Sea Glimpse Investments P. Ltd. Vs the Deputy Commissioner of Income-Tax CIRCLE-3(3) (1) and 2 Ors.

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PURTI PRASAD PARAB

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Digitally signed by PURTI PRASAD PARAB Date: 2021.12.23 18:28:56 +0530

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

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WRIT PETITION NO. 3172 OF 2019

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Sea Glimpse Investments Pvt. Ltd.

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….Petitioner

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 V/s.

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The Deputy Commissioner of Income
Tax Circle 3 (3) (1) and Ors.…Respondents

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----

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Ms. Dinkle Hariya i/b Ms. Namrata Kasale for Petitioner.
Mr. Sham V. Walve for Respondents-Revenue.

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 ----

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 CORAM : K.R. SHRIRAM &
AMIT B. BORKAR, JJ.
 DATED : 22nd DECEMBER, 2021

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P.C. :

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1.Petitioner is impugning the notice dated 31st March, 2019

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issued by first respondent under Section 148 of the Income Tax Act, 1961
(the Act) for A.Y. 2014-15 and also the order dated 14th October, 2019
rejecting the objections raised by petitioner to the proposed re-opening.

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2.Various grounds have been raised in the petition. The primary
ground being (a) there has been non application of mind while granting the
sanction under Section 151 of the Act; and (b) the facts as recorded in the
reasons are not correct.

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3.Ms. Hariya submitted that it is the settled position in law that

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the Assessing Officer acquires jurisdiction to issue re-opening notice only

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Purti Parab

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when he has reason to believe that income chargeable to tax has escaped
assessment and the reasons to believe that income chargeable to tax has
escaped assessment must be on correct facts. If the facts as recorded in the
reasons are not correct re-opening notice could not be issued.

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4.The reasons to re-open is annexed to the petition. In paragraph
no. 5 it says necessary approval of the Additional Commissioner of Income
Tax ……. has been obtained …….. vide letter No. ……. dated _______,
2019. This is one lacuna that Ms. Hariya pointed out.

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Secondly, Ms. Hariya submitted that the assessee had filed its e-
return of income on 25th November, 2014 as could be seen in the assessment
order dated 27th October, 2016 but in the reasons for re-opening it is stated
that assessee e-filed its return on 27th October, 2016 and scrutiny assessment
was completed under Section 143(3) of the Act on 27th October, 2016. This
ground itself would show non application of mind not only by the Assessing
Officer but also the authority which sanctioned the proposal of re-opening
the assessment. Any one reading the first paragraph in the reasons for re-
opening would wonder how the filing of return of income and scrutiny
assessment under Section 143(3) of the Act can be completed on the same
date. It is therefore, clear that the sanction has been granted without
application of mind.

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One more fact which appears from the reasons for re-opening
that exposes total non application of mind by the sanctioning authority and

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Purti Parab

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also the person recording the reasons is it says that the assessee holds
0.01% i.e., 10 shares in itself. How can a company hold its own shares?
This erroneous statement of fact in the reasons itself should have made the
authority granting sanction to refusegranting the sanction. Moreover, in
the petition, position before amalgamation and post amalgamation has been
mentioned which is at variance with what is given in the reasons for re-
opening. It is also alleged in the petition that change in shareholding
pattern as recorded in the reasons for re-opening is erroneous. That has not
been denied in the affidavit in reply. The reason to believe that income
chargeable to tax has escaped assessment must be on correct fact. If the
facts as recorded in the reasons are not correct, it is for the Assessing Officer
to establish that the facts stated by him in the reason as recorded are
correct. The Division Bench of this court in Ankita A. Choksey vs. Income-
Tax Officer And Others1in paragraph no. 6 and 7 has held as under :

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6.It is a settled position in law that the Assessing Officer
acquires jurisdiction to issue a reopening notice only when he has
reason to believe that income chargeable to tax has escaped
Assessment. This basic condition precedent is applicable whether
the return of income was processed under Section 143(1) of the
Act by intimation or assessed by scrutiny under Section 143(3) of
the Act. [See Asst. Commissioner of Income Tax v/s. Rajesh
Jhaveri Stock Brokers (P) Ltd., [2007] 291 ITR 500 (SC) and
Principal CIT v/s. Shodimen Investments P. Ltd. [2018] (93)
taxmann.com 153 (Bom). Further, the reasons to believe that
income chargeable to tax has escaped Assessment must be on
correct facts. If the facts, as recorded in the reasons are not
correct and the assessee points out the same in its objections, then
the order on objection must deal with it and prima facie, establish
that the facts stated by it in its reasons as recorded are correct. In

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1 [2019] 411 ITR 207 (BOM)

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the absence of the order of objections dealing with the assertion of
the assessee that the correct facts are not as recorded in the
reason, it would be safe to draw an adverse inference against the
Revenue.

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7.Thus, we are of the view that even in cases where the return
of income has been accepted by processing under Section 143(1)
of the Act, reopening of an assessment can only be done when the
Assessing Officer has reason to believe that income chargeable to
tax has escaped assessment. The mere fact that the return has
been processed under Section 143(1) of the Act, does not give the
Assessing Officer a carte blanche to issue a reopening notice. The
condition precedent of reason to believe that income chargeable
to tax has escaped assessment on correct facts, must be satisfied
by the Assessing Officer so as to have jurisdiction to issue the
reopening notice. In the present case, the Assessing Officer has
proceeded on fundamentally wrong facts to come to the
reasonable belief/conclusion that income chargeable to tax has
escaped assessment. Further, even when the same is pointed out
by the Petitioner, the Assessing Officer in his order disposing of the
objection does not deal with factual position asserted by the
Petitioner. Thus, it would be safe to conclude that the Revenue
does not dispute the facts stated by the Petitioner. On the facts as
found, there could be no reason for the Assessing Officer to
believe that income chargeable to tax has escaped assessment.

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5.It is settled law as held by the Division Bench of this court in
German Remedies Ltd. vs. Deputy Commissioner of Income Tax2that while

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granting approval it was obligatory on the part of the Principal
Commissioner of Income Tax to verify whether there was any failure on the
part of the assessee to disclose full and true relevant facts in the return of
income filed for the assessment of income of that assessment order.

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6.In view of the above, the impugned notice and consequential
order justifying reasons recorded are unsustainable. The same are liable to
be quashed and set aside. Hence, petition is allowed. Rule made absolute

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2 [2006] 287 ITR 494 (BOM)

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in terms of prayer clause - (a) and (b) which reads as under :

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(a) that this Hon’ble Court may be pleased to issue under
Article 226 of the Constitution of India an appropriate direction,
order or a writ, including a writ in the nature of ‘Certiorari’,
calling for the records of the case and after satisfying itself as to
the legality thereof quash and set aside the notice dated
31.03.2019 issued by the First Respondent under section 148 of
the Income Tax Act, 1961, being Ex. - ‘G’ hereto ;

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(b) that this Hon’ble Court may be pleased to issue under
Article 226 of the Constitution of India an appropriate direction,
order or a writ, including a writ in the nature of ‘Certiorari’,
calling for the records of the case and after satisfying itself as to
the legality thereof quash and set aside the order dated
14.10.2019, Ex. - ‘L’ herein, passed by the First Respondent,
purportedly disposing of the objections raised by the Petitioner
against the initiation of the reassessment proceeding by the First
Respondent.

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7. Petition disposed.

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(AMIT B. BORKAR, J.)

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(K.R. SHRIRAM, J.)

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Purti Parab

Sea Glimpse Investments P. Ltd. v. the Deputy Commissioner of Income-Tax CIRCLE-3(3) (1) and 2 Ors.

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Sea Glimpse Investments P. Ltd. v. the Deputy Commissioner of Income-Tax CIRCLE-3(3) (1) and 2 Ors.

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