C/SCA/16999/2018 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/SPECIAL CIVIL APPLICATION NO. 16999 of 2018 RAJENDRA SUGANCHAND SHAH Versus ASST. COMMISSIONER OF INCOME TAX CIRCLE 1(3) Appearance: MS VAIBHAVI K PARIKH(3238) for Petitioner(s) No. 1 NOTICE SERVED(4) for Respondent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO Date : 19/08/2019 ORAL ORDER (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) 1. respondent although served with notice issued by this Court, yet has chosen not to remain present before this Court either in person or through advocate and oppose this writ application. 2. By this writ application under Article 226 of Constitution of India, writ applicant has prayed for following reliefs : (a) quash and set aside impugned notice at ANNEXURE to this petition; (b) pending admission, hearing and final disposal of this petition, to stay implementation and operation of notice at ANNEXURE to this Page 1 of 11 C/SCA/16999/2018 ORDER petition and stay further proceedings for Asst. Year 2011-12; (c) any other and further relief deemed just and proper be granted in interest of justice; (d) to provide for cost of this petition. 3. It appears from materials on record that writ applicant seeks to challenge notice dated 28.03.2018 issued by respondent under Section 148 of Income Tax Act, 1961 (for short Act, 1961) seeking to re-open writ applicant s income tax assessment for Assessment Year 2011-12. 4. writ applicant is engaged in business of running petrol pumps. writ applicant also has proprietary concern namely, M/s. Shasan Corporation from which, according to writ applicant, no business activities are being conducted. writ applicant received sum of Rs.6 Crore on 04.04.2006 i.e. Financial Year 2006-07 relevant to Assessment Year 2007-08 by account payee cheque from M/s. Pushti Enterprise Pvt. Ltd. (now known as M/s. Reliance Progressive Traders Pvt. Ltd.) towards advance for sale of property. It is case of writ applicant that said deal however, came to be cancelled and amount referred to above was repaid by writ applicant Page 2 of 11 C/SCA/16999/2018 ORDER during Financial Year 2010-11 vide cheque drawn from ICICI Bank Account No.005205002647 held by writ applicant in name of his proprietary concern by borrowing equivalent sum from one Shri Mitul J. Shah from Financial Year 2010-11. Thus, prima facie it appears that for purpose of purchasing property writ applicant borrowed particular amount. Later, to re-pay borrowed amount, he once again borrowed particular amount from different person. writ applicant filed his return of income for Assessment Year 2011-12 on 30.03.2012 declaring his total income at Rs.36,88,730/-. case of writ applicant was selected for scrutiny assessment. It is not in dispute that various information and details were called for by then Assessing Officer and same was duly furnished by writ applicant. 5. It is pertinent to note that then Assessing Officer vide notice dated 07.10.2013 issued under Section 142(1) of Act, had called upon writ applicant to furnish following information : Confirmations for unsecured loans / advances along with name, PAN, address, assessment details and various such information; Page 3 of 11 C/SCA/16999/2018 ORDER Account number, bank name, branch and address of all bank accounts for concern as well as proprietor / partner; 5.1 Assessing Officer upon due consideration of all necessary details and information furnished by writ applicant thought fit not to make any addition in respect of transaction as to receipt of Rs.6 Crore as well as re- payment of same while framing assessment under Section 143(3) of Act vide order dated 24.01.2014. It appears that thereafter impugned notice dated 28.03.2018 came to be issued under Section 148 of Act seeking to re- open case of writ applicant for year under consideration. reasons assigned for re-opening under Section 147 of Act, 1961 are as under : 3. During investigation it was ascertained that te amount credited in account of M/s Shashan Corporation was received from account of Shri Mitul J. Shah on 27.01.2011 and on very same day amount of Rs.6 Crores was transferred to M/s Reliance Progressive Traders Pvt. Ltd. On perusal of books of accounts of Shri Rajendra Shah there was no mention of any advance of Rs.6,00,00,000/- nor there was any mention in audit report in this aspect. Thus said amount of Rs.6,00,00,000/- remained unsubstantiated. assessee was not in Page 4 of 11 C/SCA/16999/2018 ORDER position to substantiate or produce any details or explain mode of receipt of advance amounting to Rs.6 crores. Thus it is very certain that amount of Rs.6,00,00,000/- remained unexplained. 4. assessee contended that said amount of Rs.6,00,00,000/- was received as advance against sale of mall premise however, no documentary evidence could be furnished by assessee with regard to said contention. said amount was stated to be advanced in year 2006 and till date no interest was paid on same amount by assessee. Thus, assessee could not substantiate nature of such transfer with supporting evidence, hence same remained unexplained. In view of failure of assessee to explain nature of such advance received and also in view of failure to reflect same in his books of accounts as advance received in 2006, said amount of Rs.6 crores is income from unexplained sources which has escaped assessment. Thus, income to tune of Rs.6,00,00,000/- or more has escaped assessment in case of assessee attracting provisions of Income-tax Act. 6. Mr. Tushar Hemani, learned senior counsel appearing for writ applicant has canvassed following submissions : (1) It is submitted that amount in question was received in Assessment Year 2007-08 and in such circumstances, respondent could not have re-opened Assessment Year Page 5 of 11 C/SCA/16999/2018 ORDER 2011-12 for taxing such amount; (2) re-opening is beyond period of four years and there is no failure on part of writ applicant as to full and true disclosure; (3) It is submitted that re-opening is based on mere change of opinion; (4) It is also submitted that reasons for re-opening lack validity as there is no reason to believe that income chargeable to tax has escaped assessment; (5) It is also submitted that re-opening is not permissible for undertaking roving or fishing inquiry or investigation without there being specific finding as to escape of income; (6) It is also submitted that there is no cause and effect relationship between reasons recorded for re-opening and income escaping assessment; (7) In last, it is submitted that re-opening is based on borrowed satisfaction . 7. Having heard Mr. Tushar Hemani, learned senior counsel appearing for writ applicant and having gone through materials on record, we find substance in two submissions : first submission that transaction cannot Page 6 of 11 C/SCA/16999/2018 ORDER be examined under Assessment Year 2011-12 as amount is said to have been received in year 2006 and second submission that it appears to be case of change of opinion. 7.1 In Commissioner of Income-Tax vs. Kelvinator of India Ltd. reported in (2010) 320 ITR 561 (SC) , Supreme Court had observed as under : On going through changes, quoted above, made to Section 147 of Act, we find that, prior to Direct Tax Laws (Amendment) Act, 1987, reopening could be done under above two conditions and fulfillment of said conditions alone conferred jurisdiction on Assessing Officer to make back assessment, but in section 147 of Act [with effect from 1st April, 1989], they are given go-by and only one condition has remained, viz., that where Assessing Officer has reason to believe that income has escaped assessment, confers jurisdiction to re- open assessment. Therefore, post-1st April, 1989, power to re-open is much wider. However, one needs to give schematic interpretation to words reason to believe failing which, we are afraid, Section 147 would give arbitrary powers to Assessing Officer to re-open assessments on basis of mere change of opinion , which cannot be per se reason to reopen. We must also keep in mind conceptual difference between power to review and power to reassess. Assessing Officer has no power to review; he has power to reassess. But re- Page 7 of 11 C/SCA/16999/2018 ORDER assessment has to be based on fulfillment of certain pre-condition and if concept of change of opinion is removed, as contended on behalf of Department, then, in garb of reopening assessment, review would take place. One must treat concept of change of opinion as in-built test to check abuse of power by Assessing Officer. Hence, after 1st April, 1989, Assessing Officer has power to re-open, provided there is tangible material to come to conclusion that there is escapement of income from assessment. Reasons must have live link with formation of belief. Our view gets support from changes made to Section 147 of Act, as quoted hereinabove. Under Direct Tax Laws (Amendment) Act, 1987, Parliament not only deleted words reason to believe but also inserted word opinion in Section 147 of Act. However, on receipt of representations from Companies against omission of words reason to believe , Parliament reintroduced said expression and deleted word opinion on ground that it would vest arbitrary powers in Assessing Officer. We quote hereinbelow relevant portion of Circular No.549 dated 31st October, 1989, ([1990] 182 ITR (St.) 1, 29) which reads as follows : 7.2 Amendment made by Amending Act, 1989, to reintroduce expression `reason to believe in Section 147.--A number of representations were received against omission of words `reason to believe from Section 147 and their substitution by `opinion of Assessing Officer. It was pointed out that meaning of expression, `reason to believe Page 8 of 11 C/SCA/16999/2018 ORDER had been explained in number of court rulings in past and was well settled and its omission from section 147 would give arbitrary powers to Assessing Officer to reopen past assessments on mere change of opinion. To allay these fears, Amending Act, 1989, has again amended section 147 to reintroduce expression `has reason to believe in place of words `for reasons to be recorded by him in writing, is of opinion . Other provisions of new section 147, however, remain same. 7.2 then Assessing Officer, vide notice dated 07.10.2013 issued under Section 142(1) of Act, called upon writ applicant to furnish various details including followings : Confirmations for unsecured loans / advances alongwith name, PAN, address, assessment details and such other information; Account number, bank name, branch and address of all bank accounts for concern as well as proprietor / partner; 7.3 writ applicant, vide letter dated 17.10.2013, had furnished various information including details of all bank accounts maintained by writ applicant in his personal capacity and also in name of business. Such Page 9 of 11 C/SCA/16999/2018 ORDER bank details also included details of current account being Account No.5205002647 maintained with ICICI bank Ltd. 7.4 writ applicant, vide letter dated 06.01.2014, had further stated and submitted as follows : writ applicant has not maintained personal books of accounts; Photo copy of wealth tax return for Assessment Years 2009-10 and 2010-11 were furnished; Confirmations of loan account in personal bank account were filed. same included confirmation as well as acknowledgment of return of income of Mitul J. Shah from whom, writ applicant had received sum of Rs.6 crore during year under consideration; 7.5 then Assessing Officer, after due consideration of details and information furnished by writ applicant from time to time, consciously chose not to make any addition in respect of transactions as to receipt of Rs.6 crore as well as repayment of same while framing assessment under Section 143(3) of Act. Thus, issue on hand had been minutely scrutinized by then Assessing Page 10 of 11 C/SCA/16999/2018 ORDER Officer at stage of original assessment. Now, respondent is looking forward to touch very same issue by re-opening writ applicant s case which is nothing but change of opinion. action of re-opening writ applicant s case under Section 147 merely based on change of opinion is not tenable in eye of law. 8. In result, this petition succeeds and is hereby allowed. impugned notice at Annexure to this petition is hereby quashed and set aside. Consequently, all proceedings undertaken, if any, pursuant to issue of notice also stands terminated. (J. B. PARDIWALA, J) (A. C. RAO, J) Dolly Page 11 of 11 Rajendra Suganchand Shah v. Asst. Commissioner of Income-tax Circle 1(3)