TMI Blog2023 (1) TMI 282X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the preliminary objection as raised by the Revenue is not tenable and stand rejected. Reason to believe OR reason to suspect - reason to believe that income has escaped assessment is a mandatory condition for reopening the assessment by notice under Section 148 - Reason to believe supplied to the petitioner refers to information received from the Deputy Director of Income Tax, Investigation as also to the statement of Deepak Jain recorded u/s 132 (4) during the course of the investigation pursuant to the search and seizure carried out at his premises as also the entries in the form of bogus loan/purchase/sale appearing in the books of M/s Sanmatri Gems Pvt. Ltd. for the Assessment Year 2017-18. Neither of the above documents have allegedly been supplied to the petitioner. The petitioner in the grounds to the petition has taken a categorical stand that the respondents failed to furnish the information which formed the basis for reopening the assessment. It was not even provided with the statement of Deepak Jain, on which heavy reliance was being placed. There is no averment in the reply of the respondents anywhere that any such information or a copy of the statement was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner, the entire proceedings for the reopening of the assessment and leading to the consequential assessment stand vitiated in law. Accordingly, the impugned notice and the order ismissing the objections of the petitioner are hereby quashed - Decided in favour of assesee. - Hon'ble The Chief Justice Mr. Pankaj Mithal (Through Vc Jaipur) And Hon'ble Ms. Justice Rekha Borana For the Petitioner(s) : Mr. Sanjay Jhanwar, Senior Advocate assisted by Mr. Prakul Khurana through VC, Mr. Abhinav Mathur, Mr. Pushkar Taimni, Mr. Pranav Bhardwaj For the Respondent(s) : Mr. Kamal Kishore Bissa, Mr. G.S. Chouhan ORDER PER HON BLE THE CHIEF JUSTICE 1. Petitioner is a private limited company engaged in manufacturing of marble slabs and tiles. It filed its income tax return for the assessment year 2017-2018 and the same was processed under Section 143(1) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) and an intimation regarding acceptance of nil tax liability was issued to it on 22.06.2018 by the Centralized Processing Centre of the Income Tax Department. 2. The petitioner received a notice dated 30.03.2021 under Section 148 of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... petitioner has a statutory remedy of appeal under the Act. Therefore, the writ petition is not maintainable and that the challenge to the notice under Section 148 of the Act is now meaningless in view of the re-assessment order. He has relied upon the decision rendered in Commissioner of Income Tax Ors. vs. Chhabil Dass Agarwal [(2014) 1 SCC 603] wherein it has been held that the Act provides for a complete machinery for assessment/re-assessment of tax and for the scrutiny thereof by means of appeal. Therefore the assessee is not supposed to surpass the mechanism provided thereunder and to invoke the extra-ordinary jurisdiction of the High Court, if no exceptional ground exists for invoking such a power. 9. It is true that where a statutory remedy is provided under the Act itself more particularly in matters of tax, the assessee is not supposed to jump the said remedy and invoke the writ jurisdiction of the Court. In the case at hand, no doubt the petitioner has assailed the re-assessment order also by getting the writ petition amended but the thrust of its challenge is to the very basis of the said re-assessment order i.e. the notice issued under Section 148 of the Act and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment orders came to be passed with the understanding that those orders would be without prejudice to the rights of the petitioner in the writ petition, held that the passing of the assessment orders does not affect the right of the petitioners to obtain the relief under Article 226 and thus directed for quashing of the assessment orders also when the impugned notices were found to be bad in law. The relevant paragraph of the aforesaid decision in this regard is reproduced herein below:- 31. We are informed that assessment orders were in fact made on March 25, 1952, by the Income-tax Officer in the proceedings started on the basis of these impugned notices. This was done with the permission of the learned Judge before whom the petition under article 226 was pending, on the distinct understanding that these orders would be without prejudice to the contentions of the parties on the several questions raised in the petition and without prejudice to the orders that may ultimately be passed by the Court. The fact that the assessment orders have already been made does not therefore affect the company's right to obtain relief under article 226. In view however of the fact tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason to believe that income has escaped assessment is a mandatory condition for reopening the assessment by notice under Section 148 of the Act, but the reason to believe must not be confused with the reason to suspect. The respondents have tried to reopen the assessment proceedings on the ground of mere suspicion, that too without supplying to the petitioner proper and necessary material which formed the basis for issuing the notice. The petitioner was not supplied with the copy of the statement of Deepak Jain recorded under Section 132(4) of the Act. In fact, a search and seizure was carried out in the business premises of one Deepak Jain. It was during the investigation of his case that his statement under Section 132(4) of the Act was recorded. The petitioner was identified as one of the beneficiaries of the bogus entries, therefore, his statement becomes material and so is his books of accounts to enable the petitioner to respond to the notice in an effective manner. The petitioner being a third party was not liable to be proceeded on the basis of such investigation under Section 148 of the Act, rather the respondents ought to have, if necessary, initiated proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken, namely:- (i) On the information available on the Insight Portal of the Department of Information; (ii) Information received from the Deputy Director of Income Tax, Investigation, Mumbai; (iii) Investigation material covering Deepak Jain, who is said to have revealed that he was an entry provider and had provided entry of bogus loan/purchase/sale amounting to Rs.93,21,520/- to the petitioner from M/s Sanmatri Gems Pvt. Ltd.; and (iv) The statement of Deepak Jain recorded under Section 132 (4) of the Act. 21. The aforesaid material, which formed the basis for forming opinion that the officer has reason to believe that the income chargeable to tax has escaped assessment in the hands of the petitioner for the relevant year, do not appear to have been supplied to the petitioner to enable it to file a proper and effective reply/objections to the reasons to believe. 22. Accepting that as per the decision of the Supreme Court in GKN Driveshafts (India) Ltd. Vs. Income-tax Officer, (2002) 125 Taxman 963 (SC), dated 25.11.2002, the Assessing Officer is bound to furnish reasons within a reasonable time and on receipt of the same, the noticee is entitled to file object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here to certain guidelines in reopening the assessment proceedings. It emphasized that the Assessing Officer shall not merely state the reasons to believe in the letter addressed to the assessee, but if the reasons make reference to any other document or a letter or a report, such document or letter or report should be enclosed to the reasons. Therefore, in view of the aforesaid decision also, it appears to be mandatory on the part of the Assessing Officer to supply the petitioner with all relevant documents, referred to in the reasons to believe so that the petitioner may file proper objections opposing reopening of the assessment. 27. In the case at hand, as previously mentioned, reason to believe supplied to the petitioner refers to information received from the Deputy Director of Income Tax, Investigation as also to the statement of Deepak Jain recorded under Section 132 (4) of the Act during the course of the investigation pursuant to the search and seizure carried out at his premises as also the entries in the form of bogus loan/purchase/sale of Rs.93,21,520/- appearing in the books of M/s Sanmatri Gems Pvt. Ltd. for the Assessment Year 2017-18. Neither of the above docume ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used in evidence for making the assessment only if such statement is made in context with other evidence, or material discovered during search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger the assessment. 33. In view of the aforesaid facts and circumstances, we are of the opinion that shorn of all other technical aspects which may have been raised before us, the very fact that the material referred to in the reasons to believe was not supplied to the petitioner, the entire proceedings for the reopening of the assessment and leading to the consequential assessment stand vitiated in law. 34. Accordingly, the impugned notice dated 30.03.2021 and the order dated 18.08.2021 dismissing the objections of the petitioner are hereby quashed and all consequential proceedings including the assessment order dated 29.03.2022 are declared to be illegal, null and void with liberty to the respondents to take up a fresh exercise for reassessment, if necessary, in accordance with law. 35. In view of the above, the writ petition is allowed. Pending application, if any, stands d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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