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2024 DIGILAW 1869 (GUJ)

Arti Ratilal Popat v. Income Tax Officer Ward 1

2024-10-08

BHARGAV D.KARIA, MAUNA M.BHATT

body2024
JUDGMENT : Bhargav D. Karia, J. 1.Heard learned advocate Mr.Umaidsingh Bhati for the petitioner and learned Senior Standing Counsel Mr.Varun K.Patel for the respondent. Rule returnable forthwith. Learned Senior Standing Counsel Mr.Varun K.Patel waives service of notice of rule on behalf of respondent. 2.Both these petitions are pertaining to the petitioners who are husband and wife. The challenge in these petitions is the notice dated 08.04.2024, issued under section 148 of the Income Tax Act, 1961 (for short “the Act”) for the Assessment Year 2017-18 as well as the order under Section 148A(d) of the Act of the same date and notice under Section 148A(b) dated 20.02.2024. 3.The brief facts of the case are as under: 3.1. The petitioners are British Citizens and residing in India during the year under consideration. As the petitioners were holding the NRE account as joint holders with HSBC Bank, Ahmedabad, no return of income was filed by the petitioners for the Assessment Year 2017–18 as they were earning interest on term/ fixed deposits in the NRE account which according to the petitioner is exempt under Section 10(4) of the Act. 3.2. The respondent issued a notice under Section 148A(b) dated 09/11.03.2024 and passed order under Section 148A(d) dated 27/28.02.2024. The petitioner of Special Civil Application No.8544 of 2024 filed reply dated 05.03.2024, explaining the total amount of investment of Rs.1,21,92,914/- was out of past remittance made. The petitioner also uploaded several documents comprising of copy of his passport, detail of fixed deposits and renewal of fixed deposits, NRE statement issued by the HSBC Bank from 31.12.2013 to 31.03.2017 and Form 26AS. 3.3. Thereafter, notice under Section 148A(b) of the Act dated 09/11.03.2024 was issued by the respondents as the petitioners did not file return of income for the Assessment Year 2017–18 on the ground that the petitioner did not file return of income for the Assessment Year 2017-18, and there is escapement of income of Rs.1,21,92,914/- and the petitioner was asked to file reply to show-cause notice as to why notice under Section 148 should not be issued. 3.4. 3.4. The petitioners in response to the notice under Section 148A(b) of the Act filed reply dated 21.03.2024, along with the documents to explain that there is no escapement of income as amount stated in the show-cause notice pertains to the investment made by the petitioners since the year 2013 onwards out of their earnings in the United Kingdom. 3.5. It is the case of the petitioner that the respondents passed order dated 08.04.2024, under Section 148A(d) of the Act without providing any opportunity of personal hearing as prayed for by the petitioner and ignoring the bank statement submitted by the petitioner by observing that the source of amount is not verifiable as the petitioner did not submit the bank statement of the relevant time period, when the fixed deposit was initiated and the source of the amount which was used for investment in the fixed deposit was not submitted. 3.7. Being aggrieved, the petitioner has preferred this petition. 4. Learned advocate Mr.Umaidsingh Bhati for the petitioner submitted that notice issued under Section 148B and the impugned order under Section 148A(d) as well as the notice under Section 148 are without jurisdiction as the foundational facts given in the said notice and orders are not correct for coming to conclusion that it is a fit case to reopen the assessment as there is no escapement of the income. 4.1. It was submitted that the petitioners in their replies to the show-cause notice have explained in detail along with the documents passport, bank statement, etc. placed on record to point out that the amount of Rs1,21,92,914/- stated to have been escaped assessment is the amount of investment since year 2013 in the cumulative amount with HSBC bank by way of fixed deposit, which has been renewed from time to time. 4.2.It was further submitted that the petitioners have explained in detail with regard to the source of investment also, as the petitioners were in employment in UK prior to the year 2013 and out of their earning, the income in form of GBP was brought to India for investment initially in the year 2013. 4.2.It was further submitted that the petitioners have explained in detail with regard to the source of investment also, as the petitioners were in employment in UK prior to the year 2013 and out of their earning, the income in form of GBP was brought to India for investment initially in the year 2013. 4.3.Learned advocate Mr.Umaidsingh Bhati, therefore submitted that information which is referred to in the impugned notice and the order are contrary to the reply filed by the petitioners stating the investment made by the petitioners during the year under consideration out of the funds which was already invested on withdrawal of the fixed deposits, the new fixed deposits were placed. However, the same is not taken into consideration by the respondent Assessing Officer. 4.4.It was further submitted that even Specific Authority as per Section 151 of the Act have also not granted mechanical sanction to reopening without considering the documents placed on record by the petitioner. 4.5.It was further submitted that the petitioners have not disclosed about their residential status for the year under consideration as the same was not a material fact as the only requirement sought for reopening was about the amount of Rs.1,21,92,914/-, which is withdrawn by the petitioner and reflected in the bank statement, which was later on placed by the petitioners by way of another fixed deposit, which is not in dispute as the same is evident from the bank statement placed on record. 4.6.It was therefore submitted that the amount in question for reopening is carried forward investment of the petitioner since 2013, which is not controverted by the respondent Assessing Officer in the impugned order passed under Section 148A(d) of the Act and therefore, the impugned order and the consequent notice for reopening is liable to be quashed and set aside. 5.On the other hand, learned Senior Standing Counsel Mr.Varun K.Patel for the respondent submitted that the petitioner in Special Civil Application No.8453 of 2024 did not reply the notice under Section 148A(a) of the Act and the petitioner of Special Civil Application No.8544 of 2024 has given a vague reply vis-a-vis their residential status in India for the year under consideration as no details where provided. It was submitted that pursuant to the notice issued by this Court a detailed affidavit is filed by specified authority namely the Chief Commissioner of Income Tax, who had granted the sanction stating in detail with regard to the time period of the petitioner in India to point out that the petitioners were resident in India during the year under consideration, and therefore the impugned order has rightly been passed holding that there is no fit case to reopen the assessment. 5.1.It was further submitted that the petitioner of Special Civil Application No.8544 of 2024 has filed return of income for the year under consideration for the subsequent years, where there was a transaction of sale of property and on the basis of such data, the respondent specified authority was of the opinion that it was a fit case to reopen the assessment for the year under consideration. 5.2.It was submitted that as per the clarification issued by letter dated 11.04.2017, by the Central Board of Direct Taxes regarding the liability to income tax in India for a non resident seafarer receiving the remuneration in NRE account as well as the entries made in the NRE account are subject to scrutiny to find out whether Non Resident Indians have earned any income which is liable to tax in India and accordingly the respondents have issued notice under Section 148A(a) of the Act, however, no specific information was provided by the petitioners and therefore there was no option for the respondent authority to issue notice under Section 148A(b) of the Act as it was time barred for assumption of jurisdiction for reopening for the year under consideration and taking into consideration the facts of the case, the impugned order is passed by the respondent authority to further scrutinize the case of the petitioners who are admittedly resident in India for the year under consideration as stated in the affidavit filed by the Chief Commissioner of Income Tax. Reliance was also placed in para- 12 of the said affidavit to point out that since 2015–16, the petitioners were residing for more than 200 days in India and therefore since 2015–16, the petitioners were not having status of NRI as per the provisions of Section 6 of the Act. Reliance was also placed in para- 12 of the said affidavit to point out that since 2015–16, the petitioners were residing for more than 200 days in India and therefore since 2015–16, the petitioners were not having status of NRI as per the provisions of Section 6 of the Act. 5.3.It was therefore submitted that no interference be made by this Court at this stage when the respondent authorities have come to the conclusion that it is a fit case to reopen the assessment. 6.Considering the submissions made by both the sites, it is pertinent to note that this Court passed the following order on 15.07.2024: “1. Heard learned advocate Mr.Umedsingh Bhati for the petitioner and learned senior standing counsel Mr.Varun Patel for the respondent. 2. Learned advocate Mr.Bhati submitted that the impugned order under Section 148A(d) of the Income Tax Act, 1961 (for short ‘the Act’) for A.Y. 2017-18 is passed by the Respondent–Assessing Officer without due consideration of the reply filed by the petitioner in response to the notice under Section 148A(b) of the Act. 2.1 Learned advocate Mr.Bhati referred to the reply dated 11th March, 2024 of the assessee in detail to point out that the assessee in Special Civil Application No.8453 of 2024 is a British citizenship holder and has invested amount in GBP 1,23,623.70 in the joint NRE Savings Account with HSBC Bank in the year 2013 onwards and the same is reinvested from time-to-time. It was pointed out from the reply that the petitioner has also submitted screenshot of the NRE Savings Bank Account with the reply, however the Assessing Officer, after reproduction of the reply of the assessee in the impugned order, has observed that the assessee has failed to submit the bank statement of the fixed deposit closed during the year and there is only one debit entry of Rs.01,22,00,000/- and the assessee did not submit the documents for the purpose of verification regarding conversion of debit of Rs.01,22,00,000/- in the five different FCNR deposits and accordingly, reply of the assessee was not tenable. 2.2 It was, therefore, submitted that the respondent has passed the impugned order after taking prior approval of the Specified Authority. It was also pointed out that the Specified Authority has also granted mechanical approval to such order of the Respondent – Assessing Officer. 3. 2.2 It was, therefore, submitted that the respondent has passed the impugned order after taking prior approval of the Specified Authority. It was also pointed out that the Specified Authority has also granted mechanical approval to such order of the Respondent – Assessing Officer. 3. Learned advocate Mr.Patel for the respondent was requested to place on record the communications of the proposal made by the Respondent – Assessing Officer to the Specified Authority for taking approval as per the provision of Section 148A(d) of the Act. However, learned advocate Mr.Patel could not place on record such approval but only could produce the copies of the proposal sent by the Assessing Officer and the higher officers for approval of the Specified Authority i.e. Chief Commissioner of Income Tax, West Zone, Mumbai. Learned advocate also referred to the communication from the office of the Specified Authority granting sanction wherein the comments of the Specified Authority are summarised. 4. On perusal of the material placed on record, it appears that the Specified Authority i.e. Chief Commissioner of Income Tax while granting approval for the impugned order under Section 148A(d) of the Act has not considered the reply of the assessee wherein all details with regard to transaction in NRE Account of the assessee are made available so as to arrive at a conclusion as to whether it is a fit case to issue notice under Section 148A of the Act. 5. We, therefore, direct the Chief Commissioner of Income Tax, West Zone, Mumbai, to file an affidavit giving details as to on what basis the approval is granted to the issuance of notice under Section 148 and order under Section 148A(d) of the Act being a fit case to re-open the assessment for A.Y. 2017-18 as provided under the said Section. Such affidavit shall be filed on or before the next date of hearing. Stand over to 23rd July, 2024.” 7.Pursuant to the aforesaid order, an affidavit-in-reply was filed by the Chief Commissioner of Income Tax (I.T.) based on Mumbai on 02.08.2024 and thereafter additional reply was filed on 21.09.2024, placing on record the relevant documents of granting sanction and what has weighed with the authority to grant sanction under Section 148A(d) of the Act to the reopening of the assessment for the year under consideration. 8.On perusal of the both the affidavits, it appears that specified authority has failed to consider the notice issued under Section 148A(b) of the Act, in its proper perspective vis-a-vis the information made available from the inside portal in relation to the reply filed by the petitioner, placing on record the details of the fixed deposits of the petitioners with the HSBC Bank for the year under consideration, which is reflected from the bank statements of the HSBC Bank placed on record. It is submitted that the clumsy attempt is made by the specified authority to justify granting sanction to reopen the case. 9.Be that as it may, on perusal of the contents of the affidavits, it is clear that when the sanction was granted, there was no application of mind on the part of the specified authority and mechanical sanction was granted without referring to the documents and thereafter when the specified authority was called upon to justify the action of the sanction further details are placed on record which cannot be considered at this stage, as we are examining the validity of the impugned action i.e. passing of the order under Section 148A(d) of the Act and issuance of the notice under Section 148 to assume the jurisdiction by the respondent Assessing Officer to come to the conclusion that it is a fit case to reopen the assessment or not. 10. Therefore, on perusal of the show-cause notice and the impugned order under Section 148A(d) of the Act, it clearly shows that the assessee has shown the details of the amount of Rs.1,21,92,914/- as stated in the notice and the order being the investment made by the petitioners since 2013, and therefore there is no question of any escapement of income on face of the impugned notice and order, which would give a jurisdiction to the Assessing Officer to reopen the assessment for the year under consideration. 11. There is no other information disclosed in the show-cause notice either under Section 148A(a) or 148B. The Assessing Officer while coming to the conclusion that it is a fit case to reopen the assessment has observed as under: “However, to substantiate her claim, the assessee has failed to submit the bank statement of the Fixed Deposits closed during the year. There is no other information disclosed in the show-cause notice either under Section 148A(a) or 148B. The Assessing Officer while coming to the conclusion that it is a fit case to reopen the assessment has observed as under: “However, to substantiate her claim, the assessee has failed to submit the bank statement of the Fixed Deposits closed during the year. Further, as per the bank statement of her bank account no.101-424828-006, there is one debit entry of Rs.1,22,00,000/-; however, the assessee has claimed that she has made 5 separate FCNR Deposits. Therefore, to substantiate her claim, the assessee has not submitted the documents for the purpose of verification regarding the conversion of debit of Rs.1,22,00,000/- into 5 different FCNR Deposits. Hence, in lack of details/evidences, the contention of the assessee is not found tenable” 12. From the above observation, it is clear that the Assessing Officer has stated following false facts without taking into consideration the reply of the assessee, which ought to have been considered as provided under Section 148A(d) of the Act as such order is required to be passed after considering the reply filed by the assessee. (i) “The assessee has failed to submit the bank statement of the fixed deposits closed during the year.” The above statement is contrary to what is placed on record at page no.94, which is a statement as on 30.02.2017 from the HSBC bank which was placed on record by the petitioner along with the reply, which clearly shows that there was withdrawal of Rs.1,21,00,000/- by following five entries Which has again be placed in to fixed deposit of Rs.1,22,00,000/- along with the details of the fixed deposits in GBP, starting date from 13.02.17 to maturity date to 13.2.2018 of 29085.89 GBP. 29056.42 as principal amount of GBP for five deposits. (ii) “It is further observed that as per the bank statement of her bank account No.10142828-006, there is one debit entry of Rs.1,22,00,000/-, however the assessee has claimed that she has made 5 FCNR deposits, therefore to substantiate her claim, the assessee has not submitted the documents for the purpose of verification regarding the conversion debit into five different deposits. The above fact is also not correct as stated herein above. The above fact is also not correct as stated herein above. The details of deposits are mentioned on the bank statement which is placed on record (page 94 and 95 of the petition), which clearly shows that the GBP of Rs.29056.42 x 5 is the amount of investment made by the petitioner on 13.02.2017, which is equivalent to Rs.1,22,00,000/- which the Assessing Officer ought to have referred to and taken cognizance of before making such observation to hold that it is a fit case to reopen the assessment.” 13. In view of the above facts which are emerging from the record and which are not in dispute, we are of the opinion that the impugned order under Section 148A(d) and notice under Section 148A(b) of the Act are passed without jurisdiction as the Assessing Officer has failed to take into consideration the above facts. The petition is accordingly allowed. The impugned order under Section 148A(d) and a notice under Section 148A(b) of the Act are hereby quashed and set aside. Rule is made absolute to the aforesaid extent. No order as to cost.