S. A. Developers vs Assistant Commissioner Of Income ...
2022 Latest Caselaw 76 Bom

                                1/5             409 WP3576.2019.doc


                  IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                      ORDINARY ORIGINAL CIVIL JURISDICTION

                         WRIT PETITION NO. 3576 OF 2019

S.A. Developers                                     .... Petitioner
            v/s.
Assistant Commissioner of Income Tax
- 26(3), Mumbai and ors.                            .... Respondents

                                      ---
Mr. Devendra H. Jain a/w. Ms. Radha Halbe for Petitioner.
Mr. Sham V. Walve for Respondents - Revenue.


                                      CORAM : K.R. SHRIRAM &
                                              R.N. LADDHA, JJ.

DATED : JANUARY 04, 2022

P. C. :-

. Petitioner 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. v/s. Deputy

Commissioner of Income Tax1. The Officer 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

1 296 ITR 90 (Bom)

P.H. Jayani 2/5 409 WP3576.2019.doc

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Order and notice of demand dated 09/12/2019 be considered as withdrawn.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 2012-

2013 declaring total income of Rs.39,50,776/-. 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 27/01/2015

determining the assessed income at Rs.40,10,780/-.

4. On 27/03/2019, 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 2012-13 has escaped assessment 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.J 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 after expiry of period of 4 years, the proviso to Section 147 is

P.H. Jayani 3/5 409 WP3576.2019.doc

applicable. The Assessing Officer has no power to review an assessment

which has been concluded so he has to first come to the conclusion based on

tangible material that there is an escapement of income from assessment and

he has to also show that there was failure on the part of petitioner to truly

and fully disclose material facts. At the same time, the Assessing Officer

cannot re-open an assessment merely on the basis of change of opinion. 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 or conclude that there has been failure to disclose any material

fact. 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 amount of Rs.89,24,703/- and

remuneration of Rs.60,00,000/- paid to partners, aggregating to

Rs.1,49,24,703/- cannot be considered for deduction.

5. In our view, this is a clear case of change of opinion because petitioner

had, before the original assessment order was passed, 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.1,94,826/- has been paid

P.H. Jayani 4/5 409 WP3576.2019.doc

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 27/01/2015. 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 Parnership Act, 1932.

6. This is a clear case of change of opinion. There is also nothing to

indicate any failure on the part of petitioner to disclose any material fact.

Hence, 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.

7. For reasons aforesaid, Petition is allowed in terms of prayer clause (a)

which reads as under :-

" (a) that this Hon'ble Court may be pleased to issue a Writ of Certiorari or a Writ in the nature of Certiorari or

P.H. Jayani 5/5 409 WP3576.2019.doc

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 H"), the subsequent Order dated 19.11.2019 ("Exhibit L") disposing of Petitioner's objections on the issue of impugned notice and the assessment order and notice of demand dated 09.12.2019 ("Exhibit N"). "

8. Petition disposed.

             (R.N. LADDHA, J.)                                                 (K.R. SHRIRAM, J.)




         Digitally signed
PREETI   by PREETI
         JAYANI
H        Date:
         2022.01.10
JAYANI   12:35:45
         +0530




                P.H. Jayani