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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
Dhiraj Singh Thakur, Valmiki Sa Menezes, JJ.
Sahebrao Deshmukh Co-op. Bank Ltd - Appellant
Versus
Assistant Commissioner Of Income Tax & Ors. - Respondents
Writ Petition No. 3259 of 2022
Decided On : 10-02-2023
Income Tax - Challenge to order under Section 148 of the Income Tax Act, 1961 - [Reserve Bank of India Act, 1934, Section 148, Section 143(3), Section 156, Section 271(1)(c)] - The court found that the Assessing Officer acted in gross violation of the directions in a previous judgment and in contravention of the provisions of Article 14 of the Constitution of India. The impugned orders were quashed and set aside, and the matter was remanded back to the Assessing Officer to provide the Petitioner with the necessary documents and material and to comply with specific directions before passing new orders.
Fact of the Case:
The Petitioner, a Co-operative Bank, challenged orders related to the reopening of assessment and subsequent assessment orders issued by the Respondent No.2. The main ground for challenge was the lack of opportunity for a hearing and non-compliance with the principles of natural justice. The Petitioner also claimed to be governed by the provisions of the Reserve Bank of India Act, 1934.
Finding of the Court:
The court found that the Assessing Officer had acted in gross violation of previous directions and in contravention of the provisions of Article 14 of the Constitution of India. Consequently, the impugned orders were quashed and set aside.
Issues: The main issue was the lack of opportunity for a hearing and non-compliance with the principles of natural justice. The Petitioner also raised specific objections regarding the documents and material required for the assessment process.
Ratio Decidendi: The court applied the ratio of a previous judgment and specific directions contained therein to conclude that the Assessing Officer had acted in gross violation of the directions and in contravention of the provisions of Article 14 of the Constitution of India.
Final Decision: The impugned orders were quashed and set aside, and the matter was remanded back to the Assessing Officer to provide the Petitioner with the necessary documents and material and to comply with specific directions before passing new orders.
JUDGMENT
Valmiki Sa Menezes, J. - This is a writ petition invoking this Court's power under Article 226 of the Constitution of India to challenge order dated 31.03.2021, passed under Section 148 of the Income Tax Act, 1961 (hereinafter referred as 'the Act'), and further challenge to order dated 22.03.2022, rejecting the Petitioner's objections to reopening of the assessment, Assessment Order dated 31.03.2022, passed under Section 147 read with Section 143(3) of the Act, Notice of Demand dated 31.03.2022, issued under Section 156 of the Act, and Penalty Notice dated 31.03.2022, issued under Section 271(1)(c) of the Act, issued by Respondent No.2.
2. Rule. By consent of the parties, Rule is made returnable forthwith and the petition is heard finally.
3. The main ground for challenge in this petition is, that the Respondent No.2 - The Assistant Commissioner of Income Tax, Central Circle 7(2), whilst dealing with the objections filed by the Petitioner to the notice for reopening of assessment and the final order of assessment dated 31.03.2022 alongwith the notice of demand and penalty notice are issued without giving an opportunity of hearing to the Petitioner in the matter and all are passed contrary to the principles of natural justice.
4. It is the Petitioner's case that it is a Co-operative Bank providing financial and banking services, and for that purpose, it is governed by the provisions of the Reserve Bank of India Act, 1934, and directions given by the Reserve Bank of India under that Act. It is further the Petitioner's case that for the Financial Year 2012-13, relevant to the Assessment Year 2013-14 to which, this petition pertains, the Respondent No.1 - The Assistant Commissioner of Income Tax, Central Circle 7(4), Mumbai, issued a Notice dated 31.03.2021, under Section 148 of the Act, claiming that it had reason to believe that the Petitioner's income chargeable to tax for the relevant Assessment Year 2013-14 had escaped assessment. By that notice, the Petitioner was called upon to file a return in the prescribed form, within 30 days from the service of the notice. The Notice also claimed that it was being issued after obtaining necessary satisfaction of the Principal Commissioner of Income Tax (Central), Mumbai-4.
5. Thereafter, the Respondent No.2 issued a Notice dated 26.01.2022, under the provisions Section 142(1) of the Act, calling upon the Petitioner to furnish on or before 1. 02.2022, the accounts and documents, details of which were provided in an annexure to the said Notice.
In its reply dated 27.01.2022 filed online to the portal of the Income Tax Department, the Petitioner replied to both, Notice dated 26.01.2022 issued under Section 142(1) of the Act, and with reference to Notice under Section 148 dated 31.03.2021, requested the Respondent No.2 to furnish copy of the reasons for believing that the income chargeable to tax had escaped assessment; in the said reply, it also stated that the Petitioner - Co-op. Bank had filed its regular return of income in electronic form on 26.09.2013, declaring an income of Rs.7,65,40,780/- under Section 143(1) of the Act, and Assessment Order dated 17.03.2016 had come to be passed thereon. On the same date, the Petitioner also filed its return of income.
6. By Notice dated 05.02.2022, the Respondent No.2 provided reasons to the Petitioner with the information sought, which was in the form of an Annexure, and further clarifications, which were detailed in an Annexure to that Notice, wherein it alleged that based upon survey conducted under Section 133A carried out on 14.12.2016 at the premises of Shri Shripal Vora at Bhavnagar, unaccounted cash was seized from that premises and from a statements on oath recorded under Section 131 of the Act, from the said Vora, it came to be revealed that the Petitioner was involved in accommodation entry business and charging commission @ 2.75% of the transaction or accommodation entry provided. After receiving this information, the Petitioner -
The main legal point established in the judgment is the requirement for the Assessing Officer to comply with specific directions and principles of natural justice in the assessment process.
Reopening of assessment under the Income Tax Act after four years is impermissible without failure to disclose material facts; mere change of opinion does not justify such action.
The challenge to a notice and order for reopening of assessment is maintainable when there is no statutory remedy available under the Act. Non-supply of material forming the basis for reopening the a....
Reopening of assessment under the Income Tax Act requires fresh tangible information; reliance on previously available data constitutes a change of opinion, which is impermissible.
Reopening of assessment beyond four years without fresh tangible material or proper disposal of objections is illegal under the Income Tax Act.
The assessment order was quashed due to violations of natural justice and failure to follow mandatory procedures under Section 144B of the Income Tax Act.
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