2016 (12) TMI 59 - HC - Income Tax

Taxability of income - correct person to be taxed - Additional Solicitor General to contend that the tax in the hands of the Estate of late Ramniklal N. Mehta is not correct and the Revenue is obliged to tax the income in the hands of the correct person i.e. Petitioner herein - Held that - When we queried the learned Additional Solicitor General with our understanding at the stage of rejoinder he clarified that the Revenue is not contending that the Estate of late Ramniklal Mehta has been wrongly taxed but it was his submission in the alternative that even if the said Estate of late Ramniklal N. Mehta has been wrongly taxed it is the obligation of the Revenue to tax the right person (s) including the Petitioner. We accept this as an alternative submission made by the Revenue and we concede that it is likely that we may have not correctly understood the same when voiced by the Revenue at the first instance. This submission of Additional Solicitor General was an alternative submission made even though the Executor of the Estate of late Ramniklal N. Mehta one Mr. Dilip Mehta uncle of the Petitioner clearly admits in his statement made to the Income Tax Authority on 10th January 2012 that he has limited authority to operate the A/c. No. 5091404580 in the name of M/s. White Cedar. The Revenue ought to have in fact proceeded further and held the uncle of the Petitioner Mr. Dilip Mehta who is Executor of the Estate of late Ramniklal N. Mehta bound by his admission that he has limited authority to operate the Account No. 5091404580 in HSBC Geneva of M/s. White Cedar. As we understood the Revenue to contend that the Estate of late Ramniklal Mehta is not the correct person to be taxed there was no occasion to to examine the statement of Dilip Mehta dated 10th January 2012 as extracted in the order dated 30 May 2014 passed in the case of the Estate before our attention was invited by the petitioner to the order dated 30 May 2014 in support of its case during its rejoinder. We would expect the Revenue in matters such as these to take decisions with due consideration and some thought before taking a stand as taken in the affidavit in reply 16 December 2015 with regard to the order dated 30 May 2014 passed on the Estate of late Mr. Ramnikal Mehta. Neither the Petitioner nor her uncle i.e. Executor of the Estate of late Ramniklal N. Mehta is ready to obtain the necessary statement either directly or through M/s. White Cedar from HSBC Geneva in respect of A/c. No. 5091404580 by exercising or causing to be exercised the limited authority to instruct White Cedar to apply for and obtain the requisite information. In the normal course of human conduct if a person has nothing to hide and serious allegations /questions are being raised about the funds a person would make available the documents which would put to rest all questions which seem to arise in the mind of the Authorities. The conduct on the part of the Petitioner and her uncle in not being forthcoming to our mind leads us to the conclusion that this is not a fit case where we should exercise our extra ordinary writ jurisdiction and/or interfere with the orders passed by the authorities under the Act. If a person has nothing to hide we believe the person would have cooperated in obtaining the Bank Statements.

Summary

Issues Involved:
1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Limitation period for reopening the assessment.
3. Jurisdiction of the Assessing Officer to issue the notice.
4. Application and interpretation of Explanation 2 to Section 147 of the Act.
5. Adequacy of reasons to believe that income chargeable to tax has escaped assessment.
6. Requirement of consent waiver form for obtaining information from HSBC, Geneva.
7. Alternative remedy under the Income Tax Act.
8. Tax liability of non-residents under Section 9(1) of the Act.
9. Impact of previous assessments on the Estate of late Ramniklal Mehta.

Detailed Analysis:

1. Validity of the notice issued under Section 148 of the Income Tax Act, 1961:
The petitioner challenged the notice dated 31st March 2015 issued under Section 148 of the Act, seeking to reopen the assessment for the Assessment Year 2006-07. The petitioner argued that the notice was barred by limitation and lacked jurisdiction. The court examined whether the Assessing Officer had valid reasons to believe that income chargeable to tax had escaped assessment.

2. Limitation period for reopening the assessment:
The petitioner contended that the notice was barred by limitation under Section 149(1)(b) of the Act. The respondent argued that the notice was within the limitation period as per Section 149(1)(c), which allows reopening within sixteen years if assets located outside India are involved. The court had to determine whether the notice was issued within the permissible time frame.

3. Jurisdiction of the Assessing Officer to issue the notice:
The petitioner argued that the Assessing Officer lacked jurisdiction to issue the notice, as the entire amount in question had already been taxed in the hands of the Estate of late Ramniklal Mehta and other beneficiaries. The respondent countered that the notice was valid as the petitioner was a beneficiary of the foreign account and had not been assessed for her share of the income.

4. Application and interpretation of Explanation 2 to Section 147 of the Act:
The petitioner challenged the application of Explanation 2 to Section 147, which deems income to have escaped assessment if a person is found to have assets outside India. The court examined whether this explanation applied to the petitioner's case and whether it justified the reopening of the assessment.

5. Adequacy of reasons to believe that income chargeable to tax has escaped assessment:
The petitioner argued that the Assessing Officer did not have sufficient reasons to believe that income chargeable to tax had escaped assessment. The respondent maintained that the reasons recorded were adequate and that the mere finding of a foreign asset justified the reopening of the assessment. The court evaluated the sufficiency of the reasons provided by the Assessing Officer.

6. Requirement of consent waiver form for obtaining information from HSBC, Geneva:
The respondent highlighted that the petitioner had not signed the Consent Waiver Form, which would have allowed HSBC to provide information about the foreign account. The petitioner later agreed to sign a modified waiver form. The court considered the implications of the petitioner's refusal to provide the necessary consent and its impact on the case.

7. Alternative remedy under the Income Tax Act:
The respondent argued that the court should not exercise its writ jurisdiction as the petitioner had an alternative remedy available under the Act. The court examined whether it was appropriate to intervene in the case or if the petitioner should have pursued the alternative remedy.

8. Tax liability of non-residents under Section 9(1) of the Act:
The respondent contended that the petitioner, despite being a non-resident, was liable to pay taxes on the amount in the foreign account due to its Indian connection. The court analyzed the applicability of Section 9(1) and whether the petitioner had a tax liability in India for the income in question.

9. Impact of previous assessments on the Estate of late Ramniklal Mehta:
The petitioner argued that the entire amount had already been taxed in the hands of the Estate of late Ramniklal Mehta and other beneficiaries, making the current notice redundant. The respondent asserted that the correct person needed to be taxed, and the previous assessments did not preclude the reopening of the petitioner's assessment. The court considered the impact of the previous assessments on the current case.

Conclusion:
The court dismissed the petition, stating that the petitioner and her uncle's refusal to provide the necessary bank statements or consent waiver forms indicated a lack of cooperation. The court decided not to exercise its extraordinary writ jurisdiction, allowing the authorities under the Act to proceed with the case. The court did not express any opinion on the merits of the petition, leaving all contentions open for the parties to raise before the tax authorities. The petition was dismissed with no order as to costs.