Bombay High Court
S. A. Developers vs Assistant Commissioner Of Income ... on 1 December, 2021
Bench: K.R. Sriram, Amit B. Borkar
1 916-WP 3579-19.odt
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.3579 OF 2019
S. A. Developers ] ... Petitioner
Versus
Assistant Commissioner of Income Tax-26(3), ]
Mumbai & Ors. ] ... Respondents
Mr. Devendra H. Jain for Petitioner.
Mr. Sham V. Walve a/w Mr. Pritish Chatterjee for Respondents.
Mr. Sujaykumar Samantha, Deputy Commissioner of Income Tax, present.
Mr. Arvind Kumbhare, Aassistant Commissioner of Income Tax, present.
CORAM :- K. R. SHRIRAM &
AMIT B. BORKAR, JJ.
DATE :- 01 DECEMBER, 2021
P. C. :-
1. Petition is impugning a notice dated 27/03/2019 issued
under Section 148 of the Income Tax Act, 1961 (hereinafter referred to as
'the Act'), subsequent order dated 19/11/2019 disposing Petitioner's
objections to the impugned notice and the Assessment Order and notice of
demand dated 09/12/2019. As regards Assessment Order and notice of
demand, the same was passed without waiting for the mandatory period
of 4 weeks prescribed in the Judgment of this Court in the case of Asian
Paints Ltd. Vs. Deputy Commissioner of Income Tax 1. The Officer
1 296 ITR 90 (Bom)
URS 1 of 6
Digitally signed
UMESH by UMESH
RAMESH
RAMESH SHINDE
SHINDE Date: 2021.12.02
11:55:29 +0530
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Mr.Arvind Ramchandra Kumbhare who has passed the Assessment Order
has filed an Affidavit dated 01/12/2021 stating that he was not aware
about the Asian Paints Judgment and hence passed the order before
expiry of the mandatory period of 4 weeks. The Affidavit is taken on
record and the apology tendered by Mr. Kumbhare is accepted. In view of
this, Mr. Walve states that the Assessment Order and notice of demand
dated 09/12/2019 be considered as withdrawn.
2. Now what remains to be considered is whether the notice
dated 27/03/2019 issued under Section 148 is a valid notice. If the Court
answers in negative, the subsequent order dated 19/11/2019 will also get
set aside.
3. Petitioner had filed its return of income on 19/11/2014 for
AY 2014-2015 declaring total income of 'Rs.NIL'. The case was selected
for limited scrutiny under Computer Aided Scrutiny Selection (CASS) and
the assessment was completed under Section 143(3) of the Act on
21/10/2015 determining the assessed income at 'Rs.NIL'.
4. On 26/03/2019, Petitioner received a notice under Section
148 of the Act stating that there are reasons to believe that Petitioner's
income chargeable to tax for AY 2014-2015 has escaped assessment
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within the meaning of Section 147 of the Act. The reasons for re-opening
have been provided and it is contained in a communication dated
07/06/2019, copy whereof is at Exh.K-2 to the Petition. We have perused
the reasons with the assistance of Mr. Jain and Mr. Walve. Since re-
opening of the assessment is proposed within the period of 4 years, the
proviso to Section 147 is not applicable. At the same time, the Assessing
Officer cannot re-open an assessment within a period of 4 years merely on
the basis of change of opinion. The Assessing Officer has no power to
review an assessment which has been concluded unless he has tangible
material to come to the conclusion that there is an escapement of income
from assessment. But in the reasons to believe in the present case, we do
not find even a single ground which can be considered to be tangible basis
for re-opening the assessment. The Assessing Officer states that from the
partnership deed, audited accounts and Form No.3CD report, it is seen
that that the Assessee has 15 partners, one of whom is Dhansukh Nanda
HUF. According to the Assessing Officer, an HUF cannot become a partner
of a firm or enter into a contract with other person and hence the
Assessee has not complied with the provisions of Section 184 of the Act
and the interest of Rs.61,50,664/- paid to partners cannot be considered
for deduction.
URS 3 of 6
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5. In our view, this is a clear case of change of opinion because
Petitioner had filed Form No.3CD in which Dhansukh Nanda HUF is
shown as a partner with 10% profit sharing ratio. Form No.3CD also
indicates that a sum of Rs.1,65,554/- has been paid as interest to
Dhansukh Nanda HUF. These materials were on the face of a document
available before the Assessing Officer who passed the original Assessing
Order dated 21/10/2015. Mr. Walve states that in the original
Assessment Order, there is no mention about Dhansukh Nanda HUF and
therefore it is likely that the original Assessing Officer has failed to note
that one of the partners in Petitioner firm was an HUF. We do not agree
with Mr. Walve because if Assessment Order does not speak about this, we
would consider it as having been accepted by the Assessing Officer who
passed the original Assessment Order that it was perfectly okay for an
HUF to be a partner in Petitioner firm. We would hasten to add that we
are not for a moment opining whether an HUF can be a partner in a firm
under the provisions of Indian Partnership Act, 1932.
6. We also have to note that in paragraph 5C of the Petition,
Petitioner has averred as under :
"5C. ........ In the Petitioner's case, it sought assessment as a
firm in AY. 2008-09 and for all the subsequent years, based on
the Deed of Partnership dated 13.12.2008 and 27.07.2010,
and the same was allowed even in the A.Y. 2011-12 and AY
URS 4 of 6
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2012-13, for which scrutiny assessment was made. The deed
was then modified on 20.10.2014 and in the first assessment
after the change in constitution made by the partnership Deed
dated 20.10.2014, already the claim of interest paid to
partners has been allowed in the order under section 143(3)
dated 21.10.2016. Dhansukh Nanda HUF has always been a
partner through its karta in all these deeds. It is a matter of
record that the earlier years' assessments have attained finality
in this regard. Therefore, under section 184(3) it is
mandatory for the Assessing Officer to assess our firm as a
firm only in all subsequent assessment years. ......"
7. Respondents have not denied these averments. Since we
have concluded that it is nothing but a change of opinion, we do not
propose to go into the issue as to whether the stand of Respondent that
Petitioner has not complied with provisions of Section 184 of the Act is
correct.
8. For reasons aforesaid, Petition is allowed in terms of prayer
clause which reads as under :
"(a) that this Hon'ble Court may be pleased to issue a Writ
of Certiorari of a Writ in the nature of Certiorari of 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 notice u/s 148 dated 27.03.2019 ("Exhibit
I"), the subsequent Order dated 19.11.2019 ("Exhibit
M") disposing of Petitioner's objections on the issue of
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impugned notice and the assessment order and notice
of demand dated 09.12.2019 ("Exhibit O")."
9. Petition disposed.
(AMIT B. BORKAR, J.) (K. R. SHRIRAM, J.)
URS 6 of 6
