PCIT Vs Sheetal Dushyant Chaturvedi (Bombay High Court, Nagpur Bench)
Summary: Bombay High Court, Nagpur Bench dismissed the Revenue’s appeal challenging the ITAT order that had quashed reassessment proceedings for AY 2006-07. The assessee had filed her return under Section 139, which was processed under Section 143(1), followed by a notice under Section 148 and reassessment in which Rs.5.81 crore was treated as business income. The Revenue questioned the Tribunal’s jurisdictional findings and its recourse to Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963. The High Court rejected the Rule 27 objection because the assessee had challenged the legality and jurisdiction of the Section 147/148 notice both before the Assessing Officer and before the CIT(A). On the validity of reopening, the Court held that the Assessing Officer’s jurisdiction under Section 147 crystallises in the recorded reasons supplied to the assessee. Those reasons merely indicated a need to verify documents and contained no link establishing a reason to believe that income had escaped assessment. Information subsequently relied upon by the Revenue could not supplement the recorded reasons because it was absent from them. Following Nivi Trading Limited, the Court held that the Tribunal’s conclusion that the reopening was without jurisdiction was neither perverse nor illegal. Accordingly, no substantial question of law arose and the Revenue’s appeal was dismissed. Sheetal Dushyant Chaturvedi – SC Sheetal Dushyant Chaturvedi – SC
Cases Discussed
- Commissioner of Income-Tax-4 v. Jamnadas Virji Shares & Stock Brokers (P) Ltd., [2012] 21 taxmann.com 27 (Bombay High Court) — The Revenue relied upon this decision while contending that the Tribunal could not entertain the jurisdictional challenge under Rule 27. The Court rejected the Revenue’s submission on the facts because the assessee had already challenged the legality and jurisdiction of the Sections 147/148 notice before the Assessing Officer and CIT(A).
- Nivi Trading Limited v. Union of India, Writ Petition No. 2314 of 2015, decided on 07/04/2015 (Bombay High Court) — Followed by the Tribunal on the validity of reassessment where the recorded reasons merely called for verification; the High Court upheld the Tribunal’s conclusion that the reopening was without jurisdiction.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
Heard the learned Counsel for the Parties.
2. This Appeal is filed by the Appellant-Revenue challenging the order dated 28 June 2017 passed by the Income Tax Appellate Tribunal, Nagpur in Income Tax Appeal No.16/Nag/2013 pertaining to the Assessment Year 2006-07. The Appellant-Revenue has pressed the following grounds as which according to the Appellant are substantial questions of law raised in this Appeal.
“i) Whether on the facts and circumstances of the case and in law, the Hon’ble ITAT is justified in quashing the assessment proceedings, holding that the AO had failed to record ‘reasons to believe that the income has escaped assessment’ within the meaning of Section 147 read with Section 148 of the Income Tax Act, 1961?
ii) Whether on the facts and circumstances of the case and in law, the Hon’ble ITAT is justified in quashing the assessment proceedings, even when the assessing officer on the basis of tangible material (information by investigation wing) had a reason to believe that the income had escaped assessment before reopening the assessment.
iii) Whether in the facts and circumstances of the case and in law, the unique methodology adopted by the ITAT can be set to be legal and valid by taking recourse to Rule 27 of the ITAT Rules which would be completely contrary to the mandatory provisions of Civil Procedure Code, 1908 particularly Order 41 Rule 33?”
3. The Respondent-Assessee filed regular Return of Income under Section 139 of the Income Tax Act, 1961 on 22 March 2007 declaring total income of Rs.11,47,240/-. The Return of Income was processed under Section 143(1) of the Income Tax Act on 12 July 2007. Thereafter, a notice under Section 148 of the Income Tax Act was issued on 11 May 2010. The notice was objected to and Reasons were provided to the Respondent-Assessee, but the Respondent-Assessee filed Return of Income. The Assessing Officer carried out the assessment on 29 December 2011 and Rs.5,81,63,820/- was treated as business income. The penalty proceedings were initiated separately.
4. The Respondent-Assessee filed an Appeal before the Commissioner of Income Tax (Appeals), Nagpur. Before the Commissioner of Income Tax (Appeals), the Respondent-Assessee challenged the re-assessment proceedings under Section 147 of the Income Tax Act and also merits of the assessment. The Commissioner of Income Tax (Appeals) partly allowed the Appeal by order dated 19 October 2012 against which the Appellant-Revenue filed an appeal bearing I.T.A. No.16/Nag/2013, which was dismissed by the impugned order dated 20 June 2017.
5. We have heard the learned Counsel for the Parties.
6. As regards the question of law raised based on Rule 27 of the Income Tax (Appellate Tribunal) Rules, 1963. The learned Counsel for the Appellant-Revenue relying on the decision of the Division Bench of this Court in the case of Commissioner of Income-Tax-4 v. Jamnadas Virji Shares & Stock Brokers (P) Ltd.1 and submitted that it was not permissible for the Tribunal to entertain the additional ground of challenge regarding the legality of notice under Sections 147 and 148 of the Income Tax Act. The learned Counsel submitted that no specific challenge was raised and the Respondent-Assessee had submitted to the jurisdiction.
7. It is not possible to accept the submission made by the Appellant-Revenue, as it is factually not correct. The Respondent-Assessee had challenged the legality and jurisdiction in respect of notice under Sections 147 and 148 of the Income Tax Act before the Assessing Officer as well as the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) had rejected the said ground and allowed the Appeal on merits. Rule 27 of the Income Tax (Appellate Tribunal) Rules permits the Respondent though may not have appeal to support the order on any of the grounds decided against the Respondent. Therefore, this ground cannot be accepted.
8. As regards the ground Nos.1 and 2 are concerned, it is the contention of the Appellant-Revenue that before the Assessing Officer, all facts were considered and even the order disposing of Reasons give sufficient reasons and the information was received from investigation being pursuant to which notices were issued. The learned Counsel further submitted that the finding of the Tribunal that there was a change of opinion is perverse. The learned Counsel for the Respondent-Assessee has drawn our attention to the Reasons, which have been reproduced in paragraph No.8 of the impugned order.
9. As the Tribunal has rightly noted, the jurisdiction for the Assessing Officer to resort to Section 147 of the Income Tax Act is crystallized in the Reasons supplied. The Tribunal has rightly, observed that the Reasons only referred to a need to verify the documents and there is no link between the statement that there is a reason to believe that income as escaped assessment with the rest of the Reasons supplied. It is not permissible, as rightly noted by the Tribunal, to add to the Reasons. The contention that there was an information received was not included in the Reasons. The Tribunal has followed the decision of the Jurisdictional High Court, dated 7 April 2015 in the case of Nivi Trading Limited in Writ Petition No.2314 of 2015. If the Tribunal in these facts and circumstances has found that the reopening of assessment was without jurisdiction based on reading of the Reasons, it cannot be said that any perverse or illegal view has been taken by the Tribunal. No question of law arises. The Appeal is dismissed. Sheetal Dushyant Chaturvedi – SC
Notes:-
1 [2012] 21 taxmann.com 27 (Bom.)
