Gurvinder Singh Sohal Vs Central Bureau of Investigation (High Court of Punjab and Haryana)

 

 

JUDGEMENT SUMMERY

Court

High Court of Punjab and Haryana

Related Act

IPC and Prevention of Corruption Act, 1988

Section(s)

Section 120-B of IPC and Section 7 of Prevention of Corruption Act, 1988

Year of Order

17/09/2020

Summery

Section 132 of the Central Goods and services Tax Act, 2017 section 120-B of Indian penal code, 1860, Section 7 of the Prevention of Corruption Act, 1988 (amended in 2018) at Police Station, CBI ACB, Chandigarh.

 

CRM-M-27988-2020                                                

 

IN THE HIGH COURT OF PUNJAB AND HARYANA

AT CHANDIGARH

 

                                                 CRM-M-27988-2020

                             Date of decision: September 17, 2020

 

Gurvinder Singh Sohal                                  ....Petitioner

                            Versus

Central Bureau of Investigation                        ....Respondent

 

CORAM: HON'BLE MR. JUSTICE ARVIND SINGH SANGWAN

 

Present:   Mr. Vinod Ghai, Senior Advocate with

           Ms. Kanika Ahuja, Advocate

           for the petitioner.

 

           Ms. Shubhra Singh, Advocate

           for the respondent-CBI.

           (through video conferencing)

 

ARVIND SINGH SANGWAN, J.


Prayer in this petition is for grant of anticipatory bail to the petitioner in FIR No.RC0052020A013 dated 13.8.2020 registered under Section 120-B IPC and Section 7 of the Prevention of Corruption Act, 1988 (amended in 2018) at Police Station, CBI ACB, Chandigarh.

Learned senior counsel for the petitioner has argued that the petitioner is working as Superintendent in the office of Commissioner of CGST, Rohtak. He further submits that the petitioner and the other officials, in compliance of a public notice issued by the department that the hand-sanitizers are taxable at 18% GST w.e.f. 1.7.2017, conducted a raid in the 1 of 8 premises of complainant Manoj Kalra and the complainant was found evading 6% tax of GST, therefore, he was directed to pay the tax and in that process, the complainant has falsely trapped the petitioner and the other accused.

Learned senior counsel has further argued that as per the allegations/version of CBI, the petitioner and the other officials has raided the premises of the complainant on 6.8.2020 and on that day, 03 other co-employees of the petitioner, namely, Kuldeep Hooda, Superintendent; Rohit Malik, Inspector and Pardeep Inspector pressurised the complainant to pay Rs.09 Lacs as bribe. It is further the case of the CBI that the petitioner and co-accused demanded Rs.12 Lacs but a deal was settled for Rs.09 lacs and complainant was directed by the petitioner to pay Rs.04 lacs as part payment of bribe on that day. The complainant, however, handed over Rs.03 lacs in a polythene bag by keeping the same in the car of the petitioner and this fact is recorded in the CCTV. Later on, on the same day, the complainant received a phone call from the petitioner, wherein he in a coded language stated "WO SAMAAN TEEN KILO HI NIKLA HAI", meaning thereby, the amount was Rs.03 lacs only. On this, the complainant was directed to come to the office of the petitioner.

2 of 8 It is the further case of the CBI that since the complainant did not want to make the payment of bribe, he made a complaint on 10.8.2020 to the SP, CBI/ACB, Chandigarh. Accordingly, the complainant reached the office of CBI and a trap was prepared by putting a spy camera on the person of complainant Manoj Kalra by inserting a fresh memory card, by putting it inside the shirt of the complainant. Thereafter, the complainant along with Chander Mohan, Director of the company went to meet the petitioner in his office and as per the conversation between them, the complainant requested the petitioner to reduce the amount but the petitioner stated that whatever is fixed, it is fixed as it is to be paid to the higher officials as well. Thereafter, the complainant came back to the office of CBI and the transcription of the dialogues between petitioner and the complainant was made the part of the complaint. Further with regard to demand of bribe, the complainant was directed to reach the office of the CBI on 11.8.2020 along with government currency of Rs.06 lacs, which was to be paid as bribe and after preparing an inventory the complainant was asked to make a phone call to the petitioner to inform that his work will be done on Monday. Again, on 14.8.2020 the complainant was instructed to meet the CBI officials and a trap was laid and the petitioner, along with Kuldeep Hooda 3 of 8 came to collect the remaining bribe of Rs.06 lacs in Creta car driven by petitioner Gurwinder Singh Sohal, however, feeling apprehension, Kuldeep Hooda threw the said bribe money on the rear seat of the said car and dropped from the moving vehicle and thereafter, the petitioner abandoned his Creta car near the Mama Confectionery Shop on Delhi Chandigarh Highway, Bahalgarh and ran away on foot. Thereafter, the bribe money was recovered by the CBI in the presence of the independent witnesses from the car and the currency notes were the same notes which were marked by the CBI.

Learned senior counsel for the petitioner has argued that, in fact, the petitioner is not previously involved in any case and has gone to the factory of complainant to perform his duties and certain lapses were found regarding payment of GST @ 12%, instead of 18%. Therefore, the petitioner is falsely involved in this case. Learned senior counsel further submit that as per the CCTV footage of 6.8.2020, the complainant is shown to be keeping some bag, however, the money is not visible. Learned senior counsel further argued that on 14.8.2020, as per the CBI version, there were many police officials to trap the petitioner and Kuldeep Hooda, at the spot but it is unbelievable that they ran away by abandoning the Creta car. Learned senior counsel further submits that since the petitioner was not arrested at the spot, therefore, 4 of 8 there cannot be any evidence that Rs.06 lacs were handed over to the petitioner or co-accused Kuldeep Hooda.

Learned senior counsel further submits that the petitioner is involved in this case only on the basis of certain inferences that the complainant kept a polythene bag in the car on 6.8.2020 and there was some conversation between the petitioner and the complainant on 10.8.2020 when he visited to the office and an amount of Rs.64 lacs was recovered from co-accused Kuldeep Hooda by raiding his house and he was arrested on 13.8.2020, whereas nothing was recovered from the house of the petitioner when a raid was conducted by CBI. Learned senior counsel also submits that the entire evidence is based on documentary evidence and, therefore, the custodial interrogation is not required.

In reply, the learned counsel appearing for the CBI has opposed the prayer on the ground that there is incriminating evidence against the petitioner who was directly in contact with complainant Manoj Kalara and had accepted part payment of bribe on 6.8.2020 and, thereafter, he called the complainant in his office. Since the complainant did not want to make the payment of bribe, he approached the CBI and on 10.8.2020, he visited the office of CBI and a spy camera was fixed under the shirt of the complainant in which, conversation between him and petitioner was recorded which 5 of 8 also suggest that the petitioner was demanding the bribe and when complainant asked about the amount, he has stated that whatever is fixed, the complainant should pay. It is further argued that when co-accused Kuldeep Hooda was arrested an unaccountable amount of Rs.64 Lacs was recovered and the presence of the petitioner on all the relevant dates, I..e. 6.8.2020 at the premises of the complaint, on 10.8.2020 in the office of the petitioner, and on 14.8.2020 at the place where the trap was laid is proved. Learned counsel for the CBI has further argued that the Creta car admittedly belong to the petitioner and same was found abandoned by him on the date when the trap was laid at Bahalgarh, on Delhi-Chandigarh Highway and there is no explanation as to how his car reached there. Learned counsel further submitted that the custodial interrogation of the petitioner is necessary to find out the nexus between all the accused and for proper investigation.

After hearing the counsel for the parties, I find no ground to grant the anticipatory bail to the petitioner for the following reasons :-

(i) As per the CCTV footage dated 6.8.2020, the complainant was keeping a polythene bag of Rs.03 lacs as bribe in the car of the petitioner, where the petitioner, along with three other co- accused was present ;

6 of 8

(ii) Again, on 10.8.2020, the complainant made a complaint to CBI, he was asked to visit the office of the petitioner by putting a spy camera in his shirt and as per the recording of the conversation between the petitioner and the complainant, regarding the payment of balance amount when the complainant asked the petitioner to reduce the amount of bribe, the petitioner replied in negative and stated that whatever is fixed, is fixed as the amount is to be paid to the higher officials. Even the complainant was asked not to talk much about the payment of money in the office;

(iii) Again, on 14.8.2020, the presence of petitioner, along with co-accused Kuleep Hooda at the place where the CBI has planned a trap is proved from the fact that the petitioner while driving his own Creta car reached at the spot and after the amount of Rs.06 lacs (Marked currency notes) was handed over to co-accused Kuldeep Hooda, he sensing some problem threw the bag on the back seat of the car and escaped away from the moving car. Later on, the petitioner abandoned his Cretra car near big Mama Confectionery Shop on Delhi-Chandigarh Highway and from the car, the marked currency of Rs.06 lacs was recovered by the CBI official in the presence of the independent witnesses;

(iv) The argument raised by the counsel for the petitioner that the petitioner has been falsely implicated on account of a raid conducted by 7 of 8 him for checking the difference of 6% GST to be paid by the complainant is a matter of evidence; and

(v) It is undisputed fact that co-accused Kuldeep Hooda was arrested on the next day, i.e. 15.8.2020 and a huge unaccounted amount of Rs.64 lacs was recovered from his house.

Therefore looking into the serious allegations against the petitioner, which suggest his active involvement in the case, custodial investigation of the petitioner is required.

Accordingly, this petition is dismissed.

However, nothing observed herein will have any bearing on the merits of the case.

 

 

                                        ( ARVIND SINGH SANGWAN )

September 17, 2020                          JUDGE satish

 

 

 

 

           Whether speaking/reasoned : Yes/No

           Whether reportable        : Yes/No

NISHARAHEMAD VAJIRKHAN PATHAN Versus THE INCOME TAX OFFICER

 NISHARAHEMAD VAJIRKHAN PATHAN

Versus

THE INCOME TAX OFFICER

 

JUDGEMENT SUMMERY

Court

Gujarat High Court

Related Act

Income Tax Act, 1961

Section(s)

Section 139, 143, 147, 148, 149, 150 of Income Tax Act, 1961

Year of Order

18/01/2021

Summery

Just because partnership firm failed to file its return of income for relevant Financial Year, by itself, will not confer jurisdiction upon authority concerned to issue notice against individual partners of the firm with respect to their individual return of income for relevant year in consideration.

 

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

R/SPECIAL CIVIL APPLICATION NO. 16304 of 2019

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR. JUSTICE J.B.PARDIWALA Sd/-

and

HONOURABLE MR. JUSTICE ILESH J. VORA Sd/-

==========================================================

1 Whether Reporters of Local Papers may be allowed to see the judgment ? Yes

2 To be referred to the Reporter or not ? Yes

3 Whether their Lordships wish to see the fair copy of the judgment ? No

4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? No

==========================================================

NISHARAHEMAD VAJIRKHAN PATHAN

Versus

THE INCOME TAX OFFICER

==========================================================

Appearance:

MR. TUSHAR HEMANI, LD. SR. COUNSEL WITH MS VAIBHAVI K

PARIKH(3238) for the Petitioner(s) No. 1

MRS MAUNA M BHATT(174) for the Respondent(s) No. 1

==========================================================

CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA

and

HONOURABLE MR. JUSTICE ILESH J. VORA

Date : 18/01/2021

ORAL JUDGMENT

(PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)

 

1. By this writ application under Article 226 of the

Constitution of India, the writ applicant has prayed for the

following reliefs;

“(A) quash and set aside the impugned notice at

Annexure-A to this petition;

(B) pending the admission, hearing and final disposal of

this petition, to stay the implementation and operation of

the notice at Annexure-A to this petition and stay the

further proceedings for the Assessment Year 2012-13;

(C ) any other and further relief deemed just and proper

be granted in the interest of justice;

(D) to provide for the cost of this petition.”

2. For the sake of convenience, the following details may be

stated as under;

Assessment Year 2012-13

Assessment History 143(1)

Date of notice under section 148 Beyond four years

3. It appears from the materials on record that the writ

applicant is one of the partners in a partnership firm running in

the name and style of “M/s. Shree Khodiyar Developers”. The

said partnership firm purchased two immovable properties

(Block Nos.533 and 534 respectively, situated at Moje

Palaswada, Dabhoi, District: Baroda) vide the sale deeds dated

30th May, 2011 for the total sale consideration of

Rs.30,01,548/- and Rs.53,25,452/- respectively. The writ

applicant herein is a signatory to the said conveyance deed in

his capacity as a partner of the firm.

4. It is not in dispute that the sale consideration for the

purchase of the two immovable properties, referred to above,

was paid from the account of the partnership firm.

5. It appears that the partnership firm had not filed its

return of income for the A.Y.2012-13.

6. The Income Tax Department thought fit to issue notice

under Section 148 of the Act, 1961 to the writ applicant in his

individual capacity proposing to reopen the assessment for the

A.Y.2012-13 on the ground that the income chargeable to tax

for the relevant year had escaped assessment within the

meaning of Section 147 of the Act, 1961. The following reasons

came to be assigned for the reopening of the assessment.

“1. Brief details of the Assessee:

Assessee is an individual and he has filed the return for

the year under consideration declaring total income at

Rs.3,64,000/- on 19.03.2013 vide acknowledgment

no.580507250190313.

2. Brief details of information collected/received

by the AO:

In this case the information was received from the ITO

Ward-1(2)(4), Vadodara vide letter No. BRD/ITO/Wd.1(2)

(4) Inf./2018-19 dated 18.02.2019 that assessee along

with five others, has purchased two immovable property

situated at Block No.533 and 534, Moje Palaswada,

Dabhoi, Dist. Baroda for a consideration of Rs.30,01,548/-

and Rs.53,25,452/- respectively.

3. Analysis of information collected/received.

It is seen that assessee has purchased two properties

valuing Rs.88,13,060/- including registration and stamp

charges in which his share is 1/6th (Rs.14,68,843).

4. Enquiries made by the AO as sequel to

information collected/received:

The ITO, Ward-1(2)(4), Vadodara vide above mentioned

letter forwarded the information and the addition made

by the AO in case of one of the co-owner of the property

is confirmed by the CIT (A) with a direction to ensure that

assessment of unexplained investment in the hands of

the other partners of the firm. Under these

circumstances, there is no need to conduct separate

enquiry for satisfaction of reason of escapement of

income.

5. Findings of AO:

From the above facts available, it appears that assessee

has made investment in the property to the tune of

Rs.14,68,843/- as unexplained investment.

6. Basis of forming reason to believe and details

of escapement of income:

Therefore, from the above facts I have reason to believe

that entries to the extent of Rs.14,68,843/- has escaped

assessment and I am satisfied that this is a fit case for

reopening the assessment u/s.147 for A.Y.2012-13.

7. No information about any asset outside India.

8. Applicability of the provision of section 147/151 to

the facts of the case.

In this case return of income was filed for the year under

consideration but no assessment was made and the only

requirement to initiate proceeding u/s.147 is reason to

believe which has been recorded above.

(refer paragraph 6).

It is pertinent to mention here that in this case the

assessee has filed return of income for the year under

consideration but no assessment at stipulated u/s.2(40)

of the Act was made and the return of income was only

processed u/s.143(1) of the Act. In view of the above, the

provisions of clause (b) of Explanation 2 to section 147

are applicable to facts of this case and the assessment

year under consideration is deemed to be a case where

income chargeable to tax has escaped assessment.

This case is within four years from the end of the

assessment year under consideration. Hence, necessary

sanction to issue the notice u/s. 148 has been obtained

separately from joint commissioner of income tax as per

the provisions of section 151 of the Act.

Or

In this case more than four years have lapsed from the

end of assessment year under consideration. Hence,

necessary sanction to issue notice u/s. 148 has been

obtained separately from Principle Commissioner of

Income Tax as per the provisions of section 151 of the

Act.”

7. The writ applicant responded to the above referred notice

by filing his objections as under:-

“A. I have received letter dated 19.06.2019 stating

reasons for reopening of the assessment for A.Y.2012-13

as under:

“Reason for reopening of assessment in case of Shri

Nishar Ahemad Vazirkhan Pathan for A.Y.2012-13 u/s.147

of the Act.

1. Brief details of the assessee:

Assessee is an individual and he has filed the return for

the year under consideration declaring total income of

Rs.3,64,000/- on 19.03.2013 vide acknowledgment

no.580507250190313.

2. Brief details of information collected/received by

the AO:

In this case the information was received from the ITO

Ward-1(2)(4), Vadodara vide letter no.BRD/ITO/Wd. 1(2)

(4) Inf./2018-19 dated 18.02.2019 that assessee along

with five others, has purchased two immovable

properties situated at Block No.533 and 534, Moje

Palaswada, Dabhoi, Dist. Baroda for a consideration of

Rs.30,01,548/- and Rs.53,25,452/- respectively.

4. Analysis of information collected/received.

It is seen that assessee has purchased two properties

valuing Rs.88,13,060/- including registration and stamp

charges in which his share is 1/6th (Rs.14,68,843).

5. Enquiries made by the AO as sequel to

information collected/received:

The ITO, Ward-1(2)(4), Vadodara vide above mentioned

letter forwarded the information and the addition made

by the AO in case of one of the co-owner of the property

is confirmed by the CIT (A) with a direction to ensure that

assessment of unexplained investment in the hands of

the other partners of the firm. Under these

circumstances, there is no need to conduct separate

enquiry for satisfaction of reason of escapement of

income.

6. Findings of AO:

From the above facts available, it appears that assessee

has made investment in the property to the tune of

Rs.14,68,843/- as unexplained investment.

7. Basis of forming reason to believe and details

of escapement of income:

Therefore, from the above facts I have reason to believe

that entries to the extent of Rs.14,68,843/- has escaped

assessment and I am satisfied that this is a fit case for

reopening the assessment u/s.147 for A.Y.2012-13.

B. On perusal of the above and without prejudice to

the above and under protest, please note our following

objections:

a. The reason for reopening inter-alia stated vide para

2 that “Brief details of information collected/received by

the AO; in this case the information was received from

the ITO Ward-1(2)(4), Vadodara vide letter

No.BRD/ITO/Wd. 1(2)(4) inf./2018-19 dated 18.02.2019

that assessee along with five others, has purchased two

immovable property situated at Block No.533 and 534

Moje Palaswada, Dabhoi, Dist: Baroda for a consideration

of Rs.30,01,548/- and Rs.53,25,452/- respectively”.

In this respect, I would like to inform you that I have not

purchased the immovable property bearing Block

No.534/1 moje Palaswada for total purchase

consideration of Rs.53,25,452/- and Block No.533 Moje

Palaswada for total purchase consideration of

Rs.30,01,548/- vide registered sale deed no.1169 of 2011

and 1170 of 2011 respectively dated 30.05.2011 but the

immovable property have been purchased by the

M/s.Shree Khodiyar Developers. The purchase

consideration was paid by the firm M/s. Shree Khodiyar

Developers. Copy of the sale deeds and bank statements

of M/s. Shree Khodiyar Developers are hereby enclosed

for your verification.

It seems that the wrong information is

collected/gathered. The property subject matter of the

reopening was not purchased by me at all. The reason

for reopening of the assessment itself is on wrong

premise and fact and it is completely base on wrong

reason, so reasons lacks validity. When the notice itself

is thus, defective, it would have no effect of reopening on

the assessment.

b. The reason for reopening inter-alia stated vide para

4 that “enquiries made by the AO as sequel to

information collected/received. The ITO , Ward-1(2)(4),

Vadodara vide above mentioned letter forwarded the

information and the addition made by the AO in case of

one of the co-owner of the property is confirmed by the

CIT(A) with a direction to ensure that assessment of

unexplained investment in the hands of the other

partners of the firm. Under these circumstances there is

no need to conduct separate enquiry for satisfaction of

reason of escapement of income.

I would like to state that the addition made by the other

AO and confirmed by the CIT(A) in case of other co-owner

of the property, is not relevant. It cannot be the base for

not making separate inquiry for the satisfaction of reason

for reopening on the basis of escapement of income.

Because in case of the other co-owner Shri Hasitkumar

Bhatt case while making inquiry about the source of the

investment in the subject matter immovable property

situated at Block No.534/1 moje Palaswada for total

purchase consideration of Rs.53,25,452/- and Block

No.533 moje Palaswada for total purchase consideration

of Rs.30,01,548/- vide registered sale deed no.1169 of

2011 and 1170 of 2011 respectively dated 30.05.2011,

the Income Tax Officer has appreciated the fact that the

immovable property was purchased by M/s. Shri Khodiyar

Developers. He has concluded the matter at inquiry level

and has not initiated proceeding u/s.147 r.w.s. 148 of the

Act. Copy of the inquiry letter and copy of reply is

herewith enclosed.

Hence AO is required to inquire the matter independently

of information received and to satisfy himself about

reason for reopening. Hence, the reopening of the

assessment under Section 147 of the Act stating that

“there is no need to conduct separate enquiry for

satisfaction of reason of escapement of income” is bad in

law. The reasons to believe must have a material bearing

on the question on escapement of income. It does not

mean a purely subjective satisfaction of the assessing

authority; the reason be held in good faith and cannot

merely be a pretence. Thus the reason recorded is totally

erroneous and invalid reason and is not in terms of

Section 147 of the Act.

c. I have filed my return of income for the A.Y. 2012-13

dated 19.03.2013 vide E-filing Acknowledgment Number

580507250190313 disclosing fully and truly all material

facts necessary for his assessment. I have also suo motu

informed the Income Tax Officer, Ward-2, Mehsana that

the immovable property of the subject matter was not

purchased by me but it is purchased by the M/s. Shree

Khodiyar Developers vide letter dated 19.03.2019. Copy

of the acknowledged letter is enclosed herewith.

It seems that no cognizance has been taken of the letter

submitted by me. When return has been filed disclosing

fully and truly all material facts and letter explaining the

things has already submitted. I am totally surprised to

receive notice u/s.148 on the basis of purchase of

immovable property. The reopening of an assessment

after the lapse of many year is a serious matter. I can't

see any genuine reason to reopen the assessment after

so long duration has been lapsed that too on the basis of

untrue reason. The reopening of the assessment is

without the authority permitted u/s.147 of the Act.

d. I have filed his return of income for the A.Y.2012-

13 dated 19.03.2013 vde E-filing Acknowledgement

Number 580507250190313 disclosing fully and truly all

material facts necessary for my assessment. An

intimation u/s.143(1) has been issued stating NIL Income

Tax demand amount. Hence first accepting the return

under Section 143(1) and thereafter issue notice to

reopen the assessment is mere change of opinion. There

shall not be any distinction between cases where

assessments were framed earlier under Section 143(3)

and cases where mere intimations were issued earlier

under section 143(1). Otherwise an assessee in whose

case the return was processed under section 143(1)

would be in a more vulnerable position than an assessee

in whose case there was a full-fledged scrutiny

assessment made under section 143(3). Whether the

return is put to scrutiny or is accepted without demur is

not a matter which is within the control of assessee, he

has no choice in the matter. Thus change of opinion is

not permissible u/s.147 of the Act.

C. In the case of GKN Driveshafts Ltd (259 ITR 19), the

Hon. Supreme Court made remarks, when a notice

u/s.148 of the Income Tax Act is issued, the proper

course of action for the notice is to file return and if he so

desires, to seek reasons for issuing notices. The AO is

bound to furnish reasons within a reasonable time. On

receipt of reasons, the noticee is entitled to file

objections to issuance of notice and the AO is bound to

dispose of the same by passing a speaking order.”

8. The objections, referred to above, came to be overruled

vide the order dated 3rd July, 2019 as under:-

“2.1 In this connection, with the objection raised in the

para (B)(a) of letter dated 03.07.2019, assessee have

stated that the property was purchased by M/s. Shree

Khodiyar Developers (Firm) and not by me. It is seen that

all the partners have signed the registered deed. Further

in this matter the copy of reason was provide in which it

was clearly mentioned that CIT(A) vide order dated

25.10.2017 have confirmed the addition of

Rs.14,68,843/- in hand of one of the partners of Firm of

Shree Khodiyar Developers (Shri Manish

Rameshwarprasad Guar). As the assessee Shri Manish

Rameshwarprasad Gaur has not contended in front of the

Ld. CIT(A), the genuineness of addition is confirmed.

Further in the para (b.1.) of the assessment order of the

said assessee, the AO has mentioned that Firm has not

submitted its return of income for the year under

consideration, so the investment remain unexplained. In

this case the reopening is as per the provisions of the I.T.

Act, 1961 is applicable.

2.2 Para (B)(b) the assessee has raised issued of to

inquire the matter independently of information received

and to satisfy himself. In this it is to state that the

information was already made available to the office and

in return no any capital gain was disclosed for the

A.Y.2012-13.

2.3 In relation to para B(c) it is to state that as per the

I.T. Act, 1961 the cases can be reopened for not more six

years, have elapsed from the end of the relevant

assessment year. Therefore, it is stated that the case is

reopened as per the provisions of the I.T. Act, 1961 and it

is within the time allowed.

2.4 In relation to Para B(d) of the letter dated

03.07.2019, it is to state that in this case the law is

enforceable as per the provisions of the I.T. Act, 1961.

Further, in this matter it is to state that material is

available on which the addition is made and in this there

is no any change of opinion as no any assessment was

made previously for the A.Y.2012-13.

3. Disposal of objection:

I have given due consideration to the submission of the

assessee. However, the same is not acceptable

therefore being disposed of by way of passing a speaking

order on the basis of the above facts. Further it is to also

to state that in place of the partner Shri Manish

Rameshwarprasad Gaur has option to approach Hon'ble

ITAT against addition made by the Ld. CIT (A). Once one

of the partner addition is confirmed by the Ld. CIT(A),

and the partner has no objection, the same rule is

applicable to all the partners. On this basis and other

facts the objection raised by the assessee is disposed of.

4. Reason to believe:-

The belief that the AO was not arbitrary or irrational. The

belief that income has escaped assessment was based

on reasons which were relevant and material also

available on the records. There exists a rational and

intelligible nexus between the reasons and belief

therefore. There was independent formation of opinion

by the AO as per the IT Act, 1961 that income has

escaped assessment as the addition is confirmed in case

of one of the partner. Therefore, the notice of reopening

is sustainable.

5. To conclude, it is emphasized that the reopening in

the case of the assessee is valid in the light of the facts

and the established law. The procedural requirements

such as proper recording of reasons, service of notices

and forwarding of reasons, have been met. In addition,

the matters raised by the assessee have been dealt with

in an elaborate manner. It is requested that the

assessee/its AR to to co-operate in the re-assessment

proceedings. The above order is passed in view of the

observation of the Hon'ble Supreme Court in the case of

GKN Diveshafts (India) Ltd. vs. ITO and others (259 ITR

19) (SC).”

9. Being dissatisfied with the aforesaid action, the writ

applicant is here before this Court with the present writ

application.

Submissions on behalf of the writ applicant:-

10. Mr. Tushar Hemani, the learned senior counsel assisted

by Ms. Vaibhavi Parikh, the learned counsel appearing for the

writ applicant submitted that the Department seeks to reopen

the assessment broadly on the ground that in the case of one

of the partners of the partnership firm, the investments were

found to be not satisfactorily explained. The writ applicant,

being a co-partner, has also not been able to explain the

investments during the year under consideration. It is

submitted that the notice under Section 148 is not sustainable

in law as the properties in question were purchased by the

partnership firm wherein the writ applicant is one of the

partners. The writ applicant, in his individual capacity, is not

the purchaser of the two immovable properties.

11. It is argued that the condition precedent for resorting to

reopening is that there must be “escapement of income

chargeable to tax”. In the absence of escapement of any

income chargeable to tax, it is not open for the Department to

reopen the case of the assessee.

12. The learned senior counsel would submit that the

Department has failed to appreciate the following:-

“The writ applicant has not purchased the properties in

question.

Rather, such properties were purchased by the

partnership firm namely M/s. Khodiyar Developers”,

wherein the writ applicant is a partner. This fact was

conveyed to the respondent immediately upon receipt of

the reasons for reopening.

Even payment has been made by the said firm through

the banking channel.

The writ applicant was a signatory to the said

conveyance deeds in the capacity of partner of the said

firm.

Thus, the properties in question were purchased by firm

wherein writ applicant is a partner and not by the writ

applicant.”

13. It is argued that it is the partnership firm which derived

lawful title over the properties in question. In such

circumstances, no addition can be made in respect of the

alleged unexplained investment in the hands of the writ

applicant.

14. It is argued that merely because in the hands of one of

the partners, the investment is treated as unexplained, would

not necessarily mean that such investment should also be

treated as unexplained in the hands of the writ applicant. The

Department seeks to reopen the assessment merely on the

ground that certain investment made by some other person

has remained unexplained.

15. In the last, Mr. Hemani submitted that even otherwise

there cannot be any “reason to believe” for the following

reasons:-

“Investments in question were made by the partnership

firm and not by the writ applicant.

Such investments were made through banking channel.

The mere fact that certain investment has been made by

an assessee cannot be a ground so as to have reason to

believe that income chargeable to tax has escaped

assessment in the hands of such assessee.

If such a stand of the Department is entertained, then it

would result into a very dangerous proposition whereby

in each and every case where some investment is made,

the case of such assessee shall be reopened merely on

the alleged count that such investments are unexplained.

That has never been the intention of the Legislature.”

16. In such circumstances, referred to above, Mr. Hemani

prays that there being merit in his writ application, the same

may be allowed and the impugned notice may be quashed and

set aside.

Submissions on behalf of the Revenue:-

17. Ms. Mauna Bhatt, the learned senior standing counsel

appearing for the Revenue has vehemently opposed this writ

application. She would submit that the writ application has

been preferred at a premature stage inasmuch as only a notice

under Section 148 read with section 147 of the Act has been

issued. It is argued that in the event if the final assessment

order is passed, then the assessee can always prefer an

appeal against such order before the CIT (A) and, thereafter,

before the Appellate Tribunal. Ms. Bhatt took the Court

through the averments made in the affidavit-in-reply upon

which due reliance has been placed on behalf of the Revenue.

“4. The facts are that in this case an information was

received from the ITO, Ward (1)(2)(4), Vadodara vide

letter dated 18.2.2019; in relation to the properties

purchased by the six co-owners i.e. Shri Nisharahmed

Vajir Pathan, Shri Manish R. Gaur, Shri Manoj H. Patel,

Shri Manish Mulchand Patel, Shri Hashitkumar D. Bhatt

and Shri Ganpat Amrutlal Patel at Block Nos.533, 534

mouje Palaswada, Dabhoi, Dist: Vadodara of

Rs.39,01,548/- and Rs.53,25,452/- respectively. The

assessee had also paid stamp duty and registration

charges of Rs.4,86,060/-.

5. It is submitted that the case of one of the partner

Shri Manish Rameshbhai Gaur was selected under the

CASS for A.Y.2012-13 and addition of Rs.14,68,843/- was

made for unexplained investment of the said properties,

During assessment proceedings of Shri Manish Gaur, it

was contended by him before the AO that the properties

belong to a firm however Shri Manishbhai Gaur failed to

prove that properties were purchased by firm viz. M/s.

Shri Khodiyar Developers bearing PAN No.ABWFS2637J.

6. It is submitted that as observed in the assessment

order in the case of Shri Manish Gaur, the firm viz. Shri

Khodiyar Developers has not filed its return of income for

the year under consideration. In the said assessment

order, AO had further observed that firm is represented

by the partners and firm has not filed its return of income

for the year under consideration and therefore,

investment in purchase of land is treated as unexplained.

As the assessee viz. Manish Gaur failed to prove the

purchase of properties in question by the firm the share

of the property was equally divided and Rs.14,68,843/-

(1/6th of Rs.88,13,060/- total of the amount paid as

mentioned has been added to the total income for

A.Y.2012-13 in case of Shri Manish R. Gaur. Thereafter,

Shri Manish Gaur filed an appeal before the CIT (2),

Vadodara but he did not appear and CIT(A)(2), Vadodara

framed assessment under order dated 25.10.2017. In the

order dated 25.10.2017 it has been observed by CIT(A)

that the AO shall ensure assessment of unexplained

investment in the hands of the other partners of the firm.

7. It is submitted that order of CIT(A) being tangible

material in the hands of the AO of the petitionerassessee,

the AO verified the details and reopened the

assessment, which is valid and legal.

8. It is further submitted that the contention of the

petitioner that firm has purchased the property is not

correct. As observed in case of Mahesh Gaur no

evidence was placed on record to justify the ownership

by the firm. Moreover, the firm has not filed the return

of income for A.Y.2012-13 and therefore, the investment

could not be verified in hands of the firm. In this event

merely when there is no return of income by the firm nor

any evidence suggesting investment made by the firm

i.e. M/s.Shri Khodiyar Developers, it is clear that

investment has been made by the respective co-owners

from their unexplained income.

9. It is submitted that in this case original assessment

was framed under Section 143(1), therefore, there was

no opinion formed at the original assessment stage. Even

the information received which was the tangible material

was not available at the time of original assessment.

10. It is submitted that the contention of the petitioner

that there is no escapement of income chargeable to tax

since the property in question were purchased by

partnership firm wherein the petitioner is partner is

without any basis. As the firm has not filed its return of

income, there is no evidence to show that the property

was purchased by firm. Moreover, the order of CIT(A) in

the case of co-owner is the tangible material in the hands

of AO to form a reasonable belief that income chargeable

to tax has escaped assessment.

11. The contention of the petitioner that there is no

reason to believe that income chargeable to tax has

escaped assessment is not correct. As stated in the

earlier para, assessment framed in case of one of the coowners

which has been upheld by the order of CIT(A)

supported by the fact that no return has been filed by

the partnership firm, is the tangible material to form

belief that income chargeable to tax has escaped

assessment.

12. It is submitted that the contention of the petitioner

that reopening is based on the borrower satisfaction is

not correct. As stated earlier, it is reiterated that AO

based on the information received verified the details.

Even in the order of the CIT(A) it has been directed to

verify the details in the case of co owners. There is no

evidence to support that the purchase was made by the

partnership firm. Therefore, the belief formed by the AO

is based on the information available on record and

sufficient to form a belief that income chargeable to tax

has escaped assessment. It is further submitted that at

this stage A.O. Is not required to conclusively prove the

escapement of income. In the present case there is

tangible material available in the hands of the AO to

form a belief that income chargeable to tax has escaped

assessment and therefore, notice under Section 148 is

legal and valid notice.”

18. On 7th January, 2021, this Court passed the following

order:-

“This matter was heard yesterday and was adjourned to

come up today to enable Ms. Bhatt, the learned Senior

Standing Counsel appearing for the Revenue to take

appropriate instructions with regard to the other partners

of the partnership namely M/s. Shree Khodiyar

Developers. Ms. Bhatt has been able to collect the

necessary information and would like to place it on

record by way of an additional affidavit. Post this matter

on 18th January 201 on top of the Board. By that time,

the additional affidavit shall be placed on the record of

the case.”

19. Pursuant to the aforesaid order passed by this Court

dated 7th January, 2021, an additional affidavit-in-reply has

been filed on behalf of the Revenue stating as under:-

“1. This additional affidavit is filed to place further

information/documents on record. It is submitted that as

stated in the affidavit dated 24.11.2019, income

chargeable to tax has escaped assessment and

therefore, notice under Section 148 was issued for

A.Y.2012-13. The assessee had purchased two properties

valuing Rs.88,13,060/- where his share is 1/6th in the

property. Though purchased, the said property was not

shown in the return of income filed. The objection of the

assessee that the property was purchased by firm and

not by partners was considered in the order disposing of

objections, therefore, investment remained unexplained.

Thus, there is no illegality in issuing notice to the

assessee.

2. It is submitted that M/s. Khodiyar Developers is

partnership firm consisting of five partners. Out of these

ive partners in case of partner of M/s.Shri Manish

Rameshwarprasad Gaur and Shri Ganpatbhai Amthabhai

Patel reassessment proceedings were initiated. The

additions u/s.69 of the Act were made as unexplained

investment in both the cases and CIT(A) has confirmed

the addition made by the AO. In other three partners

reassessment proceedings were not initiated. Details of

assessment proceedings in relation to all five partners of

M/s.Khodiyar Developers is annexed hereto and marked

as Annexure-R.1.

3. It is submitted that income chargeable to tax has

escaped assessment. No scrutiny was done at the

original assessment stage. Moreover in absence of return

filed by the firm, verification was not done at the original

assessment stage. Therefore, if the Hon'ble Court is of

the opinion that the notice under Section 148 ought to

have been issued to the firm and not to the partners then

it is submission of the respondent that in view of Section

150 o the Act, findings/directions may be issued so that

appropriate proceedings under the provisions of the Act

can be initiated against the firm.

4. In view of the above, there is no illegality in

initiation of the proceedings u/s.148 of the Act.”

20. Ms. Bhatt vehemently submitted that the Department

could be said to be justified in reopening the assessment of

the writ applicant for the relevant year as the partnership firm

had failed to file its return of income. The Department wants

to understand the source of funds pumped in by the writ

applicant in the partnership firm. It has not been explained by

the writ applicant in his return of income for the relevant year.

It is pointed out that the assessment was under Section

143(1) of the Act and not Section 143(3) of the Act.

21. In the last, Ms. Bhatt submitted that if this Court is

inclined to hold that the reopening is not sustainable in law,

then the Department may be permitted to invoke Section 150

of the Act for the purpose of proceeding against the partnership

firm.

22. In such circumstances, referred to above, Ms. Bhatt prays

that there being no merit in this writ application, the same may

be rejected.

23. Having heard the learned counsel appearing for the

parties and having gone through the materials on record, the

following two questions fall for our consideration;

(I) Whether the impugned notice of reassessment issued

under Section 148 of the Act is sustainable in law on the

reasons as assigned by the Department? and

(ii) Whether Section 150 of the Act has any applicability so

far as the present case is concerned?. In other words, whether

by virtue of Section 150 of the Act, the Department can now

proceed against the partnership firm?

24. The following principles of law are discernible from the

various decisions of the Supreme Court and the High Courts so

far as reopening of the assessment under Section 147 of the

Act is concerned.

(i) The Court should be guided by the reasons recorded for

the reassessment and not by the reasons or explanation given

by the Assessing Officer at a later stage in respect of the

notice of reassessment. To put it in other words, having regard

to the entire scheme and the purpose of the Act, the validity

of the assumption of jurisdiction under Section 147 can be

tested only by reference to the reasons recorded under

Section 148(2) of the Act and the Assessing Officer is not

authorized to refer to any other reason even if it can be

otherwise inferred or gathered from the records. The

Assessing Officer is confined to the recorded reasons to

support the assumption of jurisdiction. He cannot record only

some of the reasons and keep the others upto his sleeves to be

disclosed before the Court if his action is ever challenged in a

court of law.

(ii) At the time of the commencement of the reassessment

proceedings, the Assessing Officer has to see whether there is

prima facie material, on the basis of which, the department

would be justified in reopening the case. The sufficiency or

correctness of the material is not a thing to be considered at

that stage.

(iii) The validity of the reopening of the assessment shall

have to be determined with reference to the reasons recorded

for reopening of the assessment.

(iv) The basic requirement of law for reopening and

assessment is application of mind by the Assessing Officer, to

the materials produced prior to the reopening of the

assessment, to conclude that he has reason to believe that

income has escaped assessment. Unless that basic

jurisdictional requirement is satisfied-a postmortem exercise of

analysing the materials produced subsequent to the

reopening will not make an inherently defective reassessment

order valid.

(v) The crucial link between the information made available

to the Assessing Officer and the formation of the belief should

be present. The reasons must be self evident, they must

speak for themselves.

(vi) The tangible material which forms the basis for the belief

that income has escaped assessment must be evident from a

reading of the reasons. The entire material need not be set

out. To put it in other words, something therein, which is

critical to the formation of the belief must be referred to.

Otherwise, the link would go missing.

(vii) The reopening of assessment under Section 147 is a

potent power and should not be lightly exercised. It certainly

cannot be invoked casually or mechanically.

(viii) If the original assessment is processed under Section

143(1) of the Act and not Section 143(3) of the Act, the

proviso to Section 147 will not apply. In other words, although

the reopening may be after the expiry of four years from the

end of the relevant assessment year, yet it would not be

necessary for the Assessing Officer to show that there was any

failure to disclose fully or truly all the material facts necessary

for the assessment.

(ix) In order to assume jurisdiction under Section 147 where

assessment has been made under sub-section (3) of section

143, two conditions are required to be satisfied;

(i) The Assessing Officer must have reason to believe that

the income chargeable to tax has escaped assessment;

(ii) Such escapement occurred by reason of failure on the

part of the assessee either (a) to make a return of income

under section 139 or in response to the notice issued under

sub-section (1) of Section 142 or Section 148 or (b) to disclose

fully and truly all the material facts necessary for his

assessment for that purpose.

(x) The Assessing Officer, being a quasi judicial authority is

expected to arrive at a subjective satisfaction independently

on an objective criteria.

(xi) While the report of the Investigation Wing might

constitute the material, on the basis of which, the Assessing

Officer forms the reasons to believe, the process of arriving at

such satisfaction should not be a mere repetition of the report

of the investigation. The reasons to believe must demonstrate

some link between the tangible material and the formation of

the belief or the reason to believe that the income has escaped

assessment.

(xii) Merely because certain materials which is otherwise

tangible and enables the Assessing Officer to form a belief that

the income chargeable to tax has escaped assessment, formed

part of the original assessment record, per se would not bar

the Assessing Officer from reopening the assessment on the

basis of such material. The expression “tangible material”

does not mean the material alien to the original record.

(xiii) The order, disposing of objections or any counter affidavit

filed during the writ proceedings before the Court cannot be

substituted for the “reasons to believe.

(xiv) The decision to reopen the assessment on the basis of

the report of the Investigation Wing cannot always be

condemned or dubbed as a fishing or roving inquiry. The

expression “reason to believe” appearing in Section 147

suggests that if the Income Tax Officer acts as a reasonable

and prudent man on the basis of the information secured by

him that there is a case for reopening, then Section 147 can

well be pressed into service and the assessments be reopened.

As a consequence of such reopening, certain other facts may

come to light. There is no ban or any legal embargo under

Section 147 for the Assessing Officer to take into

consideration such facts which come to light either by

discovery or by a fuller probe into the matter and reassess the

assessee in detail if circumstances require.

(xv) The test of jurisdiction under Section 143 of the Act is not

the ultimate result of the inquiry but the test is whether the

income tax officer entertained a “bona fide” belief upon the

definite information presented before him. Power under this

section cannot be exercised on mere rumours or suspicions.

(xvi) The concept of “change of opinion” has been treated as a

built in test to check abuse. If there is tangible material

showing escapement of income, the same would be sufficient

for reopening the assessment.

(xvii) It is not necessary that the Income Tax Officer should

hold a quasi judicial inquiry before acting under Section 147. It

is enough if he on the information received believes in good

faith that the assesee's profits have escaped assessment or

have been assessed at a low rate. However, nothing would

preclude the Income Tax Officer from conducting any formal

inquiry under Section 133(6) of the Act before proceeding for

reassessment under Section 147 of the Act.

(xviii) The “full and true” disclosure of the material facts would

not include that material, which is to be used for testing the

veracity of the particulars mentioned in the return. All such

facts would be expected to be elicited by the Assessing Officer

during the course of the assessment. The disclosure required

only reference to those material facts, which if not disclosed,

would not allow the Assessing Officer to make the necessary

inquiries.

(xix) The word “information” in Section 147 means “instruction

or knowledge derived from the external source concerning the

facts or particulars or as to the law relating to a matter bearing

on the assessment. An information anonymous is information

from unknown authorship but nonetheless in a given case, it

may constitute information and not less an information though

anonymous. This is now a recognized and accepted source for

detection of large scale tax evasion. The non-disclosure of the

source of the information, by itself, may not reduce the

credibility of the information. There may be good and

substantial reasons for such anonymous disclosure, but the

real thing to be looked into is the nature of the information

disclosed, whether it is a mere gossip, suspicion or rumour. If

it is none of these, but a discovery of fresh facts or of new and

important matters not present at the time of the assessment,

which appears to be credible to an honest and rational mind

leading to a scrutiny of facts indicating incorrect allowance of

the expense, such disclosure would constitute information as

contemplated in clause (b) of Section 147.

(xx) The reasons recorded or the material available on record

must have nexus to the subjective opinion formed by the A.O.

regarding the escapement of the income but then, while

recording the reasons for the belief formed, the A.O. is not

required to finally ascertain the factum of escapement of the

tax and it is sufficient that the A.O had cause or justification to

know or suppose that the income had escaped assessment

[vide Rajesh Jhaveri Stock Brokers (P.) Ltd.'s case (supra)]. It is

also well settled that the sufficiency and adequacy of the

reasons which have led to the formation of a belief by the

Assessing Officer that the income has escaped the assessment

cannot be examined by the court.

25. The powers under section 147 of the Act are special

powers and peculiar in nature where a quasi-judicial order

previously passed after full hearing and which has otherwise

become final is subject to reopening on certain grounds.

Ordinarily, a judicial or quasi-judicial order is subject to appeal,

revision or even review if statute so permits but not liable to

be re-opened by the same authority. Such powers are vested

by the Legislature presumably in view of the highly complex

nature of assessment proceedings involving large number of

assessees concerning multiple questions of claims, deductions

and exemptions, which assessments have to be completed in

a time frame. To protect the interest of the revenue, therefore,

such special provisions are made under section 147 of the Act.

However, it must be appreciated that an assessment

previously framed after scrutiny when reopened, results into

considerable hardship to the assessee. The assessment gets

reopened not only qua those grounds which are recorded in

the reasons, but also with respect to entire original

assessment, of course at the hands of the revenue. This

obviously would lead to considerable hardship and

uncertainty. It is precisely for this reason that even while

recognizing such powers, in special requirements of the

statute, certain safeguards are provided by the statute which

are zealously guarded by the courts. Interpreting such

statutory provisions courts upon courts have held that an

assessment previously framed cannot be reopened on a mere

change of opinion. It is stated that power to reopening cannot

be equated with review.

26. At the cost of repetition, we shall once again look into the

reasons for the issue of notice under Section 148 of the Act.

The partnership firm is said to have purchased two immovable

properties for total sale consideration of Rs.83,13.060/-

including the registration and stamp charges. According to

the Assessing Officer, the 1/6th share of the writ applicant

herein, as one of the partners, comes to Rs.14,68,843/-. The

Assessing Officer proceeds on the footing as if all the partners

equally contributed for the purchase of the two properties.

The Assessing Officer, thereafter, proceeds on the footing

that the investment of Rs.14,68,843/- remains unexplained by

the writ applicant in his individual return filed by him in the ITR

Form:-ITR-4 for A.Y.201-13. The Assessing Officer, thereafter,

proceeds on the footing that in the case of a co-partner, the

assessment was reopened and an appeal before the CIT(A) is

pending against the assessment order. In such circumstances,

referred to above, the Assessing Officer, ultimately, concludes

that the writ applicant had failed to fully and truly disclose his

investment of his share in the two properties in his individual

return of income.

27. It is also the case of the Revenue that the partnership

firm had failed to file its return for the relevant assessment

year. Of course, in this regard, the Department thought fit

not to initiate any proceedings against the partnership firm

including any criminal prosecution.

28. A lot was argued on behalf of the Revenue as regards the

rights and liabilities of a partnership firm and also as regards

the legal status of a partnership firm. We may give a fair idea

in this regard by referring to few judgments.

29. In Addanki Narayanappa v. Bhaskara Krishnappa ,

1966 AIR 1300, the Supreme Court, while considering a

question of similar nature, held as under (page 1303) :

"From a perusal of these provisions it would be

abundantly clear that whatever may be the character of

the property which is brought in by the partners when

the partnership is formed or which may be acquired in

the course of the business of the partnership, it becomes

the property of the firm and what a partner is entitled to

is his share of profits, if any, accruing to the partnership

from the realisation of this property, and upon dissolution

of the partnership to a share in the money representing

the value of the property. No doubt, since a firm has no

legal existence, the partnership property will vest in all

the partners and in that sense every partner has an

interest in the property of the partnership. During the

subsistence of the partnership, however, no partner can

deal with any portion of the property as his own. Nor can

he assign his interest in a specific item of the partnership

property to any one. His right is to obtain such profits, if

any, as fall to his share from time to time and upon the

dissolution of the firm to a share in the assets of the firm

which remain after satisfying the liabilities set out in

Clause (a) and sub-clauses (i), (ii) and (iii) of Clause (b) of

Section 48."

30. So also in Malabar Fisheries Co. v. CIT, 1980 AIR 176,

the Supreme Court, while considering the provisions of

Sections 2(47), 34(3)(b) and 155(5) of the Income-tax Act, held

as under (head-note) :

"A partnership firm under the Indian Partnership Act,

1932, is not a distinct legal entity apart from the partners

constituting it and equally in law the firm as such has no

separate rights of its own in the partnership assets and

when one talks of the firm's property or the firm's assets

all that is meant is property or assets in which all

partners have a joint or common interest. It cannot,

therefore, be said that, upon dissolution, the firm's rights

in the partnership assets are extinguished. It is the

partners who own jointly or in common the assets of the

partnership and, therefore, the consequence of the

distribution, division or allotment of assets to the

partners which flows upon dissolution after discharge of

liabilities is nothing but a mutual adjustment of rights

between partners and there is no question of any

extinguishment of the firm's rights in the partnership

assets amounting to a transfer of assets within the

meaning of Section 2(47) of the Income-tax Act, 1961.

There is no transfer of assets involved even in the sense

of any extinguishment of the firm's rights in the

partnership assets when distribution takes place upon

dissolution."

31. The Madras High Court had an occasion to consider a

question of similar nature while dealing with Section 5(1)(iv) of

the Wealth-tax Act, 1957, in R. Venkatavaradha Reddiar R.

v. CWT, [1995] 214 ITR 76. In that decision, this court after

considering all the decisions on this aspect, culled out the legal

principles in the following manner (page 90) :

"(1) a firm has no legal existence and as such it cannot

hold any property ;

(2) it is the partners, who own the partnership property

as such;

(3) partners alone should have the benefit of the

exemption under Section 5(1)(iv), when their individual

assessments are taken up to the extent of their

respective shares in the net wealth of the partnership

firm ;

(4) the mere fact that a partner cannot claim to be

entitled to any portion of the property owned by a firm as

exclusively belonging to him will not completely

disentitle him from seeking the benefit of exemption

under Section 5(1)(iv) of the Act, so long as he is the

owner of the house property even though as a partner in

a firm ;

(5) For the purpose of the exemption under Section 5(1)

(iv), it is not necessary that the partner should be able to

say that the property or any specific part thereof

exclusively belongs to him."

32. The Madhya Pradesh High Court in Ratansi Narayan

Patel v. CIT, [1988] 173 ITR 547, while considering the

provisions of Sections 2(29), 2(42A) and 45 of the Income-tax

Act, 1961, held as under (headnote) :

"The whole concept of partnership is to embark upon a

joint venture and for that purpose to bring in as capital,

money or even property including immovable property

and once that is done, whatever is brought in would

cease to be the exclusive property of the person who

brought it in. A partner has no exclusive right over any

such property and he cannot also exercise any right in

such property even to the extent of his share in the

partnership because his right during the subsistence of

the partnership is to get his share of profits from time to

time as may be agreed upon among the partners and

after dissolution of the firm to get the value of his share

in the net partnership assets as on the date of

dissolution. These are restrictions over the right of

ownership of partners and they do not militate against

the legal position that the partners collectively own the

partnership property. The property really vests in the

partners collectively in proportion to their shares."

33. In CIT v. K. Saraswathi Ammal, [1981] 127 ITR 404,

this court, while considering the provisions of Section 85 of the

Income-tax Act, 1961, as modified by Section 31 of the

Finance Act, 1968, extracted a passage, which runs as under

(page 407) :

"The property of the firm' is statutorily defined in Section

14 of the Partnership Act ; the property that has been

brought in by the partners and the property that is

acquired by a firm will be the property of the firm.

According to Section 14 of the Partnership Act, when one

talks of the property of the firm, it has to be remembered

that a firm as such is not a legal entity ; nor can a firm as

such, according to the English concept, hold property.

This is the reason why the Supreme Court in two

decisions held that when the firm is dissolved and the

partnership assets are distributed among the partners,

there will be no transfers of the property of the firm in

favour of the partners so as to attract the provisions of

the Income-tax Act, for capital gains. The decisions are

CIT v. Bankey Lal Vidya , CIT v. Dewas Cine Corporation .

These two decisions clearly show that in general law, the

firm cannot be treated as the owner of the shares in

Kalinga Tubes Ltd. But, for the purpose of the Income-tax

Act, the firm has been made a legal entity just as a

person, as a firm is included in the definition of the term

'person' under the Income-tax Act. The firm is a separate

entity for the purpose of assessment and, therefore, a

firm will be entitled to the exemption under Section 85.

Whatever that be, we are not concerned with that now,

and we do not wish to express any opinion on that

matter. As far as the individuals who make up the

partners of the firm are concerned, we have no doubt

that the properties, which are called the assets of the

firm, really vest in the partners of the firm. This has also

been said by the Supreme Court in the decision in

Narayanappa v. Bhaskara Krishnnappa, ."

34 . In K.I. Viswambharan and Brothers v. CIT, [1973] 91

ITR 588, a Full Bench of the Kerala High Court, while

considering the provisions of Sections 45, 54(i) and 114 of the

Income-tax Act, 1961, Section 2 of the Finance (No. 2) Act,

1967, and Section. 14 of the Indian Partnership Act, 1932, held

(head-note) :

"That for purposes of assessment to tax, the Income-tax

Act treats a registered firm as an entity distinct from the

partners. Under the specific provisions of the Partnership

Act relating to the property of a firm and the judicial

pronouncements on the matter, a firm is legally

competent to own or hold property and also to deal with

such property. Any property or gain derived by a firm in

pursuance of the sale of a capital asset, owned or held by

the firm is, therefore, exigible to tax in accordance with

the relevant provisions of the Income-tax Act."

35. Thus, the ratio discernible from the aforesaid case law is

that the abstract proposition that the partnership is not a legal

entity is not correct. It is true that under the law of

partnership, a firm has no legal existence apart from its

partners and it is merely a compendious name to describe its

partners. But under the Income Tax Law, the position is

different. The firm and the partners are distinct assessable

entities. The law has thus for some specific purposes relaxed

its general rigid notions and extended a limited personality to

a firm. There is nothing in the partnership law to suggest that

a firm cannot be treated as an entity for the purpose of dealing

with the property.

36. Bearing the aforesaid in mind, we need to consider the

question whether or not the writ applicant was obliged in law

to disclose the investment alleged to have been made by him

in the partnership firm for the purpose of the purchase of the

two immovable properties. The answer to such question is

whether there had been a failure on the part of the writ

applicant to disclose fully and truly all material facts necessary

for the assessment. We are of the view that it would depend on

the nature of the obligation which is enjoined upon the

assessee in this regard by virtue of various provisions of the

Income Tax Act. If an assessee fails to disclose or furnish to

the Assessing Officer, all such facts and other related

information which he is obliged under the law to disclose, and

which are necessary for the purpose of making his assessment,

then surely he can be accused of having failed to disclose fully

and truly all the material facts for the purpose of his

assessment. It is a trite law by now commencing from the

decision of the Supreme Court rendered in the case of

Calcutta Discount Co. Ltd. vs. ITO, (1961) 41 ITR 191 that it is

always the duty of an assessee to disclose fully and truly all

primary facts, but not inferential facts, which are necessary

and relevant for the purpose of making the assessment by the

Assessing Officer. But, as stated above, the nature of

disclosure that the assessee is obliged to do so by the statute

will necessarily depend upon the nature of information or

disclosure that the assessee is obliged to do so by the statute.

In the instant case, originally, the assessee filed his return in

Form ITR-4 wherein the disclosure of investment is not requires

to be disclosed as writ applicant had disclosed his income on

presumptive basis under Section 44AD of the Act and his

assessment was completed accordingly for the relevant

assessment year. We are of the view that the writ applicant

was was not obliged to furnish any information as regards the

partnership firm or the investment if any in the partnership

firm. This issue, according to us, is not, at all, germane for the

purpose of Section 148 of the Act.

37. After the receipt of the return of income either under

Section 139(1) or under Section 139(2) the ITO has power

under Section 143(1) to make the assessment without

requiring the presence of the assessee or production by him of

any evidence. This means the ITO believes the assessee and

accepts the returned income without any inquiry about the

correctness or completeness of the return of income filed. If

the ITO is not satisfied about the correctness or completeness

of the income returned, he has been empowered under two

different provisions of the Act to embark upon an enquiry. One

provision is Section 142(1) of the Act which empowers the ITO

to issue a notice to an assessee and call for such information

on such points as he considers necessary for the purpose of

making assessment. Once such notice is issued by the ITO

under Section 142(1) it is incumbent upon the assessee to

furnish and disclose all such information as is required and

demanded by the ITO. The other provision is Section 143(2) of

the Act which also empowers the ITO to issue a notice to any

person who has filed the return either under Section 139(1) or

under Section 139(2) to appear or cause appearance and to

produce before him any evidence as the assessee may rely in

support of the return filed. The notices under Section 142(1)

and under Section 143(2) are issued to ensure that the income

declared in the return is correct and complete. After issue of

notices under Sections 142 and 143 the ITO is then expected

to make the assessment after taking into consideration such

evidence as the person concerned wanted to produce as also

such other evidence as he might have directed the assessee to

produce on the points raised by him. On analysing these

provisions we see that the beginning is made in this process of

assessment by the filing of return by the assessee and he is

obliged and commanded to furnish such particulars of his

income as are laid down and mentioned in the various columns

of the return of income form prescribed by the relevant rules.

In other words, the assessee is required to truly and fully

supply the information and other particulars sought for in the

various columns of the prescribed form of return of income.

Now if the Assessing Officer was of the opinion that the

Information conveyed as per the prescribed form of return of

income was complete, correct and sufficient for making the

assessment, he could proceed and assess the person filing the

return on the basis of such return and at that stage no

question, of the assessee furnishing any information other than

that required to be furnished in the prescribed form of return,

could arise. It, therefore, follows that if the assessee discloses

true and full information which he is required to supply in the

prescribed form of return no question of his failing to disclose

any other particulars of his income at that stage could arise.

Then the next stage in the process of making an assessment

upon a person was where a return is filed by him in the

prescribed form but the ITO felt that the information conveyed

by such person in the prescribed return form was inadequate

and required further inquiry and verification for the purpose of

making assessment, the ITO then acts by issuing notices,

requiring the assessee to produce such evidence, material,

particulars or information either upon his direction under

Section 142(1) or under Section 143(2) directing the assessee

to produce such evidence as he (assessee) may rely in support

of the return filed. It is at this third and crucial stage when the

assessee is required by the ITO to elucidate on some particular

points that the assessee has been obliged to disclose truly and

fully all necessary facts in respect of those points to enable the

assessing officer to make a valid and proper assessment.

Therefore, unless this third stage was reached there can be no

obligation on an assessee to disclose and produce any

evidence in respect of points other than those in respect of

which the assessee was, as provided in the form of return,

obliged to furnish.

38. As far back as 1969 the Supreme Court was concerned

with a question whether or not an assessee is bound to

disclose in its return information which is relevant for his

assessment but which is not specifically required to be

supplied or furnished in the prescribed form, came up for

consideration in the case of V.D.M.RM.M.RM. Muthiah Chettiar

(supra). In that case one Muthiah who had been assessed to

income-tax in respect of his share in the income of a firm as

also income from other sources, while disclosing the amount of

income from the firm received by his sons did not disclose the

facts that they were minors. The ITO while assessing Muthiah

did not include in his income the share income of the minor

sons received from the firm in which Muthiah was a partner as

provided in Section 16(3)(a)(ii) of the Income-tax Act, 1922.

After the completion of the assessment the ITO realised that

the share income of the minor sons from the partnership firm

in question was liable to be included in the income of Muthiah

under the provisions of Section 16(3)(a)(ii) of the 1922 Act. The

Assessing Officer, therefore, initiated proceedings under

Section 34(1)(a) of the 1922 Act [corresponding to Section

147(a) of the Income-tax Act, 1961] on the ground that the

information given by Muthiah in his return was not full in the

sense that he had not stated therein that his three sons who

had received a share in the income of the partnership firm

were in fact, minors. After examining the facts of the case the

Hon'ble Supreme Court held that Muthiah was not guilty of

failure to disclose true and full facts relating to his assessment.

The Supreme Court observed at p. 187 as under:

"The Act and the Rules accordingly impose no obligation

upon the assessee to disclose to the ITO in his return

information relating to income of any other person by law

taxable in his hands. “

39. It was then held by the Supreme Court in the said case

that the Assessing Officer cannot resort to Section 34(1)(a) of

the 1922 Act and reopen the assessment. This judgment of the

Supreme Court was followed by the Hon'ble Calcutta High

Court in the cases of Radheshyam Ladia v. ITO [1971] 82

ITR247and also Madanlal Maheswart v. ITO[1973] 87 ITR 295.

40. The aforesaid observations made by the Supreme Court

clearly make out that while filing a return an assessee is not

bound or obliged to disclose any information in relation to any

fact other than what is required to be supplied and furnished

by him in the various columns of the prescribed form of return

of income or which he is bound under the provisions of the Act

to furnish even though that fact may otherwise be relevant for

the purpose of his assessment. For the simple reason that such

information has not been furnished in the return it would not

mean that the assessee had failed or omitted to disclose fully

and truly all material facts which are necessary for the purpose

of his assessment.

41. In the aforesaid context, we may also refer to a decision

of this High Court in the case of Bhavik Bharatbhai Padia

vs. Income Tax Officer Ward 3(3)(1), rendered in the

Special Civil Application No.17021 of 2018, decided on

19.08.2019. One of us J.B. Pardiwala, J., speaking for the

Bench, observed as under;

“16. It is not in dispute that the form of return of income

i.e. ITR2, then in force had no separate column for the

disclosure of any investment. The question is whether

the assessee was under any legal obligation to disclose

about his investment of Rs.50,00,000/in the LIC policies.

In the aforesaid context, we would like to refer to and

rely upon a decision of the Supreme Court in the case of

CIT Vs. Smt. P.K. Kochammu Amma reported in [1980]

125 ITR 624 (SC).

17.In that case, the assessee filed her return for the

assessment year 196465, disclosing therein income from

property and income from other sources and against

item (b), under the column “Profits and gains of business

and profession” stated: “please ascertain from the firms’

files”.

Though the prescribed form of return did not contain a

separate column for that purpose, there was a note in

the return stating that, if the income of any other person

is includible in the total income of the assessee under the

provisions of the Incometax Act, 1961, inter alia, of

Section 64, such income should also be shown under the

appropriate head. The respondent, however, did not

show in the return the amounts representing the shares

of her husband and minor daughter in the two firms,

though they were includible in her total income under

Section 64(1)(I) and (iii). The question was whether

penalty could be imposed on the respondent under

Section 271(1)(c), on the ground that the assessee had

concealed the particulars of her income because she had

not shown the shares of her husband and her minor

daughter in the two firms as forming part of the total

income in the return submitted by her. The Supreme

Court held (at page 627):

“There is a decision of this court which is directly in point

and it concludes the determination of the question

arising in this appeal against the Revenue but before we

refer to that decision, we might first examine the

question on principle as a matter of pure interpretative

exercise. Section 271, Subsection (1), Clause (c),

provides for imposition of penalty on an assessee if it is

found, inter alia, that the assessee has concealed the

particulars of ‘his income’. The question is what is the

scope and content of the words ‘his income’ occurring in

this penal provision. Do they refer only to the income of

the assessee himself or do they also take in the income

of others which is liable to be included in the

computation of the total income of the assessee by

reason of the relevant provisions of the Act, such as

Section 64, Subsection (1), Clauses (I) and (iii) ? The

answer to this question obviously depends upon as to

what is ‘his income’ which the assessee is liable to

disclose for the purpose of assessment, for, concealment

can only be of that which one is bound to disclose and

yet fails to do so. Section 139 provides for filing of a

return of income by an assessee and Subsection (1) of

this section lays down that every person whose total

income during the previous year exceeds the maximum

amount which is not chargeable to income tax, shall

furnish a return of his income in the prescribed form and

verified in the prescribed manner, and setting forth such

other particulars as may be prescribed. The return of

income is required to be filed in order to enable the

Revenue authorities to make a proper assessment of tax

on the assessee. It must, therefore, follow a fortiori that

the assessee must disclose in the return every item of

income which is liable to be taxed in his hands as part of

his total income. The charge of income tax is levied by

Section 4 on the total income of the assessee, and ‘total

income’ is defined in Section 2, Subsection (45), to mean

‘the total amount of income referred to in Section 5

computed in the manner laid down’ in the Act. It is no

doubt true that the definition of ‘total income’ in Section

2, Subsection (45), refers to Section 5 and this latter

provision lays down that all income, profits and gains

accrued or arising to the assessee or received by or on

behalf of the assessee shall be liable to be included in his

total income but this provision is subject to the other

provisions of the Act, and, therefore, if the income of any

other person is declared by any provision of the Act to be

includible in computing the total income of the assessee,

such income would form part of the total income exigible

to tax under Section 4 of the Act. Now, Section 64,

Subsection (1), is one such provision which provides for

inclusion of the income of certain other persons in

computing the total income of an assessee. Clauses (I)

and (iii) of this subsection provide that in computing the

total income of an assessee there shall be included all

such income as arises directly or indirectly to the spouse

of such assessee from the membership of the spouse in a

firm carrying on a business in which such individual is a

partner as also to a minor child of such assessee from

the admission of the minor to the benefits of the

partnership firm. It is clear from this provision that

though the share of the spouse or minor child in the

profits of a partnership firm in which the assessee is a

partner is not the income of the assessee but is the

income of such spouse or minor child, it is liable to be

included in computing the total income of the assessee,

and it would be assessable to tax in the hands of the

assessee. The total income of the assessee chargeable to

tax would include the amounts representing the shares

of the spouse and minor child in the profits of the

partnership firm. If this be the correct legal position,

there can be no doubt that the assessee must disclose in

the return submitted by him, all amounts representing

the shares of the spouse and minor child in the profits of

the partnership firm in which he is a partner, since they

form part of his total income chargeable to tax. The

words ‘his income’ in Section 139, Subsection (1), must

include every item of income which goes to make up his

total income assessable under the Act. The amounts

representing the shares of the spouse and minor child in

the profits of the partnership firm would be part of ‘his

income’ for the purpose of assessment to tax and would

have to be shown in the return of income filed by him.

The assessee then contended that the return of income

which was required to be filed by her under Section 139,

Subsection (1), was a return in the prescribed form and

the form of the return prescribed by Rule 12 of the

Incometax Rules, 1962, did not contain any column for

showing the income of the spouse and minor child which

was liable to be included in the total income of the

assessee under Section 64, Subsection (1), Clauses (I)

and (iii), and there was, therefore, no obligation on the

assessee to disclose this income in the returns filed by

her. This contention is also, in our opinion, fallacious and

deserves to be rejected. It is true that the form of return

prescribed by Rule 12, which was in force during the

relevant assessment year did not contain any separate

column for showing the income of the spouse and minor

child liable to be included in the total income of the

assessee, but did contain a note stating that if the

income of any other person is includible in the total

income of the assessee under the provisions, inter alia, of

Section 64, such income should also be shown in the

return under the appropriate head. This note clearly

required the assessee to show in the return under the

appropriate head of income, namely, ‘profits and gains of

business or profession’, the amounts representing the

shares of the husband and minor daughter of the

assessee in the profits of the two partnership firms. But

even so, the assessee failed to disclose these amounts in

the return submitted by her and there was, therefore,

plainly and manifestly a breach of the obligation imposed

by Section 139, Subsection (1), requiring the assessee to

furnish a return of her income in the prescribed form. It is

difficult to see how the note in the prescribed form of the

return could be ignored by the assessee and she could

contend that, despite the note, she was not liable to

show in her return the amounts representing the shares

of her husband and minor, daughter in the two

partnership firms. The contention of the assessee, if

accepted, would render the note meaningless and futile

and turn it into dead letter and that would be contrary to

all recognised canons of construction. There can be no

doubt that the assessee was bound to show in her return

the amounts representing the shares of her husband and

minor daughter in the two partnership firms and in failing

to do so, she was guilty of concealment of this item of

income which plainly attracted the applicability of

Section 271, Subsection (1), Clause (c).”

18.Although, on this view, the order imposing penalty on

the assessee could have been sustained but, in view of

the decision of the Supreme Court in V.D.M.RM.M.RM.

Muthiah Chettiar v. CIT [1969] 74 ITR 183, which is a

larger Bench decision where a different view had been

taken by a Bench of three judges of the Supreme Court,

the contention of the assessee that imposition of penalty

in his case is illegal had to be upheld. There, the

Supreme Court proceeded to hold (at page 629 of 125

ITR):

“It was held in this case (Muthiah Chettiar) that even if

there were any printed instructions in the form of the

return requiring the assessee to disclose the income

received by his wife and minor child from a firm in which

the assessee was a partner, there was, in the absence in

the return of any head under which the income of the

wife or minor child could be shown, no obligation on the

assessee to disclose this item of income, and the

assessee could not be deemed to have failed or omitted

to disclose fully and truly all material facts necessary for

his assessment within the meaning of Section 34(1)(a) of

the Indian Income tax Act, 1922. With the greatest

respect to the learned judges who decided this case, we

do not think, for reasons already discussed, that this

decision lays down the correct law on the subject, and

had it not been for the fact that since July 1, 1972, the

form of the return prescribed by Rule 12 has been

amended and since then, there is a separate column

providing that ‘income arising to spouse/minor child or

any other person as referred to in Chapter V of the Act’

should be shown separately under that column and

consequently there is no longer any scope for arguing

that the assessee is not bound to disclose such income in

the return to be furnished by him, we would have

referred the present case to a larger Bench. But we do

not propose to do so since the question has now become

academic in view of the amendment in the form of the

return carried out with effect from July 1, 1972. We

would, therefore, follow this decision in Muthiah

Chettiar’s case , which being a decision of a Bench of

three judges of this court, is binding upon us, and

following that decision, we hold that the assessee could

not be said to have concealed her income by not

disclosing in the return filed by her the amounts

representing the shares of her husband and minor

daughter in the two partnership firms.”

The next decision cited is in ITO v. Radheshyam Ladia.

There the Supreme Court affirmed the decision of the

Calcutta High Court in Radheshyam Ladia v. ITO [1987]

166 ITR 135 which was relied on by the Appellate

Assistant Commissioner, In Radheshyam Ladia [1987]

166 ITR 135 (SC), the assessment years involved were

196061, 1961-62 and 196263. The Supreme Court

followed the decisions in Smt. P.K. Kochammu Amma and

Muthiah Chettiar’s case in and Malegaon Electricity Co. P.

Ltd’s case . The Supreme Court extracted the aforesaid

passage from Smt P. K. Kochammu Amma and observed

(at page 141 of 166 ITR):

“We agree with what has been stated in Kochammu

Amma’s case , and for the reasons indicated therein, we

do not propose to refer the case to a larger Bench.

Following the law as laid down in the two cases in

Muthiah Chettiar’s case and Malegaon Electricity Co. P.

Lid’s case , we dismiss this appeal.”

19. The aforesaid two decisions of the Supreme Court

have been referred to and relied upon by the Calcutta

High Court in the case of Commissioner Of IncomeTax Vs.

Sarala Devi Birla reported in [1993] 203 ITR 953

(Calcutta).

20.In the said case before the Calcutta High Court, the

original assessment for the relevant assessment year

was completed under Section 143(3) of the Act. Later,

the reassessment was made on a higher income. The

assessee had given a cash gift to her minor daughter and

the said amount was invested in shares. The Income tax

Officer was of the view that the income arising from the

assets transferred to the minor child was to be treated as

the income of the individual under Section 64(4) of the

Act and, therefore, such income had escaped assessment

due to failure on the part of the assessee to disclose fully

and truly all material facts necessary for assessment.

Since such income was not disclosed in the original

return, the Income tax Officer initiated reassessment

proceedings under Section 147(a) and included the

capita gains arising on the transfer of shares and

dividend income from the shares in the total income

already determined. On appeal, the Assistant

Commissioner held that the Income tax Officer had no

jurisdiction to reopen the assessment under Section

147(a) of the Act. On revenue’s appeal, the tribunal

affirmed the order of the Appellant Assistant

Commissioner. The Revenue went in appeal before the

High Court. The High Court framed the following two

substantial questions of law for consideration:”

1. Whether, on the facts and in the circumstances of

the case, the Tribunal is right in law in holding that the

assessee was under no obligation to disclose in her

return of income, the income of her minor daughter?

2. Whether, on the facts and in the circumstances of

the case, and on a correct interpretation of Section 64(4)

of the Income tax Act, 1961, the Tribunal misdirected

itself in law in holding that the Income tax Officer was not

justified in reopening the assessment of the assessee

under Section 147(a) of the Income tax Act, 1961, in

respect of her omission or failure to disclose the income

of her minor daughter in her own assessment ?”

21.The first question came to be answered in the

affirmative and the second question in the negative and

both in favour of the assessee. The observations made

by the learned Judge of the Calcutta High Court are as

under:

10.Mr. Bajoria, learned counsel for the assessee,

contended that the principles laid down in the aforesaid

decisions of the Supreme Court will govern this case as

the assessment year involved in one of the decisions was

196263 and in the other 196465. This is, however, not

relevant. The question is whether, at the material time,

when the return was filed by the assessee, the form of

return contained a separate column to include the

income under Section 64. The Supreme Court in

Kochammu Amma [1980] 125 ITR 624 mentioned that

the amendment in the form of return was carried out

with effect from April 1, 1972, long after the original

return was filed in this case.

11.It appears that the Income tax (Second Amendment)

Rules, 1967, came into force with effect from April 1,

1967. Rule 12 of the Incometax Rules has been amended

by the said amendment which provides as follows (see

[1967] 64 ITR (St.) 13):

“12. Return of income.(1) The return of income required

to be furnished under Subsection (1) or Subsection (2) or

Subsection (3) of Section 139 shall,

(a) in the case of a company, be in Form No. 1 and be

verified in the manner indicated therein;

(b) in the case of a person not being a company, be in

Form No. 2 and be verified in the manner indicated

therein; Provided that in the case of a person, not being a

company or a cooperative society or a local authority,

whose total income (as computed by such person) does

not exceed fifteen thousand rupees, the return of income

may be furnished in Form No. 3 and shall be verified in

the manner indicated therein.

(2) Notwithstanding anything contained in Subrule (1),

(a) where a return of income relates to the assessment

year commencing on April 1, 1961, or any earlier

assessment year, it shall be furnished in the appropriate

form prescribed in Rule 19 of the Indian Income tax

Rules, 1922, and shall be verified in the manner

indicated therein;

(b) where a return of income relates to the assessment year

commencing on April 1, 1962, or April 1, 1963, or April 1,

1964, it shall be furnished in the appropriate form in

force immediately before April 1, 1967, and shall be

verified in the manner indicated therein.”

12. Thus, for the assessment year 196263, the old

return form which was considered by the Supreme Court

in those decisions remained in force.

13. The return form which has been prescribed by the

said Amendment of 1967 Rules, also contains a note

which is as follows : “3. If the income of any other person

is includible in your total income under the provisions of

Section 60, 61, 62, 63 or 64 of the Incometax Act, 1961,

such income should also be shown in this return under

the appropriate heads.”

14. But no separate column has been provided for

inclusion of the income under Section 60, 61, 62, 63 or

64 of the Incometax Act, 1961.

15. The rules were amended by the Incometax

(Amendment) Rules, 1971, which came into force on April

1, 1971. In the return form prescribed by the Rules, there

is no separate column indicated but only a note was

appended being Note No. 1 which is as follows : “If the

income of any other person is includible in your total

income under the provisions of Section 60, 61, 62, 63 or

64 of the Incometax Act, 1961, such incomes should also

be shown separately in this return under the appropriate

heads.”

16.Surprisingly, even after the judgment of the Supreme

Court in V.D.M.RM.M.RM. Muthiah Chettiar v. CIT [1969]

74 ITR 183, the Central Board of Direct Taxes, while

amending the Rules, did not provide any separate

column for inclusion of the income under Section 64 of

the Act. In V.D.M.RM.M.RM. Muthiah Chettiar v. CIT , a

similar note was considered by the Supreme Court and it

was held that, in the absence of any head under which

the income of the wife or minor child of a partner whose

wife or minor child was a partner in the same firm, could

be shown, by not showing that income, the taxpayer

cannot be deemed to have failed or omitted to disclose

fully and truly all material facts necessary for his

assessment ; it is only by the Incometax (Second

Amendment) Rules, 1972, which came into force on July

1, 1972, in the return form prescribed thereunder, a

column has been added being column 12(b) where

income arising to spouse/minor child or any other person

as referred to in Chapter V of the Act is required to be

shown. This amendment was noticed by the Supreme

Court in Kochammu Amma [1980] 125 ITR 624.

17.In our view, therefore, at the material time when the

original return was filed by the assessee some time in

1962, the form of return in force did not provide for any

separate column to disclose the income arising under

Section 64 of the Act. Even assuming that there was

escapement in the subsequent return filed in 1968, in

response to the notice under Section 148 read with

Section 147(b), the position would not be different

inasmuch as the 1967 Rules, which came into force with

effect from April 1, 1967, did not also provide for any

separate column for inclusion of such income under

Section 64 of the Act. On the contrary, the form with a

note continued to remain in force until a new form with a

separate column came into force with effect from July 1,

1972.

18.For the reasons aforesaid and in view of the principles

laid down by the Supreme Court as mentioned

hereinbelow, it must be held that there was no omission

or failure on the part of the assessee to disclose all her

income.

23.Applying the aforesaid principle of law to the facts of

the present case, we are of the view that the impugned

notice for reopening of the assessment is not sustainable

in law.”

42.. We are not convinced with the argument canvassed on

behalf of the Revenue that once an addition has been made

in the hands of one of the partners of the firm and affirmed by

the CIT (A), it should necessarily follow with respect to the

other partners also. We take notice of the fact that in the case

of one of the partners, namely, Shree Hasitkumar Bhatt, the

concerned Assessing Officer, after considering the reply filed

by him, dropped the reassessment proceedings. In the case of

one another partner, namely, Harshitkumar Devendrakumar

Bhatt, the inquiry in respect of the very same properties was

made by the concerned Assessing Officer vide notice dated

11th March, 2019. Pursuant thereto, the said assessee filed his

reply dated 19th March, 2019, pointing out that such properties

were purchased by the partnership firm (M/s. Shree Khodiyar

Developers) and the sale consideration was paid by the said

firm. Having regard to such reply, the Assessing Officer

thought fit not to initiate the reassessment proceedings in his

hands.

43. In our opinion, there is no escapement of income

chargeable to tax. The conditions precedent for resorting to

reassessment under Section 147 of the Act are not satisfied in

the present case. Just because the partnership firm failed to

file its return of income for the relevant year, by itself, will not

confer jurisdiction upon the authority concerned to issue

notice against the individual partners of the firm with respect

to their individual return of income for the relevant year in

consideration.

44. The aforesaid takes us to consider the arguments of the

learned senior standing counsel appearing for the Revenue as

regards Section 150 of the Act. Section 150 reads thus;

“150. Provision for cases where assessment is in

pursuance of an order on appeal, etc.

(1) Notwithstanding anything contained in section 149,

the notice under section 148 may be issued at any time

for the purpose of making an assessment or

reassessment or re-computation in consequence of or to

give effect to any finding or direction contained in an

order passed by any authority in any proceeding under

this Act by way of appeal, reference or revision 1 or by a

court in any proceeding under any other law].

(2) The provisions of sub- section (1) shall not apply in

any case where any such assessment, reassessment or

recomputation as is referred to in that sub- section

relates to an assessment year in respect of which an

assessment, reassessment or recomputation could not

have been made at the time the order which was the

subject- matter of the appeal, reference or revision, as

the case may be, was made by reason of any other

provision limiting the time within which any action for

assessment, reassessment or recomputation may be

taken.”

45. Section 149 of the Act prescribes the maximum period of

four or six years depending upon the quantum of tax as

mentioned in the said section for initiating the reassessment

proceedings. Section 150 (1) of the Act, referred to above,

states that the period of limitation prescribed in Section 149 is

not applicable if the reassessment is proposed on the basis of

any order passed by “any authority in any proceedings under

the Act by way of appeal, reference or revision” or “by a Court

in any proceeding under any other law”. Sub-section (2) of

Section 150, however, makes it clear that the reassessment

permissible under sub-section (1) of section 150 would not be

applicable to the Department where the period of limitation for

such assessment or reassessment has expired at the time it

proposes to be reopened.

46. The plain reading of Section 150 reveals that it deals with

a situation where an assessment or re-assessment for a

particular year or for a particular person is necessitated by an

order passed by an appellate or revisional authority or on a

reference. In such cases, it may not be possible for the

Revenue to adhere to the time limits prescribed under Section

149, as the order of appeal, reference or revision or by a Court,

proceeding under any other law may be passed beyond the

period contemplated under section 149. It is for this reason,

the legislature has not placed any time limit for making the

assessment or re-assessment in such circumstances and for

this reason, Section 150 begins with a non-obstante clause. At

the same time, it does not mean that the power under Section

150(1) is uncanalised or unrestricted. The safeguard has been

built under Sub-section (2) of Section 150. The entire object of

Section 150 (2) is to bar the proceedings under Sub-Section (1)

in the matter of assessment/re-assessment or re-computation,

which has become the subject matter of the reference or

revision by reason of any other provisions limiting the time

limit. Section 150 (1) provides that the power to issue notice

under Section 148 in consequence of or giving effect to any

finding or direction of the Appellate/Revisional Authority or the

Court, is subject to the provision contained in Section 150(2),

which provides that directions under Section 150(1) cannot be

given by the Appellate/Revisional Authority or the Court if on

the date on which the order impugned in the appeal/revision

was passed, the re-assessment W.P.(C) 11452/2017 Page 31 of

34 proceedings had become time barred. In other words, as

per section 150(2), the Appellate Authority could give

directions for the re-assessment only in respect of an

assessment year, which was within the limitation stipulated

under Section 148 in respect of which re-assessment

proceedings could be initiated on the date of passing of order

under appeal.

47. At this stage, we may refer to a decision of the Supreme

Court in the case of Commissioner of Income-Tax, Shimla

vs. The Green World Corporation, Parwanoo, (2009) 7

SCC 69. In para-45 of the judgment, the Court, after quoting

Section 150 of the Act, has observed as under:

“The aforementioned provision although appears to be of

a very wide amplitude, but would not mean that recourse

to reopening of the proceedings in terms of Sections 147

and 148 of the Act can be initiated at any point of time

whatsoever. Such a proceeding can be initiated only

within the period of limitation prescribed therefor as

contained in Section 149 of the Act.

Section 150 (1) of the Act is an exception to the

aforementioned provision. It brings within its ambit only

such cases where reopening of the proceedings may be

necessary to comply with an order of the higher

authority. For the said purpose, the records of the

proceedings must be before the appropriate authority. It

must examine the records of the proceedings. If there is

no proceeding before it or if the Assessment year in

question is also not a matter which would fall for

consideration before the higher authority, Section 150 of

the Act will have no application. “

48. In our opinion, the argument canvassed on behalf of the

Revenue that this Court may permit the Department to invoke

Section 150 of the Act for the purpose of proceeding against

the partnership firm for the relevant year is not at all palatable

or rather sustainable in law.

49. In the overall view of the matter, we have reached to the

conclusion that the decision to reopen the assessment is not

just and proper.

50. In the result, this writ application succeeds and is hereby

allowed.

(J. B. PARDIWALA, J)

(ILESH J. VORA,J)

Calcutta HC in the case of Nowrangroy Agro Private Limited Versus Union of India

  Calcutta HC in the case of Nowrangroy Agro Private Limited Versus Union of India Case Covered:   Nowrangroy Agro Private Limited   ...