The main legal point established in the judgment is that the jurisdictional conditions for invoking section 147 – 148 of the Income-tax Act, 1961 must be satisfied, and there should be no failure to disclose material facts fully and truly. The court emphasized the importance of the AO carefully examining the material and providing reasons to believe otherwise, and highlighted the principles of 'shifting of onus' under the evidence act.

JUDGMENT :

KAMAL KHATA, J.

1. This Petition under Article 226 of the Constitution of India challenges the notice under section (u/s) 148 of the Income-tax Act, 1961 (‘Act’) dated 9th March 2015 issued by Respondent No.1 for reopening of assessment for assessment year (‘A.Y.’) 2008-09 and the order dated 21st January 2016, rejecting the objections raised by Petitioner to the notice issued to re-assess the income.

2. Rule was issued on 16th April 2016. No reply filed till date.

FACTS:

3. Petitioner a partnership firm filed its return of income for AY 2008-09 on 15th September 2008. It’s case was selected for scrutiny and a Notice u/s 143(2) was issued on 19th August 2009. Thereafter, by a notice u/s 142(1) dated 12th July 2010 a questionnaire seeking details regarding loans and advances of secured and unsecured loans with names /address details, interest payment, loan confirmation details of unsecured loans, details of source and capacity of creditor, complete address of creditor with PAN and bank statements were sought. All queries were answered with particulars and supporting documents. An assessment order u/s 143(3) was passed on 29th October 2010.

4. After four years, Respondent No.1 issued a notice dated 9th March 2015 under section u/s 148 of the Act, to reopen the assessment which was responded by letter dated 8th April 2015. After supplying (i) the notice u/s 142(1) and (ii) recorded reasons, matter was fixed for hearing on 21st August 2015. Petitioner filed its objections on 11th September 2015 and pointed out that: (a) all material facts were fully and truly disclosed in the original assessment, (b) original assessment was completed u/s 143(3), (c) no fresh or tangible material for re-opening beyond 4 years was found, (d) re-opening was based on mere change of opinion, (e) information, which was the basis for, ‘reasons recorded’ was not made available, (f) the case of M/s Rushabh Enterprises in Writ Petition No. 167/2015, part of the same group, with similar facts and reasons, be considered.

5. Respondent No.1 selectively reproduced and dealt with the objections whilst passing an order dated 21st January 2016, rejecting objections.

6. Petitioner has, therefore filed the present Petition, challenging impugned notice and impugned order issued by Respondent No.1.

7. Respondent No. 1 in its reply stated that the Petitioner has failed to ‘fully and truly’ disclose material facts in the original assessment and contended that the department had to only make out a ‘prima facie case’ on the basis of which the Department could reopen the case and the ‘sufficiency and correctness’ of the material was not a thing to be considered at this stage. In support, they relied on the following cases:

i. M/s Bright Star Syntex Pvt. Ltd v ITO 9(2)(1) & Ors., Writ Petition No. 430 of 2016 (Bom) Judgment dated 14th March 2016.

ii. Nickunj Eximp Enterprises Pvt. Ltd vs ACIT Range 1 (2), Writ Petition No. 2860 of 2012 (Bom) Judgment dated 18th June 2014.

iii. Phool Chand Bajrang Lal v ITO, [1993] 69 Taxman 627

iv. Ess Ess Kay Engg. Co. (P) Ltd v CIT, [2002] 124 Taxman 491 (Supreme Court)

v. Raymond Woollen Mills Ltd. v ITO, [1999] 236 ITR 34 (Supreme Court)

CONCLUSION:

8. We have heard both learned counsel and carefully perused the papers and proceedings.

9. We find that the jurisdictional conditions for invoking section 147 – 148 are not satisfied as there is no failure to disclose material facts fully and truly. It is not in dispute that by the letter dated 11th September 2015 (Exhibit H) the Petitioner have submitted all the particulars along with supporting documents to the Respondent No.1. Hence the reasons to believe and a presumption based on the statement of Shri Bhanwarlal Jain (a third party) in the course of a search, that the loans of the entities were bogus or accommodation entries was clearly dispelled. Moreover, the specific provisions of S. 153C would prevail over the general provisions of section 147 in the case of search on 3rd party.

10. In our