ACQUA BOREWELLS PRIVATE LIMITED vs. THE PRINCIPAL COMMISSIONER OF INCOME TAX

THE PRINCIPAL COMMISSIONER OF INCOME TAX BENGALURU 1, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, KORAMANGALA, BENGALURU-560 095.

THE INCOME TAX OFFICER WARD-1 (1) (1), ROOM NO. 201, 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, 6TH BLOCK, KORAMANGALA, BENGALURU-560 095. …RESPONDENTS

A perusal of the material on record will indicate that on 30.03.2017, respondents issued a notice under Section 148 of the I.T.Act to the petitioner in relation to the assessment year 2010-11, to which, the petitioner submitted a reply dated 17.04.2017 intimating them that the original returns are to be treated as returns filed to the said notice. In his reply, petitioner also sought for reasons for the respondents to re-open the assessment proceedings and for details of the approval obtained by the 2nd respondent which would enable him to re-open the assessment. On 01.08.2017, the 2nd respondent issued a notice under Section 142(1) of the I.T.Act to the petitioner followed by copy of the reasons recorded for re-opening which were served on the petitioner on 09.08.2017. On 29.08.2017, the petitioner submitted objections to the re-opening sought to be made by the respondents and also sought for personal hearing.

Thereafter, on 06.10.2017, 2nd respondent issued a letter intimating the petitioner that the returns had been processed under Section 143(1) of the I.T.Act, in pursuance of which, the petitioner addressed communications dated 11.10.2017 and 21.10.2017 informing the 2nd respondent about non-disposal of the objections filed by the petitioner. On 07.12.2017 and 19.12.2017, the 2nd respondent issued notices under Section 142(1) of the I.T.Act, to which the petitioner submitted replies dated 15.12.2017 and 25.12.2017 specifically contending that the objections of the petitioner had not been addressed by the 2nd respondent and called upon him to do so before proceeding further in the matter. It is the grievance of the petitioner that despite the aforesaid facts and circumstances, the 2nd respondent proceed to pass the impugned assessment order without considering the petitioner’s reply or objections by raising a demand in a sum of Rs.3,18,38,330/- against the petitioner, who is before this Court by way of the present petition.

Heard learned Senior counsel for the petitioner and learned counsel for the respondents – Revenue and perused the material on record.

In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned Senior counsel for the petitioner submits that the impugned assessment order is illegal and arbitrary, since the objection filed by the petitioner to the reasons recorded by the 2nd respondent for re- opening the assessment had not been addressed, considered or disposed of as required in law, as a result of which, the impugned order was vitiated and deserves to be set aside. It was also contended that apart from the fact that the notice under Section 148 issued by the 2nd respondent contained material errors without stating as to from whom approval had been obtained under Section 151 of the I.T.Act, the mandatory notice under Section 143(2) had also not been issued by the 2nd respondent before passing the impugned assessment order. It was also submitted that the refundable deposit received by the petitioner has been erroneously treated as ‘income’ in the hands of the petitioner, which is impermissible in law, in addition to the fact that the 2nd respondent has purported to re-assess the loss for the purpose of re-opening the assessment and in the absence of any reasons to believe to re- open the assessment as contemplated under Section 147 of the

Per contra, learned counsel for the respondents – revenue would reiterate the various contentions urged in the statement of objections and submits that there is no merit in the petition and the same is liable to be dismissed.

I have given my anxious consideration to the rival submissions and perused the material on record.

As rightly contended by the learned Senior counsel for the petitioner, the undisputed material on record will indicate that in response to the reasons recorded by the 2nd respondent for re- opening the assessment, the petitioner filed objections on 29.08.2017 which were undisputedly not considered, addressed or disposed of by the 2nd respondent before passing the impugned order, which stands vitiated in the light of the well settled position of law as held by the Apex Court and this Court in various judgments including GKN Driveshafts’ s case supra, wherein it has been held that it is incumbent and obligatory on the part of the 2nd respondent to dispose of the objections filed by the petitioner before passing the impugned assessment order, which deserves to be set aside on this ground alone.

A perusal of the material on record will also indicate that the 2nd respondent had not issued the mandatory notice under Section 143(2) of the I.T.Act, which is another circumstance vitiating the impugned order as held by the Apex Court and this

A perusal of the impugned assessment order will indicate that the petitioner had entered into an MoU dated 15.03.2010 with M/s.Khoday Eshwarsa & Sons, under which, petitioner received a refundable deposit of Rs.5 crores which has also been erroneously held to be income in the hands of the petitioner without appreciating that the said sum was received by the petitioner only as a refundable deposit which can be never construed, considered or treated as an income in the hands of the petitioner, especially when as per the MoU, the other parties among whom the refundable deposit is to be collectively apportioned as per the agreement. Further, the Assessing officer of the other party namely M/s.Khoday Eshwarsa & Sons has passed an assessment order dated 27.12.2017 categorically holding that under the aforesaid MoU, there was no transfer during the financial year 2009-10 by placing reliance upon the judgment of the Apex Court in Balbir Singh Maini’s case supra, and consequently, the petitioner being co-owner along with the other party, there cannot

Though several other grounds and contentions have been urged by the petitioner and respondents in support of their respective claims by placing reliance upon the aforesaid judgments, having regard to the findings recorded by me hereinbefore and the facts and circumstances obtaining in the instant case, the same are not dealt with elaborately for the purpose of the present order and as such, I am of the considered opinion that the impugned orders, notices and all consequential proceedings pursuant thereto are illegal, arbitrary and without jurisdiction or authority of law and contrary to the provisions of the I.T.Act warranting interference by this Court in the present petition.

In the result, I pass the following:- ORDER