The Bombay High Court allowed a writ petition challenging the impugned notice under section (u/s) 148 of the Income Tax Act, 1961 dated 31st March 2021 and the impugned order on objection dated 10th June 2022 in addition to the impugned reassessment proceedings for Assessment Year (A.Y.) 2014- 15. The Court observed that it is the very same material on which a different view is being taken.
Brief Facts:
The petitioner was a director of Cinepolis India Pvt. Ltd., Gurgaon. In 2007, the petitioner collaborated with the Cinepolis Group to set up Cinepolis India and acquired certain shares and equity in Cinepolis India. In Financial Year (F.Y.) 2013-14, the petitioner transferred the equity shares and rights in Cinepolis India. On 11th July 2016, a notice was issued to the petitioner u/s. 142(1) for scrutiny. The petitioner submitted the required information. The Assessment Officer (AO) passed an order accepting the total income.
On 31st March 2021, the petitioner was issued the impugned notice u/s. 148 of the Act to reopen the assessment AY 2014-15. The petitioner filed his objections inter alia on the ground that the impugned notice was issued on borrowed satisfaction of another AO was issued beyond the period of four years from the completion of the regular assessment without demonstrating any failure on the part of the petitioner to disclose any material facts truly and fully. Respondent no.1 disposed of the objections of the petitioner stating that the assessee is required to be taxed under the head income from salary and should have disclosed the income under the head income from salary. The order, however, failed to demonstrate any failure on the part of the petitioner to disclose material facts.
On 3rd May 2021, the PAN of the petitioner was unilaterally transferred from the jurisdiction of respondent no.1 to respondent no.2 without giving any hearing. The petitioner preferred Civil Writ Petition challenging the order. This Court quashed the order on objections and remanded the matter directing the Jurisdictional Assessing Officer (JAO) to pass a reasoned order dealing with the objections of the petitioner. Respondent no.2 passed the impugned order dated 10th June 2022 holding that there was a failure on the part of the petitioner to disclose material facts and therefore, the reopening of assessment for the year 2014-15 was warranted.
Contentions of the Petitioner:
The Learned Counsel for the petitioner argued that the reopening of the assessment vide impugned notice dated 31st March 2021 is made beyond four years from the end of the relevant assessment year 2014-15 without demonstrating any failure on the part of the petitioner, to disclose material facts and consequently is vitiated in terms of the first proviso to section 147 ― the statutory requirements under the section 147 i.e., the assessee failed to disclose, truly and fully, any material facts necessary for the assessment is not established.
Further, the petitioner submitted that the reopening was initiated solely on the basis of information received from the ACIT, Gurgaon without application of mind.
Contentions of the Respondent:
The Learned Counsel for the respondent supported the impugned order and argued that the expression “reason to believe” cannot be read to mean that the AO should have finally ascertained the fact by evidence or conclusion. He submitted that the initial agreement dated 6th October 2007 was not furnished by the petitioner and was noticed only during the appellate proceedings in the case of Shri Milan Saini another director who also received a similar consideration from the same company.
Observations of the Court
The Court observed that there was no failure on the part of the assessee to disclose fully and truly the material facts, nor there was any tangible material with the A.O. which would have otherwise justified the reopening of the assessment by issuing the notice impugned. It is clearly the very same material on which a different view is being taken.
Further, the Court remarked that merely because another director of the same company had disclosed the income received differently, cannot be a ground for reopening and the same is evidently a change of opinion not only based on conjectures and surmises but also a case of blindly relying on information and borrowed satisfaction which is not permitted for reopening.
The decision of the Court:
The Bombay High Court, allowing the petition, held that it is an imperative duty of the authorities to be updated with the law and to apply it to the case at hand before taking decisions and passing orders.
Case Title: Deepak Marda vs The Income Tax Officer & Ors.
Coram: Hon’ble Justice Dhiraj Singh Thakur and Hon’ble Justice Kamal Khata
Case no.: WRIT PETITION NO. 8010 OF 2022
Advocate for the Petitioner: Mr. Mihir Naniwadekar
Advocate for the Respondents: Mr. Suresh Kumar
Read Judgment @LatestLaws.com
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