YOGESH KUMAR SAINI vs. U O I AND ORS

[2024:RJ-JP:46965-DB] HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Civil Writ Petition No. 10030/2014 Yogesh Kumar Saini S/o Late Shri Kanhaiya lalji Saini, aged app. 60 years, R/o Plot No. 35, Manu Marg, Alwar (Rajasthan) ----Petitioner Versus 1. Union of India, through the Ministry of Finance, North Block, New Delhi-110 001, through the Commissioner of Income Tax, Alwar 2. The Commissioner of Income Tax Alwar, Moti Doongri Road, Alwar 3. The Income Tax Officer, Ward-2(3), Moti doongri, Alwar ----Respondents For Petitioner(s) : Mr.Anant Kasliwal, Sr. Adv. with Ms.Charu Pareek Mr.Diwakar Khaldwa & Mr.Raghav Krishnatri For Respondent(s) : Mr. Anuroop Singhi with Mr. Aditya Khandelwal & Mr. N.S. Bhatti HON'BLE MR. JUSTICE AVNEESH JHINGAN HON'BLE MR. JUSTICE UMA SHANKER VYAS ORDER RESERVED ON:- 08/11/2024 PRONOUNCED ON:-

14/11/2024 AVNEESH JHINGAN, (J):- 1. This petition is filed seeking quashing of notice dated 31.03.2014 issued under Section 148 of Income Tax Act, 1961 (for short ‘the Act’) for Assessment Year (for brevity ‘AY’) 2009-10 and order dated 20.06.2014 rejecting the objections. 2. The brief facts are that the petitioner filed the Income Tax Return for the relevant year. The assessment under Section 143(3) of the Act was finalized on 11.10.2011. Notice dated 31.03.2014 was issued under Section 148 of the Act on the ground that petitioner wrongly claimed deduction under Section 54B and there is an escapement of tax on income of

[2024:RJ-JP:46965-DB] (2 of 6) [CW-10030/2014] Rs.9,42,296/-. The objections filed by the petitioner were dismissed on 20.06.2014. Hence, the present petition. 3. Learned Senior Counsel for the petitioner submits that the assessment case of the petitioner was selected for scrutiny, questionnaire was issued and after considering the reply filed the assessment was framed. The deduction claimed under Section 54B of the Act was examined by Assessing Officer (hereinafter referred to as ‘AO’) and the reassessment proceeding is on the basis of change of opinion. 4. Learned counsel for the respondent contended that the AO had not considered the deduction under Section 54B of the Act. Reliance is placed upon the decision of High Court of Calcutta in Principal Commissioner of Income Tax versus ITC Ltd. reported in (2024) 467 ITR 467 (Cal). The argument is that for the land sold by brothers of petitioner the deduction under Section 54B of the Act was claimed by petitioner. 5. The assessment of the petitioner for the relevant year was framed under Section 143(3) of the Act. On failure of the petitioner to furnish the account for receipts and details, the addition of Rs.35,000/- was made to the professional income. The notice under Section 148 of the Act was issued on ground that the petitioner wrongly claimed deduction under Section 54B of the Act as the land was sold by the brothers of the petitioner and the AO had reason to believe that income of Rs.9,42,296/- had escaped assessment. 6. The case of petitioner is that the assessing authority in the assessment order has taken note of income from Long Terms

[2024:RJ-JP:46965-DB] (3 of 6) [CW-10030/2014] Capital Gain (hereinafter referred to as ‘LTCG’) and this entitles the petitioner to claim deduction under Section 54-B of the Act. Present is not a case of reopening of assessment on change of opinion. There was no application of mind by AO on the issue of deduction claimed under Section 54-B of the Act. From disclosure of income LTCG in return, it cannot be inferred that the issue of deduction claimed under Section 54-B of the Act for the land sold by the brothers of the petitioner was considered or discussed during assessment. 7. From the perusal of the reply filed during assessment proceedings and the assessment order, it is evident that there was no specific question raised with regard to deduction claimed under Section 54B of the Act. The case would have been on different pedestal if the AO during the assessment proceedings had raised query with regard to deduction under Section 54B of the Act. In that case the reply and material filed by the petitioner relating to the deduction would have either been accepted or rejected or further probe ordered. 8. The Supreme Court in Assistant Commissioner of Income Tax versus Rajesh Jhaveri Stock Broker Pvt. Ltd. reported in (2007) 291 ITR 500 held:- 16. Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to tax if he has reason to believe that income for any assessment year has escaped assessment. The word 'reason' in the phrase 'reason to believe' would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression cannot be read to mean that the Assessing Officer

[2024:RJ-JP:46965-DB] (4 of 6) [CW-10030/2014] should have finally ascertained the fact by legal evidence or conclusion. The function of the Assessing Officer is to administer the statute with solicitude for the public exchequer with an inbuilt idea of fairness to taxpayers. Supreme Court in Central Provinces Manganese Ore Co. Ltd. v. ITO [(1991)191ITR662(SC)] held:- for initiation of action under Section 147(a) (as the provision stood at the relevant time) fulfillment of the two requisite conditions in that regard is essential. At that stage, the final outcome of the proceeding is not relevant. In other words, at the initiation stage, what is required is 'reason to believe', but not the established fact of escapement of income. At the stage of issue of notice, the only question is whether there was relevant material on which a reasonable person could have formed a requisite belief. Whether the materials would conclusively prove the escapement is not the concern at that stage. This is so because the formation of belief by the Assessing Officer is within the

realm

subjective

satisfaction. 17. The scope and effect of Section 147 as substituted with effect from April 1, 1989, as also Sections 148 to 152 are substantially different from the provisions as they stood prior to such substitution. Under the old provisions of Section 147, separate Clauses (a) and (b) laid down the circumstances under which income escaping assessment for the past assessment years could be assessed or reassessed. To confer jurisdiction under Section 147(a) two conditions were required to be satisfied firstly the Assessing Officer must have reason to believe that income profits or gains chargeable to income tax have escaped assessment, and secondly he must also have reason to believe that such escapement has occurred by reason of either (i) omission or failure on the part of the assessee to disclose fully or truly all material facts necessary for his assessment of that year. Both these conditions were conditions precedent to be satisfied before the Assessing Officer could have jurisdiction to issue notice under Section 148 read with Section 147(a). But under the substituted Section 147 existence of only the first condition suffices. In other words if the Assessing Officer for whatever reason has reason to believe that income has escaped assessment it confers jurisdiction to reopen the assessment. It is however to be noted that both the conditions must be fulfilled if the case falls within the ambit of the proviso to Section 147. The case at hand is covered by the main provision and

not

the

proviso.

[2024:RJ-JP:46965-DB] (5 of 6) [CW-10030/2014] 18. So long as the ingredients of Section 147 are fulfilled, the Assessing Officer is free to initiate proceeding under Section 147 and failure to take steps under Section 143(3) will not render the Assessing Officer powerless to initiate reassessment proceedings even when intimation under Section 143(1) had been issued. (emphasis supplied) 9. There is no quarrel with the proposition of law that the reassessment proceedings cannot be initiated merely on change of opinion. The reasons for reopening clearly indicates that the AO had reason to believe that income had escaped assessment. We at this stage are not at all suggesting that the inference drawn is correct. What is required at this stage is that the AO has reason to believe that there was an escaped assessment. 10. There is no bar that under Section 147 of the Act that the reasons to believe cannot be based upon the material already available on record. 11. The Supreme Court in Phool Chand Bajrang Lal & Anr. Versus Income Tax Officer & Anr. reported in (1993) 4 SCC 77 held as under: 27. From a combined review of the judgments of this Court, it follows that an Income-tax Officer acquires jurisdiction to reopen assessment under Section 147(a) read with Section 148 of the Income Tax 1961 only if on the basis of specific, reliable and relevant information coming to his possession subsequently, he has reasons which he must record, to believe that by reason of omission or failure on the part of the assessee to make a true and full disclosure of all material facts necessary for his assessment during the concluded assessment proceedings, any part of his income, profit or gains chargeable to income tax has escaped assessment. He may start reassessment proceedings either because some fresh facts come to light which where not previously disclosed or some information with regard to the facts previously disclosed comes

[2024:RJ-JP:46965-DB] (6 of 6) [CW-10030/2014] into his possession which tends to expose the untruthfulness of those facts. In such situations, it is not a case of mere change of opinion or the drawing of a different inference from the same facts as were earlier available but acting on fresh information. Since, the belief is that of the Income-tax Officer, the sufficiency of reasons for forming the belief, is not for the Court to judge but it is open to an assessee to establish that there in fact existed no belief or that the belief was not at all a bona fide one or was based on vague, irrelevant and non-specific information. To that limited extent, the Court may look into the conclusion arrived at by the Income-tax Officer and examine whether there was any material available on the record from which the requisite belief could be formed by the Income-tax Officer and further whether that material had any rational connection or a live link for the formation of the requisite belief. It would be immaterial whether the Income-tax Officer at the time of making the original assessment could or, could not have found by further enquiry or investigation, whether the transaction was genuine or not, if one the basis of subsequent information, the Income-tax Officer arrives at a conclusion, after satisfying the twin conditions prescribed in Section 147(a) of the Act, that the assessee had not made a full and true disclosure of the material facts at the time of original assessment and therefore income chargeable to tax had escaped assessment. The High Courts which have interpreted Burlop Dealer's case (Supra) as laying down law to the contrary fell in error and did not appreciate the import of that judgment correctly. (emphasis supplied) 12. In view of the above discussion, it is not a case of change of opinion, the petition is dismissed.

(UMA SHANKER VYAS),J (AVNEESH JHINGAN),J Riya/Danish/162 Reportable: Yes