DEEPAK MARDA vs. THE INCOME TAX OFFICER WARD-1 ICHALKARANJI AND ORS

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WP/3707/2022HC BombayHCBM01043798202113 April 2022Bench: HON'BLE SHRI JUSTICE K.R. SHRIRAM,HON'BLE SHRI JUSTICE N. R. BORKAR4 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the reopening of assessment was proposed after the expiry of four years from the end of the relevant assessment year, making the proviso to Section 147 of the Income Tax Act applicable. The Court found the Assessing Officer's (AO) view that he only needed to show the existence of relevant material to form a belief to be incorrect. The AO, when seeking to reopen after four years, is obligated to demonstrate that the assessee failed to disclose material facts truly and fully. The Court also noted that the order passed by the AO on the petitioner's objections lacked application of mind and that the AO had failed to provide the petitioner with the information relied upon for reopening. Consequently, the Court quashed and set aside the two orders on objections dated 21.04.2021 and 22.04.2021. The matter was remanded for de novo consideration by the Joint Assessing Officer (JAO), who was directed to pass a reasoned order addressing all objections and submissions of the petitioner. The petitioner was permitted to submit further objections within two weeks of receiving specified documents. The JAO was to dispose of these objections within four weeks after providing a personal hearing, ensuring that any relied-upon High Court or Tribunal orders were provided to the petitioner in advance. The Court clarified that no observations were made on the merits of the case.

What were the facts?

The petitioner, Deepak Marda, filed a writ petition challenging orders passed by the Income Tax Officer (ITO), Ward-1, Ichalkaranji, concerning the reopening of his assessment. The petitioner had raised objections to the reopening. The ITO's order on these objections, dated 21.04.2021, was found by the High Court to lack application of mind. Specifically, the ITO referred to sections 149 and 151 of the Income Tax Act without any objection from the petitioner on their applicability and failed to provide the petitioner with information relied upon for reopening. The reopening was proposed after four years from the end of the relevant assessment year. An affidavit-in-reply filed by the respondent admitted that the petitioner had submitted all facts fully and truly.

What were the issues?

1. Whether the Assessing Officer (AO) properly applied the provisions of Section 147 of the Income Tax Act, particularly the proviso concerning reopening after four years from the end of the relevant assessment year, and whether the AO correctly discharged the burden of proving failure to disclose material facts truly and fully by the assessee. Assessee's Contentions: The assessee argued that the reopening was proposed after the expiry of four years from the end of the relevant assessment year, triggering the proviso to Section 147. The assessee contended that the AO's view that he only needed to show relevant material for forming a belief was incorrect, and the AO was duty-bound to establish the assessee's failure to disclose material facts truly and fully. The assessee also pointed out that the order on objections lacked application of mind and that crucial information relied upon for reopening was not provided. Revenue's Contentions: The revenue's contentions are not explicitly recorded in the judgment, other than the admission in the affidavit-in-reply that the petitioner had submitted all facts fully and truly.

Which sections of the Income-tax Act were involved?

Section 147,Section 149,Section 151

AI-generated summary — verify with the full judgment below

950-cwp-3707-22.doc IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 3707 OF 2022 Deepak Marda

… Petitioner V/s. The Income Tax Officer Ward-1 Ichalkaranji and ors.

… Respondents ---------------- Mr. Suyog Bhave i/b Ms Farzeen Khambatta for the Petitioner. Mr. Suresh Kumar for the Respondent. ----------------

CORAM : K.R. SHRIRAM &

N.R. BORKAR, JJ. DATE : APRIL 13, 2022. P.C. 1] We find that order passed by respondent No.1 to the objections filed by petitioner does not display application of mind. In the order dated 21.04.2021, at paragraphs 3 and 4, Officer has referred to provisions of sections 149 and 151 of the Act and says why they are applicable, even though no objection has been raised by petitioner regarding its applicability. Moreover none of the information as mentioned in the reasons recorded for reopening has been provided to petitioner. 2] Respondent No.1 is directed to provide copy of information/letter dated 07.03.2018, copy of the settlement agreement Dinesh Sherla 1/4 DINESH SADANAND SHERLA Digitally signed by DINESH SADANAND SHERLA Date: 2022.04.19 16:59:58 +0500

950-cwp-3707-22.doc on which he is relying upon, copy of the appeal of in case of Milan Saini that was disposed by CIT (A), Gurgaon and copy of order passed by CIT (A), Gurgaon, on which, respondent No.1 has relied upon in the reasons recorded for reopening within two weeks of this order being uploaded. 3] Here is a case where reopening is proposed after expiry of four years from the end of relevant assessment year and therefore, the proviso to section 147 of the Act shall apply. The view of respondent No.1 that he has to only show whether there was any relevant material which a person could have relied upon to form a requisite belief is totally incorrect. The Assessing Officer who wishes to reopen after four years from the end of relevant assessment year is duty bound to make out a case of failure to disclose material facts truly and fully by assessee. Therefore, we quash and set aside two orders on objections dated 21.04.2021 and 22.04.2021. 4] We have to also note that in the affidavit-in-reply filed by one Goushkan A. Pathan, affirmed on 10.02.2022, respondent admits that the petitioner has submitted all facts fully and truly. Dinesh Sherla 2/4

950-cwp-3707-22.doc 5] The matter is remanded for de novo consideration by J.A.O., who shall pass a reasoned order dealing with all objections and submission of the petitioner. Petitioner is permitted, within two weeks from the date of receipt of documents/information referred to in para 2 above, to submit further submissions /objections to reopening of assessment. 6] The JAO shall dispose the objections within four weeks from the date of submission of further submissions/ objections, after giving a personal hearing to petitioner. The notice for personal hearing shall be issued atleast seven working days in advance. If the Assessing Officer wishes to rely on any order or judgment of any High Court or Tribunal, then a list thereof shall be provided to petitioner alongwith the notice of personal hearing so that petitioner may be able to deal with/distinguish those orders/ judgments. 7] The JAO shall, we repeat, shall deal with every objection raised by petitioner and pass the order on objections dealing with every point raised by petitioner. Dinesh Sherla 3/4

950-cwp-3707-22.doc 8] The time from the date of lodging this petition, i.e., 06.12.2021, until the time granted for disposing objection is excluded for completion of the assessment proceedings. 9] We clarify that we have not made any observations on the merits of the case. 10] Petition accordingly disposed.

(N.R. BORKAR, J.) (K.R. SHRIRAM, J.) Dinesh Sherla 4/4

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