BELGUNDI CEMENTS PVT LTD vs. THE INCOME TAX OFFICER

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WP/58388/2017HC KarnatakaKAHC02015849201727 August 2024Bench: JYOTI MULIMANI9 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the issuance of successive notices under Section 148 of the Act was unsustainable in law. The Court found that the reasons recorded for reopening of assessment were without application of mind. The Assessing Officer had disposed of the assessee's objections by concluding that there were reasons to believe income had escaped assessment, based on information from the Investigation wing, Mumbai, and stating there was no return in hand for the relevant assessment year to cross-check facts. However, the Court noted that the assessee had filed its return for AY 2010-11 on 08.10.2010, which was processed, and this fact was brought to the notice of the officer. The Court observed that the officer failed to notice the filed return and the information about the One Time Settlement (OTS). Therefore, the reasons for reopening were considered untenable and based on borrowed satisfaction, which is impermissible. The Court quashed the three notices under Section 148 and the communication disposing of the objections. The ratio is that reopening of assessment based on a failure to consider readily available information, including filed returns and objections, and relying on 'borrowed satisfaction' is invalid. The Court allowed the writ petition.

What were the facts?

Belgundi Cements Pvt. Ltd. (the assessee) filed its return for AY 2010-11 on 08.10.2010, declaring an income of Rs. 95,93,523/-. This return was processed under Section 143(1) accepting the returned income. The assessee filed rectification requests on 05.08.2011 and 09.04.2014, which were processed. Subsequently, the assessee received three notices under Section 148 of the Income Tax Act, dated 30.03.2017 and 31.03.2017, from different Income Tax Officers. The assessee requested that its original return be treated as the return in response to these notices. The assessee filed objections to the reopening of assessment, which were disposed of by the Assistant Commissioner of Income Tax on 27.11.2017. The assessee challenged the issuance of the three Section 148 notices and the disposal of objections in this writ petition.

What were the issues?

1. Whether the issuance of successive notices under Section 148 of the Income Tax Act, 1961, is defective and bad in law, particularly in the absence of proper approval under Section 151 and without jurisdiction. 2. Whether the reasons recorded for reopening of assessment are based on application of mind and constitute valid 'reasons to believe' as mandated by Section 147 read with Section 148 of the Act, or if they are based on borrowed satisfaction. 3. Whether there was any escapement of income warranting the reopening of assessment. Assessee's contentions: The successive Section 148 notices are defective and bad in law, lacking proper approval under Section 151 and issued without jurisdiction. The reasons recorded for reopening are without application of mind, not constituting valid 'reasons to believe', and are based on impermissible borrowed satisfaction. There was no escapement of income, making the entire proceedings bad in law. Revenue's contentions: The writ petition is not maintainable as the assessee has an alternate substantive remedy. Multiple questions of fact are involved, which cannot be decided in extraordinary jurisdiction. The revenue has exercised discretionary powers, and there is no jurisdictional error. Information was received from ADIT (Inv.), Unit 5(4), Mumbai, indicating an OTS with Central Bank of India and escapement of income to the tune of Rs. 39,81,54,570/-.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 148,Section 147,Section 151

AI-generated summary — verify with the full judgment below

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NC: 2024:KHC-D:12199 WP No. 58388 of 2017

IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 27TH DAY OF AUGUST, 2024 BEFORE THE HON'BLE MS. JUSTICE JYOTI MULIMANI WRIT PETITION NO. 58388 OF 2017 (T-IT) BETWEEN:

BELGUNDI CEMENTS PVT. LTD., REP. BY ITS AUTHORISED REPRESENTATIVE SRI. AMARINDER SING BAWEJA, SON OF SRI. NARINDER SINGH, AGED ABOUT 52 YEARS, VILLAGE BELGUNDI, BELAGAVI-590 108. …PETITIONER (BY SRI. A.SHANKAR., SENIOR COUNSEL FOR SRI. SHASHANK HEGDE., ADVOCATE)

AND:

1.

THE INCOME TAX OFFICER, WARD-1(3), OPP. CIVIL HOSPITAL, DR. AMBEDKAR ROAD, BELAGAVI-590 001.

2.

THE INCOME-TAX OFFICER, WARD-1(2), OPP. CIVIL HOSPITAL, DR. AMBEDKAR ROAD, BELAGAVI-590 001.

3.

THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(1) OPP. CIVIL HOSPITAL, DR. B.R. AMBEDKAR ROAD, BELAGAVI-590 001. …RESPONDENTS (BY SRI. M.THIRUMALESH., ADVOCATE FOR R1-R3 A/W SMT. ROOPA ANAVEKAR., ADVOCATE)

Digitally signed by THEJASKUMAR N Location: HIGH COURT OF KARNATAKA

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NC: 2024:KHC-D:12199 WP No. 58388 of 2017

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, SEEKING CERTAIN RELIEFS.

THIS WRIT PETITION IS LISTED FOR PRELIMINARY HEARING IN ‘B’ GROUP, THIS DAY, AN ORDER IS MADE AS UNDER: ORAL ORDER Sri.A.Shankar., learned Senior counsel on behalf of Sri.Shashank Hegde., for the petitioner has appeared through video conferencing. Sri.M.Thirumalesh., learned counsel for respondents 1 to 3 has appeared in person. 2. The short facts are these: Belgundi Cements Pvt. Limited is a Company incorporated under the Companies Act, 1956. The company filed a return for the A.Y 2010-11 on 08.10.2010 declaring a total income of Rs.95,93,523/- (Rupees Ninety-Five Lakh Ninety-Three Thousand Five Hundred and Twenty-Three only). The return was processed under Section 143(1) of the Income Tax Act (for short ‘the Act’) on 08.03.2011 accepting the returned income. The petitioner filed a rectification request on 05.08.2011 which

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was processed on 17.08.2011. The petitioner filed another rectification request on 09.04.2014 which was processed on 21.04.2014. As the matter stood thus, the petitioner received a notice under Section 148 of the Act dated 30.03.2017 by post on 07.04.2017 issued by the Income Tax Officer Ward-1(3), Belagavi. The petitioner received another notice under Section 148 of the Act dated 31.03.2017 through email on 31.03.2017 issued by the Income Tax Officer, Ward 1(2), Belagavi. The petitioner received another notice under Section 148 of the Act dated 31.03.2017 through email on 01.04.2017 issued by the Income Tax Officer, Ward 1(2), Belagavi. The petitioner filed a letter on 25.04.2017 to the first respondent requesting to treat the original return filed for A.Y 2010-11 as the return filed in response to the notices issued under Section 148 of the Act. The petitioner filed a return electronically on 14.09.2017 in response to the notices issued under Section 148 of the Act declaring a total income of Rs.95,93,523/- (Rupees Ninety-Five Lakh Ninety-Three Thousand Five Hundred and Twenty-Three only) as declared in the original return of income. The first

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respondent issued the reasons recorded for re-opening of assessment via a letter dated 17.10.2017. The petitioner filed its objections to re-opening of assessment vide letter dated 09.11.2017. The Assistant Commissioner of Income Tax, Circle- 1(1) Belagavi disposed of the objections filed by the petitioner vide Communication dated 27.11.2017. The issuance of three successive notices under Section 148 of the Act and the Communication dated 27.11.2017 are called into question in this writ petition on several grounds as set out in the memorandum of a writ petition. 3. Sri.A.Shankar., learned Senior counsel appearing on behalf of the petitioner submits that successive notices issued under Section 148 of the Act are defective and bad in law. There is no proper approval under Section 151 of the Act. The notices issued under section 148 of the Act are without authority/jurisdiction. Next, he submits that the reasons recorded for reopening of assessment are without application of mind and cannot be said to be the reasons to believe which is a mandatory

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condition to invoke the provisions of Section 147 read with Section 148 of the Act. A further submission is made that there is no income escaping and hence the entire proceedings are bad in law. Learned senior counsel vehemently contended that the reasons recorded for reopening of assessment are based on borrowed satisfaction which is impermissible in law. Lastly, he submitted that the writ petition may be allowed. Sri.M.Thirumalesh., learned counsel for the respondents submits that the Writ Petition is not maintainable as the petitioner has an alternate substantive remedy under the Act. Next, he submits that there are multiple questions of facts involved and the same cannot be decided in extraordinary jurisdiction. He submitted that the respondent has exercised discretionary powers and there is no jurisdictional error. A further submission is made that information came to be forwarded by the ADIT (Inv.), Unit 5(4), Mumbai vide letter dated 17.03.2017. He submitted that the Unit at Mumbai

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informed the ITO, Ward 1(3), Belagavi that the Company has undergone OTS with the Central Bank of India and there was escapement of income to the tune of Rs.39,81,54,570/- (Rupees Thirty Nine Crore Eighty-One Lakh Fifty Four Thousand Five Hundred and Seventy only) within the meaning of Section 147 of the Act. Learned counsel vehemently contended that the Assessing Officer i.e., Income Tax Officer Ward 1(3), Belagavi issued notice under section 148 of the Act. Among other grounds, he sought for dismissal of the petition. 4. Heard the contentions urged on behalf of the respective parties and perused the Writ papers with utmost care. 5. The facts and the contentions are sufficiently stated and do not require reiteration. The issue falls on a narrow compass and revolves around the issuance of three successive notices and how the objections are considered by the officer concerned. 6. Suffice it to note that the Company filed returns on 08.10.2010 and they were processed by accepting the returned

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income. Strangely, the Income Tax Officers issued the notices after a lapse of almost seven years based upon the intimation that was received from ADIT (Inv.), Unit-5(4), Mumbai dated 17.03.2017 stating that the Company had undergone a one- time settlement (OTS) with the Central Bank of India and it had not filed the returns. Without prejudice to other contentions, the company replied to the notices and filed objections. The true copy of the objections that were filed by the company is furnished along with the Writ Petition and the same is marked as Annexure-G. A careful perusal of the same would reveal that the Company brought to the notice of the officer concerned about the filing of the returns in the year 2010 i.e., on 08.10.2010 and about the One Time Settlement. However, the officer concerned without application of mind, disposed of the objections concluding that there are reasons to believe that income has escaped assessment and the same was established on the intimation received from the Investigation wing, Mumbai and there was no return in hand for the relevant assessment year to cross-check the facts. This is untenable. The reason is apparent. It is relevant to note that the company had already filed its returns in the year 2010 and it was also brought to the

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notice of the department about the one-time settlement. However, the same was not noticed and the officer concerned concluded that there was no return to cross-check. Absolutely, there is no application of mind by the officer concerned in dealing with the objections and reopening the assessment. The reasons recorded for reopening of assessment are without application of mind and cannot be said to be reasons to believe which is a mandatory condition to invoke the provisions of Section 147 R/w Section 148 of the Act. I may venture to say that the reasons recorded for reopening of assessment are based on a borrowed satisfaction which is impermissible in law. Hence, the reasons for reopening of assessment are untenable. Furthermore, the issuance of successive notices under Section 148 of the Act is also unsustainable in law. Therefore, the Communication dated 27.11.2017 and the notices are liable to be quashed. Accordingly, they are quashed. 7. The Writ of Certiorari is ordered. The Notice dated 30.03.2017 issued by the Income Tax Officer Ward - 1(3), Belagavi – first respondent vide Annexure-A1, Notice dated 31.03.2017 issued by the Income Tax Officer, Ward 1(2), Belagavi – second respondent vide Annexure-A2, Notice dated

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31.03.2017 issued by the Income Tax Officer, Ward 1(2), Belagavi vide Annexure-A3 and the Communication dated 27.11.2017 issued by the Assistant Commissioner, Income Tax, Circle 1(1), Belagavi in F.No.ACIT/C-1(1)/BGV/2017-18 vide Annexure-B are quashed. 8. Resultantly, The Writ Petition is allowed.

Sd/- (JYOTI MULIMANI) JUDGE TKN LIST NO.: 2 SL NO.: 79

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