Dilip Gangaram Patil v. Additional/Joint/Deputy Assistant Commissioner of Income Tax & Ors.

1. Rule. By consent of the parties, since pleadings are completed, Rule. By consent of the parties, since pleadings are completed, taken up for final disposal. By consent of the parties, both the writ taken up for final disposal. By consent of the parties, both the writ petitions are disposed of by common order since the issue involved is petitions are disposed of by common order since the issue involved is identical. We propose to treat Writ Petition No.2771 of 2022 as a lead identical. We propose to treat Writ Petition No.2771 of 2022 as a lead matter. matter.

2. The petitioner challenges notice dated 25 March 2021 issued The petitioner challenges notice dated 25 March 2021 issued under Section 148 of the Income Tax Act, 1961 (‘the Act’) for the under Section 148 of the Income Tax Act, 1961 (‘the Act’) for the assessment year 2013-14. assessment year 2013-14. Brief facts:

3. The petitioner is engaged in the business of real estate and has The petitioner is engaged in the business of real estate and has filed his return of income on 27 September 2013 declaring total income filed his return of income on 27 September 2013 declaring total income of Rs.54,91,960/-. On 31 December 2015, an assessment order under of Rs.54,91,960/-. On 31 December 2015, an assessment order under Section 143(3) of the Act came to be passed accepting the return Section 143(3) of the Act came to be passed accepting the return income. income. Proceedings u/s 263: Proceedings u/s 263:

4. On 29 November 2017, a notice under Section 263 of the Act On 29 November 2017, a notice under Section 263 of the Act came to be issued by the Commissioner of Income Tax on the ground came to be issued by the Commissioner of Income Tax on the ground that M/s. Orchid Builders and Developers has sold 6 flats on behalf of that M/s. Orchid Builders and Developers has sold 6 flats on behalf of the petitioner for Rs.2,74,94,950/-. However, the same is not reflected in the petitioner for Rs.2,74,94,950/-. However, the same is not reflected in the profit and loss account for the year ending 31 March 2013. The the profit and loss account for the year ending 31 March 2013. The notice further seeks to examine disallowance on account of interest notice further seeks to examine disallowance on account of interest payment and proposes to examine income from house property which payment and proposes to examine income from house property which was not offered for tax. The petitioner filed his reply to the said show was not offered for tax. The petitioner filed his reply to the said show cause notice vide letter dated 1 March 2018. On 16 March 2018, an cause notice vide letter dated 1 March 2018. On 16 March 2018, an order under Section 263 was passed by the Commissioner of Income-tax order under Section 263 was passed by the Commissioner of Income-tax ppn 3 setting aside the assessment order with a direction to conduct proper setting aside the assessment order with a direction to conduct proper inquiries, investigation and examine all the issues raised in 263 notice inquiries, investigation and examine all the issues raised in 263 notice and pass a fresh order. Pursuant to the said direction, Assessing and pass a fresh order. Pursuant to the said direction, Assessing Officer Officer on, 14 December 2018, passed an assessment order under Section 143 on, 14 December 2018, passed an assessment order under Section 143 (3) read with Section 263 assessing income of the petitioner at (3) read with Section 263 assessing income of the petitioner at Rs.57,06,250/- by making additions on account of notional rent under Rs.57,06,250/- by making additions on account of notional rent under the head ‘income from house property.’ the head ‘income from house property.’ Proceedings u/s 148: Proceedings u/s 148:

5. On 25 March 2021, a notice under Section 148 of the Act was On 25 March 2021, a notice under Section 148 of the Act was issued to the petitioner calling upon the petitioner to file his return of issued to the petitioner calling upon the petitioner to file his return of income for assessment year 2013-14 since the respondents proposed to income for assessment year 2013-14 since the respondents proposed to reassess the income under Section 147 of the Act. The petitioner on 4 reassess the income under Section 147 of the Act. The petitioner on 4 January 2022 filed his return of income in compliance with the said January 2022 filed his return of income in compliance with the said impugned notice. On a request being made by the petitioner, the reasons impugned notice. On a request being made by the petitioner, the reasons recorded for reopening the case were furnished on 22 March 2021. The recorded for reopening the case were furnished on 22 March 2021. The petitioner vide letter dated 2 March 2022 objected to the reasons for petitioner vide letter dated 2 March 2022 objected to the reasons for reopening on the ground that the issue for which the reopening is sought reopening on the ground that the issue for which the reopening is sought was subject matter of 263 proceedings and, therefore, reopening is badwas subject matter of 263 proceedings and, therefore, reopening is badin-law. The petitioner also raised objection with respect to there being in-law. The petitioner also raised objection with respect to there being no failure to disclose fully and truly all material facts and further no failure to disclose fully and truly all material facts and further challenged the sanction obtained from the Commissioner of Income Tax challenged the sanction obtained from the Commissioner of Income Tax under Section 151 of the Act. On 11 March 2022, an order rejecting the under Section 151 of the Act. On 11 March 2022, an order rejecting the objections came to be passed. In the said order, the reopening was objections came to be passed. In the said order, the reopening was justified on the grounds that, if in the original assessment, the income justified on the grounds that, if in the original assessment, the income liable to tax has escaped assessment due to oversight, inadvertence or a liable to tax has escaped assessment due to oversight, inadvertence or a mistake mistake committed by the Assessing Officer, the assessment can be by the Assessing Officer, the assessment can be reopened on the basis of information obtained from the original reopened on the basis of information obtained from the original ppn 4 assessment. In the said order, reliance was placed on the decision of the assessment. In the said order, reliance was placed on the decision of the Supreme Court in the case of Supreme Court in the case of Kalyanji Mavji & Co. Vs. CIT Kalyanji Mavji & Co. Vs. CIT[1]..

6. It is on the above backdrop that the petitioner is before us It is on the above backdrop that the petitioner is before us challenging the order rejecting the objections dated 11 March 2022 and challenging the order rejecting the objections dated 11 March 2022 and notice under Section 148 of the Act dated 25 March 2021. notice under Section 148 of the Act dated 25 March 2021.

7. Ms. Pawar, learned counsel for the petitioner submits that in the Ms. Pawar, learned counsel for the petitioner submits that in the absence of any failure to disclose fully and truly all material facts, the absence of any failure to disclose fully and truly all material facts, the impugned proceedings cannot be initiated and for this submission, she impugned proceedings cannot be initiated and for this submission, she placed reliance on the first proviso to Section 147 of the Act. She placed reliance on the first proviso to Section 147 of the Act. She further relied upon the third proviso to Section 147 of the Act and further relied upon the third proviso to Section 147 of the Act and submitted that since in the instant case an order under Section 263 of submitted that since in the instant case an order under Section 263 of the Act was passed and there being no fresh material to reopen the case, the Act was passed and there being no fresh material to reopen the case, the impugned proceedings were bad-in-law. the impugned proceedings were bad-in-law.

8. Ms. Pawar further submitted that the issue for which reopening is Ms. Pawar further submitted that the issue for which reopening is sought was subject matter of not only proceedings under Section 263 of sought was subject matter of not only proceedings under Section 263 of the Act but also an order passed pursuant to the directions under Section the Act but also an order passed pursuant to the directions under Section 263 of the Act and, therefore, the impugned proceedings are based on 263 of the Act and, therefore, the impugned proceedings are based on change of opinion. She further submitted that the reliance placed by the change of opinion. She further submitted that the reliance placed by the respondent on the Supreme Court’s decision in the case of respondent on the Supreme Court’s decision in the case of Kalyanji Kalyanji Mavji & Co. (supra) Mavji & Co. (supra) is no more a good law as per the decision of the is no more a good law as per the decision of the Supreme Court in the case of Supreme Court in the case of Indian & Eastern Newspaper Society Vs. Indian & Eastern Newspaper Society Vs. Commissioner of Income-tax Commissioner of Income-tax[2]. Therefore, she submitted that the. Therefore, she submitted that the impugned notice should be quashed. impugned notice should be quashed.

9. In support of her submissions, she relied upon the following case In support of her submissions, she relied upon the following case 1 (1976) 102 ITR 287 (SC) 2 (1979) 2 Taxman 197 (SC) ppn 5 laws:i. ACIT, Circle 12(3)(2) Vs Marico Ltd. 3 ii. CIT, Delhi Vs Kelvinator of India Ltd. 4 iii. PCIT Vs State Bank of India 5 iv. State Bank of India Vs ACIT, Circle 2(2)(1), Mumbai[6] v. ITO Vs Lakhmani Mewal Das 7 vi. Hindustan Lever Ltd. Vs R.B.Wadkar 8 vii. Chandra Global Finance Ltd. Vs ITO 9 viii. Saravana Stocks Investments (P.) Ltd Vs DCIT10 ix. Samet Estates (P.) Ltd. Vs CIT11 x. Tumkur Minerals (P.) Ltd. Vs JCIT12 xi. HDFC Bank Ltd. Vs ACIT13

10. Mr. Sharma, learned counsel for the respondent defended the Mr. Sharma, learned counsel for the respondent defended the impugned proceedings by relying upon the reasons recorded and the impugned proceedings by relying upon the reasons recorded and the order rejecting the objections. He submitted and prayed that the petition order rejecting the objections. He submitted and prayed that the petition be dismissed. be dismissed.

11. We have heard learned counsel for the petitioner and respondent We have heard learned counsel for the petitioner and respondent and with their assistance have perused the documents on record. and with their assistance have perused the documents on record.

12. Admittedly, the reopening is sought to be done beyond the period Admittedly, the reopening is sought to be done beyond the period of 4 years from the end of the relevant assessment year. The reasons for of 4 years from the end of the relevant assessment year. The reasons for reopening as furnished to the petitioner reads as under:reopening as furnished to the petitioner reads as under:- 3 (2021) 133 taxmann.com 122 (SC) 4 (2010) 187 Taxman 312 (SC) 5 (2022) 145 taxmann.com 33 (SC) 6 (2019) 103 taxmann.com 164 (Bombay) 7 (1976) 103 ITR 437 (SC) 8 (2004) 137 Taxman 479 (Bombay) 9 (2024) 168 taxmann.com 182 (Delhi) 10 (2021) 133 taxmann.com 315 (Madras) 11 (2022) 140 taxmann.com 342 (Bombay) 12 (2022) 145 taxmann.com 397 (Bombay) 13 (2022) 136 taxmann.com 69(Bombay) ppn 6 ppn 7 ppn 8 ppn 9 ppn 10 ppn 11

13. At the outset, the reasons recorded seek to reopen the assessment At the outset, the reasons recorded seek to reopen the assessment which was made under Section 143(3) of the Act on 31 December 2015. which was made under Section 143(3) of the Act on 31 December 2015. It is important to note at this stage that, this order of 31 December 2015 It is important to note at this stage that, this order of 31 December 2015 ppn 12 was set aside by the PCIT in revisional proceedings under Section 263 of was set aside by the PCIT in revisional proceedings under Section 263 of the Act vide order dated 16 March 2018. The assessing officer passed a the Act vide order dated 16 March 2018. The assessing officer passed a fresh assessment order pursuant to the direction issued under Section fresh assessment order pursuant to the direction issued under Section 263 of the Act on 14 December 2018. Therefore, the original assessment 263 of the Act on 14 December 2018. Therefore, the original assessment dated 31 December 2015 which is sought to be reopened did not exist dated 31 December 2015 which is sought to be reopened did not exist on the date of recording the reasons and, therefore, on this ground itself on the date of recording the reasons and, therefore, on this ground itself the proceedings are bad in law. The assessing officer glossed over the the proceedings are bad in law. The assessing officer glossed over the assessment order passed under Section 143(3) read with Section 263 of assessment order passed under Section 143(3) read with Section 263 of the Act on 14 December 2018 which was the order in existence on the the Act on 14 December 2018 which was the order in existence on the date of recording reasons and sought to reopen the assessment order date of recording reasons and sought to reopen the assessment order which was not in existence. which was not in existence.

14. In any event, the issues raised in the reasons recorded for In any event, the issues raised in the reasons recorded for reopening are identical to the reasons for which revisional proceedings reopening are identical to the reasons for which revisional proceedings under Section 263 of the Act were initiated by the PCIT on 29 November under Section 263 of the Act were initiated by the PCIT on 29 November

2017. The said revisional order under Section 263 of the Act was passed