Rajhans Processors vs Union Of India
2023 Latest Caselaw 1493 Raj

                                        (1 of 11)                 [CW-16985/2021]


     HIGH COURT OF JUDICATURE FOR RAJASTHAN AT
                      JODHPUR
              D.B. Civil Writ Petition No. 16985/2021

Rajhans Processors, Through Its Authorized Partner Sh. Shrenik
Chhajer, Aged About 37 Years Having Its Place Of Business At
Plot No. A-4, Nextgen Textile Park, Sardarsamand Road, Pali.
                                                                   ----Petitioner
                                   Versus
1.      Union Of India, Through Secretary Finance, Ministry Of
        Finance, North Block, New Delhi-110001.
2.      Principal Chief Commissioner Of Income Tax (NaFAC),
        North Block, New Delhi-110001.
3.      Principal Chief Commissioner Of Income Tax, Aaykar
        Bhawan, Paota, Jodhpur.
4.      Income Tax Officer, Ward-1, Income Tax Office, Pali.
5.      Additional/Joint/Deputy/Assistant                 Commissioner        Of
        Income Tax/income Tax Officer, NFAC, New Delhi.
                                                                ----Respondents


For Petitioner(s)        :     Mr. Sharad Kothari
For Respondent(s)        :     Mr. K.K. Bissa



           HON'BLE MR. JUSTICE SANDEEP MEHTA
           HON'BLE MR. JUSTICE KULDEEP MATHUR

                                    Order

Date of pronouncement : 08/02/2023

Judgment reserved on : 05/01/2023

BY THE COURT : PER HON'BLE MEHTA, J.

The petitioner has filed the instant writ petition under

Article 226 of the Constitution of India for questioning the legality

and validity of the re-assessment notice dated 31.03.2021

(Annex.5) under Section 148 of the Income Tax Act, 1961 and the

order dated 13.09.2021 (Annex.12) disposing of the objections

(2 of 11) [CW-16985/2021]

submitted by the petitioner against the re-opening of the

assessment for the Assessment Year 2017-18.

Brief facts relevant and essential for the disposal of the

writ petition are noted hereinbelow:-

The petitioner firm came into existence in the financial

year 2016-2017 (Assessment year 2017-2018) and since then it is

engaged in the business of textile job work at Pali. The petitioner

filed its original return of income in terms of Section 139 (1) of the

Income Tax Act, 1961 for the assessment year 2017-2018 on

30.09.2017 and the same was verified by the respondent

Department without any defect. After filing of the return of income

for the Assessment Year 2017-18, a notice/summon dated

24.08.2017 under Section 131 (1A) of the Income Tax Act was

issued to the petitioner for making an enquiry in relation to the

source of large investment to the tune of Rs.1,21,40,000/- made

by the petitioner firm in acquiring immovable property situated at

plot No.A-4, Nextgen Textile Park, Sardarsamand Road, Pali. The

petitioner filed detailed explanation in prescribed format alongwith

documentary evidence in response to the said notice/summon. No

further proceedings were forthcoming after the explanation

submitted by the petitioner as above. However, a notice dated

31.03.2021 (Annex.5) was served upon the petitioner under

Section 148 of the Income Tax Act proposing to reopen

proceedings for the assessment year 2017-2018 stating therein

that the Assessing Officer (A.O.) had reasons to believe that

income chargeable to tax had escaped assessment for the

Assessment Year 2017-18 within the meaning of Section 147 of

the Income Tax Act. The petitioner filed a fresh return of income in

response to the notice issued under Section 148 of the Income Tax

(3 of 11) [CW-16985/2021]

Act declaring identical particulars of income as per the original

return filed under Section 139(1) of the Act. Thereafter, the

petitioner requested the respondent I.T.O., Pali to supply copy of

the reasons recorded prior to initiation of proceedings under

Section 148 of the Act alongwith copy of approval/sanction from

the competent authority in terms of the Section 151 of the Income

Tax Act. In response thereto, the petitioner received a

communication dated 28.06.2021 (Annex.8) issued under Section

143 (2) of the Act incorporating therein the reasons to believe and

so also the approval for initiating the re-assessment proceedings.

The reasons for reopening the assessment as highlighted in the

Annex.8 are reproduced hereinbelow for the sake of ready

reference:-

"The assessee M/s Rajhans Processors has invested in immovable property situated C-152, Nirman Vihar, Delhi for an amount of Rs. 1,21,40,000/- . Thus, the assessee has made huge investment to the tune of Rs.1,21,40,000/- for purchase of above property during the F.Y. 2016-17. On verification through system & record, it is noticed that, the assessee has not disclosed this investment in its return of income as well as the source of investment made for purchase of above undisclosed income. As such the amount of Rs.1,21,40,000/- is actually the undisclosed income of the assessee and the same has escaped assessment. The same is liable to be brought to tax by initiation of proceedings u/s 147/148 of the I.T. Act.

I have gone through the information as well as the facts of the case, I have reason to believe that the income of Rs.1,21,40,000/- is chargeable to tax has escaped income for A.Y. 2017-18 and accordingly I am satisfied that taxable income to the tune of Rs.

(4 of 11) [CW-16985/2021]

1,21,40,000/- which has escaped income, and it is a fit case for initiation of proceedings u/s 147 of the I.T. Act, 1961."

The petitioner filed preliminary objections dated

30.08.2021 (Annex.9) to the above communication stating therein

that the very foundation of the notice was non-existent as the

petitioner had not procured any property at Delhi with the

description C-152, Nirman Vihar, Delhi for the amount of

Rs.1,21,40,000/- during the financial year 2016-2017. It was

emphatically mentioned in this letter that the assessee had rather

purchased land located at plot No.A-4, Nextgen Textile Park,

Sardarsamand Road, Pali for a sum of Rs.1,26,37,900/- from M/s.

Nextgen Textile Park, Private Limited having its registered office at

C-152, Nirman Vihar, Delhi. This transaction was duly disclosed in

the audited financial statement, i.e. balance-sheet and fixed asset

chart as well as the return of income filed by the petitioner for the

Assessment Year 2016-17. It was asserted that the reasons

formed by the A.O. were based merely on suspicion, assumptions

and conjectures and there was nothing in the communication

dated 28.06.2021, which could suggest that there was any

material to support the allegation/assumption of non-disclosure of

land transaction. The preliminary objections submitted by the

petitioner against the reopening of assessment for the Assessment

Year 2017-18 were disposed of by the respondent I.T.O., Ward-1,

Pali by order dated 13.09.2021 (Annex.12).

The notice under Section 148 of the Income Tax Act

dated 31.03.2021 (Annex.5), the reasons to believe conveyed vide

notice under Section 143(2) of the Income Tax Act dated

(5 of 11) [CW-16985/2021]

28.06.2021 (Annex.8) and the order dated 13.09.2021

(Annex.12), whereby the objections submitted by the petitioner

against the reasons to believe and reopening of proceedings were

turned down, are assailed in this writ petition filed on behalf of the

petitioner under Article 226 of the Constitution of India.

Learned counsel Shri Sharad Kothari, representing the

petitioner, placed reliance on the Supreme Court judgment in the

case of Jeans Knit (P) Ltd. Vs. Deputy Commissioner of

Income Tax & Ors. [(2018) 12 SCC 36] and urged that a writ

petition is maintainable against the order disposing objections

against the reasons supplied under Section 148 of the Income Tax

Act. Reliance is also placed on the judgment rendered by the

Delhi High Court in the case of Principal Commissioner of

Income Tax-6 Vs. Meenakshi Overseas Pvt. Ltd. [(2017)

395 ITR 677 (Del)] and it was submitted that reopening of

assessment cannot be done merely on the basis of borrowed

satisfaction, i.e. on the basis of the information received from

investigating wing, and independent application of mind before

adverting to this course of action is essential because the

Assessing Officer is a quasi judicial authority. Shri Kothari also

placed reliance on the Bombay High Court judgment in the case of

South Yarra Holdings Vs. Income Tax Officer

[MANU/MH/1543/2019] and urged that where the very

foundational facts in support of notice for re-assessment are

lacking, such notice cannot be considered compliant of law.

Reliance was also placed on the judgment rendered by Bombay

High Court in the case of Sea Glimpse Investment Pvt. Ltd.

Vs. The Deputy Commissioner of Income Tax & Ors. [2021

(12) TMI 1096] and it was submitted that re-assesment could

(6 of 11) [CW-16985/2021]

not be permitted for the reason that the foundation thereof is

factually incorrect. Shri Kothari urged that the petitioner had filed

the return for the assessment year 2017-18, wherein the

investment for acquiring the immovable property situated at Pali

was clearly reflected. At that point of time, there was no

requirement upon the petitioner of uploading the audited financial

statements, but no sooner the impugned notice under Section 148

of the Income Tax Act was issued, the petitioner filed a fresh

return annexing therewith the duly audited financial statements,

wherein entire details of the subject land transaction are reflected.

He submitted that the order dated 13.09.2021 (Annex.12) is

erroneous on the face of the record because at point No.2.1, the

Assessing Officer has mentioned that the assessee had not

uploaded the schedule of fixed assets as mentioned in the

schedule 6 in the balance-sheet. He urged that this schedule was

duly annexed with the duly uploaded balance-sheet, which fact is

not disputed in the reply of the respondents. In this schedule, the

transaction to the tune of Rs.1,26,25,900/- for purchase of land

situated at Pali is clearly depicted under the column of fixed

assets. Shri Kothari, thus, urged that the foundation of the

impugned notice and the impugned order being non-existent, the

same are liable to be struck down.

Shri K.K. Bissa, learned counsel representing the

respondents, has filed a detailed reply to the writ petition, wherein

the allegations made in the impugned notice; the order indicating

reasons to believe and the order disposing the objections are

reiterated and highlighted. However, the pertinent assertion of

the petitioner that it did not acquire any property with the

description "C-152, Nirman Vihar, Delhi" is not disputed and rather

(7 of 11) [CW-16985/2021]

it is submitted that as the investigating wing supplied the

information regarding investment in the immovable property

located at C-152, Nirman Vihar, Delhi and since the proceedings

were lapsing on account of bar of limitation, the notice was issued

on the basis of the details supplied by the investigating wing. It is

also mentioned in the reply that purchase deed was not available

with the information and since the DDIT, in its note, mentioned

address of the property as C-152, Nirman Vihar, Delhi, the

authority bonafide proceeded to issue the notice under Section

148 of the Income Tax Act for undisclosed transaction with the

above details of the property. Respondents have stated in reply to

the writ petition that the objections raised by the assessee could

not be accepted because the assessee had not uploaded the

relevant annexure of the balance-sheet, i.e. Schedule-6 and only

the figures under the fixed asset column were mentioned in the

balance-sheet.

At this this stage, it would be fruitful to mention that

these figures in the head of fixed assets are incorporated in the

Schedule-6 filed by the assessee as an annexure of the balance-

sheet and the same refer to the land transaction worth

Rs.1,26,25,900/-. Apparently thus, the assertion made in the

reply regarding the land transaction made by the petitioner in the

financial year 2016-2017 not being disclosed in the financial

statements is factually incorrect. It has been admitted by the

respondents in the reply that the property at Delhi was

inadvertently mentioned in the proceedings under Section

147/148 of the Income Tax Act and reference thereto may be

considered as the property at Pali. The respondents have further

averred in the reply that the address C-152, Nirman Vihar Delhi, is

(8 of 11) [CW-16985/2021]

the registered business place of M/s. Rajhans Processers. It may

be reiterated that this assertion made in the reply of the

respondents is again factually incorrect because the registered

sale deed filed on the record of the writ petition confirms the fact

that C-152, Nirman Vihar, Delhi is the registered business place of

the firm M/s. Nextgen Textile Park Private Limited, which sold the

plot at Pali to the petitioner. Apparently thus, the proceedings

were initiated by the respondents in hot haste without

ascertaining the correct facts and with sheer non-application of

mind.

Learned counsel Shri Bissa, in utmost sincerity, tried to

justify the impugned notice and the impugned orders urging that

the petitioner may contest the assessment proceedings which are

faceless in nature and in case, the averments of the petitioner are

found to be correct, the assessment can be completed/dropped.

Shri Bissa placed reliance on the Delhi High Court judgment in the

case of Touchstone Holdings Pvt. Ltd. vs. Income Tax

Officer, Delhi & Ors. (W.P.C. No.13102/2021 decided on

09.09.2022) and urged that the sufficiency or correctness of the

material is not to be considered at this stage when the matter is

before the writ court. The Court cannot strike down the reopening

of the case on these grounds and it will be open to the assessee to

prove that the assumptions of facts made in the notice were

erroneous. The questions of fact and law should be left open to

be investigated and decided by the assessing authority. On these

submissions, he implored the Court to dismiss the writ petition.

Nonetheless Shri Bissa was candid enough in admitting

during the course of arguments that the impugned notice dated

31.03.2021 (Annex.5), the order conveying reasons dated

(9 of 11) [CW-16985/2021]

28.06.2021 (Annex.8) and the order dated 13.09.2021

(Annex.12) turning down the objections of the petitioner suffer

from a fundamental flaw inasmuch as the property transaction

which as referred to and reiterated by the A.O. (of the property at

C-152, Nirman Vihar, Delhi) does not exist. It is an admitted fact

that the petitioner filed detailed objections to the reopening

proceedings, highlighting the fact that this is the address of the

firm M/s. Nextgen Textile Park Private Limited, which sold the plot

at Pali to the petitioner. In the order dated 13.09.2021, whereby

the objections of the petitioner were turned down by the

competent authority the following observations were made:-

"In order to determine as to whether the Assessing Officer had a bona fide belief about the escapement of income of the assessee, it has to be considered as to whether the facts and circumstances justify the formation of the belief in contrast to suspicion. There has to be some material on record on the basis of which the Assessing Officer formed a bona fide belief that the income of the assessee has escaped assessment. In other words, the material on the basis of which belief is formed must be in the nature of prima facie evidence, direct or circumstantial, giving rise to belief in the mind of the Assessing Officer about the escapement of income."

Thus, the authority admits in this order that there has

to be some material on record on the basis of which, the A.O.

would form a bonafide belief that income of the assessee had

escaped assessment for the Assessment Year 2017-18. When we

peruse the impugned notice (Annex.5) and the reasons for

reopening the assessment (Annex.8), it becomes clear that the

(10 of 11) [CW-16985/2021]

same are founded on a non-existent transaction of purchase of

immovable property situated at C-152, Nirman Vihar, Delhi. In

spite of the petitioner elaborating in its reply as well as objections

that it had never entered into any such transaction, the

respondent authorities made no effort whatsoever to rectify the

blatant blunder and instead they have tried to justify the

fundamentally flawed reopening proceedings on entirely a new

ground that the petitioner did not upload the financial statement

with the return and that the details of the land transaction were

not mentioned in the Schedule 6 of the balance sheet. This

observation of the authority is also incorrect on the face of record

because the balance-sheet was admittedly uploaded with the

return filed by the petitioner pursuant to receiving the notice

under Section 148 of the Income Tax Act. In Schedule 6 of the

balance sheet, transaction pertaining to procurement of

immovable property worth Rs.1,26,25,900/- is clearly stated.

Resultantly, we are of the firm view that the very

foundation of the impugned notice, the reasons to believe and the

order turning down objections is non-existent. All the three

proceedings are based sheerly on conjectures and surmises. The

A.O. had no tangible evidence to initiate the re-assessment

proceedings against the petitioner and the impugned action is

based sheerly on borrowed satisfaction. Even if it is assumed for

argument's sake that the transaction made by the petitioner for

acquisition of immovable property at Pali may be read in place of

Delhi, then also, the said transaction is duly mentioned in the

return filed by the petitioner for the relevant financial year and is

supported by the audited balance-sheet, which was accepted by

the Assessing Officer. Hence, there is no escape from the

(11 of 11) [CW-16985/2021]

conclusion that no tangible material was available with the

Assessing Authority so as to initiate the re-assessment

proceedings against the petitioner by taking recourse to the

provisions under Section 148 and 143 (2) of the Income Tax Act.

As a consequence, the impugned notice under Section

148 of the Income Tax Act dated 31.03.2021 (Annex.5), the

reasons to believe conveyed vide notice under Section 143(2) of

the Income Tax Act dated 28.06.2021 (Annex.8), the order dated

13.09.2021 (Annex.12) disposing of the objection of the petitioner

and all consequential proceedings sought to be taken in pursuance

thereof deserve to be and are hereby quashed and struck down.

The writ petition is allowed, accordingly.

No order as to costs.

                                   (KULDEEP MATHUR),J                                      (SANDEEP MEHTA),J


                                    Pramod/-









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