profit on sales of units. Ms. Mangat, the learned counsel appearing on behalf of the petitioner placed considerable reliance upon the observation in the order that the necessary details were checked on test-check basis and kept on record. 5. The impugned notice was issued by respondent No.2 under cover of a letter dated 13th December, 2011. A copy of the reasons recorded was also enclosed. The same reads as under :- “Reasons for Reopening the assessment u/s.147. The assessee during the year under consideration is in receipt of Rs.41,59,800/- as leave and licence fees and Rs.26,34,480/- as maintenance charges from M/s. GE Country wide and M/s. Hindustan Times Media Ltd. During the course of assessment proceedings, for A.Y.2003-04, it was seen that the assessee was not owner of the premises let- out by it but had hired the same on rent and in turn sub-let it out to the above two companies. In view of this fact, the leave and licence fees as well as the maintenance charges received by the assessee should have been declared under the head “Income from Other Sources” whereas the assessee has treated the above receipts as “Business Income” and has claimed the following expenses against these receipts ; SRP                                                                                                                                                           3/9 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:52:56

WP511.12 I. Office Expenses Rs.44,80,400/- II. Personnel Expenses Rs. 7,48,000/- III. Administrative Expenses Rs.12,40,384/- IV. Depreciation Rs. 3,37,368/- ------------------ Rs.67,96,152/- ========= The expenses so claimed against the above receipts under the guise of business expenses are not allowable. Similar view has been taken by the CIT-7, Mumbai while passing the order u/s.263 dated 24.03.2008 in the case of this assessee for A.Y.2003- 04 and the order passed by the CIT-7, Mumbai u/s.263 has been confirmed by Hon'ble ITAT, E, Bench, Mumbai vide their order in ITA No.774/Mum/09 dated 26.02.2010. Thus, I have reason to believe that income to the extent of Rs.67,96,152/- has escaped assessment by way of wrong allowance of expenses in this case in terms of the provisions of sec.147 of the I.T. Act, 1961. Approval of the Commissioner of Income tax-7, Mumbai is therefore sought u/s.151(1) to issue notice u/s.148.” 6. The petitioner, by a letter dated 19th December, 2011, filed its objection to the notice under section 148, which reads as under : “With regard to the notice u/s.148 issued by you on 13.12.2011 to reopen our assessment year 2006-07, We state and submit that the original assessment order dated 19/12/2008 was completed u/s.143(3). All material facts necessary for the assessment were stated in the Return of Income or during the course of assessment proceedings. There is no non-disclosure of material facts on the part of the assessee. Notice u/s. 148 has been issued merely on change of opinion. Conditions laid down u/s. 147 are not satisfied. SRP                                                                                                                                                           4/9 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:52:56

WP511.12 I therefore object to reopening of assessment u/s. 147 and notice u/s. 148 as aforesaid issued by you. You are requested to kindly cancel the proceeding under intimation to me.” 7. The objections were disposed of by an order of the respondent No.2 dated 20th December, 2011. The order refers to various judgments which were preceded by the following observations : “In connection with the assessment proceedings pending in your case u/s. 147 of the I.T. Act in respect of A.Y.2006-07, you have filed a letter in this office on 19.12.2011 whereby objecting to issue of notice u/s.148 for the reasons mentioned therein. Your above referred letter has been considered carefully but is not found convincing. In fact, the validity of initiation of proceedings u/s.147 has been upheld and validated by plethora of judgments, a few of which are cited herein below.” 8. The proceedings were adopted after a period of more than four years. It was submitted that there was no basis whatsoever for re- opening the assessment. 9(A) The petitioner admittedly is not the owner of the premises in respect whereof income was earned by it by letting / sub-letting the same out to third parties. The petitioner was only a tenant in respect SRP                                                                                                                                                           5/9 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:52:56

WP511.12 thereof. On the basis of the record of this petition, it was not clear whether the petitioner had, in fact, disclosed this fact and the record in relation thereto to the Assessing officer. Realising the same, Ms. Mangat stated that in the reply dated 19th December, 2011, to the notice under section 148, the petitioner had stated that all material facts necessary for the assessment year were stated in the Return or during the course of assessment proceedings. She further submitted that this was not denied in the order rejecting the petitioner's objections. (B) However, on the other hand, it was pointed out on behalf of the respondents that the letter dated 19th December, 2011, did not indicate either the manner in which the material facts necessary for the assessment were stated in the course of the assessment proceedings or the particulars of such facts and the documents in relation thereto. 10. Whether the material facts were stated as alleged by the petitioner or not would require to be considered. It would be one of the issues to be decided while considering the validity of the SRP                                                                                                                                                           6/9 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:52:56

WP511.12 impugned notice. We do not think it necessary or proper to deal with the same in a Writ Petition. 11. Ms. Mangat, on behalf of the petitioner tendered an affidavit dated 22nd August, 2011, of one Nimesh L. Joshi, which relied upon a letter dated 8th December, 2008, along with enclosures thereto. This was to establish that the material particulars had been furnished before the assessment order was made. This letter was, however, not referred to in the objections to the notice. It is also pertinent to note that the letter dated 8th December, 2008, pertained only to the assessment year 2006-07 which is relevant to Writ Petition No.511 of 2012. In other words, a similar letter had not been addressed in respect of the other assessment years in respect whereof also notices under section 148 were issued and have been challenged by separate Writ Petitions which were also considered by us today. Whether the letter dated 8th December. 2008 was, in fact, addressed to the respondents and if so, whether the enclosures were also forwarded to the respondents at the relevant time is another issue which would have to be decided while considering the validity of the impugned notice. The effect of the SRP                                                                                                                                                           7/9 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:52:56

WP511.12 letter upon the notice would also have to be considered. 12. The matter regarding the validity of the impugned notice is not free from doubt. Firstly, admittedly, with the original return the facts regarding the petitioner's rights in respect of the premises were not expressly stated. In fact, in Part-B of the return of income, which pertains to computation of income and tax thereon, the petitioner had disclosed income from business or profession. Schedule 24, which referred to the details of the tax deducted at source, referred to the nature of payment as rent from the third parties to whom the premises had been let. The nature of the petitioners right qua the premises were not mentioned. The question whether the return was in accordance with the provisions of the Act or not is a different matter altogether which does not fall for consideration at this stage. 13. In view of the rival contentions, including the disputed question as to whether the relevant facts were disclosed or not at the material time, we are not inclined to exercise our jurisdiction under Article 226. It would be appropriate to permit the petitioner to raise the contention SRP                                                                                                                                                           8/9 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:52:56

WP511.12 regarding the validity of the re-assessment proceedings, including the validity of the notice and the orders passed on the objections before the Appellate Authorities in the appeal, if any, from the final order of the Assessing Officer. All the rights and contentions of the parties in this regard are kept open. 14. The Writ Petition is, accordingly, disposed of with liberty to the petitioner as aforesaid. No order as to costs. M.S. SANKLECHA, J. S.J. VAZIFDAR, J. SRP                                                                                                                                                           9/9 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 04:52:56 Powered by TCPDF (www.tcpdf.org)