Case Law Details
Deloitte Haskins And Sells Vs ACIT (Gujarat High Court)
The High Court recently adjudicated a case concerning a writ petition filed under Article 226 of the Constitution. The petitioner, a partnership firm practicing as chartered accountants under the name “M/s. Deloitte Haskins & Sells,” challenged a notice issued under Section 148 of the Income Tax Act, 1961. The petitioner sought quashing of the notice and requested that the Income Tax Department be restrained from proceeding further. The case primarily revolved around alleged escaped income from foreign entities, including payments received from Spain and Japan, and the department’s failure to address the petitioner’s objections before proceeding with reassessment.
The dispute arose from a scrutiny assessment conducted for the Assessment Year 2012-2013, where the petitioner’s declared income was initially accepted. However, in 2019, the department issued multiple notices under Section 133(6) to verify unreported income, including Rs. 83.61 lakh from the Master Trust Bank of Japan and Rs. 36.48 lakh from Spanish sources. The petitioner provided explanations, attributing part of the income to different assessment years and another portion to a separate entity. Despite these clarifications, the Assessing Officer proceeded to issue a notice under Section 148, alleging escaped income. The petitioner filed objections, requesting a detailed response, but the objections were summarily rejected without a substantive hearing.
Relying on judicial precedent, the petitioner cited the Gujarat High Court’s ruling in Chetan Engineers v. Assistant Commissioner of Income Tax (2021), where the court emphasized that a reassessment notice must be based on proper reasoning and that objections must be addressed with a reasoned order. The petitioner argued that the Income Tax Department failed to fulfill this obligation, as the rejection of objections lacked justification and relied solely on previous correspondence rather than substantive analysis. The respondent’s counsel could not refute this contention, leading the court to intervene.
The High Court ruled in favor of the petitioner, setting aside the impugned order and remanding the case back to the Assessing Officer. The court directed the department to provide all relied-upon information to the petitioner and reconsider objections in a fair manner. The reassessment process was ordered to be completed within 12 weeks. The ruling underscores the necessity of procedural fairness in reassessment proceedings and reiterates that tax authorities must engage with objections meaningfully rather than treating them as a formality.
FULL TEXT OF THE JUDGMENT/ORDER OF GUJARAT HIGH COURT
1. Heard learned advocate Mr. Manish J. Shah for the petitioner and learned advocate Mr. Karan Sanghani for learned advocate Mr. Nikunt Raval for the respondent.
2. By this petition under Article 226 of the Constitution of India, the petitioner has prayed for the following reliefs:
“A) this Hon’ble Court be pleased to call for the records of the proceedings, look into them and be pleased to issue a writ of certiorari or any other appropriate writ, order or direction quashing the impugned 148 notice at Annexure-H and the Respondent’s order rejecting the objections at Annexure-N.
B) this Hon’ble Court be pleased to issue a writ of mandamus or any other appropriate writ, order or direction asking the respondent not to proceed further in pursuance of section 148 notice at Annexure-H and the order rejecting the objections at Annexure- N.
C) Pending the hearing and final disposal of this application, this Hon’ble Court be pleased to stay further proceedings in pursuance of section 148 notice at Annexure-H.
D) In view of the undisputed facts and law on the point, this Hon’ble Court be pleased to kindly dispose off the matter at the notice stage.
E) This Hon’ble Court be pleased to grant any further or other relief as this Hon’ble Court deems just and proper in the interest of justice, and
F) This Hon’ble Court be pleased to allow this application with cost against the respondent.”
3. Brief facts of the case are that the petitioner is a partnership firm and is being assessed to income tax at PAN No.AADFD2337G for last several years. The assessee is a Practicing Chartered Accountant and runs the business in the name and style of “M/s. Delloite Hasking & Sells”.
4. For the Assessment Year 2012-2013, the petitioner assessee filed return of income on 28.09.2012 declaring total income of Rs.47,47,10,870/- and subsequently filed revised return of income on 31.03.2014.
5. A scrutiny assessment came to be made on the petitioner on total income of Rs. 47,47,10,870/- by order dated 27.02.2015. Thereafter the petitioner received a letter dated 26.03.2019 from the Deputy Commissioner under section 133(6) of the Income Tax Act, 1961 (For short “the Act”) informing that it has received Rs.36,48,158/- in Assessment Year 2012- 2013 from Spanish entities and amongst other things whether the same has been offered to tax in Assessment Year 2012- 2013.
6. The petitioner gave reply by letter dated 27.03.2019 stating that Rs.27,22,857.70 was received by the petitioner in Assessment Year 2013-2014 and Assessment Year 2015-2016 whereas Rs. 12,49,285.46 was received by Deloitte Haskins & Sells, Ahmedabad a different firm with PAN: AABFD7919A.
7. The petitioner thereafter received a notice under section 133(6) of the Act dated 26.03.2019 from the Income Tax Officer, Ward 1(2)(1), Vadodara informing that the department has information that the petitioner received Rs.83,61,890/- from the Master Trust Bank of Japan Limited and therefore, whether said receipt of Rs.83,61,890/- has been offered to tax for the Assessment Year 2012-2013. It is the case of the petitioner that such information was to be furnished on or before 28.03.2019 and petitioner received the said letter on 27.03.2019. Therefore, the petitioner within a day vide letter dated 28.03.2019 gave reply to the said notice stating that the amount received from the said client has been offered to tax in return of income of Deloitte Haskins and Sells bearing the PAN: AADFD2337G.
8. Respondent thereafter issued notice under section 148 of the Act dated 31.03.2019 for Assessment Year 2012-2013 stating that he had reason to believe that income chargeable to tax has escaped assessment and the petitioner to file the return.
9. The petitioner filed return on 26.04.2019 in response thereto. The respondent supplied the reasons by letter dated 29.09.2019.
10. The petitioner on receipt of above reasons vide letter dated 8.10.2019, requested the respondent to provide the details of payment in regard to receipt of Rs.83,61,890/- from the Master Trust Bank of Japan Limited as also the similar details in respect of Rs.26,48,158/- received from Deloitte Asesores Tributarios SL. in order to reconcile the payment from the Master Trust bank of Japan Limited. The petitioner again sent a reminder letter dated 25.10.2019 reiterating his request.
11. It is the case of the petitioner that since the petitioner did not receive any reply to the said letters, the petitioner filed objections vide letter dated 13.11.2019.
12. Respondent disposed of the objections vide order dated 2.12.2019.
13. It is the case of the petitioner that though the elaborate and detailed objections filed by the petitioner remained unattended, yet the respondent issued notice under section 142(1) of the Act dated 1.12.2019. The petitioner replied to such notice vide letter dated 3.12.2019.
14. Being aggrieved by the impugned notice as well as order disposing of the objections, the petitioner has preferred the present petition.
15. Learned advocate Mr. Manish Shah for the petitioner submitted that the respondent Assessing Officer has disposed of the objections filed by the petitioner in response to the notice issued under section 148 of the Act without dealing with the objections filed by the petitioner relying upon letter dated 28.03.2019 filed by the petitioner in response to the notice issued under section 133(6) of the Act. In support of his submission, reliance was placed on the decision of this Court in case of Chetan Engineers v. Assistant Commissioner of Income Tax Circle Patan (Order dated 17.02.2021 passed in Special Civil Application No. 17702 of 2018), wherein it is held as under:
“8. Mr. Shah, the learned counsel has raised manifold contentions to make good his case that the impugned notice of reopening is not sustainable in law. However, we have noticed something which in our opinion should not be overlooked. It is a settled position of law that if the Assessing Officer intends to reopen the assessment, he is obliged to assign reasons for the same. Once such reasons are assigned, the assessee has a right to lodge his objections to the same. Once the objections are lodged, it is obligatory for the Assessing Officer to take such objections into consideration and pass a speaking order. When we say speaking order, it means a meaningful order dealing with the objections raised by the assessee. The exercise which the Assessing Officer is supposed to undertake while dealing with the objections raised by the assessee is not an empty formality. The order disposing of the objections should reflect application of mind.”
16. Learned advocate Mr. Manish Shah further submitted that though the petitioner has requested the respondent to provide information on basis of which impugned notice under section 148 of the Act is issued, however, same is never supplied and therefore, the petitioner raised objections on the basis of information available from record only. It was therefore, prayed that respondent may also be directed to provide information received so as to enable the petitioner to file a detailed further reply.
17. Learned Senior Standing Counsel Mr. Karan Sanghani for the respondent could not controvert the fact that the respondent Assessing Officer has failed to deal with the objections only on basis of reply letter dated 28.03.2019 filed by the petitioner in response to the notice under section 133(6) of the Act.
18. Considering the above undisputed
facts, without entering into the merits of the matter, the impugned order dated 2.12.2019 disposing the objections of the petitioner is hereby quashed and set aside and the matter is remanded back to the Assessing Officer to give an opportunity of hearing to the petitioner so as to consider the objections filed by the petitioner in detail in response to the impugned notice under section 148 of the Act. Respondent Assessing Officer is also directed to provide information in his possession which is referred to and relied upon in the reasons recorded for issuance of the impugned notice under section 148 of the Act and the petitioner shall be at liberty to file further reply if required on basis of such information. Such exercise shall be completed within 12 weeks from the date of receipt of a copy of this order.
19. It is clarified that this Court has not gone into the merits of the matter and the respondent Assessing Officer is directed to dispose of the objections filed by the petitioner in accordance with the law.
20. Petition is disposed of. Notice is discharged. Interim relief, if any, stands vacated.
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