Vikas Singhal Vs ITO (Delhi High Court)
The Delhi High Court considered a writ petition challenging the notice dated 31.03.2021 issued under Sections 147/148 of the Income Tax Act, 1961 for Assessment Year 2014-15. The petitioner had filed the return of income on 06.09.2014, and a scrutiny assessment under Section 143(3) had been completed on 16.12.2016. During the original assessment proceedings, the Assessing Officer (AO) had issued detailed questionnaires calling for books of account, bank accounts, bank statements, and explanations regarding credit entries, including transactions of ₹1 lakh and above. After examining the material, the AO accepted the returned income and recorded that the return had been thoroughly examined and assessed accordingly.
Nearly five years later, the AO issued a notice under Sections 147/148 after receiving information through the Insight Portal indicating credits of ₹23.77 crore in the petitioner’s bank account, including cash deposits of ₹21.17 crore followed by RTGS transactions of ₹23 crore. The AO recorded that there had been a failure by the assessee to disclose fully and truly all material facts necessary for assessment. The reassessment proceedings were initiated with prior approval of the Commissioner, although the approval referred to “assessment” instead of “reassessment.” During the pendency of the writ petition, the Court permitted the reassessment proceedings to continue but directed that any assessment order passed should not be given effect to.
The petitioner contended that the reassessment proceedings were without jurisdiction because the assessment had already been completed under Section 143(3) after detailed scrutiny. It was submitted that the AO had examined the books of account and bank statements during the original proceedings, and reopening the assessment solely on the basis of Insight Portal information amounted to a change of opinion. The petitioner also argued that the recorded reasons did not even mention the earlier scrutiny assessment under Section 143(3), thereby omitting a relevant jurisdictional fact while seeking approval for reopening. It was further argued that there had been no failure to disclose fully and truly all material facts.
The Revenue relied upon Chetan Sabharwal vs. Assistant Commissioner of Income Tax to argue that the existence of a prior assessment under Section 143(3) did not preclude reopening where an aspect had not been examined and that the substantial cash deposits justified reassessment.
The High Court observed that the original assessment was not summary in nature but involved detailed scrutiny, including a specific questionnaire seeking complete details of all bank accounts, narration of significant debit and credit entries, and supporting documentary evidence. The Court held that the AO had consciously examined the petitioner’s bank statements and accepted the returned income after recording satisfaction. It further observed that the information obtained through the Insight Portal merely reflected cash deposits already available in the bank statements produced during the original assessment.
The Court distinguished Chetan Sabharwal, holding that the facts were materially different. It observed that where two views are possible and the original AO has adopted one view during a scrutiny assessment under Section 143(3), a successor AO cannot reopen the assessment merely because he does not agree with that view. The Court stated that such an approach would undermine certainty in assessment proceedings.
The Court also found that the reasons recorded for reopening did not mention the earlier assessment under Section 143(3), the questionnaire issued during that assessment, or the examination of the bank statements. According to the Court, this omission deprived the approving authority of the complete factual background and rendered the finding regarding non-disclosure of material facts perverse and without application of mind. Since the bank statements had already been furnished during the original assessment, the Court held that there was no basis for alleging failure to disclose fully and truly all material facts. The notice also did not identify any transaction or information allegedly concealed by the assessee.
Holding that the reassessment proceedings were without jurisdiction, arbitrary, and violative of Articles 14 and 300A of the Constitution of India, the Delhi High Court quashed the notice issued under Sections 147/148. The consequential assessment order dated 30.03.2022 and the demand notice issued during the pendency of the writ petition were also quashed.
Petitioner represented by Dr. Kapil Goel, Advocate.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
1. By way of the present writ petition, the petitioner has challenged the notice dated 31.03.2021 issued by the Assessing Officer (hereinafter referred to as ‘AO’) under Section 147/148 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act of 1961’) for the Assessment Year 2014-15. The brief facts leading to issuance of impugned notice are that the petitioner filed his regular return of income on 06.09.2014 and his assessment under Section 143(3) of the Act of 1961 was made on 16.12.2016.
2. As an ancillary but relevant fact, it may noted that during the course of assessment proceedings, the AO had issued various questionnaires and called for books of accounts, including the petitioner’s bank account/statements, as can be seen from page No. 75 and having satisfied himself about the correctness, he accepted petitioner’s return income. While doing so he observed thus:- “examined thoroughly and assessed the petitioner’s income as per return filed”.
3. After about five years, a notice under Section 148 of the Act of 1961 came to be issued to the petitioner on 31.03.2021, with the prior approval of the Commissioner indicating therein that he had received an intimation on the ‘insight portal’ that the assessee’s bank account reflected total credits to the tune of Rs. 23,77,00,000/-, which included, cash deposit of Rs. 21,17,00,000/-, with corresponding RTGS of Rs. 23,00,00,000/- made immediately.
4. The AO initiated the reassessment proceedings by recording that there was a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment. The initiation of impugned proceedings though preceded by the approval granted by the Competent Authority, but, the same however contained inscription ‘assessment’ and not reassessment.
5. When the matter came up for consideration, while issuing notices, a Co-ordinate Bench of this Court had allowed the assessment proceedings to continue but directed that the order so passed shall not be given effect to.
6. Learned counsel for the petitioner argued that the initiation of reassessment proceedings in the instant case is wholly without jurisdiction and arbitrary inasmuch as the petitioner’s assessment had already been completed under Section 143(3) of the Act of 1961. He added that the AO had framed a scrutiny assessment; examined each aspect of the matter; issued detailed questionnaires; examined books of account as well as the petitioner’s bank accounts; therefore, merely on the basis of information received on insight portal, which only gives details of cash deposits in bank account, the petitioner’s completed assessment cannot be re-opened, more particularly when the assessment was under Section 143(3) of the Act of 1961 had been completed.
7. Inviting the Court’s attention towards the reasons recorded, learned counsel submitted that the AO has not made even a whisper about the previous assessment which was made under Section 143(3) of the Act of 1961, perhaps to misguide the higher officer, by not disclosing that an assessment had already been framed. He argued that the fact that an assessment under Section 143(3) of the Act of 1961 had been made, was a relevant and necessary jurisdictional fact, which the AO was required to record before initiating proceedings under Section 148 of the Act of 1961, so as to form a concrete opinion that there was a real non-disclosure or mis-representation on the part of the assessee, so as to invoke extended period of limitation and elicit approval of the PCIT.
8. He further submitted that the issuance of notice under Section 148 of the Act of 1961 is also illegal, as the same is simply on a change of opinion. Explaining the position, he argued on the very same transactions, the earlier AO, while passing the assessment order under Section 143(3) of the Act of 1961, after due examination of the material had taken a considered view and made no addition and now in relation to the very same cash transaction, the AO is seeking to assess the petitioner. He argued that it is a settled position of law that the re-assessment proceedings cannot be taken merely for a change of opinion.
9. Sanjeev Menon, learned Standing Counsel for the Department, on the other hand, relied upon the judgment passed by this Court in the case of Chetan Sabharwal vs. Assistant Commissioner of Income Tax reported in (2019) 418 ITR 8 and submitted that simply because an assessment under Section 143(3) of the Act of 1961 had been made, it cannot be said that AO is precluded from initiating proceedings under Section 148 of the Act of 1961 or that the same amounts to change of opinion. He argued that while framing the assessment under Section 143(3) of the Act of 1961, if particular aspect of the matter has not been examined, the AO can well initiate proceedings under Section 148 of the Act of 1961 and bring the escaped income to tax. Learned counsel further argued that the fact that the petitioner had made huge cash deposits in his bank account shows that there was an escapement of income and thus, the initiation of proceedings under Section 148 of the Act of 1961 was justified.
10. Heard learned counsel for the parties and perused the records.
11. There is no denial of the fact that on 16.12.2016, the petitioner’s assessment had been made under Section 143(3) of the Act of 1961. A perusal of the record shows that such assessment was not a summary or cursory assessment. During those proceedings, the AO had issued a long questionnaire and the assessee/his Authorised Representative had produced not only the books of account but also the bank statements, which can be gathered from a reading of page number 75 of the paper book.
12. It will not be out of place to reproduce relevant questionnaire issued to the assessee:
“Details of all bank accounts maintained by you either personal or for business purpose along with narration of Debit/Credit amounts of Rs. 1,00,000/- and above. Documentary evidence of credits not forming part of total income may be submitted. Also file copy(s) ofSaving Bank Account(s) with narration of all Debit/ Credit entries. The details should include nature of account, account no., name and address of bank.”
13. While passing the assessment order and accepting the petitioner’s returned income, the AO had in unequivocal terms recorded his satisfaction. Such satisfaction, in our considered opinion, has its own bearing and legal implication and consequence. It shows the AO’s conscious application of mind on all aspects of the matter, including the nature of transactions, may it be cash deposits reflected in petitioner’s bank account or RTGS made therefrom.
14. The information to which the AO has referred in the notice under Section 148 of the Act of 1961, (insight portal) is nothing more than an intimation about the cash which the petitioner had allegedly deposited in his bank account.
15. In the light of the judgment of this Court in the case of Chetan Sabharwal (supra), Menon’s arguments that the AO can examine that aspect of the transaction, which was not examined by the AO during the regular assessment proceedings is erroneous in law and liable to be rejected. We are of the considered opinion that the fact that huge cash amount was deposited in the bank and corresponding RTGS was simultaneously made, is a striking feature and an apparent abnormality. It does not require any rocket science to understand such cash deposits and withdrawals, nor does it require some forensic skill to say that important aspect of those transactions were omitted to be examined.
16. The facts involved in the case of Chetan Sabharwal (supra) were quite different, for which said judgment hardly helps the Revenue. In our considered opinion, when two or more views are possible in relation to a transaction, and one of those probable views has been taken by the AO while passing an assessment under Section 143(3) of the Act of 1961, the subsequent incumbent in the chair cannot initiate proceedings under Section 148 of the Act of 1961, simply because he does not endorse or attribute to the views so taken.
17. Such an approach shatters the very certainty of the assessment proceedings.
18. A copy of reasons recorded by the AO (Annexure P-8) reveals that he has not made even a whisper about the assessment already made under Section 143(3) of the Act of 1961. The entire gamut of the reasons is, as if it was a case of escaped assessment, whereas it was a case of reassessment. In absence of mentioning or cognizance of the factum of the assessment having been made; the questionnaire having been issued and Bank statement having been examined, it cannot be inferred or discerned as to whether the AO and PCIT did have an occasion to consider the aspect of the transactions having been examined and/ or the case being that of change of opinion.
19. There is another aspect of the matter, if we look at paragraph No. 5 of the reasons recorded, we find that the AO has recorded that there has been a failure on the part of the assessee to disclose fully and truly all material facts necessary for his assessment.
20. According to us, during the course of assessment proceedings under Section 143(3) of the Act of 1961, the assessee had produced the statement of bank account and therefore, it cannot be said that there has been any failure on the part of the assessee to disclose fully and truly all the material facts necessary for the assessment.
21. So far as details of bank account is concerned, the same were very much available with the AO when the return was filed and the bank statement was made available during the course of assessment under Section 143 of the Act of 1961. Therefore, the very basis or reason for which the reassessment proceedings have been initiated, is faulty. The AO was not justified in alleging that there has been a failure on the part of the assessee to disclose fully and truly. The notice does not mention which transaction or information had been concealed by the assessee.
22. It is noteworthy that while recording the reason for reopening, the AO has not even mentioned it a a fact that petitioner’s assessment under Section 143(3) of the Act of 1961 had been made. According to us such fact is a relevant jurisdiction fact in order to ascertain as to whether he is seeking to assess escaped income or he is seeking to reassess or making reassessment. Non mentioning of such fact has its own effects and consequence – the AO’s finding that there has been a nondisclosure of material fact or misrepresentation becomes perverse and without application of mind and on the other hand, the PCIT or PCCIT (as the case may be) the competent authority is deprived of appraisal of entire material more particularly the alleged nondisclosure on the part of the assessee. Such indiscrepancy in the proceeding goes to root of the matter and vitiates the proceedings.
23. In view of the above discussion, we are over all of the opinion that the notice for reassessment issued to the petitioner under Section 147/148 of the Act of 1961, is without jurisdiction, apart from being arbitrary and violative of Article 14 and 300A of the Constitution of India. The same is, therefore, quashed. The consequential assessment order dated 30.03.2022 and demand notice issued during the pendency of the present writ petition is also hereby quashed.
