Rainbow Texchem Private Limited vs Income Tax Officer Ward No 2(1)(1)
2021 Latest Caselaw 6217 Guj

    C/SCA/19253/2019                                CAV JUDGMENT DATED: 17/06/2021




               IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

                R/SPECIAL CIVIL APPLICATION NO. 19253 of 2019


FOR APPROVAL AND SIGNATURE:


HONOURABLE MS. JUSTICE BELA M. TRIVEDI                          Sd/-

and
HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI                      Sd/-
==========================================================

1 Whether Reporters of Local Papers may be allowed to see the judgment ? NO

2 To be referred to the Reporter or not ?

YES 3 Whether their Lordships wish to see the fair copy of the judgment ? NO

4 Whether this case involves a substantial question of law as to the interpretation of the Constitution NO of India or any order made thereunder ?

========================================================== RAINBOW TEXCHEM PRIVATE LIMITED Versus INCOME TAX OFFICER WARD NO 2(1)(1) ========================================================== Appearance:

MR DARSHAN R PATEL(8486), ADVOCATE for the Petitioner(s) No. 1 MR NIKUNT RAVAL, SR. STANDING COUNSEL FOR MRS KALPANAK RAVAL(1046), ADVOCATE for the Respondent(s) No. 1 ==========================================================

CORAM:HONOURABLE MS. JUSTICE BELA M. TRIVEDI and HONOURABLE DR. JUSTICE ASHOKKUMAR C. JOSHI

Date : 17/06/2021

CAV JUDGMENT (PER : HONOURABLE MS. JUSTICE BELA M. TRIVEDI)

1. The petition filed by the petitioner under Article 226 of the

C/SCA/19253/2019 CAV JUDGMENT DATED: 17/06/2021

Constitution of India is directed against the Notice dated 26.3.2019

(Annexure-B) issued by the respondent under Section 148 of

Income Tax Act (hereinafter referred to the "said Act") and the

preliminary order dated 21.9.2019 (Annexure-E) passed by the

respondent disposing off the objections raised by the petitioner

against the said Notice.

2. The short facts giving rise to the present petition are that the

petitioner is a Private Limited Company incorporated under the

Companies Act and is being regularly assessed to income tax by the

Income Tax Department. For the A.Y. 2012-13, a return of income

was filed on 29.9.2012 by the petitioner. No scrutiny assessment

was filed under Section 143(3) of the said Act. The petitioner

received the impugned Notice dated 26.3.2019 issued by the

respondent under Section 148 read with Section 147 of the said

Act, stating inter alia that the respondent had reason to believe that

the income of the petitioner chargeable to Tax for the A. Y. 2012-

13 had escaped assessment. The petitioner, therefore, was called

upon to deliver a return in the prescribed form for the said A.Y.

The respondent also issued a letter dated 7.5.2019 providing the

reasons recorded for reopening of the assessment for the A.Y.

2012-13 under Section 147 of the said Act. The petitioner filed his

objections to the said reasons on 28.7.2019, which have been

C/SCA/19253/2019 CAV JUDGMENT DATED: 17/06/2021

rejected vide the impugned order dated 21.9.2019.

3. The respondent has filed affidavit-in-reply resisting the petition by

contending inter alia that the respondent had reason to believe that

the petitioner had suppressed income to the tune of Rs.67,64,436/-

for the A.Y. concerned, for the grounds stated in the letter dated

7.5.2019, and therefore, the assessment was sought to be reopened

under Section 147/148 of the Act.

4. The learned Sr. Advocate Mr.D.R. Patel for the petitioner raised

various contentions, challenging the action of the respondent in

seeking to reopen the assessment for the concerned year by

submitting that the respondent did not have the jurisdiction under

Section 147/148 to reopen the proceedings based on incorrect facts.

According to him, the petitioner had never carried out any

transactions with Kamal Zaveri, proprietor of M/s. Rishit

Corporation or his proprietary concern, nor had taken any

unsecured loans from him, which was evident from the audit report.

He further submitted that the respondent cannot be permitted to

carry out fishing or roving inquiry merely for the purpose of

verification. There was total non-application of mind on the part of

the respondent in reopening the assessment, and therefore, it could

not be said that there was a reason to believe on the part of the

respondent in initiating the proceedings under Section 147 of the

C/SCA/19253/2019 CAV JUDGMENT DATED: 17/06/2021

said Act. Mr.Patel has sought to rely upon the unreported

judgement of this Court in case of Parth Knitex Pvt. Ltd.,

Pravinkumar Ramkaran Agarval Vs. Deputy Commissioner of

Income Tax Circle 2(1)(1) (Special Civil Application No.21107

of 2017 decided on 27.2.2018) and in case of GKN Driveshafts

(India) Limited Vs. Income-Tax Officer and Others, reported

in 259 ITR 19 in support of his submissions.

5. Per Contra the learned Senior Standing Counsel Mr.Nikunt Raval

for the respondent submitted that a survey action was undertaken by

the Investigation Wing, Surat under Section 133A of the said Act in

case of one Kamal Jayantilal Zaveri, Proprietor of M/s.Rishi

Corporation on 24.3.2015 and during the reassessment proceedings

in case of the said Kamal Jayantilal Zaveri, the impounded material

revealed the entries of tax bills and accommodation loan entries

connecting the present petitioner to the tune of Rs.67,64,463/- for

the A.Y. 2012-13, and therefore, on the basis of the said material

the respondent had sought to reopen the assessment by recording

the reasons. Placing reliance on the decision of Supreme Court in

case of A Raman & Company, reported in 67 ITR 11 (SC), he

submitted that the word 'information' means instruction or

knowledge derived from external source or as to law relating to a

matter bearing on the assessment. He also relied upon the decision

C/SCA/19253/2019 CAV JUDGMENT DATED: 17/06/2021

of the Supreme Court in case of Kalyanji Mavji, reported in 102

ITR 287 (SC) to submit that information can come from external

sources or even from material already on record and the word

information would include the true and correct state of law.

Reliance was also placed on the decision of this Court in case of

Jayant Security and Finance Limited Vs. ACIT, reported in

(2018) 91 taxmann.com 181 (Gujarat), and in case of Aaspas

Multimedia Limited Vs. DCIT, reported in (2017) 83

taxmann.com 82 (Gujarat) to submit that the A.O. having

recorded the prima facie findings on the basis of search conducted

of Shri Kamal J. Zaveri, it could not be said that there was no

tangible material available with the A.O. Mr.Raval has also relied

upon the judgement of the Supreme Court in case of Raymond

Woolen Mills Limited Vs. ITO &Ors., reported in (1999) 236

ITR 34 (SC) in support of his submission that the sufficiency or

correctness of the material could not be considered at this juncture

and what is required to be considered is whether prima facie there

was some material before the Assessing Officer for reopening of the

case of the assessment.

6. At the outset, it may be stated that one of the purposes of Section

147 of the said Act is to ensure that a party does not get away by

willfully making false or untrue statement at the time of original

C/SCA/19253/2019 CAV JUDGMENT DATED: 17/06/2021

assessment, and when that falsity comes to notice, to turn around

and say "you accepted my lie, now your hands are tied and you

cannot do anything", as observed by the Supreme Court in case of

M/S. Phool Chand Bajrang Lal And Another vs Income-Tax

Officer And Another, reported in 203 ITR 456 (SC) . It is also

well settled proposition of law that the Income Tax Officer acquires

jurisdiction to reopen an assessment under Section 147 read with

Section 148 of the said Act, only if on the basis of specific, reliable

and relevant information coming to his possession subsequently, he

has reason, which he must record, to believe that the income

chargeable to tax has escaped assessment for the concerned

assessment year. The sufficiency of reasons for forming the belief

is not for the Court to judge, but it is open to the assessee to

establish that there, in fact, existed no belief or that the belief was

not bona fide or that the belief was based on vague or irrelevant

information. Therefore, let us examine as to whether the initiation

of action under Section 147 read with Section 148 of the said Act

against the petitioner is legal and justified.

7. In the instant case stated earlier, the impugned notice dated

26.3.2019 was issued by the respondent under Section 148 of the

said Act, calling upon the petitioner to deliver a return in the

prescribed form for the A.Y. 2012-13 as the respondent had a

C/SCA/19253/2019 CAV JUDGMENT DATED: 17/06/2021

reason to believe that the income of the petitioner chargeable to tax

for the said assessment year had "escaped assessment" within the

meaning of Section 147 of the said Act. The respondent had also

supplied the reasons in support of the said Notice, conveyed to the

petitioner vide the letter dated 7.5.2019. The petitioner, on

28.7.2019, had filed the objections to the said reasons recorded for

reopening the assessment, which have been rejected by the

respondent.

8. Now, it appears that the impugned action under Section 147/148 of

the said Act has been initiated against the petitioner by the

respondent on the basis of the material and the impounded

documents recovered during the course of survey action undertaken

by the Investigation Wing, Surat under Section 133A of the said

Act in case of one Shri Kamal J. Zaveri, Proprietor of M/s. Rishit

Corporation on 24.3.2015. Therefore, there was a tangible material

available with the respondent and the said material had a prima

facie link with the petitioner and with the formation of the belief by

the respondent that income of about Rs.67,64,463/- had escaped

assessment.

9. In case of CIT Vs. M/s.Kelvinator of India Limited, reported in

320 ITR 561 (SC), it has been held inter alia that the Assessing

Officer has power to reopen, provided there is "tangible material" to

C/SCA/19253/2019 CAV JUDGMENT DATED: 17/06/2021

come to the conclusion that there is an escapement of income from

assessment and that reasons must have a live link with the formation

of the belief.

10. Our Court has also in similar case, in the case of Aaspas

Multimedia Pvt. Ltd. (supra) held that if on the basis of

information supplied by/from the office of Principal Director of

Income Tax (Investigation), the A.O., has found that the petitioner

assessee was the beneficiary of accommodation entries provided by

the other assessee, it could not be said that there was no tangible

material available with the A.O., to prima facie form an

opinion/belief that income of the petitioner chargeable to tax has

escaped an assessment.

11. As rightly submitted by the learned Sr. Standing Counsel

Mr.Raval, what is required to reopen a case is "reason to believe",

the sufficiency or correctness of material cannot be considered at

this juncture, as held by the Supreme Court in case of Raymond

Woolen Mills Limited Vs. ITO (supra).

12. The Supreme Court in case of ACIT Vs. Rajesh Jhaveri

Stock Brokers Pvt. Ltd., reported in (2007) 291 ITR 500 (SC),

has also observed that the word "reason" in the phrase "reason to

believe" would mean cause or justification. If the Assessing Officer

C/SCA/19253/2019 CAV JUDGMENT DATED: 17/06/2021

has a cause or justification to know or suppose that income had

escaped assessment, it can be said to have reason to believe that an

income had escaped assessment.

13. The decision relied upon by the learned Advocate Mr.D. R.

Patel for the petitioner in case of GKN Driveshafts (India)

Limited Vs. Income-Tax Officer and Others (supra) has no

application to the facts of the present case. In the said case, it was

observed that the A. O. is bound to furnish reasons within a

reasonable time, and on receipt of the reasons, the noticee is

entitled to file objections to issuance of notice and the A. O., is

bound to dispose of the same by passing a speaking order. In the

instant case, the A. O. has disposed of the objections of the

petitioner by passing a speaking order considering all legal and

factual aspects, which are just and proper, and do not call for any

interference by this Court, exercising the jurisdiction under Article

226 of the Constitution of India.

14. In that view of the matter, the petition being of devoid of merit is

dismissed.

Sd/-

(BELA M. TRIVEDI, J)

Sd/-

(A. C. JOSHI,J) V.V.P. PODUVAL