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2017 DIGILAW 663 (GUJ)

Sandeepkumar Mithulal Mehta v. Income Tax Officer

2017-03-23

B.N.KARIA, M.R.SHAH

body2017
JUDGMENT : M.R. Shah, J. 1. By way of this petition under Article 226 of the Constitution of India the petitioner has prayed for an appropriate writ, order or direction to quash and set aside the impugned notice dated 21/03/2016 under Section 148 of the Income Tax Act (hereinafter referred to as "the Act") by which the Assessing Officer has sought to reopen the assessment for the Assessment Year 2009-10 alleging inter alia that the income chargeable to tax for the relevant Assessment Year has escaped the assessment within the meaning of Section 147 of the Act. 2. The facts leading to the present Special Civil Application in nutshell are as under; 2.1 The petitioner - assessee is engaged in the business of dealing in scrap of iron and steel, ferrous and non ferrous metal, PVC material and old scrap cables. The petitioner - assessee filed the return of income for the year under consideration on 30/09/2009 declaring the total income at Rs. 20,51,540/-. The case was selected for scrutiny and various details were called for by the Assessing Officer. The petitioner - assessee produced the books of accounts, stock register, purchase and sales vouchers for the expenses. The petitioner - assessee also produced relevant materials such as purchase orders, invoices etc. The petitioner - assessee showed the purchase of scrap from foreign sellers and for which the petitioner - assessee produced the purchase orders as well as invoices etc. to prove the genuineness of the creditors, as according to the petitioner - assessee, the petitioner-assessee purchased the goods from the foreign sellers and the amount was outstanding. Thereafter, the Assessing Officer framed the scrutiny assessment vide order dated 20/10/2011 under Section 143(3) of the Act determining/assessing the total income at Rs. 21,07,900/-. It appears that thereafter the case of the petitioner - assessee for the Assessment Year 2012-13 was selected for scrutiny assessment and various details were called for by the then Assessing Officer. As the amount due and payable to the foreign sellers/creditors was found to be outstanding since long, the Assessing Officer called for their name, postal address and confirmations of the creditors outstanding as on 31/03/2012 to justify as to why the liability in respect of such creditors aggregating to Rs. 5,58,10,755/- should not be treated as cessation of liability under Section 41(1) of the Act. 5,58,10,755/- should not be treated as cessation of liability under Section 41(1) of the Act. It is the case on behalf of the petitioner - assessee that the assessee furnished necessary particulars asked by the Assessing Officer. However, this Court is not concerned with the same. Thereafter, on the basis of the genuineness of the creditors, doubted by the Assessing Officer while considering the scrutiny assessment for the Assessment Year 2012-13, the Assessing Officer has reopened the assessment for the Assessment Year 2009-10 doubting the genuineness of the foreign creditors by issuing notice under Section 148 of the Act. Thereafter, the petitioner - assessee requested to supply the copy of the reasons recorded for reopening. The Assessing Officer supplied the copy of the reasons recorded for reopening vide letter dated 23/02/2016 wherein it was stated that the petitioner's - assessee's case for the year under consideration has been reopened on the count that the amount in respect of two parties i.e. (1) AL - Rahim Closeout Inc. amounting to Rs. 12,76,500/- & (2) AL-Mahaseel Scrap Trading C. LL.C. Amounting Rs. 1,33,74,482/- is shown as outstanding liability in the books of accounts and since such liability has not been discharged, such liability is deemed to have been in cessation as per the provisions of Section 41(1) of the Act and accordingly a sum aggregating to Rs. 1,46,50,982/- is deemed to be profit and gain of the business or profession for the year under consideration. Subsequently, vide letter dated 07/10/2016 the respondent informed the petitioner - assessee that the reasons for reopening supplied earlier vide letter dated 29/07/2016 were draft reasons, which were not the basis of satisfaction of the appropriate authority for reopening the case of the petitioner - assessee. Thereafter, the Assessing Officer supplied the correct reasons recorded for reopening the assessment for the Assessment Year 2009-10. The correct reasons recorded to reopen the assessment for the Assessment Year 2009-10 reads as under; "Reasons for re-opening in the case of Shri Sandeepkumar Mithulal Mehta, Prop. Sheth Sanwaliya Traders, 270 G.V.M.M. Ltd., Odhav, Ahmedabad - 382 415 A.Y.2009-10 In this case, assessment under Section 143(3) of the Act finalized on vide order dated 30/12/2011 determining of total income at Rs. 21,07,900/- as against returned income of Rs. 20,51,540/-. Sheth Sanwaliya Traders, 270 G.V.M.M. Ltd., Odhav, Ahmedabad - 382 415 A.Y.2009-10 In this case, assessment under Section 143(3) of the Act finalized on vide order dated 30/12/2011 determining of total income at Rs. 21,07,900/- as against returned income of Rs. 20,51,540/-. Later on during the course of assessment proceedings of A.Y. 2012-13 it has come to the notice that during the F.Y. 2008-09 the assessee has been made the purchased copper scrap from the following foreign entities on credit basis and the purchase amount has been shown as outstanding liability in his books of accounts. However, the assessee was not able to produce the details of the genuineness of the transactions called for during the proceedings for A.Y. 2012-13. The outstanding liability as shown by the assessee are unexplained purchases to the extent of amount of Rs. 1,46,50,982/-. Therefore, the unexplained purchases to the tune of Rs. 1,46,50,982/- is deemed to be profits and gains of the business or profession and chargeable to income-tax for that year. This issue has not been dealt with by the AO in the assessment order under Section 143(3) of the Act passed for A.Y. 2009-10 dated 20/10/2011. In view of the above, I have reason to believe that the income chargeable to tax to the extent of Rs. 1,46,50,982/- has escaped assessment on account of failure on the part of the assessee to disclose fully and truly all material facts pertaining to the A.Y. 2009-10 and no opinion was formed in the original assessment. In view of above, I am of the opinion that this is a fit case for reassessment by invoking the provisions of Section 147 of the Income Tax Act, 1961 for A.Y. 2009-10." 2.2 On receipt of the reasons recorded to reopen the assessment for the Assessment Year 2009-10, the petitioner - assessee raised the objections against reopening, which has been disposed of against the petitioner - assessee. Hence, the petitioner - assessee has preferred the present petition challenging the impugned notice of reopening. 3. Ms. Vaibhavi Parikh, learned advocate appearing on behalf of the petitioner - assessee has vehemently submitted that the impugned notice under Section 148 of the Act and reopening of the assessment for the Assessment Year 2009-10 is bad in law and against the proviso of Section 147 of the Act. It is submitted by Ms. 3. Ms. Vaibhavi Parikh, learned advocate appearing on behalf of the petitioner - assessee has vehemently submitted that the impugned notice under Section 148 of the Act and reopening of the assessment for the Assessment Year 2009-10 is bad in law and against the proviso of Section 147 of the Act. It is submitted by Ms. Parikh, learned advocate appearing on behalf of the petitioner - assessee that the assessment for the Assessment Year 2009-10 is sought to be reopened beyond the period of four years from the relevant Assessment Year, and therefore, unless and until the condition precedent as per proviso to Section 147 of the Act are complied with i.e. unless and until it is found that there was any suppression of material fact and there was any non-disclosure on the part of the petitioner - assessee in not disclosing true and correct facts for the Assessment Year, the Assessing Officer is not justified in reopening the assessment. It is submitted by Ms. Parikh, learned advocate appearing on behalf of the petitioner - assessee that in the present case the Assessing Officer has reopened the assessment for the Assessment Year 2009-10 doubting the transactions with the foreign creditors i.e. (1) AL - Rahim Closeout Inc. & (2) AL-Mahaseel Scrap Trading C. LL.C. and that too on the basis of the reassessment proceedings for the Assessment Year 2012-13. It is submitted that the transactions in question, which are now sought to be doubted and/or genuineness of which is now sought to be considered, were in fact considered earlier while framing the scrutiny assessment. It is submitted that at the time of scrutiny assessment, the petitioner - assessee did produce the relevant materials, more particularly, books of accounts, purchase orders, invoices etc. to prove the genuineness of the creditors with respect to the transactions in question, which are now doubted by the Assessing Officer. It is submitted that only thereafter the Assessing Officer framed the scrutiny assessment. It is submitted that therefore as such it cannot be said that there was any failure on the part of the petitioner - assessee in not disclosing true and correct facts necessary for the purpose of assessment. 3.1 It is further submitted by Ms. It is submitted that only thereafter the Assessing Officer framed the scrutiny assessment. It is submitted that therefore as such it cannot be said that there was any failure on the part of the petitioner - assessee in not disclosing true and correct facts necessary for the purpose of assessment. 3.1 It is further submitted by Ms. Parikh, learned advocate appearing on behalf of the petitioner - assessee that even otherwise the impugned notice has been issued and the assessment for the Assessment Year 2009-10 is sought to be reopened on the basis of the opinion given by Superior Officer, and therefore, there is no subjective satisfaction on the part of the Assessing Officer. Making the above submissions, it is requested to allow the present petition. 4. The present petition is vehemently opposed by Shri Nitin Mehta, learned advocate appearing on behalf of the revenue. It is submitted by Shri Nitin Mehta, learned advocate appearing on behalf of the revenue that while framing the assessment for the Assessment Year 2012-13 the Assessing Officer doubted the genuineness of the transactions/creditors whose dues were pending since long. It is submitted that though the petitioner - assessee was called upon to furnish the details with respect to such creditors whose dues were pending since long, the petitioner - assessee failed to satisfy the Assessing Officer with respect to the genuineness of such creditors. It is submitted that therefore thereafter when the Assessing Officer having been satisfied with respect to the genuineness of the creditors for the year under consideration and having found that the petitioner - assessee did not disclose true and correct facts before the Assessing Officer and as such the Assessing Officer did not go in detail with respect to the genuineness of the creditors from whom the petitioner - assessee purchased the goods and thereafter when the Assessing Officer has initiated the reassessment proceedings, the same cannot be said to be bad in law and/or contrary to the proviso of Section 147 of the Act. It is submitted that as such genuineness of the creditors/foreign creditors from whom the petitioner - assessee purchased the goods and to whom a large sum was due and payable was not considered in detail by the Assessing Officer while framing the scrutiny assessment for the Assessment Year 2009-10. It is submitted that as such genuineness of the creditors/foreign creditors from whom the petitioner - assessee purchased the goods and to whom a large sum was due and payable was not considered in detail by the Assessing Officer while framing the scrutiny assessment for the Assessment Year 2009-10. It is submitted that therefore the Assessing Officer is justified in reopening the assessment for the Assessment Year 2009-10 even beyond the period of four years. Making the above submissions, it is requested to dismiss the present petition. 5. Heard the learned Advocates appearing on behalf of the respective parties at length. At the outset, it is required to be noted and it is not in dispute that the assessment for the Assessment Year 2009-10 is sought to be reopened beyond the period of four years, and therefore, considering the proviso to Section 147 of the Act unless and until there is any failure on the part of the petitioner - assessee in not disclosing true and correct facts necessary for the purpose of assessment, the Assessing Officer is not justified in reopening the assessment. In the present case, it appears from the reasons recorded to reopen the assessment for the Assessment Year 2009-10 that on the basis of the scrutiny assessment for the Assessment Year 2012-13 in which the Assessing Officer doubted the genuineness of the creditors solely on the ground that the outstanding amount due and payable to such creditors was pending since long, and therefore, while reopening the assessment for the Assessment Year 2009-10 the Assessing Officer has doubted the genuineness of the transactions with the foreign creditors. However, it is required to be noted that at the time of scrutiny assessment for the Assessment Year 2009-10, the petitioner - assessee did produce all the necessary materials, including the books of accounts, purchase orders, invoices etc. to prove the genuineness of the creditors with whom the transactions had taken place and from whom the petitioner - assessee purchased the goods. The Assessing Officer while framing the scrutiny assessment under Section 143(3) of the Act, as such, seems to be satisfied, and therefore, did not doubt the genuineness of the transactions and/or with respect to the foreign creditors from whom the petitioner - assessee purchased the goods. The Assessing Officer while framing the scrutiny assessment under Section 143(3) of the Act, as such, seems to be satisfied, and therefore, did not doubt the genuineness of the transactions and/or with respect to the foreign creditors from whom the petitioner - assessee purchased the goods. Under the circumstances and in the facts and circumstances of the case, it cannot be said that there was any failure on the part of the petitioner - assessee in not disclosing true and correct facts. Under the circumstances, considering the proviso to Section 147 of the Act and as observed hereinabove, there does not appear to be any failure on the part of the petitioner - assessee in not disclosing true and correct facts necessary for the purpose of assessment, and therefore, the Assessing Officer is not justified in reopening the assessment beyond a period of four years. On the aforesaid ground alone, the present petition deserves to be allowed and the impugned reassessment proceedings deserves to be quashed and set aside. 6. In view of the above facts and the reasons recorded hereinabove, the present petition succeeds. The impugned notice under Section 148 of the Act and the reassessment proceedings deserves to be quashed and set aside and is accordingly quashed and set aside. Rule is made absolute accordingly. No order as to costs.