The Bombay High Court allowed a writ petition under Article 226 of the Constitution of India challenging the notice under section (u/s) 148 of the IT Act, 1961 for the reopening of assessment for the assessment year 2008-09, and the order dated 21st January 2016, rejecting the objections raised by Petitioner to the notice issued to re-assess the income. The Court observed that the Petitioner has by production of bank statements and supporting documents shown that the reasonable belief of the AO was unfounded and consequently, the presumption that the Petitioner was one of the beneficiaries of the accommodation entries based on the statement of the third party was disproved.
Brief Facts:
Petitioner, a partnership firm, filed its return of income for AY 2008-09 on 15th September 2008. Its case was selected for scrutiny and a questionnaire seeking certain details was sent. All queries were answered and an assessment order u/s 143(3) was passed on 29th October 2010. After four years, Respondent No.1 issued a notice dated 9th March 2015 under section u/s 148 of the Act, to reopen the assessment. Petitioner filed its objections. Respondent No.1 selectively reproduced and dealt with the objections whilst passing an order dated 21st January 2016, rejecting objections.
Petitioner, therefore, filed the present Petition, challenging the impugned notice and impugned order issued by Respondent No.1.
Contentions of the Respondent:
The Learned Counsel for the Respondent stated that the Petitioner has failed to ‘fully and truly’ disclose material facts in the original assessment and contended that the department had to only make out a ‘prima facie case’ on the basis of which the Department could reopen the case and the ‘sufficiency and correctness’ of the material was not a thing to be considered at this stage.
Observations of the Court
The Court observed that the jurisdictional conditions for invoking sections 147 – 148 are not satisfied as there is no failure to disclose material facts fully and truly.
Further, the Court observed that once the Petitioner provided the bank statements and details of parties as sought, the AO must necessarily carefully examine the material and then give particulars and reason/s to believe otherwise, whilst rejecting the objections, more so, when there is an assessment order u/s 143(3). This process would be in tune with the principles of ‘shifting of onus’ under the evidence act.
The Court also noted that where the assessment was sought to be reopened on account of a change of opinion of AO, the reopening was not justified. Where primary facts necessary for assessment are fully and truly disclosed the AO is not entitled to reopen the assessment on a change of opinion. While considering the material on record, one view is conclusively taken by AO, it would not be open for the AO to reopen the assessment based on the very same material and take another view.
The Court said that the Petitioner has by production of bank statements and supporting documents shown that the reasonable belief of the AO was unfounded and consequently the presumption that the Petitioner was one of the beneficiaries of the accommodation entries based on the statement of the third party was disproved. Consequently, the onus would be on the AO to provide reasons to disbelieve the bank statements and supporting documents for reopening the assessment, which it failed to do.
The decision of the Court:
The Bombay High Court, allowing the petition, held that the AO has acted in excess of the limit of his jurisdiction to reopen the assessment in the exercise of powers under section 147 read with section 148 of the Act and hence, the Petitioner would entitled to succeed in this proceeding.
Case Title: M/s. Aditi Constructions vs Deputy Commissioner of Income Tax & Ors.
Coram: Hon’ble Justice Dhiraj Singh Thakur and Hon’ble Justice Kamal Khata
Case no.: WRIT PETITION NO. 783 OF 2016
Advocate for the Petitioner: Ms. Rucha Vaidya
Advocate for the Respondents: Mr. Suresh Kumar
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