Bombay High Court
Shrenik Kumar Baldota vs Dy Commissioner Of Income Tax Circle 1 ... on 20 January, 2025
Author: M. S. Sonak
Bench: M. S. Sonak
2025:BHC-OS:868-DB
Sayyed 18-WP.1331.2022.docx
IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO.1331 OF 2022
Shrenik Kumar N. Baldota ...Petitioner
Versus
Deputy Commissioner of Income
Tax Circle - 1(2)(1), Mumbai & Ors. ...Respondents
_____________________________________________________
Mr. Satish R. Mody a/w Ms. Aasifa Khan for Petitioner.
Mr. Suresh Kumar for Respondents.
_____________________________________________________
CORAM : M. S. Sonak &
Jitendra Jain, JJ.
DATED : 20 January 2025
ORAL JUDGMENT:- (Per Jitendra Jain, J.)
1. Heard learned counsel for the parties.
2. Rule. The Rule is made returnable immediately at the request
and with the consent of the learned counsel for the parties.
3. This Petition is filed for the assessment year 2015-2016
challenging re-assessment notice dated 27 March 2021 under Section
148 of the Income Tax Act, 1961 ("the said Act"). The reasons recorded
reads as under :-
"The assesse company has filed return of income for A.Y. 2015-16
on 25.09.2015 declaring total Income of Rs. 107,15,89,910/-
under normal provisions of the IT Act, 1961. The case was selected
for Scrutiny assessment under CASS selection. Assessment u/s,
143(3) of the I.T. Act was completed on 09.11.2017 accepting the
same as the assessed income.
1. During the year under consideration the assessee received
Income from salary, house property, business, capital gains and
other sources.
2. On perusal of the Profit & Loss account for the year ending
31.03.2015, it is noticed that the assesse had an interest income of
Rs. 2,75,81,210/- the details are as below/-
1. 1. Interest from Venture funds : Rs. 12,29,978/-
2. Interest on Loan : Rs. 1,55,55,804/-
Sayyed 18-WP.1331.2022.docx
3. Interest from THE GREATER BOMBAY CO-OPERATIVE BANK
: Rs. 1,01,27,269/-
4. Interest-Others : Rs. 6,68,159/-
1. During the assessment proceedings the assesse has also filed
details of interest receipts shown as income in capital account. As
per the details the total interest receipt during the year is Rs.
3,92,77,790/-. The details are as under.
1. 1. Interest from MSPL Gases : Rs. 1,55,55,804/-
2. Interest from PPF Accounts : Rs. 2,47,715/-
3. Interest from PF Accounts : Rs. 1,25,43,340/-
4. Interest from THE GREATER BOMBAY CO-OPERATIVE BANK
: Rs. 1,01,27,269/-
5. Interest from PRAGATI GRAMIN BANK: Rs. 5,48,720/-
6. Interest-Others : Rs. 2,54,942/-
1. Out of these interest receipts, interest from PPF of Rs. 2,47,715/-
and PF of Rs. 1,25,43,340/- totaling to Rs. 1,27,91,055/- are non
taxable income, therefore rightly excluded from the computation of
income. But no explanation has been submitted for non exclusion
of interest from Pragati Gramin Bank of Rs. 5,48,720/-. Even there
is a difference in the "interest - others' shown in the computation
and capital account. In capital account interest - others is Rs.
2,54,942/-where as in computation interest - others is Rs.
6,68,159/-. In absence any bifurcation, it is not clear whether
interest of Rs. 2,54,942/- is part of interest - others shown in the
computation.
2. From the above discussion, it can be concluded that interest
from Pragati Gramin Bank of Rs.5,48,720/- and interest - others of
Rs 2,54,942/- has not been included in the computation of income
by the assesse. The AO has accepted the computation submitted by
the assesse in the assessment order. This resulted in under
assessment of Rs. 8,03,662/- involving tax effect of Rs. 2,73,165/-
(excluding interest u/s 234A, 234B and 234C).
3. Further it was seen that the assesse had submitted vide letter
dated 25.09.2017 that he had borrowed funds of Rs.
20,74,59,584/- from Pragati Gramin Bank, Hospet and advanced
loans amounting to Rs. 1,77,39,11,205/- The assessee further
submitted that interest of Rs. 1,75,52,396/- was paid to Pragati
Gramin Bank. On perusalof the details available on the records, it
is seen that the assessee has received interest only from loans
advanced to MSPL Gases Ltd. In his submission dated 25.10.2017,
the assessee had given details of loans borrowed from the bank and
loan advanced to M/s MSPL Gases Ltd. from these details, it is
observed that though the loan amount from the Gramin Bank has
been increased from Rs. 14,81,16,106/-as on 31.03.2014to Rs.
20,74,59,583/- as on 31.03.2015, whereas loan advanced to MSPL
Gases Ltd has been decreased from Rs. 57,80,37,737/- as on
31.03.2014 to Rs. 51,93,87,961/- as on 31.03.2015. It is pertinent
Sayyed 18-WP.1331.2022.docx
to mention that on perusal of loan confirmation of MSPL Gases Ltd,
it is seen that no fresh loan was advanced by the assessee to the
company during the financial year 2014-15. Therefore the
increased amount of loan taken from Pragati Gramin Bank of Rs.
5,93,43,477/- cannot be said to have been utilized for giving loans
to MSPL Gases Itd by the assessee. The AO should not have been
allowed proportionate interest of Rs. 50,20,834/- on the amount of
Rs. 5,93,43,477/- as deduction u/s 57(iii) of the act.
4. This resulted in total under assessment of income by Rs.
58,24,496/- (Rs. 8,03,662+ Rs. 50,20,834/-).
5. Thus I have reason to believe that income in excess of Rs.
1,00,000/- chargeable to tax has escaped assessment in this case,
for the assessment year 2014-15. The word reason in the phrase
'reason to believe' would mean cause or justification. If the
Assessing Officer has cause or justification to know or suppose the
income had escaped assessment, it can be said to have reason to
believe that the income had escaped assessment. The expression
cannot be read to mean that the Assessing Officer should have
finally ascertained the fact by legal evidence or conclusion,
objectively. In the present case, since the assessee has failed to
substantiate its payments towards interest on loan taken from the
banks, it leads-to-enough cause for forming of belief by the
undersigned regarding of income during the year under
consideration.
6. The reason for re-opening the assessment u/s. 148 is enclosed
herewith for your information. You are requested to file your
objection if any, within 15 days from the receipt of this mail,
otherwise it will be considered as accepted by you."
4. The Petitioner vide letter dated 22 July 2021 filed his
objections which were disposed of vide order dated 11 February 2022.
Since the order rejected the objections raised by the Petitioner, the
Petitioner is before us challenging the impugned proceedings.
5. Mr. Mody, learned counsel for the Petitioner, submits that
there is no allegation of any failure to disclose fully and truly any
material facts necessary for the assessment as mandated by first proviso
to Section 147 of the said Act and, therefore, the jurisdictional
condition is not satisfied. He further submits that on a perusal of the
reasons recorded, it clearly demonstrates that reasons are based on
what was filed during the course of the regular assessment proceedings.
He further submits that the successor Assessing Officer is seeking to re-
Sayyed 18-WP.1331.2022.docx
open on the ground that the predecessor officer has not computed the
assessed income correctly. Mr. Mody, therefore, submits that the
proceedings are without jurisdiction and bad in law.
6. Mr. Suresh Kumar, learned counsel for the Respondents placed
reliance on the order rejecting the objections and the affidavit-in-reply
dated 27 June 2023. He states that the re-opening is done based on the
audit objections and, therefore, that constitutes new and tangible
information for assuming jurisdiction. He vehemently opposed the
submissions made by the Petitioner.
7. We have considered the rival submissions and perused the
records. Admittedly, the impugned notice is issued after a period of four
years from the end of the relevant assessment year and proviso to
Section 147 is attracted.
8. In this case, the assessment order under Section 143(3) of the
said Act was passed on 9 November 2017. Therefore, first proviso to
Section 147 is clearly attracted, whereby the Assessing Officer has to
satisfy the jurisdictional condition that there was failure on the part of
the assessee to disclose fully and truly all material facts necessary for
the assessment. On a reading of the reasons for re-opening, we could
not find any allegations as contemplated under the first proviso to
Section 147 of the said Act indicating that there was any failure on the
part of the assessee to disclose fully and truly all material facts
necessary for the assessment. Based on the reasons recorded, it is
apparent that the information has been culled out from the documents
and submissions made in the course of the regular assessment
proceedings. The reasons recorded admits that the predecessor officer
has not assessed the income correctly. In our view, based on the reasons
as recorded the jurisdictional condition contemplated by the first
Sayyed 18-WP.1331.2022.docx
proviso to Section 147 cannot be said to have been satisfied and,
therefore, the impugned proceedings are required to be quashed.
9. We may also observe that the Petitioner in its objections had
raised the jurisdictional objections which is required to be satisfied
before re-opening the case. None of these objections has been rebutted
by the Assessing Officer while disposing the order rejecting the
objections. The order rejecting objections merely reproduces various
judgments. In our view, in the absence of any rebuttal to the objections
raised by the Petitioner, it shall be presumed that the Respondents have
accepted the objections raised by the Petitioner and, therefore, the
impugned proceeding is liable to be quashed.
10. Lastly, in the reply filed to this petition, Respondents have
relied on the audit objections to justify the re-opening. It is settled
position that the jurisdiction of re-opening has to be tested on the
touchstone of the reasons as recorded and nothing can be added or
subtracted thereform. Neither in the reasons recorded nor in the order
deciding the objections it is stated that the re-opening is done on the
basis of audit objections and, therefore, the contentions raised on this
count is also to be rejected.
11. For the above reasons, Rule is made absolute in terms of
prayer clause (a) which reads as under :-
"(a) Declare that the impugned notice under section 148 of the Act
dated 27 March, 2021 (Exhibit F) and the impugned order dated
11 February, 2022 (Exhibit J) are wholly without jurisdiction,
illegal, arbitrary and liable to be quashed;"
12. This Petition is disposed of with no order as to costs.
(Jitendra S. Jain, J.) (M. S. Sonak, J.)
Signed by: Sayyed Saeed Ali
Date: 21/01/2025 15:43:09
