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TMI Blog2025 (3) TMI 100X X X X Extracts X X X X X X X X Extracts X X X X ..... e by the petitioner of all details necessary for assessment were duly disclosed by the petitioner in its letter dated 19 December 2016 (supra) along with all details, annexures in specific response to the final show cause notice dated 13 December 2016 issued by the respondents for the A.Y. 2014-15. It is such material which formed the basis of reopening of the assessment as is evident from the impugned assessment order dated 29 March 2022. There appears to be no fresh tangible material before the respondents to form its own/independent opinion in regard to reopening of the petitioner assessment for the A.Y. 2014-15, under Section 147 of the IT Act. Denial of natural justice - We may observe that the mandatory procedure postulated u/s 144B is also not followed by the respondents. This is in as much as the petitioner's objection dated 18 February 2022 to the reasons recorded for reopening of the assessment by the respondent dated 9 December 2021 were neither considered, dealt with, much less disposed of by the respondents. Further the reply of the petitioner to the draft assessment order dated 24 March 2022 was filed by the petitioner on 28 March 2022, mainly pointing out that the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of Certiorari or a Writ in the nature of Certiorari or any other appropriate Writ, order or direction, calling for the records of the Petitioner's case and after going into the legality and propriety thereof, to quash and set aside the said (i) Notice dated 27th March, 2021 u/s 148 for A.Y. 2014-15 (Exh. A) and (ii) Assessment Order u/s 147 r.w. 143 (3) dated 29th March, 2022 being (Exh. "B") and after examining the legality and validity thereof to quash and set aside the same; (b) This Hon'ble Court be pleased to issue a Writ of Mandamus or a Writ in the nature of Mandamus or any other appropriate Writ, order or direction, directing the Respondents, its servants, subordinates, agents and successors in office; (i) To forthwith withdraw and/or cancel and/or quash the (i) Notice dated 27th March, 2021 u/s 148 for A.Y. 2014-15 (Exh. A) and (ii) Assessment Order u/s 147 r.w. 143 (3) dated 29th March, 2022 being (Exh. "B"); (ii) To forthwith forbear from taking any steps whatsoever pursuant to or in implementation of the (i) Notice dated 27th March, 2021 u/s 148 for Α.Υ. 2014-15 (Exh. A) and (ii) Assessment order u/s 147 r.w. 143 (3) dated 29th March, 20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid letter dated 19 December 2016. This was followed by another letter of the petitioner where the petitioner clarified that out of loans of Rs. 105.77 crores (Supra), unsecured interest free loans were to the extent of Rs. 89.60 crores and secured interest-bearing loans of Rs. 16,17,68,368 (Rs. 16.17 crores approx.) It was also pointed out that there were no fresh withdrawals by the partners during the year instead capital was introduced by the partner of the firm during the said A.Y. 2014-15. The petitioner clarified that drawings by one of the partners Mr. Mukesh Doshi is out of interest-free funds available with the petitioner and not the interest-bearing funds. 7. Further to the above the respondent no. 1 issued a demand notice dated 29 June 2016 under section 156 of the IT Act to the petitioner for the A.Y. 2014-15 by which the petitioner's income was assessed as NIL. The respondent no. 1 proceeded to then issue an impugned notice dated 27 March 2021 under section 148 of IT Act for A.Y. 2014-15. It appears that the said notice was issued beyond period of 4 years from the relevant assessment year being A.Y. 2014-15. In response to such notice under section 148 of IT Act the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 29 March 2022 premised on the following substantial grounds; (a) Notice issued by the respondent no. 1 under Section 148 of the IT Act is bad in law as it is beyond the mandatory period of four years as provided under first proviso to Section 147 of the IT Act for the reason that there was no failure on the part of the petitioner to truly and fully disclose the material facts; (b) Reopening of the petitioner for the A.Y. 2014-15 in the facts of the present case tantamounts to change of opinion of the assessing officer, which is legally impermissible to reopen the assessment; (c) Reopening of assessment for the A.Y. 2014-15 in the present case is based on an internal audit which is contrary to law. Moreover, the objections to reopening by the petitioner are neither disposed off by a separate order nor done so in the same impugned assessment order dated 29 March 2022. 13. Mr. Hakani would next submit that the reopening of the petitioner's assessment for A.Y. 2014-15 is illegal and without jurisdiction inasmuch as it is hit by the first proviso to Section 147 of the IT Act, being reopened after the stipulated period of four years from the relevant A.Y. 2014-15. Fur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2022, much less not even adjudicated and/or disposed of. 15. Mr. Hakani would also refer to the decision of this Court in the case of KSS Petron Private Limited V/s The Assistant Commissioner of Income Tax Circle 10(2) 2016 SCC Online Bom 13550. This was in support of his submission to the effect that non disposal of the objections of the petitioner by the assessing officer is a jurisdictional issue, which goes to the root of the matter as held by the Supreme Court in GKN Driveshaft (Supra). A failure on the part of the respondent to act in such manner vitiates the impugned order rendering it illegal. 16. Mr. Hakani would point out that the notice dated 10 May 2016 issued under Section 142 (1) of the IT Act seeking various details from the petitioners was responded to by the petitioner vide letter dated 24 May 2016. Thereafter, notice dated 13 December 2016 was issued under Section 142 (1) by Respondent No. 1 wherein it was specifically stated that the petitioner had taken loan of Rs. 105.77 crores and given loan of Rs. 75.64 crores. Therefore, the petitioner was asked to show cause why interest of Rs. 9.07 crores on principal amount of Rs. 75.64 crores (approx) at 12% should not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... borate response to the said show cause notice by letter dated 19 December 2016 setting out all details as required by the respondent including the loan confirmations from various parties, schedule of capital account and balance sheet to show that no interest is charged to profit and loss account and that the debit balance of partner is on account of the interest free amount received. 18. Mr. Hakani would submit that the reasons recorded in the subsequent notice dated 2 February 2022 would further demonstrate that the exercise of reopening was undertaken on the basis of an internal audit. According to him, the notice dated 27 March 2021 issued under Section 148 of the IT Act pursuant to the reopening to the petitioner's assessment under Section 147 which itself is illegal, also making the said notice being issued without authority of law. 19. Mr. Hakani in support of the above would place reliance on the decision of the Supreme Court in Commissioner of Income-Tax v. Kelvinator of India Ltd [2010] 320 ITR 561 (SC) to contend that where the assessing officer adopted one possible view then he cannot adopt a completely different view on the same material before him as that would tanta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT Act provides for a remedy in form of appeal under section 246A and revision under section 264 of the IT Act. In view thereof, no writ shall lie. In the alternative, on merits he would submit that merely stating that the debit balance is out of the petitioner's interest free funds without providing any supporting evidence in this regard, to does not tantamount to full and true disclosure under the provisions of section 148 of the IT Act. Mr. Sharma would further contend that the Supreme Court and various High Courts have justified the reopening of the assessment in such facts and circumstances. Consequently, the window of reopening of assessment will remain open for assessing officer on those points where the assessing officer neither accepts nor rejects such claim. 23. Mr. Sharma would then place reliance on the decision of the Gujarat High Court in the case of Gujarat Power Corporation Ltd v. Assistant Commissioner of Income Tax 2012 SCC OnLine Guj 4293 to infer that no opinion was formed by the assessing officer, it will be far-fetched to assume that a change in that opinion was being effected. Further, he would submit that the safest and surest guide to ascertaining whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from doubt. Mr. Sharma would submit that the issue raised by the audit was not disclosed by the petitioner in its return of income and also not disclosed during the course of original assessment proceedings. In vie thereof, such reopening was just legal and proper in the given facts. Rejoinder of the Petitioner:- 28. Mr. Hakani would reiterate his submissions recorded above inter alia asserting that the assessment proceedings were commenced without disposing the objections of the petitioner or without giving further time to petitioner to file its objections. Further, the rejoinder clarifies that the petitioner specifically asked for a copy of the recorded reasons on 12 January 2022 and the same were supplied to the petitioner on 2 February 2022, after which the petitioner filed its objections on 18 February 2022. Hence, the allegation of the respondent that petitioner did not file objections to reopening in a reasonable time is not only contrary to the given facts but also a perverse finding indicating non-application of mind, vitiating the impugned assessment order dated 29 March 2022. D. Analysis and Conclusion:- 29. We have heard learned counsel for the parties. With thei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rence or revision, which is chargeable to tax and has escaped assessment.] Explanation 1.-Production before the Assessing Officer of account books or other evidence from which material evidence could with due diligence have been discovered by the Assessing Officer will not necessarily amount to disclosure within the meaning of the foregoing proviso. Explanation 2.-For the purposes of this section, the following shall also be deemed to be cases where income chargeable to tax has escaped assessment, namely:- (a) where no return of income has been furnished by the assessee although his total income or the total income of any other person in respect of which he is assessable under this Act during the previous year exceeded the maximum amount which is not chargeable to income-tax; (b) where a return of income has been furnished by the assessee but no assessment has been made and it is noticed by the Assessing Officer that the assessee has understated the income or has claimed excessive loss, deduction, allowance or relief in the return; [(ba) where the assessee has failed to furnish a report in respect of any international transaction which he was so required under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing officer issued notice u/s 142 (1) dated 13/12/2016 wherein it was specifically stated that Assessee has taken loans of Rs.105.77 crores and given loans of Rs.75.64 crores and asked as to why interest of Rs. 9,07,70,902/- on Rs.75.64 crores @12% should not be charged to tax. In response to said notice, the petitioner filed its letter dated 19 December, 2016 wherein it was mentioned that Rs. 75,64,24,189/- was debit balance of partner Mr Mukesh Doshi 31. The petitioner then filed replies dated 24 May 2016 and 19 December 2016. The assessing officer thereafter passed the original assessment order dated 29 June 2016 upon duly verifying the issue of taxing the interest on the debit balance of the partner. Thereafter, the petitioner received a copy of such recorded reasons from the jurisdictional assessing officer on 9 December 2021, i.e., after 7 months, directing the petitioner to file reply by 24 December 2021. However, on 24 December 2021 itself the petitioner received a notice under Section 142 (1) from Respondent No. 2 without even waiting for the petitioner to file its objection. For this reason, the petitioner once again asked the respondents to furnish a copy of such record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act read with the judgments in this regard, as further discussed below. 34. We may observe that the mandatory procedure postulated under Section 144B of the IT Act is also not followed by the respondents. This is in as much as the petitioner's objection dated 18 February 2022 to the reasons recorded for reopening of the assessment by the respondent dated 9 December 2021 were neither considered, dealt with, much less disposed of by the respondents. Further the reply of the petitioner to the draft assessment order dated 24 March 2022 was filed by the petitioner on 28 March 2022, mainly pointing out that the reassessment proceedings were contrary to the provisions of section 147 of the IT Act read with the decision of the Supreme Court in GKN Driveshaft (Supra). The respondent failed to even consider these vital aspects which embrace the requirement of reasonable opportunity to be given to the petitioner, rushed to pass the impugned assessment order on 29 March 2022 i.e., just within a day after receiving a reply dated 28 March 2022 from the petitioner to the draft assessment order. No opportunity of being heard/hearing was given to the petitioner despite the variations prejudicial t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure. This would lead to unnecessary harassment of the Assessee by reviving stale/ old matters." Considering the facts in the given case, the above decision is applicable and in light of such settled legal principles we see no reason to take a different view as Mr. Sharma would want us to. The impugned order cannot be given any effect to as it is eclipsed by the observations and ratio of such judgments. 37. Further, at this juncture it is apposite to refer to a decision of the Supreme Court in Kelvinator of India Ltd (Supra), where the court was pleased to hold thus:- "6. However, one needs to give a schematic interpretation to the words "reason to believe" failing which, we are afraid, section 147 would give arbitrary powers to the Assessing Officer to reopen assessments on the basis of "mere change of opinion", which cannot be per se reason to reopen. We must also keep in mind the conceptual difference between power to review and power to reassess. The Assessing Officer has no power to review; he has the power to reassess. Hence, after 1st April, 1989, the Assessing Officer has power to reopen, provided there is "tangible material" to come to the conclusion that there is esca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... form his opinion. It is for him to put his opinion on record in black and white. The reasons recorded should be clear and unambiguous and should not suffer from any vagueness. The reasons recorded must disclose his mind. Reasons are the manifestation of mind of the Assessing Officer. The reasons recorded should be self-explanatory and should not keep the assessee guessing for the reasons. Reasons provide link between conclusion and evidence. The reasons recorded must be based on evidence. The Assessing Officer, in the event of challenge to the reasons, must be able to justify the same based on material available on record. He must disclose in the reasons as to which fact or material was not disclosed by the assessee fully and truly necessary for assessment of that assessment year, so as to establish vital link between the reasons and evidence. That vital link is the safeguard against arbitrary reopening of the concluded assessment. The reasons recorded by the Assessing Officer cannot be supplemented by filing affidavit or making oral submission, otherwise, the reasons which were lacking in the material particulars would get supplemented, by the time the matter reaches to the Court, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully and truly disclose all the materials. This apart, the reasons demonstrate that the entire basis for such reopening is on the materials which was already available with the Assessing Officer, in finalizing the petitioner's assessment under Section 143 (3) of the IT Act. If this be so, the Assessing Officer was acting on a complete change of opinion on the same material and / or intending to have a review of the assessment order passed by him. This was certainly not permissible applying the settled principles of law as discussed by us hereinabove. Thus, on both the counts namely on failure of the Assessing Officer in adhering to the mandate as contained in the first proviso to Section 147, and on exceeding his jurisdiction as conferred by the said provision by forming an opinion on the same material, which was available with him in the course of assessment proceedings, was wholly an impermissible exercise of jurisdiction, to issue the impugned notice. This is writ large from the plain reading of the reasons for reopening as furnished to the petitioner. We have already observed that there was substantive correspondence between the petitioner and the Assessing Officer on all mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the objections filed by the petitioner dated 18 February 2022 to the reasons recorded for reopening of assessment vide letter dated 2 February 2022 of the respondents, were neither separately disposed of nor has it been dealt with/adjudicated upon in the impugned assessment order. Further, from a perusal of the reply affidavit of the respondents it appears that the respondents have sought to justify their conduct in not following the mandate of the statutory provisions under Sections 147 and 144B of the IT Act to save such assessment from being barred by limitation. However, such justification is legally untenable in light of the clear statutory provisions and the settled law referred to (Supra) and hence cannot be countenanced. 42. For the reasons set out above, the impugned assessment order fails to consider that the assessment cannot be reopened beyond a period of four years from the relevant assessment year A.Y. 2014-15 in terms of the first proviso to section 147 of the IT Act. Such action would stare in non compliance of jurisdictional requirements, and is therefore, non-est in law. We cannot be oblivious to the fact that the impugned notice dated 27 March 2021 issued u ..... X X X X Extracts X X X X X X X X Extracts X X X X
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